This summer, a New York-based investment company bought almost an entire neighborhood near Spanaway.
The company, FREO, paid $2.9 million to buy 31 homes, all at once, from a regional homebuilder.
Almost all of them were rental homes to begin with. According to county property records, only about a dozen homes are owned by individuals.
The situation in this neighborhood is an extreme example of a new experiment: What happens to rental rates, and to renters themselves, when a faceless, out-of-state company suddenly owns hundreds of properties? What happens to the property values of people who live in neighborhoods dotted with rental homes?
FREO, which now owns most of the neighborhood at the intersection of Canyon and Military roads, is the smallest of the top three out-of-state investors that have bought almost a thousand homes in Pierce County this past year. FREO and the others — American Homes 4 Rent and two subsidiaries of The Blackstone Group — all promise high-quality professional management of single-family rental homes. But they’re attempting something that’s never been done before: Centralized property management of homes scattered across a wide area.
The News Tribune went to FREO’s neighborhood on a recent Saturday to talk to neighbors about their new landlord. We knocked on about a dozen doors. Five people answered, two spoke in detail, but only one would give her name.
Christina Childs, 25, told us about the difficulty she’s had with her rental in the year she’s lived there.
The problems with her home started before FREO, but weren’t resolved by the company until The News Tribune asked about it.
Her front-door deadbolt had been wrapped with Scotch tape to help hold the door closed, but her main concern had been the heat. It didn’t work downstairs. It hadn’t for a year.
She thought new management might fix it. The upstairs works fine. For four months, she called. Emailed. Filled out online forms.
“They’re not very good,” said Childs, running the space heater yet again as her 4-month-old son napped on the couch. “They don’t even come out.”
The News Tribune asked a spokeswoman for FREO’s parent company about the heat on Monday. On Wednesday, Childs said the property manager fixed the heat, as well as the deadbolt.
“The issue pre-dated (FREO parent company’s) ownership,” a company spokeswoman said in an email to the newspaper. “As soon as we were made aware, it was addressed immediately.”
Childs and her husband, James, also are in a dispute with FREO over the monthly sewer bill. Her lease indicates sewer is billed separately, and she’s been paying it, but FREO wants her to pay them for it, too.
“The only time they talk to you is to tell you, ‘You owe something,’” she said.
How the companies behave as landlords matter to everyone. Only time will tell if they’re good neighbors or slumlords.
Some early reports indicate trouble. The online newspaper Huffington Post published a story Friday detailing some renters’ frustration with getting responses to basic maintenance requests.
“It boils down to whether the landlord is keeping the home in good condition and has strict qualifications for tenants: who they’ll accept, and what kind of behavior they expect,” said Tim Ellis, real estate data expert and founder of the blog Seattle Bubble. “That sets the tone for the neighborhood.”
Fair or not, stereotypes of renters as less-than-ideal neighbors persist. Such as: They don’t take care of the lawn. They are more likely to have annoying pets. They generally care less.
“If you own a home in a neighborhood that has become almost entirely rentals, that is going to be a negative for your home’s value and ability to sell,” Ellis said. “It will reduce the price you will get.”
Homeowners can be vigilant about new rental properties by trying to work with management companies to ensure standards stay high, Ellis said. Or, homeowners might consider just selling to these investment companies and moving.
Another thing to watch will be rental rates. Trends for single-family homes are almost impossible to track, several rental property managers said. Unlike for apartments, no one comprehensively follows rates for single-family homes. Some websites, such as rentometer.com, let people plug in an address and the site’s algorithm offers data such as median and average rental rates nearby. For example, the site says the Childs’ rent of $1,095 per month is about $200 lower than the median for comparable properties within a mile radius.
That certainly is in line with the rumor in Childs’ neighborhood — that FREO plans to raise the rents “to meet the market,” she said. Her husband said they’d move if that happens. Why stay in their home with all the management hassle when they can pay $1,300 a month for a place nearby that offers a two-car garage and a fireplace?
“I know all of our neighbors,” Childs said. “We have barbecues. We have game nights. We stay because we love our neighbors.”