Scattered Site Rental Toolkit:

Business Planning for Development & Management









III.D. Property Selection and Acquisition Strategies

Value of integrating rental development with other community efforts within a neighborhood: Integration of SSR development with other community efforts within a neighborhood is valuable as a strategy for neighborhood stabilization and revitalization. What may not be so obvious is that this integration with other efforts is important, even if your primary goal is to provide housing to people rather than to revitalize the neighborhood. Other activities such as neighborhood groups patrolling the streets, social services, new commercial development, and new houses for sale all increase neighborhood safety and desirability, which in turn ensures that you will be able to get and keep good tenants who will feel safe and comfortable in the neighborhood. For this reason, it is impossible to entirely separate housing goals from community revitalization goals.

The inverse is also true. Providing good quality, well managed, SSR properties within a neighborhood can help that neighborhood to become better and more desirable. You are providing a benefit to the other property owners and developers working within the area. It is also worth considering the value of improving your own property values in neighborhoods where you currently own property by purchasing and demolishing or rehabilitating blighted properties near yours, then turning those new properties into additional rental units. By strategically working in this way, you are improving the marketability and value of your existing units.Click here to see sample SSR acquisition guidelines.

Avoid assumptions: Perhaps that urban family does not want to move to the suburbs where there is no public transportation and they have a lawn to mow. It is better to find out where and how people want to live, which requires that you do your homework. You may need to conduct surveys or review data and research in order to identify your target population and find out what they value.

Clustering of Units:The more scattered your units are, the more difficult it is to manage and maintain the units and to even be aware of any problems. Compare this type of development with project-based rental development, for example. In a typical project-based rental model, you would have an on-site manager who can show potential tenants available units simply by walking over to the unit; and who can manage tenant squabbles, maintenance issues, unkempt properties and destructive behavior all without ever leaving the site. In addition, when maintenance personnel are called to repair multiple units, those units are within close proximity, to keep travel time and costs to a minimum. With the typical SSR program you have none of these advantages. It will be up to you to figure out how to locate and manage your properties in ways that will alleviate as much of this disadvantage as possible and that will lend to efficient and economical operation.

Clustered SSR neighborhoods require scale. The farther they are away from your center of operations, the larger the cluster of properties needs to be. This provides you the option of deciding that on a given day you will perform maintenance on all of the properties in a given section of town. Driving time can quickly eat away at efficiency and add to costs. One very experienced practitioner reported the formula they use as follows:

1.†††††† All units need to be clustered to some extent.

2.†††††† No units should be farther away from the office than a 45 minute drive.

3.†††††† The farther the cluster of units is from the office, the larger it needs to be.

This issue needs to be considered when making plans for where to purchase property, when determining maintenance and management costs and when deciding on a staffing model. It is a very real factor in determining the feasibility of SSR development.

Selecting similar units:If rehabbing existing structures, strive to select units that are similar in terms of type, square footage, and key features. You may elect to target a handful of unit types, such as bungalows, shotguns, and four-squares. This will allow you to standardize interior and exterior finishes and achieve efficiencies with ongoing maintenance.

Project and portfolio scale: SSR programs must seek economies of scale to be economically feasible. While all SSR practitioners agree on this principle, it is difficult to point to a minimum number of units that makes SSR workable. Estimates ranged from a couple of dozen to over a thousand units necessary to break even. What will work for you will partially depend on your current portfolio, in-house and third party management capability, efficiency of your development and management models and your local housing market. Based upon our experience and research regarding the models that other practitioners are following, we feel that the following is a minimum scale for an organization starting an SSR program in an urbanized market:

         Develop no fewer than 20 units at a time.

         Build up a portfolio of no fewer than 50 units within the first five years of SSR operation.

Organizations adding SSR to an existing portfolio donít necessarily have to achieve such scale to realize efficiencies, as the incremental burden of each new unit is not as costly as for an organization building a new portfolio.Rural organization may develop smaller portfolios as demand dictates in their service area.

Next: III.E. Table of Neighborhood Types, Characteristics and the Role of SSR Development">