HOUSINGNEWS REPORT
THE RISING ‘BIG MIDDLE’ OF SINGLE FAMILY RENTALS
properties to passive investors from across the country.
Founded in Memphis in 2003 by Clothier’s father, Memphis Invest has migrated to other markets as the available inventory of properties that meet the company’s quality standards has decreased, according to Clothier. “We don’t want to buy as many properties in Memphis as we used to because the market dynamics are not the same. We are looking to go into not just the secondary markets, but the tertiary markets, because we have a highly duplicative model,” he said, explaining that the company is
already active in Texas, Oklahoma City and Little, Rock Arkansas, but is also considering markets such as Cincinnati, St. Louis, Nashville and Louisville, Kentucky. “We had two choices: go to other cities or lower our standards. If you want to buy the less expensive junk there is a provider for you, but it’s not us. We wouldn’t be able to sustain our growth if we didn’t find new markets.” While Memphis Invest and large hedge- fund backed SFR operators are still banking on the relative safety of the suburbs, Bloom, owner of NetWorth Realty, believes the quality of those suburban neighborhoods is being eroded by the higher share of renters now present in those areas. “They are turning these subdivisions into rental neighborhoods, and low- income rental neighborhoods at that,” he said, noting that at the same time poorer populations are being pushed out of urban neighborhoods by more affluent millennials and baby boomers migrating to those areas. Bloom is banking on this trend he dubs “the reverse suburbanization of America” for his long-term investing strategy. “For the most part in any major area, I’m not buying in the suburbs,” he said. “I’m buying downtown. I’m buying in areas that in 10 to 15 years I’ll be able to tear down … hold the property and redevelop it when everything changes.”
“The high quantity of properties are located in the most challenged areas of markets … parts of the city that are struggling. That’s not always a good investment because the people there are struggling. That’s not the best areas for rents,” Clothier said. “They should invest today for return of capital first and return on capital second. Investors should focus on only properties where they can get back 100 percent of their money if they sell it.”
“They are turning these subdivisions into rental neighborhoods, and low-income rental neighborhoods at that. … For the most part in any major area, I’m not buying in the suburbs. I’m buying downtown. I’m buying in areas that in 10 to 15 years I’ll be able to tear down … hold the property and redevelop it when everything changes.”
MARK BLOOM OWNER, NETWORTH REALTY
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NOVEMBER 2017 | ATTOM DATA SOLUTIONS
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