I t is certainly unusual to encounter a land- lord who is as big of a fan of the month- to-month lease as is Bruce McNeilage. Month-to-month leases renew at the end of each month, allowing both tenant and landlord to exit the agreement at the end of each month without breaking the lease. While most tenants like the idea of flexible end-dates on their tenancy, both landlords and tenants tend to view the inherent fluctuation of rental rates and the general uncertainty about length of occupation that accompanies a month-to-month agreement as a bit unsettling. Not McNeilage. “Because our goal is to give people the opportunity to first rent the Amer- ican Dream and then, ideally work toward owning it, month-to-month rental agreements are perfect for us,” he said. “If you rent a home from us, you can buy it whenever you want. We will tear up the lease and sell you the house tomorrow.” McNeilage generally offers his residents month-to-month renting options at the conclusion of a successful annual lease. McNeilage pioneered the “build-to-rent” business during the housing meltdown in the mid-2000s. He began buying houses at rock-bottom prices, fixing them up, and renting them out to homeowners who certainly could not afford to buy at the time but wished to live in an updated, essentially new home. Hedge funds routinely bought out his inventory during this time. In 2015, McNeilage sold his entire Nashville inventory to American Homes 4 Rent for a record-setting $9.63 million. “It really validated the business model,” he said, noting that Kinloch Partners has also been bought out in Atlanta, Georgia, “11 times in the past six-and-a-half years.” THE LAW OF ATTRACTION: WHY TENANTS AND LANDLORDS LOVE LUXURY AND MONTH- TO-MONTH LEASES
that creating opportunities for new households to purchase homes is not just an opportunity for profit in the development and rental sectors, but also an obligation. “For 60 years, the American Dream of owning your own home has been on the decline, and that is a very bad thing because the largest asset that most people will ever own “In my opinion, if we do not reverse the downward trend of homeownership, that could be our biggest societal failure of our generation,” he concluded. Kinloch Partners does not just talk the talk. They also walk the walk. For McNeilage opportunities that are sustainable for both the residents of the property and the owners of the developments. Sometimes, the residents become owners, and sometimes, McNeilage acknowledged, the residents simply have no desire to make that transition. In the latter situation, he gladly rents to those long-term tenants at affordable rates and on empathetic terms [see sidebar]. “I’m a provider of moderately priced housing. obtainable housing, whether that takes the form of single- family homes, condominium projects, or apartment complexes, and whether my customers ultimately choose to buy or rent. Either way, we’re providing housing that is usually completely out is their home,” explained McNeilage passionately. and Zachary, this means creating homeownership My job is to create and provide middle class,
of reach to our consumers, and that makes the concept of ownership more appealing,” he said. For example, in the Atlanta, Georgia, metro area, McNeilage and his company have purchased tens of millions of dollars in residential real estate since the housing crash. “I started buying rental houses that were brand new in 2005 and was renting them out en masse ,” McNeilage recalled. “I was six years ahead of the game, but I didn’t know then that I was a pioneer. Then major investment companies started doing what I had been doing and asking me to do it for them. They would rather buy 50 houses from me than buying one at a time off the MLS. That’s how I got started in the Southeast.” AFFORDABILITY & PROFITABILITY: A COMBINATION THAT JUSTWON’T QUIT Today, Kinloch Partners is still buying, building, and developing brand-new, high-end single-family rentals and even entire single-family rental communities in Atlanta and the surrounding metro area thanks to McNeilage’s foresight. “The business model works because we have a drive not just to grow in the cities where we currently operate and make ourselves money, but we also have a broader goal, to create opportunities for people to own their own homes in places where they otherwise might not have that chance.” Best of all, Zachary added, the two have the luxury of being in control of their mission. No one can “pull the strings” or tell the two what to do if they agree that their investing and development decisions serve their greater goals. Those goals look slightly different in Nashville, Tennessee, where McNeilage and a partner, Rachel Franks, first purchased what they describe as “a very out-of-favor, half-empty apartment complex” in 2011. The two updated the facilities, gated the community, and
(Above) This Atlanta-area home is just one of hundreds McNeilage has owned in the area. It is nearly new and highly affordable for the area. (Left) Bruce stands proudly in front of his then-unfinished inaugural build-to- rent house in the metro Atlanta area. spent the next year working hard to create “something the neighborhood would become proud of.” The project was such a success that he and Franks decided to erect a 100-unit affordable, high-quality condominium project, ultimately named Solo East [see sidebar on pg. 23], on the three acres adjacent to their now- attractive multifamily development. “It was a $25 million project in an area that was on the fringe of transition at that time,” recalled McNeilage, who was rejected outright by the first 15 lenders he approached for funding. When the sixteenth banker finally decided to fund the deal after encountering McNeilage and his well-worn presentation at a luncheon, the development quickly began to take shape. As it did so, local media and, not surprisingly, local Millennials took notice. The project garnered so much attention that when McNeilage’s development company, Harpeth Development, put the condos up for sale, they held the event at the Tennessee Titans’ Nissan Stadium in order to accommodate the crowd of eager buyers. “We sold 34 condos in two hours,” McNeilage said proudly. “Even during the second phase with a price increase we were still $50,000 less than any other pre-construction condo project in Nashville at that time.
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