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Saturday, Jun 23, 2018
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Foreclosure boom benefits landlord investors

TAMPA — Chris Zaragoza and roommate Andrew Black, who share a rental home in Riverview with Zaragoza’s wife, were whiling away time on their driveway about 4 p.m. Tuesday waiting for a moving van to arrive, as a persistent wasp kept interrupting their chat.

This would not be an easy move. The garage of their two-story home was stacked floor to ceiling with chairs, mattresses and other knickknacks, so much so that it was hard to find a pathway through the clutter.

Still, Zaragoza said he has little choice but to move. His rent already was too high for his liking, $1,500 a month, and his landlord let him know it was going up, he said. Another annoyance: He could never seem to reach the landlord’s representative.

His only contact with his landlord — one of the big investment firms that have bought up at least 3,300 homes in Hillsborough and Pinellas counties recently — is through a Web portal.

He pays rent and schedules repair requests through the portal, but to his frustration, can’t reach anyone in person.

He wasn’t even sure who owned the home, although county land records show it is an affiliate of Silver Bay Realty Trust of Minnesota.

“We can’t get a phone number to call someone,” Zaragoza, 34, said. “When we first moved in, we spoke to somebody to get the lease signed.”

The Tribune was unable to reach an official from Silver Bay’s property manager, which land records indicate is a local firm called Sun Cove Realty.

Zaragoza and Black are part of the single-family home rental boom that has swept through the area the past two years. With thousands of rentals hitting the market, one might assume rates would fall and vacancies would rise because of the new supply.

However, two data sources, a local property management firm called Home Encounter, and a national rental research firm called Rent Range, suggest rents are staying robust in the $1,000-to-$1,500-a-month range, although not rising.

That’s welcome news for investors buying houses, but bad news for people such as Zaragoza and Black looking to rent them. Using Census Bureau data, the Tribune reported in April that the Bay area ranks sixth in the nation in percentage of financially burdened renters because of its relatively low-wage jobs and high rent costs.

Steve Oehlerking, whose Tampa company, Rent Solutions, leases up rental homes, said he’s been surprised at the rental market’s resilience.

“I would’ve thought it would’ve been saturated by now,” he said.


No place is more affected by the investor surge than south Hillsborough County. Along Zaragoza’s street, a winding path of one- and two-story houses in Riverview called Golden Silence Drive, hedge funds and real estate investment trusts have bought up at least 13 houses, and that doesn’t count purchases by smaller investors.

An affiliate of Minnesota-based Silver Bay Realty Trust bought the two-story foreclosed home Zaragoza is renting for $94,000. Next door to Zaragoza, a neighbor sold his two-story home to another investment company, Beazer Pre-owned Homes, for his full asking price, Zaragoza said.

And around the block, industry giant American Homes 4 Rent has hung a for-rent sign on a beautiful two-story beige home with coffee-color trim and neatly mowed yard.

The biggest buyer of rental homes throughout the area, by far, has been a Dallas company called Invitation Homes, which is controlled by the giant investment firm Blackstone Group. Invitation Homes had purchased at least 1,801 homes in Hillsborough and Pinellas counties for at least $247 million through the end of September, records from property appraisers offices show.

The investor buying spree has helped to change Hillsborough County’s mix of homesteaded and non-homesteaded homes. In 1999, just 16 percent of homes in the county lacked a homestead exemption, but by this year that has risen to 28 percent, the Hillsborough County Property Appraiser says. It’s assumed that many of those are being rented out.

No such data were available for Pinellas.

Investors are counting on renting single-family homes to the thousands of local residents who lost their homes in foreclosures and short sales, and to new arrivals from up North or around Florida.

Around the block from Zaragoza, Eddie Caballero, 47, is renting a two-story home on Golden Silence Drive from a small investor. Caballero got caught up in the housing bubble and bust, having bought a $300,000 home that he eventually let go in a short sale for $130,000, he said.

He still owns another home in Tampa that he might move into, but for now he’s renting in Riverview for $1,100 a month. He tried to rent from American Homes 4 Rent, but the company balked at his short sale. Anyway, Caballero’s small-investor landlord seems more reasonable than the big new investment funds that moved into town, he said.

“They (American Homes 4 Rent) tell you how much it’s going to be and that’s it,” he said. “They tell you it’s $1,500 a month and they won’t bargain. They run the show.”

For now, demand for rental homes seems to be keeping up with supply, which is preventing rents from falling as much as some renters would like.

Between early 2011 and this past September, the number of homes leased up each month has risen from about 120 to more than 500 in Hillsborough County, according to local property management firm Home Encounter.

Average rents have stayed fairly flat at about $1,500 in Hillsborough and Pinellas counties over the past three years. A second research firm, Denver-based Rent Range, also showed fairly stable rents.

As of September, the typical 3-bedroom home in Hillsborough County rented for $1,313, Rent Range says. That’s up from the $1,244 a similar house rented for four years ago. Rent Range wouldn’t disclose its methodology or how many homes it tracks, saying those are proprietary, but the company’s estimates are widely used in the home rental business.


To be sure, there are some small cracks developing in the single-family rental boom.

Doug Brien, co-founder of Waypoint Homes, a California company that has purchased at least 95 homes locally, said certain pockets of the area have an oversupply of ready-to-rent homes. Landlords are having to cut rent to fill them, Brien said.

He was still optimistic rents will start rising once landlords start leasing up all their recently purchased homes.

Meantime, investors may be offering more rent concessions — such as breaks on rent — here than elsewhere.

Blackstone Group recently pulled off a first in the history of rental homes. It sold bonds to investors and is paying off the bondholders with the monthly payments from 3,207 Invitation Homes rentals around the country. Of those, 257 homes included in the “securitization” are in the Tampa area, according to a report by the rating agency Morningstar.

For some reason, Invitation Homes has to offer customers better concessions here than in its other markets around the country, Morningstar analysts noted. For example, its concessions in Tampa come to 2.4 percent of its customers’ annual rent, compared with just 0.9 percent of annual rent across the nation. Morningstar’s analysts couldn’t explain the local disparity in a recent interview, and an Invitation Homes spokesman wouldn’t discuss the bond sale and wouldn’t discuss occupancy trends in specific cities.

Until the market slows, though, many landlords are in the driver’s seat and are seeing occupancy rates they’ve rarely seen before.

From Clearwater, Dee Dee Cornelius oversees 100 single-family rental homes owned by a retired orthopedic surgeon. Many are in Tampa’s Carrollwood area and the neighborhoods around northwest Hillsborough’s Westchase community, high-demand areas that fetch around $1,500 a month, she said.

She had 95 percent occupancy for a few years, but in the past six months it’s hit 100 percent occupancy. What’s more, with so many renters with foreclosures, short sales and bankruptcies on their records, she often requires security deposits of $3,000 to $4,500 from those with troubled credit. That’s two or three times the normal deposit for someone with a clean record, she said.

She’s not sure how people are coming up with the money, but she figures people in foreclosure are withholding mortgage payments and saving up for their rental deposit.

Eventually, things will slow down when builders overbuild again and vacancies rise. But for now, “We’re not there yet.”

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Twitter: @msasso

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