The Role of Investors in the SingleFamily Market in Distressed
Neighborhoods:
Lessons from Atlanta
…and from Cleveland, Las Vegas, and Boston
National Housing Conference
Solutions 2013
Dan Immergluck
Professor
School of City and Regional Planning
Georgia Tech
Atlanta, Georgia
Likely REO-Investors Ownership
Disproportionately Concentrated
in Distressed Neighborhoods
Level
Likely-Investor
Level ofofLikely
REO-Investor
Ownership,
DSF units,
Ownership, December
20112011
City of Atlanta
no DSF parcels
LRI
MRI
HRI
VHRI
0-0.76% (0 - 50%ile)
0.77-5.87% (50-75%ile)
´
5.88-11.98% (75-90%ile)
11.99%+ (90-100%ile)
0 1.5 3
6 Miles
Demographics and REO Activity by Neighborhood Type
LRI
MRI
HRI
VHRI
median % African-American (2010 Census)
median poverty rate (2006-2010 ACS)
median vacancy rate (2010 Census)
10.6%
3.6%
7.9%
83.6%
16.7%
13.7%
90.1%
36.2%
20.6%
94.4%
40.1%
33.8%
% REO sales to likely investors, 2010-2011
14.0%
27.3%
47.3%
46.1%
% REO sales to investors to small investors, 2010-2011
87.1%
68.0%
59.3%
67.6%
$131,850
$40,000
$18,593
$14,750
42.7%
32.3%
28.5%
26.5%
4.4%
8.8%
16.2%
17.0%
median price of REO sales, 2010-2011
% REO sales to investors 2009-2010, resold w/in 1 yr
% REO sales to investors 2009-2010, resold w/in 1 yr to investor
Largest Buyers of REO, Fulton County, 2008-09 and 2010-11
20 largest investor buyers of REO, 2008-09
JOHN GALT ENTERPRISES LLC
BLUE SPRUCE ENTITIES LLC
ALAIMO ANTHONY
DOUG COKER PROPERTIES LLP
RDM HOLDINGS LLC
PAVILACK INDUSTRIES INC
WESTLINE MANAGEMENT COMPANY LLC
B & Z INVESTMENTS LLC
STONECREST INCOME & OPPORTUNITY FUND
CF TWENTY FOUR LLC
MID GROUP LLC
ATLANTA REAL ESTATE INSIDERS LLC
NATIONAL ASSET MANAGEMENT GROUP
BIRKHOLZ JOHN
PROPERTY ACQUISITIONS INVESTMENTS LLC
MORRIS ROYCE
HABITAT FOR HUMANITY IN ATLANTA INC
SOUTHERN DEVELOPMENT HOLDINGS GROUP LLC
GRINMARD GROUP INC
SB HOLDINGS LLC
Market share of top 10 investors (of all likely investors):
Market share of top 20 investors (of all likely investors):
# of REO
purchases,
2008-09
99
70
53
52
50
49
47
44
44
37
36
36
34
33
32
32
31
30
30
28
9.9%
15.7%
20 largest investor buyers of REO, 2010-11
HARBOUR PORTFOLIO LP
ATLANTA NEIGHBORHOOD DEV PARTNERSHIP INC
CPI HOUSING FUND LLC
HABITAT FOR HUMANITY IN ATLANTA INC
APD SOLUTIONS FULTON LLC
TOP RENTAL RETURNS LLC
ALAIMO ANTHONY
EQUITY TRUST COMPANY
USA RENTAL FUND LLC
TRR ATLANTA LLC
INTERCONTINENTAL ACQUISITIONS LLC
ORCHARD TERRACE ESTATES LLC
ASSET MANAGEMENT & INVESTMENTS LLC
CSF ENTERPRISES LLC
KIDDER PROPERTIES LLC
HYC FINANCIAL LLC
STONECREST INCOME & OPPORTUNITY FUND
AFFORDABLE HOUSING ASSISTANCE INC
ELEVON PROPERTIES LLC
REVITALIZE DEVELOPMENT LLC
Market share of top 10 investors (of all likely investors):
Market share of top 20 investors (of all likely investors):
# of REO
purchases,
2010-11
49
44
39
37
35
31
29
28
26
23
23
19
16
16
15
14
14
13
13
13
12.2%
17.8%
Learning from conversations with Atlanta investors…
• Acquisition factors: crime, vacancy, homeownership; building attributes less
important
• All-cash financing is dominant (but price points are low)
• In low-income neighborhoods, investors generally preferred tenants with
Housing Choice Vouchers (HCVs), due to the stability of the rental stream
• Problems using property managers; some vertically integrate; others focus on
aligning incentives and close oversight
• No investors complained about excessive code enforcement; some viewed
lack of enforcement as a major problem
• Some institutional investors avoiding “distressed” neighborhoods
Atlanta
Cleveland
Las Vegas
Boston
Typical
All-In Costs
Under $75k
Under $50k, often
less
Under
$150-200k
Over $150k
Investor
Characteristics
Small investors
dominate;
occasional bulk
buying
Small investors
dominate; some
bulk buying
More foreign
investors, many
small investors
Local investors;
somewhat more
concentrated; 51%
of large investor
purchases=condos
Investor
Strategies
Switched from
flipping to buy-torent
Flipping; little buyto-rent
Buy-to-rent
dominant
Buy-to-rent
dominant; higher
prices may lead to
quicker exits
Rehab Activity
HCVs key; hard to
do buy-to-rent
without HCV in
distressed areas
More than minimal
rehab requires
subsidy
Newer stock
Routine substantial
requires less rehab rehab when
property in poor
condition
Financing
Mostly cash
Mostly cash; some
hard money
Mostly cash
Cash common but
also hard money;
refinancing via
community banks
Lessons for Practice and Policy
•
•
Investor behavior fluid – function of market conditions
•
Housing and vacant property code and enforcement provide critical context for local
investor behavior
•
In distressed neighborhoods with low market rents, substantial rehab for buy-to-rent
often not feasible without subsidy (e.g., HCV)
NSP-type/gut rehab generally not viewed as sustainable model for buy-to-rent;
standards and cost-structures must be realistic and sustainable
 Without subsidy, “milking” behavior and abandonment is more likely
 HCV program must be well-managed locally
•
Sustainable sources of financing/subsidy may be needed to support responsible, buy-torent activity in distressed neighborhoods, especially in weaker-market metros; must
include quality control/inspections
•
Need for partnerships/methods to bring institutional investors into distressed
neighborhoods in responsible ways