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6,935 Views | 53 Replies | Last: 3 yr ago by dcAg
Diggity
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10:39a, 4/1/22
AG
I struggle to see how professionally managed communities are going to be "run down" more quickly than the equivalent starter home communities they are presumably competing with.

Go check out the housing stock in 77449 and tell me about the "pride of ownership" there. I would argue these rental communities will fare better than most of those.

Interesting thing I noticed when looking at 77449. They had more rental transactions (358) in the last 3 months than sales transactions (325). You could argue these communities were already "build to rent", without the central ownership/management component.
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dc509
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In reply to Diggity • 12:40p, 4/5/22
AG
Diggity said:
I struggle to see how professionally managed communities are going to be "run down" more quickly than the equivalent starter home communities they are presumably competing with.

Go check out the housing stock in 77449 and tell me about the "pride of ownership" there. I would argue these rental communities will fare better than most of those.

Interesting thing I noticed when looking at 77449. They had more rental transactions (358) in the last 3 months than sales transactions (325). You could argue these communities were already "build to rent", without the central ownership/management component.
They aren't going to be anymore run down than any type of real estate. There is huge demand for SFR (BFR or whatever acronym you want) and there a lot of these developments currently in various stages.
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Jester55
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In reply to ChoppinDs40 • 7:05a, 4/6/22
Not just taxes, think insurance, landscaping, maintenance, common area utilities, etc. Probable operating expense ratio of around 35% for brand new product IMO.
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ChoppinDs40
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In reply to Jester55 • 8:14a, 4/6/22
AG
Jester55 said:
Not just taxes, think insurance, landscaping, maintenance, common area utilities, etc. Probable operating expense ratio of around 35% for brand new product IMO.


35%? get outta here.

$150k house (to replace) is going to run MAYBE $1k in annual insurance… that's generous. My 800k replacement in DFW (hail storms!) is $2,200.

Landscaping? I'd say less than $1,000/year to mow the property. That's every week outside of winter for ~$30/mow.

Common area in a neighborhood like these probably isn't much at all. Say thats $100/home.

Still really good returns.
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Diggity
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In reply to ChoppinDs40 • 12:40p, 4/6/22
AG
150K replacement? You posting from 10 years ago?
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ChoppinDs40
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In reply to Diggity • 1:17p, 4/6/22
AG
Diggity said:
150K replacement? You posting from 10 years ago?
keeping these numbers consistent from previous replies. A small, siding only 1600 sqft house that's a 3/2 - mostly carpet and tile.. yeah, it can be done for $150k by these big builders I'm sure.
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AndesAg92
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2:38p, 4/6/22
AG
I have several of the projects I am working on (brokering) and have several very close clients that are developing this product. I always find it funny to see the NIMBYs come out of the wood work.
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Diggity
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In reply to ChoppinDs40 • 2:56p, 4/6/22
AG
Replacement cost is a whole different ball of wax though. The cost to build a 1-off home that suffers a total loss is not nearly as low as building a whole neighborhood of homes.
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ChoppinDs40
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In reply to Diggity • 3:15p, 4/6/22
AG
Diggity said:
Replacement cost is a whole different ball of wax though. The cost to build a 1-off home that suffers a total loss is not nearly as low as building a whole neighborhood of homes.
which emphasizes my point even more... right? these track homes are cheap to build for a big time builder... which means $1,800/month in rent gives crazy ass returns.
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ChoppinDs40
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In reply to Diggity • 4:04p, 4/6/22
AG
Diggity said:
Replacement cost is a whole different ball of wax though. The cost to build a 1-off home that suffers a total loss is not nearly as low as building a whole neighborhood of homes.
Here are the numbers I'm trying to get back to...

12 months x $1,800 rent =$21,600 X 8 years = $172,800. I imagine a 175-200k retail priced home with big time spending price breaks probably costs them that much at MOST. Just a real quick estimate.

I also didn't take into account property taxes of roughly $4,000 year. Insurance of $1k, lawn care/maintenance of $1k.

So call it $16,000/year netnet. On a $150k COST home (for the builder), that's 9 years to cover cash. Not bad.

Now.. leveraged with interest and debt service is a different story when thinking IRR.
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Diggity
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In reply to ChoppinDs40 • 4:41p, 4/6/22
AG
I'm just taking issue with your replacement costs.

I have no idea what the construction costs are for these communities but your insurance costs look low. Lawn maintenance probably on the high side.

You have to pay someone to manage these places as well.
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ChoppinDs40
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In reply to Diggity • 4:45p, 4/6/22
AG
I just figured a ~$200k house can't have more than 30% margin on it.. so ~$150k of costs, give or take.

Same as "common area maintenance"... 150 of these homes can be managed by 1 person probably with the right technology for billing/collections and what not.

I've done a lot of consulting in the multifamily software and property management side.

Some are still very antiquated while others are down right automated.
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Red Pear Realty
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5:45p, 4/6/22
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AG
https://finance.yahoo.com/news/jeff-bezos-backed-real-estate-182009732.html
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MAS444
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In reply to Red Pear Realty • 8:41a, 4/7/22
AG
That's really intriguing - and I've been all over their site but don't see any info. on what their fees/percentages are...

EDIT- just found this: https://help.arrivedhomes.com/en/articles/4546322-how-does-arrived-make-money
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dc509
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In reply to ChoppinDs40 • 8:41a, 4/7/22
AG
ChoppinDs40 said:
I just figured a ~$200k house can't have more than 30% margin on it.. so ~$150k of costs, give or take.

Same as "common area maintenance"... 150 of these homes can be managed by 1 person probably with the right technology for billing/collections and what not.

I've done a lot of consulting in the multifamily software and property management side.

Some are still very antiquated while others are down right automated.
The largest buyer of BFR in the county pays $300-$500K per home, and they like scale. 1200-1600 sf homes.

The management isn't especially difficult. You do have to integrate the appropriate tech, but that's just part of it.

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dcAg
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12:13p, 4/8/22
Basically the market is young professionals that are single or married and dont want to/or have the means to buy a house. As stated previously a lot of younger professionals do want flexibility as jobs are more flud than ever.

Until couples think about having kids and will need more room for kids etc. Then you have the divorced set that might have a couple of kids but cant afford their house any more. Then there are the Baby Boomers that dont want the responsibility, size and upkeep for the houses where they raised their kids.

It makes a lot of sense in todays housing market.
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Shooter McGavin
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1:22p, 4/8/22
AG
It is not necessary for a first time homebuyer to put 20% down on a house. That makes me crazy when I see this.

The problem I see is that young folks want to spend too much money on phones, cars, having food delivered, partying 3-4 nights a week at $50-100 per, wearing designer clothes, taking trips, etc.

The further out you go, the cheaper it is to find a house. You don't have to live next door to the bar scene or your place of work. Live further out and put your little airpods in and listen to a podcast and drive to work. Do that for a few years, build equity and then move into your preferred market.

The real estate expectations are the bigger problem People are too effing picky. You don't have to buy a Chip and Joanna refurbished home or a new home.

Look farther out and be less picky. Watch what you spend money on and it will work for you.
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Diggity
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1:29p, 4/8/22
AG
obligatory

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dcAg
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In reply to dc509 • 4:57p, 4/11/22
There is a difference in Build to Rent (BTR) and Single Family Rental (SFR). BTR are communities. SFR could be a single house in any neighborhood in the country.
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