Neighborhoods and subdivisions – sorta like people – have seasons: Birth. Active Youth. Maturity. Decline.
And like people who never come to terms with the inevitable decline that comes from stacking up the years, there will be a homeowner or two who hang on in a neighborhood while it declines around them. Their homes stand out, the grass is cut, the shrubs are trimmed and the house looks much better than the neighbor’s.
The holdout homeowners who long ago bought the house and made it a home before the season of decline are usually retired, spending hours tending landscaping, maybe flower beds. The only visible concession to the decline will be a chain link fence around the entire lot and a burglar alarm or burglar bars on the windows.
Maybe they raised their children in the home when they knew all the neighbors. Maybe the home is owned by a widow or widower who doesn’t want to leave the memories built up in the home over the years. But they’ve waited too long, they’ve become a stranger in their own neighborhood, probably the oldest, too, with little in common with the younger neighbors.
If they change their mind, it can be too late. Retired and on a fixed income, they can’t sell the house for enough for a suitable replacement.
The neighbors are likely to be renters and renters AS A GROUP have never kept up rental property as well as an owner-occupant will. It’s not their property, so there’s no pride of ownership and if the house needs paint, that’s not their expense.
Exterior maintenance is the landlord’s job, but many of them are no better at keeping the house up than the tenants they’ve put in them. They’re shooting themselves in the economic foot doing it, too. They’ll want to sell the house one day and people won’t pay top dollar for a poorly maintained house in a neighborhood that’s largely rental and looks it.
Those houses can look like a bargain to beginning investors, though. They often start at the lower end of the spectrum because it appears they’re not risking as much money and because the rent as a percentage of the selling price is higher. A $45,000 may rent for $500, but a $145,000 won’t rent for $1,450 dollars.
For beginners, a more expensive house is probably a better deal. Tenants are more qualified, stay longer and are usually easier on the property. Carefully chosen, the appreciation will make the return on their investment much better, too.
Starting at the lower end means beginners usually get defeated and stop right there, too. They seriously under-estimate what management takes, so don’t hire a professional manager. Amateur landlords are over-matched, they’ve spent a lot less time being landlords than bad tenants have been bad tenants. Practice makes perfect and there are tenants who have been practicing landlord abuse all their adult life.
If it sounds like I’m picking on ALL tenants, I’m not. There are good tenants and I have many of them, they’re just a much smaller percentage of the entire tenant population. The equation is reversed for homeowners; good homeowners vastly outnumber bad homeowners.
A good homeowner takes pride in the house, takes pride in the neighborhood and wants both to look as best they can which fuels an excellent appreciation level. That’s pretty much the ‘active youth’ period for a subdivision and it can last a long time.
The ‘maturity’ period can also last for a very long time, maybe even as long as the lifetime of some of the first buyers. If the homeowners pay attention to negative situations around them and fight back, they can potentially reverse the clock and make the maturity level last much longer.
During the birth and active youth period, buyers of new/newer homes were often the ambitious young professionals. As their families and income grew, they quickly built up equity and used it to move into more upscale neighborhoods, either here or wherever their jobs took them. Young adults move more often, selling their homes to other young adults.
An active neighborhood boosts appreciation levels. John puts his house on the market for more than his neighbor Paul thinks he’ll get for it – and then gets it. When Paul is transferred several months later, John’s success encourages Paul to price his home even higher and he gets it, so next year, George successfully goes higher and the following year, Ringo goes even higher, pushing up prices all the way.
But houses age and styles change. Dining rooms faded in favor of great rooms and kitchens are now closer to being a part of the central living area than ever before. Newer homes in newer subdivisions have newer floor plans which attracts the next batch of young professionals and the original subdivision starts drifting into the maturity stage.
With dated kitchens, floor plans and whatever else dates a house, demand might slack off. Much of the population is aging in place, which means fewer sales. Appreciation is still healthy, but it’s beginning to level off and when it levels off enough, investors move in and turn some of the houses into rental property.
All of this, of course, is massive generalizing, although you can see the stages to varying degrees in most subdivisions. What started this ramble of is a letter I got from an old acquaintance who stayed in the same house and neighborhood well into the maturity period and is now seeing signs of decline. She and some of her neighbors have reacted by doing the absolute best thing they can do. They’ve formed a HOA (Home Owner’s Association).
Parking on the grass? They helped push for and got an ordinance to control it. Too many people living in the house? Too much noise? There are also ordinances against that. Not enough enforcement? City officials and then city councilman are called.
They’ll build up neighborhood pride and responsibility with peer pressure and a welcome program for new neighbors, sponsor neighborhood garage sales, block party barbecues and “Yard of the Month” and “Most Improved Appearance” awards. In this time of investment uncertainty, the modest HOA dues could be the best investment homeowners can make because it can easily add thousands of dollars to the value of their homes.
Where it might intimidate the homeowner next door to complain about tenant or appearance problems to a landlord, the HOA president carries a lot more weight with the members backing him. Individuals complaining to officials and city council members might be dismissed as coming from grouchy old cranks, but complaints coming from an active HOA?
Those come from VOTERS!
Mike Hill has been the real estate business in Valdosta since 1976 and the real estate management business since about 1980 and will be hiding from homeowners living next to rental property for the short time it takes this column to be forgotten by everybody.
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