August 6th, 2011

Who Manages Rental Housing?

A classic tactic of the middle class is to _not_ sell their starter house to move up, but instead to rent it for enough to cover the mortgage and then rent it out. Particularly ambitious families may discover they are actually good at this (usually involves one partner being very detailed/organized and the other being able to keep up on some of the maintenance and both of them are capable of tolerating good-enough strategies. A perfectionist in the mix is guaranteed failure); they may add more properties if they are available at the right price, there are enough renters to feel confident in keeping them filled, and there is appropriate financing (very few people have a stack of cash and the inclination to manage a motley portfolio of rental properties, but they do exist -- and if you're in the right spot, some rental property portfolios will spin off enough cash to buy more for cash).

We know that distressed sales are attracting cash buyers who are buying investment property so we can assume this is already happening in places like California and Nevada.

But not everyone is good at managing, and some people have a stack of cash and no inclination to self-exploit their labor as a manager; businesses exist to provide management services for rental housing (single family or multi-family) that they don't own. I know this, because I grew up on the same small street as a family that went from managing a string of their own properties to running a property management business.

What I _don't_ know is what the management pie chart looks like for rental housing: owner vs. non-owner, small owner vs. Residential REIT, etc. It's probably out there somewhere, if I can figure out how to ask the right question.

ETA: Hmmm. Not a pie chart, but wow.

Contrasting trends

In a world in which everyone bought single family homes (<-- exaggeration), people who couldn't afford them lived in Low Income Housing (not single family homes). That low income housing has not been in the central core of cities. For a while. Turns out there was a whole business model that involved in building/running these complexes, which have a _lot_ of regulation associated with them (notably, I think you have to stick with the investment for 15 years, and a lot of the deals were done in the mid- to late-1990s. Think about that for a while.).

Many of the biggest apartment owners on MFHC's top 50 list are this kind of syndicators, and they are shedding units like crazy over the last few years.

The mid- to bottom of the top 50 list looks very different.

This resolves a lot of confusion I had about the size of the biggest owners/managers, and that they were shrinking, and so forth.

It also makes sense of this:

I'm not actually that interested in apartments being built in city cores -- that's a trend we are all familiar with and unless 3 family apartment homes are built in great masses (which could happen), it's not the trend I'm sniffing around for. The trend I'm sniffing around for is apartments/multi family being built with nice, big, suburban-house-replacement-units in the inner ring of suburbs. Learning that developers are skipping suburbs to go to the city is code for: LIHTC is done, city core is where it's at.

It is worth noting that Seattle, unlike Boston, has a lot of very low density (quarter acre lot, single family home) neighborhoods, which would be what I'm including as "inner ring of suburbs".

However, the article also covers AvalonBay communities (which is NOT LIHTC communities, EVER. ETA: But they do take advantage of 20% units "affordable" to use tax breaks and access building loans. There's a complex in _my_ town.) going into Queen Anne (NOT suburban, remotely). Avalon is also building in Ballard. This is surprising only in that it's a qualitatively larger project than the multi-family that has been going up in Ballard for the last 15 years or so.

I'll have to do some digging to determine whether the floor plans are the same old same old (studio, 1, 2 and 2 + den) or if they are extending into 3 bedroom plans.

As usual, I think I'm a little off on my timeline.

ETA: Seriously!?! And I'm just finding out about this _now_?

R. and I were just discussing how really big developments assemble land parcels in places that have already been full built out at a lower property value. I was thinking, "closed supermarket". But I guess Sunset Bowl works, too.

AvalonBay, predictably, providing charging stations in the garage:

And rainwater capture tanks. So very Seattle!

AvalonBay Queen Anne:

On the old Mountaineers club site! (Am I allowed to laugh or will that confuse and/or annoy everyone?)

About 200 units on 1 acre.

Comments thread mocks pricing. Looks like studio/1/2.

Bowling Alley Closes; Big Apartment Complex Planned

I already mentioned the Sunset Lanes -> Avalon Ballard process; AvalonBay is national.

Mastro Properties bought Leilani Lanes and closed it, planning to put up a big block of apartments, but Mastro went under (if you're bored, googling Mastro bankruptcy is fun:

I guess meetings have started up again.

It looks like the architects are driving the process; who knows who the developer would be if it actually happens. I feel like that's a little far north for this kind of thing, but I clearly have terrible judgement in this area.

If grouparchitects _is_ leading the process, they aren't the only architect-led developer in Seattle:

They're doing Harvard Flats on Cap Hill. Is this where a design+build passion takes you?

Oh, wait: looks like they don't sell the buildings, either; they manage them.

Pretty work.

Here's stuff about the North Lot development (alternative scheme for getting space in an urban area: take a stadium parking lot).

And another parking lot sold to build hotel + apartments: