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Suburbs More Viable Than You Think?

In a recent article for Multifamily Executive, author Mary Salmonsen discussed what she learned from the MFE Conference in Las Vegas and why some suburban areas across the nation could provide favorable investing conditions for investors, asset managers, and developers.

Despite some fundamental differences and the inherent unknowns that come with penetrating a new market, multiple industry pundits believe the risks might not be as bad one may think.

“I’m convinced that, even at this point in the cycle, you can go to the suburban categories, the right kind of suburbs, and not add any risk to your investment strategy, but actually also achieve a better yield and save a risk-adjusted return,” said Jay Parsons, vice president of MPF Yieldstar, in the opening section of his panel presentation “The Nation’s Strongest Under the Radar Markets,” held Sept. 19 at the MFE Conference in Las Vegas.

Parsons didn’t overlook the obvious advantages of investing in dense, urban areas. He noted factors like construction incentives and more willing investors as main reasons why urban areas are so attractive for multifamily investments and developments. But at the same time, Parsons lists those same urban market strengths as potential barriers as well, due to the cost of investor capital and the extended time it takes to build.

On the other hand, suburban areas have their own barriers to entry. In many cases, suburban cities have more restrictive zoning laws against multifamily properties. Furthermore, suburban locals might show ‘not in my backyard’ resistance to multifamily construction. Having said that, those who can bypass suburban barriers could be in line for better yields with little to no added risk.

Zillow senior economist,  Aaron Terrazas, followed Parsons by taking a more detailed look at the flucuation of rent growth in the country’s strongest metros and cross-examining his findings with Zillow’s ZIP code-level rent appreciation data. He accredited market rent growth to specific local factors like Atlanta’s infrastructure and lifestyle investments or Sacramento being a satellite market to the Bay Area. In summary, Terrazas found that each smaller market that experienced growth had a unique factor that could make it a more attractive to investors and developers than a broader, national report might suggest.

“The reality today is everybody has to do their homework,” Terrazas said. “There’s no single national narrative. Things are local, the story’s local, and you have to look at the whole data to understand what’s happening here. You can’t just take a single national line.”

Click here to read more from Mary Salmonsen and Multifamily Executive

Employment Growth in October

Last week, the Bureau of Labor Statistics (BLS) reported the addition of 261,000 jobs to the U.S. total nonfarm payroll employment during October. The BLS also reported the headline unemployment rate dropped to 4.1 percent – the lowest rate in the past 17 years.

The rebound in employment counteracts the slump in September which can be widely-attributed to Hurricanes Irma and Harvey.

EPIC Asset Management Group

According to the BLS report, employment in the food services and drink places industry spiked in October increasing by +89,000 following September’s decrease of 98,000 due to the hurricanes. The manufacturing sector saw a rise in employment by 24,000 jobs last month while health care added about 22,000 jobs. The professional and business services industry also stayed on pace with its average monthly gain by adding 50,000 jobs to the market.

Other major industries such as mining, construction, retail, government, transportation and warehousing, and information services experienced minimal change during October.

Average hourly earnings for all employees on private nonfarm payrolls only slightly varied in October. But over the last 12 months, average hourly earnings have increased by 63 cents or 2.4 percent.

Click here for the Bureau of Labor Statistics October report in its entirety: www.bls.gov

Getting Ready to Sell Your Community

Analyzing Metrics - EPIC Asset Management Group

In a recent article for the National Apartment Association, author Les Shaver, interviewed some multifamily professionals from Chicago-based AMLI Residential to learn strategies that make selling a community easier by demonstrating uncapitalized property value and analyzing macro data.

“We want to demonstrate value for the buyers by upgrading 20 percent of the apartments, Sarah Wieckowicz, Vice President of Revenue Management at AMLI, said during the Maximize session “Leaving Occupancy Behind: Identifying the Truly Important Measures” last week in Austin. “We can show a potential buyer what kinds of returns they can get.” In other words, leaving some meat on the bone will make your property more attractive to potential buyers when it comes time to sell.

In the process, AMLI is also harnessing the power of advanced metrics. The company is utilizing their access to big data to know when to accelerate or decelerate a rehab process, understand if it’s best to sell or maintain ownership of property, and accurately inform potential and current buyers.

For the entire NAA article and more details on these selling strategies, click here.

 

Airbnb Entering the Apartment Industry

Subleasing is usually something landlords do not prohibit because it’s often a high-risk low-reward situation. But that is not the case for a Newgard Development Group, a major real estate development company out of Florida. Earlier this month, CNET’s Dara Kerr reported the announcement of Airbnb’s new partnership with Newgard Development Group that will be branded as “Niido.”

The partnership will allow Newgard tenants of a 324-unit property in Kissimmee, Florida to utilize short-term leases and sublease their apartment on Airbnb for a maximum of 180 days per year. In return, Airbnb has agreed to share some of the income generated through the listings with Newgard.

Airbnb - EPIC Asset Management Group

The partnership aims to “eliminates barriers by encouraging home sharing and creating solutions that work for everyone,” stated Newgard CEO Harvey Hernandez. Furthermore, Hernandez stated the new business plan should help tenants relieve some financial pressures as cost of living increases by providing extra cash flow through Airbnb listings.  “Niido’s unique multifamily home-sharing model provides a powerful solution to this ongoing problem by delivering extra income for tenants while creating enhanced experiences for their guests.”

Beyond their intial Niido project, Newgard and Airbnb plan on furthering the partnership by building new apartments with the sole purpose of subletting to short-term tenants and tourists.

Click here to read the full CNET article covering the Airbnb/Newgard partnership

Extra Heads-Up for Colorado’s Short-Term Tenants

Last week, Colorado legislature officially implemented a new law – Senate Bill 17-245 – requiring landlords to provide their short-term tenants at least 21 days’ notice before increasing rent rates or terminating their leases. Tenants now also must give at least 21 days’ notice before terminating their own short-term lease.

According to Colorado law, short-term leases run on a month-to-month basis or last no longer than six months.  Before the new law was enacted, either party could terminate a short-term lease with just seven days’ notice, one of the fastest turnaround times in the country. Colorado State Representative Dan Pabon described reasons for the law passing in a written statement:

“In this overheated housing market, more and more people are facing rent increases and having to find short-term accommodations. This new law will relieve some of the pressure on renters when faced with these situations, and give them more time to find an alternative if needed.”

With Senate Bill 17-245 in effect, tenants and landlords should feel less pressure and more equipped to adjust to an unforeseen lease termination or rent increase.

Click here to read more from The Denver Post

Airbnb and its Impact on Real Estate

If there are any Airbnb listing located near an apartment community, odds are that multifamily property has experienced some benefits.

According to a new academic study conducted by researchers from MIT, UCLA, and USC, a 10% increase in Airbnb listings would lead to a 0.39% increase in rents and a 0.64% increase in home prices in a zip code on average, meaning neighborhoods with listings are becoming more valuable. Data was collected by MIT Research Assistant Kyle Barron, UCLA Professor Edward Kung and USC Professor Davide Proserpio, as they compiled research from resources such as Google Trends, Zillow, Airbnb, and the Census Bureau.

While the report proves an increase of Airbnb listings has an effect on home prices, perhaps the most noteworthy finding from the report, especially for the multifamily industry, is Airbnb’s  impact on rents appearing to be linked to the availability of commercial listings in a particular market.

Fast Company’s writer, Ruth Reader explains, “They found that the percent of non-owner-occupied units listed in a given region determines the rate at which rents will increase. Rents rise more heavily when there is a preponderance of home listings that the owner is not living in.” More specifically, the study shows rental rates increase when landlords/owners take long-term inventory and move them to short-term markets like Airbnb.

As services like Airbnb and VRBO become more popular, it is only a matter of time before this new form of housing market has a larger effect on residential, commercial, and multifamily real estate from a monetary and regulation standpoint.

Read the entire Fast Company article here

AXIOMetrics – July 2017 Jobs Report

Earlier this week, AXIOMetrics, a market research company that provides strategic insight reports for real estate professionals, issued its July 2017 jobs report.

Here are some major takeaways:

  • 209,000 jobs were added to the U.S. economy in July
  • The national unemployment rate slightly dropped from 4.4% to 4.3%
  • Top five annual job growth markets – New York City, Dallas, Atlanta, Los Angeles, Orlando
  • Washington D.C. and Minneapolis-St. Paul move into top 10 of job-gaining metros

Beyond the major takeaways from the July jobs report, AXIOMetrics breaks down job growth by industry, analyzes how the Federal Reserve may interpret the current and upcoming economic climate, and explains how metrics like inflation and unemployment interact with each other.

The report also includes numerous graphs and visual aids to show how certain statistics compare to past metrics, but given the abundance of useful information provided by AXIOMetrics’ research, a personal analysis of the report is suggested to ensure a full understanding of job growth in the U.S. during July 2017.

Click here for the full AXIOMetrics July 2017 jobs report

An Expert’s Opinion

Yesterday we discussed some useful research tools commercial real estate professionals can take advantage of to gain insight on their targeted market. We highlighted Yardi Systems as one of the industry leaders in real estate investment and property management software by providing detailed analyses pertaining to market characteristics such as demographics, median incomes, and other important micro and macro indicators.

Today we will be listening to a recent interview provided by Multifamily 5, a podcast hosted by the Dallas-based multifamily broker, Mark Allen, aimed at interviewing real estate investors, brokers, and other industry pundits to learn some of their keys to success.

In this particular podcast, the leader of the Yardi Matrix team, Jeff Adler, discusses his top six markets that are poised for success in the near future, how the real estate industry interacts with Yardi Matrix software, the benefits of class B, value-add properties, future economic cycles, and much more.

Click here to hear Adler’s expert opinion on his top six markets and how to use Yardi software programs to gain a better understanding of your desired market.

Helpful Research Tools

Accurately assessing the real estate industry takes much more than a good hunch. Gaining a full understanding of a market takes years worth of knowledge and experience, solid relationships with other industry professionals, and continuous research to stay updated on current and future trends.

Fortunately, with so many useful tools, software programs, and other analytical technologies readily available, making well-informed, successful real estate decisions is more achievable than ever before.

For example, Yardi Systems, an industry leader in real estate investment and property management software, provides valuable research to real estate professionals in markets such as multifamily, single family, senior, military, and many other housing categories. Yardi also offers business solutions to other real estate market segments such as retail, self-storage, office, and industrial property types.

Click here for more information on Yardi multifamily research and business solutions: Yardi Matrix  

Aside from Yardi, there are numerous corporations such as CBRE, CoStar, and REIS who provide industry reports and research insights to assist asset managers and owners in making the most informed real estate decisions possible.

Check out tomorrow’s blog post for an in-depth interview between DFW-based multifamily broker, Mark Allen, and Jeff Adler, Vice President of Yardi Matrix Products. Discussions include Adler’s top six markets to keep an eye on and how industry professionals can benefit from Yardi Matrix Products.

The Advantages of Online Property Management Services

Recent technological advances have made online property management tools less expensive and easier to use, even for smaller portfolio owners and managers. Online portals and other software programs make the renting process easier for all parties involved. As a result, online services are no longer viewed a bonus for tenants, but more so an expectation.

Having the ability to pay rent online is arguably the best perk of online property management services. Paying rent online offers multiple benefits for renters. For example, tenants don’t have to take the time to hand-deliver their monthly rent check, setting up automatic online payments ensures their rent is paid on time, and it eliminates the possibility of a tangible rent payment being stolen, lost, or misplaced.

Owners and managers see similar advantages when tenants pay rent online. In a recent article for Multi-Housing News, Ray Szabo, residential and commercial property manager with Santa Barbara Real Estate & Investment, stated:

“Having an online payment system eliminates the opportunity for a myriad of excuses that residents have for why they weren’t able to pay their rent on time, such as issues with the mail, running out of checks and so on.”

But making and receiving rent payments is not the only benefit of online property management services. An invaluable resource of online property portals is the ability to centralize maintenance management. Tenants can issue maintenance requests in the touch of the button, schedule preferred repair times, and track when the request was issued and completed. 

On the other hand, the maintenance team has an organized system to promptly and efficiently maintain the well-being of the property. Furthermore, maintenance workers are held more accountable with the online portal documenting the maintenance progress throughout the property.

Online rent payments and maintenance management are only two of the many benefits of online property management services. If property owners and managers correctly utilize such services, managing the property and communicating with the property’s community should become more stable and effective.