American Apartment Owners Association

Landlords Win Appeal in San Francisco Rental Market Fight

Thu, 04/12/2018 - 4:02pm

(CN) – A California appeals court reversed a lower court decision with implications for the property rights of landlords in San Francisco on Wednesday.

The California First Appellate District ruled in favor of the Small Property Owners of San Francisco Institute, which argued that San Francisco’s law requiring landlords to wait ten years after evicting tenants before improving their property was illegal.

“The ordinance in SFAA rather than regulating the particulars of a landlord’s proposed merger of a residential unit prohibits a landlord withdrawing a residential unit from the rental market from merging the unit with another unit for 10 years,” the three-judge panel wrote. “In doing so, the ordinance imposes a penalty on the very class entitled to protection under the Ellis Act—to wit, landowners seeking to exit the residential rental business. As such, the ordinance is indeed invalid.”

The Ellis Act is a California law passed in 1985 allowing landlords to exit the rental market and improve their property, so long as they don’t put the property back on the market.

In the throes of a severe housing affordability crisis, San Francisco County Supervisor John Avalos sought to craft regulations to dissuade the owners of non- conforming rental units – typically more affordable – from exiting the market.

He came up with a ten-year waiting list with the hopes of reducing Ellis Act evictions.

The modification to the planning code passed unanimously in December 2013 without public comment.

The institute’s failure to protest the ordinance during the county’s administrative process was a major reason the lower court ruled against it during summary judgment.

However, the state appeals court found that the ordinance’s clear violation of existing state law was enough to prevent its implementation.

“We conclude that because it imposes a 10-year waiting period for alterations of properties that have been withdrawn from rental use under the Ellis Act, Planning Code section 181, subdivision (c)(3) conflicts with, and is preempted by, the Ellis Act,” the panel wrote.

 

Source: courthousenews.com

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Senate Passes Bill That Upends Some Short-Term Rental Bans

Mon, 04/09/2018 - 5:43pm

NASHVILLE, Tenn. (AP) — The Tennessee Senate on Thursday passed a bill that overturns some local short-term rental bans after lawmakers debated for more than two hours about property rights versus local control.

Lawmakers from Nashville were the most vocal against the bill. The city recently passed restrictions on short-term rentals such as Airbnb after neighborhood groups complained about noise and rowdy parties at the rentals and their rapid growth changing the fabrics of communities. Nashville passed an ordinance earlier this year that would phase out short-term rentals of non-owner-occupied properties, which have generated the most complaints from neighbors.

The measure that passed Thursday was a compromise allowing investors in short-term rental properties to keep renting them out and be grandfathered in if a local government bans them in the future. That would mean that Nashville and any other local government in Tennessee could put restrictions on the short-term rentals going forward but would have to grandfather rights to those operating legally before the restrictions were enacted.

One of the main sponsors of the measure said it was an attempt to protect the property rights of people who had already purchased homes being used for short-term rentals.

“This bill is about property rights and justice,” said Sen. John Stevens, a Republican from Huntingdon.

But other lawmakers wondered about the property rights of longtime neighbors who opposed the rentals.

Airbnb lobbied state lawmakers intensely after Nashville passed the ordinance limiting the short-term rentals.

One Nashville Republican took aim at Airbnb, the San Francisco-based company that uses an online platform to help travelers all over the world find short-term housing rentals.

“This comes down to a national company —Airbnb— trying to come in and jack up their stock price,” Sen. Steve Dickerson said.

The AP emailed the company, but a spokesman responded by saying Airbnb would not comment on the vote or the debate.

The bill would have originally allowed grandfathered properties to continue as short-term rentals even after they were sold or the owners died. But an amendment by Sen. Bo Watson, R-Hixon, terminates that right under the sale of the property and under other conditions.

The House passed a similar bill last year but still has to approve changes made by the Senate.

Source: usnews.com

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Renters Losing Interest in Homeownership

Mon, 04/09/2018 - 5:43pm

Along with a declining rate of homeownership, analysts have noted over the last few years that fewer Americans appear to be heavily invested in the dream of owning a home.  New research from Freddie Mac gives more credence to what a company official calls a historic shift in the preferences of older consumers.

Freddie Mac’s spring edition of its Profile of Today’s Renter finds that affordability is driving the rent-versus-buy decision process.  Sixty-seven percent of renters who responded to the Profile survey viewed renting as more affordable than owning, including some of those in age groups that have long had the highest homeownership rates.  Among Baby Boomers, who are now aged 53 to 71, 73 percent of those who are non-homeowners said renting was more affordable.  Sixty seven percent of those renters who said they plan to continue as renters cited financial considerations as the reason, up from 59 percent in 2016.

Half of the Boomer renters said they did not anticipate buying a home in the future, eight points higher than responses in the previous survey conducted in August 2017.  Of those, 35 percent have no interest in owning, and 15 percent believe they will never be able to afford it.  Similarly, 31 percent of Gen Xers (aged 38-52) said they would continue to rent, up from 28 percent previously.  Of those respondents, 19 percent lack interest in buying and 12 percent believe they will never be able to afford it.

David Brickman, executive vice president and head of Freddie Mac Multifamily, said “Perceptions of affordability and cost continue to play an outsized role in the choices of America’s renters, as they overwhelmingly see renting as more affordable and the right choice for them – right now.  Remarkably, half of baby boomers who rent do not anticipate owning a home in the future, with a growing number of Generation Xers following suit. Indeed, we are witnessing an historic shift in preference among older Americans, as they increasingly are choosing the size, convenience and affordability that renting offers over ownership.”

Even though the survey found a growing number of renters who said their economic situation has improved since the last survey, it also noted affordability was more of a concern.  The 67 percent of renters who plan to continue renting for financial reasons is even higher among Millennials, those 21 to 37 years old.  Seventy-four percent of that cohort expressed that opinion, up 15 points since 2016.  The percentage of multifamily renters (versus single-family renters) with that view jumped from 57 percent in 2016 to 68 percent today.  While the increase was apparent for all locations, it was more apparent among urban renters.  

Sixty-six percent of renters are moderately or very satisfied with their renting experience, the highest such responses since 2016.  Among those who had experienced rent increases, 64 percent said they like where they live and have no intention of moving.  This response was significantly higher (70 percent) among Boomers than Millennials (59 percent.)

Most renters – 54 percent – continue to believe that renting is a good choice for them now, including 71 percent of millennials.

A companion survey found that cost concerns also play a major role in mobility and housing choices.  In that survey 64 percent of renters said price was the most important factor when considering their next home.  This answer was consistent across all age groups. It was also noted that, again regardless of age group, more renters perceived homeownership as less accessible than they did three years earlier.  Eighty-one percent of renters thought it would be difficult for them to buy a home, as compared to 38 percent who believe renting a home is difficult. Plans to continue renting remain relatively constant, with a majority (55 percent) of renters indicating they plan to continue doing so.

Renters living in the West have more issues of affordability than other respondents. Sixty-four percent said they are spending less on other essentials because of increasing rents. This was at least nine points higher than responses in any other region. Those renters also perceive homeownership as more difficult to attain than other regions, with 51 percent believing homeownership is less accessible than three years ago.  

Brickman added, “Renter satisfaction remains high, but the continued shortage of supply and growing demand means more renters are looking at cost than ever before. Although it’s clear that the demand for rental housing will continue for the foreseeable future, this survey is also a reminder of the important role we play in financing low-income and workforce housing across the United States.”

The Renter Profile survey was conducted in February among 4,115 adults including 1,209 renters. The companion survey involved 2,600 respondents both owners and renters and took place in late November and early December 2017.  Both surveys were conducted online.

 Source: mortgagenewsdaily.com

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What’s In and What’s Out in Home Renovations

Mon, 04/09/2018 - 5:42pm

They bought back in the mid-2000’s, when “Under the Tuscan Sun,” a romance about an American woman who buys a villa in rural Italy, inspired a wave of rustic but luxurious home decor featuring warm, earth-toned colors.

Now with prices hitting new records, many homeowners who bought a decade ago want to cash in and move on to the next phase of their lives, whether that’s stepping up to a bigger home or downsizing after the kids have left.

However, the faux-Tuscan-style décor that was all the rage a decade ago — not to mention the granite countertops, marble fireplace mantels, fancy millwork, and stainless steel appliances that were ubiquitous then — all but scream 2005 to a younger generation of buyers, brokers say.

The millennial buyers who are reshaping the real estate market are taking their home décor cues from “Madmen,” not “Under the Tuscan Sun,” seeking a sleeker, more minimalist mid-century modern look, says Kerrie Kelly, Zillow’s design expert and the creative director of Kerrie Kelly Design Lab.

If your home looks like a relic of the bubble years, there’s no need to panic or rip out your kitchen. The good news is, there are some simple and relatively easy fixes you can make to update your interior and make it more appealing to today’s buyers, brokers say.

“I think people are drawn to the mid-century modern style,” Kelly says. “It has that simplified look and clean lines. It doesn’t have tchotchkes all over the place — it’s light and bright.”

There’s some debate over whether stainless steel appliances are truly out now, as some may prove to be a bit more timeless.

But buyers in their 30’s and 40’s don’t want fancy crown molding and millwork, granite countertops and traditional marble-mantled fireplaces. Also on the ditch list are heavy draperies and wallpaper, which, even if it is making a modest comeback, most buyers will want to pick on their own, says Elaine Bannigan, broker owner of Pinnacle Residential Properties Wellesley, Mass.

Noticeable grout lines in the bathroom are also a no, no — another tip-off that your house was not recently renovated. Jacuzzis are out, stand-alone tubs are in.

In some of Boston’s priciest suburbs, homes that have not been updated are fetching roughly 10% less. She points to one home in tony Wellesley that hadn’t been redecorated in a decade and recently fetched just over $3 million. Back in 2004, it sold for more than $3.5 million.

“If buyers walk into a house built in 2007 with all that fancy kitchen work, lavish marble, granite countertops, they look at that and say we really have to gut that kitchen,” Bannigan says.

The sleek, uncluttered look, with easy-to-maintain materials like quartz instead of granite or marble, is appealing to younger buyers who aren’t interested in spending the few hours they aren’t working or chasing after children trying to keep up a house.

“Some sellers are realizing they do have to adapt,” says Inger Stringfellow, PSCS, and expert on mid-century modern properties at William Pitt Sotheby’s International Realty in New Canaan, Conn. “The millennials don’t want to do any work. These are families with two parents that work. They don’t have the time or energy and would prefer to be able to move right in.”

Still, there are some relatively inexpensive cosmetic changes sellers can make to give their homes a more contemporary look, brokers say.

Decluttering is a good place to start, notes Stringfellow, stripping down the interior to the bare essentials in terms of furniture. That means taking down wallpaper, drapery and “neutralizing cabinets” by painting them white.

It may be worth hiring a staging company to do the work, she says.

“Granite has sort of seen its day,” Stringfellow notes.

Giving your home a more contemporary edge will also likely mean some painful decisions, Bannigan warns.

You may love that original Shaker sideboard, but lots of heavy wood furniture can also be a turnoff for younger buyers.

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Millions of Americans are evicted every year — and not just in big cities

Mon, 04/09/2018 - 5:41pm

An interview I did with Princeton sociologist and MacArthur genius grant winner Matthew Desmond a couple of years ago really stayed with me. He did a deep study of people getting kicked out of their apartments, and there was a story of a family who got evicted because ambulances came too many times for a child with asthma. Desmond’s book “Evicted” focused on Milwaukee, but he’s just released a new set of national data showing evictions around the country are comparable to foreclosures at the height of the financial crisis.

He joined us to discussed the findings, which were published by Princeton’s Eviction Lab. Below is an edited transcript of the interview.

David Brancaccio: So in the year 2016, you found that there were nearly a million evictions that year. Give me a sense of scale.

Matthew Desmond: This is the first time we’ve really been able to look at evictions at a national level. And so a million evictions, about 900,000 evictions, that equates to about an estimated 2.3 million people evicted in that year, many of them children. So, how do we get our hands around that number? That’s about 6,300 people a day that are evicted. That’s twice the number of people who die in car accidents every day in America. We heard a lot about the opioid epidemic last year. There were about 63,000 drug overdose deaths from opioids in the U.S., which means there are 36 evictions for every tragic overdose victim that year. This means eviction is an enormous problem. It’s a problem of enormous consequence in the country.

Brancaccio: And that number you’re citing is just official evictions ordered by a judge. Sometimes one just gets evicted by the landlord, right?

Desmond: That’s the scary thing. So the number that we have is an underestimate for two reasons. One is, you know, we don’t have every single formal eviction in America — an eviction that’s processed through a court system — because some cases are sealed, like they do in California. Other places, it’s really hard to get them because it’s a very remote area. So we have the largest data set of evictions in America today, but we don’t have everything. And the largest data set of formal eviction doesn’t count these kind of informal evictions that never go through the courtroom. These are when a landlord pays you to leave or maybe commits an illegal lockout. So these numbers are scary, and they’re very high, and they’re probably underestimated by a significant degree.

Brancaccio: Now I took a look, I was wondering if it’s just the big, expensive cities. It’s not, right?  I see, for instance, Philadelphia which is a not-as-expensive city. And then you have some smaller cities?

Desmond: We are learning so much about where evictions are happening in the country. If you read the news, you’d think that the housing crisis is basically in Seattle, and New York City, and San Francisco. And that’s true. You know, the rents in those cities have really exploded over the last decade. But when you look at evictions, you don’t see them only happening in those places. In fact, the hotspots of evictions are in cities that don’t get a lot of coverage. So, Philadelphia is one of our poorest large cities, there’s about 80 evictions happening every single day in that city, even though there’s relatively low housing costs. Compare that to a city like Portland, one of the hottest housing markets in the country, and you see that in Portland, it looks like evictions are actually on the decline and they’re certainly lower than in Philadelphia.  What this data set allow us to do, I think, is to recognize that the housing crisis is much bigger and deeper than we thought. It’s not just on the coast or in our global cities, it’s in a lot of different places. It raises all these questions about what’s going on, questions that we know that we can’t answer by ourselves, which is why we wanted to get the data out as quickly as we could.

Brancaccio: I’m sure you’re curious, does public policy in a given city contribute to more evictions or fewer?

Desmond: This is one of the things that we really don’t have a solid answer to. Does this policy work here better than here? What really drives down an eviction rate? Now the data are here and will allow us to get after those kinds of questions. It also allows us to understand just the effect that eviction has on our schools, on our hospitals, on our children, in our neighborhoods. I think the question about the role that eviction plays, and housing instability in general plays, in so many social problems we really care about has kind of been beyond the reach of science and research. And what we’re hoping the people do with these data is to take them and put them to use, and start getting to work after those questions.

Brancaccio: Now, I want to get back to an important point from your original book, Evicted. If people are listening to this right now thinking, well they didn’t pay their rent, they got evicted. That is not always the case in America?

Desmond: That’s right. We’re in the middle of a housing crisis. We’ve seen incomes for Americans of modest means stagnate over the last two decades, but rents have soared and most low-income families who qualify for housing assistance simply don’t get it. You know, we just don’t have enough public assistance or affordable housing vouchers to go around. Only about one in four families who actually qualifies for this aid gets it. The waiting list for public housing in some of our biggest cities is now counted in the decades. So, when we think of a low-income family today, we shouldn’t think of them as living in public housing. We should think of them on the private rental market, getting no help from the government, and spending over half of their income on housing costs. One in four poor renting families are spending over 70 percent of their income just on rent and utilities. And when you’re in those conditions, a really small thing can lead to an eviction. You’re also right that not all evictions are caused by non-payment of rent. Sometimes it’s a domestic violence situation. In many cities, landlords don’t have to give any reason to evict a tenant. So the big reason there’s so many evictions is because of the affordable housing crisis and the inability of low-income renters to make the rent, but there’s also a lot of other reasons going on too.

Brancaccio: I remember an example from the book, what was it, a child had asthma, so the ambulance came quite a bit. That bothered the landlord allegedly and out was the family.

Desmond: Yeah, this was a big surprise from earlier work that we did. You know, I thought that if you lived with children, your chances of getting an eviction would actually go down, that children would protect you from having your things thrown on the street, but it’s actually the opposite. You know, if you live with children, the chances of you getting an eviction judgment actually triple, all else equal. That’s because, in the words of one landlord that I spent time with: you know kids cause us headache, you know, kids can destroy property or gain the attention of the police or an ambulance, like you said. So often, with low-income families, it’s being in a financially precarious position, plus something else — you know, plus you got pregnant.

Brancaccio: You run the Eviction Lab at Princeton. You alluded to this, but it’s your hope that engaged people listening to this, but also researchers will use your data?

Desmond: Absolutely. The Eviction Lab is kind of a collection of scholars and researchers here at Princeton that are just nerding out on these data all day long, and trying to get them right and validate them, but also working with a committed web team to present this data in a really intuitive way. So if you’re a high school teacher, or on your city council, or a concerned citizen, or a faith leader, you can go to this website called Evictionlab.org. You can look on this map, and you can download PowerPoint slides, or customized reports that tell you how many evictions happen in your community, what is your city like compared to other cities like yours, what have evictions done over time, where are the eviction hotspots in the places you live. You can circulate this information on social media. You could take it to your elected representatives and you could start having a conversation about what you can do about this problem in your own communities. It was really important for us to see ourselves not only as a research endeavor, but also as a public service, and that’s how we’ve treated the data.

 

Source: marketplace.org

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Only 5 of the 250 largest US cities saw rents decline by more than 1% in March

Fri, 04/06/2018 - 10:44am
Key takeaways:
  • The national average rent was $1,371 in March 2018, 2.5 percent higher than this time last year, and up 0.3 percent ($4) month over month, according to data from Yardi Matrix.
  • 86 percent of the nation’s biggest 250 cities have seen rents grow in March year over year, in 12 percent of cities rents remained unchanged, while only 2 percent experienced rent drops compared to 2017. 
  • 29 of the top 30 fastest growing rents are in small cities, including Reno, Tacoma, and Orlando. 
  • Among the largest U.S. cities, Las Vegas, Denver, and Phoenix had the fastest rising prices in March, while Brooklyn, Manhattan, and Portland the slowest. 

Two-bedroom apartment rents are outpacing other unit sizes

Two-bedroom apartment rents growing faster than rents in other apartment sizes, posting a year-over-year increase of 3.3% compared to a low 2.1% in studio rents. In March 2018 the average rent for a studio apartment in the U.S. was $1,262, a one-bedroom apartment costs on average $1,232, a two-bedroom apartment $1,417, and a three-bedroom unit was renting for $1,655 on average, 3.2% more expensive than in March 2017.

Bedroom TypeAverage RentChange M-o-MChange Y-o-YStudio$1,2620.3%2.1%1 Bed$1,2320.2%3.1%2 Beds$1,4170.4%3.3%3 Beds$1,6550.3%3.2%Nationally, Reno, Tacoma, and Orlando rents are among the top 10 fastest rising in the U.S.

No sign of Spring yet in the apartment market, as the national average rent continues its sluggish under 3% growth year-over-year for the 14th month straight. The national average rent increased by 2.5% in March compared to the same time last year, reaching $1,371/month. Month-over-month, national rents showed a more visible 0.3% increase, or $4, compared to the previous month.

The highest rent increases are taking place in small cities across the country, with Odessa, TX in 1st place with a 37.1% increase for the year, and Orlando, FL in 10th place with a 7.8% rise in prices over the year. Apartments in Orlando averaged $1,340/month in March. Also notable in the top 10 are Tacoma, WA — where rents increased by a hefty 8.3% y-o-y, reaching $1,209/month — and Reno, NV — with an even higher increase, 10.5%, with an average rent of $1,141/month. A lack of new apartments is commonly blamed for rising rents in small cities, as is the case in Reno and Tacoma. In other cities, like Orlando, rising rents are a sign of economic recovery, after suffering a longer downturn period than larger markets.

Only five of 250 cities saw rents decline by more than 1% in March, including Lubbock, TX (-4.3%), Norman, OK (-2.6%), Louisiana’s New Orleans (-2%) and Baton Rouge (-1.4%), and Portland suburb Hillsboro, OR (-1.6%). Also in the bottom 10 for slowest growing rents are Richardson, TX, College Station, TX, Brooklyn, NYC, Arlington, VA, and Brownsville, TX.

Large cities: Fast-growing rents in Phoenix surpass those in Detroit

Las Vegas apartment rents are the fastest-moving compared to prices in other large cities, up 5.9% from $917 in March last year, to $971 this March. Denver renters saw the second highest rent hike, 5.8%, from an average rent of $1,460 a year ago, they’re now paying $1,545/month for an apartment.

With a 5.7% jump in apartment rents in March, Phoenix is the third fastest growing rental market among the largest cities in the U.S. The Arizona State Capital is thriving on demand from incoming older renters in search of sunnier days and more affordable rents, currently at $961/month. This growth is sustained by an improving local economy and low unemployment numbers, in concert with local efforts to revitalize the neglected areas of Phoenix, like its Warehouse District.

In fourth place, Detroit rents were up 5.6% in March, while Jacksonville and San Diego shared the fifth spot with a 5.1% year over year increase in rents.

Rents in Brooklyn and Manhattan are buckling under the pressure of large volumes of new apartments, decreasing by -0.8% and -0.3% respectively. Rents in Portland, OR are meeting the same fate, growing by a meager 0.7%, averaging $1,449/month in March. Austin rents are the fourth slowest-rising in the U.S., up by only 0.9% in a year, currently at $1,297, only $12 more than they were this time last year. Declining rents are securing Washington, D.C. the fifth spot in the U.S. among the slowest growing large rental markets, with a modest 1.3% year-over-year increase. The average apartment in the nation’s capital rents for $2,073 as of March 2018.

Mid-size cities: Sacramento rents cruising at high-speed, while rents in New Orleans hit the breaks

The price of rent in Sacramento is cruising at high-speed, posting once again the highest year over year increase among mid-sized cities, 7.2%. The average rent in Sacramento is just about ready to hit $1,300/month, causing Sacramentan renters much angst and also exacerbating the city’s homelessness problem.

With all the new apartment construction in Colorado Springs at the high-end, rents have climbed by 6.3% y-o-y and 0.8% m-o-m, reaching $1,080 in March. Tampa, FLhas the third fastest rising rents among mid-sized cities, with an annual increase of 5.6%. Apartments in Tampa go for $1,246/month on average. Arlington, TX rents were up by 5.4% y-o-y in March. Rents in Mesa, AZ also climbed 5.3%, very similar to the evolution of rent prices in Phoenix.

At the lower end are New Orleans, LA, where rents dropped by -2%, to $1,088/month as of March. Wichita, KS rents are the second slowest, with an annual increase of 0.6%.  The third slowest mid-size city is Tulsa, OK, with a 0.8% increase in rents. Rents in Raleigh, NC have slowed down significantly, rising by only 1.2% over the year, while in Albuquerque apartment rents rose by 1.1%. Also among the 10 slowest growing mid-size markets are Cleveland, OH, with a 1.2% year over year increase and an average rent of $1,002, and St. Louis, MO with a year over year rent increase of just 1.4% and an average rent of $885/month in March.

Rents in small cities booming in 29 of the top 30 with largest increases in the U.S.

Of the top 30 largest rent increases in March, small cities claim 29 spots, Sacramento being the only larger market in the top. Odessa and Midland, TXcontinue to see the highest rent increases in the country, with spectacular yearly jumps of 37.1% and 29.9%, respectively, although not as high as last month. Yonkers, NY climbed back to the top 5, with a 10.7% increase in rents, followed by Lancaster, CA with a 10.6% increase year over year. Rent prices in Reno, NV appear unstoppable, posting another double-digit increase, 10.5% over the year, reaching $1,141 in March.

Other small cities suffering from big rent increases in March are Fort Collins, CO(8.9%), Tacoma, WA (8.3%), Greeley, CO (8.3%), Elizabeth, NJ (8%), and Orlando, FL(7.8%). Phoenix metro area’s Peoria, AZ is also seeing a big rise in rents, 7.5%, the 12th highest in the U.S., and also Gilbert, AZ is in 19th place, with a 7.1% rent increase over the year.

Rents dropped in March in slower rental markets Lubbock, TX (-4.3%), Norman, OK(-2.6%), Hillsboro, OR (-1.6%), Baton Rouge, LA (-1.4%), and Richardson, TX andCollege Station, TX (both by -0.8% year over year).

Top 10 Lowest Rents in March 2018CityStateAverage RentWichitaKS$632TulsaOK$669BrownsvilleTX$681ToledoOH$689KilleenTX$695IndependenceMO$721Oklahoma CityOK$729DaytonOH$731AmarilloTX$731Fort WayneIN$737Top 10 Highest Rents in March 2018CityStateAverage RentManhattanNY$4,066San FranciscoCA$3,433BostonMA$3,244San MateoCA$3,146CambridgeMA$3,015Jersey CityNJ$2,825SunnyvaleCA$2,775Santa ClaraCA$2,753BrooklynNY$2,688San JoseCA$2,637

The New York area is the most expensive for renters in the U.S., led by Manhattan, NYC with an average rent of $4,066 in March. In Brooklyn, the average rent for apartments is $2,688 and in Jersey City $2,825. Northern California is home to 5 of the top 10 priciest rents in the country. San Francisco has the second most expensive rents after Manhattan, $3,433/month on average. Average rents in San Mateo, CA go as high as $3,146. Apartment rents in Sunnyvale, CA go for $2,775 on average, in Santa Clara $2,753, and in San Jose $2,637. The Boston area is also in the top 10, with an average rent in Boston of $3,244, the third most expensive in the U.S. Cambridge, MA rents are in fifth place, at $3,015.

Among the 250 cities surveyed, Wichita, KS has the lowest rents. Apartments in Wichita cost on average only $632/month. The second most affordable is Tulsa, OK, with an average rent of $669, followed by Brownsville, TX with an average rent of $681. Texas’s Killeen and Amarillo are also in the top 10 for lowest rents, as well as Ohio’s Toledo and Dayton, with an average rent of $689/month and $731, respectively.

 

Source: rentcafe.com

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Grow to 600 Doors with 5 Employees

Thu, 04/05/2018 - 11:17am

Over the last 48 episodes of The Property Management Show, at least 40 of them have covered sales and marketing. So, there’s a wealth of information for growing your property management business. If you missed those, go back in the archives and pull out a roadmap on structuring your sales team, organizing your marketing, and growing your business.

Today is a little different.

Many property managers want to grow their businesses, but they feel like they cannot take on any additional growth. They think it would be irresponsible to continue growing because they are struggling to keep up with serving the customers they currently have.

That’s a good problem and a real problem.

Today, we’re talking to Todd Ortscheid, who can systemize a business better than anyone.

Background on Todd Ortscheid

Todd is at GTL Real Estate, where he manages around 400 units with five employees on the payroll, including himself. He systemizes, outsources, and uses independent contractors whenever he can. Todd feels he can add 200 properties without adding any full-time staff. The plan is to do that with more outsourcing and automation.

Releasing Less Profitable Properties

The first thing Todd did was to look at his portfolio and let go of the less profitable and labor intense owners. Most of the work was coming from the same 10 percent of owners and tenants. Those were C-class properties, which are usually owned by C-class owners and attract C-class tenants. All the company’s work was there. When Todd decided to change their processes and procedures, it was a natural point at which to get rid of the properties that weren’t working.

If you’re wondering whether it was hard to withstand the revenue hit – there wasn’t one.

At the same time that these properties were being released, Todd’s company instituted some new ancillary fees. Owners began getting charged for yearly inspections, and the rest of the new fees were coming from the tenants. The application fee went up, and other things that they hadn’t charged for previously were suddenly falling into place. That canceled out the lost revenue of those 55 properties that they shed from their portfolio. 

That’s important. The concurrent implementation of ancillary fees while culling the herd of properties can be the way to go when you don’t want your revenue affected.

Occupancy and Tenant-Related Systems

Automating the processes related to tenants and occupancy can save money and provide scalability.

Are your leasing agents bogged down with calls and emails? Instead of having them spend their time taking phone calls from prospective tenants, explore different options. Todd’s company uses Rently, and there are other platforms that use similar technology.

There’s a combination lock box and leasing line that make it easy to outsource the showing and leasing process. When someone calls based on a sign that they see or an advertisement, the call is routed to Rently. Everything is automated. If they want to see the house, they get a code and they let themselves in to see the property. If they have questions or want to talk to someone, those calls are routed through PropertyWare. 

This is an important piece of the leasing process that property managers can get off their plates. Prospective tenants always ask the same questions. They want to know if the property has a fence or they want to know what the leasing qualifications are. When a call center takes care of answering these questions, your leasing agents can protect their time and only get involved if there’s an unusual question or a problem. 

Integrating the Application Process with the Leasing Process

After a prospective tenant views the property, they get an automatic questionnaire that they’re asked to fill out. This gives you the opportunity to collect feedback on the condition of the home, etc. The prospects are also asked to indicate whether they want to apply. If so, they get a link to the online application. This is an integrated process and a good way to improve the tenant’s experience.

You might worry that people will want to meet with someone – get through the process face to face.

But, do you really come across those people very often? Maybe renters of a different generation, but most tenants today are Millennials, and they are not interested in meeting with someone in person. They want to look at properties and fill out applications on their own time and on their own schedule, without ever speaking to a person.

For Todd, the application is hosted by PropertyWare. With this system, all of the application information becomes the leasing information. E-signatures are gathered, and after the tenant is approved, the lease goes right out to the new tenant. Todd and his team don’t interact with the tenants until they get past the approval stage. 

Once a tenant is approved, they receive an email with their security deposit information. Lower credit scores often have a contingency fee. This is the first time the tenants hear from their property managers. They pay the security deposit, and the property is taken off the market. 

Operations and Information Flow

The tenant moves in, and all of their information is stored with PropertyWare. Other software systems do the same thing. The lease is auto-filled by the information collected on the tenant’s application. Everything is streamlined and efficient. There is no manual entry needed.

You can use a system like this for management agreements and independent contractor agreements, and even vendor contracts. With the click of a button, everyone can sign documents electronically, and it’s all stored. This will make it easy for you to stay organized.

There is some effort on the front end to build all this out. But, it will take hours and save you a lot of time in the long term. 

With systems like Microsoft Forms, Jot Forms, and others, you can also manage your information and paperwork. For example, if a tenant has been charged for a maintenance issue and they want to dispute that charge, they can fill out and submit a form. It saves a property manager from having a 45-minute conversation with the tenant. Instead, the tenant can state their case, and submit it. Todd’s team reviews the situation, and a decision is made. The time cost is very minimal. 

You can also use systems like these for owner surveys. A lot of information can be collected to make your operations more efficient.

SharePoint is another example of technology that can work for you and save you time. Todd uses SharePoint as his company’s intranet. All of the documents, pictures, and HR information is stored there. Staff can access videos and other information. It’s Outlook-based, and Google has similar tools.

Business Process Outsourcing

Think about your maintenance process and work order system. How much time are work orders taking from your property managers? Is everything flowing, or is this one of the reasons you don’t think you can support any more growth? 

With work orders, two big things work for Todd, and they go hand in hand. Property Meld and EZ Repair Hotline are what he’s using, and there are other companies doing the same things. This enables a call center to handle repair and maintenance requests. If you’re spending hours of every day looking through service requests, dispatching vendors, and trying to get in touch with tenants to schedule maintenance; you are wasting your time.

EZ Repair Hotline takes every tenant request, whether it’s submitted online or over the phone, and dispatches a vendor from the list that Todd has provided. Property managers don’t have to get involved unless there is a problem.

Text messages and robo-calls are also part of the process. If you’ve got tenants who are late with rent, you can schedule robo-calls to remind them to pay. For Todd, every tenant with an unpaid balance gets a text on every Friday. It also works when leases haven’t been signed or when owners owe you money. This is a valuable resource for any situation where you need to get information out without spending the time to reach out to each person individually. 

Utilizing platforms like Help Scout or Zendesk can help you share information. Think about the common questions you get. If you had a collection of articles that answered those questions, you could send them right to the tenants or the owners who ask them. Help Scout keeps all the commonly asked questions, and if there’s not an article or a response already stored, one is easily created. So, when a tenant asks if their late fee can be waived, that tenant will get an article with your late fee policy and a list of situations in which they might be waived. 

Streamlining customer emails through a platform like this can save you time while offering exceptional support. The benefit is that when there’s something that cannot be addressed by Help Scout, they email the question to you, and your entire team can see it. So, if you’re not free to answer the question, another member of your team can take it. This is better than an email or a voicemail message sitting in someone’s inbox for 12 hours.

Property Management Growth and the Future

One size no longer fits all when it comes to property management. To grow both your capacity and your client base, you need to be willing to discover new solutions.

Lately, the industry has developed so many new things. The technology is finally coming around, and you may not realize how many tools you have at your disposal.

Next for Todd is to complete the outsourcing of all his back office processes. He doesn’t want his staff spending time on anything that doesn’t require boots on the ground. He’s using virtual assistants and implementing new technology.

You can help your staff handle more properties and wow customers. Todd thinks he can grow by 12 properties a month and move into high growth mode. If you want to talk to him about how he’s managed the automation and outsourcing of the things that were taking up all his time, visit him at gtlrealestate.com. You can also find him talking about this in one of the property management Facebook groups.

As always, you can contact us at Fourandhalf if you have any questions about how to grow your property management company and increase your capacity for that growth.

 

Source: fourandhalf.com

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Landlord signed tenant up for utilities without permission

Thu, 04/05/2018 - 11:10am

Q: Can a landlord start an Xcel Energy service in my name without my permission?

A: Your question raises several issues.

Assuming that you have a signed lease, the first issue is that tenants can be responsible to pay utilities only if the units are separately metered. If the utilities are not separately metered, then the tenant should not be responsible to pay for electricity.

Next, some leases contain language stating that the tenant is responsible for the utilities, and the landlord has permission to contact the utility companies and set up the tenant as an obligor with the utilities. If your lease contains both these clauses, then there is nothing prohibiting a landlord from following through and setting up a tenant to pay the utilities.

If your lease does make you responsible for the utilities but does not authorize the landlord to contact the utility company and set you up as an obligor on the utilities, then it gets a little tricky. There is nothing in Minnesota law that prohibits a landlord from doing this. However, the agreement between the utility company and the individual responsible for payment is a contract, which requires all of the normal essentials of a contract, including acceptance by the parties. If someone doesn’t signal acceptance, then the contract may be void.

Utility companies used to always require that the landlord submit the lease, to show that the tenant had accepted responsibility to pay the utilities. But I have learned that utility companies are at present getting a little lax, and too often are allowing a landlord to call in and simply designate the tenant as the payee for the utilities, without submitting the lease.

If this has happened, there may be some problem on the utility company’s end, as it doesn’t have an agreement with the person it is trying to hold responsible for the payment.

Finally, if the lease does not require that the tenant pay utilities, then it is not appropriate for the landlord to start the service without your permission, as the landlord is legally responsible for utilities unless the lease requires the tenant to make those payments.

You should check the language in your lease. If you do not have a written lease, or if you aren’t required to pay for utilities and you haven’t authorized your landlord to set you up with a utility company, then you should consider contacting a tenants’ rights organization such as HOME Line at 612-728-5767.

Kelly Klein is a Minneapolis attorney. Participation in this column does not create an attorney/client relationship with Klein. Do not rely on advice in this column for legal opinions. Consult an attorney regarding your particular issues. E-mail renting questions to kklein@kleinpa.com, or write to Kelly Klein c/o Star Tribune, 650 3rd Av. S., Minneapolis, MN 55488. Information provided by readers is not confidential.

 

Source: startribune.com

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Here’s what spring buyers are looking for in a home

Thu, 04/05/2018 - 8:09am

The average buyer this spring selling season is looking for a three-bedroom, two-bathroom home with a modern kitchen and spacious garage, according to a new survey by realtor.com of more than 1,000 prospective buyers.

The survey found that 44 percent of respondents are looking for a three-bedroom home, while a whopping 93 percent say two bathrooms is a minimum requirement. However, a garage is also in big demand, with 27 percent rating it as “important”. Other features include an updated kitchen, warranted by 24 percent, and an open floor plan, cited by 20 percent.

Other characteristics that buyers are on the lookout for include privacy, required by 20 percent of respondents aged 55 and older. On the other hand, some 17 percent of millennials said their family needs were a high priority. Just 12 percent of buyers younger than 55 years old said privacy was an important priority.

Another interesting finding from the survey is that increasing rental costs are pushing greater numbers of young adults to aspire to homeownership. Twenty-three percent of buyers aged 18 to 34 said that rising rents were the main factor behind their decision to buy.

“Although record-low inventory and high prices make this housing market unique, some classic features still top most shoppers’ wish lists,” said Danielle Hale, chief economist for realtor.com. “At the same time, we found some clear differences in priorities. For instance, older buyers are concerned with privacy and being able to age comfortably, while millennials place more emphasis on family needs, stability, and personal expression.”

The survey also found generational differences when it came to architectural preferences. Older buyers tend to prefer a ranch style home, while millennials desire contemporary and colonial homes, the survey found.

 

Source: realtybiznews.com

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Study: landlords might be falling short on screening renters

Thu, 04/05/2018 - 7:55am

More than half of all landlords don’t conduct credit checks on their renters, according to a national study.

The Real Property Management franchise surveyed 290 landlords nationally in January for its research, which was carried out by the Boston firm Liminality, Inc.

The landlords were asked how often a series of activities were completed for their property – always, sometimes or never. Included were things that either the landlord did themselves or that a property manager or other third party did on their behalf. The survey uncovered the following information in the key areas of screening prospective residents:

55 percent of landlords report that they never or only sometimes require renter’s insurance.

About 57 percent of DIY landlords never or only sometimes conduct credit checks.

About one in four landlords don’t allow pets in their rentals. About 44 percent of DIY landlords responded that they “sometimes” allow pets.

More than a quarter of landlords reported that they do not use an enforceable lease that is legally compliant, covers important obligations and rights, and protects both the landlord and the tenant.

And 45 percent of DIY landlords do not always or never enforce sections of the lease, the study found.

Real Property Management said it is the leading property management franchise in the nation, with more than 300 offices in North America managing assets worth $13 billion.

 

Source: idahobusinessreview.com

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How to Adapt to the Growing Influx of Online Deliveries at Your Apartment Community

Thu, 04/05/2018 - 7:41am

Every year, more and more Americans are turning to online shopping as their preferred method of commerce. Goods bought on the Internet account for millions of packages delivered to doorsteps every day, and this growing trend is quickly becoming a challenge for multifamily housing properties. With the booming development of e-commerce platforms and websites, online stores now offer a full range of products that consumers can have shipped to their homes. Everything from clothing and small household goods to groceries and furniture is being shipped out across the country, and as this daily wave of packages increases, the sheer volume of daily deliveries are forcing multifamily housing communities to adapt as they reconsider traditional methods of package acceptance.

Property managers that have accepted, signed for, and held resident packages are now struggling to handle the growing popularity of online deliveries. With 41 percent of Americans receiving two to five packages every month, property management companies have taken on the role of community delivery centers, which can be a taxing duty for staff to handle. In fact, a recent survey conducted by the National Multifamily Housing Council found that the typical building or complex receives up to 100 packages a week, which takes property staff up to five hours each week to sort and process.

To combat this delivery issue, some businesses have stopped offering package receiving services altogether. For example, three years ago, Camden Property Trust, then the 14th-largest multifamily housing business in the U.S., halted the acceptance of packages on behalf of their residents at every one of their 169 properties after receiving almost one million parcels in a single year. The company’s analysis estimated that each package resulted in ten minutes of lost productivity for staff, costing 3.3 million dollars in annual employee wages. But while the costs of traditional package receiving policies are becoming costly for multifamily properties, the growing trend of online purchases isn’t slowing down anytime soon. The 2017 holiday season saw record-setting numbers of online sales with Americans buying 3.07 billion dollars of goods on “Cyber Monday” alone, and the number of U.S. packages shipped soared in tandem with those online purchases.

With these rising numbers of shipments, the demand for safe package acceptance services has also become a top priority for today’s renters. This is due to the vulnerability of packages in the online purchasing and shipping process. E-commerce has led to a rise in package theft—nearly one in three Americans have reported getting a package stolen, and 35 percent of consumers are reluctant to get packages delivered to their homes due to this growing concern.

So, while traditional delivery policies are overwhelming property managers, doing away with the service altogether may prove to be an unattractive solution to this issue. Multiple surveys in the last year illustrate that package acceptance services rank among the top ten amenities that renters seek when searching for an apartment home. Luckily enough for multifamily housing professionals, there are new services available that are designed to aid property managers attempting to manage this 21st-century phenomenon. With delivery services poised to become a crucial concern for today’s renters, these solutions have the potential to become a marketable and even a profitable amenity.

In the past five years, multiple property management companies have invested in innovative, electronically-operated lockers for their multifamily communities. These receiving systems have successfully gained traction in the market as both property managers and renters seek solutions, but none have been as successful as Amazon.

Just last year, Amazon signed contracts with multifamily property owners and managers for more than 850,000 apartments in the U.S. to install “Amazon Hubs,” the company’s delivery locker service that ensures safe package delivery. The lockers are electronically controlled and only accessible to apartment residents, who receive a text or e-mail notification when a package arrives as well as a code that allows them to open their assigned locker slot and retrieve their parcel.

The Hub service marks a milestone development for Amazon’s locker service, which was previously only available for commercial businesses, in addition to only being utilized for Amazon purchases. But the multifamily-focused Hub is able to receive packages from major carriers including FedEx, UPS, and the U.S. Postal Service, and the electronic interface takes the burden of sorting and storing deliveries off property managers. The system creates efficiencies for mail carriers as well, providing a central delivery location to deposit packages instead of multiple doorsteps, which translates into quicker deliveries. Best of all, residents no longer need to worry about package theft, missed deliveries, or rushing home before the management office closes to pick-up an important package.

Amazon Hub costs apartment owners between $10,000 and $20,000, but most property management companies currently signed up for Amazon Hub do not plan to charge residents for the service. There are no additional monthly fees for properties to host a Hub, and with the savings on staff labor that the service provides and its appeal to modern, mobile renters, offering Amazon Hub as a community amenity could prove to be a valuable selling point for your property.

While traditional package receiving policies have become troublesome for multifamily housing properties, it is important to continue to offer this attractive (and even vital) service in the Digital Age.  Doing away with package receiving services altogether can negatively impact your occupancy levels as renters seek amenities and services that complement their contemporary lifestyle. With online shopping quickly becoming the new norm for today’s consumers, offering modern package management solutions can be as useful to your staff’s workflow as it is to your business’s modern appeal and overall resident satisfaction.

Source: multifamilybiz.com

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The Best Tenants Exhibit These Traits

Thu, 04/05/2018 - 4:33am

Longtime landlords know that one of the keys to stress-free property management is finding high-quality types of tenants for every unit. Review the top five traits of a great tenant to find the right people for your property.

Top Five Traits of a High-Quality Tenant1. Responsible

Responsible renters pay rent on time, take care of the property, and let you know if anything needs repair.

To see how responsible potential renters are, check their credit score and employment history. Then, contact their previous landlords. Take their written and oral communication into account, too. If they are polite, show up on time (or let you know they’ll be late), and pass the tenant screening, they’re likely a good fit.

2. Honest

Many renters lie on their application in the hopes of getting the apartment. If individuals aren’t honest about how long they’ve held their job, what else will cause them to lie? The last thing a landlord needs is illegal subletters, pets in a no-pet apartment, or other problems that affect the quality of life for others.

Lies are unmasked when you check credit, employment and references. Request proof of income or call someone’s employer to ask about salary.

3. Committed

While not everyone needs a long-term rental, it benefits you to choose tenants who want to stay in the area rather than folks who only plan to stay short term. Someone who moved to the area for graduate school, recently started a job, or has family nearby may be more committed to staying in the apartment for several years. If a qualified, committed applicant applies for your rental, extend an offer quickly.

4. Low Maintenance

High-quality tenants are not high-maintenance renters who overreact or demand special treatment. In contrast, low-maintenance tenants communicate promptly when there’s an issue, but respect your boundaries and your time. They often handle little issues on their own, such as shoveling during a snowstorm or using drain cleaner to clear a light clog.
It is tiresome to manage a high-maintenance tenant and can adversely affect your experience as a landlord. If someone shows signs of being high maintenance — for instance, not listening to you and expecting you to drop everything to show him or her the apartment — it’s smart to deny his or her application.

5. Tidy

Renters who are tidy are apt to take care of the apartment. Keeping a neat space preserves the property’s value and mitigates against accidental property damage. Slobs are less likely to care for the unit. Gauge this characteristic by paying attention to grooming, hygiene and appearance. If someone looks put-together when you meet, he or she is probably tidy. If someone shows up in ripped, stained clothing, it could be a red flag.

Gain peace of mind with every renter by screening tenants as part of the application process. American Apartment Owners Association members receive low-cost tenant screening and many other benefits. Explore all the benefits of becoming an AAOA member today.

Disclaimer: All content provided here-in is subject to AAOA’s Terms of Use.

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Before You Forget: Is Moving Tax Deductible?

Mon, 04/02/2018 - 12:05pm

Share this article with your tenants or use it yourself if you’ve moved lately!

Early April means one thing in the United States; it’s tax season. This year, Tax Day is two days later than usual falling on Tuesday, April 17, 2018. If you’re like most Americans, you’ll want to make sure you have all your deductions in order. Remember, the taxes you file in 2018 refer back to the previous year.  

2017 is the last year that previous tax legislation will be in effect. Beginning with 2018, there will be a number of changes taking place with the tax code. The changes are particularly relevant if you’re considering moving in 2018. In the past, moving could be deducted from your federal income taxes in certain cases connected to employment. After this year, that will no longer be the case.  

Am I Eligible? 

If you had to move for your job in 2017, you may have done it at the perfect time. However, moving costs related to employment are only deductible in certain cases. There are three tests that determine whether or not a move is deductible. First, the move must be closely tied to your employment. Second, your new place of work must be at least 50 miles further from your previous home than your prior place of work. If that sounds confusing, check out this diagram taken from irs.gov: 

In the illustration above, the distance test is met in the top example because the new main job location is 55 miles further away than the old main job location from the former residence. In the lower example, the distance test is not met because the new main job location is only 35 miles further away than the old main job location from the former residence.  

Lastly, if you’re an employee you must work for at least 39 weeks in the first 12 months you are at your new location. If you’re self-employed, you must work 78 weeks out of the first 24 months at your new location. Once you’re confident your relocation has passed the three tests, examine it against this additional diagram from irs.gov:

 

 How to Deduct Moving Costs 

 Assuming your move is deductible, the next step is to calculate how much you can deduct. Thankfully, irs.gov has a form available to expedite the process: 

The first line of this form accounts for any costs associated with the moving process itself. For example, if you hire a moving company, enter those costs on line 1. On line 2, enter any travel costs associated with the move. If you travel by car, the allowed deduction is 17 cents per mile driven. After adding moving and travel costs, it is imperative to enter any reimbursements your employer offered on line 4. Then, it’s as easy as subtracting line 4 from line 3. In the event that line 4 is a higher number than line 3, you cannot deduct any moving costs.  

Once you have calculated your moving deduction, you need to transfer the number to your 1040. Form 1040 is the main income tax return form in the United States. Within Form 1040, deductions for moving expenses are to be entered on line 26.  

Along with entering the deduction on line 26, it is required to attach Form 3903. Once you’ve done that, you can subtract costs from your taxable income.  

Unfortunately, 2017 will be the last year that moving costs related to employment are deductible. However, there is one great exception. If you’re an active member of the military who is moving due to a military order, you may continue to deduct moving costs for the foreseeable future. As for everyone else, moving will no longer be deductible until at least 2025.

 

Source: Movematcher.com

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Why You Need to Rethink Leasing Incentives

Mon, 04/02/2018 - 11:44am

In their book Freakonomics the economists Steven Levitt and Stephen Dubner ask (and answer) a number of provocative questions about economics. And if you’re in the apartment marketing world, the book is well worth your time.

The reason that the book is so helpful for marketers to read is that it helps us to understand incentive. And at the end of the day, all marketing boils down to incentive.

Every time we do marketing, we work to incentivize a prospective customer to take the next step. We build ads that entice apartment shoppers to click, so that they visit our website. Once on our website, we incentivize the most valuable calls to action—visiting one of our floorplan pages, watching a video tour, or especially contacting our leasing staff with a phone call or an email.

But here’s the funny thing: Even though all of marketing is about incentives, we automatically think exclusively of price discounts whenever we start talking about “leasing incentives.” This is a really bad habit that can cripple our businesses—and Freakonomics has the data to prove it.

Listen to this case study from the book:

Imagine for a moment that you are a manager of a day-care center. You have a clearly stated policy that children are supposed to be picked up by 4 p.m. But very often parents are late. The result: at day’s end, you have some anxious children and at least one teacher who must wait around for the parents to arrive. What to do?

A pair of economists who heard of this dilemma—it turned out to be a rather common one—offered a solution: fine the tardy parents. Why, after all, should the day-care center take care of these kids for free? (p. 21-22)

The obvious suggestion to correct this problem was to implement an economic disincentive, by fining parents $3/child for each incident.

How did this solution work out for the day-care center?

After the fine was enacted, the number of late pickups promptly went…up. Before long there were twenty late pickups per week, more than double the original average. The incentive had plainly backfired. (p. 22)

Why would that happen? Who wants to pay extra fees? Levitt and Dubner explain:

Economics is, at root, the study of incentives: how people get what they want, or need, especially when other people want or need the same thing. Economists love incentives. They love to dream them up and enact them, study them and tinker with them. The typical economist believes the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme….

An incentive is simply a means of urging people to do more of a good thing and less of a bad thing…

(p. 22, 23)

Why didn’t this experiment work? Two main reasons: the fine of $3/day was too small to offer all that much of a disincentive to keep parents from picking up their kids. But additionally, this solution

substituted an economic incentive (the $3 penalty) for a moral incentive (the guilt that parents were supposed to feel when they came late). For just a few dollars each day, parents could buy off their guilt. (p. 27)

But something else happened that was far worse:

Furthermore, the small size of the fine sent a signal to the parents that late pickups weren’t such a big problem. If the day-care center suffers only $3 worth of pain for each late pickup, why bother to cut short your tennis game? Indeed, when the economists eliminated the $3 fine in the seventeenth week of their study, the number of late-arriving parents didn’t change. Now they could arrive late, pay no fine, and feel no guilt. (p. 27-28, original emphasis)

Why Economic Leasing Incentives Backfire

The same kind of problems crop up when we resort to economic incentives every time we need to generate more business. When we offer free rent as an incentive to entice new residents, we send a very clear message about our property: The value of this apartment is lower than the price we are charging for rent. Whether we intend to or not, when we offer a rent concession, we are teaching new residents to devalue our property.

This means that rent incentives might actually make it more difficult for you to rent your apartments. Remember that the number of late-arriving parents actually increased when the day-care center introduced an economic disincentive (a $3 fine), because the economic disincentive removed other, more powerful incentives (the moral incentive of following the rules and picking up your child on time). In the same way, if a rent incentive reduces the perceived value of your property, you may have a more difficult time closing deals, even with the rent incentives you are offering.

But that’s not all. Later on, when your new residents actually do begin paying full price for their rent, they will perceive that they are overpaying, a mindset that will be difficult to shed every time they write their rent check. Just as removing the $3 fine at the day-care center had no effect on the increased numbers of late-arrivals, suddenly paying the full amount of the rent price won’t help residents suddenly feel the full value of their apartment. Instead, they will probably feel cheated month after month, making it an uphill battle for you to retain that resident at lease renewal time.

How to Rethink Leasing Incentives

Instead of relying exclusively on rent incentives (value-degrading incentives), your marketing needs to focus on all the other, value-adding incentives your community has to offer. Obviously, you should spend time highlighting the economic incentives your community has to offer, such as the included amenities (pool, fitness center, cable television, wifi internet, etc.) that puts money directly back in their pocket from saved gym memberships and cable/internet bills.

But there are other ways to offer incentives. Just as a moral incentive had actually done a pretty good job of limiting late-arriving parents at the day-care, so also your community probably has a range of incentives that you don’t realize are incentives.

For example, is your community close to the university or an employer? Do you offer a fantastic playground that kids love? Do your floorplans lend themselves well to hosting other people? These are examples of social incentives that you need to weave into the narrative that you tell about your community.

Or, your community might even offer some moral incentives that you should highlight. Does your community do service projects together? Do you sponsor a blood drive on-site? For people who value giving back to their community, those kinds of activities are powerful moral incentives.

At the end of the day, your marketing can devalue your community by pleading for people to live in your apartments through rent incentives, or your marketing can increase the value of your community by laying out all the great incentives (of all kinds) that would encourage people to live at your community.

Instead of taking the low-effort, high-cost road of rent incentives, let’s spend just a little more time improving our marketing to build up the compelling value of our property in the eyes of the people we are trying to reach.

 

Source: rentping.com

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Design Recipes: 10 tips for preparing your summer rental

Mon, 04/02/2018 - 11:39am

Spring has officially arrived. But if you are looking to rent your home or investment property, then you are likely already looking to summer. Summer is typically the hottest season for seasonal and vacation rentals, and spring is the ideal time to start to prep your property with the hope of securing top dollar. Here are some suggestions to help your property show its best, while also making the most of your investment dollars.

Check windows and doors. The spring is an ideal time to make sure all doors and windows open and close properly.

Have your HVAC system serviced. From changing filters to making sure everything is operational, heating and cooling systems may need a checkup.

Install a generator. Summer storms can be just as devastating as winter ones, and renters will have little sympathy if they are renting a property in which the power is out.

Deep clean. Often, a property may have undergone little maintenance during off months. So in preparation for the new season, now is the time to allow your rental property to experience a deep scrub.

Change the water in your hot tub. If you have a hot tub, now is the time to drain the water, clean surfaces and refill.

Refresh landscaping. Spring is one of the busiest seasons for those in the garden and landscape business, so you will certainly need to book your professional early.

Make provisions to combat pests and insects. If you have an issue with rodents, insects or unwanted animals, they will soon come out of hibernation. Now may be an ideal time to plan for their return.

Install or replace lighting especially along sidewalks and pathways. While the sun sets later in warmer months, you certainly want to make sure your guests have a clear path, even at night.

Plant a seed and watch it grow. The spring is a splendid time to plant a tree you wish to bloom at your rental property next year.

Have your drinking water tested. This is something many homeowners do annually, along with making sure smoke alarms and carbon dioxide monitors have fresh batteries and are fully functional.

 

Source: magicvalley.com

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Budget Deal in Congress Includes Help for Affordable Housing

Mon, 04/02/2018 - 11:36am

When Congress voted last year to sharply reduce corporate income taxes, it undermined the nation’s largest subsidized housing program. This week’s federal spending compromise may help shore it up.

The program, called the low-income housing tax credit, enables corporations to lower their taxes by helping to finance low-cost housing. Lower corporate tax rates made the credit less useful, alarming developers and agencies that provide housing for the poor in rural America and large cities.

Senator Maria Cantwell, Democrat of Washington, negotiated a provision in the spending bill to increase the number of affordable-housing credits for the first time in a decade. Developers said the move was a needed plug in a system that is struggling with financial leaks.

In a news release, Ms. Cantwell called the provision a “down payment” that “will help us deal with the tremendous deficit we have in affordable housing.”

Still, according to industry analysts, the measure won’t come close to closing the gap created by the tax cut at a time when close to half of renters struggle to pay their rent and homelessness is rising in cities around the country.

The low-income housing tax credit was created in 1986 as part of Congress’s last sweeping tax overhaul and has grown into a $9 billion-a-year program. It funds virtually all of the nation’s subsidized rental housing and created a sprawling industry of affordable-housing developers that now makes up a vital piece of the safety net — especially in high-cost cities like New York, San Francisco and Seattle.

The program has been increasingly important in the aftermath of the Great Recession. As home building declined sharply and millennials entered the work force, the number of renters surged by about one million a year — the largest increase since the baby-boom generation came of age in the 1970s, according to the Joint Center for Housing Studies at Harvard University.

Rents have risen steadily since 2010, pushing the housing cost burden to punishing levels. In 2017, about half of renters paid more than 30 percent of their income on housing, and a quarter paid more than half.

The program works like this: The federal government allocates tax credits that are eventually awarded to affordable-housing developers. The credits are then transferred to corporations — usually banks — in exchange for investments in rental buildings for tenants who do not make more than 60 percent of the area’s median income. The corporations then use the credits as a coupon against future taxes.

The tax bill that was passed last year amounted to a big cut in the program, because with corporations now paying lower tax rates, the credits aren’t as valuable as they once were. Even though the law has been in place only for a few months, it has already forced developers and municipal affordable-housing agencies to scramble to make up millions in funding shortfalls that emerged as the value of the credits fell.

According to an analysis by Novogradac & Company, a national accounting firm based in San Francisco, the tax law will reduce the growth of subsidized affordable housing by 235,000 units over the next decade, compounding an existing shortage.

Ms. Cantwell’s provision would increase the number of tax credits available, but only for four years. It would also change the income cutoff for affordable projects, making it easier for developers to secure financing.

Still, even if the increase in tax credits was made permanent, only about 30 percent of the decline in affordable housing due to last year’s tax cuts would be restored, according to Novogradac’s analysis.

“It’s going to help us reclaim some of the units lost by tax reform,” said Michael Novogradac, the firm’s managing partner. “However, there’s still a large shortage of units that aren’t going to get produced or preserved, so additional action is going to be needed to get back to the production levels before tax reform.”

Source: nytimes.com

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How Short-Term Rentals Impact Home Inventory

Mon, 04/02/2018 - 11:34am

A recent WalletHub study found that Hawaii was the state with the lowest effective tax rate at 0.27 percent, but that isn’t helping when it comes to maintaining an affordable housing stock in the Aloha State. Most of the country is currently experiencing a mix of increasing home prices and decreasing inventory, especially for lower-income homebuyers. But now a new report examines how the affordability situation in Hawaii is being exacerbated by the local rental market.

According to a study released by a nonprofit advocacy group called the Hawaii Appleseed Center for Law and Economic Justice, more than a quarter of the homes sold between 2008 and 2015 in Hawaii were purchased by non-residents. Many of these homes are purchased in order to be put on the market as rental units for visiting tourists. Moreover, while there are inventory and affordability issues nationwide, the situation in Hawaii is magnified by the fact that the island state’s housing costs are among the highest in the United States, and Hawaiian workers “earn the lowest wages in the nation after accounting for cost of living,” according to the report.

The report further explains that Hawaii is building half as many homes as it needs to be to meet demand from local residents—and that figure drops to only one-third when focused on “units needed for low- and moderate-income households.” Approximately 43 percent of Hawaii’s residents are renters, according to the report, which works out to the fourth-highest percentage in the nation.

While the rental investment market is a crucial part of the real estate landscape throughout the country—especially as soaring home prices are leading many potential homebuyers to consider renting longer. However, this report specifically highlights the problem caused by short-term vacation-rental units (VRUs), many of which operate illegally within Hawaii.

The report states that there are currently 23,000 VRUs being advertised in Hawaii, of which only 223 are legal. According to the report, one out every 24 housing units in Hawaii is a VRU, and “up to 93 percent of them are [advertising] for entire homes, rather than the rent-out-a-room image purveyed by the VRU industry.” It’s difficult problem to slow—the report reveals that “the average VRU brings in about 3.5 times more revenue than a long-term rental unit.”

However, the proliferation of short-term rental units in Hawaii is impacting not only local residents faced with a shortage of affordable housing but also the local traditional rental market. “The loss of long-term rentals to VRUs means higher housing costs for Hawaii residents,” states the report. “Although Hawaii derives some benefits from VRUs through increased tourism spending and tax collection, the benefits are far outweighed by the costs.”

“Speculators and investors have been eager to take advantage of the tremendously profitable vacation rental industry at the expense of our residents,” said Hawaii Appleseed Center for Law and Economic Justice Co-Executive Director Victor Geminiani in a statement. “We need to establish controls to protect our communities from fragmentation.”

The report points to San Francisco as another market facing similar difficulties from VRUs. “San Francisco estimates that their local economy loses up to $300,000 per VRU per year. The impact of VRUs in Hawaii is likely to be similar,” says the report.

 

Source: dsnews.com

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Credit tips for buying an investment property

Mon, 04/02/2018 - 11:32am
If you love the idea of being a landlord, and don’t mind being on duty around the clock, buying an investment property may be the wealth-building option for you.

Property values have enjoyed a steady increase over the decades. That’s why real estate has earned its reputation as a sound investment that builds wealth and credit.

Most people, however, don’t have the quantity of cash on hand to purchase a house or apartment building outright. Still, if becoming a landlord means taking out a 30-year mortgage, the monthly payments from the tenants should be enough to service the loan and build equity for you, while leaving some cash flow so you can maintain the property.

If buying investment property sounds like a step you’d like to take, here are some credit considerations every investor needs to know.

  1. Be mindful of the inquiry stage

Once you decide to purchase an investment property, it’s important to do everything you can to make sure your credit score stays as high as possible until the loan is approved and signed. Your goal is to land the best possible interest rate, because even half a percentage point can add tens of thousands of dollars of total interest payments to a 30-year loan (and affect your wealth-building abilities).

During this time, things like continuing to make on-time payments on your existing loans can be helpful in maintaining your credit score. However, sometimes people unintentionally lower their credit score when they’re actually trying to be fiscally responsible. For example, when shopping around for the best mortgage rate, keep in mind that multiple inquiries can have a negative effect on your credit score, especially if you don’t have a long credit history. Fortunately, many credit bureaus recognize that you may be comparison shopping, so make sure you do this within a defined time frame of 30-45 days.

  1. Keep credit utilization low

When maintaining a property, having access to credit can be helpful because it lets you make repairs and keep things in good living condition for your tenants. One thing that can affect your credit score is the amount of credit you’re using.

Unfortunately, keeping a higher balance could result in a lower credit score. As a rule, keep your credit utilization at 30 percent or less. For example, if your credit card has a $5,000 limit, the balance should not get any higher than $1,500. Throughout the billing cycle, keep an eye on the balance, and pay it down when you can.

  1. Keep a cushion of cash

It happens. You get that call about a water leak, and before you know it, you’re spending your Saturday evening pricing plumbers, searching for one whose overtime rate is only in the range of mildly outrageous.

Being a property manager means expecting the unexpected, and one of the best ways to be ready is to have enough cash at the ready to take care of these problems. Build an emergency fund in your savings account, and keep your credit paid down so you always have that cushion to fall back on during any crisis.

  1. Beware of low and no-interest financing deals

When it’s time to replace the oven range or a refrigerator, one of those “no payments, no interest for 18 months” deals can seem like a lifesaver. It sounds like a great deal, but these alluring promises are designed to play a psychological trick on you. Because you don’t have to pay yet, it doesn’t really feel like spending money when you’re making the purchase.

However, once the interest-free promotional period is up, a double-digit interest rate often kicks in. If you don’t have the cash to pay off the balance or make payments, you could end up with penalties that can affect your credit score. Before you sign on, always read the fine print.

Before you invest, do your research on credit scores and know your pros and cons. More than 8.5 billion credit scores compiled by VantageScore Solutions were obtained and used in the U.S. between June 2016 and July 2017. Whatever your stage in life, the market offers many options for those who wish to build their wealth through investing in real estate.

Source: moderndiplomacy.eu

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South Dakota Law Alters How Landlords Handle Support Animals

Mon, 04/02/2018 - 11:27am

SIOUX FALLS, S.D. (AP) — New South Dakota legislation will allow landlords to evict or fine tenants who fake a disability or provide false documentation to keep a pet in their rental unit.

Gov. Dennis Daugaard signed into law this month a bill intended to prevent tenants from lying about medical conditions and claiming they have an emotional support animal. The law takes effect July 1, the Argus Leader reported.

A loophole in current law allows tenants to keep miniature horses, snakes and chickens as support animals, said Amy Miller, president of Charisma Property Management.

“It’s a huge problem,” Miller said. “Nobody wants to get sued so nobody’s pressing it.”

The federal Americans with Disabilities Act describes trained animals but not specifically therapy or emotional support animals. The language means that landlords can’t deny tenants from living with the animals.

But state law didn’t distinguish service or therapy animals either, so landlords often choose to allow them in order to avoid lawsuits.

“It goes unquestioned because (the law is) so ambiguous that unfortunately, I think landlords get taken advantage of,” said Paul Gourley, chair of the South Dakota Multi-Housing Association. “There’s a loophole in the system that needs to be corrected.”

The new law says landlords can request that tenants whose disability or health condition isn’t “readily apparent” provide a doctor’s note affirming their need for the service or emotional support animal.

University of South Dakota student Taiya Bunde has a support cat named Snuggles that she keeps in her off-campus apartment. Bunde’s psychiatrist approved Snuggles as an emotional therapy animal. The 21-year-old said she hopes “that people don’t abuse it and ruin for those that need it.”

 

Source: usnews.com

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Rent is rising more slowly, easing strain on Americans

Thu, 03/29/2018 - 3:18pm

Apartment rent increases slowed further in the first quarter, a development that, combined with faster wage growth, is expected to ease financial stresses for low- and middle-income households over the next couple of years.

Average rent rose 2.3% to $1,310 in the first three months of the year, according to RealPage, a real estate technology and analytics firm. That marks a decline from the fourth quarter’s 2.6% pace and the smallest yearly gain since the third quarter of 2010.

Rent increases have slowed steadily since peaking at 5.3% in the second half of 2015.

Equally significant is that apartment occupancy in the first quarter fell to 94.5%—a historically normal level—from 95.1% late last year and an average 95% from 2012 to 2017. During that period, tight apartment supplies and surging demand from Millennials pushed occupancy and rent higher.

“What we’re seeing is a return to more normal conditions,” says RealPage chief economist Greg Willett.

The price moderation can be traced to a massive wave of apartment construction the past few years. About 319,000 units were completed over the past 12 months and another 314,000 are expected the next year, Willett says, well above the normal pace of 250,000.

Renters won’t immediately feel the benefits. For several years, rent hikes have outpaced tepid annual wage growth averaging 2% to 2.5%. But pay increases picked up recently to 2.6%, Labor Department figures show, and many economists expect gains to approach 3% by the end of the year as the low unemployment rate forces employers to bid up for workers.

Over the next year or two, “Household income is going to go up faster than rent,” Willett says. “That’s a more comfortable situation.” He expects rent growth to stabilize at about 2.5% during that period.

In the first quarter, Las Vegas had the sharpest annual rent growth at 6.2%, followed by Orlando, Fla., at 6.1%, and Sacramento, Calif., at 5.5%.

 

Source: cnbc.com

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