American Apartment Owners Association

Is It Time to Sell Residential Real Estate Investments?

11 hours 44 sec ago

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.


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How Value-Add Has Changed Since The Great Recession

11 hours 2 min ago

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

11 hours 9 min ago

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.


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The 20 most expensive zip codes for renters in America

11 hours 22 min ago

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


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Set the Mood During an Open House With the Right Lighting

11 hours 28 min ago

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

11 hours 37 min ago

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

14 hours 1 min ago

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.

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How To Get the Highest Return As A Real-Estate Entrepreneur

Thu, 05/18/2017 - 1:36pm

What began as my savings for the purchase of my dream car back in the 1990s quickly turned into the hard-earned $20,000 that my mom refused to let me spend on anything less than an investment for a substantial return.

“You are not going to buy that stupid car,” she told me. And when I tried to venture off to the car dealership anyway, she forced me to spend my savings on a down payment for a condo. At 19, and against my wishes, my mom had turned me into an investor. She told me, “God can only manufacture one thing: Land. And I hear he’s not making any more of it, so buy now!”

Inadvertently, she taught me that to become a real estate investor is to become a business owner. Here’s what I’ve learned about investment and management since then:

1. Focus on monthly cash flow, not equity gains.

As a business owner, it is your task to create distance between the money flowing into your business every month and the expenses necessary to keep that business sustainable and growing. When you begin your investment research, you ought to be calculating how much renters will be able to put in your pocket each month, and then likewise ensuring that that number is greater than your expenditures. Maintain that formula and you’ll stay in the black.

2. Time can pay you money.

Time preference — also known as delay discounting — is a term economists and investors to use to describe the difference in something’s financial return over time. People who exercise a poor use of time preference trade a higher future income for the lower equivalent, because they lack the patience to wait for that greater dollar.

Investment requires patience, and the best real estate returns often come from a willingness to wait decades before cashing in on the big bucks that have accrued because of your home’s growing value. It’s also worth mentioning that you can be rewarded immediately and annually for your willingness to wait: Owning a home gives you tax write-offs and, if you run your business right, can mean that tenants cover all your monthly expenses.

3. Desperation is expensive.

Avoid problem tenants by doing your homework. A desperate tenant-seeker is bound to cost themselves more than a few dollars because of their impatience.

My early days in real estate investment came with many headaches: evictions, property damage, late payments, etc. It did not take many of these poor tenant experiences before my patience grew enough that I began conducting more thorough background and reference checks before saying “yes” to just anyone. First-come is not always first-served when it comes to renters.

4. Surround yourself with the right people.

From the outside, real estate investment can seem like a one-man show. But the best investors I know have made a habit of surrounding themselves with the right influencers and maintaining an openness to learn.

Establish a team. Join an investor networking group like REIN (Real Estate Investment Network), and then connect with real estate agents, accountants, bookkeepers, real estate lawyers and others who are connected to your goals. These friendships and professional networks improve your chances of success by putting you within ears reach of advice from diverse vantage points within the same industry.

The right idea from an accountant and lawyer could save you millions of dollars if you try to involve yourself in the right conversations.


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Apartment Landlords Are Hopping Into Bed With Airbnb For Long-Term Rentals

Thu, 05/18/2017 - 1:29pm

As Airbnb continues to jump over regulatory hurdles, the home-sharing giant is working to expand its long-term rental business — which is fraught with hurdles of its own. The major landlords that could really bring credibility to its long-term rentals are the same landlords that, so far, have been the most resistant, Yardi Matrix director of business intelligence Doug Ressler said.

Airbnb already has a landing page dedicated to long-term rentals and sublets that last 28 days to six months. Fully furnished abodes can be rented monthly in more than 65,000 cities worldwide. Renters pay for their stay, which typically includes all bills and utilities, through Airbnb’s online portal monthly. Though Airbnb’s long-term listings are vast, most stem from individual homeowners and tenants renting out their own properties and units. So far, these longer-term rentals have not affected the big players in the multifamily market, especially those with 50-plus units, Ressler said. “We see limited impact on the apartment market because I think Airbnb is still trying to get a strategy that scales,” Ressler said. “I think they’re determining how to effectively scale and ethically maintain and provide rentals for apartments with 50 units and above.”  A Leasing Agent For Small Apartment Owners? When thinking about the economics involved in renting units for the long term using a third-party rental service, Steve Kinder said there is value in using a social platform like Airbnb.  Kinder, who owns a mixed-use building in Dallas with 11 live/work units that will deliver in June, plans to use one or two of the units at his 1808 Good Latimer property exclusively for Airbnb rentals that could last from weeks to months. Kinder found Airbnb’s long-term rental options compelling for two reasons: First, his 1808 property, which is anchored by co-working concept Good Work, has community building at the heart of its mission.

“The value of Airbnb is that it’s a social network. When somebody chooses to go through Airbnb — a brand with credibility— it helps build an audience,” Kinder said. Airbnb rentals at 1808 will come with a day pass to Good Work, and Kinder is toying with the idea of including other add-ins, such as a Turo car rental.  Secondly, Kinder said his busy schedule does not afford him time to market and handle transactions like he would wish. Because of this, he said he likes the fact that Airbnb handles transactions and acts as an off-site leasing agent. “For a guy like me with multiple ventures and companies, [to have] Airbnb doing the heavy lifting and making a margin off my rentals, I’m willing to do that.” Unlike Kinder, for a landlord that already has a network of leasing agents and on-site staff, renting units monthly through Airbnb adds to the overhead. But Ressler thinks as jobs continue to automate, landlords will catch on that Airbnb could be an alternative to in-person staff. “They might think ‘those leasing agents are costs, and I could transfer that business function to Airbnb,'” Ressler said. Craigslist Competition

Airbnb enlisted consulting firm McKinsey & Co. to research the long-term rental market back in March. Such an expansion would put Airbnb in competition with Craigslist’s housing section, which includes categories for sublets and temporary housing. McKinsey was expected to present findings to Airbnb in April, but Airbnb has yet to publicly comment on these reports. At present Ressler said he only knows of landlords with fewer-unit apartments that market and rent empty units through Airbnb, both for the short and long term. He estimated within the next 18 to 24 months, more major landlords will get involved in long-term rentals through Airbnb. “I think the five- to 49-unit properties will be the first guys over the fence, but they’ll eventually all see that it makes you money and [doesn’t] cost you money,” Ressler said.


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5 Ways to Catch Up with the Fast-Paced Real Estate Market

Thu, 05/18/2017 - 1:27pm

The best way to determine the right properties to buy and the right time to sell is by staying on top of the real estate market. But real estate is an investment is very much dependent on market prices and influences that can change from one month to the next. Here are some ways to catch up with what’s happening.

1. Millennials

One of the best indicators of demand today is the market for millennials. This is the generation that’s just coming of age, getting established in their careers, and looking to buy their first home. For most, this is going to be a starter home. A good starter home that’s agreeably priced should sell within 60 days. Keeping track of these sales is a good indicator of the market’s potential.

2. Online Sources

A great deal of online activity is being captured for analysis. Real estate websites can show you much more information on your area than simple listings. Some of the major ones, such as Trulia and Zillow, provide smartphone apps so you can check on your local market anytime you want to.

3. Neighborhood Indicators

When the unemployment rates are falling and median sales prices are rising in your area, housing markets are taking an upturn. Short-term trends usually turn into long-term trends. Checking on the number of for sale signs as you drive through a particular neighborhood is also a good idea. If it seems like there’s too many, no one’s buying.

4. Time on Market

The length of time a house stays on the market before it’s bought is a good indicator of what type of real estate is selling in a particular area. Often, you can order online search results by time on market. Compare the fastest sellers to the slowest sellers, and you’ll get a good idea of hot property types. Narrow your search down further, and you’ll discover what features are in demand. Contact a realtor from a business like North Captiva Realty Inc if needed.

5. Community

Find out what’s happening within your target community. If there’s new businesses coming in, that could represent an upturn. Growth in transportation, retail, and hospitality industries usually involves well-informed investors. If they think the community is booming, it probably is. But demand for real estate may be mitigated by new housing development. Opportunity lies where there’s economic growth in the vicinity, but limited housing in a particular area.

Make it a habit to follow real estate trends and prices in a particular area, or even in a wide geographic sense, will help you develop a better sense of when the right time to buy or sell comes around.



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Why Millennials Are Interested In Real Estate Investing

Thu, 05/18/2017 - 1:25pm

Americans have stashed the majority of their investment dollars in the stock market over the years. But there may be a new trend on the horizon. In 2007, nearly two-thirds of Americans were investing in the stock market; last year, just over half did. A new generation of investors may be turning to real estate instead.

RealtyShares recently teamed up with Harris Interactive to put out the Real Estate Investing Report, surveying Americans on their investment preferences. And according to the survey results, 55 percent of millennials are interested in investing in real estate, the highest percentage of all demographics questioned. Research from Fannie Mae supports these findings, reporting that 85 percent of millennials think real estate is a good investment. With such a strong preference for real estate, it is important to understand why millennials are interested and how they may invest in the future.

Why is it important? Well, last year, millennials became the largest generation of Americans. According to a recent Pew report, there are 75.4 million millennials compared with 74.9 million baby boomers. As the largest age group in America, millennials will have the greatest ability to shift the market as their net worth builds, rendering it key to take note of millennials’ views on real estate and investment opportunities overall.

Millennials are skeptical of the stock market

Survey respondents were asked to choose between stocks, real estate, commodities, bonds, and cash equivalents such as oil, gold and cotton as the best-performing investment since 2000. Overall, 40 percent reported uncertainty around which asset class performed best, and 25 percent believed the stock market was the best investment.

In reality, real estate outperformed the stock market during that time frame. Millennials got it right: over the 16-year period from 2000 to 2016, the S&P 500 yielded a 5.43 percent annual total return compared to 10.71 percent in real estate. And while the S&P has had a slight advantage more recently, both markets have recovered well since the Great Recession, with the S&P and real estate at 12.65 and 11.37 percent, respectively (range from Dec. 31, 2010 – Dec 30, 2016).

 People walk by retail space in lower Manhattan on April 17, 2017 in New York City. (Spencer Platt/Getty Images)

Americans have stashed the majority of their investment dollars in the stock market over the years. But there may be a new trend on the horizon. In 2007, nearly two-thirds of Americans were investing in the stock market; last year, just over half did. A new generation of investors may be turning to real estate instead.

RealtyShares recently teamed up with Harris Interactive to put out the Real Estate Investing Report, surveying Americans on their investment preferences. And according to the survey results, 55 percent of millennials are interested in investing in real estate, the highest percentage of all demographics questioned. Research from Fannie Mae supports these findings, reporting that 85 percent of millennials think real estate is a good investment. With such a strong preference for real estate, it is important to understand why millennials are interested and how they may invest in the future.

Why is it important? Well, last year, millennials became the largest generation of Americans. According to a recent Pew report, there are 75.4 million millennials compared with 74.9 million baby boomers. As the largest age group in America, millennials will have the greatest ability to shift the market as their net worth builds, rendering it key to take note of millennials’ views on real estate and investment opportunities overall.

Millennials are skeptical of the stock market

Survey respondents were asked to choose between stocks, real estate, commodities, bonds, and cash equivalents such as oil, gold and cotton as the best-performing investment since 2000. Overall, 40 percent reported uncertainty around which asset class performed best, and 25 percent believed the stock market was the best investment.

In reality, real estate outperformed the stock market during that time frame. Millennials got it right: over the 16-year period from 2000 to 2016, the S&P 500 yielded a 5.43 percent annual total return compared to 10.71 percent in real estate. And while the S&P has had a slight advantage more recently, both markets have recovered well since the Great Recession, with the S&P and real estate at 12.65 and 11.37 percent, respectively (range from Dec. 31, 2010 – Dec 30, 2016).

 In the RealtyShares survey results, 20 percent of millennials indicated they believe real estate has performed the best since 2000. In fact, millennials were the age group with the largest percentage with that belief. The next highest group to believe real estate outperformed the stock market since 2000 is comprised primarily of Generation X (ages 35–44), 16 percent of whom chose real estate as the top performer.

Why are millennials the generation most likely to value real estate over the stock market? Many millennials graduated from college and entered the job market during the Great Recession. This major economic downturn made it difficult for millennials to find jobs. Simultaneously, they watched the stock market undergo the worst crash since the Great Depression. Although the housing bubble burst contributed to the stocks’ crashing, the stocks may have lingered in people’s minds longer than the housing market did.

Millennials have watched real estate bounce back

In 2007 and 2008, the subprime mortgage crisis caused a panic to unfold in real estate. Across the country, many Americans took home loans they couldn’t afford, which artificially increased property prices. The resulting bubble led to a major market adjustment — housing prices fell 18 percent in 2008. CNN Money reported that at the end of 2008, home prices had fallen 27 months in a row.

It has taken eight years for the real estate market to recover, but in some markets, real estate is red-hot. Housing prices in popular millennial destinations like Portland, Denver and Austin have been steeply rising. And while millennials may have waited a bit longer than prior generations to marry and buy a home, Zillow reports that half of first-time home buyers in the United States are under 36 (compared with the median age of around 33 from 1995–2009), and first-time buyers make up 47 percent of all property sales.

Morgan Stanley believes we are still in the midst of a real estate recovery, but there is still more good news ahead in the coming years. According to a study by the American Modern Insurance Group, 86 percent of millennial renters plan on owning a home someday. This equates to roughly 50 million future homebuyers entering the future housing market.

Millennials see advantages in owning a tangible asset

Millennials, ever-vigilant on the internet, are paying heed to online financial experts. One of these experts especially popular among millennials is personal finance blogger Financial Samurai, who recently shared his preference for investing in real estate over the stock market.

Also, stocks, as an intangible asset, are difficult for many to quantify. However, with real estate you can physically see and occupy the investment. This makes for an intriguing investment choice for the more visually minded/image-oriented millennial generation.

While the large down payment needed to invest in real estate is the biggest reason millennials aren’t buying real estate, thanks to online real estate investing platforms, millennials can now invest in real estate without saving tens of thousands of dollars for a down payment.

Real estate may flourish with millennials leading the charge

While older generations may be more interested in downsizing, millennials are having children and growing in their careers. Buying a home is the next logical step. With positive returns potentially on the horizon, millennials are on the right track. The data says real estate has the capacity to be the best investment, and millennials are on board.


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Suburban renters outpacing urban renters in the U.S., new study finds

Thu, 05/18/2017 - 1:22pm

With home prices and interest rates rising, many renters feel the American Dream is more out of reach than ever. But that isn’t preventing them from moving to the ’burbs. A new analysis from RentCafé found that the number of suburban renters increased faster over urban renters in 19 out of 20 major U.S. metro areas between 2011 and 2015. Remarkably, the suburbs of St. Louis, Atlanta, Boston, and Riverside, CA, each attracted three times the number of new renters than their cities’ urban cores.

So what’s the deal? The most likely driver of suburban rental growth is the price tag: in 18 of the 20 metro areas studied, rents were cheaper in the suburbs by an average of 11 percent. That translates to a month’s rent.

During the foreclosure crisis, the number of single-family suburban rental homes spiked by more than 40 percent as investors were able to pick up foreclosed abodes at bargain rates. Those rentals might otherwise be affordable starter homes for aspiring buyers. The lack of inventory drives up home prices and makes it more likely that a family will continue renting.


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What Is a Constructive Eviction? A Rental Gone Very, Very Wrong

Mon, 05/15/2017 - 1:44pm

Most renters have certainly heard of eviction—the dreaded process in which a landlord kicks out a tenant for not paying rent or some other major infraction. But what is a constructive eviction?

That’s a whole different ballgame, where a landlord essentially “evicts” a tenant by not fixing an uninhabitable rental. And while “constructive” may sound like a positive word, it’s not. It means the landlord is failing to fulfill his legal duty.

Constructive eviction is rare, but tenants who face this dire scenario should know their rights, and how to fight back.

How constructive evictions work

“A common way landlords attempt to force out tenants would be by failing to provide heat in the winter,” says Brooklyn Law School professor David Reiss. Other ways a landlord could run into constructive eviction territory include turning off the water supply or failing to clean up flaking lead paint or toxic mold.

Constructive evictions are uncommon, because most landlords will usually help tenants with an issue. Or, if they are reluctant at first, they’ll eventually reach a compromise with a tenant through the court system, says Boston attorney Robert Pellegrini.

As such, tenants should attempt to work through any problems with the landlord first. That said, if a property owner won’t budge and the living environment puts a renter in harm’s way, a tenant can pursue a constructive eviction claim.

How to file a constructive eviction claim

Unfortunately, tenants can’t file a constructive eviction claim if their floors creak or if their walls are painted a hideous shade of avocado green.

“More minor conditions like peeling (nonlead) paint, stuck windows, and drafty doors would be weak bases for a claim,” says Reiss.

Pellegrini agrees, adding, “The standards are very high for this, because you’re basically asking the court to conclude that the landlord essentially evicted you when he hasn’t.”

Here are five things a tenant must demonstrate to an attorney to prove a constructive eviction:

  1. Your landlord owed you (the tenant) a duty, such as providing heat in the winter or a residence free from toxic mold.
  2. The landlord neglected the duty.
  3. The apartment became uninhabitable as a result of the neglect.
  4. You gave the landlord notice of the neglect and time to take care of it.
  5. You left the apartment within a reasonable amount of time after the landlord’s failure to fix the issue.

The tenant must give the landlord only one notice of any issues at hand.

“If you’re talking about a toxic situation, you should ask once and seek immediate removal from the apartment, storage of your things, and an alternate place to live,” says Pellegrini.

To file a successful claim of constructive eviction, tenants should gather all evidence of the issue. Make sure to document everything, including photos, videos, statements from health inspectors, and all communication with the landlord regarding the issue.

It’s also important to note that you have to leave the premises in order to prove a constructive eviction. And while it may be possible to withhold rent after you’ve moved out, you may have to pay it later if you don’t win your claim.

If you do win, however, you will be able to terminate your lease and move on to more livable quarters. To weigh whether a construction eviction lawsuit is the right avenue for you, consult the housing courts in your area. You can also call the U.S. Department of Housing and Urban Development’s Multifamily Housing Complaint Line toll-free at (800) MULTI-70.


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How to get rich renting instead of buying a home

Mon, 05/15/2017 - 11:55am

In an earlier post, I assessed home ownership from an investment perspective and found that homes are terrible investments that barely keep pace with inflation.

This poor investment, however, does force the average American to save the money they’d otherwise spend.

The result? The median net worth of American home owners is over 30 times the median net worth of American renters. Home owners might not get back every dollar they put into a home, but they’re getting back a lot more than the American who rents.

But it need not be that way. Here is how any renter can beat the average American home owner in the long run.

First off, you need to save a down payment by age 33

That’s the average age of the first-time home buyer.

Instead of using it for a physical home, you’re putting a down payment on what I call a “money mansion.” You can’t live in your money mansion, but it will make you rich. According to the median American home price ($229,000), a 20 percent down payment is $45,800. Invest this in a brokerage account that tracks the market — where you can hope for a 7 percent annual return.

Here you have one major advantage over the home owner: You can open the account right away and begin collecting interest instead of piling up a lump sum in savings. Just make sure your money mansion is worth $45,800 by age 33. Assuming you collect 7 percent interest per year, you could save as little as $3,000 per year and still make it, even after taxes. Or you can play it safe and save $4,580 per year from 23 to 33 — on top of your 10 percent retirement savings.

Once your money mansion hits $45,800, you need to feed it a portion of your monthly income equal to what the home buyer spends on their mortgage. See, the home buyer is essentially saving this money because at the end of a 30-year mortgage, they own a house worth all the money they put into it, which has (hopefully) matched inflation. But this is the tricky part.

On average, home owners spend 15 percent of their after tax income on their mortgage, while renters spend 30 percent of their after tax income on rent. That means you need to put 15 percent of your income into your money mansion on top of your rental payment if you want to beat the average home owner. This would be the time to move into a one bedroom with your significant other to save on rent. Every dollar you don’t spend there is a dollar you can put toward your 15 percent.

If you take these steps, 45 percent of your take-home pay goes to rent (< 30 percent) + money mansion (> 15 percent). This means you’re living off of only 55 percent of your take-home pay. Do you currently do this? Probably not. But that’s what it takes to beat the home owner.

So, let’s talk numbers

If you manage to rent + save + invest, how much do you win in the end?

Using the average American household income of $54,000 as a guideline, your 15 percent money mansion contribution becomes roughly $5,100 per year after taxes. If you start with a “down payment” of $45,800 and contribute 15 percent of your monthly income every year for a “30-year mortgage,” you’ll have $728,000 in your money mansion (that’s after taxes, with a conservative 7 percent yearly return).

So the gamble you’re making is that today’s average American house will not exceed $728,000 in value after 30 years of appreciation. If our $229,000 house keeps pace with inflation, it will be worth only $555,000 — and that’s a big if. A hundred years of inflation-adjusted US housing prices suggest that a home increases only 0.1 percent in value per year on average. Your home probably won’t be the exception.

Looks like the renter wins

He or she gains 25 percent more net worth, and all of it liquid and free of closing costs. Some would say the liquid capital is worth a premium.

But the renter only gets to live on 55 percent of their take-home pay during their life while the home owner lives on 85 percent. That’s an extra 30 percent of income — not spent on rent — to spend on life. The home owner could easily invest the difference and beat the renter.

The home owner has other home-related expenses, however. Home upkeep and repair costs average 1 percent of the value of the home per year. On our $229,000 home, that’s $2,290 per year. But taking inflation into account, you can expect the costs to rise over time. Over 30 years, that could be $114,000 or more.

The home owner also pays property taxes. These vary widely by state and county. For the sake of simplicity, let’s assume our median American home owner pays a median American property tax of 1 percent of the home value per year — which is lower than many countries surrounding major metros.

So how does that figure in? Over 30 years, those home upkeep costs and property taxes will eat into 50 percent of the income the home owner isn’t spending on rent. So the home owner’s true take-home savings are just 15 percent of income. They get to live on 70 percent of their income, while the renter, on average, lives on just 55 percent. But at the end of the road, the renter is 20 percent richer.

Suddenly, home ownership doesn’t seem like such a great deal. By renting and investing, you can end up with enough money to buy a home in cash by the end of your life — and you will never pay a penny of interest, or property taxes, or buy a new sump pump along the way. What’s more, homes are risky investments. You never know how the community, city, or state will turn. By comparison, investing in the market seems like a pretty safe bet. I don’t know about you, but it’s a renter’s life for me.



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Four-Legged Residents Welcome

Mon, 05/15/2017 - 11:46am

For many people, pets are family members. That’s why 81 percent of consumers say they’ll take animal-related considerations into account when deciding on their next living situation, according to the National Association of REALTORS®’ 2017 report “Animal House: Remodeling Impact.” To meet the growing demand for pet-friendly apartments, Kristen Gucwa, vice president of national lease-up operations at Richman Signature Properties, says her company is “reinventing rental living and what that looks like.”

The Richman Group, a rental property development company and seventh largest owner and operator of residential apartments in the country, has 15 Richman Signature Properties in Florida and Texas, with more to come in Denver and Los Angeles. These projects range from 240 to 417 residences, depending on their location and market. Some are in urban areas and others in suburban settings, with studios to three-bedrooms ranging from $1,200 to $2,800 per month. What they all have in common is accommodations for pets. Gucwa says it’s one of their best strategies for staying competitive. “The statistics out there dictate how you need to adapt to the market; everyone is going to have to grow and adapt to what renters want today,” she says. “Most aren’t willing to give up their pet to move into a rental property.”

Indeed, NAR’s study found that 89 percent of respondents would not give up their animal because of housing restrictions or limitations. That’s why higher-end multifamily developers like The Richman Group are focusing on providing more resort-style amenities for four-legged tenants. Gucwa describes the properties she oversees as having dog parks, open spaces, and even agility courses on the grounds. Some have “pet salons,” which include tubs where residents can wash their dogs.

The Richman Signature Properties’ websites clearly spells out its policy: “We are a pet-friendly community; cats and dogs are allowed.” The message appears next to professional photos of the communities and residential units and is highlighted among other amenities, such as pools and charging stations for electric cars. It’s included in their marketing and mentioned during onsite tours.

The pet-friendly emphasis is part of an overall lifestyle marketing initiative, highlighting a live-work-play atmosphere. The company has adapted their fitness centers to include on-demand video trainers. Property management teams will coordinate social groups, get-togethers, and outings. The activity calendar, which includes wine clubs, running clubs, book clubs, fishing clubs, and even beer clubs, also appears on each community’s website. Each property is developing its own personality, Gucwa says.

Looking ahead to the opening of properties in Denver and Los Angeles, Gucwa sees two trends continuing to grow in the multifamily home sector: pet accommodations and local business partnerships. Richman Signature Properties is starting to team up with local shops and boutiques in the area to offer amenities and services to residents. They’ve also recently partnered with Barkbox, a pet toy and treat service, to provide residents who own pets with a three-month subscription as a move-in gift.

“We want to make sure it’s more than just a temporary living space,” Gucwa says. “Pet-friendly developments encourage a sense of community amongst residents.”


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More Americans are writing their rental checks for single-family homes

Mon, 05/15/2017 - 11:41am

We’re becoming a nation of renters — and not just apartment dwellers. Since the housing crisis, more renters are writing the monthly check for single-family homes. More of them are also writing checks to corporate landlords like Invitation Homes, Colony-Starwood, and American Homes 4 Rent.

Back in 2005, “there were about 10.5 million single-family rental properties,” said Karan Kaul of the Urban Institute. “Today that number is north of 17 million. That’s almost a 70 percent increase. If you look at the other segments of the rental market,” he said, “the growth in those units has not been close to what you’re seeing in the single-family market.”

During the housing crisis, when foreclosures were mounting, investors with cash snapped up tens of thousands of distressed properties in cities like Atlanta, Phoenix and Las Vegas, and converted them to rentals.

Jade Rahmani is managing director at financial services firm Keefe Bruyette & Woods, which works closely with some of the largest companies in this sector. He said even though the homes purchased by large institutional investors accounted for only about 1 percent of the market (about 208,000 properties nationwide), the sales helped end the free fall in prices during the housing crisis.

“These companies entered in and had the capital to invest directly in cash. Then they also put in on average around $20,000 of capital improvements.”

In places like Las Vegas those renovations and improvements meant houses that might have been abandoned were occupied and updated during the worst of the crisis.

Now, like much of the country, the Vegas market is rebounding, with prices up almost 13 percent in the last year alone, according to the Greater Las Vegas Association of Realtors. But the slow recovery changed things, said John Restrepo of RCG Economics in Las Vegas.

“A number of institutional investors came in and started buying groups of homes to turn them into rental properties with the anticipation that in a few years, they could then resell those homes as the housing market came back,” Restrepo said. “It’s not worked out quite like they anticipated, primarily because the housing recovery took a lot longer than anyone anticipated.”

But it seems to have worked out pretty well, at least for these corporate landlords. Over the past week, several of the big players have rolled out solid quarterly earnings. Continued growth, said Rahmani of KBW, will depend on creating concentrated areas of housing where rents are rising and companies can bring down maintenance costs.

“The real way [toward growth] is to be a scaled player, which means to own … north of 500 homes in a given market so that you can efficiently service the homes,” he said.

With today’s housing supply so tight and prices rising, it’s not as easy for companies to snap up cheap homes anymore, so some are planning to expand by building new houses, even entire neighborhoods, and putting them up for rent.


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Some D.C. Renters Make Tens of Thousands of Dollars Exploiting Decades-Old Law

Mon, 05/15/2017 - 11:39am

Some D.C. renters are holding homes hostage for high-dollar payouts and blocking sales by exploiting a decades-old law, the News4 I-Team learned.

If you live in a rental that’s going up for sale, you can get a piece of the profit.

“I’ve heard payouts as high as $50,000 to $100,000, and that’s for single family homes,” D.C. Association of Realtors President Colin Johnson said.

Renters have become more savvy in using the law to force buyers and sellers to pay up or risk having their sale held hostage, Johnson said.

Enacted in 1980, the Tenant Opportunity to Purchase Act (TOPA) was designed to keep longtime D.C. renters from being forced out of gentrifying neighborhoods or to help them afford a new lease in a different building.

It basically gives the renters the first right to buy the place they live once it goes up for sale.

But the News4 I-team found even when tenants don’t want to, or can’t afford to buy it, they can rake in big bucks by selling those rights to the highest bidder.

“It Felt Like Extortion”

A first-time homebuyer named Clara said her sales contract for a Capitol Hill row house fell apart the night before closing because of TOPA.

“It felt like extortion … like the whole thing felt really slimy,” she said.

The sellers had been asking for the renter who lived in the basement to sign a TOPA waiver since they first accepted Clara’s offer to buy the house.

“They were offering her $10,000 to sign the waiver, and so we felt who wouldn’t take that kind of a deal?” Clara said.

But the renter got an even better deal by selling her TOPA rights to a developer who was willing to pay more and got to buy the house instead.

“It was really frustrating,” Clara said. “I had a legal agreement with the seller to buy the place and I felt like it was kind of being ripped out from under my feet.”

The News4 I-Team found out your name doesn’t even have to be on the lease to get paid, because the district’s TOPA law doesn’t define what a “tenant” is.

“If you had your live-in significant other consider this property their home, they’re also a tenant,” said real estate attorney Joy Siegel, who’s also seen an increasing number of sales contracts collapse due to TOPA.

TOPA payouts also happen long after leases are up and tenants have left the property, Siegel said.

It’s gotten so bad, some title insurance companies won’t let you close without a TOPA waiver from every tenant who’s lived in the building going back a whole year just in case a TOPA chaser finds them, Siegel said.

That could include a health worker who lived in the home to care for grandma for a few weeks or the summer intern who rented a room. Even a squatter can stop a sale and demand payment for TOPA rights.

“They can post it online and say, Hey, anybody want to buy my row house that I live in? I have the right to assign this to someone else,” Siegel said.

Clara said in her case, the renter bragged about having multiple offers she was considering.

“It felt like she had me hostage,” said Clara, who tried to abide by TOPA’s mission of keeping renters from being booted from their homes.

“I was up for collaborating with her to figure out what she wanted and what she needed to stay,” Clara said. “But instead, what I got back was, What’s your best offer?”

In the end, the renter forced Clara to leave instead.

“I’ve Been Accused of Hostage-Taking”

The News4 I-Team uncovered a whole new industry of TOPA chasers targeting D.C. renters for a portion of their payout.

“I would estimate it’s essentially about a $100 million a year industry that is virtually untapped,” said Andrew McGuire, who has converted his entire law practice to handle only TOPA cases.

“I’ve been accused of hostage-taking,” McGuire said. “I don’t like that term.”

But he acknowledged he holds up home sales for a living.

He said his goal is to get tenants the most money he can for their TOPA rights, and he takes a cut of the payout.

“You want the buyer to walk away,” he said. “If the buyer walks away, it clears the deck so the tenant can assign his rights to a developer who’ll come in and then the seller has no one else to sell to.”

McGuire drives a TOPA mobile, decked out with a TOPA billboard. He’s even trademarked the phrase, “Got TOPA?”

Because renters who do can get paid.

“I have several cases where there’s over $100,000 being paid,” McGuire said.

“It’s like someone actually sticking a gun to your head and actually saying, ‘You know what, until you pay me exactly what I want, your home and your life will be held hostage,’” said Yolanda Smith, who had never heard of TOPA when she bought her home in Northeast D.C. in 2012.

She decided to rent it out a year later when she moved out to care for her mother. Now, she’s been trying to sell for more than six months. She’s already lost one buyer to a TOPA delay.

“Had I known, I would never ever, ever rent property in Washington, D.C.!” Smith said.

“It’s Almost Like Ambulance Chasing”

McGuire said he disagrees with the term “extortion” being used by some buyers and sellers to describe TOPA payouts. Renters who are losing their home to a sale have every right to maximize their profits under TOPA, he said.

He finds his clients by using a list the District posts online once landlords give notice of their intent to sell the property.

“I go throughout the city, I knock on doors, I try to meet every tenant in every property where there’s a TOPA notice,” McGuire said.

“It’s almost like ambulance chasing, only they’re chasing tenants,” Siegel said.

“They learn later that they didn’t get their TOPA rights and they come to the lawyer and say, ‘Well, what can I get out of it?’” Siegel said.

The D.C. law’s failure to define a “tenant” as being on the lease or paying rent complicates it even more. You just have to have stayed in the rental unit that’s up for sale.

“My view of the law is that ‘tenant’ would be anything short of a trespasser,” McGuire said.

But his view of the law has the DC Association of Realtors questioning how it’s being used.

“Is it extortion? Call it what you will,” DCAR CEO Ed Krauze said. “But I think, more importantly, people are taking advantage who might not be the intended beneficiaries of it.”

Those who are forced to pay higher prices to buy out renters will eventually pass that cost on to the next buyer or renter, raising housing costs District-wide, Krauze said.

TOPA allows the people most affected by the changeover of affordable housing to have a direct say in what happens to them, McGuire said.

“Tenants have not only the right to buy the house, they have the right to essentially sell the house,” he said. “And this is the magic of TOPA.”

He thinks renters should even have the right to show the house, just like an owner would when looking for the highest bidder.

And the only way for renters to know what their TOPA rights are worth is to open them up for sale on the free market.

McGuire has some advice for owners thinking of selling.

“You have to look at the tenant as a partner in the process,” he said. “If you don’t do that, it can get very messy and difficult.”


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Housing Affordability Ticked up in First Quarter

Mon, 05/15/2017 - 11:36am

Rising wages helped to boost housing affordability in the first quarter, even as interest rates rose.  The National Association of Home Builders (NAHB) said its NAHB/Wells Fargo Housing Opportunity Index indicates that 60.3 percent of new and existing homes that sold nationwide between the beginning of January and end of March were affordable to families earning the U.S. median income of $68,000. In the fourth quarter of 2016 59.9 percent of U.S. homes met that criteria.

NAHB said moderating home prices also played a role in the increased affordability.  The national median home price fell to $245,000 compared to $250,000 in the final quarter of 2016, helping to offset the near half-point increase in mortgage rates.  The average rate increased from 3.84 percent in the fourth quarter to 4.33 percent in the first quarter.

“Builders are reporting confidence and solid traffic in many markets across the nation even as they continue to grapple with nagging headwinds,” said NAHB Chairman Granger MacDonald.  “Regulatory constraints, trade barriers on Canadian softwood lumber, and persistent shortages of lots and labor are slowing the pace of the housing recovery.”

“Ongoing job growth continues to fuel demand for housing, while wage growth is helping to offset the effects of rising mortgage rates and keep home prices affordable,” said NAHB Chief Economist Robert Dietz. “NAHB anticipates that housing will continue on a gradual, upward path throughout the year.”

The Youngstown-Warren-Boardman (Ohio/Pennsylvania) MSA was rated the nation’s most affordable major housing market for the second straight quarter with 92.7 percent of homes sold being affordable to families earning the area’s median income of $54,600. Rounding out the top five affordable major housing markets in respective order were Elgin, Illinois; Scranton-Wilkes Barre, Buffalo-Niagara Falls, and Syracuse.

Meanwhile, Kokomo, Indiana, was rated the nation’s most affordable smaller market, with 96.3 percent of homes sold in the first quarter being affordable to families earning the median income of $62,500. Other affordable small markets at the top of the list included Glen Falls, New York; East Stroudsburg, Pennsylvania; Binghamton, and Lansing-East Lansing.

For the 18th consecutive quarter, the San Francisco metro area was the nation’s least affordable major housing market. There, just 11.8 percent of homes sold in the first quarter were affordable to families earning the area’s median income of $108,400.  All the remaining least affordable markets were also in California; Los Angeles, Anaheim, and San Diego which tied with San Jose at number five.

California was home to all five least affordable small housing markets as well. At the very bottom of the affordability chart was Salinas, where 13.8 percent of the quarter’s home sales were affordable to families earning the area’s median income of $63,100. It was followed by Santa Cruz, Napa; San Luis Obispo, and San Rafael.


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5 Ways To Increase The Value Of Your Rental Property

Mon, 05/15/2017 - 5:49am

When you hold property as a rental investment, it’s only natural to want the value of your investment to increase. While the real estate market plays a role in the value of your properties, you can take matters into your own hands with home improvements that add value.

Five great ways to boost the valuation of your rental property and how to make these improvements.

  1. Replace old bathroom fixtures. Bathroom upgrades deliver immediate impact and value. Replace outdated sinks and toilets with low-flow models that feature new hardware. You’ll save on water bills and instantly improve your apartment’s valuation. When replacing bathroom fixtures, hire a professional plumber to do the work.
  2. Renew kitchen countertops. Even a minor kitchen upgrade will retain roughly 80 percent of its value five to 10 years down the road, which is great news for property owners who want to make money now and sell for a profit in a few years. Replacing cheap laminate countertops with wood, granite, cement or engineered stone is a great place to start when renovating an old kitchen. Hire a countertop installer for this task.
  3. Dump old carpet and linoleum for high-end flooring. If your rentals have linoleum and wall-to-wall carpeting, this screams cheap and ugly to renters looking for a new home. Increase your apartment’s appeal and valuation by upgrading your flooring. Natural materials like wood or stone are favorites. These materials are durable, easy to clean and hold their value once installed.
  4. Update lighting and appliances. Adding new fixtures and appliances can brighten the apartment, increase energy efficiency and give an old unit new life. If you have pre-1990 lighting, replace it to slash energy expenses and make the apartment look more modern. Always have lighting installed by a licensed electrician.
    If you have old appliances — anything from a dishwasher to a hot water heater — swapping them for sleek, stainless steel, energy-efficient models will boost your return on investment and slash your overhead. Order new appliances during seasonal sales to get the lowest price. Many stores take away your old appliance for free when they install the new ones for you, reducing your overhead.
  5. Increase storage. Storage is a top priority for renters. Whether you add a basement storage cubby, place a shed in the backyard, add open shelving in the bathroom, or put hooks by the front door, you’ll help renters make the most of the space. You can keep things cheap and easy by using hooks and shelves you can hang yourself, or hire someone for more sophisticated storage upgrades.
Tips for Property Owners Who Want to Improve Rental Investment Value

Plan smartly by making home improvements in between tenants. Time your repairs so the unit’s ready when demand peaks in your area. This way, you can rent out the renovated unit quickly and command a competitive price. In turn, immediately starting to recoup the money spent on repairs through the higher rental property valuation and new market-rate rent.

Whether you’re purchasing flooring by the square foot or shopping for coat hooks, the savings add up when you join American Apartment Owners Association.

Member perks include discounts at home improvement stores and paint stores, plus a directory of licensed home improvement professionals.

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.

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Smart Landlord Policies for Pet-Friendly Property Rentals

Thu, 05/11/2017 - 9:43am

Want a surefire way to increase tenant demand for your rental? Take down the No-Pets Allowed sign.

The decision about whether to allow pets is a tough one for many owners, and there are no right or wrong answers. But some surveys show that nearly 75 percent of renters own pets. That’s a huge pool of potential tenants to turn away.

Tenants who find a welcoming home for Fluffy are also more likely to stay longer, which can reduce vacancy time. For owners renting their property as an investment, being pet-friendly makes good business sense.

But allowing pets isn’t always the right answer for owners renting out a home they plan to return to. For owners who have pets themselves, allowing renters to keep a cat, dog or goldfish will likely make leasing the home faster and easier. For those who haven’t had pets, keeping the rental pet-free is a reasonable choice.

According to a recent survey by, 9 out of 10 renters said deciding where to live hinged on the landlord’s pet policies. Seventy-two percent of renters said they owned pets.

Protecting Your Property When Allowing Pets

How can you avoid the dog that barks day and night and chews the cabinets, or the kitty that favors the closet floor over a litter box? Finding responsible pet owners is key to protecting your property and neighbors’ sanity.

The Humane Society suggests that landlords check references on both the tenant and their animal, including calling prior landlords, the veterinarian and neighbors to ensure the animal behaves and won’t cause serious damage.

The organization suggests owners limit the number of pets allowed in each unit and approve pets on a case-by-case basis, rather that create limits based on size or breed. The Humane Society recommends creating a pet policy that outlines acceptable pet behavior and requires that all pets be licensed, up-to-date on vaccinations and spayed or neutered.

Deposits and Fees

Beyond policies, landlords often charge extra deposits, fees or pet rent to limit risk and cover the cost of additional cleaning or wear and tear animals can cause to the unit, building and grounds. In the survey, nearly 80 percent of renters said they had to pay a fee or deposit for pets, with more than half paying $200 or more per year.

Be aware of what’s customary in your neighborhood plus local laws when deciding how much of a fee or deposit to charge.

D.C. law does not require that you rent to tenants who have pets. Service animals for people with disabilities are an exception. Under Fair Housing laws, landlords must allow service animals, even if a property is pet-free, and may not charge extra fees or deposits.

Whether you decide to allow pets or not, advertising your policy and targeting tenants most likely to appreciate your decision will help you find the perfect tenant faster.



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