Editor’s note: This is the second part of a series on the reasons for housing shortages in Cowlitz County. Part 3, originally scheduled to run today, will appear Tuesday.
In a rental climate favorable for landlords, out-of-town investors have been flocking to Cowlitz County. They are having a major impact on the housing market.
“I have several investors. They’ll buy places and fix them up and that’s going to cause the rents to go up,” said Paul Van Baalen, designated broker of Sunworld Group Inc., which manages rental properties in Clark and Cowlitz counties. “We’ve taken places that are $600 to $700 on a three-bedroom and we’re going up to $900. And that’s because the rents were devalued, but the properties were distressed.”
Mike Rodley, a California investor who owns 65 rental units in Kelso and Longview, said he rehabilitates his apartments every time a tenant moves out. He repaints the walls, cleans the floors, installs new fixtures and sometimes puts on a new roof.
“I’m a small investor. I’ve always had to buy property ideally that is distressed so that I can make a sweat equity investment in it and make a higher return,” Rodley said.
In the 13 years that he has owned the two-bedroom apartments, Rodley said he has increased rents from about $400 to about $600.
“Rising property values is something happening throughout the world,” he said. “It’s not like there’s anything malevolent going on here. It’s just the price of doing business. … (Investors) are having to raise their rent to guarantee a return on investment.”
The average apartment rental rate in the county rose from $610 two years ago to $820 last fall, a 34 percent increase. This has been driven by plain old supply and demand: a shortage of rentals, as shown by an exceptionally low vacancy rate of 1.4 percent (5 percent to 6 percent is considered healthy).
But as investors buy and upgrade cheaper rental properties, and as landlords cope with inflation themselves, the number of apartments in lower price ranges dries up.
Donna Britten, CEO of New Spring Property Management, said she recently met with representatives from Cowlitz County to discuss affordable housing options. The county wanted to know how many properties she had that could be rented for $450 a month. Her answer: None.
“$450 ... Well, that’s really low when maintenance has gone up, minimum wage has gone up, utilities have gone up” and property taxes have gone up, she said. “My fear is we’re going to out (price) the people that are on a fixed income, and what are they going to do? ... Where are they going to go?”
While many market forces are at work, Catlin Properties owner Ray Pyle said some investors raise the rent just because they can. In one 80-unit complex Catlin Properties manages, Pyle said an investor hiked rents to $800 a month recently, up from about $550 and $600 a month. About 30 percent of the tenants moved out. Pyle declined to name the investor.
“It’s an impossible increase for some people. Unfortunately it really hit some people. But here you are, a property manager, and they’re not your properties,” Pyle said.
He said investors were attracted to rental properties here because, until recently, purchase prices were low and rents were cheap. New landlords could easily raise rents and make a solid profit. But the market can’t support further rent increases, Pyle said, calling them “unsustainable.”
Still, Sam Ellis, property manager with Rodman Realty, said her out-of-town investors are attracted to the relatively cheap property in the area. And they are telling their friends to invest here. Rents have gone up, but they’re still less than in many other places in the region, she said.
One California investor, who goes by J.K., said he wanted to invest in Southwestern Washington because he went to college in the area and thinks it is a good location.
“There’s been a lot of job growth in the area, particularly the Seattle metro area and Portland metro area, and I think it’s just a matter of time before that growth makes its way through Cowlitz County,” he said. “It’s a great market and a great county for young families that are just getting started out. The lifestyle seems to be really good with outdoor opportunities.”
J.K. owns a 63-unit mobile home park in the area and said he is actively looking for more investment opportunities. He said he has only raised rents once and he doesn’t plan to do so again until there is a large increase in inflation.
“When you look at property in Cowlitz County, it’s probably more fairly valued relative to markets like Portland and Seattle,” J.K. said. “I don’t, frankly, have a lot of experience going into markets and raising rents. That’s just not what I do. I like to look at rents relative to the market and relative to inflation.”
Ellis, with Rodman Realty, said sometimes these outside investors don’t understand the local market from afar and want to increase the rents here based on their own markets.
“I feel bad for our community because they aren’t used to these rents. They don’t have the means for the rents that some of our owners are expecting,” Ellis said. “I don’t believe in sticking it to people if you don’t have to. Luckily, a lot of my owners have been understanding of that.”
Ellis said she understands the sentiment of investors trying to make money, especially when they have to spend money to improve a project.
“Why are you in the investment business if you can’t make money — I get that,” Ellis said. “I understand you want to maximize your investment and get the most dollars for what your investment is, but it should be within reason.”
J.K. seemed to agree.
“I think investors try to maximize their returns. But that’s short-sighted. Raising rents and making it hard on people to live there, that’s flawed and not a business model I pursue.”