Bruce McNeilage has always looked at real estate from an unconventional perspective. That perspective enabled him to pioneer build- to-rent developments after the housing crash and build affordable, in-demand condo developments today.
SOLO EAST CASE STUDY: A NEW FACE FOR HOMEOWNERSHIP
STARTER HOME: A relatively small, economical residence that meets the requirements of a first-time homebuyer. Usually, these properties appeal to younger buyers, but the aesthetic requirements for starter homes have changed as Millennial buyers often delay their first home purchase until they are in their 30’s.
W hen Bruce McNeilage invested in a 162-unit apartment complex in east Nashville, he soon realized that the investment was even better than he and had originally envisioned. He and his partner on that project, Rachael Franks, soon had revitalized the development and were in possession of a hot product in high demand: brand-new, truly af- fordable housing. Clearly, the only thing to do in this situation was build more and, instead of renting it to Millennial tenants who could not resist the location and amenities, sell it to first-time home- owners who believed themselves priced out of the American Dream. With that decision, the Solo East con- dominium development in east Nash- ville was born and McNeilage’s concept for providing accessible, affordable hous- ing to people buying at a moderate-in- come level expanded once again. “Here’s the thing about Nashville and about our national housing market as well: The areas of the country that are becoming hotbeds of real estate are leav- ing the ‘common man’ (or homeowner) out of the equation,” he said. “If the educators and public servants in your community cannot afford to live there, I don’t think your community can be considered truly successful.” As more and more of these people fall into the “young professional” and “Millennial” categories who have de- layed homeownership due to personal circumstance or preference, projects like Solo East become increasingly popular with buyers and investors. However, to succeed, a developer must know what their customers prefer and require in a residence. “It’s no longer breaking news that Millennials have been called a generation of renters for one particular reason: inflated real estate prices,” wrote Rentberry analyst
Oksana Tunikova earlier this year. She added, “When it comes to trending locations [for Millennials, often prime locations in major cities], choosing a condo is oftentimes the only housing option” should a resident wish to own instead of rent. Condo and apartment developments are likely to become more prevalent and more attractive to both buyers and investors in the future. In January 2016, the National Association of Home Builders (NAHB) published a report examining why Millennial buyers had not begun purchasing homes in the volumes many experts and analysts had predicted after “new mortgage programs and looser mortgage insurance require- ments” made their debut in early 2015. The report concluded that there would need to be “smaller homes at lower price points” without cork flooring and with granite countertops, “never laminate.” McNeilage understands the nature of the Millennial buyer
Solo East (below) is the only condo community in Nashville officially endorsed by Shark Tank investor and real estate mogul Barbara Corcoran.
This intense focus on serving the needs of tenants and potential buyers has led to some unique business decisions over the course of the past ten years. “My houses are always for sale to the tenants currently living in them,” said McNeilage. Kinloch Partners offers tenants the option to move to a month-to- month lease after one year of occupancy, promises tenants that they can literally “tear up their lease and buy the house tomorrow” if they like, and seldom, if ever, raises rents. “If someone is renting one of my houses, paying on time and treating that property the way I would treat it, then why would I want to ever sell that house out from under them or raise the rent? I would not want to change that relationship at any point!” said McNeilage adamantly. “One-third of my tenants stay about nine years. About one-third stay four or five years, and maybe a quarter move out after a year or two,” he estimated. “It’s very unlikely that once someone moves in, they can find a nicer rental than these new homes.”
instinctively in a way that few developers seem to. While the NAHB remains somewhat aloof from the resident, McNeilage is all empathy. “The aver- age Millennial isn’t even buying a house until their mid-30’s and in the mean- time, prices keep going up,” he said. “When owning is cheaper than renting, however, owning is pretty attractive. They see that equity – and the granite countertops, hardwood
“JUST ABOUT EVERYONE’S American Dream is to own their own single-family house. If they can’t own it, then they want to rent it,” says Bruce McNeilage, co-founder and CEO of Kinloch Partners, Kinloch Homes, LLC, and Harpeth Development, LLC. If you think his corporate titles are lengthy, wait until you see the trail McNeilage, a Michigan native who now divides his time between Nashville, Tennessee, and Atlanta, Georgia, has been blazing over the past decade. He and co-founder of Kinloch Partners, Christopher Zachary, describe their mission as “providing a path to homeownership for new homeowners through new construction, home
renovation, and investment in financially distressed real estate properties.” More simply put: McNeilage and Zachary have dedicated their past decade in business to one of the most underserved populations in housing, the starter-home buyers and would-be starter-home buyers. “We work hard to establish routes to ownership, but not everyone wants that. I find when my tenants either opt not to buy or simply never reach the point where they feel able, they stay a long time, creating a really profitable tenant. I will go out of my way to make it easy for them to stay right where they are, renting with me in one of the nicest rentals you could ever find, right up to the point where their needs change,” McNeilage said.
floors, and crown molding – and they start to think seriously about homeown- ership and equity, which is what they need to be doing.”
Immediately above, Gary Ashton of RE/Max Advantage in Nashville and Bruce McNeilage celebrate opening Solo East with project partner Rachel Franks, Barbara Corcoran, Steven Franks, and broker Debra Beagle (L-R).
CREATING OPPORTUNITIES OUT OF HOUSING AFFORDABILITY McNeilage and Zachary believe
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