Most small Detroit apartment buildings (20-50 units) are owned by local operators who have consistently neglected to re-invest in their apartment buildings opting instead to extract maximum cash out of the multifamily over the years. They end up with an apartment building that has a very long list of deferred repairs.
These deferred repairs result in high vacancy rates as unhappy and neglected tenants leave. It is very common to see an apartment building in a strong neighborhood of Detroit running at 50% to 60% occupancy for no other reason other than neglect & mismanagement of the current owners.
Most apartment owners in Detroit choose not to work with affordable housing tenants (Section 8 / HUD-VASH) because these housing agencies require a stringent inspection by the agency, fixing up the shortcomings in your units and also being current on your yearly property taxes with City of Detroit and Wayne County. Most apartment owners fail one of the above requirement and simply opt-out of working these affordable housing agencies.
We see a huge opportunity in repositioning these 'broken-assets' into affordable housing communities with seniors and veteran tenants. Affordable housing rent subsidy programs like HUD-VASH (for veterans) and Section 8 provide a safe harbor to investors by creating predictable cashflow every month.
With these affordable housing agencies, rent is paid every month between the 1st & 4th by these housing agencies to owners. All leases are 12 months and renew with an annual inspection. Apartment units unlike houses are relatively smaller in size and their inspections typically result in fewer minor things to fix up compared to a 1500 sq.feet rental single family house. The inspection passes, the lease renews and the monthly rents keep coming consistently.
Our tenants are seniors and retired veterans. Seniors represent a stable tenant base. Tenants in their 20’s and 40’s move frequently due to jobs, relationships and kids. They also might leave the tenant pool and buy or rent a house as kids get older. Seniors in their 60’s have already passed that phase in their lives and have no interest in looking for a new place to liver every 12 months. They also want to live in an apartment community that is made up of other residents that belong to the same age group and in case of veterans, live next door to other veterans.
Veteran and senior living apartments are come with low turnovers and long term stable tenants. Both of these factors directly lower expensive turnover maintenance and lease-up costs for an investor.