Jim Jacobi is president and founder of Parkland Communities and build-to-rent company Parkland Residential, which helps meet the needs of the missing middle with a unique product.
He sat down with Zonda chief advisory officer Tim Sullivan to talk about why his developments are different than what’s out there in his market, and why it’s so important to keep costs down as interest rates rise.
Sullivan: Would you share what kind of site you’ve looked for and then talk to us about the product?
Jacobi: One thing we did going back to 2018 and 2019 pre-COVID was identify midblock, unanchored retail shopping centers. Amazon was putting many out of business. It was kind of a one-two punch. We started looking for the 4-, 5-, and 6-acre tracts; we maximized our returns off of that.
What we did was come up with a stacked townhouse. In Atlanta, that’s not very common. We’ve got these stacked townhouses where nobody lives above anybody else.
Our first project was called Sweetwater Springs. If I’d done this as a traditional townhouse project, this is a 4.6-acre tract. It was developed for a retail center and gas station; it was just never built vertically. We went back through zoning, downzoned it from commercial to residential. But at eight units an acre, the yield would have been 36 units. And that just wasn’t enough yield to make a commercial land value work.
We came up with a stacked townhouse concept that yields anywhere from 12 to 18 units an acre. We’ve substantially reduced our costs and ultimately raised our profit.
Sullivan: I would argue you could do this product for sale or rent, but I want to emphasize this is rental. Give us a sense of the rent that you’re getting.
Jacobi: For my three-bedroom unit right now, we are getting $2,620 a month. For the two-bedrooms, we’re getting $2,450 a month.
Sullivan: That’s fantastic. You also have a new product?
Jacobi: My big motivator was the epic change we’ve had since January with these interest rates. What we did with this project we have coming up now, it’s all single-family homes. All 60-foot wide, there are 90-foot-wide lots here. It’s 317 houses.
But one thing I tried to figure out, I need to be able to hit the rental market that’s kind of uncertain, and how can I get our rents even further down and still make it work? Instead of pushing my rents higher, I’m trying to pull everybody out of apartments. Why lease an apartment when you can lease my house for the same price?
Sullivan: I think this is such a terrific opportunity that you’re in right now, because it is detached.
Jacobi: This location is in Warner Robins, Georgia, which is about two-and-a-half hours south of Atlanta. And so it’s a tertiary market. But what’s driving it is the Robins Air Force Base, which is the largest employer in the state. There are 24,000 people there who go to work. They’re going every day with 7,000 service personnel, and, not to mention that when you start researching the number of jobs, the largest Frito-Lay manufacturing facility is there. The area is really underserved.
Sullivan: In the rental world, pretty much any product can be rented. But apartments and then cottage product and then single-family detached all kind of self-select the renter. I think you can pull renters from apartments; you can pull from the cottage side and offer a detached unit.
Jacobi: And we’re all for fully amenitized. Clubhouse, swimming pool, large play area, and play field, which not many communities down here offer. What we came up with was a floor plan. In apartments, you don’t get a garage. We’re doing a one-car garage carport. You technically have two parking spaces. But you’re on a 60-foot-wide lot.
I have a four-bedroom home that’s 1,475 square feet—very efficient space. We have a three-bedroom home, it’s only 1,275 square feet, and we’re building a two-bedroom home that is only 975 square feet. But the beauty is it’s a slab single-story, ranch construction, but these floor plans are very versatile, where they will accommodate the millennials just as easily as a boomer. Those are the two biggest groups we have.
Sullivan: Don’t make me do the math. What is that going to be per square foot?
Jacobi: Per square foot, I’m high. But if you look at my total cost, I’m low. It’s $118 a foot total. That includes permits, plus we must buy all the appliances.
The way you really build efficiently is being repetitive. My kitchen is the same in every unit so I can order kitchens by the truckload and store them on site. And we have the same arrangement in the bathrooms. When we start replicating, we can order in mass quantities and get our costs down. I can build my two-bedroom unit for about $117. I can do my three-bedroom unit for about $125. Compare a standard three-
bedroom, 1,800-square-foot, two-story house in Atlanta, it’s going to cost you somewhere around $165 plus or minus maybe, $170 total costs, but I’m now going to build for $125.
This interview has been condensed from a video produced for subscribers to Zonda’s Rental Housing Outlook. Visit https://zondahome.com/products/data-intelligence/rental-housing-outlook for details.