The Capital Stack
This week will feature Part II of our third quarterly update of 2024. The portfolio updates we share every quarter highlight each property we own and share a bit of what we work on each day. Let’s dig in.
Village Court Apartments
We purchased Village Court Apartments on July 18, 2024, with a gross monthly income of $13,461. Since then, we have increased this income to $17,261. At the time of purchase, three units were vacant. All of these units have been renovated and leased at our target market rent of $1,250, with relatively low capital expenditures. Since closing, we have made several improvements, including cleaning up the landscaping—specifically cutting back a large section of tall grass behind the porch to create larger backyard spaces for residents. We have also repaired the porches, repainted the decks, and modernized the hallways with new paint and fixtures.
Sugar Pine Apartments
We acquired Sugar Pine Apartments on February 13, 2024, with an initial gross monthly income of $14,030. Since then, we have increased this income to $16,595. We successfully turned and leased two units quickly at $950 each and are currently testing a new market renovated rent of $1,100 for our most recently renovated unit. Since closing, we have updated the hallways with fresh paint and carpet and switched to a more reliable laundry provider. Currently, we have two vacant garages, one of which is utilized for the property. Overall, the property has transitioned smoothly, with relatively low capital expenditure to date.
Creekside at Fenton Heights
We purchased Creekside at Fenton Heights on November 22, 2020, with a gross monthly income of $10,400 and 10 out of 24 units vacant. The property was stabilized within seven months, and today the gross monthly income has increased to $28,580. The property is currently 100% occupied. Recently, we switched management, which has significantly reduced vacancy times and improved delinquency.
Piney Grove Townhomes
Piney Grove Townhomes, which we acquired on November 4, 2021, has faced significant hurdles. At the time of purchase, the property had a gross monthly income of $27,689.50. Since then, we’ve successfully increased the gross monthly income to $36,246. Initially, we believed the property was stabilized in March 2023. However, we discovered that our previous management company had neglected unit turns and misrepresented occupancy rates, failed to file evictions for non-paying tenants, and, in instances where they did file, neglected to attend hearings, leading to dismissed cases and continued non-payment. After switching management companies in Q4 of 2023, we have addressed these issues throughout 2024. We are now seeing progress and finally approaching re-stabilization.
In Conclusion
We are pleased with the current status of our portfolio. Overall, we are experiencing strong leasing activity across all properties, and our new in-house renovation team has significantly improved our ability to turn units faster than ever before. This enhanced efficiency is contributing to our ongoing success and setting the stage for continued growth and value creation.
Major Market News
Rise of Wealthy Renters
An article by TheRealDeal highlights a growing trend of wealthy Americans, including millionaires, choosing to rent instead of buy homes. From 2018 to 2022, the share of renters with an annual income of $750,000 rose to 10.5%, marking the highest level of wealthy renters recorded. Similarly, 3.7% of households in the top 5% wealth bracket were renting in 2022, a record dating back to the 1990s. The rising cost of homeownership, including mortgage rates, property taxes, and insurance, has made renting more appealing even for the affluent. Developers are responding by designing properties with larger floor plans and luxury amenities tailored to long-term renters.
Source: TheRealDeal. (2024, September 16th)The rise of the millionaire renter. https://therealdeal.com/national/2024/09/16/the-rise-of-the-millionaire-renter/
Tips and Tricks
Terms-
Gross Monthly Income -Gross monthly income refers to the total revenue generated from a property in a given month before any expenses are deducted. This includes all rent payments from tenants and additional income sources, such as pet fees, parking fees, laundry facilities, or any other charges that generate revenue for the property. Gross monthly income is a key metric for evaluating a property’s financial performance, as it provides a snapshot of its income potential before accounting for costs like maintenance, taxes, or management fees.
