Inside the business of low income housing in Greenwood.
If you ask Justin Williams, Dave Thompson is a lifesaver.
Thompson isn’t a paramedic, firefighter or police officer. He doesn’t work for a nonprofit.
Thompson is a landlord with more than 70 properties in the city of Greenwood, the majority of which he rents for $300 to $500 per month.
Williams is one of his tenants.
“Now I can actually live in an affordable place and it’s not going to kill me to live there, I’m not going to be struggling month to month,” Williams, a cook at Waffle House, said.
According to the Greenwood City/County Consolidated Plan 2035, one of the city’s goals should not only be development but affordable development.
Most low-income households are renters.
“205 households in the County (17.1%) are considered to have extremely low incomes of only 0 to 30% of area median income,” the consolidated plan, which was published in 2015, reads. “Of these extremely low-income households, nearly two-thirds … are renters.”
Thompson is quick to say that he doesn’t run a charity. He runs a business. What’s good for his tenants, he said, is good for him.
“My goal is to keep the rents affordable,” Thompson said, “but my goal is to also keep them full and keep the expenses relatively managed and as low as possible.”
That’s because the income he gathers from the first 10 months of rent a tenant pays is used to cover expenses.
In South Carolina, secondary properties are taxed at 6 percent instead of 4 percent, “which is one thing that makes it difficult to keep rents low,” Thompson said. “If I have to pay twice what you pay to live in your house cause it’s your personal house but it’s my secondary house … that amount of money has to come from somebody, and ultimately it has to come from the person who rents it so that I can maintain the house.”
The first three months of a tenant’s rent will, typically, cover a property’s tax liability, Thompson said. Months four and five cover insurance. Months six and seven, “continual repair-type expenses.” Eight, nine and 10, mortgage payments. Months 11 and 12 are profit.
Despite that, profit margins are healthy. Better, in fact, than if he were to rent to the upper-middle class.
“The average rental property that most people buy that aren’t in the low-end scale of things, they get anywhere from 8, 12, maybe 15 percent return,” Thompson said.
He guesses that it wouldn’t be possible to rent out apartments for more than $1,300 — most who could afford that would rather buy than rent.
“On the lower end of things, you’re normally looking more to the 25 to 50 percent return because it’s more effort.”
Critical to maintaining those margins is finding houses at bargain-bin prices. But keeping costs low is not feasible for every would-be low-income landlord.
“The home remodeling works well with the rental properties because we have a built-in maintenance group,” Thompson said.
Although he rents apartments through Thompson Rental Properties LLC, his main business is Help Around the Home, a home remodeling company.
Thompson may put more money into a condemned home than it cost to buy in order to make it livable. Four units on Hall Avenue, for example, cost him $6,000. But the price to fix them was several times that.
Williams had been sleeping in his car when he found one of those homes online.
“Oh my goodness,” he said when asked how it compared to other similarly-priced apartments he had rented. “I don’t have to call him up every other day to say, ‘Hey, something is messed up, hey something is broken.”
Renters like Williams rarely have much choice when it comes to housing. They’re limited not only in what they can afford but who is willing to rent to them. Williams had looked at apartments in Lakeview, Winter Ridge, Huntington and New Haven complexes, all of which required prospective tenants make three times what it costs to rent the apartment, pay a deposit, and have a decent credit score, he said.
“Individual owners like myself, agencies get frustrated with because we will rent to someone who has either bad credit or who has had an eviction on their record,” Thompson said. “What that does for people like me … it puts a group of people out on the streets who say, ‘I gotta have a place to stay, I can’t go through agencies anymore because they all share my information and I don’t have any way to get into an apartment. “Those people will be the ones who come to us and say ‘Hey, you’re our last resort. We need a place to stay, we don’t have the best credit, we don’t have the past record, but if you give us the chance we’ll try to do well with you.’ And as a private owner, we are able to give them that chance.”
On Thursday, Thompson bought a house at 218 W. Creswell Ave. for $18,000, with another $1,000 going to the person who had found it for him. The city had it appraised at $25,000, which, Thompson said, is typically less than a house’s market value.
According to his estimates, the annual tax bill would be $720, and the annual insurance bill $400.
At First Citizens Bank, Thompson was able to secure a 10-year amortization with a 4.5 percent interest rate after making a down payment of $3,800, or 20 percent. Including the taxes and insurance, his monthly, fixed costs would be $276.
Assuming that he would charge a tenant $650 per month, that income from two of those months would be needed to cover annual maintenance and that the house would be vacant two months of the year, Thompson would bring in $5,200 per year on the house, half of which would go to the aforementioned costs.
“Those are very conservative estimates,” Thompson said. His annual profit could be as much as $4,000 if there is no vacancy during the year and maintenance costs less than expected.
All of Thompson’s units, of which he has more than 70, are currently occupied, which, he says, speaks to the demand of low-income housing. And he sees that demand growing.
“There’s just a large influx of people,” Thompson said. “Things in the past that I might have rented for $300, now they’re like $450. Prices have gone up a little bit in the past 10 years, and they’re continuing to go up because rental property is getting more and more scarce.”
Rebecca Fernandez taught in Abbeville County School District for 25 years. She recently entered the low-income rental market with Thompson’s help, buying 11 units on Walker Avenue.
“Five of those were leased immediately when I bought those apartments, Fernandez said. “And when they started working on those apartments, people were coming by and asking him every day, ‘When are the apartments going to be ready, I’m ready to lease.’”
She bought them in November. They were all leased by the end of January.
“A lot of people think of low-income rental properties as a scar on the face of whatever town or city they’re in,” Thompson said. “What I offer is necessary to have someone working at minimum wage be able to live.”