American Apartment Owners Association

8 Features That Make Your Rental Irresistible to Families

Thu, 01/04/2018 - 9:36am

Kids are high-impact on rental properties. So why the heck would any landlord go out of their way to attract families?

First, because families tend toward longer tenancies. Young adults in their 20s move frequently, as they bounce between jobs, date around, get married, and start having children. It’s a tumultuous time.

Once they find a family home to raise their children, they often set down roots. Families—parents and children alike—tend to value stability.

If my word alone isn’t good enough, consider that from 2010-2015, only 35.2% of adults aged 40-44 and 29.7% of adults aged 45-49 moved, compared to a huge 61.2% of young adults aged 25-29.

Millennials are just now entering their prime childbearing and rearing years. They are also the largest generation and one that continues to grow (due to immigration). That makes them a huge, housing-hungry demographic of potential rentals.

Lastly, consider that renters with children grew by 14% in the period from 2009-2015, significantly faster than growth among unmarried renters (10%).

No matter how you slice it, families are a large and growing percentage of the renter population. So, how can landlords target them to secure long-term, low-turnover renters who will stay for the long haul?

Here are eight amenities to attract families and have your pick of the renting-family litter. Some can be added after buying, and others are amenities to keep an eye out for in your rental investing hunt. Many will continue adding value for decades to come.

8 Features That Make Your Rental Irresistible to Families 1. High-Quality Local Schools

Good schools are a priority for every parent. It was true 50 years ago, and it will be true 50 years from now. As you search for strong rental investment properties, keep a close eye on the quality of the local schools.

An ideal solution is a good school within walking distance. My mother rented a modest house when I was growing up, but it was in a safe neighborhood with an excellent elementary school within walking distance. The circumstances of our move were no coincidence: We stayed in that tiny home longer than any of us preferred and moved when my younger sister finished at the elementary school.

Where did we move? To a larger home, within walking distance of where I went to middle and high school.

Parents will accept smaller or otherwise imperfect homes if the schools and their proximity are right. Bear that mind as you scout prospective rental investments.

2. Fenced-In Backyards

As with good schools, what parent doesn’t want a backyard for their kids?

Parents can send the kids out back to “go roughhouse outside,” and secure a little peace and quiet for themselves. Backyards mean yard games—and perhaps even a garden for mom or dad.

Neighborhoods with fended rear yards tend to attract lots of families, which in turn attracts more families. More children in the neighborhood means more potential friends—and more potential distractions and entertainment to keep the kids occupied.

3. The Patio & Fire Pit Combo

If backyards are primary draws for keeping the kiddos occupied, adults enjoy relaxing on a patio—perhaps with a glass of pinot noir in hand.

Patios don’t have to cost a fortune to install, either. On the low end, patios can cost under $1,000.

In most of the United States, patios can only be comfortably used five months or so of the year. But that can be extended by several months with a simple addition: a fire pit.

Nor do fire pits have to be permanently (and expensively) installed, either. You can pick up a standalone fire pit for $50-100.

We teach our students to find “hook” amenities that are inexpensive but attract prospective renters’ attention. Fire pits are a perfect example.

4. The Marriage-Saver Trinity: Washer, Dryer, Dishwasher

This should go without saying, but unless your rentals are (very) low-end, you should include a dishwasher, washing machine, and dryer.

Renters have come to expect them, and it will deter many otherwise interested prospects from your property if you fail to provide them.

If you don’t have these yet, it may be a good opportunity to differentiate your unit by buying smart home appliances that can be programmed and otherwise connected to the renters’ smartphones.

In small apartments, small stacked units are fine, and in desert climates, you may get away with skipping the dryer, but skimp on the “marriage-saver” trinity of appliances at your peril.

5. The Walkability Balance

Having amenities like grocery shopping, cafes, bars, restaurants, entertainment, playgrounds, parks, etc. within walking distance is a major draw. There’s just one problem—more walkable tends to mean higher density, which tends to mean higher traffic.

Car traffic is not ideal for young children (there’s an understatement for you). So what does the perfect family-friendly walkability look like?

Simple: The property sits comfortably on a low-traffic street, within easy walking distance of a denser, high-amenity street.

Keep this walkability balance in mind as you scout prospective properties. As the next wave of suburbanization hits over the next decade, keep a particular eye on the “surban” neighborhood trend.

6. Safety Details

Parents tend to be hyper-focused on safety, so put yourself in their shoes for a moment and look for potential hazards in your property.

The first that comes to mind is railings and balconies. How secure are they? Railings in many older homes can be loose and rickety, so spend a little extra effort to doubly secure all banisters and railings. They shouldn’t budge when shaken.

Don’t stop there, though. What else in or around the property could potentially prove hazardous for youngsters? Loose wiring? Lead paint?

Put yourself in the frantic mindset of a young parent, and look for little ways you can improve your units’ safety to “boast-able” levels. Make it a selling point!

7. Size: 3-4 Bedrooms, 2-3 Bathrooms

Homes smaller than 3 bedrooms will not keep family renters long-term. They’ll leave as soon as they can afford it or when they escape some other constraint holding them there.

On the flip side, homes larger than 4 bedrooms tend to make poor long-term rentals for a host of reasons, ranging from maintenance to the higher ratio of children to adults and the simple fact that anyone who wants to live in a 6-bedroom mansion will probably buy rather than rent.

The sweet spot? Homes with 3 or 4 bedrooms and at least 2 full bathrooms.

8. Paint Flexibility

How can you keep renters longer? By giving them a sense of “ownership” and “investment” in the property.

While that argument is typically made for lease-option and rent-to-own agreements, here we’re getting even simpler—letting tenants paint the property their own colors.

With that said, landlords should put a few protections in place. A simple lease clause or addendum can work wonders, requiring the tenants to repaint in neutral colors upon move-out. Failing to do so will lead to repainting costs being deducted from the security deposit.

Landlords usually need to repaint their units upon turnover, so why not move the responsibility to the renter?

This trick can be used elsewhere too, from landscaping and gardening to interior customizations. The more a tenant feels like they’ve made the property their home, the longer they’ll stay, and the lower your turnover rate will be.

When showing the property, simply say, “By the way, if you wanted to customize the property in any way, such as painting it your own choice of colors, we’re open to working with you on that.” You’d be amazed how well prospects respond to this simple offer—because they’ve probably never heard a landlord make it before.

One of the lessons we stress over and over with our students is that turnovers are where landlords lose the most money in their returns. The trick to making money as a landlord therefore is minimizing turnovers. Look for properties and neighborhoods where families will settle in long-term, and look for ways to make your existing properties that much more appealing to these long-term family renters

The reward? Higher ROI and lower labor on your rentals moving forward.



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How to Make Money Flipping Houses

Thu, 01/04/2018 - 9:31am

Want to make some serious money this year? While there are plenty of ways to achieve that goal, flipping houses is one surefire way of earning cash. And quickly. The problem? Most people have pre-conceived notions. They think that in order to flip a house you need plenty of capital or great credit. Well, you don’t need either. And I’ll tell you exactly why and how you can pull this off even if you only have a few hundred dollars to your name and a poor credit score.

Clearly, if you’re hurting for cash, you can still make money online, while you sleepor do it fast when you’re in a bind. Yes, it depends on your skillset. It’s true. We do live in a virtual world. Yet people overlook one of the most viable and lucrative endeavors for making money. Why? It takes some legwork. Sweat equity, if you will. But the best part? Making money flipping houses isn’t just a viable option, it’s a lucrative endeavor when you know what you’re doing.

The problem? Most people live with a scarcity mindset. They think that there isn’t enough money to go around. But not just money. Time. Resources. Connections. Credit. And anything else for that matter. Well, not only are people making incredible amounts of money in real estate, they’re quite literally crushing it by flipping houses. But not just flipping houses in the traditional sense. I’m not talking about buying a home and upgrading the kitchens and bathrooms. Not about replacing the flooring or pipes.

No. Not at all. I’m talking about making money, not just by flipping houses, but by flipping the contracts themselves. We’re talking about arbitrage. Buy low, sell high. Merchants do this every single day. They’ll buy low in one market, then turn around and sell it in another market for a higher price. Think import-export business. The beauty of this? You can replicate this in the real estate market simply by bringing a motivated seller and a cash buyer together. That’s it.

Investors have made a fortune with this specific method. And if you don’t believe me that you can do this without cash or credit, just look at the story of Kent Clothier. Clothier has built a proverbial empire out of flipping houses. No. Scratch that. By flipping the underlying contracts. He arbitrages his way forward to the tune of nearly 1,000 contracts flipped each and every single year.

But Clothier didn’t start out successful. In the very beginning, he was broke. Close to bankruptcy, in fact. Credit, shot. At the end of his rope. 18 months prior, he had left a successful grocery business. And he was down to his last $4,000 in his bank account. While he understood arbitrage in the grocery business, he was nearly destitute when he saw a late-night infomercial about real estate. That “system” cost him $1,000. It was 25% of his net worth at the time.

Fast forward to today and Clothier’s family now owns and operates Memphis Invest. A behemoth in rental property management. With roughly 5,000 properties under management, not only is Clothier well-versed in flipping real estate contracts, but also in managing properties themselves. He also hosts an annual event that helps educate entrepreneurs on how to implement this specific strategy.

As one of the largest aggregators of MLS data in the United States, Clothier organizes, cleanses and desiminates all the relevant datapoints for people using the platform. And it’s fairly epic. The best part? Clothier’s Real Estate Worldwide has developed a SaaS platform for people looking to specifically do this. That platform is used by over 60,000 real estate entrepreneurs across the country. It provides instant, real-time access to every dataset you’d possibly need to flip contracts.

But from the outside looking in, it seems a bit bewildering. How can you possibly making money in real estate simply by flipping the underlying contracts? It’s just a matter of finding the right sellers in the right neighborhoods and bringing them together with the right buyers. That’s it. Easier said than done? Maybe. First and foremost, you need to understand how to analyze and extrapolate the data to make the right decisions.

How to Make Money Flipping Houses

Here’s exactly what you need to do to make money flipping houses. First, a lay of the land. Understand the market forces and the playing field, and you can capitalize on it. Your goal? Find a distressed seller on one end. On the other, a cash buyer. Why a cash buyer? Because you want the transaction to close quickly and be able to turn around and sell your interest in a property fast. And, of course, you want to profit in the end.

How do you do that quickly? Find the right cash buyers. In other words, you need investors. If you know rich people or you’re friends with people who’re already investing in the real estate market, then great. If not, scour the web. There are several marketing methods you can use to ensure that you find the right buyers. You could build a full sales funnel devoted to that end. You could run Facebook ads. You could even do a webinar.

But if you want to save yourself some time and aggravation, all you need to do is comb through county records. That’s where you’ll find a gold mine of data. A treasure trove of information is just waiting to be hand-picked. All you need to do is to analyze county records for all the cash transactions, and locate the relevant buyers. Sure, it takes some effort. But it’s the easiest way to find the money.

It would be futile to identify distressed and motivated sellers without having cash buyers lined up. The only way you can flip the contracts is if you have both parties at the ready. That’s what it takes. But that’s not all. There’s an entire 5-step process for you to execute this strategy. Yes, you can make money flipping houses, but you need to ensure you execute each and every single step meticulously. Once the systems are in place, just automate. That’s it.

1. Identify the right markets

First and foremost, you need to identify the right markets. Maybe your local market isn’t the hot market right now. Maybe it’s a market in another county or state even. Search for the right market. The goal? Figure out where cash buyers are putting their money. That’s the key. While you don’t need a system to help you identify the right markets, it certainly helps.

But at the end of the day, the right markets are crucial. It could make the difference between flipping a contract and being caught holding the bag. Why? At the end of the day, if you take on a contract to purchase a house, and you can’t flip that contract to a cash buyer, you could end up being liable. Clothier says you have to be careful and know what you’re doing. One quick way to solve that issue is to tackle the right markets.

2. Identify the right price

Not only do you need to find the right market, but you need to identify the right price. We’re talking about the price that not only you’re going to pay for the property. But also, the price that someone is going to be willing to pay to buy it from you. What’s the right price? There are proven algorithms in place that will help you identify and justify this. Clothier explains it like this.

  • Take the last 30 days of transactions that were all cash for a particular neighborhood or block where you’re looking to buy a property.
  • Punch in those addresses into Zillow, Trulia, RedFin or any other website online for estimating the retail price. Get the difference.
  • Now, take the average of all those differences. You’ve just identified the gap. That gap is the average markup (or markdown) from retail for any given property in that market.
  • When you find a listing, use the average gap to estimate the price that a cash buyer would be willing to pay for that property.
  • Ensure that whatever home you secure as a contract, that it’s lower than that gap. How do you do this? You’ll have to ensure you have a motivated seller and an all-cash offer. That’s it.
3. Identify the right property

Now that you’ve identified that gap, you need to find the right property. Scour the MLS. Or, search online through retail channels. Look for distressed homes. Vacant homes. Possibly homes that are on the verge of falling into repossession or short sales. Going about this isn’t a simple task. Again, it’s easier to have a system to do this. But even without one, you can learn. You just have to start somewhere.

However, it isn’t always about using retail channels. Talk to real estate agents. Ask friends or neighbors. Go to local bake sales or PTA meetings and simply talk to people. Once you put your intentions out there, you’ll be surprised at just who comes out of the so-called woodwork.

4. Identify the right buyers

You need to line up your buyers. Keep in mind, that when you secure a contract to purchase a home, you usually have about 30 days to close on it. You’ll need buyers lined up that you can flip those contracts to. Without cash buyers at the ready, you’ll need to do all the legwork once you’ve secured the contract, and that could turn into a major hassle for you. Clothier says you don’t want to be scrambling to find those buyers when it comes to crunch time.

Here’s how you do it. Send out letters to every single cash buyer you can find in the past 30 to 60 days. You can usually locate their addresses from county records. Introduce yourself. Tell them who you are and what you intend to do. Try to schedule a call and figure out what they’re looking for. Develop a relationship. Find a way you can add value to the exchange.

5. Identify the right sellers

Clothier says that this is a bit more tricky. You have to identify the right sellers. Finding a vacant home isn’t always simple as 1-2-3. How do you go about doing this? What about homes that are near or close to entering into foreclosure? Clothier says that there are a few ways to do this.

  • Look for key terms in the listing description. For example, you might find something like “must sell” or “for immediate possession” or even “below market value.”
  • Look for liens on the property. Liens can come in the form of tax liens. They could also be from judgments or other creditors.
  • You can also drive through neighborhoods and inspect the homes. Look for telltale signs of vacant properties. For example, uncut or unkempt lawn and garden or a full mailbox.
  • Talk to neighbors located around the property and ask them about the home to figure out what’s the history and what’s been going on there.
  • Talk to real estate agents who might have some inside knowledge on a particular property and specialize in that area or neighborhood.

Keep in mind that the right seller is key. They need to be motivated. Without the proper motivation, there’s no desire for them to enter into a below-market-value purchase contract with you. Yes, there are a lot of variables to consider. But if you want to make real money in real estate, this is how you do it.



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Housing was the world’s best investment over the last 150 years

Thu, 01/04/2018 - 9:19am

Stocks will bring you highs, but periodically will seriously let you down. Treasury bonds will keep you safe, but they won’t make you rich. Housing? That’s the best of both worlds. In rich countries, over the very long term, housing investments get you returns similar to equities (like stocks and other securities), while providing the low volatility of bonds.

This is the argument of a groundbreaking new paper from economists at University of California-Davis, University of Bonn, and the Deutsche Bundesbank (the central bank of Germany). In a feat of extraordinary data collection, the researchers pulled together the annual returns of treasury bills, treasury bonds, equities, and residential housing from 1870 to 2015 for 16 now-rich countries such as the US, Germany, and Japan. The dataset is the first of its kind.

They find that, in the average wealthy country, the annual return on housing during that period was just over 7% when adjusted for inflation, while the return on equities was just under 7%. At the same time, the risk associated with housing was far lower. By standard measures of uncertainty, housing was about half as risky as equities, and slightly less risky than bonds.

The reason these findings are so remarkable is that they fly in the face of economic theories of asset valuationwhich suggest risky assets like stocks should have higher returns than stable ones like housing. But that’s not so, the authors write. The ultimate investor, according to the study, would actually hold “an internationally diversified portfolio of real estate holdings, even more so than equities.” The economists do not offer an explanation for their finding, but hope other researchers will use their data to try to solve the puzzle.

Although housing performed better than equities overall, there were large differences across the 16 countries included. At 3.3%, the extra return you would have gotten on housing compared to equity investment was largest in France, where equity investments were particularly low due to the devastation of World War II, a wave of nationalizations of private businesses after that war, and an oil crisis in the 1960s.

Recent history has been kinder to equities. Since 1980, the annual return on equities in these 16 countries was 10.7%, compared to 6.4% for housing. The researchers attribute this dip to Japan’s post-1990 housing-price collapse and slow growth in Germany’s residential real estate. At the same time, equities in Scandinavian countries like Sweden, Norway, and Finland exploded.

Yet even since 1980, when adjusted for risk, housing did better than equities. The Sharpe ratio is a popular measure of investment returns that accounts for the volatility of a stock. The metric is useful for investors who want high returns, but don’t want their account balance to ever get too low. By the Sharpe ratio, since 1980, housing was a better investment in 14 of the 16 countries examined in this study.

One limitation of the analysis is that it does not account for taxes. Researchers left out property taxes because they are often byzantine, with rates varying between and even within countries. There are also often complicated tax exemptions for certain kinds of housing. The researchers do offer a ballpark estimate of tax impact: including taxes, they write, would decrease the returns on housing one percentage point compared to equities—making housing still the better risk-adjusted asset.

The study’s findings are more useful for investors who can consider investing in multiple residential properties than they are for individuals (or individual families) who would likely be buying just one home. A single home is a much riskier asset than a diverse portfolio of residential real estate. That said, even if you aren’t a millionaire, you can diversify your residential home investments through financial products like a real estate investment trust (REIT). In other words, you probably shouldn’t buy one house based on this research, but if you are looking for a safe and valuable long term investment, you might want to buy shares in many different real estate holdings.



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Zillow: Rent Growth Accelerates Going Into 2018

Thu, 01/04/2018 - 8:56am

After slow growth during 2017, rental prices have started to tick back up again, driven mainly by an increase in single-family rental prices, according to the November Zillow Real Estate Market Report.

Median rent across the country rose 2.4% over the past year to a median rental price of $1,435 per month, the highest median rent Zillow has ever reported. With the recent pick up in rent prices, rent growth is now rising at the same pace as incomes for the first time since June 2016, causing renters to put more of their income toward a monthly rental payment. Incomes rose 2.5% since last November, and they have been hovering around that rate for over a year.

The West Coast dominates the list of markets with the fastest rising rents, with Sacramento

“After about a two-year slowdown, rent growth is starting to pick back up across the nation,” said Zillow senior economist Aaron Terrazas. “The slowdown in rental appreciation, combined with consistent income growth, gave renters some reprieve from worsening rental affordability over the past few years. But as rental growth begins to catch up with income growth, affordability will deteriorate, placing a squeeze on budget-constrained renters. Looking into 2018, rent is expected to continue gaining steam in growing employment centers, like Dallas and New York, as well as a few smaller markets like Cleveland. More widespread rent growth could mean home buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stability of a monthly mortgage payment instead.”

National home values are continuing to rise, but not as quickly as they have over the past several months. Over the past year, home values rose 6.7 percent, the slowest rate of appreciation since November 2016, to a median home value of $205,100. San Joseleads the nation in home value growth, up about 17.5 percent since last November to a median home value of $1,128,300.

Las Vegas and Seattle follow with home values up 14% and 12%, respectively. As 2017 came to a close, home shoppers will find 10.5% fewer homes on the market to choose from than a year ago.

San Jose, San Francisco, and Denver reported the greatest drop in inventory since last November. There are almost 55% fewer homes on the market in San Jose than last year. In San Francisco there are 30% fewer, and 26.5% fewer in Denver.

Mortgage rates moved in a very tight range throughout the month of November, reflecting stable financial markets and a predictable monetary policy outlook, despite looming leadership changes at the Federal Reserve. Mortgages rates on Zillow started and ended the month of November at 3.75%, which was also the month high, and hit a low of 3.68% in the first week of the month. Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site and reflect the most recent changes in the market.


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Smart Tips For Renting Out A Condo

Thu, 01/04/2018 - 8:04am

Posted on Jan 4, 2018

Particularly in proximity to business centers, condos are a smart investment for landlords. Whether you’re looking at condos for investment property or thinking “I want to rent my condo when I buy a house or relocate for work,” here are tips that can help you rent that condo quickly.

Prepare Your Condo

If you want to switch to renting out a condo where you’ve been living, you’ll need to do some work first. Make minor repairs or upgrades to modernize the unit, such as repainting walls or updating light fixtures. These quick fixes make the unit more attractive to renters, and may help you command a higher rent.

Once you’ve made light repairs, de-clutter and clean. When your condo is tidy, take high-quality photos to use for the listing. You may wish to create a video, too, which can make your unit gain an edge.

Consider Your Audience

To prepare for showing your condo, think of who would want to live there. If you’re near a university, students and professors might be a natural fit. If you’re in the downtown business area, entrepreneurs and businesspeople may like the location. While you can’t market to a particular demographic — that would violate the Fair Housing Act — you can make sure your listing is advertised at local universities or businesses, in addition to using other channels.

You can also highlight features you love about your condo that would appeal to your audience, as long as these don’t discriminate against a protected class. Maybe the location is walkable to everything, or perhaps you love the storage and parking. Brainstorm concrete selling points, which you’ll then use to create a standout listing and when you show the condo in person.

Screen Applicants

Once you list your condo, leads will start flowing. At this point, you need to screen applicants by checking their credit and running a background check. A basic background check will show previous addresses, eviction history, criminal records and credit reports. Members of the American Apartment Owners Association receive a discount on tenant screening.

When you’re learning how to rent a condo for the first time, it may seem unnecessary to screen tenants. However, no tenant who can afford to rent your condo will be afraid of passing a tenant screening. This check provides you with the peace of mind that candidates are presenting themselves honestly and can afford the rent.

Screening applicants reduces your risk of winding up with a tenant who cannot afford the rent or who mistreats your condo. If you don’t screen applicants, you could have a nightmare renter who damages your condo or skips town partway through the lease period, leaving you with an unanticipated vacancy.

Once you screen your applicants, you can accept the first qualified applicant who is interested in renting.

Get More Tips for First-Time Landlords

Renting out a condo for the first time can bring extra funds that help you reach a financial goal. Get all the tips you need to rent out your condo the right way, as well as discounts and incentives, by becoming a member of the American Apartment Owners Association today.

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

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Value of housing market in the US increased at its fastest pace for four years

Tue, 01/02/2018 - 9:49am

The total value of all homes in the United States is now $31.8 trillion, having risen $2 trillion in 2017, new data shows.

Overall, the cumulative value of the nation’s housing market grew at its fastest annual pace for four years at 6.5%, according to the latest figures from real estate firm Zillow.

It means that the housing market has gained $9 trillion since the lowest levels of the recession and the value gained in 2017 alone is equivalent to more than the valuation of two companies the size of Apple.

The Los Angeles and New York housing markets each account for more than 8% of the value of all housing and are worth $2.7 trillion and $2.6 trillion, respectively. San Francisco is the only other housing market worth more than $1 trillion.

Among the 35 largest markets, Columbus grew the most in 2017, up 15.1% while San Jose, Dallas, Seattle, Tampa, Las Vegas and Charlotte in North Carolina also grew by 10% or more over the past year.

‘This was a record year for home values as the national housing stock reached record heights in 2017. Strong demand from buyers and the ongoing inventory shortage keep pushing values higher, especially in some of the nation’s booming coastal markets,’ said Zillow senior economist Aaron Terrazas.

‘Renters spent more than ever on rent this year, but the amount they spent grew at the slowest pace in recent years as more renters transitioned into home ownership and new rental supply slowed rent growth across the country,’ he explained.

‘Despite recent changes to federal tax laws that have historically made home ownership financially attractive, the long term dynamics pushing up home values and rents are unlikely to change significantly in 2018,’ he added.

The report also shows that tenants spent a record $485.6 billion in 2017 on rent, an increase of $4.9 billion from 2016. Those in New York and Los Angeles spent the most on rent over the past year. These markets are also home to the largest number of renter households.

San Francisco rents are so high that renters collectively paid $616 million more in rent than Chicago renters did, despite there being 467,000 fewer renters in San Francisco than in Chicago.

Las Vegas, Minneapolis and Charlotte in North Caroline had the largest gains in the total amount of rent paid, with each increasing by more than 7% since 2016.



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Paint your bathroom this color and boost your home’s selling price by $5,400

Tue, 01/02/2018 - 9:45am

Pantone released its 2018 color of the year this month: Ultra Violet, a warm shade of purple. Some homeowners have reason to celebrate feeling “blue.”

Homes with blue bathrooms — specifically light shades like powder blue or periwinkle — fetched $5,400 more than expected when sold, according to a paint color analysis from real estate website Zillow. The analysis looked at more than 32,000 sold homes, comparing the sales prices of ones painted certain color versus similar properties that had white walls.

Blue paint isn’t just effective at boosting a home’s selling price when used in a bathroom though. Dining rooms painted in darker blue hues will cause a house sell for $1,926 more than anticipated on average, while homes with light blue kitchens and blue bedrooms will garner a price that is $1,809 higher than expected.

Other colors that increased home prices included grays and beiges. “Painting walls in fresh, natural-looking colors, particularly in shades of blue and pale gray not only make a home feel larger, but also are neutral enough to help future buyers envision themselves living in the space,” said Zillow chief economist Svenja Gudell in the report.

But not all paint colors have this positive effect on sales prices. For instance, a brick red dining room will slash a home’s price down by more than $2,000 versus what was expected. Other ill-advised paint choices — at least where a home’s value is concerned — included yellow, pink and brown.

Where a paint color is used is also important. While blues may wow in kitchens and bathrooms, when used in a living room it decreased home prices by $820 on average.

Those poor color choices all pale in comparison to leaving a bathroom’s walls white though. That decision can reduce a home’s sales price by more than $4,000, showing how a fresh coat of paint can work wonders when it comes to get a home to sell more quickly (and for a higher price.)

These negative reactions to certain colors (or different uses of the same colors) is a reflection of people’s taste and the way specific colors may clash with the furniture and other items prospective buyers already own. Experts recommend choosing colors with mass appeal that can work with a range of décor. It also depends on the specific property — white walls can work in a room with lots of natural light, but will make the space feel “dead” if it’s small or dark, according to designer Emily Henderson.



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Buying Rental Property Vs. Investing In A REIT, Part I

Tue, 01/02/2018 - 9:02am

One of the most common questions I get from aspiring real estate investors is whether to buy property directly or purchase shares in a real estate investment trust, commonly referred to as a REIT.

For those who aren’t familiar with REITs, these vehicles allow individuals to buy shares in companies that own real estate as their primary business activity. While some REITs are private or non-traded, in this article we’ll focus on the publicly traded REITs, which are the most visible and can be purchased by any investor with a brokerage account. I used to run one of the largest publicly traded single-family rental REITs called Starwood Waypoint (now part of Invitation Homes), which I took public in 2014. Today, I’m the CEO and co-founder of a marketplace for buying, owning and selling single-family rental investment properties — so I’m pretty familiar with both sides of the argument.

While both methods of investment allow investors to achieve real estate exposure, it’s a bit like comparing apples and oranges. One represents direct ownership, while the other is characterized by owning shares in a company whose sole purpose is to own and operate a portfolio of real estate assets. I own shares in several REITs as part of my personal equity portfolio, as well as some real estate directly. I view both of those investments differently and see the advantages and disadvantages to each.

To help you better understand the appeal of investing in brick and mortar real estate versus a publicly traded REIT, here is a list of considerations. In the first half of this two-part series, we’ll explore situations when direct investing comes out on top:

Investing Goal: Hedge Against Stock Market Risk

Real estate is cyclical, as is the stock market. But the two do not generally move in lock-step — meaning they are not directly correlated. In order to have a diversified portfolio, by definition, it is important to hold investments that react differently at the same point in time. This is perhaps the most compelling reason to own real estate directly as opposed to owning REIT stock, especially during periods where equities may be fully-priced and potentially facing more near-term downside risk than upside potential.

Investing Goal: Greater Ability To Use Leverage

Buying property directly often gives you the ability to use a higher level of debt financing than is typical in the REIT universe, as institutional investors frown on REITs that employ more than 40% leverage. By contrast, an individual investor buying an investment home can borrow up to 80% of its value through Fannie and Freddie programs. So instead of putting $20,000 into a REIT, you could use it as a down payment and obtain $80,000 in financing for a $100,000 investment property and reap the gains of the entire asset appreciating in value over time. All things being equal, greater leverage can lead to higher returns on equity in upside scenarios.

Investing Goal: Dividend Potential

Many equity REITs have annual dividends in the range of 2-3% or less, while owning individual properties could generate annual distributions of 5-8%. This disparity results from the fact that REITs: 1) often focus on institutional quality assets and markets that have relatively low yields; 2) have corporate overhead costs to cover; and 3) want to avoid the risk of having to lower their dividends in the future — and thus only pay out a conservative level they believe to be sustainable. As a result, REIT dividends tend to be lower but also highly predictable.

Investing Goal: Building Equity

While REIT investors can generate capital gains as the share price ideally increases over time, when you buy an investment property, you’re continuously building equity in a tangible asset. All the while, the tenant is paying your mortgage and your equity stake can increase as the value of the asset typically appreciates over the long term. Having more equity in your asset also gives you the ability to refinance over time and use the proceeds to buy additional assets and grow your portfolio.

Investing goal: Tax Efficiency

Both investing in REITs and investing directly in real property have tax advantages, many of which are nuanced and depend on the specifics. At a high level, REITs are exempt from income tax at the trust level, but a good portion of their dividends are taxed as ordinary income (some may be taxed at a lower rate as capital gains or exempt if characterized as a return of capital, which reduces your basis). However, when you invest directly in real property, you are able to deduct operating expenses and depreciate the asset, which can significantly reduce your taxable income. Another very significant tax advantage of investing in real estate directly is the ability to defer capital gains through a 1031 exchange, which allows investors to sell appreciated property and transfer their original cost basis over to new investment properties without triggering any taxes. Keep your eyes on the tax reform bill to see if this provision remains, as it represents one of the most significant tax advantages for long-term real estate investors.

Investing Goal: Control Over Your Investment Strategy

For many investors, having full control and owning the asset outright holds major appeal. You decide what markets and assets to invest in, how much debt to employ, whether to manage yourself or use a professional property manager, and you sign off on big decisions such as when to make capital improvements or sell properties. While direct investing can take a bit more effort, the payoff could be higher returns and some insulation from the volatility of the stock market.

This concludes Part I of our series on investing in real estate directly versus buying shares in a REIT. In the next section, we’ll discover the benefits of investing in publicly traded REITs.



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Tax Bill Causing A Year-End Frenzy To Pre-Pay 2018 Property Taxes

Tue, 01/02/2018 - 8:34am

The newly passed Republican tax bill is creating end-of-year confusion and anxiety for homeowners. With just a few days left in 2017, many are in a frenzy trying to figure out how they can pay some of their 2018 property taxes now to save money once the bill goes into effect on Jan. 1, 2018.

The new tax bill caps the amount you can deduct for state, local, and property taxes at $10,000.  That’s going to hit hard in states such as California, Connecticut, New York and New Jersey – states where the average state and local deductions in 2015 all topped $17,000,” said the Houston Chronicle. “In New Jersey, the average property tax bill alone was nearly $8,300 last year and there are scores of towns where the average bill is above the $10,000 threshold.”

Can you really pre-pay your 2018 taxes?

In some jurisdictions, prepayment has been allowed for years, although, “Others are scrambling, working to ensure that those who want to pre-pay can — even if the jurisdiction can’t necessarily guarantee the pre-payment will be deductible, said CNN Money.”

That’s because the IRS has has not ruled on whether prepayments for 2018 taxes will be deductible on 2017 tax returns. But, that hasn’t stopped some jurisdictions from trying to help.

According to the Washington Post, “The Montgomery County Council broke its winter recess Tuesday to pass a bill allowing residents to prepay 2018 property taxes, a last-minute chance for homeowners in Maryland’s largest jurisdiction to mitigate the impact of a new federal cap on tax deductions.”

New York Governor Andrew Cuomo issued an executive order Friday “allowing for partial payments on 2018 property taxes, which could help some looking to at least pay off some of the 2018 bill in 2017,” said the Democrat and Chronicle. “There’s a state law now that does not allow partial prepayment and we are going to suspend that law through the emergency executive order until Jan. 2,” he said.

The publication added that, “Counties and towns in New York are scrambling to get their property-tax bills out to give people a chance to pay before the new federal income-tax overhaul takes effect.”

Homeowners lining up

Newsday reported that “Thousands of Long Island property owners are rushing to prepay their second-half school taxes, as well as their general taxes, before the year ends on Sunday.

Similar trends are being seen across the country. In Minnesota,” Counties throughout Southeast Minnesota are reporting a surge in early payments in an effort to cash in – for one final year – on a deduction that the coming federal tax overhaul will limit,” said the Post Bulletin. While, in Tampa, the Florida Tax Collector’s Association crushed homeowners’ dreams by issuing a memo that read, “No, 2018 taxes may not be prepaid in 2017 in Florida because prepaid installments may only be made once the current year’s tax roll is open for collection,” said the Tampa Bay Times.

In Contra Costa County, CA, “Some taxpayers have been disappointed that they can’t make an even larger payment now on their 2018 bills in order to deduct more on their 2017 federal taxes,” said The Mercury News. “But that’s just not possible,”  officials around the region stress.  Russell Watts, treasurer-tax collector of the county told them that, “We couldn’t magically create these 2018 bills so these people have a place to park their money.  Our system wouldn’t be able to handle receiving these payments.”

California homeowners can, however, pay “the last installments of your 2017 taxes – which are not due until next year – before 2018. If you itemize, doing so could save you big money on your federal tax bill this year,” said The Mercury News. “California taxpayers pay their property taxes in two installments, due in December and April. Conventional wisdom has long held that it’s better to wait to give your money to the taxman, and many people don’t pay until the deadline. But that’s not necessarily the best plan this year. Paying that second installment by Dec. 31 could make a substantial difference: If you own a $1 million home, for example, you could save more than $1,000. (With a one percent property tax rate, you would owe $10,000 annually, or $5,000 due in April. If you’re in a 25 percent tax bracket, that equals a $1,250 deduction that could be lost if you wait until 2018.)”

So how do you know what you can do?

You have a few days left to consult your tax professional to find out what the best strategies are for your financial situation and your location and make any potential moves before the New year.

“There’s no one-size-fits-all strategy,” Edward Arcara, a Buffalo accountant who heads the New York chapter of the National Association of Tax Professionals, told the Democrat and Chronicle. “Tax professionals have to look at everything on a case-by-case basis. It depends on what your situation is.”


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6 Ways to Market Vacancies Positively

Tue, 01/02/2018 - 8:30am

Whenever you’re renting out units to students in a college area, you’re going to find yourself facing a lot of competition. With so many properties in the same area targeting the same audience, it’s not uncommon to have some empty spaces left over. When you have vacancies on your property, you have to be careful to ensure that that will not reflect back negatively on the property itself—in other words, you’ll need to make it clear that there’s nothing actually wrong with property so that students don’t get scared away and you can drum up more interest to fill in those vacancies. If you find yourself facing this problem, consider some of the following ways to market any vacancies in your property in a positive way, to ensure that interest in the property continues.

1. Watch Your Wording

Marketing your property positively is all about the wording that you use. Rather than saying that you still have empty spaces, for instance—which could paint the situation in a negative light—instead, say that you still have some spaces available for more tenants. Instead of marketing your property as a rental space that’s unwanted by other tenants, you’ll turn your empty spaces into an opportunity for those who are still looking for housing.

2. Emphasize the Positive Aspects of Your Property

In order to ensure that potential tenants have the best possible view of your property, make sure you include everything that it has to offer when you speak with potential tenants or post listings of the property. If your property has any fun or helpful amenities, like a gym or a swimming pool, those details should definitely be included. It’s also a good idea to mention the laundry facilities, if any, that your property has, and some more specific details about the rental units themselves. For instance, let your potential tenants know how big the apartments are, how many bedrooms are in each unit or if there’s some variety in terms of size, the appliances in each apartment, and the finishes, such as the flooring and countertops. The more details you give about your property, the more your potential tenants will be able to see what your property has to offer and all of the benefits that would come with living there.

3. Use Pictures

In addition to describing your property to students still looking for housing, it’s also a good idea to show them some pictures of the amenities included and the units themselves. That way, anyone who is interested in your property can see for themselves what to expect. Try to take some pictures of an empty unit so that students know exactly what they’ll find if they choose to lease with you, and make sure you clean it up before you take the pictures—dirty floors or nicks on the walls can still show in the pictures, and you don’t want to scare away potential tenants with faults that can easily be fixed.

4. Utilize Social Media

When you still have vacant units in your rental property, a great way to market them is through social media. Especially when you’re trying to reach a demographic of college students, social media will have the widest reach and will probably help you draw the most interest. Whether you use Facebook, Twitter, or another social media platform, students will likely respond well to your choice for advertisement. Include lots of pictures and any relevant details about the property that can help it stand apart from others, such as location and amenities.

5. Offer New Deals to Draw in Tenants

A great way to drum up new interest in your property and to get students to come check out your vacant units is by offering deals to students who decide to lease with you. Given most college students are on a tight budget, the thought of getting a good deal of housing or just saving a little bit of money will go a long way in terms of motivating them to live in your property. It’ll also be worthwhile for you, even if you end up reducing the rent or offering free parking, as you’ll be able to fill up units that may have otherwise stood empty and generated no money at all.

6. Ask Your Current Residents to Vouch for the Property

When you need to attract new tenants to fill up your empty rental units, remember that you already have one great resource on hand: your current residents. Ask the students who are already living in your properties and are familiar with it what they like about living there, and include their comments as testimonials when you market the property’s vacancies. This will ensure that potential residents are aware of the benefits that come with living in your property, and by having current residents vouch for you, they’ll be able to hear from a source they can trust.



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Older, wealthier Americans are the new renters

Tue, 01/02/2018 - 8:23am


  • The number of higher-income rental households has doubled in the last decade.
  • High-income households drove nearly 30 percent of rental growth over the last decade.
  • Today’s older Americans want flexibility to follow their children and grandchildren.
They can afford to buy homes. They just don’t want to.

That is the growing sentiment among older, wealthier Americans, who are now downsizing from big suburban homes and increasingly turning to the rental market.

The number of higher-income rental households has doubled in the last decade, according to a new report from Harvard’s Joint Center for Housing Studies, and that trend will likely increase in the coming years as more baby boomers downsize.

“I think it reflects a change in attitude coming out of the housing crash and a greater appreciation for the virtues of renting,” said Chris Herbert, managing director of the JCHS. “There had certainly been a bias toward owning being a better choice, and that is something people are weighing more carefully now.”

High-income households drove nearly 30 percent of rental growth over the last decade. That, in turn, has fueled development of luxury apartment buildings, especially in major metropolitan areas. Completions of these units averaged 300,000 annually over the last two years, their highest level since the end of the 1980s, according to JCHS.

“Much of this new housing is targeted to higher-income households and located primarily in high-rise buildings in downtown neighborhoods. Given that construction and land costs are particularly high in these locations, the median asking rent for new apartments increased by 27 percent between 2011 and 2016 in real terms, to $1,480,” according to the report.

That means households would need an income of at least $59,000 to afford these apartments, which is significantly higher than the median renter income of $37,300.

Jane Fairweather, a Realtor in Bethesda, Maryland, who sells high-end suburban homes, is well-acquainted with the trend. Many of her clients she said, are moving into luxury rentals. They are put off by high prices for condos and seeing less and less value in homeownership.

“You have to own your properties now 10 years to get your sales costs in and out,” said Fairweather, a baby boomer herself. “I think people do wonder, ‘at this stage in my life, is this where I choose to be for ever and ever?'”

She also points to flexibility. Today’s older Americans want to be able to move to where their children and grandchildren are.

Congress is also giving them new reasons to rent. The Republican tax plan will likely remove some of the deductions that favor homeownership.

“They’re really saying why bother owning? It will be interesting to see going forward how many people opt for rentals because there’s no value in it,” said Fairweather.


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