Uncertain trend

f you live in a neighborhood built in the past 10 years, there’s a good chance your next-door neighbor doesn’t own the home.

Companies have been buying homes throughout Johnson County and turning them into rental properties, with no sign of slowing down.

American Homes 4 Rent, an Agoura Hills, California-based company, offers homes for rent across the nation. The company has bought more than 300 homes in Johnson County in the past two years and lists central Indiana as one of its top markets.

Multiple neighborhoods in Johnson County meet American Homes 4 Rent’s criteria of homes to buy: 11 to 12 years old and costing $100,000 to $400,000.

The main neighborhoods targeted by American Homes 4 Rent are production-built subdivisions built about 10 years ago, which were popular here. Nearly a quarter of the houses in Johnson County were built between 2000 and 2009, and more than half of local homeowners moved into their homes during that period, according to recent Census data.

Then, the recession began, and building slowed. Many of the subdivisions the rental companies are targeting now were built by developers that no longer are in business, such as C. P. Morgan. For example, in the Heritage neighborhood in Franklin, American Homes 4 Rent owns 33 homes. The same neighborhood also has been the site of multiple foreclosures.

When houses that were built started being abandoned in 2010 and 2011 because people could not pay their mortgages, there was a rise in break-ins and illegal drug use in the empty houses, Franklin Police Department Lt. Kerry Atwood said.

Resident Jon Lusk has lived in Heritage for five years, and he doesn’t mind renters moving into the neighborhood, since vacant homes have been a target for vandalism and illegal activity in the past, he said. Since 2011, eight cases of criminal mischief were reported in the neighborhood — with half on Lusk’s street.

Neighbor Joe Persinger bought a house in Heritage in 2008. Less than a year later, C.P. Morgan filed for bankruptcy. The company stopped building homes in Heritage, and lots sat empty.

In the past couple years, more homes were filling up with families — often renters. For example, currently 11.5 percent of houses on Heritage’s Blackthorn Drive are rentals, with most of those owned by corporations.

Now, other companies are buying local homes, too. Two 1-year-old companies based in Wilmington, Delaware — WGH Indiana LLC and FREO Indiana LLC — are buying homes in the same neighborhoods targeted by American Homes 4 Rent. WGH Indiana has purchased more than 50 houses in the county, while FREO Indiana’s count is more than 30.

In some cases, WGH Indiana has been buying more properties in neighborhoods than American Homes 4 Rent, such as in Homecoming at University Park in Greenwood. Thirteen homes in that development are owned by WGH Indiana, compared to American Homes 4 Rent’s nine.

Tina Perry, who rents a house in Homecoming, said it has been difficult to reach an out-of-state company when she needs to.

Berkshire Hathaway branch manager Karen Wildey expressed concern that the corporations could try to sell the properties within a few years of owning them, a trend she has seen in the past, she said. Since the companies are less than five years old, there is no telling what could happen in the future. If the companies all sold at once, property values would go down as a result, she said.

For Homecoming at University Park, the new developers of the subdivision would rather sell a house to be rented than have a house go into foreclosure, said Barbara Whiteside, Homecoming sales and marketing representative for Ryan Homes. If a house goes into foreclosure, the property values surrounding that home go down further than if a home is a rental.

Homecoming has a limit on the number of rental properties in the subdivision, but it has not been reached.

With the drop in property values, corporations can snatch up the homes without a huge financial investment.

For example, the homes American Homes 4 Rent purchased in Homecoming have decreased in value by $13,010 on average from 2008 to 2014, according to the Johnson County Assessor’s Office. One house on Bridlewood Drive in Heritage in Franklin owned by American Homes 4 Rent dropped from $157,000 in 2008 to $109,900 in 2014.

F.C. Tucker real estate agent Christi Coffey was working with a seller who had a house in Heritage. The only two offers the homeowner received were from corporations. Both offers came in too low, so the owner turned them down, Coffey said.

Coffey looked at the comparable sales in the area and found that the only buyer in the Heritage subdivision within the past few months was American Homes 4 Rent.

With no new offers coming in, the homeowner went back to American Homes 4 Rent to see if it would reconsider buying the property. The company did resubmit an offer, but at a lower price, and the homeowner had to accept or keep waiting for someone to buy, Coffey said.

Often, the housing communities that are being sought out by corporations like American Homes 4 Rent are less desirable for first-time homeowners, Coffey said.

Most of the housing communities that corporations are buying into have homeowner association fees, which many homeowners do not want to pay. And although homeowners would like nice sidewalks, they’d rather have a big yard and neighbors farther away than those in many of the production-built housing developments, she said.

Some homeowners associations don’t allow rental homes in the subdivision, which forced American Homes 4 Rent to sell some of the homes it purchased.

Wildey advises all homeowners associations to set a percentage of homes that can be rentals so corporate-owned homes do not overwhelm subdivisions. If there is no set number or percentage of rental homes in the homeowners association bylaws, corporations have no limitations on how many houses they could buy in one subdivision, she said.

By the numbers

Two years ago, American Homes 4 Rent was one of only a few corporations on a buying spree in Johnson County. Now, other newly created corporations are getting in on the deal:

American Homes 4 Rent: 318 homes in Johnson County

WGH Indiana LLC: 53 homes

FREO Indiana LLC: 34 homes