American Apartment Owners Association

Renting is more affordable than homeownership in these states

Mon, 07/31/2017 - 8:09am

There are 11 US states (and DC) where it is currently more affordable to rent a home than to buy one.

Washington DC, Arizona and Nevada are among those identified in a coast-to-coast analysis of housing markets by using estimated rental price for all homes, median home price, and mortgage cost data from Zillow and Trulia.

Monthly costs include taxes and insurance and were based on a 30-year mortgage with a 20% downpayment.

In Arizona, monthly rent would cost $1,273 while a mortgage would cost $1,326; In Colorado, renters would pay $1,807 while homeowners would pay $1,918; and in Washington DC, rent would be $2,632 against mortgage and associated homeownership costs of $2,718.

The other states were renting is more affordable are: Hawaii, Idaho, Montana, Nevada, North Carolina, Oregon, Utah, and Wyoming. Among those, the difference is highest in Hawaii, where a renter would pay $2,433 with a homeowner paying almost $500 a month more ($2,916).

In the other 11 states found to have higher homeownership costs, the difference is generally around $100 or less (in Wyoming it’s just $8 a month), which may prove to be less of a deal breaker when considering the benefits of homeownership (including the likelihood of building equity) compared to renting.


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Choosing Paint Color Palettes for Your Residential Units and Common Spaces

Mon, 07/31/2017 - 7:59am

Choosing paint color palettes for residential units and common spaces is a task many painters and property managers struggle with. So, we spoke with the color experts at KILZ® Paint, the makers of Complete Coat Paint-and-Primer-In-One, for their solutions to some of the hardest paint puzzles.

Q. How do you choose multiple colors for common spaces?

When experimenting with multiple colors, pair colors that share a connection to each other. Opt for colors that sit next to each other on the color wheel, are complementary to each other (violets with yellows, orange hues with blues, for example), or that have the same undertone. This will allow their natural harmonies to create smooth transitions between interior spaces.

Another easy way of creating a palette for common spaces is by selecting various shades from the same color family. Lighter, darker, brighter, or softer versions of the same color can be layered in as accents for a cohesive look.

Q. What types of colors make common spaces feel bigger?

Although color choice is mostly subjective, certain colors have been recognized universally as evocative of particular feelings and reactions that virtually everyone recognizes. Light, cool colors, for instance, tend to create a distancing effect, stretching the perception of proximity and expanding the feel of a room.

Q. What types of colors are associated with luxury?

In the United States, the colors that make a space feel luxurious and sophisticated include black, white, gold, and deep, rich purple.

Q. What do you suggest for improving the durability of a color?

Neutrals (grays, whites, tans, taupes) can significantly expand the life of a wall color. These tones support a wide variety of styles and are easily updated by changing out accent colors.

Q. How do you pair interior unit color with exterior common space color?

Exterior and interior trends evolve at their own pace. For exteriors, color changes are mainly determined by functional factors rather than fashion. In the case of interiors, it depends heavily on the mood and style of the room. To bridge the difference, it’s good practice to keep at least one color in common. Update all other accents as necessary to keep your spaces from feeling dated.

Q. How many colors create a cohesive complex aesthetic?

Three—a main color, trim color, and accent is the industry standard for color combinations.

Q. Is there a rule of thumb for choosing exterior colors versus interior colors?

Due to the large surface areas in exterior applications, color presence comes across with greater intensity outdoors. For this reason, it’s advisable to select neutrals or neutralized colors for outside. Bright colors are best reserved for use on smaller surfaces, as accents.

Q. Once our colors have been determined, what finishes work for an interior space?

Selecting the right interior sheen largely depends on the use and condition of the room. Matte finishes, such as flat and eggshell, are great for use in low-traffic areas, or when the walls have imperfections one would like to hide. Higher sheens, such as satin and semi-gloss, provide greater durability and scrubbability, and are excellent choices for high-traffic areas. They’re not ideal, however, for walls with uneven textures or blemished surfaces.

Q. How should door colors be chosen for units?

Apartment door colors can be conservative or expressive as desired. Black, brown, charcoal, beige, and white are the classic door color choices for their neutrality and versatility. However, if the complex management permits, awe-inspiring door colors like red, coral, aqua, yellow, or even bright green provide a fun punch of color and can be useful for distinguishing floors and/or units. Remember, front doors are the first impression of the home, so be sure it’s a good one.



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Single-Family Landlords Are Sinking Cash Into Rust Belt Rentals

Thu, 07/27/2017 - 10:00pm

Al Beahn was a 22-year-old college grad living in his parent’s basement in the Detroit suburbs when he bought his first investment property in 2009. It cost him $27,000 and he flipped it three months later for a $16,000 profit. Today, his company, Pioneer Homes, has bought and sold 1,000 homes, primarily through a business model he calls the turnkey rental.

Beahn buys and renovates a single-family home, hires a property manager and finds a tenant—then sells the whole package to an investor. He works mostly in the historic neighborhoods west of Detroit’s downtown, where the promise of high yields has helped attract investors from more than 30 countries. “There’s not many markets in the world where you can buy a house for $50,000 and get a 1,500-square-foot brick Colonial that will rent at $850 a month,” he said.

The combination of low prices and optimism about the local economy has made the Motor City popular with property investors at a time when the for-sale market barely functions for buyers who want to live in their houses. Eighty-eight percent of the homes sold in Detroit last year were purchased by investors, according to Attom Data Solutions, up from 35 percent in 2010.

Detroit isn’t the only old industrial city attracting rental landlords at a record clip. Last year, investors accounted for 75 percent of sales in Flint, Michigan, 68 percent in Gary, Indiana, and 51 percent in Memphis, Tennessee. Other cities with comparable rates are vacation communities such as Myrtle Beach, South Carolina (69 percent) and Honolulu (54 percent).

With investors dominating these housing markets, it’s no wonder that renters now make up the majority of households in most big U.S. cities.

Whether that’s a good thing is less clear. Rental investors deserve credit for stabilizing many local housing markets after the foreclosure crisis, said Nela Richardson, chief economist at brokerage Redfin. And the Rust Belt cities where investors are playing an outsized role are still in varying states of chaos: In Detroit, it’s possible to find a portfolio of 12 homes selling for less than $550,000.

But U.S. home ownership is hovering around a 50-year low, and investors are competing for homes at a time when there aren’t enough for-sale listings to satisfy demand.  “We’ve come to a point where inventory shortages have become a part of the fabric of American housing market,” said Richardson. “It’s fair to ask: Have investors worn out their welcome?”

In the aftermath of the foreclosure crisis, such institutional investors as Blackstone Group LP and American Homes 4 Rent amassed big portfolios at distressed prices, gaining economies of scale on financing, renovating and managing the rental homes. The largest single-family investors slowed their pace of acquisitions years ago, but plenty of smaller firms are picking up the slack: Nationally, investors accounted for 33 percent of purchases in 2016, the highest share since at least 2000, the earliest year for which Attom provided data.

In most places, however, rents don’t track with appreciation; you can rent a $50,000 home for $850 a month, but you can’t rent a $500,000 home for $8,500. As a result single-family landlords won’t buy homes for more than $200,000 in most markets, according to Dennis Cisterna, chief revenue officer at Investability Real Estate, a Denver-based firm that offers a suite of services to property investors. When cities such as Atlanta and Phoenix—both of which were popular with early single-family investors—became more expensive, some landlords migrated to the Midwest.

“I’m having conversations with investors about Pittsburgh, St. Louis, Cincinnati,” Cisterna said. These markets “weren’t on anyone’s radar three years ago.”

Whether rental investors are good for the housing market depends a lot on how they treat their tenants. This new class of institutional investor appears to be more likely to file eviction notices than mom-and-pop landlords, according to research from the Federal Reserve Bank of Atlanta.

The U.S. Treasury has spent more than $381 million (PDF) in Michigan over the last decade demolishing blighted homes. The effort has stabilized the housing market enough to appeal to investors, but not enough to rekindle the for-sale market. Sure, housing is cheap, but it’s not affordable to low-income workers, said Tom Goddeeris, director of community and economic development at Detroit Future City, a local nonprofit.

The city is still grappling with the best ways to serve its growing renter population. A new ordinance requires landlords to register rental properties and set up a framework for annual inspections. An additional program seeks to help owner-occupiers obtain homes from the Detroit Land Bank, which has acquired thousands of properties through tax foreclosures, rather than have the homes sold to rental landlords.

Goddeeris believes the city is off to a good start, but he said more must be done to help neighborhoods of single-family renters thrive. “There should be ways to stabilize and provide high quality of life in neighborhoods that have high percentage of renters,” he said.



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Condo owners can try to enact restriction on smoking inside units

Thu, 07/27/2017 - 10:18am

A contiguous owner in a three-level apartment-style condo caused a fire in her unit while smoking in bed. The ashes ignited bedding while she was breathing through her medically necessary oxygen tubes. She: (1) smoked in bed, (2) fell asleep and (3) was attached to oxygen tubes. The combination of all three is unsafe. Her normal cigarette smoke discharge enters units above hers.

How can a condo board deter or prevent such behavior that presents grave safety risks to all condo residents? Is it possible to declare the condo nonsmoking. — Al

Smoking — which now includes marijuana — is the hot-button issue today in almost every community association throughout the country.

You can’t stop stupid people from doing stupid things. I hope the smoker — if she survived — has learned an important lesson. But the association cannot be the hand-holder of each and every unit owner.

However, you can restrict smoking of any kind in the common elements as well as in the units. While some of my lawyer friends believe the association can enact a rule prohibiting smoking in the common areas, I believe that the safe harbor is to get a bylaw amendment on this issue. I recognize that it often is very difficult to enact bylaw amendments.

To restrict smoking in units, you have to amend not only the bylaws but also the declaration. Such a restriction will be controversial, which is why the declaration should be amended. Now would be a good time to present such a proposal, because owners may be concerned there may be yet another fire resulting from smoking.

Case law around the country is very clear: Community association owners are legally bound not only by the legal documents in effect when the owner took title but also as to any properly enacted amendments to the legal documents in the future.

The president of our condominium association acts alone and has previous members of the board on the bank account of the association. He has been on the board for more than three years. He harassed all the secretaries and treasurers that had been elected by the unit owners.

The president doesn’t have meetings with the board or include them in any decisions for projects, nor does he let the treasurer handle the money. He also is a custodian/ janitor and he pays himself a $800 per month.

Please, we need help. Where should we report this without hiring an attorney.

I am the current secretary for the association but the president doesn’t even talk to us. He buys apartments from owners who are behind with the association dues. He owns five apartments in a 20-unit building, and he comes to the meetings with his votes plus with proxy votes from the owners who are renting out their units— Ana

My first reaction was you gotta be kidding. But then I remembered reading “Escaping Condo Jail” by Sara E. Benson and Don DeBat, so my next reaction was welcome to the wonderful world of condo living.

Are you the only one concerned about this? Have you talked with other owners to see if you could mobilize a group that would start to challenge the president? Have you advised the absentee owners of these problems so they would no longer give the president their proxy?

The best approach, in my opinion, is to try to throw the rascal out of office. Your bylaws contains the procedure for recalling an elected board member. Keep in mind that the board can terminate an officer but only the unit owners — in the percentage of vote required by your legal documents — can remove a director.

If you can prove even only half of the facts in your question, there is a strong case that the president is breaching his fiduciary duty to the association.

So why don’t you want to get an attorney? A lawyer can help, and I suspect that most lawyers would relish filing a suit against the president.

Contact the Community Association Institute ( ). That’s a national association that represents community associations across the country. There are local chapters, and you will get some names of local attorneys who practice community association law. I strongly recommend you talk to a lawyer as soon as possible.

You are the secretary of the board. You also have a fiduciary duty to the association, and in my opinion, that duty requires you to take immediate appropriate action to remove the president — either by vote of the membership or by court order.



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Curb Appeal Problems And Easy Ways To Fix Them

Thu, 07/27/2017 - 10:05am

Just how important is curb appeal? Real estate industry legend Barbara Corcoran has said, “Buyers decide in the first eight seconds of seeing a home if they’re interested in buying it.” What are buyers going to see in the first eight seconds after driving up to your place?

If you’ve walked around the perimeter of your house recently, you’ve probably seen at least a couple of issues that need to be addressed before you sell. And your plan probably depends on how much time you have available. If you’re listing your house today and expect immediate interest, you may have to pick from a few quick tips to get it in the best shape you can. Have a little more time? You can make a real impact in improving the curb appeal so potential buyers will drive up and want to see more.

Everything just looks a little shabby

It may be time to bite the bullet and repaint the house, or, at least, address some peeling trim. If your windows, walkways, and ornamental details are looking drab, a power washer can help transform the area easily and inexpensively. This is a relatively easy DIY task and the rental will only cost you about $40 a day from Home Depot.

Your open house is today and your yard is looking pretty boring

You may not have time to do any new plantings, but that doesn’t mean you can’t make the yard look tidy and pretty. Fresh flowers in pots placed near your front door will bring the eye up from the street to your entry and give the impression that your home (and your yard) is well cared for. Add a new welcome mat to finish the look.

Your front door is janky

If you’re looking at making a few smart updates before listing your home, don’t ignore your front door. A new door can return between 75–100 percent of your investment, and it’s a relatively low-cost project,” said Houselogic, with a “national median cost of around $2,000 installed.”

You have a last-minute showing and the landscaper hasn’t done his thing in the yard yet

Get in the car, drive to Lowe’s, and pack up the trunk with mulch. It’s one of the easiest ways to transform your yard and make it look fresh and neat. Lawn and bushes a little overgrown? Nextdoor is a great resource for finding last-minute landscape help or, in a pinch, a neighborhood kid with some developing gardening skills and a need for pocket cash.

Leaves. Everywhere

Get out the hose and spray those suckers away from sidewalks and walkways. Even if the hardscape is wet when the prospective buyers arrive, the area will look nice and clean. Now corral everyone in the house for some fire drill leave-bagging fun. An abundance of leaves in the yard can be a turnoff to those looking to buy as it may make them think the home is unkempt or that the yard is hard to take care of.

Your mailbox is…wow. How did you never notice that?

If it’s old, worn, rusty, or has just seen better days, buyers will notice. This seemingly little thing can make them question the quality of your home. Thankfully, it’s an easy fix that you can do yourself for almost no money. “It doesn’t matter if you have a regular mailbox by the road or if you have a box mounted to your house, adding a new mailbox can add curb appeal. You can find a new mailbox starting around $20,” said DIY Network. “When you install your mailbox, make sure that you are following the regulations that are set forth in the city that you live in. If you have a simple mailbox mounted on your house, this home improvement project should take less than an hour to complete. If you have a full-size mailbox at the road, plan for at least two hours or so to complete the project.”



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Walkable Areas Are Getting More Competition

Thu, 07/27/2017 - 10:02am

Older Americans are placing a higher value on living in walkable urban centers, according to a new survey of 1,000 respondents nationwide about their living preferences

A majority of respondents surveyed by A Place for Mom, a national referral service, said it was “very important” or “somewhat important” to live in a walkable neighborhood. They also sought neighborhoods with low crime and those that are close to family.

“It’s time to abandon the idea that only millennials and Generation X care about walkability and the services available in dense urban neighborhoods,” says Charlie Severn, head of marketing at A Place for Mom. “These results show a growing set of senior housing consumers also find these neighborhoods desirable. It’s a trend that should be top of mind among developers.”

The survey authors say it’s important for developers to consider creating multigenerational communities in suburban centers that place an emphasis on walkability. Walkability ranked high regardless of income level in the survey. Walkability ranked highest for those under 70 years old who were seeking senior apartments.

The message needs to change, says Bill Pettit, president of R.D. Merrill Co., a parent company of Merrill Gardens, which develops senior living centers. He says many developers had assumed that seniors preferred a more rural or suburban location.

“We were creating these islands of old age where you’re surrounded by your peers and you lose that intergenerational connectivity,” Pettit says. “We found we were spending a disproportionate period of time busing our seniors to other places to generate that intergenerational connectivity.”

Pettit says his company is changing its strategy. It is now focusing on developing senior living centers in urban areas with high walkability scores.

“When you can walk to shopping, or cross the street to a park, and that park is filled with children and families, I think it gives you a kind of lift that sitting and playing bingo during the day doesn’t give you,” he says.



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To See the Future of Renting, Watch the College Kids

Thu, 07/27/2017 - 10:02am

To rent an apartment on LoftSmart, a website for college students looking for off-campus housing, users browse listings, take a virtual tour, and read reviews from current or past tenants. If they find a place they like, they can put in an application, sign a lease, and pay their security deposit—all online.

That makes the website highly unusual in the online real estate industry, where most listing services direct apartment hunters to get in touch with a broker if they like a listing. It also offers a clue to the way technology is changing the process of finding an apartment for a wider universe of renters. A college student whose first housing transaction takes place entirely online may not be so quick to accept the stressful, time-consuming open houses of traditional renting during their next search.

“This demographic is a really interesting testing ground for the future of real estate,” Sam Bernstein, the startup’s 23-year-old chief executive officer and co-founder, said. “They’re untarnished by cumbersome legacy institutions.”

Bernstein started building LoftSmart in 2015 as a sophomore at the University of Virginia, intending to create a Yelp-like product to help his classmates avoid landlords known for shirking basic repairs or withholding security deposits. By the following fall, he had dropped out of college to work on the company full-time. He moved to Austin, Texas, and on his first night in town struck up a random conversation with an engineer named Sundeep Kumar, who would go on to become a co-founder.

Soon the pair realized that the real opportunity wasn’t in warning college students away from crummy rental houses but in helping big property managers market their apartments.

Even big campuses are small worlds. In many cases students will be familiar with a given apartment building, either by reputation or because they’ve already been on site to visit a friend or go to a party. In some markets, Bernstein said, 70 percent of students sign leases for housing without attending an open house or scheduling a viewing. A virtual tour suffices.

Over the past two decades, an industry has sprung up to develop off-campus apartment complexes geared to college students, featuring by-the-bed leases and, often, upscale amenities. Even in its early days, this held obvious appeal for investors. College enrollments were rising, but schools weren’t building dorms to keep pace with them, giving the off-campus-dorm developers a captive audience.

Student housing looked even better after the Great Recession, when apartments were leased readily, even as other rental landlords struggled to fill units. The operating theory is that college enrollments tend to rise in a down economy, because it’s even harder to get a job with less education and because people don’t need to give up as much opportunity to pursue a degree.

Developers have added more than 350,000 new beds in off-campus student housing since 2010, according to Axiometrics, a real estate data firm. Investors spent $9.6 billion last year acquiring student housing properties, triple what they spent in 2014. The resulting competition has led landlords to spend more on marketing and created an impetus to lease units online. Across the industry, landlords have spent heavily to stand out, buying local television spots or holding expensive raffles, according to Bernstein. (Sign a lease and be entered for a chance to win a Vespa.)

LoftSmart makes money by charging property managers a fee, typically from 4 percent to 8 percent, on transactions that close via its website. The company currently operates in 27 student housing markets across the U.S. and lists 250,000 apartments that can be leased through its site. Earlier this summer, Bernstein was awarded a Thiel Fellowship, a $100,000 grant for young entrepreneurs who work on their businesses instead of going to college.

Will today’s college students take along the habit of renting sight (and site) unseen when they leave campus?

Bernstein points to Airbnb, which has taught millions of users to choose an apartment based on photographs and user reviews. Of course, those stays can be as short as a day, while apartment leases typically run at least a year. Yet some people are even buying homes without setting foot in them, relying on 3D photography and smartphone-wielding brokers to conduct virtual tours.

LoftSmart just closed a new round of funding led by Tribeca Venture Partners, bringing its total funding to $5 million. Its additional investors include the venture arms of such real estate firms as Corigin Real Estate Group and Sterling Equities. If the company can build loyalty with first-time renters, it might one day seek to expand beyond college markets.

“Folks are feeling more and more comfortable, year-over-year,” Bernstein said. “There’s definitely been an evolution.”



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Mayors agree, Congress should invest in affordable housing

Thu, 07/27/2017 - 9:54am

Last month, the United States Conference of Mayors passed a resolution in support of expanding the Low Income Housing Tax Credit, and calling for increased investment in our nation’s critical affordable housing infrastructure. This acknowledgment of the importance of housing programs by local leaders should not go unnoticed by the U.S. Congress.

As public officials from two very different places – New York City and Des Moines – we are united by the shared need for safe and affordable housing in our communities. Our Mayors co-sponsored the Housing Credit resolution to underscore the growing shortage of affordable housing in our cities, and in towns and rural areas across the country. We come together today to call upon our congressional leaders to protect and expand federal housing programs.

The affordable housing crisis is a bipartisan issue that transcends geography. A recent report by the National Low Income Housing Coalition found only 12 counties nationwide where a minimum wage worker can afford a modest two-bedroom apartment. Nationally, one in four renter households pay more than half of their income on housing costs, leaving more than 11 million families one paycheck away from homelessness.

The negative impacts of housing instability and poor housing quality on families are well- documented. Children’s school performance suffers, the risks of asthma and type II diabetes increase, and families are too often forced to forego other essential expenses, including medicine and healthy food, just so they can make rent.

Ongoing trends in the rental housing market further perpetuate the housing crisis. As an increasing number of Americans look for rental housing, the shortage in supply drives up rents. Meanwhile, wages haven’t kept pace. To reverse this tide, we need to build more housing that is affordable to our nation’s workforce. To do that, we must protect and expand the Low Income Housing Tax Credit.

The Housing Credit is one of the longest-standing public-private partnerships in our nation’s history and continues to be incredibly successful. By offering tax credits to affordable housing developers partnering with investors, this program finances nearly 90 percent of all affordable rental housing in the United States. There is also a critical connection between housing and the economy as a whole. In addition to the fact that workers need homes they can afford near their work, the Housing Credit supports 96,000 jobs every year in the construction and property maintenance industries. New housing is often accompanied by the introduction of commercial and retail space, which bring a variety of employment opportunities into communities.

Right now, there is bipartisan legislation in both houses of Congress to protect and expand this critical resource. The Affordable Housing Credit Improvement Act would make changes to the program, such as streamlining the formula that determines how much Housing Credit equity can go into developments, allowing income averaging in order to reach families at a wider range of income levels, and protecting the use of tax-exempt private activity bonds for affordable housing. The Senate version of this bill would also increase the Housing Credit by 50 percent, which would mark the first meaningful expansion of affordable housing resources in decades. All of these changes would result in the creation of more affordable housing for Americans who need it most.

As Congress continues with federal budget negotiations, it is critical to note the importance of funding for affordable housing programs of the Department of Housing and Urban Development (HUD) and the Department of Agriculture. Without adequate funds for public housing, rental assistance, HOME Investment Partnerships, rural development and Community Development Block Grants, we cannot fully address housing needs across this country. In fact, these programs serve as an essential complement to the Housing Credit, as most affordable housing is financed through a combination of HUD program resources and credits.

Some may say we can’t afford to invest in housing, but the truth is we can’t afford not to. Housing isn’t just tied to the health and well-being of individual people.  It is connected to the productivity and strength of our communities. If we want to spur economic growth, create jobs, and connect Americans to opportunity, we must start with strategic investments in affordable housing. We applaud the U.S. Conference of Mayors for supporting the Housing Credit and other housing programs. At a time when the need for affordable housing is overwhelming, and the will to act on the local level has never been greater, we urge Congress to join us in standing behind these programs.



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Legal Tips for Real Estate Partnerships

Thu, 07/27/2017 - 8:08am

Types of Real Estate Partnership Agreements

You know the deal structure – one investor brings in a few other investors or one investor purchases an investment with another investor. Here are a few different real estate partnership agreement scenarios:

  • A property management company purchases a property with a “money guy” who is a partner who only invests money for income and profit, and wants no part of day-to-day management.
  • One partner provides the cash, while another partner is a real estate agent whose job is “sweat equity”- to locate properties, make offers, arrange financing, and work with escrow.
  • One partner may be an “equity player,” or a secured lender seeking a return on investment.
  • Two co-asset managers round up 10 limited partners to purchase some buildings.

Within these basic joint venture/partnership structures you have one partner who has certain tasks, responsibilities, and duties, and the other partner has other tasks, responsibilities, and duties. No matter what structure (general partnership, limited partnership, Limited Liability Company, joint venture, syndication, corporation, or one shot opportunity) partners owe each other fiduciary duties to act in the best interest of the other partners and the partnership, and not in their own best interest.

What is Fiduciary Duty?

A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.

A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the “principal”). There must be no conflict of duty between fiduciary and principal, and the fiduciary must not profit from his position as a fiduciary at the expense of the partnership.

How to Draft a Partnership Agreement

A well-drafted partnership agreement is a blueprint for setting the tone for the positive relationship between partners.

One way for partners in real estate transactions to adhere to their legal fiduciary duties and limit unexpected surprises is by creating and executing a partnership agreement. The partnership agreement is the foundation for a solid and flexible relationship between partners.

In a detailed and flexible format, a partnership agreement should define the duties, obligations, and responsibilities of partners, and certain legal and financial consequences for violating the spirit and the letter of the agreement. It is an important reference point to define the partner relationship. For example, the agreement may address the following:

  • At what point in time is net profit to be distributed?
  • How should a refinance of secured debt occur?
  • Who is in charge of day to day maintenance and management?
  • What is the term of the partnership?
  • When is financial reporting going to occur to investors?
  • If there is a dispute, can the partners mediate with a neutral third party?
  • When and under what conditions do partners have the right to be bought out?
  • What type of entity will hold partnership assets?

Without a well-drafted partnership agreement, partners have to resort to oral promises and representations (sometimes jotted on a paper bag or Starbucks napkin), and this can lead to embellishments, misrepresentations about material issues, in fighting and a potential court battle.   It is well worth it to have a detailed partnership agreement drafted by legal counsel.

Here are few more ideas of items/issues to address in the partnership agreement. This is not a complete list, but is a good starting point to think about the issues:

  1. Business purpose and goals of the business
  2. Choice of entity for the partnership and the assets
  3. Percentage of ownership of equitable interests/ debt
  4. Rights of limited or minority partners
  5. Property management duties, fees, and responsibilities
  6. Define the jobs, roles, and duties of general partners and key officers and managers
  7. Management of internet and social media communication and relations
  8. Division of expenses and net profits and rights to reimbursement
  9. Meetings of partners
  10. Method of accounting and rights to inspection of books
  11. Financial reporting and disclosure, right to an accounting from partners and the partnership books and records
  12. Grounds and conditions for termination of partners and buy out and transfer rights
  13. Death or disability of a partner
  14. Applicable state laws and choice of forum for litigation
  15. Rights to mediation and arbitration
  16. Rights upon liquidation or dissolution
  17. Method of amendment or suspension of terms of the agreement

When you have a detailed and well-drafted partnership agreement, it addresses and may resolve a great number of the questions and issues that can arise between partners.  Here are some general tips for handling a “real estate marriage” between partners:

General Tips for Partners in a Real Estate Joint Venture
  1. Understand the basic laws of partnership and fiduciary duties, and that you should act in the interest of the partnership- not your own self-interest.
  2. Have a well-drafted partnership agreement that covers all aspects of the partnership relationship.
  3. Have layers of insurance in place for various risks.
  4. Have real financial consequences for legal violations of the partnership agreement between partners.
  5. Provide frequent accounting and financial disclosure between partners.
  6. Have frequent and periodic meetings and conference calls.
  7. Advise partners and investors of capital expenditures that improve the asset.
  8. Avoid conflicts of interest.
  9. Understand that partners have the right to independent legal counsel at all times.
  10. Place the title of assets in the name of both partners, an LLC, or corporation, not one partner or a partner’s relative.
Partnership Disputes – Managing and Resolving Conflicts Separation, and “Divorce”

If you have a well-drafted partnership agreement that defines duties, obligations, and remedies, then you may avoid certain conflicts and expensive court battles. Sometimes the partners will need to “get divorced,” or decide an important issue.

If you have a partnership dispute, and you are not getting satisfaction or disclosure from your partner or the partnership’s controlling managers, and your partnership agreement allows it, you have the right to sue your partner for:

  1. An accounting
  2. Declaratory relief to have the court interpret a contract provision (See Cal. Code of Civil Procedure Sections 1060-1062.5)
  3. Breach of the partnership agreement
  4. Injunction to stop the bad conduct of the partner (See Cal. Code of Civil Procedure Sections 525-534)
  5. Breach of fiduciary duty and its component duties
  6. Fraud or conversion (theft of assets)
  7. Partnership dissolution and winding up of the partnership (See Cal. Corporations Code Section 16705)
  8. Partition by sale to have the court supervise a liquidation. See (Cal. Code of Civil Procedure Sections 872.820, 872.830, and 873.500-873.850).

Sometimes applying the pressure of filing and serving a lawsuit against a partner is the only way to get the partner to focus on resolving the issue, and to encourage a settlement. A lawsuit does not always have to be for money damages. The lawsuit can be for equitable relief in the form of declaratory relief or for an accounting to force and compel financial disclosure and accountability.


A real estate business partnership or joint venture is kind of like a civil marriage, the difference being you don’t have to come home to your business partner! Just like marital partners who have to respect community property, there are fiduciary duties between real estate partners, and partners cannot just pillage and loot the partnership assets and usurp opportunities and expect to get away with it. Understanding fiduciary duties between partners is a starting point in having a positive partnership experience, but the partnership is only as functional or as transparent as the partners are with each other and the partnership’s creditors. A well-drafted partnership agreement is also helpful, as is having legal counsel on speed dial for smoothing out those rough patches.

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  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, 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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5 Things You Should Consider For Your Rental Property

Mon, 07/24/2017 - 11:40am

As a property owner, you want your asset to maintain value as much as possible, regardless of whether you live in the unit or rent it to someone else. Of course, you’ll always take great care of the property you live in, but you can’t always guarantee your tenants will do the same.

Here are 5 things you should consider in order to maintain the value of your property while renting it out, and make it the reliable source of income you set out to create:

  1. Hire a property management company

When you don’t have the time or ability to deal with maintenance calls, collecting rent, and screening tenants, hiring a property management company can be a life saver. Property management companies have access to the best maintenance crews in the area, and have established long-term relationships leading to the lowest prices on their services.

With a property management company working for you, you don’t have to worry about hiring the wrong company, paying high prices, and chasing tenants for late rent.

  1. Refinance your mortgage

Renting your property makes it easier to pay the bills, but that doesn’t mean you shouldn’t consider refinancing your home mortgage loan with a reputable company. Refinancing your mortgage can do more than save you money on interest rates. Since refinancing replaces your old mortgage with a new one, you have the potential to gain more favorable terms like lowering your monthly payment and reducing the amount of time to pay off your loan.

The sooner you pay off your loan, the sooner you’ll be making a profit from your rental properties. If you pay off your loan early with your existing mortgage, you could be subject to penalties. Refinancing allows you to negotiate a different term so you don’t face those penalties.

  1. Make basic safety modifications

While you’re not required to make modifications beyond what the law requires for your home to be up to par with safety codes, certain modifications will make your tenants lives a lot easier. For example, if you’re showing your property to someone who is absolutely sold on renting it, but they have an injury or no upper body strength, low toilets might be a deal breaker. Do yourself and your future tenant a favor and replace any toilets that fall below 17 inches.

If you have a patio or a deck that doesn’t have handrails, build some. Not only will your stairs be safer for kids and older adults, but if your tenant ever gets injured, a handrail will be an absolute blessing for them and they will have a higher appreciation for your property.

  1. Check in with your tenants occasionally

Regardless of what you tell your tenants when they move in, they’re probably used to landlords not responding promptly to maintenance needs. When people who are used to indifferent landlords encounter a minor maintenance issue (like a leaky toilet or a broken ceiling fan), they’re more likely to work around it, assuming it’s not going to get fixed. Or, they may try to fix it themselves.

For example, if the toilet’s flush valve assembly is broken and your tenant doesn’t know how to replace it, they’ll probably remove the lid from the toilet tank each time they flush, which puts the lid at risk for being broken.

Check in with your tenants periodically and ask them if they need anything. This is especially important in the beginning of their tenancy because it will establish that you are there to help. You don’t need to make yourself available 24/7, and you do need to set boundaries for communication, but you don’t want to be unreachable.

The more you take care of your tenants, the more they’ll take care of your property.

  1. Prohibit the use of liquid drain cleaners in the lease

This one might sound odd, but liquid drain cleaners actually destroy pipes. By allowing your tenant to use them, you’re looking to spend thousands of dollars to replace them.

Explain to your tenants the reason you don’t want them using liquid drain cleaners. Provide your tenant with a simple, plastic drain auger for every sink and ask them to use it as part of their regular cleaning routine to help prevent buildups. Let them know it’s for their own convenience, because they’ll be less likely to experience a plumbing issue that can really put a damper on their day.

Be sure to present the information in an informative, educational way rather than condemning them. Chances are, they’ve been using drain cleaners for their whole life and have no idea the damage they can cause.



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Eight Ways Virtual And Augmented Reality Are Changing The Real Estate Industry

Mon, 07/24/2017 - 8:12am

The real estate industry is changing fast, with technology and enhanced inter-connectivity already making a massive impact in the sector in terms of how customers find a property and how they view it. The internet remains one of the most popular resources for home buyers, with 95% of customers searching for real estate online, and a record 51% actually finding their ideal home that way, according to National Association of Realtors research.

Virtual reality (VR) and augmented reality (AR) in particular are becoming increasingly popular technologies in the industry, as they allow real estate professionals to offer a unique experience and perspective to potential buyers by digitally touring properties from anywhere in the world. Helping both agents and customers save time, and considerably speeding up the buying process, this technology is only expected to grow further, as indicated by a recent Goldman Sachs report. The research predicts that the VR and AR market in real estate will reach at least $80 billion by 2025.

Below, eight real estate experts with Forbes Real Estate Council discuss the many different ways in which virtual and augmented reality technology is leaving its mark on the industry.

1. It Will Save Real Estate Agents And Clients Time

One change that real estate agents welcome is making the home showing process easier and more seamless for their clients. Ask any agent about the time suck involved in showing clients houses. VR/AR is going to change the game here and allow potential buyers to “experience a home” at another level and better filter out homes they do/don’t like, saving agents time. – John Mazur, Homesnap

2. VR/AR Tours Will Put The “Real” In Real Estate

This technology will be highly proficient in unlocking the international investment potential within the world’s real estate markets. VR/AR will reach buyers on a global basis and create an increase in foreign investments. This is the future of technology and soon buyers will be able to look at properties in New York while they’re sitting at dinner in China. – Alex Chieng, A & L Real Estate Team

3. It Adds Reality To What Seems Otherwise Intangible

As a developer, it’s often hard to have a prospective buyer visualize the end product. This causes longer sales times, reduces the ability to pre-sell projects, leaves funds stuck in projects longer and delays the cycle. With VR/AR, you can now show prospective buyers what the end product will be, adding a concrete level of tangibility and increasing the ability to pre-sell projects. – Ridaa Murad, BREAKFORM | RE

4. Buyers Will Narrow Their Options With Fewer Showings

Prospective buyers will be able to get a much better feel for a home without going inside and looking. This will allow buyers to narrow the pool to a smaller group of winners without going inside the home. We are a long way off from VR or AR removing the showing process completely as it’s difficult to sense natural light, smells, sloping or spongy floors, exterior sound and other issues. – Max Coursey, Tiger Prop



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Most single-family rental owners are local entrepreneurs

Mon, 07/24/2017 - 8:04am

The majority of America’s 44 million rental households are living in homes owned by small entrepreneurs who are likely to be local residents.

That’s among the findings of a survey from the Real Property Management franchise which reveals that the difference between the perception of the ownership of the rental market and the reality. The study considered single-family rentals, the second largest sector behind apartments.

“The single-family residential investment market has long been misunderstood and dismissed as only an option for those wealthy enough to use real estate investing as a business,” said Bob Pifke, CMO of Property Management Business Solutions, LLC, the franchisor of Real Property Management.

The survey found that two thirds of rental property investments are made in the investor’s local area, using friends, family and real estate professionals for advice. Investors in rental homes from outside local areas has a limited impact on markets.

Most of those buying investment property of adding to the rental market with just a third identified as ‘flippers’. Two thirds of properties are renovated after purchase.

Investors generally buy homes at below the market price with just a third willing to pay more than $275,000.

“The results of this study have painted a clear picture that single-family residential investors are becoming more and more serious, and that rental properties are being recognized as a mainstream asset for investors building a portfolio for retirement,” added Pifke.



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Manhattan Landlords Are About to Get Graded

Mon, 07/24/2017 - 7:57am

The for-rent advertisement on East 75th Street in Manhattan, just a half-block from Central Park, boasts natural light, a marble bathroom, and a granite kitchen. It sounds lovely, a gem of the Upper East Side—perhaps even “triple mint,” as some real estate ads breathlessly proclaim.

It better be, given that the price for the apartment is $4,095 a month.

What the listing doesn’t mention is that the building has a long history of tenant complaints and city-issued violations. Issues over the years have included mold, cockroaches, and fire safety. That information is accessible on public databases, but it can be difficult to dig up for the uninitiated.

This is where startup Rentlogic is hoping to come in. Last week, the four-year-old company released an internet browser extension that drapes a letter-grading system over more than 200 real estate websites that list New York City rentals. So now you won’t just see the perfectly angled photo of some 325-square-foot shoebox with all the upbeat modifiers (sun-drenched, airy, spacious). You’ll get all the dirt, too.

“Buildings have problems,” said Yale Fox, chief executive of Rentlogic, explaining that buildings can score well on his system despite occasional issues. “It’s when they’re repeat offenders or there are signs of negligence—we penalize that.” (The Upper East Side building received an “F” even though most of its violations have been resolved.)

The software takes two clicks to install. After that, a user who views an apartment on a listing aggregator or a rental broker’s website sees the building’s grade in a pop-up window. On following a link to Rentlogic’s website, the user will also see a list of violations, complaints, and other less-than-attractive characteristics.

“Every industry has bad apples. This is about exposing them in hopes that they adjust their behavior”

As anyone who has looked for an apartment can tell you, landlords routinely use a tenant’s credit history and other data to decide whom to rent to. Now the shoe is on the other foot.

“Every industry has bad apples,” Fox said. “This is about exposing them in hopes that they adjust their behavior.”

This new tool has been a long time coming. Fox launched the company in 2013 with an early iteration of the grading system, and has spent the intervening years adding new data and tweaking his algorithm. It was a complicated process, since grades rely on hundreds of subjective interpretations. One example: Getting rid of mold takes little more than a willingness to spend money, so buildings with unresolved mold complaints get docked extra by the system. On the other hand, even conscientious property managers can struggle to eradicate rodents.

But devising a hierarchy was child’s play compared with getting landlords to adopt it. At first, Fox wanted to work with the established powers in New York’s real estate firmament. He tried getting brokers to send him listings to publish on Rentlogic’s website, but most were willing only to send him their best. (While plenty of brokers were eager to claim “A” grades, very few were willing to own an “F.”)

Previously, Rentlogic used public data to help renters evaluate landlords in Toronto. In New York, he convinced the brokerage Citi Habitats last September to publish his letter grades, giving Fox what he hoped would become a beachhead—once other brokers saw how much renters liked the letter grades, the whole industry would rush to adopt them.

Instead, property managers quickly quashed the effort. So many of them complained to Citi Habitats that the brokerage reportedly pulled the letter grades a week after launching. (Citi Habitats didn’t return requests for comment.)

That led Fox to start working on a system that lets renters view his company’s grades, whether or not landlords like them. A Yelp!, or perhaps a Zagat for real estate, was born.

That’s bound to be controversial. Fox’s underlying data comes from government reports, but the assumptions his algorithm makes are subject to scorn by the industry. One complaint is that he goes back seven years, meaning that the system can include violations incurred by previous owners. Another is that it uses data on tenant complaints regardless of whether the landlord responded quickly or whether the complaint was verified by a city inspector. Fox said the algorithm doesn’t consider unverified complaints and, in general, is designed to give landlords the benefit of the doubt. He said he plans to introduce functions to help landlords improve building grades.

The next challenge will be to find a business model that allows Rentlogic to wring a profit out of its system. The first step, Fox said, is building an audience of apartment-hunters who depend on the service. Then he plans to sell landlords tools to help them market apartments—while persuading renters that he can manage the conflicts inherent in selling landlords services with one hand while checking their bad behavior with the other.

Publishing building violations and tenant complaints might overstate the problems with some buildings. It might also save apartment-hunters from a bad deal.

The apartment near Central Park is managed by 9300 Realty. That name might not mean much to average apartment hunters, but close followers of New York real estate will associate it with landlord Steve Croman—who has been sued by New York State Attorney General Eric Schneiderman for allegedly harassing rent-controlled tenants to force them out of their apartments. Croman, who pleaded guilty in June to fraudulently refinancing loans, didn’t respond to requests for comment emailed to 9300 Realty.


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Why It’s a Good Time to Own Rental Property

Mon, 07/24/2017 - 7:49am

The turnaround in the housing market since the Great Recession has gone too far for many Americans. A just-released report from Washington, D.C., think tank Pew Research Center found that more Americans are renting now than any time in the last 50 years. The corollary: There’s never been a better time to own rental property.

“The total number of households in the United States grew by 7.6 million between 2006 and 2016. But over the same period, the number of households headed by owners remained relatively flat, in part because of the lingering effects of the housing crisis,” the report said. “Meanwhile, the number of households renting their home increased significantly during that span,” it continued.

More Renters, Fewer Owners

Home ownership in the U.S. has been falling at a constant rate as a combination of rising house prices, growing student debt and societal changes have resulted in Millennials (25 to 34) holding off buying homes. According to Bank of America, home ownership among those aged 25 to 34 is 38%, almost 30% below the national average.

Source: PEW Research Group

While it remains a good time own property, the total number of home owners is decreasing, raising the never-ending inequality debate. According to ATTOM data solutions, 37% of home sales in 2016 went to those not residing in the home. The Pew Research found that the less educated and nonwhites continue to own homes at lower rates. “Black and Hispanic households continue to be about twice as likely as white households to rent their homes,” Pew Research said.

A report from the Harvard Joint Center for Housing Studies also found that the ball is well and truly in the property owner’s court. Within major U.S. metropolitan cities 45% of renters could not afford the monthly mortgage payment on a median priced house in their area, and if the trend in ownership continues, the distribution will continue to grow. “Even if the downtrend in home ownership continues for another five years, owner household growth would still total 4.9 million by 2025. In that case, renter household growth would hold near its recent annual pace, lifting the total increase in 2015–2025 to 8.7 million,” the Harvard report said.

For Renters, Buying is Still a Goal

Not only is it the right time to own to rent, but buying a home for personal use is remains a goal for those not there yet. In fact, a 2016 Pew report found that 72% of renters would like to own a home at some stage in their life.

“The increase in U.S. renters over the past decade does not necessarily mean that homeownership is undesirable to today’s renters,” Pew Research noted.


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Where rents are rising the most (and least)

Mon, 07/24/2017 - 7:44am

Extremely tight supplies of houses for sale and rental housing have pushed up the cost of both, according to the Harvard Joint Center for Housing Studies.

The Center reports that in 2015, nearly 19 million households paid more than half their income for housing. While home prices account for some of that, much of the increase is being driven by rising rents.

The Harvard researchers point out that slowing home sales may be driven in part by tighter inventories, but they say affordability is also a significant factor.

Nearly half of renters can’t afford to buy

The found that on average, 45% of the renters in U.S. metro areas could not afford the monthly payments on a median-priced home in their area. In several of the most expensive metros, the share drops to only 25%.

That means these consumers remain renters and are competing with other renters for available housing, making rents more expensive.

But it turns out rents are rising more, and faster in some metros than others. Personal finance publisher dug into the numbers to see where rents are going up the fastest. Not surprisingly, the top five are on the coasts.

Where rents are rising fastest

Number one is Marina del Rey, Calif., where the average rent rose $441.50 over 12 months. Second is Medford, Mass., at $405. Third is Jersey City, N.J. where the average rent rose $285, followed by Columbia, Md., at $277, and Corona, Calif., at $273.50.

But despite rising rent affordability issues, GoBankingRates researchers also found markets where the average rent is going down, sometimes for obvious economic reasons, sometimes because rents rose too far, too fast. Bronxville, N.Y., for example, saw the average rent plummet by $475. Buffalo experienced an average rent decrease of $355.

But even San Francisco, one of the most expensive housing markets in America, saw the average rent decline $226. The average rent in Walnut Creek, Calif., went down $225. Danbury Conn., saw the average rent go down $217.

What can consumers do with this information? The researchers say it could be useful for renters who have options about where to live. They say it may also prove useful in helping renters decide if it makes sense to try to purchase a home.



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

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

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

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

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

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

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

They started from the middle

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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



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Startups Help Landlords Turn Apartments Into Hotel Rooms

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

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

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

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

Yet some startups contend they can navigate these potential pitfalls.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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4 Time Management Tips for Property Managers

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

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

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

1. Write (or type) it down

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

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

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

2. Stick to the list

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

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

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

3. Divide up the big tasks

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

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

4. Connect with workers

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

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

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

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


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Three Ways To Quantify The Impact Of A Real Estate Investment

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

What keeps your real estate investors engaged?

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

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

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

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

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

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

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

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

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



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