Mt. Helix has fix for vacant Indianapolis homes: Rehab ’em and rent ’em [The Indianapolis Star]
|By Jeff Swiatek, The Indianapolis Star|
|McClatchy-Tribune Information Services|
He's willing to buy pretty much all the unwanted, vacant houses in the city that he can get his hands on, rehab them and fill them with low-income renters.
All on his own dime, without any government subsidies.
This isn't a pipe dream. It's happening.
Nelson heads a
And Mt. Helix is just getting warmed up. Nelson says he can scare up enough investor money to buy another 3,000 to 5,000 decrepit
The buying spree has thrust the little-known
What makes Mt. Helix stand out is its focus on buying vacant homes in distressed neighborhoods surrounding Downtown and turning them into low-income rentals.
In contrast, the other big investor groups active in
"There is no model for what we are doing," acknowledges Nelson, 49, a talkative former telecommunications consultant who lives in
Vacant or "zombie homes," as they're often called, are a vexing problem in
City showing caution
City officials don't quite know what to make of Nelson and his two-year-old company, named for a mountain next to its offices in
"My gut reaction is some concern," said
Roeder, who's in charge of drawing up a new plan for dealing with the 600 vacant properties currently in city hands, says he worries that if Mt. Helix's plan doesn't work, the company might dump its hundreds of houses back on the market -- sinking any hopes of recovery for some of the city's most downtrodden neighborhoods.
On the other hand, Roeder said, "Right now there's no reason not to believe
Up to now in
"This is unproven," Hanson said of Mt. Helix's plan to buy hundreds of houses across many neighborhoods and manage them as for-profit, low-income rentals. "Scattered-site housing is something that the affordable housing sector hasn't unlocked."
Apartments have always been easier to adapt for low-income housing, he said, because they're concentrated, sharing parking lots, clubhouses and sometimes heating and cooling systems that make them cheaper to run.
Hanson said he's never seen a company try to create such a large holding of rental housing using millions of dollars in private money and no government subsidies (except for federal Section 8 housing payments that tenants qualify for). "No one else is bringing this kind of capital into the market. I'd like to think they are coming in in a sophisticated way and doing it right. There are a lot of risks in the business."
The rise of big investment groups in the single-family residential rental business has been spurred by several market trends: a drop in home prices since the 2007-2009 recession, a plentiful supply of homes for sale, a strong rental market, and institutional investor demand for investment products that generate solid returns.
The more than
Mt. Helix will try to structure its housing portfolios so they pay attractive returns based on steady rental income, Nelson says. That will require Mt. Helix to maintain high occupancy rates in its houses, probably over 90 percent. In the long term, possibly 10 years or longer, Mt. Helix plans to sell the homes back to tenants or other homeowner-buyers once housing values rebound and stabilize, returning more profits for investors, Nelson said.
CDC likes what it sees
In the Eastside neighborhood of
The executive director of
"They have done a very good job," Rogers said. "Joe keeps his word. What he tells me, happens. He doesn't over-promise."
The houses Mt. Helix bought from the CDC are ones that the CDC built with the help of government tax credits from 1998 to 2000, only to see the project fail. Under CDC management, the houses slid into disrepair and 70 percent of them ended up vacant, many stripped of wiring, plumbing and fixtures by vandals.
"We spent a lot of money and it was to no (avail)," Rogers said. "Even when the CDC would board them up, they would go and take the boards down. It was sad."
In a construction blitz, Mt. Helix has now fixed up and found tenants for most of the 64 houses it bought from the CDC, plus another 40 or so in the neighborhood, which is pockmarked with 700 abandoned houses, Rogers said.
"We paid the extra to make it work," Nelson said. "This was a project we wanted to do with the CDC. It was a chance to demonstrate our commitment ... to the CDC, the city and other cities."
While Mt. Helix has focused its home-buying in
Accompanied by Rogers and a CDC board member, Nelson showed off two run-down
As Nelson stood on the new floor in the house at
Not far away, on
The house sported the standardized look and furnishings that Mt. Helix puts in all its houses: new beige carpeting, refurbished kitchen appliances, a 200-amp electrical panel and all-electric heating and cooling systems.
The standardization borrows from the mass-produced
Mt. Helix employs only electricians and construction managers. It contracts with construction crews of about a dozen workers per crew who descend on a house and completely rehab it in two to three weeks, Nelson said. The managers inspect houses weekly and pay crews only when the work is done right, Nelson said.
Rehab costs typically run
One of the first things done on every house: Installing new electric meters and boxes so the house can be alarmed against thieves who are notorious for stripping items of value from vacant homes in the neighborhoods where Mt. Helix is buying.
"We don't let them linger," Nelson said "We go in, alarm them and provide security. The police have been very helpful. The only thing, oddly enough, that we've had stolen was one alarm."
Rents range from
Standing outside the latest fixed-up home on
One success story
One of those newcomers is Shameskie Gray, who said she moved into a Mt. Helix home from a
"I was kind of deterred at first because of the area," Gray said. "There's an abandoned house on either side of me." But she likes the fact that her rent of
She also praised maintenance, saying, "They're really good with callbacks. I really do like that." When her daughter locked herself out of the house, Gray said, Mt. Helix's rental office even sent someone out to unlock it.
Nelson said demand for Mt. Helix's rehabbed homes is strong. "We have a waiting list a mile long. It's been a nice surprise."
This month, Mt. Helix's crews were rehabbing more than a dozen houses a week as the company continued to buy more. It bought 150 houses last month at the annual sale of tax-delinquent properties held by the
Given its preference for buying run-down houses, Mt. Helix owns dozens of properties cited for violations of county health and safety laws by the
"We have hundreds of violations, I'm sure, but most of those are because we inherited properties" with outstanding violations, Nelson said. "It's very rare that Health and Hospital actually fines us. We are one of the groups making an active effort to address those (property complaints)."
Investor groups flourish
Mt. Helix's president,
"I see us filling a void that's overlooked by other people," Lifton said. "No question about it, that's our niche. And I tell you, I think these (
Lifton previously co-ran a family-owned apartment management company,
Housing officials around the country are still trying to understand the impact of big investor groups and the large portfolios of rental houses they're building in many major U.S. cities.
"Areas with sizable distressed property inventory and high growth potential saw heavy investor activity ... such as
The Fed study doesn't predict how the institutional dollars might impact cities and housing markets. But Nelson is willing to share his upbeat vision.
He said Mt. Helix's mass purchases of houses have the ability to breathe new life in
"We're looking to buy and rehab the properties that have really been left behind. Turn what was a possum- and stray-cat house into a clean, non-blighted asset. We understand we can't stabilize these neighborhoods with rentals. But right now there is no alternative."
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