Affordable Housing Mogul Pays Nearly $40 Million For Malibu Mansion

The conventional wisdom in real estate has long been that there is no money to be made in building affordable housing, but Andrew Schwartzberg, a partner in one affordable housing conglomerate, would beg to differ. 

Schwartzberg recently purchased a $38 million estate on the luxurious Malibu, California, coastline. The purchase is the fourth-largest transaction in California this year.

Schwartzberg is a veteran of the affordable housing rental industry with an impressive resume. He is managing partner of Pennant Housing Group, a Washington, D.C.-based firm that purchases, preserves and redevelops affordable housing units nationwide. He also owns SSC Partners, The Affordable Housing Management Group and Subsidized Rental Housing Investments. Combined, these three companies own over 25,000 low- and moderate-income apartments. 

Don't Miss:

• Investing in real estate just got a whole lot simpler. This Jeff Bezos-backed startup will allow you to become a landlord in just 10 minutes, and you only need $100.
• Want To Grow Your Wealth Passively? Unlock Real Wealth with Cityfunds’ Exclusive 8% Yield Fund.

Schwartzberg's success reveals another fundamental truth about the American real estate market. Millions of Americans need affordable housing and providing it can be incredibly lucrative. That's especially true in America's largest cities, where rents have outpaced worker wage growth for decades.

Understanding how most low- to moderate-income apartments function and make money is important. Theoretically, a low- to moderate-income apartment community can exist anywhere — even in a wealthy neighborhood. It's designated as a low- to moderate-income community because the owner has agreed to rent to tenants whose annual income is below a certain threshold.

Trending:

• Want to Create a Passive Income Stream? These High-Yield Real Estate Notes Might Be Your Holy Grail

The difference between the tenant's income and the average rent for a comparable apartment in the area is made up for via government subsidies or tax credits. The tenant's rent and subsidies combined provide owners of affordable housing communities a cost per square foot similar to that of the owners of regular apartment communities.

Despite his holdings being classified as low- to moderate-income apartments, Schwartzberg's properties likely have capitalization rates and net operating incomes that look impressive on a balance sheet. He is a real estate owner and manager who understands how to operate successfully. As affordable housing continues to become a priority, landlords like Schwartzberg could represent the wave of the future in American housing.

Even if that doesn't happen, he's done well for himself. His 1.7-acre Malibu estate has a 4,000-square-foot, six-bedroom home with unobstructed views of the Pacific Ocean, a separate guest house, a full outdoor kitchen with a pizza oven, a pool, a spa and a staircase leading to a private beach. Schwartzberg also owns a 10,000-square-foot house on 3.4 acres in Los Angeles's Pacific Palisades neighborhood.

Low- to moderate-income apartments have a lot of profit potential. Hopefully, more developers will learn from Schwartzberg's example and begin operating in the sector. They will surely find an abundance of renters.  

Read Next:

• Dara Khosrowshahi-Backed Startup Lets You Become a Landlord with $100.
• Miami Is Expected To Take New York's Place As The US Financial Capital. Invest In It With $500 Before That Happens.