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Scattered Site Rental Toolkit: |
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Business Planning for Development &
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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 don’t 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
