American Apartment Owners Association

Health-Minded Affordable Housing Design Boosts Tenant Well-Being: Developer

Thu, 02/02/2017 - 10:49pm

BROOKLYN — A developer in an asthma-ridden section of the South Bronx noticed something unusual about one of their smoke-free, eco-friendly affordable housing buildings in the area.

The Eltona, Blue Sea Development’s first LEED Platinum building, had a lower rate of rent delinquency than other buildings in the company’s portfolio, according to firm co-founder Les Bluestone, who has been upping the ante when it comes to design features focusing on physical, social and mental health since constructing that building in 2009.

“Rent delinquencies are still not uncommon in our buildings, but we did notice that as a percentage, our first LEED Platinum building,” he said, “had a lower rate of delinquency because of medical reasons.”

Blue Sea hopes its latest project, Ocean Hill-Brownsville’s Prospect Plaza, will provide a model for affordable housing, showing that healthier buildings lead to healthier residents and better financial outcomes for developers — and the firm invited researchers from the Icahn School of Medicine at Mount Sinai to gather evidence.

“It is common knowledge that low-income populations are the most vulnerable to medical issues for a host of reasons and that it doesn’t take much to put a family into arrears when it comes to medical expenses,” Bluestone said. “Paid [sick] leave in New York City now helps, but actual doctor and medication expenses are still out of reach for many low-income or formerly homeless families.”

Prospect Plaza — part of which opened this summer — will eventually have 400 units spanning five buildings across three blocks is the first building to be certified as part of the Active Design Verified initiative, created by the New York-based nonprofit Center for Active Design and the the Washington, D.C.-based Partnership for a Healthier America (whose honorary chair is Michelle Obama).

The initiative calls for design elements that encourage physical activity in everyday use, through on-site exercise facilities and well-designed stairs to get people moving, along with incorporating free or low-cost programming in the building to support health and social well-being, like gardening classes. In exchange, affordable housing developers receive training and technical assistance.

The program’s creators say an emphasis on wellness is especially important in neighborhoods where access to safe streets, healthy food and well-maintained playgrounds are harder to come by.

At Prospect Plaza, there’s a community garden with raised beds for tenants to tend. The strawberries, blueberries and raspberries the building planted in the area are part of the overall landscaping design, “adding to the fresh, pesticide-free produce available,” Bluestone said.

Stairwells are well-lit, with plenty of sunlight coming in and speaker systems piping in music to encourage more residents to use the stairs instead of the elevator. There are outdoor bike racks and long-term bike storage indoors. A 24,000-square-foot supermarket is part of the complex.

There’s also an indoor fitness center across the street at the second of three sites in the development that will be open in a few weeks to all residents, at no charge, giving tenants the chance to exercise in all weather conditions.

Two separate outdoor recreational areas, totaling roughly 8,000 square feet, have fitness and playground equipment for children and adults to use side-by-side.

“It’s important for parents to have the opportunity to exercise or play alongside their children to set an example — and maybe, more accurately, for the children to inspire or cajole their parents to join in,” Bluestone said. “We also installed barbecue grills and tables so that there would be yet another opportunity for a family to be active. If we could figure out a way to block cellphone service, it would be a home run.”

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US homeownership rate inches up in Q4

Thu, 02/02/2017 - 10:46pm
Dive Brief:
  • The U.S. homeownership rate rose slightly to 63.7% in the fourth quarter from 63.5% in the previous quarter and is roughly on par with the same period a year ago (63.8%), according to data from the U.S. Census Bureau released today.
  • During the period, 55.6% of the 1.4 million total housing units were owner-occupied while 31.7% were renters, consistent with the owner (55.7%) and renter (31.5%) breakdown in the fourth quarter of 2015.
  • The Midwest continued to report the largest percentage of homeowners (68.4%) of the major U.S. regions while the West recorded the lowest (59%). The share of homeowners under 35 years old dipped from 35.2% in the third quarter to 34.7% in the fourth quarter.
Dive Insight:

The U.S. homeownership rate has bounced back from a 51-year low in the second quarter of 2016 and has held steady for the remainder of the year. Of the 1.2 million households occupied during the period, more were owners (63.7%) than were renters (36.2%), a positive sign for housing’s recovery. The cycle high homeownership rate was 69.1% in the first quarter of 2005.

Other housing market reports out this week paint a more complex picture of the sector’s recovery as elevated mortgage rates and continued home-price increases challenge buyers, while a skilled-labor shortage and high lot development costs have raised the stakes for builders looking to get it on growing demand.

A strong month for multifamily pushed housing starts up 11.3% in December, but the single-family category recorded a 4% drop for the month to a rate of 795,000 starts. That coincided with a 10.4% decline in new-home sales for the month to a rate of 563,000, which is 0.4% off the year-earlier mark.

Existing-home sales are facing a similar predicament, falling 2.8% in December to an adjusted annual rate of 5.49 million and facing a 3.6-month supply of unsold properties in the pipeline.

Limited supply and rising prices — together an indicator of growing demand — have builders optimistic. The National Association of Home Builders/Wells Fargo Housing Market Index fell two points in January to a mark of 67, well above the break-even score of 50, while its measures of current and future sales expectations also slipped but came in above 70.

 

Source: constructiondive.com

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Micro-Unit Trend Spreads to Smaller Markets

Thu, 02/02/2017 - 10:44pm

Workers are building a new community of micro-apartments in Austin, Texas. The 138 units at Indie Apartments will range from 350-sq.-ft. studios to 520-sq.-ft. two-bedroom apartments.

“Micro-units are spreading to secondary markets, but I would say slowly,” says Ty Puckett, executive vice president at Transwestern Development Co. Transwestern is currently building the Indie Apartments in Austin and a second micro-unit development in Phoenix.

Micro-units are much smaller than traditional apartments—often containing less than 500 sq. ft. per unit. For many decades, few developers thought to build apartments that small, except as single-room occupancy properties for very low-income people. Today, however, with a apartment vacancies in the low single digits in many metros, developers are investing in such properties, often including fancy amenity spaces to offset the very small living spaces.

“The building activity in this product niche is mostly in the most expensive coastal markets. It appears to us that Seattle has the most of these units, over San Francisco or New York,” says Greg Willett, chief economist for RealPage Inc., a provider of property management software and solutions.

Micro-units perform well

So far, these tiny apartments have performed more or less in line with conventional apartments nearby. “The micro units delivered to date have leased well,” says Willett. “But performances aren’t notably different than for same-neighborhood properties with somewhat larger units.”

However, the micro units seem to serve a different purpose than conventional units. Renters don’t stay as long, so they have higher turnover than conventional apartments. “There’s a lower propensity to renew expiring leases in micro units than in more conventional product. If renters can afford more space, most appear to prefer that option,” says Willett.

For example, Indie Apartments’ gross monthly rent is expected to be 20 percent below that of class-A apartments, making it a good choice for anyone undergoing a life transition, according to the developer.

Developers are now trying to replicate the success of micro-apartment projects in smaller markets. “The demand in secondary markets is somewhat unproven, but with good locations and competitive prices the projects are compelling,” says Puckett.

The trend towards micro apartments is part of a much larger trend as more households live in smaller spaces in urban areas. Developer are building smaller apartments overall.

“The average unit size in this construction cycle has come down a little bit, about 50 square feet,” says Willett. This is largely because developers are building a larger share of their new projects in urban areas than in previous construction cycles. To make these projects pencil out, developers typically need to squeeze more apartments onto expensive urban sites. That will tend to push down typical unit size a little, says Willet.

The average size of new apartments may rise again soon. But that will also be the result of the popularity of urban areas. In this case, a number of Baby Boomers are expected to downsize from single-family houses and move into rental apartments.

“Developers are starting to think about downsizing Baby Boomers as a growing portion of the renter audience,” says Willett. Developers like the Bozzuto Group, based in Greenbelt, Md., are now planning to build larger apartments to attract these older renters.

In all of these cases, households are willing to squeeze into smaller living spaces than they may have been used to in exchange for amenities like a great location.

Source: nreionline.com

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NMHC: Trump Ushers in Optimism and Caution

Thu, 02/02/2017 - 10:39pm

Real estate industry veterans and public policy pros came together at the National Multifamily Housing Conference’s annual meeting to discuss the impact of the new administration on multifamily.

Mitt Romney noted, paraphrasing French sociologist Auguste Comte, that demographics are destiny, and though the former Republican presidential candidate was talking about the U.S. economy, that sentiment forms the basis for the optimism surrounding the multifamily industry headed into 2017.

Romney’s fellow panelists at last week’s National Multifamily Housing Conference annual meeting in San Diego referenced the healthy demographic position in which the industry finds itself. Favorable fundamentals include the growing number of Millennials in the prime 20-34-year-old renter group, the increasing number of Baby Boomers with an escalating propensity to rent, urbanization and flattening of homeownership trends.

Given these promising demand trends that are expected to continue for at least a few more years in conjunction with the expected leveling of supply after 2017, the multifamily occupancy rate should continue at high levels in most metros. The overall performance of the industry, therefore, will rest on the strength of the capital markets and global economy.

In those areas, too, the trends look favorable. Property values have skyrocketed since the last downturn, as equity capital from around the world flows into the sector and interest rates remain low. With some exceptions, such as properties in tertiary markets, debt capital is also readily available as lenders view apartments as a relatively safe asset class. Unlike other commercial property types, multifamily has a unique source of debt capital, the government-sponsored enterprises (GSEs), that have been lending at record levels. However, the GSEs must be reformed, especially since by law their profits are being diverted into the U.S. Treasury and they will have no capital left in 2018.

The real estate industry is largely in tune with most of the Trump administration’s economic priorities, such as regulatory relief for banks, lower taxes and tax reform. There is also the view that Trump won’t do anything to harm the industry in which he made his fortune. “(Trump) believes a strong real estate economy is a strong U.S. economy,” said Ella Shaw Neyland, president of Steadfast Companies, a real estate management firm based in Irvine, Calif.

However, there are concerns, even about the prospect for strong growth, which could bring about inflation and higher interest rates. “Our business is great at two to three percent GDP. Our business is not great at four to five percent GDP, because people do stupid things,” said Willy Walker, chairman and chief executive officer of advisory firm Walker & Dunlop.

Panelists at NMHC expressed an underlying uneasiness about the impact of the president’s impulsiveness. Former Secretary of State Condoleezza Rice, for example, joked that Trump’s Twitter account be converted into a placebo. Romney suggested that Trump will have to change his style in order to maintain the political capital necessary to implement his policy priorities.

What’s more, there are a number of policy issues that will have a major impact on the industry. While details about legislation are still unclear, there are rumors that tax reform proposals will address  important issues, including carried interest, depreciation and like exchanges. GSE reform could also have a substantial impact on the availability of debt for multifamily properties. Treasury Secretary nominee Steve Mnuchin, a former Goldman Sachs partner and hedge fund manager, was quoted in an interview last month that he wanted to return Fannie Mae and Freddie Mac to private status, which fueled speculations about the administration’s intent. Some Congressional Republicans are proposing the elimination of the federal government’s guarantee of housing loans.

Walker tried to douse fears of imminent change to the GSE mandate. He said he recently spoke to Mnuchin, and the nominee “understands the need for Fannie and Freddie” and “understands the need for the government guarantee.” Walker also said GSE reform was far down on the list of Trump’s priorities, and there will most likely be continued inaction on a reform plan for another year or two. “The agencies are not going anywhere,” he said.

Another major concern centers around foreign policy, as Trump’s stringent immigration policies and overtures toward Russian President Vladimir Putin run counter to the ideology the Republican party has held during the past few decades.

Noting that “most of us in the room think free trade is important,” Rice said, “I hope we don’t close our markets, or close immigration and go back to a place where we are protectionist, fearful of the other.” Yet, “Trump voters believe it cost them their jobs and future,” she said, expressing concern about where his populist constituents will turn if Trump does not deliver on his promises.

Trump’s overtures to Putin were of concern for both Romney and Rice, who called the Russian leader a “megalomaniac.” Rice had several conversations with Putin, and recounted, “He would say, ‘Condi, you know us, Russia is always great when it is ruled by great men. … He thinks he is reuniting the Russian people in greatness.’”

Asked about the election hacking by the Russian government, Rice said that Putin likes to “mess with us,” but said the U.S. should be cautious about responding. “We should say, ‘We’ll find out and make you pay at the time of our choosing.’ We don’t want a cyber MAD,” she said, referring to the Cold War strategy of avoiding nuclear war called Mutually Assured Destruction.

Romney’s list of challenges facing the U.S. included poverty and stagnating wages, declines in manufacturing employment, climate change and the emergence of more activity from China and Russia on the international scene. America’s strengths, he said, included demographics, energy and technology. A large segment of the U.S. population is in their productive work years, unlike much of the developed world where population is dominated by older citizens. He also noted that the U.S. has cheap natural gas, which is a big advantage over the parts of the world that don’t.

Ultimately, commercial real estate players have a lot of reasons to be optimistic, but with so many unknowns about expected changes in policy, some might pause until they can ascertain the lay of the land.

“We’re definitely seeing a high degree of ‘wait and see,’ ” said Hessam Nadji, president and chief executive officer of brokerage at Marcus & Millichap. Nadji noted that up until election night, few expected a Trump victory and many were expecting more of the same policies of the last eight years. “All of a sudden, there are all sorts of impacts that weren’t there before,” he said.

 

Source: multihousingnews.com

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Here’s why you could have property tax liens in your portfolio

Thu, 02/02/2017 - 10:34pm

Bennie Smith Jr. was looking for a way to build his wealth quickly when he bid on two property tax liens in Decatur, Illinois.

He bought one on a vacant home in his former neighborhood for about $5,000 and another on a vacant lot for $600. His plan was to take over the properties if their owners did not pay the lien within a designated amount of time. He wound up getting ownership of the first one, and earned about $100 on the vacant lot a couple of weeks after the sale, when the owner paid to redeem it.

A tax lien is placed on a property by a municipality or city when the owner fails to pay real estate taxes, as well as water and sewage bills, in a timely manner.

More than $14 billion in property taxes goes unpaid across the United States and, of the 30 states and District of Columbia that sell tax liens, $4.2 billion of that is sold to private investors, according to the National Tax Lien Association, a nonprofit that represents tax lien investors, governments and servicers.

The benefit for governments is that they get the money owed immediately, while the buyer reaps the benefits of interest and penalty fees if the homeowners redeem the property. If they do not, buyers of the lien can foreclose.

While TV infomercials and real estate guru books have lauded returns and the opportunity to score a property for next to nothing, neither is likely, said Brad Westover, executive director of the NTLA. Yet, for the savvy investor aware of the many risks, tax liens can be a great way to diversify a portfolio.

“As long as you are smart and invest safely, you will be fine,” he said.

On the other hand, Derek Tharp, a financial advisor for Conscious Capital Private Wealth Management in Cedar Rapids, Iowa, said he wouldn’t recommend tax liens for most investors. “That’s not to say that I wouldn’t advise a client on the use of tax liens if they had the necessary knowledge, time and resources, but I just haven’t found that to be the case for most people,” he said.

Here what you need to know if you want to dabble in tax liens:

Figure the math carefully

While a municipality’s established interest rates and penalties could top 20 percent annually, the rates in some districts are actually often bid down in each sale to as low as 6 percent to 9 percent, Westover says. In other cases, the winning bid maybe awarded to the person who bids for the lowest percentage of ownership in the event of an eventual forced sale, or to the person who bids the highest on the lien, over and above the amount owed.

In addition, a bank holding a mortgage is likely to step in and pay off the lien, especially for a very valuable property, rather than lose the home. Given that, the best investments often are on properties owned free and clear.

Alex Feick, managing director of Denver-based Paragon Capital Management, said he once put together a fund to invest in tax liens but soon discovered that the market was too small and the yields unattractive because people were bidding over the amount owed on the property, which brought down the rate of return.

“Much of this irrational behavior was predicated on the belief that bidders could eventually end up with the property … an event that is quite rare,” Feick said.

Only about 6 percent of delinquent tax liens wind up in foreclosure, and of those, only one half of 1 percent are successful in that they are not redeemed [before the foreclosure is complete], according to the NTLA’s Westover.

If you do wind up foreclosing on a property, consider the costs of repairs and unknown problems. Smith set aside $10,000 for his property’s rehab, but he contacted the family of the previous owners to gather information on its condition. (The family was willing to let it go in the sale.)

Tharp at Conscious Capital Private Wealth Management says some municipalities charge bidders certificate and redemption fees, along with fees required to serve the owners notice of the sale. Westover of the NTLA advises bidders to divide the face amount of the delinquent tax lien by the market value of the property. It should be no more than 4 percent.

Have a thick skin

“I no longer invest in tax liens for several reasons,” said Tharp. “The primary reason is an ethical concern.

“These aren’t real investments that generate benefit for society the way that most companies and entrepreneurs do,” he added, citing lien sales generally as the result of people having fallen on hard times.

If a tax lien on an occupied property needs to be foreclosed, you have to be willing to kick the occupants out, possibly even seeking the professional help of a property manager or attorney, which could cost thousands of dollars (though that’s generally refunded to the lien holder if the owner redeems the property before the foreclosure is complete).

Do your research

Tax lien investments are not for novice investors and can be far from lucrative, financial advisors agree.

There’s a “huge amount of due diligence that needs to be done on the front end in order to ensure big mistakes are not made,” Tharp said, because sometimes the value of the parcel may actually be worth less than the tax liability, or the property could have other liens against it that the purchaser must pay to clear title.

Know when to call in professionals

If tax lien investing interests you, consider a more passive investment with a professional who does it all day, every day. It’s not a hobby. More than 80 percent of tax liens purchased in the U.S. are by NTLA members, which include tax lien investing fund managers.

“A fund will [generally] yield higher because you won’t have the same losses or write-offs” that improve net gains, said the NTLA’s Westover.

Source: cnbc.com

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Rising Interest Rates Likely to Cool Net Lease Prices

Thu, 02/02/2017 - 10:30pm

Buyers vying for net lease investment properties have been paying top dollar to win deals. But an increase in interest rates is already causing cap rates to creep higher and there could be more price adjustments ahead for 2017.

“Going into this year, the big question mark is going to be how much the recent rise in interest rates is going to affect the single tenant market, as well as investment sales overall,” says Britton Burdette, a director at the Stan Johnson Co. in Atlanta. During the fourth quarter, the 10-year Treasury yield increased about 80 basis points from 1.63 percent at the start of October to 2.45 at year-end and it continues to hover around that same level.

Pricing on net lease assets has been at all-time highs for the past two to three years, and many in the industry believe that higher interest rates will likely have a cooling effect on pricing and cap rates. In fact, there are signs a correction is already starting to occur. According to a fourth quarter report released by the brokerage firm The Boulder Group, cap rates for the single tenant net lease sector increased or remained the same for all three asset classes during the fourth quarter. Retail cap rates climbed a slight 9 basis points to 6.19 percent—their first increase since the third quarter of 2013. Cap rates for the industrial sector increased by 3 basis points to 7.17 percent, while cap rates in the office sector remained unchanged at 7.08 percent.

It is still a bit early to gauge the full impact of higher interest rates. “Overall, it hasn’t had a huge effect on demand or pricing quite yet. But that is something that we certainly expect to see a little later down the road,” says Gary Chou, first vice president and senior director at brokerage firm Matthews Real Estate Investment Services in Los Angeles.

For example, among the 40 to 50 active deals that Chou is working on currently, the increase in interest rates has only had an impact on one or two deals. There are a couple deals coming together where the buyer came in very aggressive and then re-evaluated their offer due to higher financing costs, he adds. “So it has had an effect, but it hasn’t had a drastic effect yet,” he says.

It also remains to be seen whether a shift in pricing expectations will slow sales activity. “Buyer demand is still very strong. There is still a lot of liquidity on the sidelines chasing solid assets,” says Chou. That being said, single tenant transaction volume has declined compared to the near record highs achieved in 2015. That could be a reflection of the bull run the market has been on in recent years, with a lot of opportunistic sellers that have already pulled the trigger and completed transactions.

Last year was another strong year for single tenant investment sales, with total transactions of $54.1 billion—on par with 2014. However, that volume fell short of 2015 by about 16 percent, according to research firm Real Capital Analytics (RCA), which tracks single tenant property sales valued at $2.5 million and higher.

Going forward, there could be some disconnect on pricing between buyers and sellers due to higher interest rates. Yet buyer demand remains strong even if yield parameters are a little bit different, says Burdette. Single tenant industrial assets are a highly sought after property type right now, especially properties that are e-commerce-related, Burdette adds. Private capital buyers are also being very aggressive on single tenant office properties.

Headlines about ongoing store closings have created a drag on retail sales. For example, Ruby Tuesday’s announced last year that it would shutter 95 stores across the country. Those announcements of restaurants and retailers that are closing stores, especially at a time when the economy is doing well, is going to make landlords and investors uneasy, says Chou. The retail sector of the net lease market saw the biggest decline in sales in 2016. Single tenant retail property sales dropped 24 percent last year to total $14.9 billion, according to RCA.

REIT buyers have been more disciplined of late, but individual 1031 investors remain very active in pursuing retail properties. And there are opportunistic buyers that are bidding on even distressed credit tenants with a focus on acquiring the solid underlying real estate. Other hot spots of activity in the retail sector are dollar stores and quick service restaurant chains—both of which are providing an ample supply of for-sale inventory due to continued expansion activity.

“I still think it is going to be a very active market in 2017,” says Burdette. There may be some slight upticks in cap rates, but overall cap rates are likely to hold relatively firm, he says. “Despite where cap rates are going to be or not be, we still see a very, very robust buyer demand still out in the market today,” he adds.

 

Source: nreionline.com

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How Your Apartment Community Can Win Big on Craigslist

Thu, 02/02/2017 - 10:24pm

Posting to Craigslist is, theoretically, a relatively easy task for most leasing agents and property managers. But what we have seen as we have analyzed hundreds of communities’ marketing strategies over the past several years is that many communities are not utilizing Craigslist as effectively as they could.

Part of the issue is that sometimes we rush through posting and end up making mistakes that we wouldn’t make if we were a bit more careful. In other cases, it’s a consequence of not understanding how Craigslist works or how prospects use Craigslist.

In this post we want to lay out a fairly simple, step-by-step strategy for Craigslist apartment marketing.

Step One: Figure out what city to post in.

It might be better to call this Step Zero because for most communities this will be a super easy step. You just post in whatever city’s listings you’re located in. So if you are in Omaha, NE you post on omaha.craigslist.org.

But for communities in small towns, it’s not always clear what city they should be using. For those communities, the first thing to do is to find a list of all the cities that have a Craigslist site in their state and figure out which one they are closest to.

In some cases, there may be some ambiguity if two cities are both about the same distance. In that case, the best thing to do is do a search for their town on both city’s pages. So if you’re in Denison IA, for example, you might want to search on both Ames and Sioux City’s Craigslist pages, because both are between 90 minutes and two hours away.

To do that, you would just navigate to ames.craigslist.org and siouxcity.craigslist.org, go to apartment listings, and search “denison.” We would recommend posting to whichever page appears to have other listings for your town.

Step Two: Set up a posting schedule.

We aren’t going to talk about the best times to post to Craigslist in this post, but if you’re curious about that we have done some extensive work on that question.

For now, we simply want to make the point that you should have a posting schedule. There are several benefits to creating a schedule for posting.

  • Avoid over-posting
  • Avoid green ghosting
  • Test what post times are most effective
  • Vary which floorplans are shared and at what frequency

The schedule is a great tool for guaranteeing that you do not overpost, thereby violating Craigslist’s terms of abuse and getting your community green ghosted. If you vary the times you post within the schedule–so you post floorplan A during late morning hours one day and then during early evening hours two days later—you can also get a sense of what times might get the best response in your area.

Step three: Shoot photos.

Lately we’ve seen more communities posting ads that don’t have any photos in them. This, as Gob Bluth would say, is a huge mistake. Due to the changes implemented last fall, all Craigslist posts now basically look the same. Communities are no longer able to add unique HTML templates to their posts to make their ads stand out.

What this means is that it is harder than ever to differentiate your community from your competitors on Craigslist. That, in turn, means that you cannot afford to neglect photography when posting to Craigslist.

Also, make sure that the photos you’re posting are the sort that will help a prospect move down the sales funnel. A photo of your sign out front or of the clubhouse probably won’t do that because they aren’t leasing because of the sign or even because of the clubhouse. If they sign a lease, it will be because they like the specific apartment you’re offering–so show that to them front-and-center.

Step four: Edit photos.

This is a related point, but an important one. In a day when there are all sorts of free image editors out there (and all kinds of great cameras), there’s no reason to be posting blurry photos or dark photos or washed out photos as part of your online listing.

Making basic color corrections and retouches is extremely easy in most image editing applications, so please don’t think you need to splash the cash on Photoshop or some similar high-end image editor. A free, basic image editor should serve your purposes 99% of the time. Tools like PicMonkey, iPhoto, or Google Photos could all be viable options for your community.

Step five: Write marketing copy and format the post.

The main thing with the copy is to keep it focused, concise, and peppered with information that is useful rather than marketing fluff. Number of bedrooms, number of bathrooms, square footage, location, pet policy, parking, etc. Those are the things people want to know. So make sure you share that information in the copy. The other big thing is to make sure that you include the phone number of your community. Yes, the new changes on Craigslist mean that users have to click the “click for more info” box to see it, but you should still include the phone number.

One other point to consider: You might want to slightly increase the point size of the phone number or website (on which more in a moment) or use a bulleted list to make the information stand out more. You can find instructions online for creating a bulleted list and adjusting font size.

Step six: Link to the page on your site that provides the most information about the floorplan being advertised.

This is a really key point and, unfortunately, is not a common practice in our industry. When Craigslist started removing clickable links from their posts, we saw a lot of communities stop posting links entirely.

But this is a mistake because even if the link is not clickable, prospects can still copy and paste the link into their URL bar and get to your site that way. And as our own experience with our clients demonstrates, a lot of Craigslist users will do precisely that.

The key point is to make sure you’re sending Craigslist users to a site that is relevant to their needs and provides them with the information they’re looking for. Ideally, this will be a floorplan-specific landing page. But in the absence of that, find the page on your site that gives them the best information about the specific floorplan you’re posting about and send them there.

If you follow these steps, then you should be on your way to a more successful marketing experience with Craigslist.

 

Originally published on www.Rentping.com. Rentping is an apartment marketing agency focused on providing all the essential online apartment marketing services and tools. 

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Renting To Felons: What You Need To Know To Offer Felon-Friendly Housing

Wed, 02/01/2017 - 9:21am

There are over 70 million Americans with arrest records. By providing rentals for felons, you can increase the pool of renters for your apartments while enjoying the satisfaction of knowing that you are helping an ex-convict get back on his or her feet. Yet there’s a bigger reason to rent to felons: By denying potential renters for criminal records, you risk getting sued for violating the Fair Housing Act. Learn how to avoid a lawsuit over housing for ex-felons, while protecting the safety of your other tenants.

Why Rent to Felons?

The U.S. Department of Housing and Urban Development (HUD) has pledged to “use the full force of the law” to protect the rights of ex-cons to housing after serving time for crimes. Under the new HUD policy, landlords may still ask tenants about their criminal history, such as whether they were convicted of a crime or what crime they committed. However, landlords do run the risk when taking this information into account that their denial of a rental application could be successfully challenged in court.

Bans that are deemed “arbitrary” or overly broad are more likely to be challenged. If you’ve held a policy not to rent to felons, your best bet is to revise this broad policy and start renting to felons so you may avoid a lawsuit.

However, you must protect the safety of all tenants. Consider the safety needs of apartment residents and determine how to balance the needs of others with HUD’s commandment to offer apartments that take felons.

Rentals for Felons: Screening Tenants Without Violating the Fair Housing Act

If you live in your property and rent four or fewer units, you are exempt from following the Fair Housing Act. Thus, you can decide personally what you are comfortable with, without worries of being sued. An attorney can help you explore the issue further and answer any questions about housing discrimination.

Assuming you do not live in the rental property, you must determine what makes sense for your property. You may reasonably decide that anyone who committed a felony five or more years ago and has not re-offended is a low risk, and screen by years passed since the incident. Or you might decide, based on a personal belief, that you are comfortable renting to those with drug or alcohol offenses, but not murderers. If you house families with children, you may not be able to rent to anyone on the Sex Offender Registry. Thus, denying a felon who is a registered sex offender would not constitute a violation of the Fair Housing Act.

It’s a smart idea to determine how you feel about renting to felons before anyone with a felony record applies. Then, you can write (and date) your personal guidelines for evaluating rental applications from felons. This creates a record in case anyone tries to challenge a denied rental application.

To reduce the risk of a lawsuit, offer the applicant a chance to explain in writing the circumstances around his or her arrest. This provides a written record, which you can use if you are sued. It also gives the individual a chance to explain what happened and may increase your level of trust that the person will be a good tenant.

The American Apartment Owners Association offers tenant screening forms*. If you want to make sure your form is compliant with the Fair Housing Act, become a member to enjoy free access to our form library.

* AAOA Disclaimer: The information provided herein is for advisory purposes only and AAOA takes no responsibility for its accuracy. AAOA recommends you consult with an attorney familiar with current federal, state and local laws.

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When having a ‘pet spa’ is no longer enough: Amenities on the rise in upscale apartments

Mon, 01/30/2017 - 10:57pm

What do you do when a dog-washing station isn’t fancy enough for apartment renters anymore?

Up the amenities another notch: Built-in dog food and water bowls, Vitamin C-infusing shower heads (for the human renters), free local produce for tenants, rooms with tools for people to brew their own beer. Those are some of the suggested amenities for renters that an apartment design expert suggested at the Greater Charlotte Apartment Association’s 2017 forecast on Thursday.

“Just having a simple pet spa may no longer be enough,” said Jenn Zella, founding principal of CID Design Group. “They want something different, and not cookie-cutter.”

Here are five amenity trends in new apartments Zella said to watch for in 2017:

▪ Local, local local – especially for millennials

“This demographic in particular is really looking for a local connection,” said Zella. “Really push local.”

That could mean offering a selection of locally roasted coffee instead of Starbucks or a Keurig machine in the lounge, or fresh-baked goods for residents from a local bakery. Another amenity Zella said she’s seen: Produce from local growers given away on a first-come, first-serve basis.

▪ “Wellness”

“We need to start paying attention to it as an industry,” said Zella.

It might sound like a buzzword, but Zella said anything promoting health and wellness is hot. That could include anything from Vitamin C-infusing shower heads, lighting timed to circadian rhythms, air purifiers or flexible space in a gym offering a variety of fitness classes.

▪ A “makerspace”

“It’s the age of the maker,” said Zella. “People are really interested.”

Crafting interests from building furniture to woodworking, home canning to home brewing beer, are more popular than they’ve been in decades. But (as I discovered a few years ago), trying to build furniture in a small apartment can be disastrous. That’s why Zella said buildings should include a space for such projects, whether it be a kitchen set up for people to brew beer or a space with tools for vaarious projects.

▪ More for pets

We really love our pets, and they need amenities too. That can range from on-site veterinary care to doggie day care, built-in bowls for feeding that slide out from the bottom of kitchen cabinets to a dog park with pet “agility stations.”

▪ Way more technology

It seems like there’s no corner of an apartment that can get over-saturated with tech. From smart thermostats to smart recessed LED lighting to free rapid charging stations for electric vehicles, there are a lot of possibilities. The most outlandish: A Bluetooth shower head, which can connect to your phone and play music for you while you bathe.

Source: charlotteobserver.com

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Micro-Housing Boom: An Answer to the Affordable Housing Crisis?

Mon, 01/30/2017 - 10:51pm

Though national apartment rents are growing less quickly, they still exceed the average American’s budget in some cities. One way developers are working to address this imbalance is by building micro-lofts.

Micro-housing has gained momentum these past few years, particularly in denser markets, Doug Ressler said. The concept is simple: Stuff as many miniature apartments into a building as possible in a market that caters to young professionals, charge less per unit and cash in on the profits. But the benefits aren’t one-sided, Ressler said.  “It’s a win-win for both the provider and consumer,” he said. “I think the key is they’re being designed with the person in mind, in terms of what their needs are. So you’re seeing a lot of functionality in a micro-loft that takes into account how people live and work in their offices.”

An Answer To The Affordable Housing Crisis?

Developers across the country are turning to micro-units to aid in the country’s affordable housing crisis. “It’s either a mini-unit or the sidewalk,” Panoramic Interests’ Patrick Kennedy said regarding an ambitious project his firm is pushing to tackle the homelessness plaguing the country’s most expensive markets. Its micro-units, called MicroPADs, average about 160 SF per unit. The San Francisco-based developer launched its first prefabricated apartment unit in 2013, but for the past 12 months the firm has been pushing to develop its first modular MicroPAD (which stands for Prefabricated Affordable Dwellings) in Berkeley. Manufactured off-site, the prefab homes are about half the size of a typical 300 SF micro-apartment, leaving just enough room for one person. Each unit comes with a day bed, a desk, a kitchenette, a microwave, a bathroom/shower and a closet. “This takes it to the extreme. They’re small, car-free and modular,” Kennedy said. “Those three things are going to make housing more affordable in cities where rents and costs of construction are astronomical.” The business model is simple: lease the seven-story, 150-unit apartments to the city for about $1k/unit. Kennedy said MicroPADs cost 30% less than typical apartment development and take half the time to develop, as the modular steel boxes, often resembling shipping containers, are manufactured overseas. These buildings are typically built within 10k SF sites and can be erected above existing parking lots, to maximize limited space in already dense markets. If it can get past the bureaucratic red tape and pushback from city officials who don’t favor the prefab model and unions that don’t appreciate the lack of cash inflow to their workers, Kennedy said the firm will expand and launch MicroPADs in Oakland, Sacramento, Los Angeles and San Francisco. “We’re long overdue for an innovation in this industry, probably 30 years overdue.”

Millennials Trade Space For Amenities

It’s a concept that works better for young professionals who have yet to start families, and landlords are offering amenities to appeal to Millennials: utilities and WiFi included in the rent, shared kitchen space and sometimes fully furnished apartments. But most importantly, these address two of the top concerns of Millennial renters, both in the U.S. and globally. Being close to work and public transportation and enjoying affordable rents outweigh the inconvenience of the lack of space in the 200 SF to 400 SF units. “It’s really [about] how much of your budget you can allot to housing,” Ressler said. “Young professionals want to work and live along mass transit. I would look for a micro-loft type of concept that is near where I work.”

Micro-Unit Hot Spots

Though micro-housing continues to gain momentum in San Francisco and the Bay Area, it was Seattle that led the way in micro-unit development in 2015 with 780 micro-units under its belt and almost 1,600 in the pipeline. That market slowed last year with more local government regulation, but the lack of affordable housing is causing the trend to resurface. Minneapolis is picking up steam and may approve its third micro-housing project this year, should developer CPM Cos’ proposal for a six-story, 75-unit apartment building be approved by the Minneapolis Planning Commission Committee, Finance Commerce reports. Research found the Twin Cities market is becoming a Millennial hot spot, and declining unemployment and growing wages are boosting the market’s appeal for investors, especially with Millennials migrating to the area thanks to promotions and high-paying jobs.

Source: bisnow.com

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Setting Rents for the New Year

Mon, 01/30/2017 - 10:45pm

The art of raising rents is a difficult one to master for newbie investors. The fear of creating a vacancy or offending a tenant is unbearable for most new landlords. It is a touchy dilemma. You are directly impacting the quality of a tenant’s life when you increase the rent, but you are also affecting your ability to pay your obligations with the rent increases. In this article, I would like to list reasons why raising the rent on your properties is a necessary decision, how to accurately assess the market rental rate, and how to raise the rents effectively without creating a mass exodus.

Let me list the reasons why rents should be raised:

1. Keep up with the rate of inflation.
2. Grow the top line (revenue).
3. Stay competitive in the market.
4. Fight the expense creep.

If you have just acquired a property, or are in the middle of a renovation, you should read our article on our Three Step Reposition.

It is our framework on how to take over the operations of a property, and to effectively increase any rents that are under market. It will show you how to fill the vacant units, implement Ratio Utility Billing (RUBS), and raise the remaining tenants to market.
Before you consider raising rents, you need to make sure you are delivering a quality product to your tenants. What does that entail? In our properties, we strive to deliver clean, safe, affordable units with stellar customer service. We guarantee potential tenants a same day guarantee if they qualify to rent one of our apartments. We are always stressing our customer service and our quick and professional maintenance staff.

If you are trying to raise rents, and you business model does not deliver a quality product, you are going to experience the vacancy that I alluded to earlier. A tenant knows exactly what a two bedroom apartment is renting for, and if he can get a better deal down the street, then he is gone. But, if you can couple customer service with a competitive price, your retention rate will rise.

I often discuss with our Jake & Gino community the commodity effect. If your product or service becomes a commodity in the marketplace, then people will only shop you for price, and your margins and business will suffer. Take a look at the baking industry. Money has turned into a commodity, and the investor has countless choices to access money. Investors can drive a hard bargain with banks when trying to secure financing.

You want to avoid this mistake at all costs. The Internet has revolutionized how we shop for products and has led to the commodity effect. How do we try to navigate around the commodity effect? By offering great customer service, by differentiating our product and by giving the consumer reasons other than price to do business with our brand.

Now that we’ve discussed the importance of operations, I think we should examine the reasons why you need to be “pushing” rents. The most obvious reason is to keep up with inflation. Your costs go up every year, and your revenue needs to increase to offset your increase in expenses. The next reason may not be as obvious. Jake refers to this burden as the expense creep.
Every year, vendors are testing you to see if you are checking invoices to see if expenses are rising. It is your responsibility as an owner to review your contracts with vendors every year to insure the best price and the best value. Rent increases will offset some of the expense creep that occurs in everyone’s business.

Another obvious yet often overlooked reason is that landlords who do not stay competitive in the market are not maximizing their value. Let me give you a quick example. If you own 50 units, and the units are $50 per month under market, you are potentially losing $30,000 in revenue per year. That’s not even the worst part. The value of the property is $375,000 less at an 8 cap, due to the diminished income (Income/Cap Rate: $30,000/8%).

At this point, I think you’ve realized the importance of maximizing the revenue on your property. Let’s discuss how to determine the market rent and how to implement your strategy.
The first step is to determine the market rent. There are two websites that we use as a barometer for the rents. The first one is Rentometer. Plug in your address, insert the rent you are charging, pick the unit size and voila. The rent-o-meter will give you an average price, a median price and will tell you if your price is a good deal or if you are overpriced. You need to decipher what amenities your property offers compared to the market, but this is an excellent starting point to evaluate rents in the area.

The other site that we often use is Apartments.com. Look up individual apartment complexes to see what pricing is, what amenities are offered, and what is available to rent. Most landlords use this site to advertise their rentals.

You can also try the good old fashioned way of picking up the phone and calling a couple of brokers in the market. A good multifamily broker should have the pulse of the market, and should be able to tell you what a two bed is renting for in a specific neighborhood. I employ all three of these strategies to price my property accordingly.
Now that we have assessed the market rent, it’s time to go to work. Once we have tenants coming off a lease, we will go to market rent with the apartment, depending upon how many leases come up at the same time. If you have several buildings in one property, you can select to target one building every month or two and institute rent increases. This will lower your risk of having too many tenants vacating at the same time. This will also give you an idea if your increases are in line with the market. If you are getting serious push back on the increases, then you can modify the increase or choose not to implement one.

It is imperative that you work with your staff and get constant feedback as to how the tenants are responding. Are they mad, threatening to leave, or are they just venting their frustrations. You need to maintain a careful eye upon how many tenants decide to vacate due to the increase.

Task:

Begin by analyzing the rental rates in your market. Once the market rate has been established, check to see where your rents fall. Are they at the market, or is their some upside? If there is some upside, then start renting the vacant units at the newly established market rate and begin to increase the leases that come due to the new market. Remember, take your time and be flexible with your pricing.
Please share with us any tools that you use to assess the rental rates in your market. I would also like to know how you address increasing those rents.

 

1. Determine the market rent
2. Look in December how you are performing
3. Take it one step at a time

 

Source: multifamilyinsiders.com

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I’m a Landlord: Can I Ever Truly Retire?

Mon, 01/30/2017 - 10:41pm

There is a major dilemma facing many Baby Boomer investors today. Their successes in real estate have produced a failure in quality of life. What is the problem, and is there a solution?

Let’s start with the problem: a “good problem” to have. Twenty to 40 years ago, you bought rental real estate, maybe a small apartment complex or several rental houses. This can be a great strategy to build wealth for someone in their earlier years of investing. But as I advise my own clients, owning actively managed real estate is best for a season of your life, but not for the duration of your life.

For example, you bought four rental houses long ago for $100,000 each. They are fully depreciated down to their land portion of $25,000 apiece. Today the houses would net $300,000 each. The problem is that you want to be retired now, but you own these now very old houses needing a lot of maintenance. You cringe when you receive a phone call. Is the roof leaking? Tenant moving out again? Midnight plumbing problem? Or did you just find out your “pet-free” tenant was hiding 12 cats from you when they moved in (true story)? You could hire a property manager, but they are expensive and each of these maintenance problems still costs you thousands to correct, and you still own very old houses!

So, you go to your CPA, and she informs you that if you sell the houses, your federal income tax alone will be over $250,000, and your state may tax you, too. Also, if you sell, your spouse and heirs will not be eligible for the step-up in basis when you pass away. Finally, you will be eliminating a big potential source of retirement income from your portfolio, and you would now need to find a different investment.

Section 1031 of the tax code allows for tax-deferred exchanges of properties where you can sell your real estate, then identify and close on replacement property in 45 and 180 days respectively. The problem with this solution is you still would own real estate you have to manage in your later years. Can you exchange tax free into a real estate partnership, real estate LLC, publicly traded REIT or private REIT? The answer is no to all of these.

There is a solution. Appreciated rental real estate can potentially be exchanged income tax free for real estate owned within a Delaware Statutory Trust (DST). The advantages of this can be dramatic. You can diversify by property type specifically into multi-family apartments, medical office buildings, self-storage or retail. You can diversify geographically by investing into several different DSTs in different areas of the country offered by different DST providers. The income tax of $250,000 could be eliminated for now, and potentially eliminated permanently to your heirs by continuing to hold DST investments for life.

The cash flow from DST real estate can be higher than it is from high-maintenance older rentals. These investments are professionally managed and can often be placed into newer properties. Newer properties are eligible for accelerated depreciation using a methodology called “cost segregation.” What this means to you is that you could potentially shelter much of your rental cash flow from income taxes.

As with any investment, there are risks, costs and benefits. For my own clients, we vet potential DST replacement properties through more than 40 data points, including local economic indicators, expected yield after fees, loan leverage and property manager history through the 2008 real estate bust.

Besides the diversification and income tax savings opportunities, you probably picked up on the real advantage. You worked hard your whole life, invested money and countless hours into your rentals and now you want to enjoy the fruits of your labor without being tied to your “job” as a landlord of older properties. Your solution to a true retirement could be found in these three letters, DST.

 

Source: nasdaq.com

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Rental Trends: Five Traits of a Great Property Manager

Mon, 01/30/2017 - 10:08pm

A great property manager can be hard to come by. In today’s fast-paced, social-media centric society, consumers and renters crave and demand instant gratification – they are ephemeral.

That being said, property managers must constantly be on their toes and ready to take on anything! Not only must they be ready to draw in and lease to rent-ready prospects, but they must also always roll with the punches in order to satisfy current renters. Leaky toilet at midnight? Be prepared for a call. Can’t find the mailbox key. Better be on it. Locked out of your apartment? Must be prepared! Property managers deal with these scenarios (among thousands of others) on a daily basis.

Here are five tips to being a great property manager that you and your team should keep in mind:

1. Communication

Communication is KEY! Property managers deal with tons of people (at all hours of the day) from all walks of life. Some may speak different languages, have different personalities, different needs and different backgrounds. Therefore, those in property management need to have impeccable communication skills. Staying calm and speaking in a professional manner is a top priority. A lot of times, this includes PATIENCE. Residents must always be kept in the loop on things like office closures, maintenance, payments, etc. Additionally – property managers must keep said communication timely. When a work order is submitted, the resident should be notified immediately that their work order has been received and that the issue is being worked on. When a parking lot is being worked on, residents should know of any alternative routes to take ASAP. These are just examples, of course, but the list goes on and on. Keep in mind, that with communication comes listening. Sometimes, the best thing a property manager can do for a current or prospective renter is ensure them that their voice is being heard and that the community is doing everything possible to make their living situation a comfortable one.

2. Organization

Property managers often have to deal with questions, comments, complaints and concerns from dozens of renters and prospects daily. Not only must property managers make sure their current renters are happy, make sure the rents are coming in on time and make sure that work orders are being fulfilled, but they must also work on bringing in NEW renters as well. Organization comes in handy on a daily basis through things like lease expirations and renewals, background checks, security deposits, invoices, etc. A skilled property manager must be organized, and make sure they are hiring organized staff members as well! If you are impatient, anxious, edgy or bad with tight deadlines and daily interaction with “customers” aka your residents, you may want to reconsider your future as a property manager. Do you think you have what it takes?

3. People Person

One of the best gauges of the level of quality of a property manager is the way they interact with people. This does not mean just their renters. This means current renters, prospective renters, renters moving out, maintenance, vendors, other staff, lifeguards, towing companies, plumbers, carpenters, etc. Managing an apartment community is a large undertaking, and men/women that do not have a happy, approachable, “can-do” attitude will find it hard to not only retain residents, but to draw new ones in. A personable property manager must be able to handle the fast-paced nature of community management and make the process of signing a lease and moving in an easy one. Let’s face it – moving is a drag and a hassle. When people move into an apartment, the last thing they want to deal with is an unhelpful property manager with a sour attitude. That said, go the extra mile to make your renters feel welcome! Perhaps a gift basket with community “swag” when they move in? Maybe a couple of take-out menus from your favorite local restaurants? At the end of the day, a “people person” property manager is always easier to work with than a grouch!

4. Honesty

Think about it. What are all property managers typically doing the first week of every month? Handling other people’s money! They collect rents, security deposits, and more. Property managers need to have the utmost understanding that the renters come first. They must always act with the highest level of integrity. As a property manager, they a lot of complaints are heard daily. While it may sometimes be easier to dance around the issue, a property manager needs to always be up front with the renter – even if it’s something the renter doesn’t want to hear. The washing machine can’t be fixed until Tuesday? Tell them ASAP so they can make other plans. The rent check won’t be deposited for another day? Let them know. Not being 100% truthful with renters can lead to mistrust and lower resident retention rates.

5. Reliability

Having a reliable property manager takes the burden off of a lot of people – the staff, the property owners, the renters, the prospects, etc. When a tenant asks something of a property manager or needs help with a certain issue, they should feel confident that their property manager is taking their struggle into consideration. This can be anything from a missing trash can, a broken lock, a bug problem, a noisy neighbor, etc. Property managers must come through for their residents and should be viewed as someone who can quickly and effectively problem solve. Now, the world isn’t perfect and problems aren’t always easily resolved. However, as long as a renter knows that you, as their property manager, are in their corner and working your hardest to make their stay at your property a happy one, then you have done the best you can!

These five qualities, among others, are staple traits of a great property manager. Moving into an apartment is, let’s be honest here, never the most fun and can make for a very stressful time in someone’s life. Working with a quality property manager can make the experience so much more positive – maybe even fun! An organized, honest, reliable, personable property manager with good communication skills is pure gold!

Source: arlnow.com

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Top 3 Tips for Investing In Luxury Real Estate

Mon, 01/30/2017 - 10:03pm

Investing in real estate can add diversity to your portfolio while creating a sustainable source of passive income. If you’re a high net worth investor, you may be able to expand your horizons beyond the basic fix-and-flip by moving into the luxury real estate market. If you’re interested in investing in luxury properties, here are a few things to keep in mind before diving in.

1. Identify Your Investment Goals

Generally speaking, the goal of investing in luxury real estate is to earn a return on your investment. But there’s more than one way to do it. When you’re choosing a luxury property to invest in, it helps to think about what you want to get out of your investment.

For instance, if you’re looking to turn a profit fairly quickly you may want to look at doing something in the flipping arena. You can find a luxury home that’s a bargain, renovate or remodel it and put it back on the market. If the home sells relatively quickly at the price you listed, you could have a decent amount of cash in your pocket in a short period of time.

If you want something that’s going to generate income on a more consistent basis, however, you may want to look at investing in a high-end vacation home that you could rent out or a multi-unit apartment building. If you really want to go all in, you could finance a custom build project for a luxury property to either rent or sell once it’s complete.

2. Decide How to Finance the Investment

When investing in a luxury property, one of the most important details to work out is how you’re going to bankroll the investment. If you’re sitting on a sizable nest egg, you may consider just paying cash so you can own the property debt-free. On the other hand, in some scenarios it may be better to borrow money for your investment.

Let’s say, for instance, that you want to buy a foreclosed mansion, renovate it and re-sell it. The asking price is $1 million and you believe that once the renovations are complete, its value would be closer to $2 million. The house is located in a hot market so you believe you can sell it in no time.

In that situation, you may be able to get a hard money loan to finance the flip. Hard money loans are short-term loans that are designed to be paid back in just a few months and they’re usually easier to get approved for than traditional bank loans. This type of loan usually carries higher fees and interest rates. But if everything goes as planned, you could pay it back fairly quickly without having to liquidate any of your own assets.

3. Choose the Right Market

When you’re investing in a property that comes with a seven-figure plus price tag, it’s important to be sure that there’s a demand for what you’re trying to sell. Checking the temperature of the market you’re thinking of investing in before you start shopping around is a good idea.

If you’re looking to buy in a major metropolitan area, you’ll need to consider a number of factors, including the job market, cost of living, sales prices of comparable homes, median household incomes and the area’s overall economic outlook. If you’re thinking of investing in a luxury vacation rental, you’ll also need to think about the kind of traffic the area sees during peak periods and year-round.

Bottom Line

It’s important to research prospective markets carefully to determine whether there’s sufficient demand to justify your investment. Otherwise, you could end up with an expensive property on your hands that may be difficult to unload.

Source: finance.yahoo.com

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Important Information about New Tax on Owners of Multiple Apartments

Fri, 01/27/2017 - 10:51am

The following article is referencing international tax law. This does not apply to US apartment owners.   

The new law prescribes that, as of January 1, 2017, every taxpayer must pay tax annually (January through December) for every residential apartment that he owns in excess of two apartments, at the sum defined pursuant to the provisions of the law. The taxpayer will be allowed to choose which of his apartments he deems to be his first two apartments, and which shall be taxable under this law.

In other words, owners of three and more apartments shall be taxed in respect of every additional apartment owned as of the third apartment, according to the percentage of his ownership in the said additional apartments.

Exception: the law does not apply to a taxpayer if the value of all apartments he owns, after deducting the apartment with the highest value, is less than a total of NIS 1,150,000.

Who is liable for tax?

Any individual (including a spouse – unless permanently residing at a different address – and minor children) owning a number of residential apartments, when the aggregate percentage of his ownership of these properties is at least 249%.

A residential apartment owned through a closely-held association (i.e. a partnership or company that has five or fewer direct or indirect owners) is tantamount to a residential apartment owned by an individual.

The law also defines residential apartments that are excluded from application of the law, including, inter alia, a residential apartment owned by a non-profit entity (amutah), a residential apartment used for long-term rentals pursuant to a government auction, a residential apartment that is being leased under the Tenant Protection Law, a residential apartment that constitutes business inventory for the purposes of income tax, a residential apartment obtained by way of inheritance, provided that it was not let out during the first year after the death of the testator (in any event, it shall be counted as an additional apartment after the first year).

An apartment that was lawfully split shall be deemed a single apartment.

What is the tax rate?

One percent of the value of the apartment, but not more than a total of NIS 18,000 per annum in respect of every apartment liable for such tax.

The value of the apartment is determined according to economic, social and geographic indicators, taking into account the size of the apartment and is calculated using the formula specified in the addendum to the law.

The sum of the tax in respect of ownership of a portion of an apartment shall be calculated according to the taxpayer’s relative percentage of ownership of the apartment.

Declaration and reporting

For the 2017 tax year, the taxpayer himself must file a declaration with the tax authorities by March 31, 2017, which includes, inter alia, details about the residential apartments he owns and the sum of the tax in respect thereof.

As of the 2018 tax year, the real-estate tax administration will send a notice to taxpayers by the end of January of the relevant tax year specifying the apartments liable for tax and the sum of the tax in respect thereof. Any taxpayer who receives such a notice has 30 days to select a different residential apartment that he owns to be charged tax and the apartment he selects will be liable for tax until the end of that tax year.

Taxpayers must also notify the real-estate tax administration about changes that occurred during the tax year in the number of apartments that they own – whether they sold or purchased apartments, as well as about any changes that were made, if any, in the size of any of the apartments they own.

The real-estate tax administration will operate and maintain a computerized system on the ITA’s website that enables taxpayers to file online reports directly with the ITA and to compute the tax imposed on them, according to details that they enter.

Tax payments and collections

Taxpayers are required to pay the tax in two installments, the first by June 30 of the tax year and the balance by December 31 of the tax year.

Exemptions and credit for a sale of an apartment

Pursuant to this law, a taxpayer who sells a residential apartment by October 1, 2017 will be exempt from paying the pro rata sum of the annual tax in respect of the apartment that he sold, for the period when the apartment was still under his ownership, provided that the sale was not to a relative.

Furthermore, a taxpayer who sells a residential apartment by October 1, 2017 will receive a capital gains tax credit, provided that the sale fulfills all of the following conditions:

(1) The sale is not to a relative;

(2) The sale is not for no consideration;

(3) The buyer does not own an apartment or owns a single apartment and undertook to sell it within 18 months of the purchase date;

(4) The recipient of the credit does not purchase an apartment between December 16, 2016 and December 31, 2020 (unless he purchases an apartment subject to purchase tax at the brackets of a single apartment).

The credit will be equal to the lower of (i) the capital gains tax imposed on the taxpayer in respect of the sale, or (ii) NIS 85,000.

The credit will be given in respect of a maximum of three apartment sales.

Exception: if at issue is a person owning three and more apartments to whom the law does not apply (as referred to above – the exception relating to the aggregate value of all investment properties), then his credit, in the event of a sale and the fulfillment of the above conditions, will be a total of NIS 15,000 or 50% of the betterment tax imposed on him, whichever is lower.

Source: lexology.com

 

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