Happy Tuesday! Mid August is here and with it is a massive heat wave. I couldn’t believe the other day when I looked at my weather app and it was 105 in Dallas! That’s crazy. My theory is that global warming is a Northerner conspiracy since everyone is moving to the Sun Belt and this will convince us all to move back. Jokes aside, my family and I are headed to Northern Ontario (Canada) in a few weeks to get a little respite from the heat. I’ll be packing two monitors and setting up my remote office at the in-laws place while the rest of the fam enjoys the perfect weather. The summer/fall in Ontario is beautiful.
We’ve had a busy week with the start of our new CFO, Rebecca, and the kickoff of our new leasing CRM and lead gen system. Each week I review our property by property leasing activity and last week we hit a 17-week high for net move-ins. Kudos to the team. With our continued focus on curb appeal, weekly (and sometimes daily) price adjustments, and improved response time, we are inching our way toward beating the competition.
We also set our monthly CAPEX budgets by property and are just about to roll into September budgets. I like our RVPs (in coordination with our onsite managers) to detail the units they want to renovate, the estimated scope and cost, and exterior projects that will be completed during the month. That gives our team visibility into where our money is being spent, which units are being upgraded, and accountability for specific costs. Granted, plans change from time to time, but at least we’re not pushing on a rope at that point.
I’m also excited about having Rebecca on board because we’re about to achieve our goal of sending out monthly financials to our investors on all our properties. I’ve always done the monthly/quarterly summaries that provide a fair amount of detail, but we’ve never quite gotten to the point where we could kick out a full-blown month-end close report. We’re not there just yet, but I know we’re close and it’s going to be a huge milestone.
Before I get into my story for today, just a quick reminder that we’re doing a live webinar tonight to update you on our 264-unit Lumin, San Antonio, TX project. With a pending refinance, improved yield-on-cost, and $2-3MM in estimated carry cost savings, it’s coming along nicely. We would love to have you join us as we cover the updated underwriting and show you why Lumin will complete at a 6.7% untrended yield-on-cost in a 5 cap market!
I would like to share a real-life story from one of our properties that explains, in part, why rent relief doesn’t work. Over the past several years I believe we have seen a departure from thoughtful assistance in this area and are now suffering, and will be suffering, years of consequences for these misguided decisions.
I consider myself a compassionate conservative. In the words of Myron Magnet of the Wall Street Journal,
“Compassionate conservatives […] offer a new way of thinking about the poor. They know that telling the poor that they are mere passive victims, whether of racism or of vast economic forces, is not only false but also destructive, paralyzing the poor with thoughts of their own helplessness and inadequacy. The poor need the larger society’s moral support; they need to hear the message of personal responsibility and self-reliance, the optimistic assurance that if they try—as they must—they will make it. They need to know, too, that they can’t blame “the system” for their own wrongdoing.”
In truly caring for our residents and our communities, we desire to focus on lifting them up and giving them a hope and a future. Our goal is to remove generational poverty by providing opportunity. I think for many years prior to the pandemic, millions of working-class Americans were able to achieve great success and financial stability as they were encouraged to work hard and pay their bills.
That might seem like common sense to some of us but I would venture to say that most of us were blessed with families, parents, teachers, or natural gifting that propelled us toward our success. We can tend to take for granted the influence that these folks had on our lives. There are many folks who have no hope. And when they have no hope, they can become listless – with no reason to push forward.
Our property in Houston, Westbury Reserve, is home to many working-class folks who struggle with hope. They see the daily grind of work as a somewhat miserable existence and feel that life would be better spent doing less, not more. Nonetheless, with the incentive to keep their homes (and avoid eviction), they get up every day, go to work, do their jobs, and pay their bills. And as they do this, many find a previously unknown value in the accomplishment of working hard and this motivates them to strive to do better and achieve greater things.
A few months ago, Harris County (Houston, TX) announced they received additional funding for rent relief and would be re-opening the portal for folks to sign up. Free money! Sounds like a great idea – give money to people who can’t afford to pay rent. Here’s the reality. Many folks at our complex learned of this news and stopped paying rent (in anticipation of getting rent relief). They didn’t save the money they would have otherwise used to pay rent – they spent it. They spent it on things a lot more “exciting” than rent. And when the resident portal opened for less than 24 hours before running out of money, they were stuck in a really bad spot. They now had bills to pay, not enough money for rent, and were going to be facing eviction. This is the third or fourth time we’ve seen this cycle play out.
It’s almost like buying a lottery ticket – you can always hope to get the winning ticket but the reality is most people never win so don’t count on it. These folks who are just barely learning to see the benefits of hard work and financial management are now back to square one. Their credit will be hit, their ability to get a nice apartment will be gone (good apartment complexes don’t accept prior evictions), and they could easily slide back into generational poverty. I find this frustrating and unnecessary. These people were paying their rent, they were making things work. True, it’s not easy in today’s economy – inflation has caused the cost of many things to go up faster than wages – but having a job and making ends meet (even if living paycheck to paycheck) is a heck of a lot better than sliding backward.
It’s also disappointing for us as we have to go through another wave of evictions, turnover costs, and re-leasing. And eventually, all these costs get passed on to the economy in the form of higher rents. I just don’t think it works. I’m not saying rent relief is a bad idea but I am suggesting that in the real world, it gives false hope to those who need real hope – not another handout.
That’s all for now! Thanks for reading and have a great week!