American Apartment Owners Association
Energy-efficient buildings have lower operating costs, but also tend to command higher rents and enjoy higher occupancy and tenant retention levels than traditional buildings. A recent Energy Efficiency Survey, developed by the Institute of Real Estate Management (IREM) in collaboration with the Institute for Market Transformation, looked at what motivates office building owners to improve energy performance. The survey focused on how financial methods used to evaluate capital expenditures impact decisions to invest in improving energy efficiency.
IREM and the Building Owners and Managers Association (BOMA) distributed the survey to their members and received 307 responses, which represented 1.7 percent of the total survey distribution. The survey found that most respondents use simple payback calculations to evaluate energy efficiency projects, usually basing decisions on recovering the investment in one to two years. The study revealed that this simple payback does not capture the full benefits of energy efficiency, like Net Present Value (NPV) analysis, which incorporates potential revenue increases from higher rental income.
The survey also found that building owners are more inclined to invest in energy-efficiency improvements if they can charge higher rents, particularly in split-incentive situations, where energy-cost savings accrue solely to tenants. Split incentives had posed a barrier to investing in improving energy efficiency, but this was overcome with the “green lease,” which requires tenants to participate in energy and water conservation programs.
Additionally, the survey noted that while the property manager is responsible for the building’s everyday energy management, the asset manager usually makes the final decision on whether to invest in improving energy performance. When third-party managers have authorization to make capital expenditures it is usually a small dollar amount of $25,000 or less. But that authority exists “almost not at all,” according to Brenna Walraven, founder/CEO of Corporate Sustainability Strategies Inc., which provides sustainability strategy development and execution plans.
CBRE’s Global Director of Corporate Responsibility David Pogue notes he is surprised IREM’s study focused on energy efficiency. “Energy efficiency was a singular topic a decade ago, when everyone began getting buildings Energy Star-certified,” he says. Pogue was less surprised by the low rate of survey respondents, which he suggested is an indication that people viewed the survey topic as old news.
When a 2009 study of 150 Energy Star buildings in 10 markets revealed that these buildings were commanding rent premiums of three to five percent and enjoyed high occupancy levels, landlords of class-A office buildings got on board, but those with lower quality assets did not necessarily. Today most of the office sector has broadly adapted green practices, though not every building is necessarily certified by a green-rating system, Pogue says.
The 2016 Green Building Adoption Index study by the CBRE Group Inc. and Maastricht University showed that the rate of growth in ‘green’ building has slowed, rising from 39.3 percent in 2014 to just 40.2 percent last year, but adoption of green building practices in the 30 largest U.S. cities continues to be significant.
“While the rate of growth in ‘green’ buildings has slowed modestly, our latest study underscores that in most major markets, sustainable office space has become the ‘new normal,’” Pogue notes. The study reported that 11.8 percent of U.S. office buildings, representing 40.2 percent of office space, have been certified by either the U.S. Green Energy Council’s Leadership in Energy and Environmental Design (LEED) or the U.S. Energy Department’s Energy Star program.
Pogue adds, however, that nearly 40 percent of high-profile office buildings in core urban markets are green-certified because they have to be green to compete. Those buildings tend to attract high-profile tenants, who demand a high-performance building environment.
LEED rates a building’s impact on the environment, but Pogue points out that the next level of certification, Delos Living’s WELL Certification, rates a building’s impact on occupants. The WELL Building Standard places health at the center of indoor design, incorporating healthy ideas based on seven concept categories: air, water, nourishment, light, fitness, comfort and mind.
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Despite signs of lower rents and more supply in certain U.S. multifamily markets, some lenders still see opportunity in writing apartment loans.
Since 2010, apartment sale prices have more than doubled, and many markets have had years of double-digit rent growth. But now, “there are forecasts of pretty broad-based potential [multifamily] rent declines in a lot of the major cities,” said Bill Parker, chief risk officer for U.S. Bancorp, during the bank’s Jan. 18 earnings call.
Management drew parallels with previous real estate crises when the bank avoided losses by heeding early warning signals. Publicly traded real estate investment trust are also pulling back, selling billions of dollars of apartment buildings in 2016, the first time those companies were net sellers since 2009.
Bank regulators announced in late 2015 that they would pay “special attention” to risks associated with commercial real estate. It was a reminder of guidance from 2006 that advised additional risk mitigation policies if construction loans equaled at least 100% of capital or if a bank’s overall commercial real estate portfolio grew 50% in three years and exceeded 300% of capital.
In the aggregate, lenders have pulled back slightly on mutlifamily lending. For the 12 months ended Sept. 30, 2016, aggregate U.S. multifamily loan volume was down 2% year over year.
Yet many lenders continue to push ahead with commercial real estate lending. As of the 2016 third quarter, 521 banks hit at least one of the regulatory criteria, marking the sixth consecutive quarter the number of banks breaching the concentration markers increased.
Appreciation means more cash, not more leverage
New York City and San Francisco have beaten the national average in recent years in terms of rent growth, but they now are sources of concern. Effective rents in both markets have turned negative, and new unit supply is expected to increase this year.
Bankers at leading multifamily lenders downplay bubble concerns, though, saying many of the multifamily underwriting mistakes that contributed to the Great Recession are not being repeated.
Chad Tredway, head of commercial term lending for JPMorgan Chase & Co.’s east region, said banks are not underwriting on expected future rent, a key contributor to massive losses such as the Stuyvesant Town deal apartment complex in New York City, purchased in 2006 and in default by 2010. In addition, property buyers are putting more money down, providing a greater cushion against a potential decline in value, Tredway said.
JPMorgan issued the most multifamily loans in the 12 months ended Sept. 30, 2016, posting a 1.2% year-over-year increase. During the bank’s Jan. 13 earnings call, management emphasized the bank’s focus on second-tier buildings in top markets known for limited supply. While effective rents in New York City turned negative in the 2016 fourth quarter, lenders said they expect softer rents to only affect high-priced properties as the vast majority of new construction is at the upper end of the market.
“There might be a softening in rents at the high end, but I don’t think that will happen at the low end,” said Ken Mahon, CEO of Dime Community Bancshares Inc.
Other lenders have increased multifamily lending even more. Berkeley Point Capital LLC, for example, posted a 37.7% year-over-year increase. Mitch Clarfield, senior managing director for the company, said multifamily lenders can avoid losses by maintaining a loan-to-value ratio of 75% and underwriting on existing rents with a 1.25x debt-service coverage ratio—meaning the net income from a property equals 125% of the mortgage payments.
Clarfield and other lenders also said real estate owners are putting up more equity as lenders focus on debt-service coverage ratios instead of loan-to-value ratios. By underwriting a loan based on what the rent can support, real estate owners have to use more cash since appreciation has outpaced rent growth.
“Our underwriting guidelines allow us to go higher on loan-to-value, but we just don’t get there when you look at the cash flows,” said Ed Ely, head of commercial term lending for JPMorgan’s west region.
Naturally, lenders at the top of the market also feel comfortable with their business models. Life insurance companies, which tend to be more conservative lenders, focus on high-quality properties. Gary Otten, head of real estate debt strategies for MetLife Inc., said the transactions he has seen continue to attract multiple bidders.
“Anecdotally, I’m hearing a different story in secondary markets and secondary properties,” Otten said. He acknowledged that high-end properties historically have tended to be more volatile but noted that MetLife protects itself by taking a senior position in the debt stack and allowing very little, if any, mezzanine debt.
“There’s more discipline on the lender side, but also on the borrower side,” Otten said. “You don’t hear people asking for massive amounts of leverage.”
Relying on large equity cushions and conservative underwriting methods as bulwarks against weakening rents, top multifamily lenders see no reason to slow down.
Bank of the Ozarks Inc. is a leading construction multifamily lender in top markets, coming in at No. 2 in New York City over the last year. The company’s construction debt is just below 200% of its total capital, nearly double the 100% concentration marker that regulators say warrants special attention.
Chairman and CEO George Gleason II said he is willing to continue growing the bank’s multifamily exposure since the bank maintains extremely conservative underwriting guidelines. Even in New York City, where rents are declining and projected to fall further, the softness will not trigger losses for lenders, he said.
“If apartment rents come down 3% or 5% or 7%, that’s not going to hurt any lenders. That’s not going to hurt any mezzanine lenders,” Gleason said. “And it’s not going to devastate the equity guys. They’re just going to make a little less equity return than they expected. And I think that’s where we are: on the margin. I don’t think we’re anywhere near a crisis.”
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I guess I’m getting old. My daughter just had to show me how to download an app on my new smart phone. Technology is advancing so rapidly, and I’m having a hard time keeping up, especially when it comes to smart home technology.
All of the young property managers are talking about it and I feel out of the loop. What should I be focusing on when it comes to new technology at my multifamily housing community?
It’s okay, I think my teenage son knows more about technology than me too. Kids these days! The good news is, you don’t necessarily have to understand how technology works in order to start capitalizing on the benefits it can provide to your apartment.
Smart home tech is one of the hottest trends in the multifamily industry right now. Why? Smart-home features such as smartphone-managed lighting and security are giving renters a greater sense of control.
Millennial renters aren’t going to be scared off by technology — they already know how it works… and they like it. In fact, according to a new study from Bailey Brand Consulting, 74% of them believe technology makes their lives easier. And since millennials currently make up the largest group of renters, it’s a good idea to focus your efforts on appealing to them.
Okay, now that you understand the “whys” of smart technology, let’s focus on the “what.” Here’s a list of some of the most desirable technology that will boost the IQ of your apartment building and attract renters:
How many times have you gotten calls from your renters saying they’ve locked themselves out of their apartment? Too many times, am I right? Smart locks will eliminate that. They let renters receive alerts and track who’s entering and leaving their unit; email limited-access digital passcodes to guests when they’re not home; and remotely lock and unlock their door when they’re away. They also have a low upfront cost and help you reduce your costs of rekeying units during turnover.
Smart thermostats offer remote monitoring and control. Some systems even use infrared detection to determine whether anyone is in the unit. Based on the information it collects, the thermostat can either reduce or raise the temperature. Say goodbye to frozen pipes and hello to big savings!
Light Programming and Control
Smart bulbs are the perfect place to start if you’re looking to haul your multifamily community into the smart home revolution. Not to mention, they’re getting cheaper and easier to set up. Smart bulbs let renters control all the lights from their smartphone. Gone are the days of wondering if you forgot to turn all the lights off. Side note: these systems also let renters change the color and brightness of the light — who knew light bulbs could be so fun?!
Voice Control Smart Home Hubs
And one of the coolest advancements in home automation is the growing integration of voice control. With this technology, it’s now possible for renters to start brewing coffee or shut window blinds with a single voice command. These devices link all of your smart home technology together and allow them to control it with the sound of their voice. There are a number of options out there — explore them here.
I recommend starting with the above devices, but here are a few others you might want to consider investigating:
Smart CO2 detectors and alarms that send alerts to smartphones
Security systems with remote monitoring and viewing
Smart TVs and home entertainment systems
Remote controlled window blinds
Smart Kitchen Appliances
Incorporating smart technology will help your renters live like the Jetsons. Don’t feel like you have to go all in at once — start small. Your investment will surely pay off in the long run! And who knows, maybe you’ll even become a technology expert in the process!
The post Dear Gabby: The Future of Apartments: Smart Home Tech appeared first on AAOA.
One of the most common problems we hear about from apartment marketers is that they are struggling to market their communities because they simply don’t have the budget necessary to do the job well.
Today we’re talking about the things you can do on a shoestring budget to improve your community’s marketing strategy and performance.Make sure all your basic SEO pieces are in place.
There are several basic things that are vital to get right if you want your site to perform well on search engines. If these things aren’t in place, your site will struggle to perform on search engines.
First, you’ll want to make sure the title tag includes your community’s name, location, and the word “apartments.” There are several ways you can do this. “(community name) Apartments | (city, state)” will work, as will “(community name) Apartments in (city, state).”
The key is to have all three of those things present in the title tag. That will tell the search engines that your site is about a specific community in the apartment industry located in your city and state. That, in turn, makes it much easier for the search engine to know how to rank your site for various keywords.
Second, it’s vital that you own your domain name and are sending traffic to it, rather than to someone else’s domain. We explained why in this post last week. The short version is that domains can build up authority with search engines over time. Search engines see valuable content being hosted on the domain and over time come to “trust” it, if we can put it that way. The result of that trust is higher rankings for search terms. So you want to be building that trust on your domain, not someone else’s.
Third, make sure you have 301 redirects set up correctly so that all your authority is being built up for the right domain. If you don’t set your site up correctly, you end up with two sites living on two domains–one the “naked” domain without the “www” prefix and the other being the one with the “www” prefix. This is disastrous because it splits all your SEO value in half between the two different domains. The way to resolve this problem is to set up a 301 redirect on one of the domains to send all traffic and SEO value to the other site. This makes sure that all your authority is being built up for a single domain.
Fourth, make sure that you have claimed your Google My Business location and have updated it with a link to the correct website.
Fifth, if it’s at all possible, set up your website so that each floorplan has its own landing page. This isn’t something we see very often in the industry, but there are many benefits to arranging your site in this way.
- First, it makes it easier for prospects to learn about their specific apartment.
- Second, it gives you a landing page to use on Craigslist and Google AdWords.
- Third, it provides search engines with one more indexable page that they can direct users to.
Next we need to talk about posting strategies on Craigslist, which is free in most places. There are four keys to successful Craigslist posting.
- Strong, high-quality photos that show the specific floorplan being advertised.
- Contact info is prominently listed, both the phone number and email address.
- The pet policy is included in the ad.
- The ad links to a floorplan-specific landing page rather than a generic page on the community website.
The cumulative goal of these various posting strategies is simple: You wanto to create ads that won’t get deleted or flagged and that help your community to stand out from the competition on Craigslist.
There are thousands of posts every day in many major American metros, so finding a strategy to help you stand out is essential. If you do the things we list above, you should be able to achieve that goal.Use walkthrough video tours plus photos of each floorplan.
This is one of the more difficult strategies, but the rewards are considerable. Ideally, the floorplan-specific landing pages go along with floorplan-specific content, which makes it significantly easier for prospects to research your community and figure out of they want to schedule a tour or not.
If you don’t have the budget to hire professionals, however, there are ways of working around the issue. It won’t be as good as the content a professional would shoot, but it’s better than “no floorplan specific content at all.”
Given that reality, here are a few tips to keep in mind:
- Use horizontal images rather than vertical–most image display tools online are designed for horizontal photos.
- Don’t cut off objects in the frame of your photo.
- Make sure the light in the room is good before shooting.
- Edit the photos using free tools like iPhoto or PicMonkey.
Once you have taken your photos, you once again will come back to your floorplan-specific landing pages. Ideally, you’ll have those pages set up and can display the photos on those pages. So if someone wants to see into your one bedroom floorplan, you’ll have the photos and the page that will help them to do that.Conclusion
Obviously none of these things will be on the same level as what a professional could provide for your community. But if money is tight and you can’t hire this work out to a marketing partner, then you can get a lot of good work done at low cost by doing the things we recommend above.
The post 3 Tips for the Apartment Marketing Director with No Money appeared first on AAOA.
Your apartment has been the center of your life. Over time, it may seem that every nook and cranny of that space has been used, and you’ve made your mark during your time there. But now you’re ready to move on and move into the next space.
Before you can do that, however, you will need to get your old apartment back in shape — not only so you can get your security deposit back in its entirety, but also so you can leave the place in like-new condition for its next tenant. You’ve probably already thought about what you need to do to move your belongings, but you’ll also want to be considerate of your landlord and your apartment’s next occupant.
If you’ve pondered “what to do when moving out of my apartment,” consider some steps that will make things easier on you, your landlord and the next person to call it home. After you pack up all of your belongings, refer to this apartment move-out checklist to make sure you do everything you need to do to get a deposit check back from your landlord and move on to your next place with a fresh start.
Most of the leading U.S. metropolitan areas for commercial and multifamily construction starts showed substantial gains in 2016 compared to the previous year, according to Dodge Data & Analytics. However, New York NY, the top metropolitan market by dollar amount, pulled back 15% to $29.8 billion following its 67% surge to $35.2 billion in 2015. Eight of the next nine metropolitan areas in the top 10 were able to register double-digit gains during 2016. For the top 20 metropolitan areas, 16 were able to show double-digit gains compared to 2015. At the U.S. level, commercial and multifamily construction starts in 2016 were reported at $186.3 billion, up 7% from 2015.
Rounding out the top five metropolitan areas in 2016, with their percent change from 2015, were the following – Los Angeles CA, $9.8 billion, up 44%; Chicago IL, $8.3 billion, up 34%; Washington DC, $8.1 billion, up 35%; and Dallas-Ft. Worth TX, $8.0 billion, up 16%. Metropolitan areas ranked 6 through 10 were – Miami FL, $7.5 billion, up 14%; Boston MA, $7.1 billion, up 50%; San Francisco CA, $5.0 billion, up 96%; Atlanta GA, $4.8 billion, up 60%; and Seattle WA, $4.3 billion, down 4%.
The commercial and multifamily total is comprised of office buildings, stores, hotels, warehouses, commercial garages, and multifamily housing. At the U.S. level, the 7% increase for the commercial and multifamily total in 2016 was the result of an 11% advance for commercial building and a 3% gain for multifamily housing. Compared to its 7% rise in 2015, commercial building at the U.S. level was able to pick up the pace in 2016, while multifamily housing witnessed substantially slower growth compared to its 22% jump in 2015. A primary reason for the smaller 2016 increase for multifamily housing at the U.S. level was a downturn by multifamily construction starts in the New York NY metropolitan area, which retreated 28% following its exceptionally strong amount in 2015. Excluding the New York NY metropolitan area, multifamily housing for the nation in 2016 would be up 13%, about the same as the corresponding 14% increase in 2015.
“What stands out about 2016 is that growth for commercial and multifamily construction starts became broader geographically,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “Back in 2015, the New York NY metropolitan area led the upturn by soaring 67%, while the next 9 markets combined grew 8%. In 2016, the 15% downturn in the New York NY market was countered by a 33% hike for the next 9 markets. As a result, the New York NY share of the U.S. total for commercial and multifamily construction starts settled back from 20% in 2015 to 16% in 2016, which was still relatively high compared to the 13% share during the 2010-2014 period.”
“Both commercial building and multifamily housing have benefitted from a number of positive factors in recent years,” Murray continued. “These included declining vacancies, rising rents, low interest rates, and some easing of bank lending standards for commercial real estate loans. That supportive environment began to shift during 2016, with vacancies leveling off, interest rates edging up at year’s end, and bank lending standards for commercial real estate loans beginning to tighten, especially for multifamily projects. Yet, aside from multifamily housing, the levels of construction remain generally low given the hesitant nature of the upturn to date, meaning there’s yet to be any widespread signs of overbuilding that typically show up five years into an expansion. While market fundamentals may not be quite as supportive in 2017, it’s still expected that commercial building will be able to register moderate growth, led by offices and warehouses. As for multifamily housing, the geographically broader participation by metropolitan area that emerged during 2016 is expected to continue this year, which should help the national total stay close to the elevated activity reported during 2015 and 2016. Other factors that could affect commercial and multifamily construction starts in 2017 would be two items proposed by the Trump Administration – the reduction in business tax rates to spur investment and the easing of the Dodd-Frank regulations on the banking sector.”
The 15% commercial and multifamily decline for the New York NY metropolitan area in 2016 was due to the 28% slide by multifamily housing after its 53% hike in 2015. At the same time, the commercial building categories as a group grew an additional 4% in 2016, which followed a 95% surge in 2015. Multifamily housing in New York City had been supported by the 421-a program, which provided tax incentives to developers who included affordable housing in their developments. During 2015, the pending expiration of the 421-a program contributed to developers moving up the start date for projects, while the expiration of the program in January 2016 removed the incentives. (In late 2016, an agreement was reached to renew the 421-a program, which still awaits the approval by the New York State legislature.) The New York NY metropolitan area in 2015 had featured 44 multifamily projects valued each at $100 million or more, including five at $500 million or more, led by the $575 million 15 Hudson Yards apartment building. In 2016, the number of multifamily projects valued at $100 million or more was 38, still substantial yet smaller than what took place 2015, and there were no projects in the $500 million plus range. The top three multifamily projects in 2016 were the following – the $453 multifamily portion of a $475 million high-rise in Jersey City NJ, a $407 million multifamily high-rise on Manhattan’s East Side, and the $345 million multifamily portion of a $500 million high-rise near the Hudson River in lower Manhattan.
For the commercial building categories in the New York NY metropolitan area, new office building starts retreated a slight 2% in 2016, staying very close to the robust dollar amount (up 138%) that was reported in 2015 which included the $1.9 billion office portion of the $2.5 billion 30 Hudson Yards office/retail project. The top office projects in 2016 were the $2.0 billion 3 Hudson Boulevard on Manhattan’s West Side, the $1.5 billion One Vanderbilt Tower near Grand Central Terminal, and the $682 million office portion of the $700 million Gotham Center in Long Island City. Hotel construction climbed 60%, helped by the start of the $205 million Marriott Moxy Hotel in Times Square, and warehouse construction advanced 55% with the lift coming from a $304 million warehouse on Staten Island and a $200 million warehouse in Cranbury NJ. Commercial garage starts increased 27% in 2016, but store construction starts dropped 28%.
The Los Angeles CA metropolitan area in 2016 registered a 44% increase, moving up to the nation’s second largest market for commercial and multifamily construction starts after ranking number three in 2015. Multifamily housing in 2016 soared 50% while commercial building advanced 36%. There were 14 multifamily projects valued at $100 million or more that reached groundbreaking in 2016, compared to 10 such projects in 2015. The three largest multifamily projects in 2016 were the $493 million multifamily portion of the $600 million Century Plaza mixed-use complex in Century City, the $344 million multifamily portion of the $375 million 1120 South Grand Avenue mixed-use building in Los Angeles, and the $275 million multifamily portion of the $300 million Omni mixed-use building in Los Angeles. Substantial percentage growth was reported for offices, up 67%, with the lift coming from the $178 million office portion of the $390 million Broadcom Research and Development Campus in Irvine. Hotel construction starts were also up considerably, rising 77%, with the lift coming from the $93 million hotel portion of the $135 million Edition hotel and condominiums in West Hollywood. Commercial garages increased 42% in 2016, while warehouses grew 9%. Store construction improved 7% on top of its 96% advance in 2015, boosted by the $500 million renovation of the Beverly Center in Los Angeles.
The 34% increase for Chicago IL in 2016 enabled this metropolitan area to move up to the nation’s third largest market for commercial and multifamily construction starts, after ranking number 5 in 2015. Multifamily housing jumped 82% in 2016 while commercial building held steady with its 2015 amount. The multifamily gain reflected two very large projects – the $780 million multifamily portion of the $900 million Wanda Vista Tower and the $500 million One Bennett Park Tower. There were 10 multifamily projects valued at $100 million or more that reached groundbreaking in 2016, compared to 5 such projects in 2015. Office construction grew 22% in 2016, aided by the start of a $255 million data center in Aurora IL plus two Chicago projects – the $250 million McDonalds headquarters and the $225 million CNA Financial headquarters. Warehouse construction increased 63%, boosted by the start of the $95 million M&M/Mars Wrigley Distribution Center in Joliet IL. On the negative side, declines in 2016 were reported for hotels, down 45%; commercial garages, down 34%; and stores, down 3%.
The Washington DC metropolitan area climbed 35% in 2016, with commercial building up 56% and multifamily housing up 20%. Much of the lift for commercial building came from an 87% jump for office construction, which featured 7 projects valued at $100 million or more, led by the $300 million 655 New York Avenue office building. the $220 million Four Constitution Square office building, and the $200 million addition to the Fannie Mae office building. The hotel category advanced 113%, helped by the $140 million CityCenter DC Conrad Hotel (phase 2) and the $106 million hotel portion of the $230 million Columbia Place hotel/multifamily complex. Garage construction rose 44% in 2016, but construction start declines were reported for stores, down 14%; and warehouses, down 41%. The 20% increase for multifamily housing featured 9 projects valued at $100 million or more, including $263 million for phase 1 of The Boro at Tysons in Tysons Corner VA and the $228 million Eisenhower East apartment development in Alexandria VA.
After soaring 56% in 2015, the Dallas-Ft. Worth TX metropolitan area registered an additional 16% gain for commercial and multifamily construction starts in 2016, with commercial building up 13% and multifamily housing up 22%. Office construction increased 31%, reflecting $293 million for the office portion of the $500 million Toyota Corporate Campus project in Plano, $194 million for the office portion of the $300 million JP Morgan Chase operations center in Plano, and $133 million for the office portion of a $300 million mixed-use development in Dallas. Hotel construction climbed 33%, helped by the $85 million Texas Live! convention center hotel, while garage construction advanced 37% with $106 million for the garage portion of the JP Morgan Chase operations center and $87 million for the garage portion of the Toyota Corporate Campus project. Store construction starts grew a moderate 6% in 2016, but warehouse starts fell 34%. As for multifamily housing, there were 5 projects valued at $100 million or more that reached groundbreaking in 2016, including the $160 million multifamily portion of the $240 million Drever mixed-use project in Dallas.Source: forconstructionpros.com
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“Surban” may become an important word for real estate investors this year. It’s short for “close-in” suburbs next to major cities, and surban locations are where much of the 25-to-34-year-old cohort is looking to live. According to statistics from realtor.com, Situs RERC and others, America’s most expensive cities are often too pricey for these young residents that are saddled with historically high student debt. While the more affordable outer-ring suburbs might lack amenities and offer long commute times, surban areas usually offer the live/work/play town center environment that Millennials seek, including access to mass transit and the good schools they typically grew up with, as well as proximity to their parents and other family members at a better price point.
However, for a number of reasons, including sizable down payment requirements and need for flexibility, home ownership rates continue to decline in many markets as Millennials continue to rent.
As Millennials begin to set up households and start families, the main problem they encounter is a lack of multifamily product, and the right product at that. While some gateway cities are currently experiencing an oversupply of class-A multifamily properties that primarily target singles and dual-income households with no kids (“DINKS”), the availability of desirable multifamily housing in surban markets is at historic lows. Further, available inventory is generally not well aligned with the Millennial lifestyle.
Much of multifamily inventory in surban areas is obsolete, having been built 40, 50 even 60 years ago. Further, a swimming pool is not enough to meet the needs of today’s Millennial renter looking for, above all, value—amenities, functional space and a lifestyle which includes walkability and convenience. This dearth of product leaves the door wide open for real opportunities among investors and developers of multifamily product.
Suburban markets seeing the most demand from this age group include areas around Dallas, Boston, Seattle, San Francisco and Chicago; the outer boroughs of New York City; plus Midwestern locations near universities, such as Minneapolis, Columbus, Ohio and Madison, Wis. A safe neighborhood is a top priority; so is access to quality schools, followed by community amenities and convenience.
Entrepreneurs are looking for business opportunities too in suburban locations as suburban office markets begin to improve. Older corporate campuses are being redeveloped into lifestyle centers offering a mix of multifamily, retail and office space. Aging Millennials are all too happy to forgo a commute for a convenient drive or walk to work, as well as proximity to their children’s schools and recreation just outside the big city.
Preliminary survey results from Situs RERC reveal that southern U.S. currently offers the greatest return across the multifamily property type—and with a strong return comes the potential for strong investor demand. Surban markets experiencing job creation in growth sectors and with local governments that understand the need to effectively improve the suburban living experience to meet an increasing preference for multifamily living include, but are not limited to, Charlotte, N.C., Denver, Nashville and Austin, Texas.
No doubt many suburbs and surban areas with their obsolete housing stock and aging infrastructure are ripe for redevelopment planning to accommodate a new and growing market of Millennials longing for quality suburban housing to meet their lifestyle requirements. The coming years promise continuing opportunity for the multifamily investor.
Recent Census Bureau data reveals that only 1 in 10 Americans moved between 2015 and 2016, marking the lowest level of renters or homeowners to relocate since the agency started keeping track of data in 1948, a trend exacerbated by the housing crash — which led Americans to be cautious and cling to their homes and rentals.
Yale Law School professor David Schleicher said homeownership subsidies, more land-use restrictions, the increased use of occupational licensing and municipal bankruptcies are the main culprits, Construction Dive reports. Schleicher said relocation subsidies targeting residents trapped in poor areas could help create more movers.
While the overall mover rate is low, more affordable regions of the country, like parts of the South, Midwest and Rust Belt, experienced increases in migration. According to Realtor.com, smaller markets, including Denver, Nashville and Orlando, are likely to see housing demand grow this year.
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Smart, wireless, mobile, connected technology is transforming the design and performance of our apartments and drastically changing the way our residents live in them. The boom of the Internet of Things and the growth in the on-demand economy have made on-site Internet connectivity and cellular reception indispensable for our residents.
In fact, 98% of apartment residents say good cell reception in their apartments is important—so important that more than half check a property’s on-site cell phone connectivity before choosing to lease there. Moreover, 94% rank high-speed Internet as the No. 1 apartment feature, according to the NMHC/Kingsley Associates 2015 Apartment Resident Preferences Survey.
With the increased business and resident reliance on these and other emerging technologies (artificial intelligence and virtual reality are two that come to mind), federal telecom policy is growing in importance to the apartment industry.
The Obama administration prided itself on its connections with Silicon Valley and Internet powerhouses like Google and Facebook and pushed through a consumer-facing tech agenda during its tenure. However, the 2016 election has shifted the political landscape rather dramatically. Not only does President Donald Trump lack the same deep ties to the tech industry, but new leadership at the Federal Communications Commission (FCC), coupled with a friendly(ish) Congress, suggest that Washington could strike a dramatically different tone on tech and telecom policy going forward.
Where We Are Over the past decade, federal policymakers have made broadband deployment a priority. In fact, leaders in Congress have moved quickly to free up government-held wireless spectrum for private use to keep up with the rising demand for connectivity. Increased spectrum for wireless, and potentially 5G, networks significantly benefits multifamily companies and their residents by ensuring greater access to high-speed Internet and reliable cellular service, particularly in nonurban core areas.
This focus on increasing access to high-speed broadband for all Americans—an area of bipartisan agreement—will likely continue, if not increase, via existing government programs and initiatives that leverage private-sector participation. One such program is HUD’s Connect Home initiative, which helps bridge the digital divide between those who have access to broadband and those who do not. A much-talked about infrastructure package could also be passed by Congress this year to provide another avenue for broadband investment and is worthy of note because of the potential for increased access in rural and underserved communities. Both are welcome efforts.
While this support is positive, much of America’s current telecommunications landscape and regulatory infrastructure is antiquated and arguably a hindrance to future technology advancement. Governing the communications space today is a law last updated in 1996, when the Internet was still in its infancy.
What’s Coming This tension between rapid technological advancement and slower regulatory response is the reason certain policies like net neutrality have been so contentious.
Issued in 2015, the net neutrality rules reclassified both mobile and wired, or fixed, broadband as telecommunications services, allowing the FCC to regulate Internet service providers and block them from prioritizing or degrading Internet traffic. Proponents argued that this would guarantee unfettered and equal access to the Internet to businesses of all sizes and all Americans. For apartment firms, this move had implications for connectivity access and speed in their buildings both for business operations and resident use.
Given Congress and the Trump administration’s focus on reeling in regulations, stimulating business investment and innovation, and supporting traditional market-based telecom practices, net neutrality is under fire. Many in Washington believe the rules are likely to be dramatically weakened if not repealed entirely.
But this debate over net neutrality underscores the much more fundamental issue regarding the relevancy of our existing telecom laws: Our government has been trying to regulate and classify modern communication methods and information sharing venues using a 20-year-old policy solution. We need a rewrite of the nation’s Communications Act to provide much-needed policy updates to a range of issues, many of which touch on wiring, competitive access, and cellular and wireless technology deployment—all with serious implications for multifamily communities.
Rewriting a law that governs the mechanics of such a huge economic driver of our modern economy will be challenging, but it is widely expected to garner much attention in the very near future and has been prioritized by leaders in both chambers of Congress. Technological advances continue at an ever-increasing rate, so it is vital for apartment residents, owners, operators, and the industry writ large that policymakers walk a fine line between regulating the power of the Internet and fostering the innovations that will drive our economy far into the future.
Apartment living is focusing more and more on the world outside the apartment, and developers are providing amenities that help residents connect with their neighbors, their neighborhoods and with services and amenities they need.
The lobbies say it all. Some designers now style their apartment lobbies like the entrance to a resort hotel, with places to sit down, pick up deliveries, greet guests, mingle with neighbors and even have a drink on event nights. Effectively, developers are putting a clubhouse for the apartment community next to the front door instead of secluding the clubhouse far from the entrance to the community.
“It’s just wide open,” says Mark Humphreys, CEO of Humphreys & Partners Architects. He is designing lobbies that greet visitors with a view of the property’s swimming pool or other attractive common area. “It’s a very resort-style feeling,” he says.Concierge conveniences
Developers are also helping their residents connect with services and amenities outside the community. “Newly constructed apartment properties in urban environments such as Jersey City emphasize more convenience amenities and concierge service—items like show tickets, laundry pick-up, etc.,” says J.B. Bruno, associate with real estate services firm JLL. Once again, these concierge services are increasingly located near the front entrance.
Urban apartments dwellers can also use a little help to manage deliveries, whether they involve Ramen noodles or a delivery from Amazon. Many property managers offer a “package concierge” service, as part of the lobby layout, and even refrigerate deliveries like ice cream from Fresh Direct that need to be kept cold. “Package concierge service has also become highly sought after, due to the rise of e-commerce,” says Bruno.
However, storing all those packages in an attractive way should be part of the lobby’s plan from the beginning. “It’s very hard to fix it if you don’t have it now,” says Humphreys.
Uber is also important to apartment dwellers. “Some owners have also contracted with Uber and Smart Cars to provide convenient transportation options,” says Bruno. That’s true even for residents who have a car of their own, if they live in a place where parking is painful and expensive. Car sharing services like Uber are filling in the transportation gap in places like Los Angeles and Chicago where mass transit can take residents everywhere they need to go.
Architects now design “Uber drop-off lanes” at properties to accommodate the traffic, close to the communities’ front entrance. “We believe in Uber-oriented development,” says Humphreys.
Property managers are scheduling events that can help residents connect with each other. An apartment property might offer beer and wine to residents every Thursday, like many hotels do, for an hour or simply until the drinks run out. Residents that attend are much more likely to create friendships with their neighbors. And people who have friends in their apartment community are 25 percent more likely to renew their lease, says Humphreys.
“It is a miniscule cost to spend on beer and wine to get that benefit,” he says.Suburban properties keep up
If apartments are located in areas that are served by a mass-transit system like a light rail, but the property isn’t close enough to a station for residents to walk to, the property owners may have to make up the difference.
Connection also matters for suburban apartment buildings, even if most residents depend on their cars for getting around. Many suburban property owners now provide shuttle bus service to rail and bus stations in an effort to minimize the commuting challenges faced by renters. “Shuttle service is paramount,” says Bruno.
Suburban properties are also conscious that if they aren’t within walking distance to shops and restaurants and can’t provide the bustle of urban living, the properties at least need to provide the extra space that urban apartments are less likely to give. “Larger units with extra rooms and tenant storage are key,” says Bruno.
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If you’ve ever been in property management, you know that it takes a lot of time, effort, patience and funds to find and retain quality residents. It costs a lot of money to keep turning over units, so it’s a win-win for everyone when residents are happy — they don’t have to move and you don’t have to pay apartment turnover fees.
The team at Gordon James Realty has compiled a list of action items that you may want to consider in the new year in order to keep your residents satisfied:
- Rent them a place they’ll want to move into and come home to. Make sure you’re handing over the keys to an apartment that’s been thoroughly cleaned with no sign of former tenants. Renters want to move into a clean palette – a place to make completely their own.
- Educate your renters from the get-go! If they don’t know the rules, then they aren’t able to follow them. Upon move-in, give them a run-down via the lease, an email, a flyer, and word-of-mouth. Be sure to include things like noise restrictions, pet policies, parking policies, trash day, etc.
- Send them a welcome letter. Everyone wants to feel welcomed! Especially if they are first-time renters or new to the area. Let them know that you’re glad to have them here and remind them of your contact information should any problems arise. It’s also a good idea to educate people who may be new to the area by giving them suggestions on local restaurants, bars, gyms, grocery stores, hiking trails, breweries, movie theaters, parks, etc.
- Leave them a housewarming gift. A thoughtful housewarming gift doesn’t have to be extravagant. Leave them something small that will make them think of the awesome leasing staff – a bottle of wine, flowers, or some property swag like koozies, cups, sunglasses, etc.
- Keep up with them. About a month after they move in, reach out via email to make sure everything is ok and that they are happy with their living situation so far. That being said…
- Don’t get too friendly. After you’ve confirmed that everything is satisfactory with their living conditions and you’ve reminded them how to reach you should a problem arise, keep your distance. You do not need to be “popping in” regularly. That creates unnecessary pressure on the tenant and they may feel like they are being “watched.”
- Host events. Community-wide events are a great way for residents to meet one another and a good opportunity for you to get positive exposure online. For example, you host a Thanksgiving party or a Super Bowl party and many of your residents will likely post pictures on Instagram, tweet and/or Facebook about the event – free marketing for you and your community!
- Ask for feedback. The only way to improve is to ask your residents for feedback! You can send out a survey via email or keep response cards in your leasing office. Your residents will appreciate the fact that you are trying to better the community.
- Don’t be tardy with maintenance and repairs. When a tenant reaches out about a broken laundry machine, faulty lock, etc., make sure you respond ASAP! Even if you can’t get to them right away, make sure you let them know that their request has been received and someone will fix the problem as soon as possible.
- Send season’s greetings. Everyone loves getting mail! Pop a ‘Happy Halloween’ mini bag of candy in their mailboxes, and ‘Happy Holidays’ cards.
- Be realistic. Last, but certainly not least, try to be as reasonable and lenient as you possibly can. Accidents happen. Property sometimes gets damaged. Property managers should consider purchasing tailored landlord insurance in case anything happens. Hope for the best, but always be prepared for the worst.
Author: Property Matrix
Let me take you back to 20th century’s property management for a minute…Property managers are walking from door to door, frantically knocking and collecting rent payments in ‘cash’. Unfortunately, it’s not going as smooth as they had previously hoped.
Although some landlords and managers stereotype renters as fiscally irresponsible people, one thing is sure- a bulk of tenants lead very hectic lives. A typical day might include waking up on time to drop kids at school, rushing to work, running a couple of errands during lunch time, before winding up with evening meetings and extracurricular activities. Of course it’s understandable that rent may actually be last thing on such a renter’s mind. That’s why the 20th century property manager, in our case scenario, may end up with quite a couple missed payments. And that translates to additional trips to renter’s apartments, not to mention consequent frustrations.
Strange as it may sound, there are many property managers stuck in the same cycle. While they may not be actually knocking on tenants’ doors, they are facing pretty much similar challenges. They are forced to consistently follow up on payments on a monthly basis, with tenants giving excuses like:
- “I’m sorry. I forgot..”
- “The bank is too far…”
- “I couldn’t find time to pay..”
Well, while some of these excuses are already a bit cliché, many tenants are genuinely worried about time and convenience of payment. Although timely rent payment cannot be guaranteed, providing a convenient system helps improve response and compliance. And that’s exactly where the 21st century system of online payment comes in.
So, let’s see why you should implement an online payment system:
Tenants Prefer Online and Electronic Payments Over Cash
Whoever said cash is king must have had a poor understanding of consumer behaviors and preferences. According to a 2014 TSYS online survey, cash is the least preferable form of payment. While 43% of Americans would choose to pay via debit cards, 35% prefer credit cards, and only 9% are comfortable with cash.
Well, who wouldn’t prefer paying via a smarter, simpler method, as opposed to looking for a wallet, counting the cash, paying, and then recounting change all over again? Cashless forms of payment mean less paper lying around, increased security and stress-free automated payments. That’s why Property Matrix has integrated both debit and credit cards, consequently granting tenants exactly what they love.
Increased Security For Both Tenants and Landlords
Paying via cash is gradually being considered as ‘suspicious’ because of the relative anonymity it grants its handlers, as opposed to online transactions, which leave digital trails. While online payment systems are also threatened by criminals who use stolen identities to infiltrate burgeoning cashless systems, cash is still substantially less secure.
Tenants who withdraw rent cash through ATM, for instance, are particularly vulnerable of skimming attacks, which have grown tremendously over the last couple of years. Data released by the FICO Card Alert Service shows a 546% increase in ATM skimming from 2014 to 2015, affecting both bank and non-bank ATMs spread out across the U.S.
And if, on the other hand, you’re worried about cashless fraud, you might be pleased to learn that online payment systems are increasingly marrying technological intelligence with human intelligence to boost overall security. Systems are now leveraging a knowledgeable human activity review to support machine learning that tracks and blocks anomalous changes.
Rent Can Be Paid Remotely
By now, you’re probably aware of how hectic it might be tracking down tenants who are hard to contact. While some may be frequent travelers or extremely busy workers, others are just hard to come by. We all know that type of tenant who’s never around. Checks in probably a day or two in a month, then vanishes for weeks. Collecting rent from such a person, of course, could be a nightmare- unless you’ve already implemented an online payment system.
Online payment, especially when automated, allows tenants to pay rent from just anywhere, including space. An astronaut at a space station can pay his rent thanks to automated invoicing and subsequent deduction from his account, without even having to keep tabs with the whole process. It’s that simple and straightforward.
All Payments Are Easy To Track
One of the most trying and frustrating times for any landlord or property manager, is being pulled into a payment dispute, especially when you don’t have reliable records to help settle the matter. While some disputes arise from malicious tenants attempting to evade their bills, a bulk of them are caused by poor record keeping. Failing to issue a payment receipts for instance, could result in confusion about the trail of rent payments made every month.
The best way to save yourself from such headache, especially when you’re dealing with multiple tenants, is having them pay online. You’ll be able to look back to every tenant’s payment history, paying keen attention to amounts paid, and amount still owed. Tenants can also log in through their portal to track a detailed breakdown of their payments, in terms of charges incurred, rent paid, and other utility payments. In the long run, such a systematic system of tracking considerably reduces the chances of any payment disputes.
Evidently, a comprehensive online rent payment system is not only beneficial to landlords and property managers, but also tenants.
The dynamics of individual apartment markets can often change significantly as time passes. Tremendous shifts have occurred in the past year in markets such as the San Francisco Bay Area, New York and Austin on the downward side, and Riverside, Las Vegas and Detroit on the upward side, according to Axiometrics apartment data.
Changes can also be found in smaller metros, seven of which were highlighted in last July’s article “7 Under the Radar Apartment Markets.” Given the changing dynamics of the market throughout the latter half of 2016 into 2017, we revisit our initial discussion on these cities, this time from more of an operator’s perspective.
Ann Arbor, MI
No metro among Axiometrics’ top 120 (based on number of units) exhibited stronger annual job growth than Ann Arbor, which has added jobs at a 5.6% clip as of November 2016, compared to 1.6% nationally. Comparing Ann Arbor’s employment base of 115,000 to the national base is a bit of an apples to oranges comparison, but the growth is remarkable compared even to similar-sized metros. By comparison, Deltona, FL had the second highest job growth (4.3%) with an employment base of 82,000.
The strong job growth may come with a slight caveat for prospective renters. Ann Arbor’s average rent as of December 2016 ($1,064) is higher than nearby MSAs Detroit ($919) and Warren ($966). Additionally, the exceptionally high occupancy rate (97.5%, second highest in the nation) means finding a place may prove somewhat challenging in the short term, apartment market research found.
In our initial write-up, we noted Athens’ robust annual job growth as of June 2016 (4.0%). Although job growth slowed to 3.5% as of November, that number is still well above the metro’s long-term average of 0.8%. That job growth has translated to rising occupancy rates. Annual average occupancy in 2016 was 95.9% – about 90 basis points (bps) above the annual average in 2015.
Being a smaller market, Athens has not received a substantial amount of new supply in recent years and only 282 units in 2016. The relative lack of new supply coupled with strong job growth typically translates to rising occupancy rates and increasing rent. That has certainly been the case in Athens. The annual average rent growth in 2016 (4.8%) was well above its long-term average of 0.3%.
Cape Coral, FL
Cape Coral has been one of the hottest apartment markets in the nation since 2013. Rent growth reached as high as 11.4% and 11.1% in 2014 and 2015, respectively, in response to job growth of 7.0% and 4.9%. A relatively small amount of new supply (1,205 units) between 2009 and 2014 – a byproduct of the housing bubble – also helped contribute to this swell in rent growth.
Annual job growth returned closer to its long-term average (2.8%) by recording 2.9% in November. The slowing job growth combined with the influx of new supply in 2015 and 2016 (2,466 new units in two years, compared to a total of 1,205 units in the previous six years) has caused rent growth to slow substantially in 2016. While Cape Coral’s annual average rent growth in 2016 was 5.1%, the December year-over-year rate was 1.1%, which may be indicate that the metro is returning to more sustainable performance levels.
Chattanooga’s 3.5% job growth in 2015 was the metro’s best rate dating to 1999, although annual job growth as of November 2016 has slowed to 1.3%. The strong job growth in 2015 was perfectly timed with a large influx of new supply (the 2015 inventory growth in Chattanooga was 3.6%) and occupancy rates held steady from 2015 to 2016 (both with an annual average of 95.5%).
The Chattanooga MSA has experienced steady population growth in recent years, increasing from 529,000 in 2010 to 548,000 in 2015, a 3.5% rate. Supply also has increased in accordance with this population growth, as a total of 1,635 new units have been delivered over the past two years. It will take some time to fully absorb new supply delivered in 2016, as forecasted annual average rent growth (1.8%) and occupancy rates (94.8%) will be down from previous years, but the outlook beyond 2017 looks favorable for Chattanooga.
Reno’s robust job-growth rate has continued, recording 4.1% in November after finishing 2015 at 4.3%. As one would expect, such strong job growth has helped rent growth considerably. What may be surprising is the level of rent growth Reno has experienced, as 2016 ended with an annual average rent growth of 11.7%. And even with new supply being added – 728 units in 2015 and 696 units in 2016 – the Reno MSA has been able to keep up with steady absorption rates.
It is expected that Reno, like most other metros, will eventually return to somewhat more sustainable levels. However, the economic push to diversify the local economy appears to be paying dividends for the time being, with the Professional and Business Services employment sector experiencing annual growth of 10.6% as of November 2016.
Not unlike the other Peach State metro on this list, Savannah has been fortunate to enjoy substantial job growth in 2015 and 2016. Savannah’s annual job growth as of November 2016 was 4.1%, higher than the already strong 3.7% of one year earlier. Job growth in both the Professional and Business Services and the Leisure and Hospitality sectors have been key drivers of this growth – the former adding jobs at a 12.6% annual rate and the latter at a 6.7% annual pace.
Savannah has been no stranger to new supply in recent years. A total of 343 units were added in 2016, but a staggering 775 units (an inventory growth of 3.4%) were added in 2015. While this new supply has been absorbed relatively well throughout 2015 and most of 2016, the sheer amount of new supply may cause rent growth to slow somewhat if job growth slows in 2017.
Discussions on Tacoma apartment performance are typically glazed over in favor of nearby Seattle. But as positive as the narrative has been for Seattle over the past two years, Tacoma’s is even more impressive, with annual average rent growth of 9.0% in 2016. This can be attributed to strong local job growth (2.7% in the 12 months ending November 2016) and relative affordability compared to Seattle (Tacoma’s rents are about $460 less than Seattle).
It goes without saying that 9.0% rent growth is not sustainable and moderation is to be expected. The good news for Tacoma is the landing will be soft. Rent growth in 2017 is forecast to average 5.8% throughout the year, and 2.8% in 2018 (essentially in line with its long-term average).
The post How 7 Under-the-Radar Apartment Markets Have Changed appeared first on AAOA.
- Apartment rents across the U.S. continued to edge higher in February as an uptick in some central and southern markets offset ongoing price drops in some of the country’s biggest coastal metros, according to a monthly report from online apartment finder Zumper.
- The Zumper National Rent Index nudged 0.4% higher from the month prior to a median price of $1,143 for a one-bedroom unit in February, while the rent for a two-bedroom apartment increased 0.7% to $1,358 during the period. February marks the third-straight month of rent growth for one bedrooms and the second month in a row for two bedroom units.
- Rent for a one bedroom in San Francisco fell 1.2% to $3,310 in February, while rents for a one bedroom in New York fell 2.3% to $2,910. Meanwhile, Baltimore recorded one of the biggest rises, with a 4.8% jump to $1,090 for a one bedroom.
The uptick in rents nationally is not slowing despite signs of a continued decline in higher-cost markets like San Francisco and New York as more units in those cities come online, softening price pressure there.
In August, RentCafe reported that apartment construction reached a 10-year high in 2015 with 320,000 units expected to hit the market in 2016. Cities adding the most units, however, were expected to see rental rates slow to 4.4% by the close of 2016 compared to 5.6% in 2015 and 6.3% in 2014.
A significant share of that slowdown is occurring in the upper tiers of the luxury market. Last month, The Wall Street Journal, citing a MPF Research study, noted that the overall rental market is set to see more than 378,000 new apartments built in 2017, nearly 35% ahead of the 20-year average, but that more supply is being added than ever before. If that pace continues, the slowdown could be felt throughout the category.
Meanwhile, builders like Toll Brothers’ City Living business have shifted their focus to the middle-luxury market in places like New York City, where it has noted growth potential for smaller-scale projects priced around $2,000 per square foot.
Even with the recent upward trend in mortgage rates, rising rents have caused some to consider purchasing a home instead. A report last month from Attom Data Solutions noted that buying a home was more affordable than renting one in two-thirds of U.S. housing markets.
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Is Real Estate the sleeper sector of 2017? Yes, it is.
- Reason #1: Millennials
- Reason #2: Rising Interest Rates (yes, “rising” rates!)
- Reason #3: Economic Expansion
- Bonus Round: President Trump
The real estate cycle does not follow the stock market cycle. There are times, of course, when the stocks of real estate-related firms will rise in concert with or decline as the rest of the market enters panic mode. But there have been just as many occasions in history where real estate marched to the beat of a different drummer.
In 2017, I believe the two will overlap – by which I mean we are most likely to see growth in corporate revenues and earnings, growth in workers’ wages, and an increase in tax receipts, creating a fine economic revival. This would, of itself, be excellent for our selected real estate firms but in addition to the economic expansion, there are three other reasons I believe we’ll see an exceptional market for the real estate firms we find most undervalued.
The first of these are the Millennials, the largest demographic bulge now that we Boomers are dying off at an alarming rate due to some disease called old age. Many Millennials have been quite happy to stay at home, often in the rooms they spent their childhood in, remodeled now to give them private access and a place for more of their stuff. Others have left that particular comfort and security behind but, like most of us when we are single, prefer to rent an apartment in urban areas where there are plenty of restaurants, bars, schools and easy and cheap public transit.
Here’s the thing. Even those of us who left home at 17 to make our way and the world and didn’t marry until 35, sooner or later, will frequently want to start a family. When that happens, even we want to find good schools, a house with a back yard where the kids can play and you can say yes when they beg for a puppy which they really believe they will take care of 100% of the time until they get it. When this transition happens in large numbers, people begin leaving their apartments behind and looking for single-family homes.
We no longer own any of the multi-family REITs we recommended a couple of years ago. They still enjoy great occupancy numbers – and their stock prices reflect it. We’d rather buy the shares of companies that will benefit from the demographic trend just beginning as Millennials fall in love, marry and – gasp! – move to the close-in suburbs or, if financially successful, stay in town but move to a plot or townhome of their own.
The second reason we like real estate right now are rising interest rates or, more specifically, the rate of rising rates. If interest rates were to rise 50 basis points this month and 50 more next month and 50 more in two more months, that would stifle this nascent opportunity we have for growth.
But the lessening of an onerous and questionable regulatory regime and the creation of American jobs should mean that less money will go to feed a self-perpetuating central government and more will be used to invest in new business and buying homes and furnishings. This is a change that takes time and involves some dislocation from government jobs back to the private sector.
It’s all good in that it moves us in the good direction but it means interest rates will likely rise at a pace just fast enough to make people think “I’d better take that mortgage now while rates are still low” – and allows them to do so over the weeks and months it takes to actually close on their home or complete their business loan from the bank. Rising rates are not bad for economic growth, and certainly not bad for real estate, as long as they rise slowly. I think 2017 will be such a sweet spot.US Fed Funds Rate 2007-2017
Finally, we have a president who made a lot of mistakes in real estate early on, seems to have learned from those mistakes, and done quite well since. Having seen his own net worth and those of others being secured by real estate investing, I think he will be favorably disposed to encourage more Americans, by a different regulatory structure, to form businesses and buy homes.
I imagine his administration might also be open to ideas that would not have been acceptable in the past. An example? Rather than provide housing for the less fortunate by placing them in tenement housing, might he be willing to provide them with loans to buy their own homes? There are derelict houses in scores of cities that get boarded up, then razed, leaving debris-strewn lots. Might these provide at least some respite from dark hallways and dangerous neighbors? Who knows what innovative strategies might be pursued if we change the thinking that the poor must be treated as wards of the state?
For all these reasons—Millennials movin’ on up, a better economy, a Goldilocks rising rate environment, and an administration willing to consider new ideas—we think 2017 will be very good for real estate. But which area of real estate is likely to do best? There are many candidates for this honor. Here are a few of ours:
Homebuilders: There are dozens of publicly-traded homebuilders serving the USA. In this case, we would favor those who build entry-level homes near the biggest urban areas. Most Wall Street analysts spend their time researching the latest numbers from the bigger firms with a wealthier clientele and more expensive homes since these buyers tend to provide the builder with a higher profit margin per home and a greater likelihood of securing financing. Such companies include Toll Brothers (NYSE:TOL), D.R. Horton (NYSE:DHI) and Meritage (NYSE:MTH).
The ones that are currently overlooked but are likely to see revenue and earnings rise as more Millennials begin buying homes and starting families include Beazer Homes (NYSE:BZH), PulteGroup (NYSE:PHM) and KB Home (NYSE:KBH). I’m still narrowing this large field down, but we will be buying one or more of these this month.
Commercial lenders: These are the firms that lend money to developers of retail, industrial, medical and other office, storage, distribution and warehousing firms. This is an example where many investors incorrectly assume that rising rates are bad for such firms. If we were at 10% and rates were rising to 12% I might agree. But from this depressed level, rising rates will simply be passed along to the corporate borrowers. As long as a developer is looking at a 9.5% annualized return over the life of the loan, the difference between borrowing at 5 1/8 and 5 3/8 isn’t enough to dissuade borrowing.
Most often organized as REITs, two of the leading lights in this area are Starwood Property (NYSE:STWD) and Ladder Capital Corp (NYSE:LADR). We own both in our personal accounts and in our Investors Edge ® Model Portfolio, available to all subscribers. Commercial loans are typically big loans with lots of what-ifs and how-abouts written into them. In Starwood’s case, it is managed by Starwood Capital and therefore affiliated with its home builder, regional mall operator, and Starwood Hotels. Starwood Capital is one of the largest asset managers in the world, which gives STWD access to information and deal flow that other firms may not have. We believe Ladder is particularly well-positioned for growth here.
Medical office facilities: There are a whole lot of different ways to play the graying of the developed world. Health care is likely to be one of the most profitable. But which part of health care? Ethical drugs from Big Pharma? Cutting-edge biotech? Robotic surgery? Medical devices? All very tempting, likely to have big returns – and big risks along the way. One of our preferred choices, however, is much more boring. And predictable. And, I believe, will be as much or more profitable.
You can sleep well at night and eat well the next morning with REITs that specialize in medical office facilities. As our populace ages and as we find good alternatives to our current health care system to bring more people into doctors’ offices, the REITs providing triple net lease (NNN) office space well-located on a hospital campus or very nearby will be in the catbird seat. There are quite a few companies in this side of the NNN business. We’ve narrowed down our choices to two we believe offer the best combination of safety, geographic positioning, dividend yield and future growth. They are Healthcare Realty Trust (NYSE:HR) and Physician’s Realty Trust (NYSE:DOC).
Lodging: As business improves, so does corporate travel. Hotels benefit. As the economy improves, people take vacations and enjoy weekend getaways. Hotels benefit. We have researched and owned a number of lodging companies’ stock over the past few years. Our most recent purchase was Sunstone Hotels (NYSE:SHO), first suggested for your due diligence in these pages back in September 2016. It’s up 12% since then but I still consider it fairly priced. We’ve also owned Hersha Hospitality (NYSE:HT) and Host Hotels & Resorts (NYSE:HST) and sold both of them at a nice profit. HST has been coming down the last couple of weeks so we may be snapping some more of it up as well.
The post Is Real Estate 2017’s Sleeper Sector? 4 Ways To Play It appeared first on AAOA.
The key to success for multi family building investors is to adopt a strategy that helps them control operation costs, and take steps that add value to their business. To achieve this objective, many multifamily construction companies opt for green certification program, that helps investors minimize the tax burden and add value to their property. Green certification allows multifamily housing investors get returns on their multifamily rental construction and development projects.
To help, the post discusses some factors you must consider when choosing a green certification program. Take a look.1. Certification Cost
Most certification programs, with the exception of Energy Star, involve some amount of fee for the certification. The verifier or the rater involved in the process also charge some fees, which usually varies from $ 100 to $ 400 per unit or more depending on the number of units, the need for allied (testing and consulting) services, and the number of site inspections. You may also have to install extra HVAC units, and opt for advanced air purifying systems for your multi-family housing property, along with some paperwork that may add to the total certification cost. It is, therefore, advisable to do a little homework about the fees involved in the process of green certification.2. Experienced Contractor
To meet certification requirements, you need to complete an extensive documentation process and may also need to bring several changes to your building’s layout. Opt for a program that most experts in your contractor’s team have already worked on, which in turn equips you with the knowledge of how to proceed. For example, if you’re planning to opt for a LEED certification make sure your contractor team’s include a green rater, who’ll survey the building to ensure that the design conforms with the norms underlined for specific certification. Investors interested in getting an Energy Star certification, must make sure that the team of their contractor has a certified architect and an HERS rater.3. Property Type and Size
The type of certification you can get for your multi-family building depends on its size and type. For example, LEEDS in most cases certifies new buildings . If you have an existing property, apply for certification only if the building is a mid rise (including four to six stories) and can be inspected by the certifier to check the insulation and moisture barriers. Owners who undertake gut rehab projects that involves peeling off and replacing the plaster of an old building are not eligible for certifications provided by Energy Star Multifamily High Rise Programs. Many certification programs also categorize buildings on the basis of their size and adopt different measures while providing certificates. It is advisable that you research about these parameters and ensure your building conforms to the standards before choosing a particular green certification program.4. Program Benefits
There are a range of benefits available to owners of green buildings. That said, not all projects qualify for these benefits. Some certifications, for instance help owners realize substantial tax gains, while others may help complete documentation required in many other programs. For example, the documents that you prepare when filing for an HERS certification can also help you apply for federal energy tax credits for low rise multifamily buildings. You must, therefore, evaluate major programs to ensure you get the benefits that you need the most.
Final few Words
No matter, whether you are looking for a green certification program for an existing building or a newly constructed one, it is important that you avail the services of an experienced multi family construction company that can help you evaluate these and other factors to suggest the best certification for your project. Make sure the contractor is well placed to carry out multi-family residential housing construction projects to meet green building certification requirements.
The post Multifamily Housing Properties: 4 Factors to Consider For Green Certification appeared first on AAOA.
Ah, baby boomers and millennials – could they be more different? The former are in or nearing retirement, while the other group is ambitiously rising in the workforce. Many millennials are waiting to marry and have kids, while their dear old boomer parents, quite possibly divorced by now, were comparatively eager to settle down in their twenties.
Is there any common ground between these two demographics who, rivaling in size, are so often pitted against one another? Research shows that in fact, yes, in many ways millennials and boomers are similar, not only in values but in other matters including finance, living situations, and even online presence.More Than Facebook Friends In Common
It’s become a cliché: the sentimental boomer mom or dad annoying or embarrassing their millennial kid with their clumsy Facebook attempts. Well, those days are just about over as boomers become more adept at using social media.
According to Pew Research Center, social media usage by older adults is increasing: as of November 2016, 64 percent of people between the ages of 50 and 64 are active on at least one social media site — up 14 percent from July 2015.
Like millennials, boomers are keen on sharing their experiences on social media — and to engage with user-generated and brand-curated content.
According to Olapic’s Consumer Trust Study Report, boomers and millennials trust user-generated content over content created by brands, to varying degrees. Thirty-six percent of boomers trust user-generated content, while 24 percent trust content created by brands; 47 percent of millennials trust user-generated content, with 25 percent trusting content created by brands.
Additionally, Olapic’s study found that boomers and millennials both prefer photos over other types of social content; and that 90 percent of boomers prefer Facebook to other social networking sites, while 25 percent of millennials prefer Instagram.
“My sense is that as smartphone penetration grows among boomers, they’re getting more into Facebook, mainly because it’s the most well-established [of the social media sites],” said Mark Potts, head of insights at Mindshare North America. “I think they’ll end up on Instagram, too. Like millennials, boomers show a desire for experiences, especially in the travel category. Both boomers and millennials are reactive in terms of wanting to go out and do something and get off the beaten path.”
As brands continue to strengthen their digital presence with social media ad campaigns, they may want to pay more attention to the presence of boomers.
“Our hypothesis is that brands are over-focused on millennials,” said Potts. “Take the spirits category, for instance: the majority of off-premise buyers are older consumers and yet the liquor brands tend to be focused on younger adult buyers. They should be [tailoring] their messaging to be more inclusive of older consumer groups.”Renting Houses — and Getting Roommates
Last year, home ownership rates in the U.S fell to a historic low, and while millennials — who are less likely to buy than previous generations — are partly to blame, the surging interest among boomers to rent rather than own mustn’t be discounted.
A 2015 study by the Joint Center for Housing Studies at Harvard University found that families or married couples ages 45-64 accounted for roughly twice the share of renter growth as households under the age of 35.
Like millennials, boomers are affected by increasing rents in “hot housing markets, such as San Francisco and L.A,” said Matt Hutchinson, director of SpareRoom. “With renters paying increasingly higher rents than ever before, both millennials and boomers are having to adjust their definition of affordability. For example, boomers who grew up with ‘the 30 percent rule,’ find the new standards of rental prices to be especially unaffordable.”
To manage high rent, baby boomers are increasingly open to living with roommates.
“Numerous boomers are using SpareRoom to find roommates,” said Hutchinson, noting spikes in major housing markets such as Dallas, Los Angeles, San Francisco, Seattle, and Philadelphia.
Interestingly, it’s not just money concerns that motivate boomers to take on a roomie or two. Sometimes, social factors are at play.
“[Like] millennials who choose to live with others for social reason, boomers do the same,” Hutchinson said. “In fact, we found that many boomers choose to share living accommodations even though they can afford to live alone.”In the Shadow of Student Loan Debt
Nationwide, student loan debt has topped $1.4 trillion, and is mounting every second. Millennials may be the group being hit the hardest, with recent research by Citizens Bank finding that 60 percent of college graduates aged 35 and under with student loans expect to be paying them off into their 40s — but boomers are also bearing the burden.
“Millennials get a lot of the press when it comes to the student loan crisis and how it will affect our futures, but there are boomers who are of retirement age and still dealing with student loans, many of which were probably taken out for a millennial child,” said Erin Lowry, author of ‘Broke Millennial: Stop Scraping by and Get Your Financial Life Together.’ “Concerns about paying off debt and being able to retire comfortably transcends generational divides.”
Lowry pointed to 2015 research by the Federal Reserve Bank of New York that shows 2.8 million borrowers were 60 years or older.
“A decade prior, it was only 700,000,” said Lowry.Making a Difference
Politically tense times tend to bring people of all ages together, and we’re seeing that profoundly right now — but when it comes to boomers and millennials, the political bond may be deeper than we realized.
Ashleigh Hansberger, co-founder and director of brand strategy at Motto, notes that when it comes to wanting to make a social difference, millennials and boomers are birds of a feather.
“Both generations have a sensitivity to important social and political causes,” Hansberger told NBC News.
“Optimistic boomers marched for civil rights in the sixties, while millennials were at the front of the Occupy movement and at the center of the Obama campaigns. Both generations showed up for the Women’s March on Washington to stand up for the same ideals, and both generations are ambitious, achievement-oriented, community-centered and opportunistic, and share a desire to make the world a better place.”Helping Each Other Learn
Traditionally, it’s up to the elder generation to give advice to younger ones, but with boomers and millennials, mentorship is a two-way street.
“Individuals in both generations look to the other for mentoring,” said Megan Gerhardt, professor of management and leadership at the Farmer School of Business at Miami University. “In the case of millennials, research shows that they prefer to seek advice and mentorship from boomers over Generation X, [and that] the road works both ways: We have seen the surprising development of ‘reverse mentoring,’ with millennials providing guidance and support to boomers in areas such as technology and social media.”
Boomer leaders who are open to the ideas and suggestions of millennials may benefit from allowing this generation to help improve workplace practices, and may also find this to be an effective way of creating opportunities to provide the guidance and feedback millennials need during the early stages of their career.”
Sounds like it’s time to put the millennials vs. boomers argument to bed and just agree that really, we’re not all that different, and maybe, just maybe, we’re all in this together.
The post Living Like Millennials? Baby Boomers Are Renting, Paying off Debt, and Have Roommates appeared first on AAOA.
The federal government allows landlords and rental property owners to deduct certain expenses on their taxes, which can offset their taxable income. Being able to take advantage of so many tax deductions is often what makes owning rental property a lucrative venture. The following are the most common tax deductions for landlords.*
You may only deduct these expenses if they are considered ordinary and necessary in the line of business:
- An expense is considered ordinary if it is “common and accepted” within your industry. For example, an ordinary expense for a landlord could be paying a contractor to fix a roof leak.
- An expense is considered necessary if it is “helpful and appropriate” to your business. For example, a necessary expense for a landlord could be buying Quicken Rental Property Manager, to more seamlessly keep track of all the numerous records a landlord must document.
- You must keep detailed and accurate records if you are going to claim any of the following as deductions on your taxes.
See Also: What Records Should I Keep for Tax Purposes?
- These are common tax deductions. They do not apply to every landlord, rental property owner, or property investor.*
For example, many of these deductions do not apply to those who rent out homes or condos which are also considered their residence. The property is considered a residence if you used it for personal use for greater than ‘X’ number of days in that year or ‘X’% of days that the property was rented out at fair market value. (These numbers will be listed in the current tax year’s Schedule E or you may consult with your accountant).
*You must consult your accountant or the IRS to determine the correct way to file your taxes and the proper deductions for your specific situation.
The depreciation expense is used for those things you have purchased for your business which have a useful life beyond the current tax year. For something to be considered depreciable, it has to meet three rules:
- Be expected to last for more than a year.
- Be valuable to your business in some way.
- Lose its value or wear out over time.
Some examples of depreciable assets are:
- The purchase price of the property (minus the value of the land).
- Improvements to the property such as new kitchen cabinets or a brand new roof.
- Shrubbery or fences.
- Furniture or appliances.
- Automobile for business use.
Different assets, such as a refrigerator and a building, will have different useful lives and there are different types of depreciation that can be used, such as straight line depreciation and accelerated depreciation. Consult the IRS or your accountant to determine the type of depreciation to use and the useful life of each asset you are trying to depreciate.2. Passive Activity Losses
Owning rental property is considered a passive activity. There are complex rules which apply to passive activities, but in short, they limit your ability to claim losses incurred in passive activity against other types of income.
There are certain exceptions:
- If you are considered a real estate professional (certain rules apply such as working at least 750 hours a year on real estate related activities), any rental real estate activities you participate in are not considered passive activities.
- If you are considered actively involved in your rental activity, you can deduct up to $25,000 in passive rental losses if you make under $100,000. Actively involved means you must have participated in making management decisions, such as finding tenants or deciding on the terms of your rentals, and your interest in the rental activity has never been less than 10% for the year. The amount you can deduct will decrease for every dollar your income is above $100,000. You will not be able to deduct any passive activity loss once your income reaches $150,000.
You may deduct the expense of repairs incurred in a given tax year. Repairs are considered work that is necessary to keep your property “in good working condition”. They do not add significant value to a property. Repairs include things such as painting. It is important to understand that all maintenance you do on your property is not considered repairs. The IRS makes a distinction between improvement and repairs. Improvements are seen as adding value to the property. Improvements cannot be deducted in full in the year they incurred. Rather they must be capitalized and depreciated over their useful life.4. Travel Expenses
Landlords are allowed to deduct certain local and long distance travel expenses that are business related. This does not include commuting expenses, meaning traveling from your home to your everyday office or place of business.
If you have your own automobile for local travel, you can take your deduction using either the standard mileage rate or using the actual expenses incurred, such as the cost of gasoline and maintenance on the vehicle. You can also deduct parking fees and tolls, interest on a car loan and any applicable registration or license fees and taxes.
If you do not have your own vehicle, you can deduct your public transportation expenses for business purposes.5. Interest
You can deduct the interest you have paid on business related expenses. For example: You can deduct the interest you have paid on mortgage payments or other business loans, car loan payments (but only the part used for business purposes), and the interest paid on credit cards used solely for business purposes.6. Home Office
You can take the home office deduction if you use a part of your home exclusively as an office for your business. You must conduct the majority of your business here to claim the deduction. The amount you can deduct depends on the percentage of your home that your home office takes up.7. Entertainment Costs
Unfortunately, entertainment costs do not refer to costs used to entertain yourself. Entertainment costs mean those incurred during business dealings. For example, taking a client to your country club or giving a potential investor two tickets to the theater are entertainment expenses.8. Legal and Professional Fees
If you hire a professional to do work for you, the fee you pay to them is deductible. This includes attorney fees, accountant fees, real estate agent fees, or fees paid to other professional advisers.9. Employee Compensation
If you hire someone to do work for you, you can deduct the wages you pay to them as business expenses. This includes the wages of both full time employees, such as a property manager or a live-in superintendent and part time employees, such as a contractor you hire once to fix a roof leak.10. Taxes
You can deduct your property taxes, real estate taxes, and sales tax on business related items that are not considered depreciable for the year. You can deduct fees for tax advice and the preparation of tax forms related to your rental real estate property. You cannot, however, deduct legal fees from defending title of the property, to recover property or to develop or improve property. You must add these types of fees to your property’s basis.11. Insurance
You can deduct the premiums you paid on most types of insurance including health, accident, causality, theft, flood, fire, liability, vehicle, and health insurance for your employees.12. Casualty Losses
If your property was damaged by a catastrophic event like a fire, you may be able to deduct some or all of the loss. The amount you can deduct will depend on your insurance and the amount of damage to the property.Other Common Tax Deductions Include:
- Advertising costs.
- Rent you paid to others.
- Telephone calls related to your rental property activities. However, you cannot deduct the first line for local service coming into your home. That is considered a personal line.
- You can credit or deduct expenses paid to make your property accessible to individuals with disabilities or the elderly.
- If your property is considered a commercial building, you can deduct costs to make it energy efficient.
*You should always consult the IRS or a certified accountant to decide what deductions are applicable to your specific situation.
Innovations in university housing set the bar high. As these college graduates enter the rental market, they’ve been primed to expect a similar level of sophistication in their new apartments.
As a growing number of Millennials embark on the post-college apartment hunt, their expectations for convenience and easy accessibility are high. High-tech innovations in university housing set the bar high, such as electronic access-control systems that allow access to dorm rooms with nothing more than a cell phone or smart card. As these college graduates enter the rental market, they’ve been primed to expect a similar level of sophistication in their new apartments.
That expectation has guided multifamily property owners to ensure their properties are integrating smart home amenities, not only to increase their property’s competitiveness, but also to offer a substantial return on investment by increasing security and mitigating some of the biggest rental management challenges.
Having been steeped in technology since birth, Millennials have a much greater appreciation for the level of convenience it can provide in everyday life. Colleges and universities recognized this trend several years ago and have been showcasing the security features of their campus’ electronic access control systems as part of their efforts to recruit new students and reassure nervous parents.
It’s no surprise this tech-savvy generation is keenly aware of the role technology plays in enhancing security. In a recent Schlage survey, 61 percent of Millennials said that they would rent an apartment specifically because of its electronic access-control features. What is surprising is the level of importance it occupies compared to more traditional amenities. The same survey found nearly half (44 percent) would be willing to give up a parking space in favor of living in a “high-tech” apartment. And they’re willing to pay a premium for these conveniences as well—up to 20 percent more, which can equate to hundreds of dollars each month.
Improving Convenience for All
Equipping a facility with smart technology will not only make it more appealing to this upcoming generation of renters, it will also provide substantial ROI to property owners and managers. With high turnover rates common as Millennials enter the workforce and relocate, keyless solutions allow staff to manage access to the lock without having to be onsite. They can revoke the previous resident’s access and set up a new resident’s credentials remotely using a mobile device or computer, without ever going near the physical lock. This eliminates rekeying completely, and saves valuable time and money. Keyless locks can also be designed with open integration capabilities, making them easy to integrate with existing property management systems so only one system is needed.
Perhaps the most important benefit of installing smart locks is their ability to enhance a property’s level of security. Traditional locks can be picked and bumped, and keys can be stolen or borrowed to create replicas. In these cases, an entirely new lock and key must be installed on the door to restore safety and security. This process is both time-consuming and expensive. However, smart locks without cylinders are fully pick- and bump-proof because there’s no key—which means there are also no keys to copy or keep track of. Electronic smart credentials can quickly and easily be added or removed from the property management access control system.
People from all walks of life are turning to their smartphones for basic tasks, but Millennials are by far the most technologically active. While it’s fairly common to use a smartphone to call for a ride or track exercise, Millennials are already using them to request maintenance, pay rent and even renew a lease. It seems logical, then, that keys are steadily being replaced with the one device they rarely lose track of—their smartphone.
Once experienced, keyless locks become expected. Data shows that once a Millennial resident has experienced the convenience of a keyless lock, they prefer them over mechanical locks and tend to worry less about safety and lock-outs.
At the end of the day, electronic locks are one of the simplest ways to begin integrating more high-tech convenience into your property to attract a growing audience of millennials who have come to expect it. With more than 40 percent of students surveyed already using a keycard or fob instead of a traditional key, it’s expected the multi-family market will experience an influx of resident applicants who prefer the benefits of a keyless lock. Those properties that have upgraded their facilities with this feature will prove much more competitive in recruiting and retaining residents.
The post Millennial Renters Look for Convenience, High-Tech Amenities appeared first on AAOA.
The good news for renters is that landlords today are less likely to raise the rent by a lot. The bad news is, rents are still high and unlikely to fall anytime soon.
As with all real estate, though, rents are local, and some unexpected markets are heating up, while some hot ones are cooling off.
Austin, Texas, for example, is one of the most affordable rental markets in the nation, even though home prices there are rising fast. The reason is that job and wage growth are strong in the new tech hub, and rents are still comparatively low. It would take just 23 percent of the average resident’s monthly household income to pay the average monthly rent, according to a new study by AppFolio, an apartment management company that commissioned data from real estate research firm Axiometrics.
The most affordable city for apartment renters, according to the study, is Las Vegas. That is not surprising, given that the city was the epicenter of the foreclosure crisis, and buying a home there is still quite affordable. More homebuyers means less rental demand and therefore lower rent prices. Rounding out the top five cheapest markets are Indianapolis, Phoenix and Atlanta.
“Supply is finally catching up with demand in many markets, so rent growth is starting to slow. It took a few years extra after the recession to get to this point because during the recession construction effectively stopped, while renter demand was still growing,” said Nathaniel Kunes, vice-president of product development at AppFolio.
On the opposite end of the spectrum, New York and Miami are the most “rent-burdened” cities in the nation. Residents there pay more than half of their monthly incomes on housing alone. Boston, Los Angeles and San Francisco round out the worst market’s for rental affordability.
The toughest markets for renters are not exactly a surprise, but there are some unexpected markets where rents are heating up fast and renters are becoming increasingly stretched. These markets are in the Midwest, where demand is rising and supply is relatively stagnant.
“The Midwest is hot right now because it is one of the few markets where rent prices had been dropping. This was due to job loss and oversupply for the last few years in this market,” said Kunes. “Now people are migrating back into the Midwest and jobs are coming back. Rents are still quite affordable in the Midwest compared to the rest of the country.”
But they are rising. Minneapolis-St. Paul, for example, is seeing 4 percent rent growth, twice the growth of Miami rents. Indianapolis is also seeing rents rise faster than Boston. New York may one of the least affordable markets, but rents are actually falling there, just under 1 percent annually.
The post These cities are the most and least affordable for renters appeared first on AAOA.
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