American Apartment Owners Association

Inside Today’s Reimagined, Reenergized Clubhouses

Fri, 04/28/2017 - 11:59am

Say goodbye to tennis courts and drab, windowless fitness centers. Say hello to color-splashed clubhouses with open floorplans, high-end coffee bars, and outdoor fireplaces and kitchens.

Call it the “Starbucks effect” or the “Millennial effect.” Either way, the big trend in multifamily properties is to renovate or build anew clubhouses that serve as a communal space for residents to gather, relax, play and enjoy upscale amenities that the designers of those dated 1970s clubhouses never imagined.

This focus on amenities has been a major undertaking at Audubon Communities, where we have recently completed six major clubhouse renovations, built one clubhouse from the ground up, and have three more clubhouses in the planning stages for later this year. In each instance, our goal is to create an environment that invites residents to come and stay for a while in a place they can call “their space.”

Building upscale clubhouses is especially critical for us, because Audubon typically acquires Class B properties, yet we want our residents and prospects to feel they are getting an amenity package worthy of a Class A property. There are several important reasons for doing this.

First, we want to leave a lasting, positive impression on potential customers the first time they step into our leasing office. Also, whenever we do a major clubhouse renovation, we see it as an opportunity to reintroduce the property in the marketplace. That makes it even more vital to change their perception from the moment they drive up to the refurbished property.

Finally, an awesome clubhouse benefits our employees. It makes them proud of the place they come to work each day, and because it sets us apart from the typical competition, it gives them an added advantage in the sales effort.

So, we’ve demolished or done away with closet-sized “business centers” and darkly lit, difficult-to-find basement fitness centers areas.

Today we offer a bright communal space with free Wi-Fi as an encouragement to bring your own device and cozy up and stay a while, whether at the pool, by the fireplace, or at our indoor lounge, all while enjoying plush seating, high-end coffee bars (with free coffee) and stocked refrigerators.

Outside, we’ve built stone fireplaces and kitchens – a huge advance over yesterday’s charcoal grills. Even the adjoining pool area has gotten a makeover. Large concrete pool decks have been replaced with lush landscaping and comfortable and varied seating areas, including cabanas, trellises or pavilions to provide shaded areas.

This new vision made us realize that tennis courts are passé in most cases, leading us to convert them into generic sports or soccer fields simply by resurfacing them. In some cases, we’ve used the old tennis court space for an expanded and improved clubhouse. Basketball and handball courts also don’t add value to a property, nor do those outdated car wash areas that usually weren’t in working order anyway. So we’ve done away with them, too.

The overall intent is to create more interesting spaces in and around the clubhouse. This has been our mission since teaming with the architects at Dwell Design Studio on several clubhouse renovations. Dwell has provided us with a unique perspective on the intersection of leasing and amenities, and they are translating their experience on new construction into our rebuilds, helping us incorporate the latest in colors, furnishings, layouts and amenities, and exposing us to the newest trends in the market.

Perhaps to nobody’s surprise in the multifamily industry, the trickiest part of clubhouse renovations is determining how much to spend. On our recent renovations, we have invested anywhere from $300,000 to more than $1 million on clubhouses and related amenities and have concluded that the cost/benefit calculation is more art than science.

At Audubon, we don’t have a formula. Instead, we approach each property by asking ourselves what things we’d like to do – and then working backward from there. Capital dollars are a finite resource, and we know the more money spent on amenities and the leasing office means fewer funds to spruce up landscaping or unit interiors.

Even so, the clubhouse conversation has taken on more importance in recent years. In the early days of Audubon, the decision on how much to spend on the clubhouse and leasing office came last, and generally the budget was whatever money was left over (if any) after we completed our other work.

Today, the clubhouse and amenity discussion comes first. And if that means we end up doing less on interior renovations, that’s okay. You only get one shot at remaking a clubhouse and you want to do it right.

Done right, today’s clubhouses can translate into happier residents, higher rents and more traffic, not to mention those happier employees. So, grab a hot coffee, a book and cozy up with your friends next to the fireplace in a clubhouse near you.

 

Source: propertymanagementinsider.com

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The Nation’s Healthiest and Unhealthiest Housing Markets

Fri, 04/28/2017 - 11:56am

Nobody can dispute that the housing market has come back, despite the doomsday case laid out by some economists after it peaked in 2006, then crashed in the Great Recession of 2008. According to the Economist, on average housing prices have recovered all their losses since the 2008 drop, although, adjusted for inflation, prices are still 20% below their peak. (For more, see Is the U.S. Housing Market Really Coming Back?)

Despite the impressive gains to the national average, the recovery has been uneven, with average-home-price growth up double digits in some areas and down nearly 8% in others. Online real estate marketplace Ten-X recently released a study that looked at the hottest single-family markets as of the spring of 2017 in the nation’s 50 largest housing markets. The company analyzed sales and pricing activity along with affordability, permit activity and economic and demographic growth. Rankings are forward looking, meaning that the list also considers economic forecasts, population trends and future growth prospects.

The Healthiest Housing Markets
  • Tampa, Fla. Taking the top spot is Tampa. Metro employment is up an impressive 3.1% year over year and has been consistently growing in the 2% to 4% range for five years, and jobs have grown at a similar pace for the past five years. Existing home prices rose 13.1%, and the region’s population growth should allow Tampa to continue its upward climb.
  • Dallas When oil prices took a tumble, so did many markets in Texas, but Dallas has remained resilient. Employment growth has been in the 4% range, and home sales are up 2.9% as they continue their rise since peak levels before the recession. Home prices are up 10.6% and have printed gains for 20 straight quarters. Single-family homes are very affordable relative to income levels, and they’re a better value than local apartment rentals.
  • Columbus, Ohio The state of Ohio has its economic challenges, but Columbus has remained steadfast. Employment growth is up 2%, and home sales have increased by 6.6% – within 10% of peak levels seen prior to the recession. Home prices rose 9.6%, the strongest pace this cycle. Ten-X believes that Columbus’ solid economic forecast will likely fuel further housing growth.
  • Las Vegas You might only see Las Vegas as a vacation city, but recent data have shown that not to be true. In a market hit hard by the recession, home prices rose 9.7%, a 90% rise since bottoming out five years ago. But there’s still room to grow, as prices remain 30% below peak levels.
  • Jacksonville – A 3% increase in job growth has helped to make Jacksonville the fifth-hottest housing market despite its slowing expansion. Existing home sales grew 7.3% year over year, and accelerating population growth will set it up for additional impressive housing-market gains.
The Unhealthiest Markets

The five unhealthiest housing markets on the list are Los Angeles; San Francisco; Long Island, N.Y.; Central New Jersey and Northern New Jersey.

According to Ten-X’s chief marketing officer and former executive vice president, Rick Sharga, Los Angeles and San Francisco are actually healthy markets, but because of limited inventory and skyrocketing prices people are being priced out of them. In the cases of Long Island and New Jersey, Sharga says that a backlog of foreclosure properties that should have been on the market much earlier are serving to keep home prices low. Because it takes about three years for homes to go through the foreclosure process in that area, these homes are depressing prices in otherwise healthy communities. Additionally, low population and job growth in the region are keeping wages down. Consequently, affording the homes is a challenge for local residents.

Move your mouse over the map to see how the other housing markets ranked. The larger markers are the cities that ranked higher.

Source: investopedia.com

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How Sustainability Helps in Enhancing Property Values

Fri, 04/28/2017 - 11:52am

There was a time when we spoke of green buildings, and it was a conversation focused in large part on the building envelope. Over the years, that conversation has advanced; in a sense it has been turned inside out. Today we speak of high-performance buildings measured by their degree of sustainability and their ability to maintain and enhance the comfort, health and productivity of those occupying the space.

In this ever-advancing field, the ongoing education of property and asset managers is key. As IREM stated in last year’s “Building Performance That Pays,” a report on the Institute’s first Energy Efficiency Survey, “The on-the-ground activities that contribute to building energy efficiency put property managers in an ideal position to impact operational efficiency, in conjunction with their teams and in cooperation with tenants.”

There are multiple goals in the practice of sustainability. As we have said, there is the professional and personal well-being of the tenants. This, in turn, supports long-term occupancy and for commercial buildings in particular, the ability of corporate occupiers to hire and maintain employees. This leads to the ultimate goal of the asset and property manager: value enhancement.

We are seeing the industry respond to that multifaceted outcome. First, more and more practitioners are investigating our educational offerings to enhance their understanding of the issues involved with sustainability. In addition, the number of properties that have achieved their IREM Sustainable Property Certification continues to grow.  (The Institute also hit a major milestone this year. We are proud that IREM has earned the U.S. Environmental Protection Agency’s 2017 ENERGY STAR Partner of the Year Award.)

Recently in this space I wrote about the intricate and subtle relationship between asset and property managers. Both disciplines have indeed been early adopters of sustainable best practices. Asset managers are being driven by their portfolio managers and shareholders to drive value for assets in their portfolios. They recognize that to stay competitive and increase the value of the assets, sustainability needs to be near the top of their to-do list.

That cannot be done without the presence of property managers to provide the building analytics that support sustainability initiatives. As Sara Neff, Kilroy Realty’s senior vice president of sustainability, stated in the Building Performance report, “Property managers are a great group to do these analyses. They understand the full benefits of a project because they know their buildings so well.” Indeed, asset managers look to property managers to create a baseline of sustainable property operations and management.

In most cases the asset managers set goals for resources and cost reductions and task the property managers to meet those goals.

Of course, there are many variables in this scenario. Different buildings demand different solutions to the sustainability question. Not every asset needs to perform like a trophy tower in Midtown Manhattan.

Then there are the mindset and capital considerations of ownership. Obviously, if the owner supports the program, it will be easier for the asset manager to implement those processes. If they do not, the on-site manager simply cannot make those upgrades.

Also, smaller shops might find it hard to develop that in-house understanding because of restraints in time, manpower and focus. But sustainability is a critical expertise, no less than the need for HVAC or roofing expertise. If that knowledge does not exist in-house, that’s when you have to look to an outside contractor to provide it. One way or another, today every management concern needs a sustainability expert as part of the team.

Whatever the needs of the building, whatever the mindset of ownership, whatever the business restraints, the marching orders remain the same. All property managers today need to be knowledgeable about best practices and the products and services available to them that will best fill their shared goal of value-enhancement.

Source: nreionline.com

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Price Your Rental Property Based On The Risks You Are Taking

Fri, 04/28/2017 - 11:50am

To figure out the price you’re willing to pay for a rental property, you estimate the rent you might get, the annual costs you’ll have to pay, and what it might take to first fix the place up.

When you’ve calculated the net annual revenue, you divide by a capitalization rate to come up with the maximum price you’re willing to pay after deducting the fix-up costs. The cap rate basically is the annual return you expect. (Of course, you hope to pay a lower price and get a higher return.) These days that rate may be around 4 percent, so if you expect a net return of $20,000 per year, you should be willing to pay up to $500,000 for the property.

But if the cap rate is 5 percent, you should only pay $400,000. Clearly, the cap rate makes a big difference. How do you know which cap rate to use?

Traditionally, you find out from a broker what the actual cap rate has been on recent transactions in your area. Finding recent cap rates is an informal process, there aren’t published figures because most buyers don’t want to tell you.

But here’s the point – even if you HAD that information, how confident are you that other buyers knew what they were doing? Just because other people used a cap rate, does that mean you should, too? Every time you’re assured that professional investors know what they’re doing, remember that there was a giant real estate crash in 2008.

We developed a calculation for cap rates for local markets at my company Local Market Monitor by starting at the other end. Forget what rate other investors are using – what rate should YOU be using? A rate that reflects the risks you’re taking.

We start with a market rate for roughly comparable investments and add premiums for risks that can be anticipated. We use the Bank of America Merrill Lynch effective yield on BBB corporate bonds – widely available – as  a market rate and add a premium for investing in real estate, a premium for the chance that local rents will fall, and a premium for the chance that local home prices will fall.

This produces Risk-Adjusted Cap Rates specific to local markets.

The risk premium for investing in real estate – usually a fairly safe investment – depends on current market rates. In early 2017, with the BBB rate just under 4 percent, we add a risk premium of 1/2 percent. Feel free to add more.

The premium for rents only kicks in when the local economy is in lousy shape, either stagnating or actually losing jobs. In such an environment, younger people – renters – move away or move back in with their parents. The demand for rentals shrinks and landlords have to accept rents that are lower than they want. As a rule of thumb, for every percent that local annual job growth is under 1 percent, add a risk premium of 1/2 percent.

The risk premium for the chance that home prices will fall can be large in over-priced markets and is more difficult to estimate by an easy rule of thumb. Our own calculations compare current local home prices with the level they ‘should’ be at in view of local income. It’s an involved process.

You can make a rough estimate by finding out how fast local prices increased in the last few years – you’re looking for a bubble. For every year that prices rose more than 8 percent, add a risk premium of 1/2 percent. If they rose more than 12 percent in a year, add a full percent for that year.

One of the attractions of investing in rentals is that you may be able to sell your property for a much higher price in the future, as home prices rise. And you expect rents to rise as well. But don’t let these possibilities push you into paying a higher price for your investment. These bonuses belong to you, not to the seller. Stick with your cap rate, don’t overpay.

Risk-adjusted cap rates can’t account for every risk, but they can help you adjust the price of your investment to the risks you’re taking.

Right now – in early 2017 – a number of local markets already have rent or home price risk premiums; as the US economy slows during the next few years, and as bubbles reappear, we’ll see even more.

 

Source: forbes.com

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LA considers crackdown on tenant harassment by landlords

Fri, 04/28/2017 - 11:46am

Los Angeles officials are looking at creating a law that would protect tenants who report being harassed by landlords trying to empty apartments so they can raise rents.

Tactics could include refusing to do repairs or taking away amenities in the lease, such as parking or laundry facilities, according to a proposal that went before the City Council on Wednesday.

A tenants harassment law would come at a time when Los Angeles is facing a severe housing shortage that has driven up rents and home prices. Housing advocates say it’s critical to stop the further loss of affordable units, especially in gentrifying neighborhoods such as Boyle Heights, Highland Park and Hollywood.

Many units in these neighborhoods are rent-stabilized, meaning annual increases are restricted. But state law allows landlords to raise the rent to market rates once an apartment is vacated.

Landlord groups point out that the offenses that would be targeted in a tenant harassment law are already illegal and they questioned the need for a separate ordinance.

“In this environment where we’re completely undersupplied, there’s a continual look to try to find villains out there,” said Fred Sutton of the Apartment Association of Greater Los Angeles

Beverly Kenworthy, executive director of the California Apartment Association, also didn’t see the point for a new law.

“We spend so much time going over the details of these issues that may or may not make a difference when we know that housing production and affordable housing production will make a difference,” Kenworthy said.

But supporters of such tenant laws argue they help shield tenants. Santa Monica has had a tenant harassment ordinance on the books since the late 1990s and has processed thousands of complaints, said Deputy City Attorney Adam Radinksy.

“We’ve had many complaints filed over the years,” Radinsky said. “Each one we’re able to investigate. And if there‘s unlawful behavior going on, we’ll address it.”

He said landlords can be fined up to $10,000, and forced to pay the tenants’ attorney’s fees if they violate the ordinance.

In Los Angeles, officials say they will be looking at Santa Monica’s law, as well as similar ones in West Hollywood and San Francisco.

Jennifer Ganata, a senior staff attorney at the Inner City Law Center, said Los Angeles is in dire need of more tenant protections. In four years of helping tenants deal with evictions, she reports an uptick in tenant harassment. Incidents include false charges for eviction; she said one of her clients was accused of housing his children when they were actually living with his ex-wife.

Ganata said property management companies hired by landlords are more savvy than mom-and-pop operations, and will often try different tactics to get tenants to move.

“It’s like a string of events,” Ganata said. “The landlord’s trying to figure out what they can get you out on.”

Councilman Jose Huizar proposed the tenant harassment ordinance after getting complaints from housing advocates reporting landlords who were trying to push out tenants.

The council approved moving forward his proposal, which he co-introduced with Councilmember Marqueece Harris-Dawson. The council will have to rehear it for consideration on Friday because it had been inadvertently voted on without public comment, according to Huizar’s office.

 

Source: scpr.org

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Redfin: These are the best college towns to buy an investment property

Thu, 04/27/2017 - 10:40pm

As spring home-buying season is now underway and investors are looking their next great buy, Redfin has singled out the best college towns to purchase an investment property.

Redfin points out that investing in a home near a college or university has some great perks, such as stable rent prices and a constant source of tenants. The online real estate brokerage’s list was compiled using the most recent U.S. News and World Report rankings for colleges and universities, median list price data for homes near the schools, tuition costs and fees, and walking score data from Walk Score.

“It’s always great to invest in a location where there is a large pool of tenants, which is exactly what you get when you invest in a property near a school like Georgia Institute of Technology,” said Rory Haigler, a Redfin real estate agent based in Georgia. “The pool of potential tenants is also stable with new students coming in every year, so a property owner really doesn’t have to worry about where they will find the next tenant.”

Haigler explained that he’s had several clients looking for investment property near Georgia Tech, but “the problem is that because it’s such a hot market, homes aren’t listed often.”

“It’s not just a great location for students to rent, but also a great option if an investor ever decides to live in their investment home, given that the school is in the heart of a major metro area with everything to offer in terms of entertainment, culture and food,” he said.

Here are Redfin’s best college towns to buy an investment property:

10. Cleveland, Ohio – Case Western Reserve University

Median List Price: $216,000
Tuition and Fees: $46,006
U.S. News and World Report Ranking: 37
Walk Score: 80

 

9. Pittsburgh, Pennsylvania – University of Pittsburgh

Median List Price: $165,000
Tuition and Fees: $29,758
U.S. News and World Report Ranking: 68
Walk Score: 61

8. Rochester, New York – University of Rochester

Median List Price: $114,900
Tuition and Fees: $50,142
U.S. News and World Report Ranking: 32
Walk Score: 64

 

7. Philadelphia, Pennsylvania – University of Pennsylvania

Median List Price: $179,900
Tuition and Fees: $51,464
U.S. News and World Report Ranking: 8
Walk Score: 78

 

6. Houston, Texas – Rice University

Median List Price: $239,900
Tuition and Fees: $43,918
U.S. News and World Report Ranking: 15
Walk Score: 48
5. Columbus, Ohio – Ohio State University–Columbus

Median List Price: $155,000
Tuition and Fees: $28,229
U.S. News and World Report Ranking: 54
Walk Score: 40

 

4. St. Louis, Missouri – Washington University in St. Louis

Median List Price: $149,900
Tuition and Fees: $49,770
U.S. News and World Report Ranking: 19
Walk Score: 64

 

3. Baltimore, Maryland – Johns Hopkins University

Median List Price: $154,900
Tuition and Fees: $50,410
U.S. News and World Report Ranking: 10
Walk Score: 69

 

2. Chapel Hill, North Carolina – University of North Carolina–Chapel Hill

Median List Price: $175,000
Tuition and Fees: $33,916
U.S. News and World Report Ranking: 30
Walk Score: 35

 

1. Atlanta, Georgia – Georgia Institute of Technology

Median List Price: $235,000
Tuition and Fees: $32,404
U.S. News and World Report Ranking: 34
Walk Score: 72

 

Source: housingwire.com

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Condos may be appreciating faster than single-family houses

Thu, 04/27/2017 - 3:13pm

It’s a real estate question that historically has had an easy answer: Do single-family detached houses appreciate in value faster than condominiums?

The standard answer has been: Of course single-family houses appreciate faster. They are what most Americans prefer to live in, so there’s stronger demand. They come with their own piece of land — and we all know that land is a crucial driver of value.

Condos, on the other hand, tend to be smaller in square footage as well as more complicated. They come with boards of directors, association fees, rules and restrictions.

But hold on. New research conducted for this column by Trulia, the online realty marketing and information company, suggests that these old assumptions could be giving way to changing market trends. According to data compiled by Trulia on millions of properties in the 100 largest metropolitan areas between February 2012 and February of this year, the median appreciation rates of condos outpaced those of single-family detached houses.

It wasn’t even close. Median condo market values rose by 38.4 percent over the five-year period, while median single-family detached houses appreciated by 27.9 percent. In some local markets, especially those that have seen significant new condo construction downtown or that have little available land suitable for detached housing, the median value of condos exceeds median values of single-family detached houses in the surrounding suburbs.

The most extreme example is metropolitan New York, where median condo values are now at 138 percent of median single-family detached house values. In Detroit, the median condo value is 125 percent of median single-family house values. Major urban areas where condos are appreciating faster than detached single-family units include Seattle, San Francisco, San Jose, Atlanta, Dallas-Fort Worth, Denver, Syracuse, San Diego, Boston and dozens of others.

Single-family house values continue to be higher in the vast majority of markets, but the gap is narrowing in many, thanks to the faster appreciation rates of condos in recent years.

Ralph McLaughlin, chief economist at Trulia, says one reason for the trend is that in many urban markets, condos are “located in areas that are becoming more desirable because they are closer to amenities”: employment, transit and other attractions.

Some metro areas — such as Washington — that have high-cost single-family houses in parts of the city and in the close-in suburbs, are seeing only slight increases in median condo values relative to single-family houses. The D.C. market has experienced modest growth in values during the past five years, but condos have appreciated a smidgen faster: 22.4 percent, compared with 21 percent during the same period for detached single-family houses.

Other major metro areas, such as Chicago, aren’t seeing the pattern noted by Trulia. In the past five years, median Chicago condo values are up by 23 .3 percent, but median single-family values have risen by 25.5 percent.

Trulia’s analysis may be controversial. It derives from the massive database it maintains on millions of housing units nationwide. Using an automated valuation model that incorporates a wide range of data available on individual houses, it estimates ongoing property values for both properties that are on the market and those that are not.

Some housing economists take issue with Trulia’s conclusions on condo appreciation. The National Association of Realtors reports that based on closed sales prices — not automated value estimates — single-family houses appreciated an average of 4.7 percent annually between 2010 and 2016, while condos averaged 3.4 percent. Rob Dietz, chief economist of the National Association of Home Builders, says that based on construction starts of condos, which totaled just 28,000 in 2016, he does not see demand pushing up prices faster on condos compared with detached houses.

But Trulia’s McLaughlin insists that using automated estimates of value produces a more accurate picture. “Sales prices are susceptible to significant bias because of the mix” of houses on the market at any given point, he says. “We estimate the value of all houses . . . and take the median of that number instead. This approach is prone to less bias than taking median sales prices.”

What to make of the new Trulia data? Clearly condos are playing a key role in some cities’ downtown revivals. In other markets, they continue to be more affordable than detached single-family houses and may be appreciating in value faster as a result.

 

Source: washingtonpost.com

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Legal Update: New Retrofit Requirements in Los Angeles Could Apply to You

Thu, 04/27/2017 - 9:22am

According to notification on the website of the Los Angeles Department of Building and Safety, the City of Los Angeles recently passed Ordinance 183893, which requires the retrofit of pre-1978 wood-frame soft-story buildings and non-ductile concrete buildings.

What is a Retrofit?

A retrofit is an improvement to your building by altering or adding any structural elements.  Please check when your building was built, when a certificate of occupancy was issued, and the type of construction in your building.  The goal of the mandatory retrofit programs, under the ordinance is to reduce structural deficiencies and improve the performance of these buildings during earthquakes. Without proper strengthening, these vulnerable buildings may be subjected to structural failure during and/or after an earthquake.

What is a “soft-story retrofit program”?

There is a “soft-story retrofit program.”  A soft-story building is a structure which has a weaker first floor and is unable to carry the weight of the stories above during an earthquake. The first floor generally would have large openings in the perimeter walls such as garages, tuck under parking or even large windows.   From past earthquakes, multi-story buildings with weak and/or open front wall lines creating a “soft-story” (i.e. buildings with tuck-under-parking) performed poorly and collapsed. The goal of the mandatory retrofit program, under Ordinance 183893 and Ordinance 184081, is to reduce structural deficiencies by the most economical and feasible method. Without proper strengthening, these vulnerable buildings may be subjected to structural failure during and/or after an earthquake.

Is your building vulnerable?

Buildings that are most vulnerable have been identified with the following criteria:

  • Consisting of 2 or more stories wood frame construction
  • Built under building code standards enacted before January 1, 1978
  • Contains ground floor parking or other similar open floor space

The program does not apply to residential buildings with 3 or less units.  Property owners are sent an order to comply. Some notices went out in 2016, and others will be sent in 2017.   The property owner must comply with the ordinance within the following time limits:

  • From the receipt of the Order to Comply – 2 years
  • Submit proof of previous retrofit, or plans to retrofit or demolish – 3.5 years
  • Obtain permit to start construction or demolition
  • 7 years to complete construction

Please visit the City of Los Angeles Department of Building and Safety website for more information.    To be in compliance you should have a written plan in place, consider financing options to pay for the cost of retrofit, and get bids from contractors that have experience in this type of construction.

 

Copyright 2017 Nate Bernstein, Attorney at Law. LA Real Estate Law Group. All Rights Reserved.

The author of this article, Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy matters. The contact number is (818) 383-5759, and email is natebernstein44@gmail.com.  Nate Bernstein is a 22 year veteran Los Angeles real estate and business attorney and trial lawyer. Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options. He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, and in house counsel at Denley Investment Management Company. Nate Bernstein created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation. Nate Bernstein is a local expert on real estate law and economic trends in the real estate and leasing market, business law, and bankruptcy law. Nate has personally litigated more than 40 major real estate trials, and has settled more than 200 complex real estate and business cases. 

Any statement, information, or image contained on any page of this article not a promise, representation, express warranty, or implied warranty, or guarantee about the outcome of a legal matter, and shall not be construed as being formal legal advice. All statements, information, and images are promotional. All legal matters are factually specific, laws change on a daily basis, and courts interpret laws differently. No express or implied attorney client relationship shall be inferred from any statement, information, or image contained any pages of this website. No attorney client relationship is formed until the client or the client’s representative, and the attorney signs a written retainer agreement.

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The Importance of Property Valuer Guidance

Thu, 04/27/2017 - 8:46am

What is a Property Valuer? A Property Valuer or Appraiser is a recognized name in the world of real estate. It is offered as a high-class service for clients in various types of property valuation.  One of the many things they offer is expert, as well as an unbiased appraisal for their customers in a universal range. This includes members of public, corporate body clients, residential property valuations and many more. They are known for their high-quality customer service.

What type of Residential Property do they offer?

Residential properties are unique, they traditionally combine modern and contemporary architecture as one. Standard residence without any scam is available on their credit. Most people don’t understand how simple scamming can be, especially when it comes to finding a property. The reasons why scamming is mostly easy when trying to purchase a home is because the excitement of obtaining a new home makes people thoughtless to the process of signing the contract documents and are ignorant to what they are signing up for. This appears mostly with first time buyers who are trying to get their first apartments /homes, they are not aware of the scamming that commonly appears as they are new to the method and have the disadvantage of have never having renting nor buying a place which always leads to misinformed details. The risk of people who are renting a place for the first time is more than the people who have previously. As scamming is so common you will always have to second guess every process, however the following tips help eliminate the exposure of scamming as well as saving your time but also your money.

Living in your dream home fills your heart with joy. Nevertheless, living must be comfortable and hassle free. For this purpose, majority of the people search the dependable real estate who can make their experience healthy. Property Valuers Brisbane takes the stress of your property and turns it into a life time experience, there is no doubt that they are experts in providing right property valuation. Property valuation Melbourne also does a great job with their customer service and handling the client with respect & professionalism.

Reading carefully

Everything that you read in the contract will be in some way applicable to your life in the long run. It is crucial to recognize what you are getting yourself into. A good example of this would be strict landlords who disapprove in simple changing or repairing. While repair is the right of the resident it is the responsibility of the landlord, so read the commitment and don’t be afraid to ask for amendments.  Negotiating is key.

Take someone with you

Moral support is essential in purchasing a home, especially for the first time. Tag along a friend or a family member. Preferably one with the experience, being as it is to your benefit.  Not only this but taking your friend with will give an impression that someone is by your side to witness and observe.

Take your time in asking questions

There are multiple things that no one ever understands right away. This is okay, don’t be afraid to take your time in reading it over again and making sure you understand everything you are signing yourself up for. If there is a predicament, ask your landlord or the property dealer to explain the clause to you. This understanding will give out an impression that you know how to handle things and you are serious about your life. Hesitance and the serious questioning will reduce the risk of scamming by a tremendous amount because it is likely to notice more flaws about the process they are offering.

Use a certified website

The Certified website known as craigslist will help you find your dream apartment. However,
Property Valuers Brisbane is more accessible and affordable as it provides the option of selecting the location along with the size or even the amount you are looking to pay. With the easy and relatively affordable rates you could not go wrong!  This being said, enjoy finding your favorite place to live in these apartments and houses.

Source: realtybiznews.com

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6 tips for renting your condo

Thu, 04/27/2017 - 8:44am

Thinking about going into the condo rental business? Does the thought of owning beachside property and making money by renting it out sound too good to be true?

The Log spoke with both a local condo owner and management company to help you get to the bottom of these questions to see if there are any nitty-gritty secrets or helpful tips that you should know before taking the condo rental leap.

We spoke with vacation rental and property management company representative Dale Peterson, owner of Dale E. Peterson Vacations in Destin, and private owner, certified accountant and 13-year Okaloosa Island condo owner Cindy Day of Fort Walton Beach.

What is one thing you wish you’d known before renting out your condo?

Peterson: A lot of the owners that use our company tell me that they didn’t realize how management-intense the business is. A lot of people do VRBO (vacation rental by owner), and what they find out is they didn’t know this is a real job and it is a real job.

Day: I guess one thing would be the amount of time that it takes to have a successful rental.

What is the best feedback you’ve received from patrons?

Peterson: One of the things that I like to hear is how clean the unit is to be honest. If there’s a couch that is old and when you sit in it you roll to the middle, you’re going to hear those types of complaints.

Day: They appreciate the personal check-in and the cleanliness of the condo. I get that with almost every guest. They also enjoy the information about the area that I provide in the condo.

What do you do when items go missing?

Peterson: A number of management companies offer insurance for those kind of things. Mostly it’s if you break something. If guests will tell us that instead of trying to hide it, there are insurance for that. It’s very difficult for an absentee owner to find that stuff and know when it happened.

Day: I call my guests. I have that rapport with each of my guests because I have gotten to know them and I feel like I can ask them and often they accidentally took it with them or they broke it, and in that case I take it out of their deposit, but I always let them know.

What makes a condo more inviting?

Peterson: I think that a very full and well-equipped kitchen is a good thing and always your cleanliness is important. But it goes right down to the quality of your towels, kitchen items; all of those things add up. Also try to post as many pictures that are true and give an honest opinion of your property because if your customers are happy I like to say, “Repeat business is the best business.”

Day: The homey feel I always say. The view, the cleanliness, the homeliness of it. My hope is to provide the comforts of home with a beautiful view.

How accessible should owners be?

Peterson: That goes back to the management company. The management company should be available 24 hours a day. You need somebody that is ready to respond. It’s hard when you are trying to manage something on a VRBO and you live in Atlanta, you need someone with boots on the ground to oversee it.

Day: I personally feel you need to be very accessible if you want to have a successful business with repeat customers. At least 50 percent of your guests are going to be repeat customers.

Final words of wisdom?

Peterson: Go to a professional management company. They are familiar with marketing, they’ve been in the business for a long time and they are great at overseeing their guests. In most cases management companies are very thoughtful regarding the number of people in your property. They also have professional cleaners that will abide by health department rules and will make sure you are getting good accounting and the maintenance that you need. A professional management company will make sure that you are maximizing your value.

Day: It’s a full-time job, especially in the summer. And then in the off season you spend a whole lot of time marketing it. It just depends on how hands-on the owners want to be. I feel the more hands-on you are, the better renters are going to leave your condo. It depends on what people want, but I want to be hands on and give personal attention to each guest.

Source: thedestinlog.com

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The Five Markets with Outsized Apartment Rent Growth

Thu, 04/27/2017 - 8:40am

Apartment rents are growing fastest in smaller cities and secondary markets, far from the mega-cities where developers have focused most of their attention in recent years.

“Decent job growth, combined with very low new supply levels, is a recipe for high rental growth rates,” says Louis Rosenthal, analyst for data firm Axiometrics.

Here we look at secondary markets with the highest rent growth for apartment properties.

Sacramento, Calif.

The California state capitol has the strongest rent growth in the country, according to several top research firms. The estimates for the growth in effective rents range from 8.8 percent according to Axiometrics to 9.7 percent according to MPF Research over the year ending in the first quarter 2017.

“Existing product is jam-packed full with occupancy at 97.2 percent, and there’s not much construction activity,” says Greg Willett, chief economist for MPF. Deliveries in the past year were limited to about 600 units, and only 2,200 units are on the way.

Seattle

Seattle is one of the only top cities for new development that is also a top city for rent growth. Estimates for effective rent growth here range from 8.3 percent, an estimate from MPF Research, to 4.9 percent, according to Axiometrics, over the year ending in the first quarter 2017.

In 2016, developers added nearly 11,000 new apartments to the markets in Seattle. That’s nearly twice the historical average of 6,200 new apartment units per year, according to Axiometrics. However, demand has kept pace. “There is a lot of growth in the tech industry in Seattle and rents are not as high there as in San Francisco,” says Barbara Byrne Denham, senior economist in the research and economics department at Reis Inc.

Riverside and San Bernadino, Calif.

The estimates for growth in effective rents range from 7.8 percent, according to MPF Research, to 6.0 percent, according to Axiometrics.

“Like Sacramento, the Inland Empire is a late-recovery economy where the existing apartment stock is now full again, but construction has not yet kicked into high gear,” says MPF’s Willett.

Fort Worth, Texas

Strong employment growth and limited new development have pushed effective apartment rents upwards consistently at a rate of more the 6.0 percent a year since 2015. Effective rents grew an average of 6.5 percent over the year that ended in the first quarter, according to MPF Research.

However, “construction starts are accelerating now, so today’s rent growth momentum may prove difficult to sustain,” says Willet.

Atlanta

Developers have been slow to build new apartments in Atlanta, since it was badly hurt by the real estate crash.

But now Atlanta’s economy is roaring ahead. “The employment market has been very strong there,” says Reis’ Denham.

Annual employment growth in Atlanta has just hit 100,000 jobs, and that expansion is creating lots of demand for apartments. Effective rents grew by an average of 6.2 percent over the year that ended in the first quarter, according to MPF Research.

Source: nreionline.com

 

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The Future of Reputation Management

Thu, 04/27/2017 - 8:37am

While the primary objective of reputation management is to look good in the eyes of prospective renters who scour review sites, savvy operators have begun to utilize their reviews as free market research.

By now, most apartment operators have figured it out: Reviews can no longer be treated as a minor annoyance and left untouched in cyberspace.

Reputation management has become a common practice in the multifamily industry, as apartment operators are well aware that an overwhelming majority of prospects (83 percent, according to J Turner Research) use ratings and reviews during their search. But what’s next? Is reputation management as mature as it’s going to get, or is there new territory yet to be discovered?

“I think there is a full evolution that will happen over the next 12 to 24 months,” says Ryan Perez, vice president of marketing for CF Real Estate Services. “Our industry has embraced reputation management. However, holistically speaking, PMCs aren’t using this as a lead or revenue generation tool. Strategic refinement of the overall online review management space will open doors to new possibilities in the near future.”

While the primary objective of reputation management is to look good in the eyes of prospective renters who scour review sites, savvy operators have begun to utilize their reviews as free market research. Reviews oftentimes serve as the most genuine, emotional data one can get because reviewers are posting by choice rather than being solicited for their opinion. Reviews represent raw material from those who felt strongly enough to volunteer their feedback.

However, many community teams read a review, compose a response and, on occasion, follow up with the reviewer—and that’s where the process ends. While 70 percent of consumers are more likely to do business with you if their concerns are addressed, according to Lee Resources, simply responding and then moving on means one isn’t tapping into the ability to use reviews as a lead and revenue generation tool. It also overlooks the opportunity to utilize reviews for insight into adjustments that can be made in operational practices for current and future onsite teams.

“We’re making reviews a key focal point when it comes to training our teams and how we manage our assets,” says Ashley Allen, marketing and training director for Carter-Haston. “We believe there is validity in every review and feel it is extremely important to listen to our residents’ feedback. Our passion is building relationships and creating an environment where our residents love living at one of our communities. A great way to be able to do that is with reviews.” 

Reviews can be frustrating at the community level because they may contain exaggerations or even unfair criticisms. But the feedback can be used to create an overall view of how your community is perceived, which areas need upgrades and what part of your service is lacking—plus the things you’re doing well.

“We currently conduct reviews on all move-ins and are testing work-order and renewal reviews in our Atlanta market,” Allen says. “We feel it is very important to see the resident’s point of view through the entire process. By doing so, it allows us to celebrate our team’s success with the positive reviews and determine whether there are certain areas that we need to focus on a little more.”

Only 20 percent of consumers leave a review when they’ve had a positive experience, according to Chatmeter. With this in mind, apartment operators have shifted their focus to proactively generating reviews in the last few years, but reputation management needs to take the process a step further by addressing all reviews, positive and negative, in further detail.

“Reputation management will continue to change and evolve,” Allen says. “It’s very fluid, and as an industry, we have to open-minded to this and be ready for change. We have to be proactive and not reactive.”

Source: multihousingnews.com

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Questions To Ask When Prescreening Tenants

Wed, 04/26/2017 - 12:23pm

By utilizing the proper tenant screening methods, you may be able to avoid future problems and headaches by performing the proper prescreening process.

Screening prospective tenants is much like interviewing candidates for a job. Asking good resident screening questions will help you determine who will make the best tenants for your property. Prescreening questions for renters help you determine why the renter is moving, what potential problems you may encounter and whether or not the tenant is qualified to rent from you.

Consider taking advantage of the benefits offered by a tenant screening service, and remember to follow fair housing laws by holding all applicants to the same set of standards. Here are some tenant interview questions that you can ask early in the process — even over the phone — to determine whether or not someone is a good candidate:

Please note: These questions do not serve as a fully comprehensive guide to tenant screening. While these questions are a useful starting point in the tenant prescreening process, they do not replace the tenant screening process as a whole.

Why did you decide to move?

Find out prospective tenants’ reasons for moving. If they are looking for a new place because of landlord problems or an eviction, you need to be careful. If they complain about their current landlord, be wary. Look for tenants who need a location change or a larger place for a growing family.

What is your monthly household income?

This may sound personal, but as a landlord you want to make sure the prospective tenants can afford the apartment. Whether you ask this question in person or on your tenant questionnaire, you need to know how much income they have. Look for tenants who make at least 2.5 times the amount you are charging in rent each month.

Will you agree to credit and background checks?

Credit and background checks must be part of your tenant application process, but you must get consent to administer these checks. If a would-be tenant is not willing to provide this consent, look elsewhere. This is one of the most important questions to ask when prescreening tenants.

Do you have a pet?

Make sure any pets the tenants have comply with your pet policy. Chances are tenants are not going to part ways with a furry family member to adhere to the terms of a lease.

How many people are living with you?

Is the apartment large enough for the number of people who will be moving in? You need to limit the number to no more than two people per bedroom. Allowing too many residents could be a violation of your municipality’s fire safety laws, and could put the occupants and other tenants at risk.

Have you ever been evicted?

Ideally, this would be one of the tenant prescreening questions to ask previous landlords. That’s not always possible. Don’t hesitate to ask this important question of would-be tenants, but know that you may not get a straight answer if they have something to hide. If they say “yes,” asking will give them the chance to explain. People sometimes have experienced a job loss or other difficult financial situation that they since have rectified, and this question gives them the opportunity to tell you the details.

If you need more information about creating a list of tenant screening questions, or are looking for help understanding or conducting background checks, call today to take advantage of the services offered by American Apartment Owners Association.

Disclaimer:
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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Axiometrics: Rent Growth to Match Long-Term Average

Mon, 04/24/2017 - 12:45pm

Apartment data provider Axiometrics predicts that annual effective rent growth in 2017 will match the long-term average, however they say performance will strengthen in 2018 & 2019.  Their latest forecast estimates an average rent growth of 2.3% this year, equaling the average rate from 1995-2016 and actually 10 basis points (bps) higher than their previous forecast.  This slight increase also comes in the wake of a predicted fall in the job-growth rate to 1.4%, with 2.01 million jobs added to the workforce in 2017.

Their key takeaways:

  • While average effective rent growth will hit a recent low of 2.3% this year, it is expected to rise to 3.2% in 2018 and 4.1% in 2019 before moderating back to 3.2% in 2020 and 2.6% in 2021.
  • Job growth also will increase in 2018 and 2019, to 1.7% and 2.0%, respectively. Like rent growth, this metric is expected to retrench to 1.7% in 2020 and 1.4% in 2021.
  • Occupancy is expected to average 94.6% in 2017, rising to 94.8% in 2018 and 95.2% in 2019, exceeding the magical 95% at which a market is considered full. That rate is predicted to fall to 95.0% in 2020 and 94.7% in 2021.
  • The total number of building permits issued is forecast to rise to 1.4 million this year, but fall to 1.3 million in 2018 and 1.2 million in 2019. This includes all housing, both single-family and multifamily.

Source: realestateinvestingtoday.com

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9 Affordable Strategies to Find, Buy, and Sell Real Estate

Mon, 04/24/2017 - 12:40pm

Buying and selling real estate can take a great deal of time and money. And since time is possibly the most valuable commodity of them all, I’ve compiled a list of some affordable strategies to find (and sell) properties.

Here are 9 affordable strategies to find highly motivated sellers and great real estate deals…

1. Out-of-State Homeowners

Should new investors target out-of-state property owners? Yes! Some of the most motivated sellers are homeowners who live in a state other than where the (distressed and non-distressed) property is located.

These homes may appear completely abandoned and could have “squatters” or homeless people living in the unoccupied residences. This can lead to serious financial liability for the out-of-state owner, who may be quite open to offers well below market or who may offer creative and flexible seller financing terms.

2. Divorce Court

Divorce and medical bills are two of the main reasons for financial ruin. During a hotly contested divorce battle, the former spouses may be so angry with one another that one or both are more than willing to “unload” their former home or investment properties as quickly as possible or to cover their ongoing legal expenses.

3. Bankruptcy Court

Anyone who is on the verge of filing for bankruptcy protection (Chapter 7 for the individual, Chapter 11 for a corporation) may be extremely motivated to convert assets like real estate into liquid cash as fast as possible.

Before, during, and after a bankruptcy filing and discharge, the individual, business entity, or Bankruptcy Trustee appointed by the federal Bankruptcy Court work towards finding cash by selling off or restructuring assets and debts.

4. Expired Listings

How motivated are sellers with expired MLS listings? When the economy is sluggish and there’s a fairly large inventory of unsold homes for sale, you can find 90-day and 180+ day listings that have expired after a Realtor’s unsuccessful attempts to sell the home by way of “Open Houses” and other expensive traditional marketing efforts.

Once these MLS listings expire, you’ll likely find owners willing to drastically discount their price and terms to an investor (you!) who approaches them directly in order to avoid paying the Realtor’s commissions.

5. For Sale by Owner

FSBOs (For Sale by Owner) can be quite willing to structure an assignment or “creative” flip to investors who can close quickly.

Time is precious and finite, life is too short, and “time is money” for most people. Some property owners are just tired of holding a property and prefer to deal directly with someone who can take their headache off of their hands as soon as possible.

6. Bandit Signs

What is more effective and affordable than a Bandit Sign? Yes, those little signs you see on your neighbor’s lawn, or a common area in a condo or townhouse development, or on a public street are one of the best ways to let the world know you have a home for sale with creative terms or that you are looking to buy properties for quick closings.

There are correct and legal ways to properly use Bandit Signs, and there are other ways that can be deemed as illegal by way of planning, zoning, and usage restrictions, so do your homework and be very cautious here.

Why not try some creative ways to use old-fashioned advertising strategies, such as a physical postcard or paper signs on the street with modern-day connections, like links to digital content on your personal website, blog, and social media sites?

7. Your Own Real Estate Blog

Most people want to learn something new each day, especially in fields like real estate investing.

A blog is a fantastic option to create loyal followers and potential (buyer and seller) prospects. Blogger and WordPress are great blog sites you can set up completely free of charge.

People are tired of working hard for their money. Now, they want to find ways where their money can work hard for them.

8. Clever Business Cards

Business cards with a few key words like, “I buy homes for cash in one day” have long helped investors find incredible opportunities. Printing companies, both online and offline, can design and publish hundreds of business cards for as little as $15 to $25.

9. Probate & Estate Sales

The only certainties in life are taxes and death. Keep a close eye on published Probate or Estate Sales in your local newspaper classified sections, or by doing more detailed investigations through online search engines.

Probate or Estate Sales provide many different investment opportunities where properties are sold quickly at prices well below market value.

Never Give Up…

The key to success with business ideas or dreams is to take the first step forward, regardless of whether it’s small or large. If you’re successful or not on the first attempt, keep trying, make necessary changes, and never give up.

A marketing strategy can work fantastic one week, and not so great the next. So, keep learning and make necessary changes as you move forward, so that you reach your goals in 2017.

Source: creonline.com

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Can You Actually Turn a Profit Flipping Homes in Today’s Market?

Mon, 04/24/2017 - 12:32pm

Back in 2012, house flipping seemed like the perfect opportunity for a person with extra cash and an eye for remodeling. The market was flush with homes left vacant from waves of foreclosures prompted by the housing bubble that burst a few years earlier. You could buy a home from a bank, make any necessary repairs, install hardwood floors and splash on a fresh coat of paint and then sell it at the top of the market.

Nowadays, with a largely recovered economy, more and more potential flippers have that extra cash in hand. And they’ve been studying TV shows like “Flip or Flop” on HGTV and “Zombie House Flipping” on A&E;, just waiting to find the right bargain to start their flipping career.

But with the housing market back to pre-recession levels, the number of homes coming on the market each month is low. Bidding wars are beginning the day a property is listed, driving home prices above asking in many cases. Buyers willing to pay more to occupy the home they purchase are having a tough time finding affordable real estate, which means it’s even tougher for investors looking for houses at a rock-bottom price.

With a tight inventory and no expectation for single-family home development to catch up with demand any time soon, is it still possible to make money in the house-flipping game?

“Honestly, probably not,” says Kevin McGraw, primary broker at Reinvest Consultants, a full-service real estate brokerage specializing in investing in Cincinnati.

It’s not just a matter of fewer homes going on the market – there’s also a saturation within the home-flipping industry. At real estate auctions, McGraw says where 20 people would bid on 40 homes a few years ago, now there are 150 people bidding on 20 homes.

“Maybe 40 of those people have real money [in excess to invest]. The rest will spend every penny they have,” he says.

The situation is similar in Boise, Idaho, where Dan Rowe, broker and owner of Dan Rowe Realty, often represents investors as buyers. Rowe says it’s hard to stick to a budget when it comes to the few homes that end up on the auction block these days.

“Every time we go to an auction or something like that, you’re thinking you’re going to get a deal, and the price just blows right by it,” Rowe says.

But that’s not stopping people from trying to flip homes. Last month, ATTOM Data Solutions released its 2016 Year-End U.S. Home Flipping Report, which reveals 193,009 single-family homes and condos in the U.S. were successfully flipped last year. That’s a 3.1 percent increase from 2015 and accounts for 5.7 percent of all single-family home and condo transactions last year.

The last time this many home flips sold was more than 10 years ago – 2006 saw more than 275,000 flipped homes sold.

With such a high number of flips, it’s not only hard for those trying to break into the industry – it’s hard for investors who have been flipping homes for years. Rowe says it’s gotten to a point that the homes investors are looking for simply aren’t on the market.

“My investors call me up thinking they’re going to make 50 grand on a flip, and I try to manage expectations. If I could find them, I would,” Rowe says.

House flipping isn’t necessarily dead in the water, but both McGraw and Rowe stress the profit margin is much smaller than it was a few years ago – or what you might be seeing on TV, where profits over $40,000 appear common and are sometimes close to $100,000 for a single property.

Some good news for those who want to begin real estate investing, whether flipping homes or serving as a landlord: You don’t necessarily need to have the capital to buy property with cash. Susan Naftulin is the owner and president of Rehab Financial Group, a lender for real estate investors in Rosemont, Pennsylvania, and she says her firm takes the pace of the market into account to help borrowers remain competitive with cash-heavy buyers.

“We work as hard as we can to wrap up our side of it and underwrite as quickly as possible so as not to be an impediment,” Naftulin says.

But whether you finance or use your own cash, Naftulin says first-time investors should check their expectations before jumping in for the sake of their own finances. “Better to make your mistakes with a smaller rehab and a smaller loan than bigger,” she explains.

Here are three things you can do to increase your chances of earning money through house flipping.

Invest small. If you still want to try flipping a home, don’t go for the former crack den with burst pipes and a hole in the ceiling. Naftulin says you’re more likely to turn a profit with a home that doesn’t need much work, but with minor fixes and some skillful staging can sell at a higher price point. It’ll also be easier to entice a lender when less risk is involved, especially if it’s your first dive into real estate investing.

Your profit won’t be gigantic, but you won’t have inadvertently bought a money pit, either. “You don’t make a lot on each property, but you can do a lot of houses,” Naftulin says.

Invest in a different way. Single-family homes are the classic type of flip, but don’t discount other options. McGraw says condos have been overlooked in the Cincinnati market.

Commercial real estate is often a missed opportunity for small-time investors, though you’ll likely need a bit more capital than with a single-family home. “The allure of the single-family rehab is you don’t need a lot of money to go into those. In the other classes, you need some cash to do that,” McGraw says.

You could also try purchasing and holding onto your property for rental income, though you would also take on the role of landlord – and all the maintenance and management responsibilities that come with it.

Wait for the economy to tank. It’s not an optimistic approach to real estate investing, but when it comes to flipping houses, you need a surplus of homes for sale to be able to snag good deals on properties to flip. The only way to really guarantee an excess supply of homes is when people can no longer afford to live in them. And that means an economic downturn. But the current outlook remains bright for real estate values and the larger economy.

 

Source: realestate.usnews.com

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New Survey Finds Cluelessness on Real Estate Investing

Mon, 04/24/2017 - 12:30pm
Is real estate a good investment? According to a new survey commissioned by RealtyShares, an online marketplace for real estate investing, 40 percent of Americans did not know if stocks, real estate, commodities, bonds, or cash equivalents such as oil, gold and cotton generated the best returns since 2000. Only 16 percent of respondents believed real estate was the best performer, but 25 percent identified stocks as the best investment. The survey, conducted online among over 2,000 adults by Harris Poll, found 64 percent of and 68 percent of women agreeing that home flipping is a good way to make money. Adults between 35 and 44 were more likely to view home flipping positively than those 45 and older (77 percent versus 60 percent), while 44 percent of men and 31 percent or women thought they would be able to complete a home flip. “Risks are inherent with all investments, so diversification is important for any investor’s portfolio,” said Nav Athwal, CEO of RealtyShares. “That the majority of Americans haven’t tapped into real estate can speak to the lack of access that has been inherent in the industry for a long time.” Source: nationalmortgageprofessional.com

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Lead Testing Among Children and Landlord Liability

Mon, 04/24/2017 - 12:29pm

A California assemblyman is taking steps to protect California children from lead poisoning. In response to reports about higher rates of lead poisoning among children in certain parts of the state, Assemblyman Bill Quirk of Hayward introduced a bill that would require lead testing for all young children.

In 2012, more than 650,000 California children under the age of 21 were tested for lead, according to the state’s Department of Public Health. About 2% of those children or 16,000 kids had lead levels in their blood considered potentially unsafe. Lead poisoning could lead to increased risk for heart and kidney damage, future reproductive problems, and brain and nerve damage.

Children under the age of 6 showed particularly high rates of lead exposure in certain parts of California. Certain neighborhoods in the Fresno and Alameda areas actually tested worse than Flint, Michigan, where lead contaminated the public drinking water for years.

According to a Reuters analysis, 7% of children who were screened in the Fruitvale area of Oakland and more than 6% of children tested in Selma, near Fresno, had elevated levels of the toxic metal in their blood. In comparison, about 5% of children tested in Flint showed high levels of lead in their blood.

In response to these findings, Quirk introduced a bill that would require lead testing for all children ages 6 months to 6 years. Right now, only children receiving aid from government assistance programs or who live in homes built prior to 1978 are tested.

While this bill could help with the safety and welfare of our kids, it could also change the way real estate investors operate in California and in potentially in other states.

Disclosure Requirements for Landlords

Currently, landlords are required to disclose lead-based paint hazards before they rent or renovate a property with some exemptions. A property might be exempt because it was permitted before 1978, is a loft, an efficiency, a studio, a short-term rental, or was previously certified as lead-free by a state-accredited inspector. But if this bill goes through, those exemptions might change.

Both tenant and landlord must also sign a disclosure document to prove that the tenants were warned about the existence of lead-based paint or lead hazards on the property. Landlords must also hand out an EPA pamphlet on protecting family members from lead in the home. Failure to take these simple steps can results in a $16,000 penalty for each violation.

There are many ways that kids are exposed to lead. It can get into the water from old pipes as it did in Michigan. It can be inhaled as dust from soil. And it can be brought into the home by parents or family members who are exposed to lead dust where they work.

Lead Exposure Liability for Property Owners

It depends. If a child is found to have unacceptable levels of lead exposure, the landlord would probably need to provide documentation certifying that the home is in the clear. To protect yourself ahead of time, consider conducting additional testing on your property, especially if it’s an older building. Chances are that the original paint had lead, so you need to make sure that paint isn’t peeling and is adequately sealed so that children are not exposed.

Furthermore, if you own investment property in the areas identified by the state as especially problematic for lead exposure, you might end up having to take remedial action to deal with contaminated soil and water.

In real estate, it always pays to err on the side of being prepared. And often times those preparations are not costly if you take steps before there’s a problem.

If you’d like to know more about lead poisoning in California, the state has made the entire study available to the public — that includes a list of places where lead exposure is highest. Getting all the facts in advance will give you peace of mind and your portfolio a more peaceful existence.

 Source: realwealthnetwork.com

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4 “Must-Knows” Before Taking on a Distressed Property

Thu, 04/20/2017 - 10:39pm

Have you ever looked at a distressed property—a truly distressed property—and been thrilled with the idea of buying it, renovating it, and renting it?

It can be an appealing notion, especially if you’re an investor with an imagination.

With so many areas undergoing revitalization, the idea of taking a cheaper distressed property and making it something valuable in an up-and-coming market seems attractive.

But is it actually worth it?

To really answer the question, we have to first get on the same page about exactly what is a distressed property and what makes it different than, say, a regular fixer-upper.

Think of it this way. Your average, everyday fixer-upper is a property where an investor can see some subtle changes and improvements in their mind’s eye and know that those improvements will increase the value. This would include basics like quality paint, new flooring, maybe removing a wall or moving some rooms to change the flow of the house. An investor can see minor changes that are relatively small-dollar improvements and know that those changes will help them meet their ROI.

Whether an investor intends to hold for long-term or to try for a quick turnaround sale, these types of properties are ideal because of forced appreciation. If an investor can perform the right renovations and do them inexpensively, then the return comes from the forced increase in value. This allows them to pay more and consider more properties with lower discounts.

On the other hand, a distressed property, for the sake of this discussion anyway, is one that has a few more warts than your average ole fixer-upper. Those warts could be fire damage, water damage, foundation issues, and years or even decades of neglect and vacancy. A distressed property comes with its own set of issues, and they are truly unique.

Those issues are often enough to scare even experienced renovation investors away from a deal. They are simply too big, there are too many unknowns, and they come with increased risk. So, why the appeal?

Along with risk, they often promise an even bigger reward. It takes nerves of steel to walk into a distressed property in need of a complete overhaul and smile like you know this is going to be a home run.

With all of the unknowns, the questions and the risks, these highly distressed properties hold a promise that is very enticing. So what does an investor need to know before embarking on a challenge like this? We’ll start here and see where this list takes us.

4 “Must-Knows” Before Taking on a Distressed Property 1. Low market price doesn’t mean low-cost.

New investors often make the mistake of buying the cheapest properties on the market, thinking that they’re going to make the best investments. It’s not bad logic: Reduce your costs by saving on the property, and you’ll earn more, right? Not so fast!

A low-cost price tag for a property does not always mean the property isn’t as valuable. You can rightly assume the quality isn’t there, at least when you buy it as-is. You can assume the property is discounted due to the condition and work needed. But that does not mean that you ignore basic investing 101.

An investor still needs to know the basics of how they are going to earn a return on a property. A cheap property in a bad area is still going to demand the same low rent no matter how nice you make it. Therefore, you cash flow won’t be as good. Ask me how I know this!

Obviously, a distressed property has that nice low price tag because it has some problems. Those problems have to be fixed. Even if that initial price tag looks nice, you have to know that you’re about to need to go through the costs of getting it to a place where it pays off. And you have to be open to the fact that the payoff simply may not happen with that property, no matter how low-cost and attractive the price may be.

Maybe you aren’t going to go through the full lengths a flipper would, but it still adds up—and you don’t necessarily have the advantage of leveraging a bank loan to pay for your renovation costs. It’s an investment in and of itself to fix it up!

So make sure on the front end that you know exactly how you are going to make the numbers work. Are you holding for a long-term rent or are you planning to sell the property quickly? Either way, know your numbers on the front end and understand how every dollar you spend will effect your final ROI.

Never forget that highly distressed properties hold secrets. You have to budget and account for them. This is not some arbitrary number. You really need to go through and consider what major costs may be hidden due to age of the property, amount of time it has been sitting distressed, and what special distresses that property holds. Each of those factors can increase your hidden costs and makes what looks like a sound, quality investment turn into a money pit.

2. They take much more direct investment.

Speaking of the renovation costs, handling a distressed property does take much more investment and involvement than a traditional investment property. Distressed properties don’t need sprucing up. They need major overhauls that often take long renovation timelines—you might be completely overhauling the sub-flooring, foundation, roof, plumbing, electric, and flooring. You might need to create new spaces or redo the layout.

There are any number of big-ticket items that could come into play on a distressed renovation. Those big overhauls can be very, very costly. Sometimes they can cost as much as you paid for the property itself. Not only that, but it’s not necessarily something you want to be hands-off with. Honestly, distressed real estate can be a little unpredictable.

3. Unanticipated risks abound.

Whether it was old or neglected, distressed rental properties can be chock full of hidden risks. Inspections may not save you here when you’re calculating costs. There are the property issues you could run into, such as mold, septic issues, asbestos, foundation problems, and any number of costly problems.

But there are other things that we don’t always consider: an unclean title, unforeseen issues with the bank, issues with neighbors, and even zoning issues.

It can get tricky. It can turn into a massive headache and can consume much more of your time than you budget for on the front end. And it really isn’t for the faint of heart! These types of projects have the ability to suck the passion out of an investor, so you have to be strong-minded on the front-end.

There will be issues—be prepared to deal with them or don’t bother in the first place!

4. It’s a flipper’s game.

Buy and hold investors typically aren’t the ones who go after these highly distressed properties. One of the reasons is this: When a flipper takes on a distressed property, they have a few advantages when they flip it versus trying to rehab it as a rental. One, they’re looking at the short term. They don’t have to worry about future market fluctuations to wonder if their current investment is going to pay off down the line.

They pretty much know what they’re going to get out of it in the end, and they understand the risks associated with the unknown.

Two, experienced quick turnaround investors have this down to a fine art at this point. Experienced investors know how to handle the unexpected horrors of distressed real estate. Inexperience can kill you when it comes to these types of properties, but knowing how to handle them can reap big rewards.

They have a shorter runway from purchase to return and therefore they are able to calculate a slightly different risk tolerance. A buy and hold investor who needs a property to hit a very particular number on the bottom line in order to be profitable may find themselves either cutting corners or pushing the rental market to make a deal work for the long haul.

Again, in this scenario, an experienced buy and hold investor who targets these types of projects may already know on the front end that they can break even with a rental for a short period of time (usually two years or less) and then sell the property for a more modest return when the market allows.

Bottom line: Experience rules the day, and having a very open mind and clear understanding of risk usually only comes with experience.

If You’re a Buy and Hold Investor, Know This…

You don’t need to rely on capital appreciation to succeed.

Renovating cheap properties and renting them out isn’t going to bring you success. It might work for you as a strategy, but there is so much risk involved! You can invest successfully without so much leg work and risk.

If you want to flip, by all means, buy all the distressed properties that you want. But if you’re looking for long-term real estate investment, you don’t need to look for cheap properties to be profitable. What you need is quality.

I will save the argument of DIY real estate versus passive real estate for another day, but the idea of finishing with quality plays an important role when deciding whether or not to buy highly distressed properties and what your ultimate strategy will be.

As for the original question of “are they worth it?”

As a very experienced real estate investor and entrepreneur, I can attest to one recurring theme: Highly distressed properties work best for investors who have a lot of experience, capital, and talented teams at their disposal. Regardless of long-term buy and hold or quick turnaround, the key is experience. If you have that, they are definitely worth the effort!

What’s your opinion—do you take on highly distressed properties or are these something you avoid?

 

Source: biggerpockets.com

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Here’s why the housing market continues to struggle with low inventory

Thu, 04/20/2017 - 10:26pm

Tight housing inventory supply could put a strain on this year’s spring home-buying season, according to the monthly Outlook released Tuesday by Freddie Mac.

The low supply of inventory continues to push home prices up as they outpace rising incomes. Rising home prices combined with higher interest rates caused affordability to decrease in March.

“Tight housing inventory has been an important feature of the housing market at least since 2016,” Freddie Mac Chief Economist Sean Becketti said. “For-sale housing inventory, especially of starter homes, is currently at its lowest level in over ten years.”

“If inventory continues to remain tight, home sales will likely decline from their 2016 levels,” Becketti said. “As we enter the spring home-buying season, all eyes are on housing inventory and whether or not it will meet the high demand.”

Freddie Mac outlines four reasons why housing inventory remains low. They are:

1. Fear of low inventory

One of the main reasons for low inventory, is, ironically, the fear of low inventory. Homeowners are hesitant to put their home on the market as they are unsure if they will be able to find a new home in their budget once they sell theirs.

2. Mortgage rates

As mortgage rates rise, homeowners are less likely to put their homes up for sale because they don’t want to forfeit their current low interest rate.

3. Home prices

While home prices are high, in some areas they are not quite back to their pre-crisis levels. Because of that, homeowners are unable to sell their home for enough to pay back what they currently owe.

4. Housing starts

Housing starts were a disappointment in March as the annual rate of housing starts slipped nearly 7%. And housing economists explained this lackluster growth won’t be enough to meet the rising demand. Freddie Mac’s report explains the projected 1.26 million starts for 2017 will not be enough to cover the needed 1.7 million new housing units.

And this tight inventory will pull down home sales for the year. Freddie Mac predicts home sales will come in at 5.9 million in 2017, falling from 5.97 million in 2016, which was housing’s best year in a decade.

Source: housingwire.com

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