I just came back from Norway. It is a gorgeous country, extremely friendly people, and I can’t gush enough about it.
It also is very expensive to live there. I’m not going to pretend to know all the reasons why but they choose to support a deep social safety net and they tax themselves heavily. Incomes are high but after taxes and a high cost of living, there’s not much left. Gas is $9.
They have built and maintain a fantastic transportation network that includes roads that are in much better condition than any of ours; tunnels, lots of tunnels; and trains. It’s all expensive, of course, and reflects a people-focused government service priority.
What also seems to be happens in high tax areas is those who are the most innovative, most ambitious, and most likely to create a company that hires the most people, don’t want to operate their business in these areas. We can see that in the U.S., where business owners move business to lower tax states. That leads to demographic shifts but it also suppresses growth where there are no other options.
Norway’s population doesn’t grow much, and the differences in taxes between different regions of the country are nominal if any. If someone has a great idea, they are likely to leave the country to start their business.
So when high tax countries or states try to solve challenges like housing, there aren’t the smart, creative, innovative and risk-taking people who will invest their hard-earned money to buy and improve apartments. Instead, government has to do that. And unfortunately the results are poor quality, under-supply, even over-supply in some highly controlled economies of the world.
I’ve developed a lot of respect for those who have taken the time in their lives to see the world and share their experiences. I relate to differences among countries from a business and housing perspective.
I also appreciate how some democratic countries chose to prioritize the care of their people over the financial growth of their society. The results aren’t how many of us would choose to live but it works for them.
Market update
Greenville, SC – South Carolina has long been a state that cherishes free markets, and Greenville has benefited from those laws. Adding to this are several factors that have made it an attractive place to live, work, and run a business.
First is its climate. Warm and sunny but not blistering hot like the Southwest. A little clammy but you have the ocean nearby, an easy escape during long summers.
Next is its proximity to Charlotte and Atlanta, right on the highway between them. There is still a lot of land to build on, a development and growth mentality among city leaders, a container terminal in Charleston which is not bound by the onerous, expensive workforce restrictions found further north, and a culture of friendliness that is pervasive throughout the state. You can get used to that.
Then there is a growth momentum that few metro areas can match. Companies like the area because there are smart, willing and able workers, and families like it because there are jobs, communities with strong values.
The Northeast to Southeast migration continues to grow, and those attracted to the allure of the South don’t have to leave the urban arts, music, and entertainment culture behind. These factors breed on each other, and the city’s reputation continues to grow.
Look at population. Greenville’s population is 72,000. Wait, 72,000? That’s not exactly the kind of metro we look for in multifamily investing, is it?
Dig deeper. The Metropolitan Statistical Area of Greenville is actually 874,000 as of 2015. South Carolina has laws that make it hard for a city to annex surrounding cities and communities but there are actually quite a high number of them. When investing in this area, keep in mind the location’s proximity to the economic centers, even if the real estate is not in Greenville.
The Greenville MSA has experienced steady population growth over the last 30+ years, averaging over 3% a year. That is a high number for any city, and this growth has been consistent, no down years.
Jobs growth has been good too. Jobs growth exploded after the initial pandemic-driven employment drop to average over 5% growth year-over-year, up until end of last year. This year it has averaged 2.3%, a little lower but still good by any measure, and actually reflects strength in an economically challenged year.
What industries call Greenville home? Healthcare, schools, government, Walmart, and power utilities, naturally, but also banks like TD Bank, BMW in nearby Spartanburg, and GE just to name a few. This region is happy to have a diversified industrial base and the stability it brings.
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Finer Points of Multifamily Properties
What Turns Off a Prospective Tenant
You are targeting the kind of tenant that appreciates an apartment that is clean, everything works, and looks attractive inside and outside. That tenant understands that they’ll be paying more for these benefits. Regardless of whether they got a concession or any discount in rent, they think they’re paying a premium for their new apartment.
That’s the kind of renter you want. Not the renter who knows the place is in disrepair, utilities barely work, it’s not clean, and the landlord says take it or leave it. That renter knows they’re not paying much so they shouldn’t expect much.
The renter who believes they’re moving into a premium apartment can be turned off by a number of things. They saw pictures of the outside of the property where the sky was blue, the sun was shining, and the flowers were blooming, and the carefully staged interior of a unit that is “just like” the one they’re renting. Then the prospect arrives for their showing and they see things that shatter that illusion.
What are those deal killing first impressions? And what can you fix? Let’s call out a few of the exterior things that many apartments have and tenants don’t like.
There might be dozens of those “stops”, those disruptions to their image of a perfect apartment. They might be just quick negative mental notes or they might scream “I can’t live with this!”.
From the outside, start with the parking lot. Potholes, gravel, no lines, the lot blends in with the grass. This is a big indicator of low maintenance. The owner doesn’t care, makes the tenants park in random places, and walk over a lot that they can trip on. Fix the holes, repave or resurface, and restripe. If you can’t budget to fix this, you shouldn’t buy the property.
Paint. If the color looks bad or the paint is peeling, that is a turn off. Maybe not a huge issue, but the appeal of fresh paint with a well-chosen, modern color is astounding. That gets noticed.
Sidewalks, same as pavement. Cracks in sidewalks don’t just appear in newer properties. They start cracking when the property gets old, and once it’s cracked, it is easier for the ground to push it around even further. It’s above all a safety issue but it is disconcerting for a tenant to have to navigate a cracked sidewalk. Then they trip and you get sued.
Windows are often not noticeable, until something about them looks bad. Cracked glass is very noticeable, broken blinds the same. Fix these, even if you can’t afford to replace every window.
Air conditioners in the windows make the property look cheap. It typically means the main cooling system in the unit is not working or not sufficient. Tenants with even a nominal eye for quality notice them and avoid them. Get the main units working. Budget for replacing HVAC before you buy the property.
What else can you think of? Satellite dishes? Mansard siding? Signs in the windows? Your property manager needs to be ruthless about these. Get the little things fixed or replaced, give tenants notices right away when they break their blinds or put up signs or satellite dishes. When the little issues get ignored, you’ll have bigger issues.