The Mill House Thread - Profiting and Succeeding w/ Mill Houses

4 Replies

Hey Ya'll,

This thread is intended for those who own/operate mill houses successfully.  Let's keep the negativity around the asset class away...

Mill Houses comprise much of the most affordable inventory in the Carolinas and other areas of the Southeast (Greenville, Spartanburg, Charlotte, Gastonia, Shelby, Triangle - Raleigh Durham, Augusta, Columbia, Hickory, Rock Hill).  Most often they are clustered together to form neighborhoods around old textile mills and often day from the first half of the 20th century.  Depending on who you ask, they can either be loser investments or stable B/C class cashflow generators and good homes to solid, blue collar tenants.

@Chad Carson authored a post (link below) about his experience with one specific mill house and the lessons he learned from the money losing endeavor.  Some questions for the crowd as we try to establish this as the ultimate mill house best practices thread.

  1. Do you own any mill houses in the Southeast?
  2. What has been your long term experiences with this asset class - cashflow generators or pigs in an asbestos sided blanket?
  3. How much do you set aside ($$ terms) for R&M and Capex monthly per house? What reserves do you maintain per house?
  4. What are your No-Gos when evaluating at a prospective investment?  What red flags do you avoid?
  5. What are the keys to operating this asset class profitably?
  6. To what standard do you maintain your mill houses?
  7. How do you keep and retain good tenants?
  8. Does anyone have experiencing BRRRing this asset class repeatedly?
  9. Do you continue to invest in mill houses?
  10. How do you divest from this asset class when it comes time?

Game on!

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Disclosure: I personally have a handful of mill houses in my portfolio and am trying to craft a long term viable strategy around owning and operating this specific type of asset west of Charlotte.

My own answers:

  1. We own 7 west of Charlotte in the greater Gastonia area.
  2. The mill house I've owned for 10 years has performed well, it was owner occupied at first and became an accidental rental property when I left the area.  It is in a nice town and rents for a premium due to its location.  It was rehabbed extensively in the mid 2000s by the previous owner and is in great shape.
  3. 10% of rental income for each so on the order of $50-60 dollars per month for R&M and also CapEx.
  4. Primarily neighborhood but also at this stage would avoid anything with major structural issues.
  5. I'm not quite sure, I think the biggest thing the landlord can do is to screen/screen/screen tenants as much as possible.  Also keep a close eye on the properties (monthly drive bys) and let the tenants know you keep an eye on them.
  6. To a reasonable standard - where someone can be comfortable to live but without any frills.  Basic, bog standard parts and finishes all around.
  7. Screen, screen, screen.  Treat them with respect and hope they reciprocate.
  8. No experience BRRRing these homes.
  9. Undecided, need to collect some wisdom from the crowd and find some like minded folks who have had demonstrable success in this niche.
  10. Haven't divested yet.

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Chad Carson's article - https://www.biggerpockets.com/renewsblog/2016/07/2...

@Josh Stack

My answers:

  1. Yes in Greenville Greer, SC area.
  2. Definitely cash flow generators. There has also been a huge amount of gentrification downtown Greenville. Several properties are now in 200k neighborhoods and people are building new houses in area I never would have imagined.
  3. I have so many of these now that I have cash to take care of a roof or an HVAC unit without breaking the bank.
  4. Well this is constantly changing as land down town is becoming so valuable. If I can get $700/month rent and it doesn't need to be torn down and the price is right then I am interested, Most of my deals pay for them selves in less than 5 years.I still avoid a war zone, but those are going away as gentrification changes the landscape.
  5. Controlling expenses and training new tenants. Tenants will take advantage of you if you let them.
  6. I convert mine to central HVAC, new flooring (no carpet), new paint, new kitchen. Some tenants have told me my house is the nicest place they have ever lived.
  7. I treat them fairly and maintain my houses. I have many long term tenants now. Proper background checks upfront help weed out the bad tenants early.
  8. I have been paying cash for my houses and have built a portfolio up over time.
  9. Absolutely!
  10. I have sold a couple of my lower end properties and traded up. I only did this because someone approached me with cash that wanted them more than I did.
Originally posted by @John Underwood :

@Josh Stack

My answers:

  1. Yes in Greenville Greer, SC area.
  2. Definitely cash flow generators. There has also been a huge amount of gentrification downtown Greenville. Several properties are now in 200k neighborhoods and people are building new houses in area I never would have imagined.
  3. I have so many of these now that I have cash to take care of a roof or an HVAC unit without breaking the bank.
  4. Well this is constantly changing as land down town is becoming so valuable. If I can get $700/month rent and it doesn't need to be torn down and the price is right then I am interested, Most of my deals pay for them selves in less than 5 years.I still avoid a war zone, but those are going away as gentrification changes the landscape.
  5. Controlling expenses and training new tenants. Tenants will take advantage of you if you let them.
  6. I convert mine to central HVAC, new flooring (no carpet), new paint, new kitchen. Some tenants have told me my house is the nicest place they have ever lived.
  7. I treat them fairly and maintain my houses. I have many long term tenants now. Proper background checks upfront help weed out the bad tenants early.
  8. I have been paying cash for my houses and have built a portfolio up over time.
  9. Absolutely!
  10. I have sold a couple of my lower end properties and traded up. I only did this because someone approached me with cash that wanted them more than I did.

 John...you own similar houses in or around Greer? How do you see the Greer area doing going forward 5-10 years based on your experiences? The Greer CBD seems to continue to ramp up over time...

Originally posted by @Jade S. :
Originally posted by @John Underwood:

@Josh Stack

My answers:

  1. Yes in Greenville Greer, SC area.
  2. Definitely cash flow generators. There has also been a huge amount of gentrification downtown Greenville. Several properties are now in 200k neighborhoods and people are building new houses in area I never would have imagined.
  3. I have so many of these now that I have cash to take care of a roof or an HVAC unit without breaking the bank.
  4. Well this is constantly changing as land down town is becoming so valuable. If I can get $700/month rent and it doesn't need to be torn down and the price is right then I am interested, Most of my deals pay for them selves in less than 5 years.I still avoid a war zone, but those are going away as gentrification changes the landscape.
  5. Controlling expenses and training new tenants. Tenants will take advantage of you if you let them.
  6. I convert mine to central HVAC, new flooring (no carpet), new paint, new kitchen. Some tenants have told me my house is the nicest place they have ever lived.
  7. I treat them fairly and maintain my houses. I have many long term tenants now. Proper background checks upfront help weed out the bad tenants early.
  8. I have been paying cash for my houses and have built a portfolio up over time.
  9. Absolutely!
  10. I have sold a couple of my lower end properties and traded up. I only did this because someone approached me with cash that wanted them more than I did.

 John...you own similar houses in or around Greer? How do you see the Greer area doing going forward 5-10 years based on your experiences? The Greer CBD seems to continue to ramp up over time...

I see Greer doing well. It is part of the greater Greenville area, but Greenville city is on fire due to demand.

Hi John,

Thanks for the reply, sounds like you are doing well with your Mill Houses.  Are most of yours 2/1 and 800-1000 sqft?  That's what most of the inventory is in my area.

Without the revitalization of downton Greenville do you still think you would have the same success with this asset class or are you riding the economic tail winds?