Zillow Instant Offers: What’s the real estate industry’s response?

Inmannews - 3 hours 15 min ago
Earlier today, Inman broke the news that Zillow was launching an "Instant Offers" platform -- allowing homeowners to connect with investors and sell their homes quickly, with or without a real estate agent ...
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Real Safe Agent system gaining traction with Realtor associations

Inmannews - 5 hours 47 min ago
Close to three years after the murder of Arkansas agent Beverly Carter and amid reports of other attacks on vulnerable real estate professionals, more Realtor associations are stepping up to tackle the issue of agent safety ...
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‘Because they can’: One industry pro’s take on Zillow Instant Offers

Inmannews - 6 hours 53 min ago
“We sell ads, not houses.” Everyone in the real estate industry has heard Spencer Rascoff say this time and again. The Zillow team was adamant: "We’re just a media company." ...
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Listing power: Unlocking the power of a listing

Inmannews - 7 hours 6 min ago
In this webinar, you’ll learn about tools to help you harness the power of your listings and how to use them to set you on a path to financial success ...
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11 burning questions about Zillow Instant Offers

Inmannews - 7 hours 29 min ago
Today portal giant Zillow launched its Instant Offers program in two test markets. The announcement will undoubtedly rattle the industry. To help you cut through the noise, here are 11 burning questions with our best take on answers. ...
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Opendoor vs. Zillow Instant Offers: Who wins?

Inmannews - 8 hours 19 min ago
Zillow Group is testing a new service that looks a lot like Opendoor. Sellers can use “Zillow Instant Offers” to get a bid on their property within 24 hours, and if they choose to accept it, close in as little as a week ...
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Zillow launches ‘Instant Offers’ pilot program for homesellers

Inmannews - 8 hours 24 min ago
Today, Zillow launched a pilot program in two cities -- Las Vegas and Orlando, Florida -- called “Zillow Instant Offers,” with the promise that a home sale transaction can be completed in as little as a week ...
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Is It Time to Sell Residential Real Estate Investments?

Real estate investing goes through cycles. Real estate is not one big market. It’s made up of regional and local markets. Real estate isn’t like buying or selling milk and eggs. There is no stable supply and demand. In real estate, supply and demand are constantly in flux. Still, we all known the wise investor buys low and sells high. What is your crystal ball telling you today?

When Will Your Local Market Peak?

This is all food for thought. Or maybe a good discussion topic at your next investment club meeting. In the rear view mirror, you can clearly see that the time to buy was 6 or 7 years ago. Real estate was one of the best investments 7 years ago. The market was flooded with foreclosures, REO, short sales, and individuals desperate to sell. Buyers were very few and very far between. Unemployment was stretching for historical highs. Foreclosures and unpayable debt trashed people’s credit ratings by the millions. If you didn’t have cash, even a stellar credit rating probably won’t buy you a mortgage.

Fast forward those 7 years. People are fully emerging from foreclosures, bankruptcies, bad credit ratings, and are again fully employed. Home mortgages that were once underwater are now afloat. Home values have been strongly appreciating in value. Markets like San Francisco, New York City, and Los Angeles, are beyond the last bubble peak in terms of pricing. If not declining in price, these have become price stagnant. Bidding wars are dwindling in number as the result of few buyers being able to afford or willing to pay peak prices.

The major markets have shifted with Seattle leading the nation in price appreciation for multiple months. Outlying areas as far away as Tacoma are seeing steep increases in purchase prices. There may or may not be opportunities remaining in these secondary markets.

The questions to be asking yourself are for how long and how much higher will your current holdings continue rapid appreciation during this real estate cycle? It takes time to liquidate for top dollar. Before marketing any property, most investors have some maintenance, repairs, and sprucing up that needs attending to before marketing for top dollar. Have you given serious consideration to if it’s time to sell current holdings and what it will take to bring in that top profit?

Those that have multiple holdings should be fully aware which ones are generating the highest profit rate and which ones are at the bottom of the list. It may not be time to divest of all properties but it may be time to sell the lowest performers. Is it time to sell before your local market goes over the peak?

Investment Diversification and Distressed Properties

Grab your profit. And jump back into real estate investing. At any point in the real estate cycle, there are great investment opportunities. This could be the time to diverse your portfolio into commercial real estate. There is still plenty of upside in the right commercial sectors. Or it could be time to diverse into raw land or brownfields. Most indicators show strong and growing demand for new supply.

Specialized niche experts always have a network of people on the lookout for distressed properties for sale. Mold infested houses, fire damaged houses, and those with crumbling foundations, etc. never appeal to buyers looking for a turnkey home. If you’re a niche investor, maybe it’s time to sell an existing lower preforming property to start a new project. Start early because it takes time to market and sell one place while simultaneously searching out that next bargain deal.

No one can time the market perfectly, and anyone who says he or she can is lying or ignorant about how lucky they have been. But you should always strive to buy low and sell high.

Please leave a comment if this article was helpful or if you have a question.


The post Is It Time to Sell Residential Real Estate Investments? appeared first on AAOA.

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How Value-Add Has Changed Since The Great Recession

In the 10 years since the Great Recession, the process of value-add multifamily investing — buying a property, renovating it, raising rents, then selling for a profit — has completely changed. Markets with strong population growth and healthy job markets have become the epicenter for the new value-add.

Putting The Value Back In Value-Add

In the years following the housing crash in 2008, many value-add multifamily assets were in serious need of cash, better management and a new owner.

“You used to find very low occupancy when we began [in 2011],” Exponential Property Group managing principal Kimberly Radaker said. “We were fixing an occupancy issue as well as getting units to market. By 2013, most properties we were seeing were 90% occupied, but still had a lot of value-add potential as far as amenities, interiors and things that could increase rents.”

When Wehner Multifamily owner Ryan Wehner founded his property and construction management company in 2007, the value of value-add assets was that the new owner had some kind of capital. “Value-add used to mean the previous owner ran out of money and we bought it at a discount, upgraded it just a little and pushed rents about 3% to 5%.” These days, value-add means a lot more than increasing occupancy.

Many value-add firms, like Milestone Group, take a holistic approach.  “We define value-add not only as interior and exterior renovations but also as potential improvements to management, inefficiencies and capital structure issues,” Milestone co-managing partner Robert Landin said. That approach may have changed the definition of the term, but realities of financing and finding deals, coupled with the population surge in many Sun Belt cities, have caused a lot of variation in the market.

Conti Organization CEO and co-founder Carlos Vaz said that benefits renters. Tiers of renovations allow renters to have more options, and more affordability, when choosing an apartment. A tier 1 value-add property may include full renovation of all units, tier 2 may include partial renovation, tier 3 includes some cosmetic upgrades such as new appliances, and tier 4 properties get new paint and some landscaping. Those upgrades are reflected in rents, with lower tiers allowing for more affordable options in increasingly less affordable markets.

Today’s Value-Add

More Competition, More Money The competition for value-add acquisitions has gotten stiff in markets with strong job growth and population surges, like Texas.  Conti, which has about 15 properties in DFW, is competing with out-of-state and global investors more than ever before. Milestone Group, which has completed more than $10B worth of transactions in the Sun Belt since 2004, is competing for acquisitions more now with private equity investors and institutional groups.

“The attractiveness of the multifamily sector has only gained momentum over the last 20 years,” Landin said. “That stability [of the sector], tax advantages and residual upsides create more competition.” Exponential Property Group, which has just under 2,000 units across five properties in Texas, has recently been competing with developers to acquire properties.  “We see some groups who were doing more building now doing more redeveloping,” Radaker said.

Many outside investors have seen the success of markets like Dallas, and are now flocking to put their money in Dallas assets, she said. Financing options have also become more plentiful.  In 2010, Wehner saw many owners buying a property with a loan and using equity for the rehabilitation. The amount of Fannie Mae and Freddie Mac money, CMBS loans and local bank debt in the market today opens up a lot more options during acquisition and value-add, Wehner said. Radaker said plentiful financing options might allow more competition in the market, but she thinks the additional loan options have been positive. “Besides the higher price per door to renovate and lower cap rates, it’s easier to finance now than it was in 2011 [when Exponential was founded],” Radaker said.

When Land Value Tops Rental Value Although it has been the darling of the multifamily world for the last few years, the rising cost of acquisitions and renovations is pushing many owners away from value-add.  For Vaz, it is simple math. “If you bought 200 units for $10M [earlier in the cycle], you might have spent another $4M in renovations. Now you may pay $16M for that same property, so you can’t put another $4M on top or else the price doesn’t make sense,” Vaz said. If both scenarios allow owners to push rents the same amount, $4M in renovations may only pencil out for the lower price.

Vaz said at some future point the true worth of value-add in attractive infill markets may not lie in the property, but in the land.  “Value-add will never go away, but at some point the highest and best use of the land will change. Today, buying a 1980s property and renovating it makes sense. In the future, the highest and best use for that land may no longer be multifamily,” he said.


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Three Simple Landlord “Mistakes” That Could Send You To Prison

Do you look good in orange?

How about an orange, one-piece jumpsuit?

I recently watched the entire first series of “Orange is the New Black” on Netflix, and although it was an entertaining look at life inside prison, it also made me realize how much I really don’t want to end up there. Frankly, I like my freedom and personal space just a little too much and orange looks terrible on me.

I’m going to do whatever it takes to make sure I stay out of jail. You wouldn’t think it would be that hard to avoid, right? I mean… don’t punch a postman, don’t rob a gas station, and don’t start a riot. Check, check, check.

However, I’ve got some bad news for you…

For all the great things real estate investing can do for you, it can also send you straight to jail- do not pass go, do not collect $200.  After all, in the words of Uncle Ben from Spiderman, “with great power comes great responsibility.”

However, have no fear! This post is going to throw open the doors on three of the most common ways real estate investors find themselves in prison and hopefully prepare you to avoid those simple mistakes so you can avoid the prison life.

1.) Killing Someone… By Accident

People die everyday.

I’m sorry to put it so bluntly, but it’s true.

In fact, if you really want to get specific about it, 169,000 people will die on planet earth today, which means by the time you finish reading this three minute article, 354 people will no longer be around (but don’t worry, in those same three minutes, we’ve added 762 to our numbers! Isn’t life grand!?)

The first key to staying out of prison as a landlord is to make sure you aren’t responsible for any of those deaths. Sure, I know you aren’t about to go hire a hitman for your tenant who paid late…(right?)… but what about accidents?

In Oklahoma, criminal charges are being sought for a landlord after a fire broke out in one of his rental properties and he did not have working smoke detectors in the home.

Don’t let a $1 battery send you to jail. Make sure each of your rental properties have working smoke detectors when the tenant moves in, and consider doing semi-annual inspections to ensure the alarms are working and present.

Additionally, make sure all your properties are as safe and up to par on all other areas. Decks and patios should be checked for rotten boards, electrical problems fixed by a professional, and maintenance concerns addressed promptly.

Accidents happen all the time and are sometimes unavoidable. However, to avoid the orange jumpsuit – make sure you’ve taken the necessary steps so you aren’t the one at fault.

2.) Discrimination: A Fast Track to a Fat Fine

The second major reason you might find yourself facing a major fine and possibly hauled off to prison for is something the government is VERY concerned about: discrimination.

As a landlord, you are able to choose the best tenant to rent your property, but you don’t have the ultimate authority to decide who can’t rent your property. Over the past fifty years, there have been multiple acts and laws which today make up the “fair housing laws” that govern what qualifying factors you can and can’t include in your real estate decisions.  These laws have created certain “protected classes” that you, as a landlord, must not refuse to rent, sell, steer, advertise, or charge extra fees for including:

  • race
  • color
  • national origin
  • religion
  • sex
  • familial status
  • disability

Keep in mind also that there may be other local protected classes in your area that you could face steep penalties or jail time for breaking. For example, the following states include “sexual orientation” as a protected class in regards to housing: California, Connecticut, Colorado, Delaware, District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Hampshire, New Mexico, New York, Oregon, Rhode Island, Washington, Vermont, and Wisconsin.   (source: HUD)

Will you really end up in jail?

3.) Tax Fraud – A Ticket to the Slammer

I hate taxes.

I work hard for my money (and my money works hard for me) and I don’t like to see that money disappear.

However, I also understand that hiding any income to evade taxes is a sure way to head off to federal prison.  It seems that a week doesn’t go by that I don’t hear of some powerful real estate mogul being investigated for tax inconsistencies. Since the beginning of the tax system, there have been real estate investors who have tried to hide their wealth and ended up paying for it through the loss of many free years of their life while they sit in jail.

Many of these “imprisoned investors” are the real estate guru from past years, who made  a lot of money but didn’t want to share their wealth with the government. Bad idea.

Don’t end up in federal prison. Get a qualified CPA to do your taxes for you if you can’t do them right yourself, and pay the government what the government is owed.


Please, don’t go to jail. It doesn’t shine the best light on the real estate investing community and besides – I kinda like having you around. So buy yourself some smoke detectors, follow the discrimination laws, and give to Caesar what Caesar is due.

Besides, you look terrible in orange.


The post Three Simple Landlord “Mistakes” That Could Send You To Prison appeared first on AAOA.

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The 20 most expensive zip codes for renters in America

If you’re considering moving to New York City, you’ll want to crunch some numbers first. According to a new report from apartment search site RENTCafé, 16 of the 20 most expensive zip codes for renters are in Manhattan.

Using data from Matrix, the site collected rent averages for every state and every zip code in 125 major U.S. markets. “The top award for ‘most outrageous rent prices’ this year goes to New York City’s 10282 (Battery Park City), where rent costs on average almost $6,000 per month,” RENTCafé reports.

Read on to see which other cities besides New York boast some of the most expensive neighborhoods, and the monthly rent you’d have to shell out to live in each. Average rent prices are as of March 2017.

20. 10128: Manhattan, New York

Neighborhood: Carnegie Hill / Yorkville

Average rent: $3,977 per month

19. 10011: Manhattan, New York

Neighborhood: Chelsea / Flatiron / Greenwich Village

Average rent: $4,006 per month

18. 10014: Manhattan, New York

Neighborhood: West Village / Meatpacking / Greenwich Village / Hudson Square

Average rent: $4,010 per month

17. 10028: Manhattan, New York

Neighborhood: Carnegie Hill / Yorkville

Average rent: $4,014 per month

16. 94158: San Francisco, California

Neighborhood: Mission Bay / Central Waterfront

Average rent: $4,070 per month

15. 10022: Manhattan, New York

Neighborhood: Central Midtown / Sutton Place / Turtle Bay

Average rent: $4,097 per month

14. 10010: Manhattan, New York

Neighborhood: NoMad / Kips Bay / Flatiron / Gramercy Park / Peter Cooper Village

Average rent: $4,166 per month

13. 10003: Manhattan, New York

Neighborhood: Gramercy Park / East Village / Greenwich Village / Flatiron / NoHo

Average rent: $4,178 per month

12. 02199: Boston, Massachusetts

Neighborhood: Back Bay

Average rent: $4,227 per month

11. 10001: Manhattan, New York

Neighborhood: Chelsea / Koreatow n/ Hudson Yards / NoMad

Average rent: $4,373 per month

10. 10036: Manhattan, New York

Neighborhood: Hell’s Kitchen / Theatre District / Central Midtown

Average rent: $4,375 per month

9. 94105: San Francisco, California

Neighborhood: Yerba Buena / South Beach

Average rent: $4,380 per month

8. 10013: Manhattan, New York

Neighborhood: TriBeCa / Soho/ Hudson Square / Chinatown / Little Italy

Average rent: $4,422 per month

7. 10002: Manhattan, New York

Neighborhood: Lower East Side / Bowery / Chinatown / Two Bridges

Average rent: $4,441 per month

6. 10024: Manhattan, New York

Neighborhood: Upper West Side

Average rent: $4,525 per month

5. 10025: Manhattan, New York

Neighborhood: Manhattan Valley / Upper West Side / Morningside Heights

Average rent: $4,535 per month

4. 94129: San Francisco, California

Neighborhood: Presidio

Average rent: $4,762 per month

3. 10023: Manhattan, New York

Neighborhood: Lincoln Square / Upper West Side

Average rent: $4,892 per month

2. 10065: Manhattan, New York

Neighborhood: Lenox Hill

Average rent: $4,898 per month

1. 10282: Manhattan, New York

Neighborhood: Battery Park City

Average rent: $5,924 per month


The post The 20 most expensive zip codes for renters in America appeared first on AAOA.

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Set the Mood During an Open House With the Right Lighting

When a home is on the market, it’s all about creating a light and bright feel throughout the space to welcome buyers. A home seller can do this in a number of ways by utilizing natural light, painting and adding more indoor lighting.

The more light bouncing around each room, the bigger the home will appear, and since buyers are purchasing square footage it’s important to make sure you’re showcasing the illusion of maximum space.

Natural light provides several benefits when showing off a property while keeping money in your wallet. Sunlight, rather than light from a fixture, can save on energy costs and boost a buyer’s mood when walking through the home. Start by assessing the natural light in each room of the house:

  • Does the room feel dark or light?
  • How many windows do you have?
  • How many doors?
  • Would it make sense to update either of these or add skylights?

Here are a few tips on how to intensify a natural light source to appeal to buyers touring your home.

Trim bushes and trees. Overgrown trees, bushes or shrubs in the yard can immediately put a dark cloud over a property. Trim hedges and prune branches away from the windows so the home gets ample sunlight. Be sure to clear the exterior and interior windowsills for optimal sunlight.

Consider new window treatments. Some window treatments can actually block sunlight from entering the home, like Roman shades, which are usually made of fabric that lies directly over the window. Heavy fabrics like velvet or tweed and dark colors can also weigh a room down. The best type of window treatment to use is a sheer, light cotton or linen curtain that can hang on either side of the window. Make sure to have the curtains open during every showing.

Replace solid doors. Try replacing the solid front door for one that has a window. It will instantly add light to the entryway. You can also add a screen door so you can leave the front door open during showings, providing the illusion that there is more light in the entryway than there really is.

Add more windows and doors. Consider adding a window, skylight, door or sliding door in a particular room that lacks natural light. The more windows and doors you have in a room, the brighter it will be. Before adding any of these, though, make sure to monitor how the sunlight reflects in the room to determine if and where additional light will be most helpful.

Use a mirror. Mirrors are a great way to reflect light around a room. Adding a mirror on a wall opposite to a window doubles the light streaming in and can make the space appear brighter. Try using a large mirror, a grouping of mirrors or mirrored furniture and accents to bounce the light around.

Another way to make a room look lighter and brighter is by choosing the right paint colors. Dark colors absorb light while light colors and whites bounce natural light around the room. Plan on lighting up the color palette before putting the property on the market.

Choose the color of the walls carefully by determining what direction the room is facing. A north- or south-facing window, morning versus afternoon light and the amount of natural light the space gets can play a big part in how you should paint it.

For example: If the room faces north, avoid cool colors with blue undertones. Instead, opt for colors that are warmer on the color wheel and have yellow undertones.

Wall color sets a room’s atmosphere. Use neutral earth tones rather than all white. Try choosing a darker color for an accent wall. When choosing a paint color for a room, take a cue from the items in the room such as the flooring, woodwork, tile or cabinets.

The fifth wall. Over time, a ceiling can look dull from dust, pollen, aging paint, nicotine and cooking oils in the air. Use paint sold as “ceiling white paint” because it is especially designed to be reflective. It’s a pure, bright white.

Once the room’s natural light has been determined and the paint has dried, it’s time to add indoor fixtures. While this seems obvious, most homeowners have ample lighting in their home, they just neglect to change the burnt-out lightbulbs in their fixtures. So take a moment to check lighting. Make sure to use the appropriate wattage (use maximum wattage), and on a multi-bulb fixtures all lightbulbs should match.

There are different ways to utilize indoor lighting. Light can come from ceiling fixtures, fans, chandeliers, table lamps and floor lamps.

Ceiling fixtures. Overhead lighting is a must. Many homes have no overhead fixtures in some of the most important areas of the home, such as the entryway, living room and bedrooms. If you’re faced with this problem, the first thing to decide is whether you have money in the budget to add lighting. Add a fixture in the middle of the room or add hi-hat lighting so you have ample lighting throughout the space.

Ceiling fans. Fans are a great way to circulate air throughout the home, especially in bedrooms, living rooms and great rooms. Use fans with a lighting kit, but try to avoid fans with control chains – get fans with remote controls instead. Also, pay attention to the fan’s finish, and match it to other finishes throughout the room.

Chandeliers and pendant lighting. This type of lighting is a great way to add bling to a room. Chandeliers are statement pieces, so be sure to choose one that matches the home’s aesthetic and style decor. Add a chandelier in an entryway, dining room or master bedroom using something big, bold and reflective. A pendant light is ideal overkitchen islands. Hang pendant lights approximately 30 to 36 inches above the countertops.

Table lamps. A table lamp is a great way to update a space – it’s budget friendly and can add a huge impact on the overall feel of the home. Table lamps come in different sizes, colors and shapes. Choose lamps that match the home’s decor and are proportionate to the other items in the room. Swap shades by using neutral, patterned or textured lampshades. A drum shade can instantly update a lamp. Be sure to avoid dark lampshades that absorb light. Don’t rely on your real estate agent to turn on all the lights when showing a home – put lamps on timers to make sure dark rooms are always well-lit.

Floor lamps. Like table lamps, floor lamps effectively add extra light in a space where a table won’t necessarily fit. Put a floor lamp next to a couch or chair. Be strategic about placement, though. Try to make cords invisible, rather than having an extension cord out for buyers to trip on. Also, look for a lamp that provides ample light and doesn’t take up a lot of square footage.



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3 Rules For 7% Income And Market-Beating Returns In REITs

Buying real estate investment trusts isn’t like buying other stocks; despite their high yields and big long-term returns, REITs require a bit more attention and a bit faster action than more popular dividend-payers, like blue chips and dividend-growth stocks.

But it’s more than just speed and care. To win with REITs, you need to follow three rules—and I’m going to show you those today.

These REIT rules have never been more important than they are now. Broadly, REITs are getting more valuable, but the market is getting more scared of them. This disconnect makes no sense and is partly the reason why two extremely healthy and valuable REITs—Sabra Health Care REIT (SBRA) and Care Capital Properties (CCP) recently merged.

In their announcement, both firms said the merger would save $20 million in costs annually, provide greater diversification and give the new company more cash for expansion.

The market’s response? Both REITs have plunged in recent days, giving both negative returns since CCP’s IPO in 2015:

Markets Cautious on REITs

At times, drops like this gave contrarian investors a great opportunity to get both SBRA and CCP on sale when the stocks were ridiculously oversold. Like back in November 2016, when buying SBRA was a no-brainer: it was absurdly undervalued due to a plummet in price without a drop in earnings, capital access or expansion.

Selling SBRA after the merger announcement also made sense, because the market is worried that the combined company isn’t going to deliver on management’s promises. The market is wrong on this, which means waiting for both Sabra and CCP to bottom and then jumping in again might be a good idea.

This brings us to our first rule of successful REIT investing.

  1. Get the Timing Right

Many things affect REIT pricing, but the biggest is whether there’s a better alternative out there. That’s always changing, of course, which is why the ratio between a REIT’s funds from operations (FFO, the metric used as earnings per share is used for stocks) and its price can change by 30% or more in a matter of months.

And as my colleague Bill Stoller recently pointed out, REIT investors—like all investors—can be fickle; their confidence in a particular REIT or REIT sector can vanish easily, again causing big price swings.

This all means we need to take a closer look when a REIT has fallen extremely quickly in a very short period. Ask yourself: is there a good reason for this fall, like a steep decline in the value of the company’s assets, an explosion of debt without accompanying growth or changes in management that aren’t good for investors? If you can’t find these smoking guns, it’s probably an irrational panic that you can profit from.

  1. Compare FFO and Pricing

Finding the details in Rule No. 1 isn’t easy. But it is easy to take a quick look at REIT price and FFO and get a sense of whether there’s disaster or opportunity ahead. Are there any radical disconnects between the two? In the case of SBRA, one became apparent in late 2016, as you can see in the red circle below:

Weakening Price, Rising FFO

Notice how prices fell in late 2015, shortly before FFO plummeted, then rose again in early 2016, just before FFO began to rise? That’s the market anticipating changes in the company’s FFO and pricing the stock accordingly.

But then in late 2016, something odd happens—FFO showed no signs of dropping and was about to soar past its 2015 level, yet prices went down suddenly and sharply.

Why? Think back to November 2016. President Trump was just elected, and the market saw this as great for inflation, interest rates and financial stocks. But it was also seen as a bad thing for REITs, so the entire sector took a dive.

This was a rare moment when temporary hot-button issues overshadowed the fundamentals in a REIT—and created a buying opportunity.

When it comes to REITs, we need to wait for those rare moments when the market stops focusing on fundamentals and drops the ball.

Of course, the market quickly realized its mistake and started recovering almost immediately, so Sabra was back to its pre-Trump election level before January. Then it was up nicely just before the merger news. That means there was a nice window of six months in which investors could capitalize on the market’s mistake.

The key takeaway? Ignore the noise from the news, focus on how FFO is trending and take note when the market stops focusing on fundamentals and punishes a REIT unfairly. Then jump in.

  1. Buy at a Discount

In other words, you need to buy REITs at a discount and constantly look at the stock’s price trend alongside quarterly earnings reports to see if that discount is disappearing or not.

Sound hard?

It is. Instead, some investors just give up and put their money in a REIT index ETF, like the SPDR Dow Jones REIT ETF (RWR). This is a bad idea for two reasons.

Firstly, with an index we’re getting winners and losers because no one is digging through the REITs. Secondly, there’s no churn—the fund isn’t offloading REITs when they’re overvalued and buying when they’re undervalued, so we’re not really taking advantage of the emotional swings of the real estate market.

On top of this, the fund’s yield is weak; we’re going to get a 5.2% dividend when we can get over 7% elsewhere.


In closed-end funds (CEFs). These more actively managed funds can take advantage of changes in the real estate market to buy and sell REITs when it makes sense to do so. That gives them the opportunity to produce bigger capital gains while accessing the income of high-quality REITs, and that translates into higher dividends.

Let me show you four such REIT-focused CEFs: Nuveen Real Estate Income (JRS), RMR Real Estate Income Fund (RIF), Neuberger Berman Real Estate Securities Income Fund (NRO) and the Cohen & Steers REIT & Preferred Income Fund (RNP).

And as I wrote back on May 2, CEFs are a great way to buy REITs at a big discount. And all four of the above funds are trading at discounts to net asset value (NAV, or the value of their underlying assets), although their discounts vary, from less than 1% to over 16%:

That means we’re not only getting access to professional analysis of REITs, we’re also getting that for less than we’d get REITs for with RWR, which doesn’t trade at a discount at all.

But you have to be picky. Not all CEFs are good—and many are horrible. This is as true with REIT funds as it is with anything else. If we look at the last 10 years, we see that only one of these four REIT funds has beaten RWR on a total-return basis:

CEFs Deliver Mixed Performance

CEFs demand a close look to pick the winners from the losers; when you take that close look, you can pick a fund that almost doubles the index’s performance over a decade, like we see Cohen & Steers delivering with RNP. And that’s not the only fund to offer this superior return.



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How To Handle Rental Properties With Bed Bugs

Bed bugs on your rental property can be a landlord’s worst nightmare. It can take months to rid your property of a bed bug infestation, especially if other units become infested. Find out how to deal with bed bugs quickly in case you get the dreaded call that a renter found bed bugs in his or her apartment.

Bed Bug Treatment Options

If a renter suspects bed bugs, remain calm and hire an exterminator to check things out. This could simply be a case of fleas, rather than bed bugs. When screening for bed bugs, an exterminator will inspect mattresses, drawers, shelves and other areas. You have the option to tag along if you wish, or ask the exterminator to get back to you with the results.

A qualified exterminator will be able to tell you the probable cause of your bed bug infestation, if indeed you have bed bugs. Generally, the person who brought bed bugs into the apartment should be financially responsible for the bed bug extermination. However, proving fault can be difficult. If you have a multiunit building and you’re dealing with several complaints of bed bugs, you may not be able to determine who originally brought the bed bugs on site. When you have a bed bug issue, you need to start bed bug removal right away or the problem will get worse. Proceed with bed bug removal while you and the renters come to an agreement over who is responsible to pay for the bed bug treatment.

Exterminators will spray insecticide for bed bug removal, steam clean furniture or seal furniture completely until bed bugs die. After the exterminator treats the property for bed bugs, your renters must clean the apartment. This includes washing everything in hot water to kill the bed bugs, encasing mattresses and box springs in special bed bug encasement sleeves, and vacuuming everything. If your renters do a poor job of cleaning, or if they bring new bed bugs into the unit, the infestation can continue.

Protecting Yourself With a Bed Bug Addendum

If you’ve been through the hassle of bed bug removal before, you may wonder whether you should protect yourself with a bed bug addendum to the lease.

Laws in 22 states dictate actions that landlords must take regarding bed bugs. In some states, landlords have to pay for bed bug extermination before renting an infected unit and provide renters with educational material regarding bed bugs.

Check your state’s laws before you make any changes to the lease agreement.

If you decide to include a bed bug addendum in your lease, use it to set rules and regulations regarding bed bugs. For instance, you might explicitly state that a renter found to have brought bed bugs into the unit is liable to pay for extermination. Or, you may prohibit tenants from bringing in furniture found on the street, which may contain bed bugs. If renters violate this, they could be held liable for the extermination.

If you decide to use a lease addendum, get started with a customizable template from the American Apartment Owners Association. The customizable template is easy to use, professional looking and cost effective when compared with the cost of hiring a lawyer to draw up a lease addendum. To save on landlord forms, become an American Apartment Owners Association member today.

The information provided herein is for advisory purposes only and AAOA takes no responsibility for its accuracy. AAOA recommends you consult with an attorney familiar with current federal, state and local laws.

The post How To Handle Rental Properties With Bed Bugs appeared first on AAOA.

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