Friday, March 11, 2016

Beware the Condo-Apartment

What is a condo-apartment?  A condo-apartment is a unit in a condo building that is rented with a one year rental term, or perhaps a month-to-month arrangement, or perhaps you rent it for only one night via Airbbn. By the way, plenty of Airbnb rentals in Dunwoody, maybe one on your street. I'm not aware of any city code restrictions.  Perhaps someone on city council can provide some input on the topic.  Other Georgia municipalities have recently enacted code to restrict Airbnb type rentals. 

When developers mention 'condos' or 'town-homes', most folks assume owner-occupied.  This is not the case, and proposed condos at Perimeter could be 50% rental units. A rental condo is the same as an apartment, regardless of what developers and real estate 'professionals' tell you.

At the DHA meeting on Sunday we had a man from the Manhattan tower in attendance.  The Manhattan is the very tall building next to Target, located in the Perimeter area.  The Manhattan allows for 25% of the condos to be rented.  The guy from the Manhattan is on the HOA there and he encouraged the DHA board to consider supporting only new condo towers with lower than 25% rental units. He implied that the few issues the HOA has at the Manhattan are from the renters. Currently there are many units for sale and rent there.

When and why are condos rented?  When an individual or business has debt, they usually need to make payments on that debt.  Payments require cash.  If a condo is empty, it is not bringing in cash.  If you can't sell a condo, you rent it.  The housing recession impacted many condo and HOA communities. Individual condo unit owners rent to a subtenant and developers often rent out unsold units in new buildings until buyers are found.  You can read more about renters versus owners for condos at many web sites. In summary, condo owners, condo managers, and condo HOA's prefer owners over renters.  The condo tower, like a traditional single-family home, is a close community.  Owners are more likely to invest time and volunteer at the building, and in general, make better neighbors, based on the 'research' conducted here at DunwoodyTalk.

Back to the renter versus owner-occupied issue.  Just a month ago the DHA, the city council, and other boards discussed the new town homes on Dunwoody Village Parkway.  The DHA supported a 10% limit on the number of rental units. We don't believe the DHA should support anything that is multi-family due to Dunwoody's congestion and current/future inventory of multi-family units, but if it does, a 5% or 10% cap seems appropriate.

You can read more about condos and rental units HERE and HERE.

 Sandy Springs continues to add more and more apartments. 




7 comments:

albertontario said...

Great blog of rental apartment he results indicate that there does appear to be at least some premium achieved by purpose-built rentals over competing condo supply. All else being equal, renters tend to favor a professionally managed and secure source of housing.Thanks for sharing.......


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Max said...

The residential portion of the Crown Holdings property will get built first. The balance of the already approved office towers will need to follow soon to catch this strong market.

I am less worried about 'renters' in this price range than I would be in another Madison-type project.

We don't live in a world of absolutes, so I am please with the DHA's decision to recommend, with conditions.

Dunwoody may need a circulator-type mini-van, like in use at PCID, to eliminate SOME traffic load. Growth is coming and unlike Sandy Springs, we are more cautious about residential multi-family.

Anonymous said...

I own a condo in Athens (Ga, not Greece) and we have a limit on unit rentals. It is ZERO with only one exception. Your estate can rent the unit during probation for a period not to exceed 3 years. While not officially "olde farts only" the average age is high fifties to mid sixties (Dunwoody's Fave Age) so the estate settlement clause is a nice gesture. The zero rentals restriction is written into the Declaration of Condominium and can only be changed with an 80% majority of owners with votes taken in writing. Given the firm belief on the part of owners that this policy bolsters property value it is highly unlikely this restriction will be lifted.

Condos are strange creatures and the FHA treats them differently with some rules at odds with others. They take a dim view of rentals and "condotels" and the FHA is probably where the "25% max rental rule" originates. It isn't clear how many folks would consider the Federal government a sound authority on financial matters so some might consider that limit too high. I certainly do.

One anecdote isn't that compelling but I believe a pretty good case can be made for limiting rentals to zero. Under no circumstances should it be equal to or greater than the percentage of "No Votes" needed to block a change to the Declaration of Condominium as this would effectively block later adoption of an owner-occupied-only policy.

Anonymous said...

Max,

The dollar amount these condos would sell for is a moving target. In the Crier this week the developer mentions State farm employees. those are call-center jobs mostly and not folks able to spend $250,000+ on a condo

Max said...

The $250,000 condo causally mentioned by the developer, describes a studio, which would not be suitable for a family with children.

You may wish to learn more about major employers in Dunwoody as your characterization fails to describe the majority of professional positions at that location.

Everything will be OK.



SDOC Publishing Internet Solutions said...

Max (and everyone else reading this) -
The Crier's article got the facts wrong. There was no approval or endorsement by the DHA. The only decision made was to go forward with negotiations that MAY or may not lead to an endorsement. Big difference there and the exec board was quick to get that correction out as soon as we noticed it. Whether the Crier corrects themselves is another story.

A more accurate assesment of the meeting was published in the Reporter:

http://www.reporternewspapers.net/2016/03/07/dunwoody-homeowners-association-compiling-list-conditions-crown-towers/

This was the statement posted to the DHA website last Tuesday:

http://www.dunwoodyga.org/Corrections-to-Reports-of-DHA-Meeting-of-March-6-by-Dunwoody-Crier

Please help us get the word out.

Max said...

Nor did I mention that the decision was approved or endorsed by DHA, SDOC.

Some of the conditions seem odd to me, like underground parking requirement. That site may have good ol' Stone Mountain granite running through it, making such a proposal extremely costly. What does it matter if the deck is six stories high?

DHA walks a fine line to positively impact development and not be an onerous business impediment. Frankly, the idea that some folks in Dunwoody may not like a '24-Hour city' is easily countered by many that do like that idea, especially in the busy Perimeter area.

Like most CID's the self-taxing businesses can and do pay extra to contract for additional Police services, which might be helpful in a 24 hour locale. I would ask DHA to consider that a mini-Fire precinct is located on site. Avalon has such a facility to quickly act in case of a medical/fire emergency.

I am pleased that DHA is working with veteran, quality developer Charlie Brown. We have an opportunity to have something really epic built here by a guy with an excellent track record for quality build-outs.

DHA can and should bargain for amenities like a theater/convention hall on this site, as well as roof top uses, which would be hugely popular, if done right.

This is a tremendous opportunity to transform an under utilized property into a first class development.

Just my two cents, I am not working with Charlie/Crown on this project.