Author Topic: Affect of Development on Rental Prices  (Read 575 times)

mrigney

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Affect of Development on Rental Prices
« on: January 11, 2018, 01:28:43 PM »
So this a pretty specific question, but thought people might have input.

I own a rental property (used to be my primary residence). It's a good starter home, 3BR/2BA, 1530 sq ft. Was new when I bought it, now 8 years old. This week (and this will give away where I live) Toyota/Mazda announced a huge new production facility in Huntsville, AL. This new facility is about 5 miles from my rental property. I imagine that this has to be good for my both my property value and my rental price, right? We're talking about a $1.6B facility being built 10 minutes away, 4k new jobs plus estimated 6-12k ancillary jobs all over the next 5-10 years. Does anyone have any experience with how massive developments like this affect property prices? I'll be honest that I'm dreaming of big increases, but don't want to get my hopes up. Haha. City the house is in (a Huntsville suburb) is known for superb schools, quality of life, etc.

Dave1442397

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Re: Affect of Development on Rental Prices
« Reply #1 on: January 11, 2018, 03:34:35 PM »
Just look at Reno, NV. Once the tech firms announced that they were moving in, home prices and rents skyrocketed.

Duke03

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Re: Affect of Development on Rental Prices
« Reply #2 on: January 11, 2018, 10:29:55 PM »
Toyota built a plant to build Tundra pickups on the south side of San Antonio over 10 years ago.  Once it was announced developers flooded the area and bought up a lot of land and started building houses and neighborhoods. To this date most of those developments are half finished with several never finishing a single house before they where foreclosed on and can't even be resold.  The thought was all these Toyota workers would want to live close to the plant and buy up all these house.  The only problem with that little idea is the area the plant is located is a total shit hole.....sorry couldn't resist.  Seriously that side of town has the worst schools, crime, no business ect.  No one wants to live there. 

If you currently are in a good area then I think you will be on the plus side of things.  I only brought up what I've seen with my own eyes to prove you can't spur growth in a spot no one wants to live in.  Several business: a bank and fast food restaurants have gone broke right out side of the Toyota plant because the area sucks so bad.

Cwadda

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Re: Affect of Development on Rental Prices
« Reply #3 on: January 11, 2018, 11:00:43 PM »
Id be giddy to sell if the home prices skyrocket while rents marginally increase.

mrigney

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Re: Affect of Development on Rental Prices
« Reply #4 on: January 12, 2018, 10:43:01 AM »
Yeah, I'm not sure the San Antonio development is analogous (although I understand what you're saying). To get a lay of the land, Huntsville for the last 15 years has been one of the more rapidly growing mid-sized cities in the country, been named "best _____" by tons of different publications. On it's western edge is Madison, a suburb that has grown from ~25k to 50k+ in the last 15 years mainly driven by the high standard of living/low cost of living. E.g. Niche.com named Madison "the best place to live in Alabama" in 2017. It's also made numerous other lists the same.

There has actually been massive amounts of new construction over the last 12 years in Madison. Started with the last Base Realignment and Closure (BRAC) in ~2005. I moved here in 2009 in the mdist of all that. That building boom is one of the reasons I didn't sell when I moved to a different part of town....new construction was generally suppressing prices. For example, when I bought my (brand new) house that is now my rental in 2009, there were about 10 houses in the development. There are now about 250. And my development is one of dozens in the area. Lots of new retail, industry, etc that have moved in. All that to say, the area has been for the last 10 years one of the most desirable places to live with tons of growth.

The new Toyota/Mazda plant will be just west of Madison (yes, Huntsville as a city actually extends out and around Madison, the western suburb). This area is currently all farm land with a couple of pretty big developments over the last couple of years (Polaris built a $140M facility about a year ago in this same "megasite area" that Toyota is going in; BOCAR, an auto supplier just announced a $115M facility two months ago).

So yeah, good points about the SA plant. I get that. I think this is a different dynamic in that you're plopping the $1.6B plant down on the edge of what has been one of the more explosively growing, desirable places to live in the region. I suppose one can only wait and see!

coopdog

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Re: Affect of Development on Rental Prices
« Reply #5 on: January 12, 2018, 01:48:41 PM »
I think your assessment is reasonable. Jobs drive real estate demand. In my experience, it takes longer than you'd think. It won't happen over night. It took Spring Hill just north of you a good 10 years before it really started humming from the effects of the GM plant which bounces around 4,000 employees. 

mrigney

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Re: Affect of Development on Rental Prices
« Reply #6 on: January 12, 2018, 03:08:25 PM »
Yeah, I don't really expect any immediate impacts. It's just something to remind myself of over the next several years. The property as a rental is marginal...would've never bought it as a rental, but since I already owned and there was so much new construction, made sense for the time being to rent...more tempted to hold onto it long term as long as it's cash flow positive and see what happens.