Business Spotlight: A Homegrown Strategy

Isaac Stewart fondly remembers the first home he bought with the intention of renting it out. It was in The Rivers subdivision in Ozark.

“I still own it,” he says.

That was in September 2014. Eight years and over 150 properties later, he recently acquired a 55-plus community in the same town. Through Stewart’s management company, Humble Abode Properties LLC, he purchased the 47-unit The Villages at James River, bringing the firm’s portfolio to roughly 200 units.

Previously, he worked six years in financial planning with Merrill. That initial home purchase changed the trajectory of his career.

“It just started by buying one single-family residence and decided it was a good fit for me,” he says. “We tried to scale as quickly as possible without taking on outside capital.”

That home led to another, which led to another, and then duplexes came into the mix. Today, the properties are scattered across Ozark, Rogersville and Springfield.

The Villages at James River – a $10 million development built in 2019 by Triple S. Properties Inc. and Morelock Builders and Associates Inc. – is not Stewart’s first senior living property. Humble Abode Properties also manages Ingram Mill Villas, a 43-unit 55-plus independent living community in southeast Springfield.

The duplexes and single-family homes make up the balance of the company’s portfolio, which Stewart says has been built strictly through acquisitions. Ron Stenger Cos. in 2015 built Ingram Mill Villas, a $5 million project at the time.

“We haven’t got into development at this point,” Stewart says, noting the business plan may come to that – “potentially, as it becomes harder to find the volume that we want to acquire.”

Business for McShane Heating & Cooling LLC has increased along with the growth curve of Humble Abode Properties. Owner Jack McShane says his company performs repairs and replacement of heating and air conditioning units as needed.

“If one of the renters calls in,” McShane says, “they give me the call.”

It amounts to three or four calls a week during the peak summer season. The tickets average $80 for a visit to $250 for parts to fix a malfunction, and then he says new units can run $3,500, citing a recent replacement for an outside condenser.

McShane and his two-man crew have similar arrangements with a handful of area property managers, such as Pierce Properties and Aaron Properties Inc., while others have maintenance staff for quick fixes and call him for troubleshooting beyond their capabilities.

“From what I’ve seen, they stay on top of their stuff,” McShane says of Humble Abode, noting a key factor is that an after-hours answering service routes calls to him for quicker response – and then he can work directly with the renters to schedule a visit.

Stewart says the working relationship with McShane has been in place since Humble Abode started.

Today, all properties are 100% leased, Stewart says, and the average rental rate is $1,700 per month. The Villages at James River bumped the average as monthly rates in the gated community run $1,900-$2,300.

Stewart says there’s a financial advantage to his growth-through-acquisition strategy.

“We’ll have cash flow month one after acquisition,” he says. “That’s one reason we’ve chosen acquisitions. It can just increase the velocity on our money. If you’re doing ground-up development, it takes multiple years before you get a return on your investment.”

Stewart says he’s not been deterred by higher-interest rate environments. The company’s goal is to add 100 properties to the mix this year.

“Even though interest rates are high, if a property will cash flow, we will still acquire it and hope to refinance it in the future,” he says. “We’ll start to look for the next one.”

Stewart says his firm’s average monthly rate has increased by double-digit percentage points the past two years based on market demand. The rent component in the U.S. Bureau of Labor Statistics’ March consumer price index reports that rates are up 8.8% in the past year. He doesn’t see that trend continuing.

“Rental rates have stabilized,” Stewart says.

With a staff of three, including senior living property manager Carolyn Burnett, the company primarily markets its units through three sites: Zillow.com, Rent.com and APlaceForMom.com.

“Most of the rental pool uses just a few websites,” Stewart says.

He spends roughly $1,200 a month for paid placements on the sites and found that’s a good return: “It’s well above 50%,” he says of leases that come through those sites.

Stewart’s noticed a trend in that, too: “We are seeing a substantial influx from different cities and states – California, Colorado; we had some from Arizona. It’s a pretty affordable area to live. From those other states, Springfield looks pretty good.”