![]() Once landlords contribute their properties, they lose the ability to pull them out and do a tax-deferred exchange in the future. Metro Denver home inventory is in the basement and closing prices are at all-time high If fewer landlords sell, the fewer options that renters who want to become homeowners will have. There’s also the wider issue of metro Denver’s inadequate home inventory. That could range from banning buy-and-scrapes in popular neighborhoods to limits on home upgrades, preventing them from commanding the highest rents possible. Under a NOAH approach, Denver would implement restrictions designed to preserve older homes with below-market rents as part of the housing stock. Having a wider mix of homes allows for a more diverse mix of households to live alongside each other. ![]() In exchange for a lower rent, some tenants are willing to live with 1980s decor and outdated floorplans. The model, however, has the potential of bumping heads with a concept that Denver and other cities are exploring called Naturally Occurring Affordable Housing or NOAH. In the initial group of properties that Flock Homes acquired, it had to address multiple issues, Rubin said.įlock’s model is to upgrade the homes it acquires, add more environmentally friendly amenities like native ground cover and solar arrays, and command a higher rent to benefit investors. Many independent landlords allow their properties to show their age as they show theirs, often losing either the ability or interest in maintaining them. Rubin adds that there is a wider community benefit. Plus, it avoids completely parting ways with a home that might have been in the family for decades and carries sentimental value. Splitting a monthly dividend payment is easier than fixing up and selling grandma’s home and dividing proceeds. ![]() Miller said Flock Homes is “ideal” for accidental landlords, such as heirs who pick up homes they don’t know what to do with through probate. “You have someone who has invested more mainstream through their financial institution and only expects a more conservative return.” “Yes, that does seem high, but looking at this, you have to consider the active or passive investor,” Miller said. But for someone used to paying fees for active management of their equity portfolio, that figure isn’t out of line, said Troy Miller, executive director of the Investment Community of the Rockies. The company charges a management fee of 1% fee of assets, which is on the high side for a REIT. Rubin said Flock Homes wouldn’t have been achievable 10 years ago. The company recently assembled a group of 20 Denver properties in a test run of the concept, with plans to eventually scale up in a variety of markets.Īnd while 721 exchanges aren’t new, the financial technology behind the company’s platform, which greatly simplifies the entire process, is. He adds the model is for those who find “owning a hassle, but selling costly.”įlock Homes has raised money from angel investors and venture capital firms, but it isn’t as capital intensive as investment pools that purchase homes outright. The company offers landlords like Turner a way to switch from active to passive ownership, avoid capital gains taxes, maintain income and diversify their real estate holdings, Rubin said. We seamlessly convert their rental property into a share of a pool of houses.” “We are focused on the accidental landlord and the retiring landlord. “Millions of Americans own rental properties,” Rubin said. In return, they earn a piece of the dividend stream spun off by a much larger pool of homes. But rather than ponying up cash for shares, landlords contribute their investment properties, in what is called a 721 exchange. The Denver startup, founded by Ari Rubin and Matt Litovitz, who met at the Stanford University Graduate Business School, operates similar to a real estate investment trust or REIT. Looking for options, Turner stumbled across a Facebook ad for a Denver company called Flock Homes, which was recruiting landlords to try a different model for owning real estate. Nor was keeping the home and rolling the dice when it came to finding a new property manager and tenants. Doubling down with her 60s approaching wasn’t an appealing option, Turner said. Using what is known in the tax code as a 1031 exchange could have avoided taxes, but it requires rolling any proceeds into another real estate investment. Digital Replica Edition Home Page Close Menu ![]()
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