Buying SFH in "Over Saturated" Apartment Area? Pros & Cons

Buying & Selling Real Estate

Buying SFH in "Over Saturated" Apartment Area? Pros & Cons

Cincinnati, OH · Member since 2016 · 73 posts · 21 votes

Throwing this question out for my fellow BPers to get some feedback. I'm a "newbie" but wanted to get some insight and perspectives from other areas of the country.

Here in Cincinnati we have a neighborhood in the metro area with explosive apartment/condo growth. It is the prime and hot area for young professionals. Within the past 1-2 years huge apartment complexes have been built and currently more on the agenda. I'm curious on how this might impact rents for SFH in the area? I'm guessing the demand is there but personally it seems that the area might become quite "saturated" with units and dense (traffic) if things keep going this way.

We've always had solid demand for our SFH, as we find people who don't want someone on the other side of the wall.

Any thoughts from other areas where you've seen this?

Thanks!

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Warren Sterling

Investor · Greenville, SC · Member since 2011 · 44 posts · 10 votes

10y

I live and invest in Greenville, SC. We have so much new construction going on at the moment. Our downtown area is adding so many rentals and condos.

Still SFR's rent and sell well. The great part of my city is that we have more people coming in to fill the units on the market.

As for your area and question, I would guess it just depends on the value. Can you provide more of what is being asked for than the apartments can?

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Warren Sterling
Investor · Greenville, SC · Member since 2011 · 44 posts · 10 votes
10y
I live and invest in Greenville, SC. We have so much new construction going on at the moment. Our downtown area is adding so many rentals and condos.
Still SFR's rent and sell well. The great part of my city is that we have more people coming in to fill the units on the market.
As for your area and question, I would guess it just depends on the value. Can you provide more of what is being asked for than the apartments can?
2 Reply
Todd Kalsey
OP
Cincinnati, OH · Member since 2016 · 73 posts · 21 votes
10y
@Warren Sterling thanks for the feedback on your area. Much like your area, I believe the demand will be there. My initial reaction is that it's seems quite aggressive. We'll have to see, but glad to hear it hasn't negatively impacted the SFHs. Hopefully we follow the same trend.
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Account Closed
Clayton, NY · Member since 2015 · 157 posts · 35 votes
10y
According to an article that I was just reading on the National Association of Realtors site, "home buyers have purchased detached single-family homes more than any other type of home in the last 35 years. Since 1981, the Profile of Home Buyers and Sellers has collected data on the types of homes purchased throughout the three-and-a-half decades. Consistently, 74 to 88 percent of home buyers purchased single-family homes each year. Home buyers purchased townhomes and condos each at roughly 10 percent of the time and other types of homes less frequently".
My area is similar in that it's saturated with new apartment complexes but single family housing still seems to be holding up against their competition. People like the idea of home ownership more so than renting *mostly*. If you can provide affordable home ownership opportunities through lease options to those who don't qualify for conventional financing and don't meet the requirement's for the housing complexes... you have leverage. Everyone has their take on it but from what I've seen and heard, home ownership beats living in a complex with 500 other people any day.
1 Reply
Brian Pleshek
Investor · Hamilton, OH · Member since 2016 · 272 posts · 77 votes
10y
I personally don't like communal living. I like my yard as a buffer between me and the next guy. Fences do make good neighbors. And there will always be people who think that way just as there will always be people who cannot be bothered doing lawn and yard maintenance who will like to move into those types of units.
And I know many of the buildings that you are talking about. I live a few miles away from the ones at the Liberty Center mall area. And I know a guy who lives there. One bedroom, one bathroom, one kitchen/living room combo. It's quite small and the sample setups at IKEA seem larger. But there is a nice large community kitchen in the hallway with a 70" TV and couches set up for entertaining guests.
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Todd Kalsey
OP
Cincinnati, OH · Member since 2016 · 73 posts · 21 votes
10y
@Account Closed yep, totally forgot about Liberty Center! I was referring the the growth in the Oakley area. Seems developers are trying to squeeze anything and everything in there. You bring up another perfect example. I couldn't agree more on the "buffer" of the yard. Thanks for the feedback!
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Brian Pleshek
Investor · Hamilton, OH · Member since 2016 · 272 posts · 77 votes
10y
Have you done any deals yet?
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Todd Kalsey
OP
Cincinnati, OH · Member since 2016 · 73 posts · 21 votes
10y
Originally posted by @Brian Pleshek:

Have you done any deals yet?
Brian...none yet. Probably a year or so away. Right now trying to educate myself and save for some capital.
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Cory Damon
Investor · Austin, TX · Member since 2015 · 42 posts · 21 votes
10y
Keep in mind the Millennial effect... a widespread trend away from SFR and towards apartment living (and bigger city apartments more specifically).
The idea of having a small-footprint is appealing and live/work/play developments are very appealing.
This is very general of course, and you know your market, but think through the process... who's renting the apartments? Are a lot of people moving into the area and getting into something small only to later transition out to a SFR? Or is there a deeper mindset that has no desire for the additional "baggage" of owning a home?
If apartments are in higher demand due to an influx of young professionals then my guess is that SFR rents will not keep pace with apartments. The situation in your market could be the inverse.
Anyway, just something to think about.
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Brian Pleshek
Investor · Hamilton, OH · Member since 2016 · 272 posts · 77 votes
10y
Feel free to get in touch with me @Todd Kalsey when you're ready. Hopefully a year from now I'll have 5 properties. That's the goal anyway.
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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
10y
Originally posted by @Todd Kalsey:

Throwing this question out for my fellow BPers to get some feedback. I'm a "newbie" but wanted to get some insight and perspectives from other areas of the country.
Here in Cincinnati we have a neighborhood in the metro area with explosive apartment/condo growth. It is the prime and hot area for young professionals. Within the past 1-2 years huge apartment complexes have been built and currently more on the agenda. I'm curious on how this might impact rents for SFH in the area? I'm guessing the demand is there but personally it seems that the area might become quite "saturated" with units and dense (traffic) if things keep going this way.
We've always had solid demand for our SFH, as we find people who don't want someone on the other side of the wall.
Any thoughts from other areas where you've seen this?
Thanks!
Don't. You have renters and not owners surrounding your investment. Renters do not take care of properties. Owners do. This is common sense.
0 Reply
Joshua Sclafani
Investor · Tampa, FL · Member since 2016 · 66 posts · 27 votes
10y
@Jon Q. can you elaborate? Are you advocating for Multifamily in an area like @Todd Kalsey describes as opposed to single family housing or would you stay away from an area where the growth trend is focused on new apartment developments? I am curious bc my area is similar to Todd's and I see SFH as a viable alternative to apartments but am also trying to vet this assumption.
1 Reply
Michael Henry
Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes
10y
Todd,
If you see a great deal on a sfh I say go for it. In many areas single family homes while they may not be as "trendy" as the new construction community type living over time however they should remain relatively stable. Also I would suspect Within sfh that if an area close by is popular or up and coming you should see some uptick in demand for your sfh and you shouldn't see the fire sale mentality that you get every so often when one you have a unit in a condo type setting for example that you're trying to get rid of.
I think it's a great idea for you that continue to take your time improve your skills and knowledge of Real Estate and then proceed forward once you have a greater level of comfort so kudos to you. Good question and thanks for sharing.
Thanks,
MH
1 Reply
Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
10y
Originally posted by @Joshua Sclafani:

@Jon Q. can you elaborate? Are you advocating for Multifamily in an area like @Todd Kalsey describes as opposed to single family housing or would you stay away from an area where the growth trend is focused on new apartment developments? I am curious bc my area is similar to Todd's and I see SFH as a viable alternative to apartments but am also trying to vet this assumption.
No, I am not. I'm advocating to invest only in areas that are not "renter areas".
Ideally, you're looking for SFRs or MFs in areas that are surrounded by well maintained single family housing with owners living in them. Check tax records and compare mailing addresses to property address to verify they are owners vs. renters....
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Todd Kalsey
OP
Cincinnati, OH · Member since 2016 · 73 posts · 21 votes
10y
@Michael Henry thank you. I've seen too many people jump in before gaining some base knowledge. Fellow BPers have been invaluable and so helpful. I truly appreciate the insight and hopefully can repay down the line to others! Thanks!
@Joshua Sclafani your "viable alternative" is exactly what I was thinking. While you have that core group that want new, trendy, no maintenance, I think there will always be a market for those who want some space but still want to be in the area. Thanks for the feedback!
@Jon Q. thank you for the perspective. I understand where you're coming from. The area is an older community with a mixture of SFH, SFR, MF and larger Complexes. There have been 3 major developments (easily 100+ units each) that have gone up over the last 2-3 years with more phases rolling out soon. It'll be interesting to see how this plays out. Thanks for the input!
3 Reply
Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
10y
My pleasure Todd.
I wish you the best!
0 Reply
Tony Keri
Investor · Cincinnati, OH · Member since 2016 · 2 posts · 0 votes
10y
Todd, just curious, are you talking about the Oakley area?
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Todd Kalsey
OP
Cincinnati, OH · Member since 2016 · 73 posts · 21 votes
10y
@Tony Keri yes...Oakley.
0 Reply
Joshua Sclafani
Investor · Tampa, FL · Member since 2016 · 66 posts · 27 votes
10y
@Todd Kalsey thanks for your post and for confirming what I was also thinking about SFRs in a similar market.
0 Reply
Julie O.
Real Estate Investor · Westminster, CO · Member since 2012 · 25 posts · 18 votes
10y
I have recently leased several SFH in the north part of the metro Denver area. Our rental market has been hot, but I'm noticing a slowdown lately, especially up here in my part of town. There are a lot of newer MFH developments going in and owners of older buildings are remodeling, I think this is cutting into the SFH market. I'm not getting nearly the number of applicants I did just 6 months ago, and those I do get have more choices. Lots of younger applicants, too. I have had to remodel all of these homes to stay competitive with the new apartments for rent around here. They're all shiny, new, and modern. So I've redone three kitchens with stainless and granite, lots of new paint, carpet, and hardwood floors. Not to get higher rent, but to attract more tenants and compete with the apartments. Based on feedback from showings, it's the new kitchens and finishes that have rented the places. So my bottom line for you? SFH is always a good investment, always appreciates better than the alternative. But be prepared to spend a bit more on your renovations, be prepared to compete favorably with shiny, new homes.
1 Reply
Todd Kalsey
OP
Cincinnati, OH · Member since 2016 · 73 posts · 21 votes
10y
@Julie O. wow...thanks for the great info on the trend in your area! I am thinking this issue may creep into my area as well in the future. I figure this isn't a huge issue but the "cost of doing business" in that particular area. Thanks for the feedback...quite helpful!
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Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
10y
@Todd Kalsey
I think the biggest key is just continuing to watch your market and time your improvements accordingly. I own a duplex just south of sloan's lake, and I can literally see the redevelopments moving slowly towards my area (Villa Park).
Today, I don't believe that an upgraded kitchen/bath area and a general fancy upgrade produce enough additional rent to justify their cost - the neighborhood is still attractive to folks looking for more of a bargain on rents. But, in 3-5 years, I could absolutely see enough redevelopment happening around that property where those improvements will make a huge difference in rent.
I think it's all about seeing what's happening in the 5-10 block vicinity of your property, and waiting for the trends to tell you what to do or not do to command more rent.
Podcast Guest on Show #223
1 Reply
Todd Kalsey
OP
Cincinnati, OH · Member since 2016 · 73 posts · 21 votes
10y
@Scott Trench I think you hit on a great point and it'll be interesting to see how things play out during the 3-5 years once all of the phases of development are up and running in my area. Thanks for the input and I'll definitely be taking a look and see how things are progressing over time. Great insight and thank you!
0 Reply
Alex Brookbank
Investor · Cincinnati, OH · Member since 2015 · 90 posts · 44 votes
10y
@Todd Kalsey I had a feeling you were referring to the Oakley area in your first post. I saw you mention it specifically in a follow up comment. I don't think there is going to be any problem with holding up rents. That area is indeed pretty hot, and saturated.
Oakley's young professionals are spilling over into Norwood and P Ridge. I'd be more worried about buying at the top of Oakley's recent cycle (although it will probably keep going up for the next decade, who knows). I'd guess rents will remain strong. Oakley is anchored by Hyde Park and Rookwood, it is a very safe investment at this point. It's crossed the threshold into "A" territory in my view. Granted there are pockets that need gentrification still, but it seems like a foregone conclusion.
On a side note, the Kroger development and surrounding plaza is ..... ugly. But Mad Tree is going in, so I guess it is bittersweet.
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Todd Kalsey
OP
Cincinnati, OH · Member since 2016 · 73 posts · 21 votes
10y
@Alex Brookbank couldn't agree more on the Kroger development. Yes, I like some of the retail going in there but the layout and ease of in/out is annoying. What actually sparked this post was a story I saw on a proposed development at Taylor & Madison (next to the church), trying to cram an apartment complex into the small lot where the vacant bank sits. It just made me think, "really?!". The area is hot, but that idea seemed crazy.
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