Rentals Are Cutting Edge Solution

Rentals are a cutting edge solution for one Bakersfield, California builder according to the Wall Street Journal's Dawn Wotapka.  Maybe this is an idea that will catch on and help turn around the single family housing industry.

The housing crash has forced a California land developer to don a different hat: Landlord.

Five years ago, Steve Lantz teamed with other investors to buy a 30-acre tract at Silverado Ranch in South Bakersfield, Calif. for about $1.8 million. They planned to quickly flip the site for a hefty profit, standard practice at the time. But, then the housing crash hit - striking Bakersfield particularly hard, depressing prices and fueling a foreclosure crisis.

Mr. Lantz, who owns a commercial-development firm, found himself stuck with land he couldn’t sell, so he made the unusual choice to build 53 homes. Instead of selling them, he’s waiting out the downturn by renting them for between $1,150 and $1,350 per month.

Construction financing wasn’t available–most lenders are hesitant to fund any new residential projects–so Mr. Lantz and his partners are paying about $85,000 to build each unit. Half the homes are done and construction should be finished this fall, reports trade publication builderonline.com.

The finished units are rented and there’s a waiting list. Things have gone so well, Mr. Lantz says, he might might stick with the month-to-month solution. “The cash flow is so good,” Mr. Lantz tells us. “We haven’t have had one late rental payment, knock on wood.”

As we’ve written before, more Americans burned by the housing market are foregoing the “American dream” of ownership and becoming renters by choice. And, given all those foreclosures, the Bakersfield region has plenty of families seeking shelter. Silverado Ranch, which offers one-year leases and doesn’t take pets, has a waiting list.

Cynthia Martinez is one of the lucky ones. She and her family moved into a four-bedroom home in March after losing their home. “Our old house was right down the street, so we knew the neighborhood,” Ms. Martinez told the Bakersfield newspaper. Plus, “we have granite countertops and landscaping and good blinds, not the cheap ones you usually see in rentals.”

Even better: The rent comes in $1,200 less than the mortgage at her previous home.

Explains Mr. Lantz: “It’s a cutting-edge solution.”