Apartment Market Digital - Apartment Outlook 2014

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Apartment Market Digital • Spring 2014 1 Apartment Market Digital • Spring 2014 1 Apartment Outlook 2014 Identity Theft: Keeping Renter Data Safe Apartment Market Outlook: 2014 Apartment Market Hot Spots: Cities to Keep an Eye On 2014 ALSO IN THIS ISSUE: • Data Sources for Average Apartment Rents • The Investment Return on Apartments • Sources That Renters Use to Find Apartments • Top Apartment Resident Complaints • How to Manage Hoarding Tenants • Recognizing False Apartment Reviews • New Construction Facts Identity Theft: Keeping Renter Data Safe Apartment Market Outlook: 2014 Apartment Market Hot Spots: Cities to Keep an Eye On

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Transcript of Apartment Market Digital - Apartment Outlook 2014

Page 1: Apartment Market Digital - Apartment Outlook 2014

Apartment Market Digital • Spring 20141 www.apartmentsforsale.comApartment Market Digital • Spring 20141 www.apartmentsforsale.com

Apartment Outlook

2014ALSO IN THIS ISSUE:• Data Sources for Average

Apartment Rents

• The Investment Return on Apartments

• Sources That Renters Use to Find Apartments

• Top Apartment Resident Complaints

• How to Manage Hoarding Tenants

• Recognizing False Apartment Reviews

• New Construction Facts

Identity Theft: Keeping Renter Data Safe

Apartment Market Outlook: 2014

Apartment Market Hot Spots: Cities to Keep an Eye On

2014ALSO IN THIS ISSUE:• Data Sources for Average

Apartment Rents

• The Investment Return on Apartments

• Sources That Renters Use to Find Apartments

• Top Apartment Resident Complaints

• How to Manage Hoarding Tenants

• Recognizing False Apartment Reviews

• New Construction Facts

Identity Theft: Keeping Renter Data Safe

Apartment Market Outlook: 2014

Apartment Market Hot Spots: Cities to Keep an Eye On

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A source of contention be-tween property managers and real estate investors is how to set the price for

a rental property. Outside of your business model and profit margin expectations you have to also con-sider what the current market will sustain and what similar properties are renting for in the local econo-my. There are resources available to help you determine what a rea-sonable asking price should be for apartment rent and what you can expect to receive for your proper-ties.• Typical residential rent prices

are provided by the U.S. Bu-reau of Labor Statistics in the Consumer Price Index which provides data for government statistical information and is an important resource of economic trends to use when setting your rent-al rates.

• Census data concerning rental prices is available through the American Community Survey. The Census Bureau further provides Statistics of Market Absorption as a quarterly and annual report showing asking prices for newly constructed apartment communities.

• HUD is another government agency that provides its infor-mation to the public concern-ing rental rates. HUD provides information concerning rental rates in both metropolitan areas and rural rental properties in the estimates of Fair Market Rents.

• The National Multifamily Hous-ing Council (NMHC) provides information on their website that includes regional statistics on the going rate for apartment leases.

• NMHC offers public distribution of reports concerning median rents, monthly distribution of rent payments and apartment rent as a percentage of house-hold income.

The use of these resources pro-vides you with factual and imme-diate, current information about rent prices nationally and how that compares to your local situation. Use these facts to judge where and

when you want to invest in buying or building rental space along with how to best determine the lease value of those spaces. p

Data Sources for Average Apartment

Rents

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Why is investing in apart-ments seen as a great option? Does it real-ly guarantee invest-

ment return as many people see it? These are questions that many people have never gotten the right answers to. Apartments are a great investment platform, not just in the United States but also across the world. These investments are bound to bring in a myriad of invest-ment returns in the near future.

The aspect of investment return

Whenever you want to invest, you need to appreciate that these returns can exceed or even fall short of those that were registered

in the past. However, demograph-ic trends suggest that the demand for apartments will continue to grow moderately in the year 2014 and the coming years.

Short average development periods

Another aspect that makes in-vesting in apartments a good option is that they have generally lower development periods. This aspect makes it easier for support to rela-tively adjust to changes in demand. This then results in a reduction in amplitudes of building cycles. Final-ly, rental controls and various forms of regulation in regard to rental property are less extensive today in the United States than in most

countries all over the world.

The past and what we can expect in future

In the year 2006, the United States had a total of 17.6 million apartment residences. The value of all these apartments was estimated at a total of $1.87 trillion at the end of that year, which was generally an all time high. The total value of all these apartments has been ris-ing at an exponential rate since that time through a period that included the state of economic recession. Direct investments in apartments have provided a competitive invest-ment return relative to other major property types in the United States.

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The Investment Return on

Apartments

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Sources That Renters Use to Find

ApartmentsIn the modern age of internet

communications, few renters use the local newspapers to find apartments anymore. However,

some traditional methods of finding a home are still in use. Although the method may vary a bit regional-ly, renters tend to consistently use three main sources to find an apart-ment across the country.

• The most common method re-mains the traditional drive by and see an apartment sign. This allows the potential rent-er to see the property firsthand and make a decision based on curb appeal. This allows the renter to find a home in an area they are familiar with,

whether it is close to work or close to the areas they tend to visit around town.

• Word of mouth is also a com-mon method of finding an apartment. A renter’s friends know what the renter likes and can keep an eye out for potential openings. This is es-pecially true when someone is moving to a town in which they don’t currently live but have acquaintances in the area.

• Internet sources are also used often when moving to a new city or when looking for a bet-ter apartment in town. Craig-slist serves the purpose that

newspapers used to serve as a starting point for the search. Paid or free websites specif-ic to property listings are also available and used when the renter needs to find a home quickly without time for an ex-tended search.

As the landlord, it is important that you keep all of these sources in mind when advertising an empty apartment. Your apartment will rent faster if you utilize all the resourc-es available to let potential renters know about your offering and it usu-ally gives you the option of several applicants to choose from to move in. p

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Some apartment residents have legitimate complaints about what they dislike in their apartment. These

complaints need to be addressed because any business is more suc-cessful with satisfied customers, especially in the real estate busi-ness. Empty apartments not only don’t produce income but require holding costs and continued main-tenance expenses while empty.

Infestations are a top concern for tenants. Nobody wants bugs in their home, and apartment residents can’t be held responsible for the effects of their neighbor’s problems as bugs cross between apartments. Fumigation is simply a business expense for apartments and has to

be included when determining the monthly payment amount.

Other maintenance problems are also high on the list of tenant com-plaints. Whether it’s a leaky roof or a leaky faucet, apartment residents hold an expectation that repairs will be conducted properly in a timely manner. It is, appropriately, their expectation that the rent payment is for an apartment with all the adver-tised amenities to not only be there but to also function properly.

Legal issues are rarely taken to court by a tenant, but compose a variety of complaints about how the lease is handled. Deposits that aren’t returned, lease terminations that aren’t handled properly and evictions fall in this category. To

handle these complaints, make sure to address these issues in your business plan so you know you ha-ven’t done anything wrong. Set up a separate account to hold depos-its until after the tenant leaves, and make sure to use all the proper le-gal procedures when conducting an eviction.

In some cases, these complaints can’t be avoided, as some tenants make excuses for being late on their rent payment. All you can re-ally do is make sure the complaints are unfounded and minimal as you take care of your apartments re-sponsibly. p

Top Apartment Resident Complaints

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As a landlord, discovering one of your tenants is a hoarder can be distressing. The American Psychiatric

Association designates hoarding as a mental health disorder. However, when a hoarder becomes one of your renters, they are protected by the Fair Housing Act which states that you cannot discriminate a rent-er due to a disability.

TypesSurprisingly there are an end-

less number of hoarding types. The most common include the Garage Hoarder and the Yard Hoarder. The Garage Hoarder stores every item they have ever owned in the garage. The Yard Hoarder keeps a disturbing number of statues, fig-ures and other structures scattered around the yard.

Warning SignsThere are many different signs

that reveal whether a tenant is a hoarder. First, sections of the apart-ment have become completely un-usable due to clutter. Second, within that clutter, there is no organiza-tion. Third, the cluttered items do not hold any value such as trinkets, figurines, junk mail or old clothes. Fourth, the home is becoming ex-tremely unsanitary. Hoarders typi-cally live in homes that are consid-erably dirty. Finally, the tenant may become extremely defensive when confronted with their hoarding.

How to Solve the ProblemDepending on the severity of the

hoarding and their behavior, the tenant may be in violation of the lease, which could be grounds for eviction. Observe and determine if the tenant is in breach of the lease due to the following:

• Property damage• Blocking emergency exits• Interfering with the ventilation• Housing animals that does not

abide by the lease agreement• Holding perishable goods that

could attract bugs, mold or ro-dents.

In this situation, it is critical to de-velop an action plan by document-ing the condition of the property, offering help to tenant, providing notice for them to remedy the situa-tion, seeking legal advice and then beginning the eviction process. p

How to Manage Hoarding Tenants

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Identity theft is a serious concern to both consumers and retailers. According to the Federal Trade Commission (FTC), it’s the fast-

est growing crime around the globe. Annually, about 10 million individ-uals fall victim to identity theft, or about 19 people per minute.

The landlord-tenant bond is one that involves trust between both parties. It’s important for apartment owners to have access to the fi-nancial records of those who live in their buildings, but it’s equally crucial that this information be kept out of the hands of criminals. Here’s what every landlord or commercial real estate investor needs to know to keep their tenants safe.

• Take care to check the back-ground of all employees. 70 percent of all thefts of identity last year were perpetrated by an employee of a business or by the victim’s coworker. Thor-oughly vetting your employees may reduce the risk of identity loss.

• Dispose of all information prop-erly. Thieves have no problem rooting around in trash to get the information they want, so it’s not enough to just toss out sensitive documents. Instead, use a shredder on all tenant information.

• Protect your computers. Stop hackers in their tracks by us-ing password protection on

files and ensuring that your vi-rus protection and firewall are kept up to date. Avoid storing sensitive information on laptop computers, which can be easi-ly accessed.

• Protect your mail. Don’t allow mail to pile up outside of your office. If it’s not delivered in-side the building, invest in a locked mailbox that will keep thieves at bay. You may want to consider purchasing locked boxes for your tenants to use as well.

Identity thieves thrive when infor-mation holders get careless or lazy. Setting up good habits now means less chance of aggravation in the future. p

Identity Theft: Keeping Renter Data

Safe

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Recognizing False Apartment Reviews

Honesty sometimes feels like a rare commodity be-tween apartment owners and tenants. As technolo-

gy provides us all with greater in-sight into the thoughts and actions of ourselves and others, it may seem as if dishonesty is the only way to make us stand out from the rest of the crowd.

However tempting it may be to post fake reviews of apartments or to “pad” the amenities offered in our facilities, we have to keep in mind that these behaviors aren’t just unethical, they’re downright il-legal. Fake apartment reviews are worthless in the long run and if you have a problem with your proper-ty that’s serious enough to require falsehoods, it’s better to spend your time fixing what’s broken instead of simply covering it up.

In a perfect world, being upfront and honest with our tenants would be all the encouragement needed to ensure an ethical partnership between all parties. Unfortunate-ly, despite our best efforts, some individuals will use social media or online reviews to harm our rep-utations. Here’s what to do if you find yourself the target of negative apartment reviews:

1. Make reviews a priority. Check apartment review sites first thing every morning to prevent any nasty surprises.

2. Respond to all reviews, if pos-sible. Thank the poster for leaving feedback and keep your tone professional when asking how to resolve dis-putes.

3. Don’t incentivise reviews. Overly glowing reviews, com-bined with negative ones, send out a warning signal to potential tenants.

4. If you receive a review that you feel is unfair talk to the web-master of the review site. You may be able to get it removed.

Thanks to the rapid expansion of social media and review sites, we’re able to communicate more effectively with our customers than ever before. Make sure you’re sending your potential tenants the right message. p

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Renting seems to have be-come the norm for a gen-eration of would be-buyers priced out of the housing

market. About 66.5% of American households owned the homes they lived in at the end of 2010 accord-ing to the U.S. Census Bureau. That figure stood at 67.2% at the end of 2009. Last year (2013), the number of home owners dropped by 30,000 compared to 2012; during this time, a total of 1.1 million renter house-holds were added.

Interestingly, though, the decline in buying is not being driven by foreclosures pushing potential buy-ers out of the real estate market. It seems more people, especially the younger generation, are being made to believe that owing a home is no longer a lucrative investment. The rates amongst people aged 55 and above remain rather consis-tent.

So, why are people renting rath-er than buying? Most cite fear for continued fall in home prices as the

main reason for not buying. Some are uncertain about the stability of their jobs while others decried tight-er credit standards for mortgages as an impediment.

For real estate investors, now is the time to take advantage of this trend towards renting. With the continual increase in demand, the apartment market has a positive outlook for the year 2014. p

Apartment Market Outlook: 2014

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New Construction Facts

There is no doubt that the financial crisis of 2012 bur-dened the younger genera-tion to a larger extent. To-

day, this same generation is poised to drive the demand for housing in most parts of the United States. After many years of downturn, the US home building industry is sol-idly contributing to the economic growth of the country at large. One important factor to take note of in this growth is the expansion of mul-tifamily construction such as condo-miniums and apartment buildings.

Home ownership remains down for the younger generation

Although there has been a growth in the property sector in most parts of the United States, home own-

ership is still down in 2014 for the young generation. The overall num-ber of homeowners is at an all time low compared to where it ought to be relative to the degree of popula-tion growth.

What has this resulted in?Due to these trends, there has

been an upsurge in rental units’ demand, which in turn has led to a reduction in vacancy rates and has driven the demand for multifamily development upwards. With few units available for an ever-grow-ing number of renters, 2013 truly marked a significant rise in multi-family construction.

The future of multifamily construction in the United States

Experts argue that multifamily development in the United States is expected to spur economic growth in 2014 and in the years to come. This element has allowed housing to significantly contribute to the growth of the economy for the first time ever in seven years. Some states and cities such as New York, San Francisco, Boston, San Jose, Northern New Jersey, Washington DC, Orange County, Los Angeles, San Diego and East Bay are wide-ly touted as top markets in terms of asking rents for multifamily con-struction. p

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As the real estate market begins to recover, more people are becoming in-terested in investing again.

The apartment market has always held high expectations for return on investment. A multi-family property provides the resources to cover it-self when one unit is empty, as op-posed to rental houses which incur holding costs and can be devastat-ing if left empty for too long.

There are the old standby cities for investment such as Los Ange-les or New York, where the nearly guaranteed return inspires a fierce competition for investment oppor-tunities. Other nationally known cities are growing and drawing in new residents. These are the hot spots for investment, as jobs draw in more people needing a place to live.

• Forbes Magazine has recently listed several Texas cities as the most rapidly growing eco-nomic areas in the country. Austin, Dallas, Houston and San Jose are each bringing in college graduates and expe-rienced professionals as new businesses open or expand into the area.

• As more tourists are finding Denver to be a pleasant vaca-tion, more locals are moving in to run the tourist industry, making this a fast growing city with plenty of opportunity for the real estate investor.

• Raleigh and Charlotte are drawing people as their uni-versities grow and banking industry finds North Carolina as an intermediate place for

main offices accessible to both the North and South Eastern states.

As with any investment, there are a few things to consider before you decide on a property to invest in. The specific area is important, con-cerning neighborhood crime rates and school districts that draws rent-ers to the particular apartment mar-ket. On a larger scale, you want to invest in cities that are growing and have job opportunities, thereby at-tracting professionals and labor that needs to find a local residency. p

Apartment Market Hot Spots: Cities to

Keep an Eye On

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... continued on page 13

Free listing service for brokers and owners for 50+ units in the United States

New Rules for Raising Capital for Real

Estate InvestmentsBy Darrel DicksonApartmentsForSale.com

Crowd funding rules for real estate changed recent-ly and with the available technology the landscape

for raising funds for real estate investments in the future will be changed.

The Jobs act created an entirely new exemption from registration of the securities act which will permit companies to publicly offer and sell up to a million dollars in securities over 12 months without needing to

register.There are restrictions and indi-

vidual investors annual income or net worth less than one hundred thousand dollars may invest no more than the greater of $2000 or 5% of his or her annual income or net worth.

If his or her income or net worth is higher than $100,000 he or she may invest no more than 10% of annual income or net worth and never more than hundred thousand dollars.

A new type of broker known as a funnel portal must be used to fa-

cilitate the sale. The funnel portal will be required to register with the SEC and other organizations and to confirm the investors satisfy the in-vestment requirements.

Companies that use the crowd funding process will have to file with the SEC. Certain information of the operating companies involved in raising funds will need to be provided to the SEC: such as the business plan description, compa-ny’s capital structure, and intended use of the proceeds, audited finan-cial statements will be required for

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PCMI is a Licensed Real Estate Broker in Washington and California.

(360)802-0983 pcmigroup.com

offerings of more than $500,000. The Offering Company will need to file ongoing reports with the SEC based on rules yet to be determined by the SEC

Crowd funding is an interesting new opportunity for syndicators to raise capital for real estate invest-ments. Real estate operators will be able to raise capital online from groups of investors in an automated way

Real estate investments typical-ly have been illiquid. Investors have plenty of opportunities to in-vest in stocks and bonds but when it comes to actually access private real estate deals the process in the past has been difficult for private in-vestors to participate. Crowd fund-ing will change all of that.

Crowd funding eliminates the barriers that are typically associat-

ed with real estate investing such as having the time and expertise, and knowledge to invest can make investing in real estate a challenge. But pulling your money together through crowd funding you can ac-cess investment opportunities that otherwise would not be available to a busy professional to manage a property by themselves. You can have others with the knowledge and experience and the time to manage your real estate investments. In the near future, I foresee that you have an opportunity to browse different investments from your computer looking at opportunities in different metropolitan markets throughout the country.

Real estate is becoming more ef-ficient with sites like Zillow and oth-ers providing incredible amounts of data to real estate investors. You are going to see more efficiency in the private real estate investment

market.Because of the change in secu-

rity laws more investors are going to have crowd funding opportunities and it is going to open up opportu-nities for not only accredited inves-tors but also with the jobs act crowd funding rules will see retail inves-tors participating in the future.

Before September 23, 2013 it was illegal for real estate invest-ment operators to publicly advertise that the private company was seek-ing funding. The new rule change allowed operators throughout their fundraising efforts to market to per-sons on Facebook or twitter or oth-er social media outlets.

Different real estate investment websites will be developed to raise money on line in the near future. It will be fun to watch which compa-nies become the leaders in this new frontier of raising capital for real es-tate investments. p

New Rules... from page 12