As Vacancies Fall, Property Managers Like Their Position

Rent.com market survey says vacancies down, rent prices up.

Much like beachgoers in San Diego, rental property managers and owners have been experiencing nothing but sunny days as of late, and, according to more than 500 industry professionals, they may only be getting brighter.

In the 2015 Rent.com Property Owner and Manager Market Report, published earlier this month, responses from property managers painted a rosy picture of the current rental market. Of the 500-plus who took part in the survey last month, 46% reported a decrease in vacancies over last year. The report, citing U.S. Census data, says the national vacancy rate in the second quarter of 2015 was 6.8% for rental housing, down from 7.5% from the same time in 2014.

With a lower vacancy rate comes more power for property managers, says Niccole Schreck, senior brand manager for RentPath, the parent company for Rent.com. “Until vacancy rates increase,” she says, “property managers are going to continue to have the upper hand because renters need a place to live. There’s no way around it.”

Consequently, of the property managers who took part in the survey—all of whom are RentPath clients and list at least one property on Rent.com—55% said they’re less likely to offer concessions or lower rents, and 64% said they’re not doing anything different to fill vacancies.

Schreck says RentPath itself is seeing higher traffic: a 21.1% increase in leads during the first half of 2015 compared with 2014.

Elaine De Lude, chief marketing officer for ROSS Management Services, which manages 28 communities in the Mid-Atlantic, says vacancies are down 1% from last year and that the company has strategically reduced its marketing presence. “We’re doing more with less at this point,” she says.

“We’ve seen just a tremendous amount of traffic at 99% of our properties,” says Andrew Kadish, president of Rockville, Md.–based CAPREIT. “I wouldn’t say we’re doing anything drastically different. It’s just getting back to basics of good customer service.” CARPEIT manages nearly 60 communities across the nation, and vacancies have dropped 1% to 2% in each of them over the past 12 to 18 months, he adds.

For Schreck, the rental market’s growth can be summed up in three words everyone who took a high school economics class knows well: supply and demand. “More people are renting, and apartment construction just can’t keep up,” she says.

Both ROSS and CAPREIT have raised rents in the past year, which is in line with 88% of the property managers who took part in the survey. “It’s based on the supply and the demand,” De Lude says. “If the supply is limited, then we increase the rents.”

“In many markets, there is just so much more demand than supply,” Schreck adds. “We’ll continue to see these high rental rates and increases in rental rates.” If property managers price their apartments competitively, she continues, “they’re going to be able to fill their vacancies. Renters need a place to live whether they consider it affordable or not.”

Kadish says we’re in the midst of a change in the U.S. populous, “from the age of homeownership to a true renter’s economy. That’s not a dirty word. It is a good thing.”

Adding to that trend are millennials and homeowners who are dumping their mortgages for leases. According to the Rent.com report, 54% of property managers reported seeing an increase in the number of former homeowners seeking rental apartments. Forty-five percent said they’ve noticed an increase in the number of millennial renters.

According to Schreck, both increases have similar causes. Renters have more flexibility to move, don’t have to worry about maintaining a home, and, above all else, she says, it’s often less expensive to rent, especially for millennials with mountains of student-loan debt.

Both De Lude and Kadish say this trend of more interest in renting and lower vacancy levels will continue. “There’s probably a couple pockets where there’s new construction and those rents may remain somewhat flat,” De Lude says, “but that’s going to be very submarket specific.”

“We are a renter’s economy now,” Kadish reiterates.

Source: MultifamilyExecutive.com

5 Tips for a Low Stress First Rental Property Investment

You don’t have to be the investor in the photo. Sure, doing anything for the first time can be a little stressful. And, it’s definitely a major investment to buy your first rental home. But, you really can make it happen without going into stress overload. Here are my top 5 tips to enjoy a successful and low stress first rental property investment.

Tip #1: Advice is OK, but Do Your Own Research

Take courses, read investment books, go to a seminar, or any other learning process that helps you to gain confidence to make decisions. I suggest that any books, courses or seminars be about how to select locations, value properties and evaluate the rental market. Your success will be based on your due diligence and most of all buying right in the right area.

Your first rental property investment is best done in your area of residence, where you know what’s going on economically. You want to know that the economy will support today’s decision into the future, as this isn’t a short term strategy. Understand who the major employers are, what drives people to move in or move away, and if things look good into the near future.

Tip #2: Don’t Just Rely on Real Estate Agents

Sure, now and then you can work with a real estate agent who handles foreclosures and get a good deal. Remember though that these will be “listed” foreclosures on the MLS, Multiple Listing Service. You and all of your competitor investors have access to the same information, so competition will likely drive up your cost of acquisition.

If you do your own marketing and locate motivated sellers, you have a greater chance of negotiation a good deal. Another approach is to work with an experienced real estate wholesaler. They are investors too, but they are experts and finding great deals that they can flip to rental property buyers at a below-market value price. Just check their references out and be sure they do know what they’re doing.

Tip #3: Know What Will Rent and for How Much

Check with property managers who handle single family homes. Go to the classifieds and check out what homes similar to the one you’re considering are renting for. Are the owners offering incentives like free months? This is usually a sign of a soft rental market or heavy competition, so you may want to try another neighborhood or property type.

Call on ads, drive around, talk to landlords as if you’re a tenant. The most important thing for you to know before the next tip is what you can reasonably and conservatively expect for rental income and low vacancy.

Tip #4: Get the Right Financing & Cash Flow

You need to know all of your costs, including estimating repairs and other maintenance costs. But, the mortgage is going to be your largest cash outlay, so it is your most important cost consideration. You’ll need to put 20% down or more in most cases. For a rental unit you may also pay a slightly higher mortgage interest rate. A great credit history helps in this regard.

Get a firm handle on all of your costs, then see what your mortgage payment with taxes and insurance escrowed will be. Let’s use an example of a $150,000 home with a $32,500 down payment and closing costs. If you can manage to clear even $250/month over cash out of pocket, your return on the actual cash invested is going to be around 9%.

Tip #5: Lock in Equity at the Closing Table

NEVER buy at retail market value. If you can’t get the home at a 10-20% discount to its current market value, don’t do the deal. You want to leave the closing table with that equity as either future profit or a cushion should you have to sell before your initially planned liquidation date.

If you’re going to work with a wholesaler who you may meet at a local investment club, be clear that you’ll want to see their valuation calcs and you’ll check them with your own. You give them your requirement. If it’s 15% below market value, then they will know what they have to deliver.

You’re in control here, and you don’t have to make a deal until you know it’s going to be a great investment.

Source: huffingtonpost.com

Ask the Attorney: Tenant Wants Off the Lease

The Landlord Protection Agency® presents John Reno, Esq., a highly experienced Landlord – Tenant attorney based on Long Island, NY.

Q: Dear Mr. Reno:
Tenants are boy-friend and girl-friend that have signed lease together, but he does not live in the property. This is a condo situation that only allows 1 rental per year.

The couple is in the midst of a personal battle.
She wants to get out of the unit and wants me to remove her from the lease, I said that can not be done since she signed a 1 year lease, she than asked me for a letter stating that she has no more responsibility for the lease and I am a little edgy about signing it and characterizing a new lease from the condo stand point? What is your take? Should they resolve that between themselves?

Mauro A Bonatti, FL

A: Yes, they should not depend on you to sort out their issues. When the lease expires, they can go their separate ways, or whatever. Until then, that’s a contract. A lease is a contract.

How to avoid common mistakes of first-time landlords.

First-time home buyers are a declining group. Historically, 40 percent of home buyers have been first-time buyers. However, that number continues to shrink, even if the true home ownership rate among millennials climbed ever so slightly last year. If you’re already a homeowner, your wheels might be spinning right about now, if people aren’t buying starter homes, then the rental market has to be booming. Right? It is in many areas, particularly where unemployment is low, the population is high, and homes aren’t overpriced. You might think you’re ready to become a landlord, but learning how to be one by trial and error is not necessarily the best way. Here are seven things to consider before you take the plunge.

1. Live near your rental property. It is important to check on it periodically, take care of repairs yourself, and show the property when it’s time to re-rent it. Forbes put together a list of the 40 top investment areas, but even if you don’t live in a prime rental region, you can still invest in one.

2. Know landlord-tenant laws. Arizona has favorable landlord laws. However, you still need to follow and know the specific landlord-tenant provisions that cover security deposits, access to the property and notice required when you want to end their tenancy. There also are federal laws you need to know, such as habitability and fair housing laws.

3. Make sure you collect the rent on time. This seems like a no-brainer, but believe me, if you get too friendly with your tenants, you might just let them slide a couple of weeks. You don’t want the tenants getting months behind, because, if they can’t pay the current month, chances are they can’t pay multiple months. You really never want to take a partial payment either because it limits your rights to evict. Also, you really do want to build a good rapport with a tenant because it makes the relationship easier to manage with repairs and access. It is very important to have thick skin if you are going to be a landlord because you are going to have to evict someone in the middle of the summer, eventually.

4. Screen potential tenants. It’s worth the time to do a background and credit check on all potential tenants. You can use an online tenant-screening service for this. Credit score alone is not always a reason to accept or deny an applicant, but it is a useful screening tool. You should also conduct an interview and check their references.

5. Customize the lease agreement. If you don’t hire a property manager, you can use a standard lease form you can find online. For example you want to know how many people are going to be residing at the property, whether or not you will allow pets, who is responsible for landscaping and pool maintenance.

6. Inspect the property regularly. A simple drive by says a lot. If the tenant is maintaining the outside, they are normally maintaining the inside. Always take pictures to establish a base line of what was in the house and the condition of the carpet and other items before they moved into the home.

7. Understand this is not a get-rich-quick scheme. It takes time before the property appreciates and your investment starts to pay off. You’ll need reserves to pay the mortgage when the property sits vacant for a few months, you need to replace the A/C unit, put in new carpet and other basic maintenance. Think of being a landlord as part of your overall investment strategy and realistically aim for getting around a 5 percent return on your investment.

Source: ahwatukee.com 

Why rents could rise by 8% in 2016

Property managers seem committed to hiking rates.

Rental rates could rise by an average of 8% through next year, according to more than two-thirds of property managers surveyed in a report issued by Rent.com.

Out of the 500 property managers surveyed in the rental site’s Property Owner and Manager Market Report—and between them, they are said to represent hundreds of thousands of rental units—88% of them have raised their rates in the last 12 months, and they seem committed to hiking rates again next year.

The reasons are manifold, but 64% of landlords surveyed identified two main factors: the twin pressures of increased demand for units and low inventory. As noted by the U.S. Census Bureau for the second quarter of this year, national vacancy rates dropped to a 20-year low of 6.8%. With the country currently in the midst of its strongest stretch of rental growth since the late 1980s, and with homeownership rates falling at historic levels, landlords have little incentive to lower their prices.

According to additional data provided to Fortune by Rent.com, the percentage of surveyed landlords willing to give concessions, such as a reduced rental price, have dropped drastically over the years:

Other real estate sites have predicted a 4% hike for rental rates next year, which represents a more modest—but still costly—increase. All together, these forecasts mean that renters are finding it increasingly more difficult to pay their rent. A recent study showed that the number of U.S. households that fork out at least half of their income on rent is set to increase by 25% to 14.8 million over the next decade.

Source: fortune.com 

September Rent Increases Mark New Record High

U.S. multifamily rents continue climbing this year with the September increase of $5 marking a new record of $1,167, according to the September edition of Matrix Monthly, a report on apartment market trends from Yardi Matrix released today.

September’s year-over-year increase of 6.8 percent was 30 basis points higher than the previous two months and the highest growth in the post-recession cycle.

In August, average nationwide rents rose $7 to $1,162, an increase of 6.5 percent year over year, according to Yardi Matrix data. That was the same percentage increase for July, when the average U.S. apartment rent rose to $1,155.

Rents have risen every month in 2015 and Paul Fiorilla, associate director of research at Yardi, told Commercial Property Executive he expects the upward trend to continue.

“We’ve had this consistency to the rate increase, which demonstrates the demand is not slowing down,” he said. “The traditional drivers of demand are not going away, so there is no reason to think that this is not going to continue for the next year or so.”

Fiorilla cited strong job growth and in-migration in the top markets as the key drivers in the “rent engine.” Citing data from the Bureau of Labor Statistics, the September report notes that about 60 percent of Yardi’s Top 30 metros have added 3 percent or more to their employment base in the 12 months ending in July.

On the demographic side, he said more multifamily households are being created as Millennials move into apartments and a growing number of Baby Boomers start downsizing and renting rather than owning homes.

Metropolitan areas in the West and Pacific Northwest led the way in September with rents in Portland, Ore., rising 16.3 percent year over year, according to the data collected by the Yardi Matrix business unit. The next top four metro regions, all above 8 percent year over year, were San Francisco, Denver, Sacramento, Calif., and Seattle.

The Southeast region, led by Atlanta, Orlando, Tampa and Miami in Florida, is also showing consistent rent growth, according to the Matrix Monthly report. Those metros were all above the national average of 6.8 percent year over year, according to the Matrix Monthly data. The report also noted that rents in Atlanta, Orlando and Miami all grew by 0.7 percent during a trailing three-month year-over-year period, with Tampa growing at 0.6 percent in the same time frame.

“Southeast metros continue to see above-trend employment growth, led by corporate relocations, increasing back-office staff and robust tourism, with growing populations drawn by the availability of jobs and inexpensive housing,” the report stated.

Areas that are not seeing the same pace of rent growth includes the Midwest and the Northeast with Richmond, Va., and Washington, D.C., falling below the long-term average. Houston, grappling with the effects of lower crude oil prices, has seen its year-over-year rent growth fall “to a relatively mediocre 4.9 percent and T-3 growth over the last three months has been almost flat, at 0.1 percent,” according to Matrix Monthly for September.

Matrix Monthly highlights the results of a monthly survey of apartment owners in 108 markets covered by Yardi Matrix. It is used as a business development tool for brokers, sponsors, banks and equity sources that underwrite multifamily investment transactions.

Source: cpexecutive.com