Over the course of several years, I’ve stumbled upon a decent rental niche in Oklahoma City that is a growing opportunity.
Baby Boomers were born between 1946 and 1964, which makes them between age 47 and 65 at the time of this writing. In the US, this group is 78 million strong.
That’s why the media says our population is getting older.
We’ve been told that the Baby Boom generation represents a great concentration of personal wealth – a value equaling 50% of the assets in the US.
What we hear less about in the news media are the larger numbers of Baby Boomers who are on the opposite end of the economic spectrum.
According the 2008 census, the current poverty rate is 13.2%. This percentage seems to cut across age groups.
According to 2009 Federal poverty guidelines, the poverty level for a single person is $10,830 annual income, and for a couple is $14,570.
Let’s talk about this opportunity. In 2004, I bought a small apartment building (11 units) near the Oklahoma City downtown area. It was a run down older building without separate utility meters. Therefore, I had to rent the units “all bills paid”.
After I bought the property, my biggest question was how this would work out from a property management perspective.
Over the last six years, I’ve fixed up each of the units. They include seven 1-bed units, 1 efficiency, and 3 units that share a kitchen, bathroom, and living room. I’ve focused on making the units as energy efficient as possible (weatherizing doors and windows, eliminating windows, and insulating). I added a coin-operated washer and dryer for the convenience of the tenants.
First, let me talk about this from an economic perspective.
The most expensive rent I’ve got in this property is $485 per month, but most are $400 per month. The shared accommodation is as cheap as $200 per month.
Every tenant in the property except one couple is single. Interestingly, only 2 of the tenants are less than 50 years old. Only 2 of the tenants have income from their job. The other tenants get their income from SSI.
The fact is that they can’t afford a higher rent. Our income criteria for an all bills paid apartment is that the rent cannot be more than 50% of their take home pay. For a single person at the poverty level of $902 per month, that would be $451 per month. That makes these units affordable for an elderly person in Oklahoma City on a fixed income.
Social security benefit checks for a single person are generally less than $1,000, so a social security recipient can generally afford one of these apartments.
Second, let the talk about this from a property management perspective. I have been following Fair Housing guidelines with this property. I don’t run applicants off because they aren’t old enough. That can land a property manager in big trouble.
What happens is the younger folks generally don’t stay too long. Many of the young ones who are locked into poverty level income have a drug or alcohol addiction. If they do, they generally don’t last too long. I don’t stand for that type of behavior at the property.
The tenants who stay long term generally don’t have drug and alcohol issues. They want a safe place to stay in which the landlord takes care of the property.
The most important screening criteria for this type of property is a criminal background check. If I can see a pattern of stable, non-criminal behavior for the last several years, they are good as gold as long as they can show me they can show me they are getting a check.
There is also a sense of belonging to a community because of there shared generational identity. This is huge because they want to be surrounded by friends. Most of the vacancies we fill are from word of mouth referrals to fellow Baby Boomers who need a place.
The City of Oklahoma City has also been a help filling these vacancies as the area is developed. Many of the competing types of properties have been converted to office buildings or upgraded to expensive condominiums. Either way, there are less and less of these types of buildings for individuals at poverty level income.
I think this type of property will continue to be a big opportunity as the ranks of the poor and elderly continue to rise. They are going to have to live somewhere.
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