A recent high-dollar deal in Wilmington represents not only a little more affordable housing in the city but also a good investment for the buyer, a broker said recently.
Eighty-three downtown Wilmington historical dwellings, which contain 93 rental units, changed hands in August for the second time in a little over two years.
Tom Cruz and John Lewis of TJ Real Estate Holdings LLC purchased the portfolio of rental units, along with a small amount of unused land, from members of the Olson family for $6.3 million with the intent to improve the properties and hang on to the portfolio as a long-term investment. At the same time, the owners have been working to increase the number of the rentals that are available to people who participate in a housing voucher program.
Broker Sharon Cushing of Coldwell Banker Commercial Sun Coast Partners represented the Olsons in the sale, and Jeff Hovis, a broker and Realtor with Intracoastal Realty, represented TJ Real Estate Holdings.
“They can provide a product that they know has clients that need it,” Hovis said of the buyers. “People can afford to live in these homes that are centrally located and close to public transportation … They’re in it for the business, but they see that providing this kind of service is something that has a conservative income stream.”
A majority of the homes in the TJ Holdings downtown Wilmington portfolio are located between Seventh and 17th streets and are two- to five-bedroom houses, mainly built between 1910 and 1925.
At the time of the sale, 10 percent of the homes were available to tenants using the Housing Choice Voucher Program, previously called Section 8.
“We’re going to be increasing that probably close to 30 percent,” working with the Wilmington Housing Authority, Cruz said in August.
The federal voucher program enables private landlords to rent apartments and homes to qualified lower-income tenants.
“There’s a huge waiting list,” said Cruz, who also had 50 rental properties of his own before the August purchase, mainly in downtown Wilmington.
“A lot of these houses that I buy, you can tell previous landlords are just not taking care of them, so that’s our big thing … We would want to live there before we rent it out to anybody,” Cruz said. “It’s a long-term investment for me and my partner. That’s why we’re in the process of renovating so many units, to get them to where we would want to live in them.”
The deal involved a lot of moving parts, including providing research about the need for such rentals in Wilmington, keeping existing leases and tenants in place, connecting the buyer to Wilmington Housing Authority officials who could explain the voucher program and appraisals and inspections for each dwelling, Hovis said.
Hovis was on the board of the Wilmington Housing Authority for nine years, serving as chairman for two years. Before moving to Wilmington, Hovis worked for the National Corporation of Housing Partnerships, a private owner of affordable and conventional housing.
The Wilmington City Council recently adopted financing revisions to its Homeownership Opportunities Program (HOP) because only a small percentage of the 120 potential buyers who completed the program’s education portion, and who were prequalified, were able to purchase a house.
“Unfortunately, these eager homebuyers have not been able to find a home that is affordable within the City limits. Of the eligible HOP borrowers, only seven closed on a home loan,” wrote City Manager Sterling Cheatham in the resolution on the changes approved Aug. 21.
He cited Cape Fear Realtors data that has been recording rising home prices in the area.
“The existing HOP guidelines allow for a maximum loan amount of $185,000 for existing homes,” Cheatham wrote. “The average sales price of an existing home in New Hanover County was $337,894 for the period January-June 2018; for that same period the average sales price for a condo/townhome was $243,847.”
The HOP program is available on a one-time basis to borrowers purchasing homes within the corporate limits of the city as their primary residence, according to city documents.
Also on Sept. 4, the City Council adopted a resolution improving incentives for the city’s Rental Rehabilitation Incentive Loan Program (RRIL), which “provides loans to developers, investors, nonprofits or those entities who could build on vacant in-fill lots or rehabilitate existing vacant units,” a city news release said.
Some property owners and affordable housing advocates say that private investment and public-private partnerships are critical to provide more affordable housing in Wilmington and beyond, with the definition of “affordable” being a housing payment and other expense associated with housing being less than 30 percent of a household’s income.
“I think affordable housing will be best solved with private investment into the area combined with public partnerships,” Cruz said in an email. “I think this is the case because the demand for affordable housing is higher than the demand for luxury $2,500/month apartments on the river.
“The investors that are doing private large-scale development in Wilmington are looking for the high-income tenants with disposable income. So that leaves investors like me that want to purchase entry-level homes, renovate them so they are desirable, and then have a steady stream of qualified tenants from the voucher program to occupy them quickly.
“Our goal is to acquire hundreds of homes in New Hanover County that we will renovate and offer to the private market and supplement with Section 8.”
Cruz said his rental rates vary greatly, from $700 for a one-bedroom unit in a quad building to $1,400 for a four-bedroom, 1,500-square-foot house downtown.
He said some potential investors have misconceptions about voucher program participants.
“I have found that some of the best tenants come from the voucher program, and I rarely have issues with damages/evictions. This is especially beneficial because the team at the Wilmington Housing Authority does an amazing job of providing landlords with guaranteed direct deposit payments, a list of pre-screened (criminal checks) tenants that are ready to move in, and resources if you have any issues,” Cruz said.
Hovis said another benefit of the TJ Holdings purchase is that it’s not a case where the buyer plans to knock down homes in favor of dwellings that would fetch higher prices and be out of the “affordable” range for many, Hovis said.
“This is stabilizing the neighborhood,” he said. “And I think that’s important.”