Rental companies snap up affordable homes
As new appliances were installed in the small, one-bedroom Rochester home, Krystal Gillespie said she envisioned a new homeowner being thrilled with them.
"You move forward with the mindset of: 'This kitchen is awesome. Somebody is going to be really lucky having this kitchen,'" said the Rochester real-estate agent representing a group of local investors who were preparing the house for sale.
Instead, it will likely be a renter who first cooks in the remodeled kitchen.
Ben Turnquist, who leads the group that sometimes includes Gillespie as an investor, said the plan was to sell the house as an affordable home.
"We always thought it was going to be someone's first home or for a resident that moved in here and stayed for four years," he said.
However, the first offer was from an out-of-state investor willing to pay full price with plans to convert the home into a rental property.
Gillespie said that means the $120,000 home, which would have required an estimated $700 monthly mortgage payment, will likely rent for $1,100 to $1,200 a month with its fenced-in backyard, garage, new siding, new windows, upgraded carpet and hardwood floors.
Dave Dunn, director of Olmsted County Housing and Redevelopment Authority, said more affordable homes than ever are being converted to rental properties in Rochester.
"It's about 1,000 single-family homes that we've lost over the last 10 years," he said, noting the number only includes rentals that have proper licenses.
"There are others that are out there that are either posted on Airbnb and flying under the radar or are just kind of illegal rental properties that haven't come to the attention of the city yet," he said. Web-based rental companies like Airbnb may allow some $200,000 homes to be rented for more than $1,000 a week.
Ben Griffith, assistant director of the Rochester-Olmsted Planning Department, said the number of homes no longer occupied by the owner has grown as high as 100 in a month.
"It's exponentially increasing," he recently told members of the Olmsted County HRA board.
Growing concerns, however, don't come with ready-made solutions.
While Gillespie pointed toward establishing limits on rentals or creating incentives to sell to future homeowners, Turnquist said he's leery of government involvement.
"I don't like the government regulation," Turnquist said. "I don't see a good plan to get out of this. It needs to be up to us."
Steve Borchardt, housing initiative director for Rochester Area Foundation, said some solutions could be emerging, from the foundation's efforts to build lower-priced homes marketed exclusively to homeowners to funding through the newly formed Coalition for Rochester Area Housing.
For now, he said the hot real-estate market continues to provide a challenge. It's difficult to build new houses in a range affordable for much of the city's workforce.
"Houses priced below $200,000 in any condition at all are flying off the market in one day with multiple offers at $10,000 over," he said, noting the competition continues to increase.