American Apartment Owners Association

Lifestyle Centers Positioned to Help Landlords Weather Industry Upheavals, Expert Claims

Thu, 07/20/2017 - 4:04pm

The Hanover Mall in Massachusetts represents a Boston retail market enjoying a surge of economic growth. Its owner, PECO Retail Partners, is planning to redevelop a 200,000-sq.-ft. outdoor portion of the mall and turn it into a lifestyle center.

If all goes well with the plan, which calls for tax concessions from the town, PECO could start developing the lifestyle center in three years, according to news reports.

Boston is not the only market that stands to benefit from a new lifestyle center. Earlier this year, Endeavor Retail Group opened The Parke, a 350,000-sq.-ft. property in Cedar Park, Texas.  Nationally, landlords and investors are taking ideas from the lifestyle center to update their properties. Industry experts expect the changes to help landlords’ portfolios withstand the major shifts occurring in the way Americans shop and spend their free time.

“Landlords are being forced to be more creative,” says Michael Nagy, a senior vice president in the Dallas office of real estate services firm CBRE. “You cannot put a center out there to the public and say, ‘Here is my shopping center.’ It has to be experiential.”

That realization is sustaining the resurgence in the lifestyle center sector that began about four years ago. In 2013, industry experts anticipated that investment sales in the lifestyle center sector would reach $1.7 billion, including finalized and pending deals. It would be a record-setting year for deals.

They started from the middle

Poag & McEwen of Memphis was among the landlords that pioneered the format in the late 1980s, characterizing lifestyle centers as outdoor retail centers leased to tenants generally found in enclosed malls. The centers first appeared in small Midwestern towns to offer shoppers more variety than the typical enclosed mall. Now they appear in upscale markets such as Los Angeles and Scottsdale, Ariz.

“It was mall tenants that weren’t in the mall or that wanted to get out of the mall,” Nagy says. “Landlords offered a better mousetrap—an outdoor venue with lower net rents. That is how it got off the ground.”

The lifestyle center count in the U.S. totaled 497 as of year-end 2016, according to data compiled by the ICSC. That represents a slow, but steady increase over the 451 existing lifestyle centers in 2012.

These days, lifestyle centers are as varied in their quality as enclosed malls. Successful projects like The Grove in Los Angeles or Scottsdale Quarter in Scottsdale can do as much as $800 or $900 in average sales per sq. ft., Nagy says. Yet other lifestyle centers manage only $250 or $300 per sq. ft., and the most upscale tenants might include an Ann Taylor.

Much like with other retail properties, the success of these centers depends on their locations. Yet in an era where retailers are announcing thousands of store closings, lifestyle centers offer landlords a better chance of withstanding the shift occurring in retail.

“As a format, it allows landlords to be more creative,” Nagy says, adding that CBRE advises landlords not to turn away lucrative leasing deals from tenants such as nail salons, yoga studios or fitness centers. “[Their]look and feel and the way they are built offer more flexibility.”

That flexibility is critical in today’s retail environment. In a recent look at retail store closings announced for 2017, Fung Global Retail & Technology Weekly Tracker found that about 5,321 retail closings were announced by June 23.

Lifestyle centers afford landlords the flexibility to offer spaces to flea market operators or even use a wing of the center to create incubator shops to local small businesses, as examples. The key for landlords is to offer as many different services and attractions to the local consumer as possible, particularly at a time when American do more and more shopping for apparel and accessories online.

“You have to be as many different things to as many different people to survive,” Nagy says. “It’s about getting people to your [property]every week as many times [as]you can. Lifestyle centers are set up to weather the storm better than a lot of other product types.”


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More Americans are renters now than at any time in the last 50 years

Thu, 07/20/2017 - 8:56am

Ten years after the U.S. housing market crashed, some things have gotten worse instead of better.

More U.S. households are headed by renters than at any point since at least 1965, according to new analysis of Census Bureau data by the Pew Research Center, a nonprofit think tank in Washington, D.C. “The total number of households in the United States grew by 7.6 million between 2006 and 2016,” it found. “But over the same period, the number of households headed by owners remained relatively flat, in part because of the lingering effects of the housing crisis.” And the rise in renters is significant, even accounting for the growth in the population over the last half-century.

The number of households renting their home has fallen since the peak of the U.S. property bubble in 2006, Pew found, while the percentage of households renting rose to nearly 37% last year from just over 31% in 2006. The 2016 rate is slightly less than the 37% in 1965. “Certain demographic groups ­— such as young adults, nonwhites and the lesser educated — have historically been more likely to rent than others,” Pew found. “However, rental rates have also increased among some groups that have traditionally been less likely to rent, including whites and middle-aged adults.”

Adults younger than 35 continue to be the most likely of all age groups to rent. In 2016, 65% of all households headed by people younger than 35 were renting, up from 57% a decade earlier. Last year, 41% of households headed by someone aged 35 to 44 were renting, up from 31% of all households in 2006. Rental households headed by someone aged 45 to 64 rose to 22% of all households in 2006 from 28% in 2016. But among baby boomers and the oldest Americans — those 65 or older — the rental rate remained steady at around 20%.

One reason so many people are renting: Only 45% of renters on average can afford the payments on a median-priced home in their area, according to a report on the state of housing from Harvard University’s Joint Center for Housing Studies released last June. Buying a house is even more out of reach for renters in expensive markets such as the West Coast, the Northeast and Florida. In these parts of the country, as few as 10% of renters could afford the mortgage payments if they bought a home, the report found. Economists recommend spending no more than 30% of gross income on housing.

Renting can also help families make ends meet, if they stick together. Tens of thousands of homes have a combined 3.6 million unoccupied rooms that could be rented out to a family member or stranger — and generate an average of $14,000 to $24,000 — according to an analysis of U.S. Census Bureau data in the 100 largest U.S. housing markets released Wednesday by real-estate website Trulia, earning between per year. “For many older Americans, renting a room provides an economic boost that may help them stay in a home longer. Prices are high, inventory is low, and new housing growth is stagnating.”



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Startups Help Landlords Turn Apartments Into Hotel Rooms

Thu, 07/20/2017 - 8:55am

A handful of startups are betting they can help apartment-building owners convert empty units into hotel rooms, a controversial practice that could help landlords generate more revenue.

The rise of home-sharing services such as Airbnb Inc. has been a boon for owners of single-family homes looking to make extra money by renting out their properties.

But so far the services have been met with fierce resistance by local governments and some tenants worried that large residential buildings could morph into hotel-like properties brimming with tourists and other transients.

Yet some startups contend they can navigate these potential pitfalls.

Arlington, Va.-based WhyHotel aims to turn apartment buildings into pop-up hotels, complete with front desks and maid services, to help owners generate revenue while they are in the midst of finding full-time tenants. of Miami leases sections of apartment buildings or even entire properties, bringing in designers to transform the units into hotel rooms.

Pillow Residential, which last month raised $13.5 million in funding, offers a platform that allows building owners to access information about Airbnb guests, and see which units in their building are being rented out and when.

The services are sprouting up just as the red-hot U.S. apartment market is beginning to cool.

In all, there are roughly 29 million apartment units in the U.S., according to the National Multifamily Housing Council. Nearly 800,000 new units have been built since the beginning of 2014, according to CoStar Group Inc.

But the vacancy rate for apartments in downtown markets rose to 8.1% in the first quarter from 6.8% a year ago, according to CoStar. Some 45% of buildings completed in the first quarter of 2016 were more than 10% vacant after a year, compared with 38% for those built in the first quarter of 2015, suggesting properties are taking longer to lease.

The startups, which are expected to typically operate eight to 16 months in a building, see potential in helping the developers of those buildings wring revenue out of units that aren’t yet leased.

WhyHotel piloted its concept with 50 empty units in a Vornado-owned building in Pentagon City, Va. Prices were $179 to $329 a night on units that otherwise wouldn’t have generated revenue until they were rented to long-term tenants. The service ran from January through May, when there were enough tenants to bring the building close to full occupancy.

“They’re very easy conversations to have because there’s a lot of product coming online,” said Jason Fudin, co-founder and chief executive of WhyHotel and a former vice president of strategic initiatives at giant landlord Vornado Realty Trust. Mr. Fudin declined to disclose what percentage of the nightly rental fee Vornado received, saying it is different for every deal.

Mr. Fudin said his team hammered out an agreement with local officials that permitted it to operate the hotel for no more than 24 months. He said the business model makes sense only in buildings that are 200 units or more, where significant structural modifications aren’t needed to bring the buildings up to hotel-like codes and they can get enough scale to make it worthwhile to operate as a hotel for only a short time.

While WhyHotel carefully avoids converting apartment units permanently to hotel rooms to help dodge controversy of local housing becoming tourist lodging, other companies are embracing that model.

YouRent takes control of a block of units in high-end apartment buildings and re-rents them as hotel rooms. Brian Ferdinand, YouRent’s chief operating officer, said the company is hoping to take advantage of the glut of luxury apartment inventory at the moment and demand for hotel rooms in hip urban cores.

The company is expanding in Miami, Austin and Nashville and plans to fan out to San Diego, Denver and Boston. Mr. Ferdinand said a two- or three-bedroom unit rents for about the price of a hotel room on a nightly basis.

Mr. Ferdinand said in some cases YouRent pays landlords 20% above what they could get from a typical tenant because the short-term rental business is so lucrative. The company’s average guest stay is 3.5 nights.

YouRent is aiming to provide a more structured alternative for landlords, Mr. Ferdinand said, offering detailed screening to weed out people with criminal records or sexual predators, paying applicable local taxes and obtaining permits and buying rental insurance.

These new services aim to get around an issue that Airbnb has increasingly been confronted with: Historically, landlords have been reluctant to allow their tenants to rent out their units because they didn’t receive any of the revenue. Most apartment leases forbid tenants from subletting their units without permission.

Airbnb has been trying to recruit owners of big apartment buildings, which represent a crucial growth opportunity for the company because the sleek modern buildings with doormen, fitness centers and modern finishes are likely to appeal to business travelers. Airbnb rolled out its own program last fall that would give landlords who allow their tenants to rent units a cut of the revenue.

The initial reception was cool. Landlords are wary of liability, disrupting the sense of community in the building and having the risks of having tenants who hadn’t gone through the full screening process.

Airbnb didn’t immediately respond to a request for comment.

Pillow Residential is aiming to make it easier for landlords to allow tenants to rent units on Airbnb. Blake Hayunga, chief operating officer at Virtú Investments, said the company is using Pillow’s services in two buildings and plans to roll it out in 11 more.

Tenants who use the platform typically give 10% of the rental revenue to their landlord, as well as a 10% to 20% commission to Pillow.

Though the upside for landlords, Mr. Hayunga said, is mostly in marketing the perk to potential tenants and helping tenants afford higher rents.

“You’ve got millennial residents who travel several weeks a year and are struggling to pay the rent,” he said.

Mr. Hayunga said when tenants are considering renting a unit, he shows them a matrix of how much they can offset their rent by using Airbnb.

Short-term rentals are already happening, he said. “This just allows us to take control of the process.”



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4 Time Management Tips for Property Managers

Thu, 07/20/2017 - 8:52am

A good property manager must have numerous skills to keep their residences functional and their residents happy. One of the most important skills for a property manager to have is great time management. Unfortunately, time management is a broad term that can mean everything from generic scheduling to meditating.

So what can a property manager do specifically to manage their time — and their staff’s — to the best of their ability? Here are four time management tips for property managers.

1. Write (or type) it down

At the beginning of each day, or at the end of the day before, make sure you have a designated place for all the tasks that need to be done. While you may have a great memory, we are all victims to saying we’ll remember something and then forgetting about it five minutes later. If a resident comes in with an emergency phone call and you don’t have their request written somewhere, the chances of it being solved are already way lower.

Also, make sure that this list of tasks is one strictly for tasks. You may write down things you need to do, but if they’re sporadically floating on random papers, Post-its, and napkins, you’ll never get them all done. In fact, you might even spend more time looking for them than actually doing them!

Writing things down, or typing them out in a list, is one of the easiest and most efficient ways to stay organized and focused throughout the day. Plus, is there anything more satisfying than checking something off the list?

2. Stick to the list

It’s even more important that you stick to your list once you make a list of the most important things that need to be done. Being a property manager means that there will probably be many things calling your attention at any given time. However, you need to be careful that you aren’t leaving in the middle of every single task to work on a different one.

You should have enough discipline to yourself to dedicate the time needed to finish each task before being distracted by another one, except for emergencies. Focusing on one task allows you to work harder and more efficiently than you would if you were bouncing around to different things every five minutes.

Don’t forget to add necessary things to your list too like eating lunch and taking breaks. These things deserve just as much attention so you aren’t getting completely burned out throughout the day.

3. Divide up the big tasks

Though this may seem contrary to the previous paragraph, breaking up large tasks is also important for staying focused during the day. When you’re looking at your list of things that need to get done, you may avoid the very large tasks that you know will take hours to complete. Of course, procrastinating on these things is not what you want to do. You want to get everything done in a timely, organized manner.

You can do this by skillfully dividing up large tasks into smaller, more manageable ones. Say, you’re going through rent checks for the month, you could schedule residents with last names A-M in one block and residents N-Z in another. Doing this with your larger projects will help them seem less daunting.

4. Connect with workers

Though you may have made an orderly, prioritized list every morning, that doesn’t necessarily mean that your employees have. As a property manager, you’re looking after many types of people and making the most of everyone’s time can be difficult.

One way to try and maximize time and efficiency is to brief everyone about the most pressing tasks at the beginning of the day. Let them know what you expect them to work on first and what other work can come after. Like you do to your own list, try and break up tasks so they don’t feel overwhelmed at first. You could also schedule a midday briefing to go over tasks for the rest of the day if you don’t want to do it all at once. All in all, communicating with your employees about this will help reduce unnecessary confusion throughout the work day.

Being conscious of your time and working diligently is the best way to start managing your time. As a property manager, just try not to be overwhelmed by what may appear to be a long and grueling list of tasks. Just remember to take things one small step at a time and you’ll be surprised at how much you can accomplish in a day.

Also, remember that surprises and unexpected events are bound to happen as a property manager and not to let them stress you out completely. Don’t be afraid to laugh things off and remember to keep your head up. You always have the tools and people necessary to solve any problem that comes your way.


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Three Ways To Quantify The Impact Of A Real Estate Investment

Thu, 07/20/2017 - 8:45am

What keeps your real estate investors engaged?

Throughout history, the obvious answer to that question has been the combination of the internal rate of return (IRR) we have been generating and the total equity multiple of our investments. However, within the past decade or so, social and environmental impact have risen the ranks to become priorities.

This realm is commonly known as “impact investing,” and according to Deloitte, it stands to become a $1 trillion industry by 2020.

Traditional investment managers are starting to embrace this trend, though measuring their impact has proven a difficult task. It’s vital for firms to define, quantify and communicate their true impact to investors, but many are struggling to do so effectively.

At my firm, we conduct a preliminary site visit, during which we identify a realistic impact thesis. Once we determine the goal, we choose specific metrics and data sources to benchmark our progress. Typically, they revolve around social and/or environmental impact.

This is a never-ending process. We constantly monitor the data during the lifecycle of the investment. We employ a Kaizen methodology of constant, continuous improvement in which we adjust and optimize our execution over time to ensure it consistently aligns with our thesis.

Here are three common categories we use to quantify our investment impact:

  1. How many families benefited? There is a real need for affordable housing in America. According to a 2014 study conducted by the Joint Center for Housing Studies of Harvard University, nearly 50% of renters (and more than 25% of homeowners) felt the burden of housing costs. More than 25% of those renters devoted more than half of their income to housing costs.To address this, we invested in apartment complexes in the Midwest through partnerships with government-sponsored entities to provide affordable, high-quality housing to refugees, veterans and the homeless. We collaborated with the U.S. Office of Refugee Resettlement (during the Obama administration), the Department of Military and Veterans Affairs (during the Trump administration) and a variety of U.S. Department of Housing and Urban Development- or Section 8-affiliated entities. To start quantifying our impact, we simply kept track of the sheer number of families we housed. But we also dug deeper into the numbers, comparing the income of the families we helped to the average median income (AMI) of that given ZIP code. Across our portfolio, we helped house more than 350 low-income families who were classified as below 60% AMI.Defining impact presents many challenges, but a way to alleviate these concerns is to strategically partner with community-based organizations that are aligned with your ultimate mission. Finding alignment means performing your due diligence to determine whether you can establish a mutually beneficial relationship that fulfills your overarching objectives.When vetting strategic partners, we looked for three non-negotiable attributes: local market influence, national-level presence and an understanding of our business model. We sought strategic partners that had a local market footprint that allowed us to leverage key relationships. Then, we determined how scalable each partner was not only locally, but also nationally, as our mission was to simultaneously effect change in communities nationwide. Lastly, partnering with an organization that understood our business model was imperative, as it had certain complexities that we were trying to balance.
  2. How much was crime cut? A tremendous byproduct of affordable housing is safer, healthier communities. In fact, while participating in a fellowship at Stanford University, researchers, a 2015 study proved that revitalizing low-income housing lowers crime rates. When investing in the Pacific Northwest, we entered a high-crime area with the intention of providing an affordable and safe environment for families. We deterred crime by working with lighting and casing manufacturers in southern China to import and assemble LED flood lights at our properties. In the process, we staved off gang and drug activity in our communities while reducing our electricity consumption. We measured our impact by tracking before-and-after crime statistics. Over the course of the first 12 months, crime was reduced by more than 60%, and three major drug dealers were eliminated from our communities.Besides reducing crime, there are a variety of ways we can impact these communities. Our methodology stemmed from wanting to consider Maslow’s hierarchy of needs by transcending physical safety and tackling the psychological aspect of community. For example, we noticed that when we reduced crime in our communities, we were able to build healthier, more productive neighborhoods.

    Another area where we can make a difference is the environmental footprint of our operations. According to research from Sustainalyticscommercial real estate accounts for 40% of global energy consumption and 30% of CO2 emissions.

  3. How big is the footprint? The investing, economic and scientific communities are increasingly aware that the world’s financial health is dependent upon the environment. In fact, the World Economic Forum’s 2016 Global Risks Report deemed climate change the top threat to our global economy. In California, we partnered with the city we were in to reduce water consumption. We installed low-flow toilet bowls that cut water consumption in half (from 1.6 gallons per fill to 0.8 gallons per fill) and saved money on water bills. We also employed a xeriscape specialist, who installed a variety of eco-friendly plants that require little to no maintenance.The impact of these types of measures is easily quantified by monitoring utility bills over time, particularly for water, sewer and electricity.While key performance indicators are subjective to each organization’s mission, we found that as we extend the useful life of a given apartment community, we are mindful of how we retain cultural resources, reduce excess waste and reduce our environmental impact.



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Nashville ranked nation’s hottest single-family housing market

Thu, 07/20/2017 - 8:17am

Nashville has the hottest single-family housing market in the U.S., according to a report that shows nation-leading annual growth in home sales and price appreciation for the recent second quarter.

The No. 1 ranking by online real estate marketplace Ten-X Research of Irvine, Calif.., is also based on local growth in population, wages and jobs plus overall state of the economy.

“In all of these areas, Nashville’s doing far better than national averages,” said Rick Sharga, a Ten-X executive vice president, citing as example last year’s 2 percent local population growth being three times the nation’s average. “Unless there’s something unforeseen that disrupts the economy like a major employer moves out, it’s really well-positioned for the next few years.”

Orlando, Fla., and Fort Worth, Dallas and San Antonio, Texas, were the other top five hottest single-family markets also based in part on annual home price growth and annual home sales growth.

Cost of living also rising at nation’s fastest rate

A separate study by personal finance website GoBankingRates, meanwhile, showed Nashville’s cost of living rose the fastest nationwide over the past year with the amount needed to live here comfortably up $9,135. It takes a salary of $70,150 to live in Nashville today, the report said, citing housing costs among factors with the median list price of a home rising almost 30 percent to nearly $340,000 from April 2015 to 2017.

Ten-X’s Top Single-Family Housing Markets Summer 2017 report, however, said that Nashville’s housing affordability remains favorable even as prices have surged almost 40 percent beyond their prior peak, which it suggests that prices can continue to progress without pressuring buyers, “The Metro also carries modest downside risks as prices only fell moderately during the housing bust,” that report read.

Rick Sharga, Ten-X’s executive vice president. (Photo: Submitted)

Previously, Nashville had been in the top 10 in Ten-X’s tracking, but ranked No. 1 for the first time in the most recent quarter. For the second quarter, local home sales increased 7.4 percent year-over-year with price growth of 12 percent to mark improvement for 20 straight quarters.

Among the 50 largest U.S. housing markets, Nashville posted the highest score in terms of economic prospects based in part on jobs and population growth. Education, health care and leisure and entertainment are among growing sectors with local employment up 4 percent year-over-year.



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Member Q&A: Can I Deny All Tenants with Criminal Records?

Mon, 07/17/2017 - 9:25am

AAOA Member Question: As an owner of a small apartment complex, I’ve had to deal with criminal activity on my rental properties in the past. I started running criminal background checks with AAOA a few years back to increase safety for my residents. I’d like to make a rule to not rent to anyone with a criminal background. Can you please provide me with how I can go about amending my rental policy for this?

Answer: There is no way to legally make a blanket policy that would exclude applicants with criminal backgrounds from renting a unit in your complex. This is especially true since the April 2016 US Department of Housing and Urban Development’s Office (HUD) released its guidance on “Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions.”

HUD’s new guidance is now being used as the de facto best practices guide for handling criminal records and it clearly indicates that blanket policies should be eliminated. Although you may not be intentionally trying to discriminate against minorities, minorities may be disproportionately harmed by a blanket policy. How is this possible? Since 2004 an average of 650,000 individuals have been released from prison on an annual bases. Having a criminal background in many cases makes it extremely difficult for these individuals to access safe and affordable housing that can help them reenter society. A high percentage of these individuals are minorities, meaning more minorities would be negatively affected by your policy, even if you have no intent to discriminate. This is known as disparate impact and is a violation of the Fair Housing Act.

As a landlord you should implement policies that are the least discriminatory. However, this does not mean that you have to accept all applicants with criminal records. HUD’s guidance states you must show that you considered each individual conviction, when it occurred, and what the convicted person has done since then. If you deny an applicant based on a criminal record, you should be able to show that your decision was necessary to achieve a nondiscriminatory interest and there was no other option that would have been less discriminatory.

You may be able to deny applicants with certain types of crimes in your policy, but you must still be prepared to prove that the criminal conduct in the person’s background is directly related to the safety of your residents. We recommend avoiding this type of policy as well to reduce your likelihood of being taken to court.


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9 Sneaky Fees to Watch for When Hiring a Property Manager

Mon, 07/17/2017 - 8:29am

To many landlords, property management services are superfluous, cutting their profit margins to a minimum in exchange for basic services. But the reality is that property managers can make your life extraordinarily easier—and most charge a reasonable enough rate that you can draw a monthly profit from your properties (headache-free).

However, when you’re searching for a property manager to handle your landlord responsibilities, it’s important to note that not all fee structures are the same. If you don’t understand how a manager’s fees work, you won’t be able to compare apples to apples, and you might end up shaving your profit more than necessary if you aren’t prepared for those fees when they come up.

9 Fees to Watch For

These are some of the most common “hidden” fees, extra fees, and differences in fee structure to watch for when comparing providers or finalizing a contract:

1. Rent Due and Rent Collected

Many property managers will charge fees as a percentage of rent, but watch how this is worded—there’s a difference between charging as a percentage of rent due and a percentage of rent collected. A percentage of rent due means your company will charge you based on how much money a tenant owes you; a percentage of rent collected means your company will charge you based on how much money a tenant actually pays you—and is generally more favorable. If you’re charged based on rent due, you’ll end up paying for property management even when your property is vacant and you have no money coming in.

2. Early Cancellation

You may also be charged an early cancellation fee should you break the contract with your property manager before the end of its outlined term. For example, if you agree to work with them for a year and you want out after eight months, you might pay an additional few hundred dollars. Be especially wary of this fee with untested property managers.

3. A La Carte Management Fees

“A la carte” management fees refer to a suite of extra fees a property manager may charge you in addition to basic services. Usually, a property manager will either charge a higher price (and no additional fees) or a lower price, with multiple additional fees, somewhat evening out. Accordingly, it pays to know what fees are applicable and what they might run you. The remaining items in this list could all be classified as a la carte management fees.

4. Vacancy

If a company isn’t charging you the full cost of management while your property is vacant, there may still be an additional vacancy fee. Rather than collecting a percentage of rent due, they may collect a smaller amount from you as a kind of retainer.

5. Advertising

When it comes time to seek a new tenant, some property managers may charge you an additional advertising fee. This would cover the cost of creating media (such as taking photos) and placing it on sources like online listings or paper publications.

6. Leasing

A leasing fee may apply when you find a new tenant for your property. This covers the cost of drafting and securing a new lease agreement and is generally low in cost. If the cost here is high, it should raise a red flag, especially if your resulting tenant turnover seems to increase.

7. Lease Renewal

Lease renewal is even simpler than initial leasing, but it may still require a fee. You may need to draw up new paperwork or renegotiate terms with a tenant, and that means your property managers will be doing a bit of extra work. Expect minimal fees here as well.

8. Maintenance

Property management fees should cover basic instances of maintenance and repair, but some companies may charge extra for big jobs, or for an inspection between tenants.

9. Eviction

Eviction can be a messy process, and if you ever need to evict, you’ll be grateful you have a property management service in your corner. Most property managers will handle the eviction completely on your behalf, but some will charge you an extra fee for the extra work involved. Expect to pay at least a few hundred dollars for this process.

Apples to Apples

Different companies might charge money in different ways, but if they’re offering similar services, you’ll likely find the bottom-line price of each to be competitive with one another. The big difference here is how you plan on using your property management company; for example, if you’re looking for long-term arrangements, an early cancellation fee shouldn’t factor much into your decision. Try to consider all these factors and all price points when comparing providers and making your decision.


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What’s on the Horizon for the Student Housing Industry

Mon, 07/17/2017 - 8:24am

If there’s one word that sums up the current state of the student housing industry, it’s growth. With an average of 48,000 off-campus purpose-built beds delivered per year, the industry is predicted to grow at a healthy and sustainable pace. Opportunities are popping up across America to invest in Student, and there’s no end in sight.

Taylor Gunn, Student Housing Analytics Lead from Axiometrics, shared a bird’s eye view of current trends along with some opportune advice for property managers. She’s one expert who takes Student seriously.

“Student housing,” Gunn said, “is a maturing asset class that is much more complex than students living in apartments.”

She pointed out the potential of Student to go beyond the reaches of the conventional market, alluding to “leading companies in the industry that have achieved results above even the conventional apartment market.” The question property managers are asking now is, what is driving the student housing industry boom and how do we stay ahead of the competition?

Supply and demand

There’s a reason behind the success of the student housing industry. According to Gunn, Student growth is most affected by supply and new demand, and new student enrollment increases housing demand year after year. Things are looking up for Student – as long as demand stays ahead of supply.

“If demand and supply are in balance, or if demand is outpacing supply, the effects are positive,” Gunn said. If supply outpaces demand, the effects are the opposite. In the current climate, however, demand appears to be well ahead of supply.

Performance trends

“Leasing velocity is a key performance metric looked at in the student housing space,” Gunn said. For the past few years, leasing velocity has outpaced the previous ones, pushing occupancy to its highest levels. “We’re seeing leasing velocity moderate compared to last year, which is a result of increasing competition and shifting leasing strategies.”

The forecast? Gunn predicts that with these conditions, we can expect moderation in some markets, but also higher revenue potential.

New opportunities

Opportunities to own and develop continue to grow, and the harvest is ripe for development. “There are still many universities with limited student housing options,” Gunn said, “and many that don’t have any off-campus options at all.”

She even predicted hope for aging dormitories and conventional apartments. “There are opportunities to update properties built in the earlier years of the student housing industry and many conventional apartments that can be repurposed,” Gunn said.

How to stay ahead

There’s a wider playing field now, and competition is on the rise. Gunn recommends knowing your market to stay ahead.

“The competition is increasing, though this is expected with a growing industry,” Gunn said. “It’s even more important to know what’s going on in your market and how to stay ahead – know when to start leasing and what your competition is offering in terms of rents, amenities, concessions, etc.”



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Should you be a landlord in your retirement?

Mon, 07/17/2017 - 8:18am

In 2005, everyone I knew was buying real estate. With no experience and no money, they bought properties they couldn’t afford and were convinced they were going to make a fortune.

Unfortunately, it didn’t work out that way, and most of them now have a foreclosure or short sale in their past.

Does that make real estate a bad investment? No. It’s an investment. The good or bad part comes from how you approach it. What’s good for one person can be bad for another.

To find out how to make real estate investments work, I decided to talk with a few experienced professionals and asked them whether real estate should be in a retirement portfolio.

“Absolutely,” says Judy LeMarr, a seasoned agent with Russ Lyon/Sotheby’s who works with clients in the Arizona and California areas. LeMarr grew up in a family that was all about real estate, and initially got her license because her dad told her it was something she “just needed to know.” That sounds like good advice.

They key, LeMarr says, is knowing what you’re in it for. Are you looking for current cash flow, long-term appreciation, or are you looking for a flip opportunity? You must know your area, she says. In the Midwest, you might find smaller residential rentals that will throw off stable cash flow. In other areas near military bases or manufacturing facilities, like Georgia, Kentucky, or Tennessee, your focus might be on Grade B multifamily properties, as you’ll have a steady source of working tenants who will pay their rent.

To make rental properties work, LeMarr advises you look at the age and condition of the roof, windows, plumbing, etc., and keep enough reserves in the bank to cover capital expenses that will come up. Also, plan on holding two months’ rent in the bank to cover turnover costs that occur between renters.

Lukas Krause, chief executive of Real Property Management, also thinks real estate can be a good investment for retirement, as rental rate increases have historically outpaced inflation. “For an individual investor, this means that an investment property bought with a break-even cash flow can become a net profit generator in a couple of years,” Krause says.

He added that rental growth rates do vary by location and said research shows that the three key factors that determine rental rates are the number of jobs, the level of wages, and the amount of available housing in a market. “Smart investors focus on markets with job and wage growth,” says Krause.

Both Krause and LeMarr talk about the importance of doing your homework before you buy. LeMarr likes to focus on finding properties before they hit the mainstream market. She looks for homes where she can go in, make improvements, and then raise rents.

Krause says you must determine a competitive rental rate for the property, and research expenses including capital improvements. Then calculate your cash flows and tax implications before making a purchase decision.

With property, be prepared for the little interruptions. LeMarr recalls one property where all the new blinds came in, but they didn’t fit. These things can slow down the time to market. And of course, with renters, there will be calls and repairs to handle. That’s why Krause says, “Smart investors realize that the value of their time is greater than the fees paid to a property manager, and property management fees are tax-deductible, so they cost less than they appear.”

If diving in to buy an investment property scares you, one way to generate rental income without the commitment of a long-term purchase is to rent out your home, or a room in it, on HomeAway, VRBO, or Airbnb. According to Airbnb’s reporting, from Sept. 1, 2015, to Sept. 1, 2016, seniors, defined as a person over 60 years old, have earned a collective $747 million from short-term rentals on Airbnb.

Rob Stephens, general manager of Avalara MyLodgeTax says that short-term renting has become very popular and easy, but there are pitfalls. “Nearly all cities and states impose lodging and occupancy taxes that must be paid on rental transactions. Over the past few years, government agencies have increased their focus on short-term rentals and stepping up enforcement tactics to ensure short term rentals are properly registered and paying the correct taxes.”

Rental real estate can be a great addition to a retirement portfolio, but it’s not a get-rich-quick scheme, and it’s not for everyone. Like any business, it takes cash, research, time, and commitment.


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Landlord alert: New index aims to take the risk out of rental investing

Mon, 07/17/2017 - 8:15am
  • Demand for single-family rental homes has never been stronger and, consequently, more investors are hoping to get in on the game.
  • For investors, the competition is high and so is the risk, especially for novices.
  • Now one company, Roofstock, claims it can gauge risk right down to the neighborhood level.
Demand for single-family rental homes has never been stronger and, consequently, more investors are hoping to get in on the game.

From large institutions buying thousands of homes to individual investors hoping to see strong returns on just a few properties, the competition is high. And so is the risk, especially for novices.

New companies hoping to help investors in every phase of the process — and cash in on their growing demand — have ranked large local markets for potential returns. Now, one claims it can gauge right down to the neighborhood level.

Roofstock, an online single-family rental marketplace, is launching a “neighborhood rating algorithm,” analyzing more than 72,000 separate Census tracks and ranking their risk. It goes beyond home values and average rent to include dozens of factors, such as income levels, employment rates, education levels, percentage of owner-occupied homes and school district ratings. It then ranks each neighborhood on a scale from 1 to 5, 1 being the most risky.

“As with any investment, whether it’s real estate or a stock or bond, you need to compare risk with return, and so what we’ve done with our star system is created a metric for estimating risk, which is really a measure of volatility or variability of your return,” Roofstock CEO Gary Beasley said. “So if you’re investing in a 4-star or 5-star neighborhood, your returns might be a little bit lower but your returns might be a little more predictable. There might be a little less variability.”

Neighborhoods with higher risk may offer better returns in the short term but will be less predictable. Beasley cites San Francisco as an example. Rents there are currently sky-high downtown, but certain suburbs of the city have very different characteristics and levels of risk. The index breaks a city down into tiny pieces and assesses each piece.

Here’s the Roofstock Rating Scale:

  • 5-star: Very high employment rates. Above-average income levels and school district ratings. Newer properties above the average home value and mostly owner-occupied.
  • 4-star: High employment rates. Average income levels and school district ratings. Average home values. Slightly older properties than in 5-star neighborhoods, but generally high quality and mostly owner-occupied.
  • 3-star: Good employment rates. Slightly below average income, with decent school districts. Home values slightly below average. Properties are a mix of new/old, with slightly more owned than rented.
  • 2-star: Below average employment, income levels, school district ratings, and property values. Homes are an equal mix of rented and owned.
  • 1-star: Lowest employment rate compared to higher-rated neighborhoods. Low income levels, school district ratings and home values. Properties are older, with more rented homes than owner-occupied.

“I think what makes our index different, and I’d argue better, is its granularity,” Beasley said. “It’s down to the neighborhood level because it’s very difficult to describe real estate at a metropolitan level.”

There are currently about 16 million single-family rental homes in the United States, about 5 million more than before the housing crisis. While large institutional investors bought thousands of distressed properties and set up a new asset class of rentals, they still make up barely 3 percent of the single-family rental market. The vast majority of rental homes are still owned by small to medium-sized, individual investors, and more novices want to get in on the currently strong demand.

“It’s a new landlord nation, where everybody is renting out their basement. When somebody moves up they don’t sell their old place, they rent it out to somebody else,” said Glenn Kelman, CEO of Redfin, a real estate brokerage.

Roofstock is not alone in the market. Companies like HomeUnion, Investability and TenX aim to guide smaller investors in picking properties. Some help with the sales, management and even renovation of the homes.

Despite the growth of this asset class, most individual investors — 70 percent according to Roofstock — purchase properties within an hour’s drive of where they live. This is likely so they can manage the properties themselves. With the huge growth of rental management companies, however, investors can look much farther for better returns. That means they need more data. The Roofstock index is free, but investors must log on and become a member of the site.

“A big part of our strategy is data — and then being able to monitor all that information and make recommendations as to which markets might look interesting for different strategies,” Beasley said. “So it is very much, from our perspective, a tech play because we’re working through this data but our goal is to simplify all that.”

While a risk index is certainly helpful, it’s not foolproof. Property values and local market dynamics can be influenced by unexpected factors, rental demand can change due to construction, and tenants are not always reliable. As with any investment, buyer beware and be informed.


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4 Questions You’ll Get at Open Houses

Mon, 07/17/2017 - 8:10am

Besides discussing the home’s layout and physical characteristics, come to your open house prepared to respond to these other common questions. Coldwell Banker recently featured some of the most common questions potential buyers may ask a real estate professional at an open house. Here’s what you need to be ready to answer:

1. How many bids have you received on the home?

Buyers may want to gauge the true price of the home and see how much competition they might face for it.

2. Why is the seller moving?

A real estate professional isn’t required to share this information, but it can be another hint to a buyer how motivated a seller is. Based on the reason given, buyers may be able to know how quickly the seller will be looking to sell if they have a job relocation, for example.

3. Are there additional homeownership costs?

Be ready to talk about any additional costs with the home, such as the property being located in a planned community and the homeowner association fees. List out the amount buyers will need to pay for association dues, additional taxes, and any other fees.

4. Are there any special regulations with the home?

Be able to talk about any regulations that the homeowner association may have that affect living in the property, such as pets, parking, or any remodeling limits for owners on the property.



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Buying a Vacation Home: The Questions Before The Purchase

Thu, 07/13/2017 - 8:42am

Whether it’s an oceanside bungalow or a luxury cabin in the mountains, many people dream of buying a vacation home. Financial advisors call a purchase like this “lifestyle investing.” Like any investment, buying a second home comes with both benefits and potential drawbacks, so it’s important to consider how a vacation home fits into your long-term plans before taking the plunge. Are you ready to pull a trigger on that property in Tahoe or Cabo? Read on before you close on any new vacation home.

Take a Close Look at Your Finances

Before even looking at listings, it’s important to assess your finances. To determine whether you can actually afford a vacation property, consider the following questions:

  • How strong is your income stream? Will it hold up during an economic downturn?
  • Will you be able to write off some, or all, of your mortgage? The IRS caps write offs for mortgage indebtedness at a maximum of $1 million between your primary and qualified second home.
  • Will you need to finance the vacation property? If so, keep in mind that banks are quite strict on limiting borrowers for a vacation property to a 42% debt-to-income ratio or less. For example, if your gross income is at $10,000 a month your total debt payments (including the new mortgage) will need to be under $4,200.
  • What is your current asset allocation? It’s typically not a good idea for anyone to have more than 50% of his or her net worth in any single asset class, especially one like real estate, where leverage is usually a big factor. You don’t want to be overexposed if the housing market turns.

Sit down with an advisor and answer these questions. If you still think a vacation home makes sense, keep reading.

Retirement Retreat or Raking It in With a Rental?

Once you’ve determined that a vacation home is economically feasible, the next big question to think about is how you want to use your vacation property. Are you planning to rent it out, fix it up and sell it, or retire there?

If you’re thinking about becoming a landlord, make sure the vacation home has rental income potential. If you’re looking to eventually profit from a sale, are you prepared to own the home for five years? You’ll likely want to keep it for at least that long in order amortize the high transaction costs associated with buying a vacation property. On the other hand, you may see the home as part of your retirement dream, which makes it more of a lifestyle decision than a purely financial one.

Making the Move

Once you know what you’ll use your home for, it’s time to figure out where to buy. Anyone who has ever bought a house has heard the adage about the three most important factors: “location, location, location.” This is even more critical when buying a vacation home.

First, look closely at the local market. As the Great Recession showed, real estate doesn’t only go up. An array of factors can drive a local market up or down, including: major employers coming or going, damaging weather events, and changing zoning laws. By working with an agent knowledgeable about the area, you can get a good idea of market activity and pricing trends.

It’s important to analyze the pros and cons of the kind of community in which you want to live. For example, a beachfront house will make it easy to find tenants if you choose to rent, but it may come with complicated insurance requirements. Mountain getaways typically offer lots of land at lower costs, but they are often located in rural communities with roads and utilities that may not be well maintained.

As you scout locations, be sure to consider the distance from your primary residence to your vacation home. According to a recent survey by the National Association of Realtors, the average vacation homebuyer purchased a property that is a median distance of 200 miles from his or her primary residence. How often will you be willing to make that drive? And have you factored in the costs associated with the journey?

The Final Decision

Once you know where you want your vacation home to be, you may be faced with the choice of buying a pre-existing home or building a new home. While many experts consider location to be the most important factor for buying a property with long-term appreciation potential, expanding a property gives you another way to make money, as the ultimate sale price can be significantly more than the construction cost of an expansion.

However, this approach isn’t without its downside, as expansion projects can often take longer and cost more than expected. There are also tax implications to consider. Before beginning a home investment process, you should run realistic worst-case cash flow numbers to see how long you can survive before your money runs out. Having two years in cash flow is a good guideline.

Another option is to buy an older home, then remodel or renovate. While a renovation or remodeling likely won’t get you a huge return on investment when you sell, it can save you money by allowing you to buy a less expensive home and then improving it over time as opposed to shelling out more money up front. Renovations can also enable you to charge more should you choose to rent out your home.

While buying a vacation home can be a dream come true, it’s important to look at it with clear eyes, just as you would with any other investment. Make sure to do extensive research and think hard about why you’re making the purchase before signing on the dotted line.


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7 Powerful Benefits To Mobile Home Park Investing

Thu, 07/13/2017 - 8:40am

“Brandon… you’re crazy!”

That’s the response I tend to get when I tell folks I’m looking to buy a mobile home park this year.

And I totally get it. A couple years ago, I would have said the same thing. But times have changed, and so has my opinion on mobile home parks.

You see, after the real estate crash nearly a decade ago, real estate investments were easy to make. Nearly every property was a good deal and great money could be made.

But that was yesterday.

Today- ­ the real estate market is tough.

Single family homes are being scooped up by homeowners attempting to get their next home before interest rates rise. New investors are learning about the power of real estate investing and buying up most “nasty houses” as well as the small multifamily deals. And hedge funds and large institutional investors are grabbing all the larger apartment complexes at prices that simply don’t make sense to savvy real estate investors.

So real estate investors have a choice: they can sit out and wait for the next real estate crash or they can get creative and find opportunities in this current market. Of course, there is nothing wrong with sitting the next few years out, but I love the action too much to stop.

So I’m opting for option two: finding opportunities.

One such opportunity that has recently caught my attention is mobile home parks. And for clarification: no, I’m not talking about buying mobile homes. I’m talking about the entire park, where the residents own (or rent) homes and I lease out the land.

My interest was peaked after interviewing several mobile home park investors on The BiggerPockets Podcast, and later finding The Mobile Home Park Investing Podcast, hosted by Kevin Bupp and Charles Dehart of Mobile Home Park Academy.  I realized that mobile home park investors were crushing it right now.

I had to dig in deeper!

So, why are mobile home parks one of the best investments left in America? I recently met up with Andrew Lanoie, Founder and CEO of Four Peaks Capital Partners (a Private Investment Group which allows qualified investors an opportunity to passively invest in this industry) and discussed with him the benefits of investing in mobile home parks.

After speaking with Lanoie, and doing many hours of research, here are seven powerful benefits to mobile home park investing.

1. Lower Cost Per Unit

When investing in large multifamily properties or single family homes ­ the cost per unit is high.

But mobile home parks allow a person to jump in and acquire more units for less money. According to Lanoie, “MHPs offer the lowest cost investment per unit of any real estate asset class with potentially higher risk ­adjusted returns”.

Most park owners own the land, not the housing units themselves ­ which means that the cost of the investment is typically going to be a lot less in comparison to the number of units owned.

You can easily expect to pay $100,000+ per home or apartment unit versus paying as little as $10,000 per lot in a mobile home park.

2. Lower cost for repairs and maintenance

One of the factors that makes me the most excited about mobile home parks is that I don’t have to work with contractors. To put it bluntly, I hate dealing with contractors. When you’re working on single family homes and multifamily properties, dealing with contractors is a daily hassle.

However, by not owning the actual homes that your tenants live in, it means that the mobile home owner is responsible for the maintenance, repairs, and updates for their residence, not the landlord. While the mobile home park owner is still going to need to account for the expenses of the upkeep for the park, it will most likely be significantly less than what they would pay for the upkeep of the homes.

3. Spread Out Risk

Because mobile home parks allow investment companies to acquire more units for each investor dollar (as discussed above), the risk for loss decreases. In other words: with more tenants, the risk is spread out more. For example, let’s say you own four single family houses, and one of the tenants forces you to evict them and you are left with $20,000 in expenses. Bummer. There goes five years of profit from your entire portfolio. While those kinds of situations are rare, they do happen.

However, when you own a large collection of units, the high cost of those freak occurrences are spread out across your entire portfolio.

4. The Demand is High

Due to numerous factors, the demand for mobile homes inside well-­managed parks is ever increasing. According to Lanoie, new mobile home parks are not being developed due to government zoning, gentrification, and zoning changes.

However, while home prices are climbing to historic levels, incomes for many Americans are not rising. The need for affordable housing is only getting stronger.

Lastly, baby boomers on fixed incomes are retiring in record numbers creating a greater demand for affordable housing that will only continue to grow. According to Lanoie “10,000 Baby Boomers retire each day with an average social security benefit of just $1,294 per month. 75% of retirees have less than $30,000 in their retirement accounts, and the bottom 50% have zero measurable savings.”

More and more lower income Americans and retirees are looking to mobile homes as their chance of still being a homeowner.

5. Less Tenant Turnover

As a landlord of numerous single family and multifamily properties, I know that one of the largest expenses for a property owner is tenant turnover. Cleaning their unit, needing to track down a new tenant, and the lack of income during the vacancy can take thousands of dollars per unit out of the investor’s pocket each year.



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Selling rental property to offspring in installments may avert tax bite

Thu, 07/13/2017 - 8:36am

We have a rental property that we would like to sell to our son and his wife. The problem is that we have not lived in the house as our primary residence for the required two years and therefore would have to pay a considerable amount in capital gains. Is there any kind of rent-to-buy or reverse mortgage or other arrangement that would make this possible without our facing a large tax bite?

Your question seems to mix two concepts when it comes to taxing real estate sales. If you own a home, use it as your primary residence and have lived in it for two out of the last five years, you can exclude from any taxes up to $250,000 in profits if you are single and up to $500,000 in profits if you are married. That’s the way it would work for personal residences.

Now if the home isn’t your primary residence and you sell it, you’d have to pay the tax on the profits on the sale of your second or vacation or investment home. The taxes on a second home sale could be significant, but remember that your taxes would be at capital gains rates and could be substantially less than if you were taxed at ordinary tax rates.

For a substantial sale, the taxes on a sale when taxed at capital gains rates would be around 24 percent; but if you sell and pay taxes at ordinary rates, you might pay around 40 percent. (We’ve rounded figures and included the 3.8 percent Net Investment Income Tax, often referred to as the Medicare Tax, which may be rescinded depending on what happens this year in Congress.)

You indicated that your property is a rental property. As a rental property, you could sell it and defer paying any federal income taxes if you plan ahead and use a 1031 tax deferred exchange. When you use an exchange, you are selling one property to then buy another property. You’d have up to 45 days after your sale to designate a replacement property and up to 180 days to close on the replacement property. So if you were planning to buy more rental properties, this is the way you should go.

Having said all that, if your plan does not include owning more homes or properties and you want to sell it to your son and his wife, we’d really suggest that you talk to an accountant, because our next suggestion would be to sell it to them on an installment basis; that is, you become their lender and sell the property to them over time. Installment sales, however, can be complicated. Without knowing any other issues you might have tax-wise, you would likely need some professional help.

There are ways to structure installment contracts to allow you to pay federal income tax as you receive the money from your son and his wife. You would still pay taxes, but you might pay at a lower rate and pay over a longer period of time. Whether this is better for you or not, we don’t know. It may be an option for you, but you’ll need to know what your taxes might be if you sold outright versus what your taxes might be if you sell on an installment basis.

Given the possible changes in the income tax code that could come up, there could be benefits in doing it over time. Then again, we don’t know what those changes might be and how any changes would affect you. Please consult with your tax preparer and a real estate attorney so that you document the sale correctly.



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NJ frat’s drinking death at Penn State — Do landlords and universities share the blame?

Thu, 07/13/2017 - 8:33am

Lawyers for Penn State University fraternity members who face charges in connection with the death of a 19-year-old pledge from New Jersey are trying to get some of the charges dismissed before a trial takes place

A preliminary hearing in the case against 18 young men who were part of the now-closed Beta Theta Pi frat house took place on Tuesday, and two additional sessions are planned for August.

They face a variety of charges relating to the February death of 19-year-old Tim Piazza of Readington, including aggravated assault, hazing, reckless endangerment, furnishing alcohol to minors, and tampering with evidence.

Piazza died after falling down a flight of basement steps in the Beta Theta Pi frat house after a night of heavy drinking, according to authorities.

Bob Ottilie, the founder and chairman of the Student Justice Project, a nonprofit organization that advocates for students, believes there are other parties responsible for the tragedy.

“One would be the landlord of the house, in which the drinking took place. Two would be the national fraternity, the Beta fraternity. And the third would be the university,” he said.

He stressed it’s easy to look at this situation and say his fraternity brothers could have done something for him, “but the landlord, the national fraternity, and the university could have done something proactively to prevent that type of event from taking place in the first instance.”

Ottilie added, “It’s not fair to suggest that a group of 18 to 22-year-old boys, most of whom are probably intoxicated, were ultimately going to be responsible for Tim Piazza. The people that should have been responsible for him were the adults in the situation.”

He said this issue needs to be addressed because several hundred young adults attending college die each year, whether it’s alcohol poisoning, an injury resulting from being intoxicated, or a drunk-driving motor vehicle accident.”

Ottilie believes the problem is becoming more pronounced because colleges, for the past 10 to 15 years, have been experiencing “an epidemic of alcohol over-consumption.”

He stressed the responsibility for this lies partially with parents, who allow their high school students to drink alcohol in their homes, and the permissiveness of universities.

He said schools will include alcohol awareness courses for freshmen, but they will also let students consume alcohol in dorms, sometimes in common areas, which encourages a party atmosphere and an over-consumption of alcoholic beverages.

“You can dramatically decrease consumption of alcohol just by eliminating alcohol in the common areas of student residences,” said Ottilie.

Instead of renting an entire house to college kids, he says landlords should only rent them rooms so they can monitor and keep control of common areas of the residence, even if it means hiring security guards.

“You don’t see a lot of people dying from alcohol poisoning after being at a bar. They might die in a car accident going home, but with Uber and Lyft that problem has been minimized. But you do see a lot of deaths in student residences, and that’s because nobody is monitoring these kids,” he said.

He noted research shows the brains of young people, particularly males, aren’t fully formed until they’re about 27 years old, which affects judgment and common sense.

“Even very smart guys make very bad judgments about alcohol,” he said.

“You cannot allow students to have 100 percent control of risk assessment or risk management. You always have to be involved with them.”

In the wake of the Tim Piazza tragedy he suggested parties in all fraternities be phased out completely and moved to licensed establishments, so there would be some control over how much alcohol is consumed, and better protections against underage drinking.

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Top zip codes for housing investments

Thu, 07/13/2017 - 8:21am

Homeowners aren’t the only ones fighting over the limited housing inventory as many investors are entering the housing market to take advantage of rapidly rising home prices.

A new report from ATTOM Data Solutions shows the median sales price in the first quarter hit $410,684. However, the Neighborhood Housing Index, which measures more than 1,000 U.S. zip codes with an A rating, showed the median sales price in 382 zip codes came in under $250,000, and 27 zip codes held median sales prices under $100,000.

<a href=’’><img alt=’2017 Neighborhood Housing Index ‘ src=’’ style=’border: none’ /></a>

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This infographic shows the top neighborhoods for home flipping by comparing the median sales price from the first quarter, the crime rate, average school score, tax rate and the 2016 gross flipping return on investment. The index score is based on a max score of 490.

Click to Enlarge

(Sources: ATTOM Data Solutions)

Using that same information, but substituting the 2017 gross rental yield for 2016 return on investment, ATTOM also found the top five markets with the best rental returns. These index scores are also based on a scale where the maximum is 490.

Click to Enlarge

(Source: ATTOM Data Solutions)



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San Francisco lawmaker wants to tax landlords who keep apartments vacant

Thu, 07/13/2017 - 8:16am

It’s a problem in San Francisco, units that remain vacant. Pick any reason why this frustrating phenomenon occurs: pro-tenant housing laws, greedy landlords smarting over rent control, owners waiting for leases to end in order to sell, overseas investments. Seeing as how the city is in the midst of a crippling housing crisis, vacant units, which could and should be filled, aren’t doing the masses any good.

Enter Supervisor Aaron Peskin, a lawmaker responsible for blocking development in the past, who wants the powers that be to toy with the idea of taxing landlords who keep units vacant.

According to the San Francisco Examiner, Peskin would like the City Attorney’s Office to “explore legislation that would allow the city and county San Francisco to impose a vacancy tax on property owners to help mitigate the impacts of the widespread practice of warehousing valuable residential and commercial units.”

This would go on top of the small fee landlords already pay for keeping space resident-free.

As SFist notes, “San Francisco’s Department of Building Inspection has since 2009 required owners of empty buildings (commercial and residential) to register their property as vacant with the city, including an explanation of what future plans they have for the property. They must also pay a $765 annual fee.”

No word yet as to how much said tax would be.

As for exactly how many residential units are currently bone-dry, a SPUR 2014 study suggests that roughly 30,000 vacant are vacant in San Francisco, which, according to the Examiner, “included 8,900 units in the process of being rented, 2,400 ownership units in the process being sold or sold and not yet occupied, vacation or seasonal use at about 9,100 units, and 9,700 units not in any of those categories.”



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6 Amazing Tips on Turning Real Estate Into a Real Fortune

Mon, 07/10/2017 - 1:56pm

At least 30 U.S. billionaires made their money from real estate; some say that it’s the greatest way to create real wealth and financial freedom. These six tycoons and members of The Oracles suggest how you can invest $100,000 or start with nothing.

1. Start small.

Although I’m a businessman first, I’ve always been a part-time real-estate investor. You can do both, too. Have a business or career that creates positive cash flow, which you can diversify into part-time real estate investing. I’ve done it for many years.

If you’ve never invested in real estate, start small and don’t use all your money. No one’s ever looked back and said, “My first deal was my best.” You’ve got to learn how to read the contracts, build your network of specialists—for example, lawyers and realtors—and develop a good eye for it. This only comes from experience.

The beauty of real estate is that you can learn the ropes while starting small: find some cheap properties, like single-family homes, renovate-and-flips, multi units, or commercial properties. Try to commit as little as possible while you get some notches under your belt. Joel Salatin, my mentor, always said, “Make your mistakes as small as possible without catastrophic consequences.”

If you have zero cash, maybe do wholesale deals. A business partner, Cole Hatter, and I created a real-estate program teaching you how to put a property under contract for very little money down, sometimes less than $1,000; you sell that contract to another buyer before the contract expires. Worst case: you just lose under a grand. Best case: you make $5,000-15,000 positive cash flow that can be reinvested in long-term holdings.

2. Think big.

It’s easy to give up on the real-estate game because you don’t have any money, but it’s the deal that matters, not how much money you have. Chase the deal, not your budget.

I know a guy who saved $50,000 and started chasing $200,000 deals. First of all, you can’t buy more than four units with that budget. The problem with four units is that each can only produce maybe $1,000 or $2,000 per month. And that’s only after you’ve done thousands of dollars in work around the units to make them rentable in the first place. That math isn’t difficult—there’s just not enough money to make it worthwhile.

That’s why you’ve got to go big from the start—with 16 units, minimum. Don’t buy less. Without 16 units, you can’t have a manager, and if you can’t have a manager, you’re going to either dedicate all your attention to the property or to your full-time job. To get 16 units, you will need to wait and save more money or use other people’s money (but you’ll need to learn how to sell).

Grant Cardone, top sales expert who has built a $500-million real estate empire, and NYT-bestselling author of “Be Obsessed or Be Average”; follow Grant on Facebook or YouTube

3. Understand the economics, then find a mentor.

The real-estate deals that look the prettiest and are easiest to find—such as buying a property that has a tenant and management in place, joining a crowdfunding website, or buying into a publicly-traded real estate investment trust—yield the lowest returns. The most profitable opportunities are the ones no one else knows about, which you find and create.

Due to a strong economy, high consumer confidence, historically low inventory levels, and extremely low interest rates, it’s the best time to flip houses in the past 40 years.

High consumer confidence and a strong economy give retail buyers the feeling that “now is a good time to buy” rather than retreat in fear and continue renting. Low interest rates allow retail buyers to purchase more of a home than if the rates were at historical average levels, like 6 percent. Low inventory levels create bidding wars by retail buyers, which increase the prices that investors sell their flipped houses for.

So, if you can find the deals before the competition, you can transform a little bit of money into a whole lot in a relatively short period by flipping houses.

If you’re seeking tax-advantaged passive income, thanks to the rise of the sharing economy and services like Airbnb and HomeAway, short-term renting of residential properties is producing the highest returns. (It’s not uncommon to obtain more than a 20 percent return on very nice properties in beautiful areas.) The majority of my real-estate holdings are now in short-term rentals.

Unfortunately, real estate is full of pitfalls. Getting educated through reputable online sources can help, but an article, book, or how-to video will be of little assistance in answering the most important questions you’ll have in the heat of a deal. That’s where the right real estate mentor becomes an invaluable resource. Phil Pustejovsky, founder of Freedom Mentor, bestselling author of “How to be a Real Estate Investor”, and #1 YouTube channel on real estate investing with nearly 20 million views

4. Learn, then earn.

Before throwing money away on the HGTV pipe dream, educate yourself! Don’t spend thousands of dollars on coaches and seminars. No matter how shiny they make it or how much you’re told you need an expensive education, you don’t. Information is inexpensive and plentiful. Find it or someone specializing in investment real estate, like me.

Holding assets is the way to build wealth through real estate. Shelter is a basic need. Dirt, in and around major metro areas, is a finite resource, and demand is constantly increasing. By owning a rental on that dirt, you have a small business that works to pay off your mortgage. Flipping is over glamorized, in my opinion. Rent and hold for the win.

Boomers and millennials want smaller housing, closer to cities. Additionally, real-estate investors commoditizing American suburbs and re-gentrification has pushed lower income families out. Because of this, America’s suburbs have seen a 57 percent increase of people living below the poverty level in the last 15 years. Buy your cities.

Don’t blow your budget. Most projects have surprises or overruns; it’s just part of the business. Keep a cushion for the unexpected. Lever your funds to increase returns and reduce risk. Start with one project. Get your model set, tweak, then buy two. Continue and progress until you build a solid portfolio.

Educate yourself, hustle, and create value. Take massive, determined action daily. Talk to brokers, call contractors, view open houses, and go to meetups. Learn! And when you’re ready, door knock! The best deal is the one that isn’t for sale. Find it, then find someone like me and close it down. Mark Bloom, President at NetWorth Realty

5. Start today.

In building over $100 million in real estate, I’ve personally used three strategies many times.

One: Purchase a low-income property, typically for $35,000 to $55,000. Costs are low but yields are consistent. Hand over all management to a third-party company, and collect your monthly rent passively, bringing in annual returns of 8 percent to 10 percent. If you purchase two to three properties like this per year, you will have a portfolio of 20 to 30 in a decade.

Two: If you can fix things yourself, do a “live-in flip.” Buy a house that needs a little work at a great deal; live in it for one or two years while you rehab it. Then flip the house for an appreciated value and profit. Doing this five times in 10 years could generate $300,000 to $500,000 net profit. That would let you buy your own house in cash! Or reinvest into rental properties, which would cover your cost of living anywhere in the world.

Three: Joint venture on a deal. People have money; they just need the right opportunity. Find a good deal and tie up the property with a contractual clause, pending financing approval within 30 days. Then find another investor to partner on the flip with you. Explain that you secured the property and just need the funds for a specific period, and the return will be split between you both.

Make enough calls, and you’ll find a joint venture partner easily. Just ensure you correctly calculate the cost of rehab and expected sale price. Most people mistakenly underestimate the rehab cost and overestimate the sale price, killing their margins. — Com Mirza, “The $500 Million Man” and CEO of Mirza Holdings; failed in eight companies back to back and today, runs a nine-figure empire with over 600 employees

6. Profit is in the purchase.

Source transactions that contain some core elements: they take the shortest amount of time to complete, and provide the maximum amount of profit while minimizing risk and the amount of cash you invest initially.

Before really embarking, solidify your A Team (advisors whose opinions you trust) and B Team (associates who turn the gears).

Once you have a plan, pull the trigger. Don’t just have a backup plan—ensure that even the most airtight scheme has at least five exit strategies. Experience has taught me that the winds of a favorable real estate market can shift rapidly; the last thing you want is to be anchored to a dozen unsellable investments.

Finally, know the difference between buying, holding, and trading. Buying is a no brainer, but it’s what you do with a property that determines your success. My primary strategy has been holding onto commercial real estate for the long term and trading out residential pretty quickly. Know your market. Roy McDonald, founder and CEO of OneLife




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How to Build a Strong Defense to Improve Apartment Website Rankings

Mon, 07/10/2017 - 1:49pm

Your property’s online presence is being challenged every minute of the day by a competitor seeking to get an edge when prospects look for apartments. The best offense to fend the attack is a strong defense, one that assures when consumers look for a place to call home they see your website first.

The evolving online world requires staying one step ahead of the competition so your website markets for rather than against you. When it does, falling asleep at night gets easier.

Improving rankings by triggering websites and maps

How well a property positions itself for searches determines the true effectiveness of a website, industry pros say. The key is not running with the crowd but employing unique branded terms – unlike those general phrases popular among internet listing services (ILSs) – that propel a listing to the top.

Because competition is so intense for the 10 organic search engine listings, properties should focus on short, one-line niche keywords that “have a fighter’s chance” of getting ranked or pulling up a map, says David Cockburn, Director of Digital Marketing at RealPage. Touting the neighborhood, amenities and proximity to local attractions, for example, improve rankings rather than generic keywords like bedroom size, a pool and even price points.

If you want to immediately start ranking and generating traffic to your website, PPC should be one of the first steps in your digital strategy. Paid ads always show first above any organic ads, so you will instantly get more prospects on your page.

The goal is to promote the brand to improve your rankings, as well generate a Google map, the latest caveat in desirable search results. With a map, prospects get an immediate introduction to community location and what it has to offer.

“Keywords with your brand name, especially if you have multiple locations, are great opportunities to trigger maps,” said Cockburn, who directs the company’s digital marketing. “Maps are very prominent on search pages.

Cockburn is among four RealPage panelists who will share thoughts on effective apartment website marketing at RealWorld 2017 July 16-18 in Las Vegas.  The hands-on session, “How to Evaluate Your Marketing Performance with Marketing Center,” will detail how properties can manage and measure marketing activities while capturing more qualified leads without depleting the marketing budget. Joining Cockburn will be RealPage Senior Director Leads and Leasing Product Management Matt Stevenson, Senior Director Digital Marketing Nikki Khorrami and Product Advocate Randy Hurn.

Consumer searches are more specific today

An effective apartment website does much of the marketing legwork and often can be done for minimal spend. But the rules for establishing a top spot have changed, and personalization and quality content are necessary to be competitive. Today’s apartment seeker is a much smarter searcher than 25 years ago when search engine optimization (SEO) began cutting its teeth. Consumers are narrowing searches to find that needle in the haystack.

In 2009, it was clear that renters depended on the internet and search engines to find apartments more than more traditional means like newspaper ads, word of mouth and even real estate brokers. According to a study, 84 percent of renters thought of searching online for an apartment instead of looking in the newspaper or a magazine.

Today, searching for an apartment is an internet race where SEO and apartment search engine marketing (SEM) are behind the wheel. Last year, J Turner Research published a report on the top 10 emerging trends in the apartment rental process, and nearly all related to cultivating information from the internet. Whether it’s searching for an apartment or looking for reviews, consumers are using the web.

Overcoming the competition by focusing on branding, unique features

Cockburn says building search volume based on the property’s brand and focusing on content specific to the community’s unique features and type may be a long-term effort but it’s basically the only defense against an ILS.

It’s a strategy that ranks well and sustains traffic month after month, keeping competitors at bay.

“It’s a defense strategy that blocks your competitors from taking that first spot,” he said. “It’s your brand, you own it and it’s all over your site. For your competitor that’s going to be a word that doesn’t match content of their page.”

Another great branding strategy is, if the budget allows, to bid on your branded terms through Google and Bing Paid search.

“A lot of people never think to Google their own branded terms and spend so much time on non-branded terms, but you will notice that your competitors may already be bidding on them and showing up first on the paid search results” says Khorrami. “This is a quick and easy way to gain cheap, high quality traffic since Google will give your branded terms high quality scores, which leads to lower costs.”



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