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Trump’s Affect on Multifamily, or Lack Thereof?

Since stepping into the political realm, Donald Trump has been one of the most polarizing figures in the world. And after being elected president, the real estate industry started holding its breath to see how Trump and his administration would impact the economy. Some were cautiously hopeful for business-friendly policies while others had their reserves about approval rates and beliefs.

Fast forward to today. Six months have passed since Trump entered the Oval Office and the economy has had some time to adjust to new leadership. But how have those adjustments affected the multifamily sector, if at all?

Recently, the National Apartment Association (NAA) issued anarticle examining how Trump has impacted the multifamily and real estate industry. A number of industry CEO’s such as Ric Campo of Camden Property Trust, Greg Mutz of AMLI Residential, and David Schwartz at Waterton chime in to tell how the political climate has affected their actions and the real estate market as a whole.

Click here to read the full article and gain insight on what the Trump election has meant to the real estate sector so far.

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Lowering Summertime Energy Costs

Summer is a fun time of the year, but it can also create a multitude of headaches for multifamily property owners.  For many regions of the country, the summertime heat can reach 100° Fahrenheit on a daily basis. As a result, residents consume an increased amount of energy to mitigate the heat.

Air conditioners constantly running, ceiling fans being left on,  personal auxiliary cooling devices, are just a few reasons for higher energy costs during the summer. Fortunately for property owners, there are proven steps to counteract some of the stifling energy bills that come along with summertime.

ProudGreenBuilding.com is a company focused on adopting high-performance strategies, systems and products for all types of buildings and multifamily homes. Furthermore, ProudGreenBuildings provides relevant digital information and knowledge needed to create dependable, efficient buildings. For example, the sustainability-focused company recently posted an article providing tips for lowering a multifamily property’s energy output.

Here are the three highlights of the article:

Quick and Easy Upgrades –Todd Feist, sustainability program manager at the Institute of Real Estate Management (IREM), said one of the easiest and most affordable things small-portfolio owners can do to make their properties more sustainable is upgrade the lighting.

“Inefficient lighting can take up a substantial part of a building’s energy profile, and upgrading to LED lighting is fairly simple and the return on investment is easy to measure and understand for a lot of people,” he said. Also, consider benchmarking, which Feist says is fundamental.

“You can’t manage what you don’t measure,” he said. The EPA created ENERGY STAR Portfolio Manager, a free energy management tool for owners looking to begin their journey toward sustainability.”

Timing Is Key – There are other common systems in multifamily buildings that consume a lot of energy, but they may not be as simple to upgrade for small-portfolio owners who have limited resources.

“Old HVAC systems are a drain on energy, but these can be a little more difficult to replace and the return on investment perhaps isn’t as apparent as upgraded lighting,” Feist said. “People usually want to use the HVAC to the end of its useful life, and then consider upgrading to a more efficient system at that point.”

It’s especially important to strategically time property improvements to not displace renters and disrupt inflows.

“A good time to complete upgrades is during lease turnover, when you can more easily swap out old equipment and fixtures for more sustainable options. If you have any big cosmetic or design renovations planned, this could also be a good time to make some energy-efficient upgrades,” he said.

Programs and Benefits – There has been an increase in state and federal programs promoting green energy in recent years, and it can be difficult to determine what you qualify for and which program is best suited for you. Since programs and tax benefits vary, Feist recommends checking out the DSIRE database, which is searchable by state.

Utilities companies are ramping up their offerings to promote energy efficiency by offering incentives. 

“A lot of times they will even go above that and offer walk-through’s and assessments of your property to identify opportunities for additional efficiency,” Feist said. “Depending on the program, the assessment could be free, and they’ll list out recommended upgrades and provide you with a quote.”

Financing companies have also increased their offerings to encourage sustainability. Well-known programs such as Fannie Mae’s Green Rewards program and Freddie Mac’s Green Advantage program are great options for small-balance owners improving existing properties.  Additionally, IREM created the Certified Sustainable Property program, a green-building certification that provides a framework for smaller owners and operators to get a handle on how to best make their properties energy efficient.

For small-balance multifamily owners, making sustainable, energy-efficient upgrades can require careful consideration.

“Owners and managers are being pulled in a million directions as it is, so it’s important to make upgrades that don’t require a huge shift in staff and resources,” Feist said. “Partner with providers that you trust, and don’t fall for improvements just for their flashiness. Make sure you have a thorough understanding of how all upgrades and improvements will benefit you and your residents.”

Click here for ProudGreenBuilding.com to learn more about energy efficiency and sustainable building strategies. 

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What Your Employees and Residents Need to Know About Pests

Allowing a property’s pest problem to go unaddressed can quickly spiral out of hand. Informing employees and residents how to prevent and detect pests can save everyone involved a substantial amount of time, money, and frustration by stopping the infestation before it occurs. So, who’s better input than that of a certified entomologist? 

In an article for multifamilyexecutive.com, Hope Bowman, a technical specialist and board-certified entomologist with Western Pest Services, covered some basic facts for employees and residents to keep in mind when preventing/detecting pests:

1. Poor sanitation can lead to pests
Pests such as rodents, flies, and cockroaches are often drawn indoors because they detect a food source. Maintaining a clean space and taking out the trash daily can help deter them.

2. Water attracts pests
Pests need water to survive, so have residents report or fix leaky faucets, empty any bowls and cups collecting water in the sink, and remove any other sources of standing water in their units.

3. Cleanliness doesn’t prevent bedbugs
It doesn’t matter how clean one keeps one’s space; bedbugs can survive anywhere they can find a blood meal—and they prefer to feed on humans. So ask tenants to stay vigilant, especially when returning from a trip out of town. If they suspect they or their belongings might have been exposed to bedbugs while they were away, tell them to contact the maintenance staff before bringing suitcases and other trip items back into their apartment.

4. Pests can spread from unit to unit
Apartments share walls, noise—and pests. When one unit has a problem, other units are often affected too. That makes it even more critical to educate all your residents about taking the proper precautions, and periodically reiterating that message with friendly reminders.

5. Management should be notified early and promptly whenever a resident detects a problem
If pests aren’t reported, they can quickly lead to an infestation. Encourage your residents to report any pests as soon as they spot them.

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Preparing for Peak Leasing Season

Peak leasing season generally takes place during the second and third quarter of the calendar year. It’s also when a multifamily property should be performing at its highest level by bringing in revenue and attracting new tenants at a higher rate than slower months of the year. Being ill-prepared for peak season can almost guarantee a property playing catch-up for the rest of the year chasing lost revenue dollars, and as a result, negatively affecting overall returns on investment.

In a recent article from National Real Estate Investor, author Scott Wickman, regional vice president of Western National Property Management, highlighted some essential techniques to use before peak leasing season that can boost a property’s performance in terms of value, revenue, and tenant retention/attraction.

Click here to see the entire National Real Estate Investor article and learn how to take full advantage of peak leasing season

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Phoenix Heating Up?

Phoenix has been experiencing steady improvements as of late, and it seems as if the capital of Arizona could continue trending upward for years to come. Yardi Matrix recently published the Spring 2017 Phoenix Multifamily Market Analysis. According to the report, new supply is on pace with demand, resulting in high occupancy rates, employment is on the rise, and job growth is strong thanks to low cost of living.

Other interesting facts and statistics included in the report:

  • Phoenix rents rose a nation-leading 5.1% year-over-year through March.
  • Yardi projects Phoenix rents to continue growing at above-trend 6% in 2017.
  • Strong investor demand: Over $5 billion worth of multifamily properties have changed hands since the start of 2016.
  • Over 1.1 million square feet of office space added to Phoenix market in first quarter of 2017.
  • $7 billion investment by Intel in the Fab 42 plant, which could produce ~10,000 local jobs.

The Yardi Matrix report contains a number of graphs, charts, and other helpful information so review the complete report for a complete understanding of the Phoenix multifamily market as of Spring 2017.

Click here for the entire Yardi Matrix Spring 2017 Phoenix Multifamily Market Analysis

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The Good and Bad of Owning A College Town Property

College towns create a unique opportunity for property owners and investors. Similar to any other market, owning property in a college town has its pros and cons. But if an owner can take advantage of the pros and mitigate the cons, a college town property has potential to be one of his/her best-performing assets. Listed below are a few of the positives and negatives of a college town real estate market.

Pros

Large Pool of Tenants:
In our previous blog post, we highlighted a study that examined 21 cities where renters outnumber homeowners. Many of the cities mentioned in the study are homes of major universities with a large population of students in need of housing, consequently creating a consistent flow of current and prospective tenants.

Low Vacancy:
While they are not a guaranteed cause and effect, there is a definite correlation between large pools of potential tenants and low vacancy rates. Each semester, a college town experiences an influx of new students and employees who replace the seniors, graduates, and transfer students on their way out. That said, in most cases, the only reason a property would have high vacancy rates is poor management, or a bad reputation throughout campus and the community.

Stable Rent:
With the demand for rentals being so high in college towns, rent rates remain relatively stable. In addition, many students get their rent paid for by their guardians, so there may be many opportunities for higher rent prices.

Market:
When you own property in a college town the area sells itself. The university and the activities it offers attracts people from all over the country. Whether it’s athletic events such as football or basketball, culture or entertainment like art exhibits or concerts, or renowned food and shopping destinations, each college town offers a unique environment that cannot be experienced anywhere else.  Cons The pros of owning property in a college town are certainly enticing, but it’s important to consider the cons as well, as they can make even the best owners regret their investments.

Tenant Turnover:
We’ve established the excellent potential a college town’s large renter’s market offers. The problemis not finding potential customers, it’s retaining tenants for an extended period of time. Best case scenario, a property retains a student tenant for their entire college career, which averages four to five years. This is a rare situation, and with many students moving multiple times during college, it’s hard to get them to extend their lease, especially when it’s for a two-year period.

Wear and Tear:
Maintenance expenses are notoriously high for college town properties. There multiple factors that contribute to high amounts of damage college student inflict upon their living space. The combination of immaturity and high alcohol consumption by student tenants often leads to a lack of respect for their living space. Furthermore, when a student’s rent is paid for by their parents, it can sometimes remove the tenant’s sense of accountability. A thorough screening process can help minimize repair costs and the number of destructive renters a property endures, but every once and awhile a bad tenant manages to slip by.

Off-Season:
During the summer, universities experience a significant drop in student population. Some students head home for a few months while others go on vacation before the upcoming semester. Either way, without the right countermeasures, property occupancy rates are very vulnerable during the summer-time. The best way to counteract a big drop in student population is to have tenants sign a minimum of a twelve-month lease. With tenants signing on for an entire year, they are on the hook to pay for the summer months, even if they don’t intend on occupying the living space during that time frame.  There’s a lot of upside in owning property in a college town, but it’s very dependent on the market, and the owner or investor. Managing some of these pros and cons can be a dangerous game to play, but if you succeed, the risk will be well worth the expended time, money, and effort.

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21 Cities Where Renters are Outnumbering Homeowners

In their recent study of the country’s apartment renting market, ABODO, a user-friendly apartment searching service, examined the top 21 cities in which renters outnumber homeowners and what makes each market so friendly to renters.

ABODO’s research provides an abundance of detailed information including a breakdown of age groups in the renter-majority markets, renter household type, and renter growth compared to housing costs. Each breakdown also includes visual aids to help understand how some markets compared to others.

Click here to see ABODO’s research in its entirety.

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Unique Marketing Techniques

The success of an owner’s property is largely dictated by marketing efforts. A property can offer the best units and newest amenities in the industry, but without effective marketing, potential customers will never learn of what they are missing out on.

In an article from AM Digital, author Alex Middel compiled a list of 40 creative marketing strategies multifamily owners and managers can take advantage of to educate potential customers on the benefits of their property and its community.

The first 20 ideas are offline strategies that are effective in reaching the surrounding community that may not spend as much time online as others. The latter half of the list is comprised of techniques tailored to reach prospective customers through the internet whether its via social media, search engine optimization (SEO), or visual content such as pictures or videos.

Click here to see all 40 strategies and learn some innovative ways to attract new, potential tenants.

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Tenant Incentives

Like any other business, multifamily properties have to provide desirable incentives to obtain and retain customers. And with competition being so high as of late, every property is looking to stay one step ahead of the others in the area. Having updated units and new amenities isn’t enough anymore, so properties have started offering various types of incentives to new and current residents to combat lower vacancy rates. Here are a few effective incentive programs to gain and keep quality tenants:

Early Payment Discount

Make paying rent attractive by rewarding tenants with a discounted rent for early payment. Even if it’s a small amount like $10-15 off their monthly rent, proactive tenants understand the discount can add up to a nice sum of cash at the end of the year. In addition, the early payment incentive helps lower delinquencies and attracts residents that are more likely to pay rent on time. It’s nice collecting extra cash from late fees, but that’s not the type of revenue, nor the target audience owners should rely on. Allowing tenants to pay rent online provides extra encouragement to pay early as they can send in their money electronically from the comfort of their home, or on the go.

Another fun way to reward early-bird payers is a monthly raffle. Anyone who pays their rent early gets their name added to the raffle, and at the end of the month the name drawn wins. Prizes can range from dinner and a movie for two, to gifts cards, or a free car wash. Furthermore, if it’s the holiday season, some popular prizes are a free turkey for Thanksgiving dinner, or a HoneyBaked ham for Christmas eve. The raffle program can be fun for everyone involved, engages the community, and is a great incentive for residents to pay rent early.  

Referrals

Tenant referral fees are an excellent way of bringing in qualified residents while saving money on advertising. A tenant referral program offers numerous benefits. Renters are motivated to act as ambassadors for their property by spreading the word of the advantage of their living community. Also, good tenants tend to know reliable people. This may not always the case, but there’s a high chance a tenant who regularly pays rent early or on time will not refer someone they deem unqualified or untrustworthy. When a tenant refers someone who signs a lease, their reward can come in the form of rent credit, unit appliances like a television or microwave, gift cards, or even cash.

Lease Extension  Once a tenant has proven to pay rent on time and take good care of their unit, the next step for management is to retain that tenant for as long as possible. Offering a reward for lease renewal is one of the most effective ways to achieve high rates of tenant retention. In general, tenants prefer monetary incentives, so lowering their rent will give them most motivation to stay. If there is no wiggle room on rent rates, giving tenants unit upgrades is a good substitute. Returning tenants often like to move into a newly renovated unit, but if there aren’t any available, upgrading their unit with brand new appliances has proven to suffice. Also, if the unit has the necessary connections, provided washer and dryers are in very high demand. Ultimately, management should do everything they can without breaking the bank to keep their best tenants.

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Mastering the Make-Ready Process

There are so many moving parts when a unit undergoes the make-ready process, execution can be stressful and overwhelming for an unprepared management and maintenance staff. If that’s the case, the make-ready process will cost a property excessive capital in maintenance and upgrades while losing important revenue due to extended vacancies. But with the right tools and tactics, a make-ready can be a smooth and efficient transition that will ultimately be well worth the dedicated time, money, and effort. Listed below are some excellent  tools and procedures to optimize the make-ready process. 

Technology

Lease expiration management plays a crucial role in the make-ready process. Being able to efficiently monitor and manage current and upcoming vacancies will largely dictate how efficient performing a make-ready will be. There are an abundance of revenue management/lease expiration software programs on the market property managers can use to simplify lease, revenue, and market monitoring. That being said, it is always important to maintain a human element when using technology, as the software should be viewed as a tool, not an employee replacement.

Click here to see a list of accredited lease management software programs. 

Walk-Throughs and Preventative Maintenance

Management should be regularly performing walk-throughs to monitor the state of each unit.  The walk-throughs offer a number of advantages. First, management can bill tenants for any damage done to the unit and maintenance can make the necessary repairs that may have prolonged the make-ready period. Second, walk-throughs allow maintenance teams to make any repairs  that would otherwise become a larger problem as time passed such as leaks, mold, or structural  irregularities. In the end, proactive management and maintenance shortens the make-ready to-do-list and reduces a unit’s vacancy duration.

The make-ready process begins the instant management sends out a notice to vacate the unit. In addition to consistent walk-throughs, performing inspections prior to a unit becoming vacant will help understand what is needed to complete the make-ready. Furthermore, pre-inspections will minimize unexpected maintenance problems, prepare the renovation team to execute the make-ready processin a single, efficient effort, and ultimately reduce the total time the unit is vacant.

Staff Incentives

Having a proactive maintenance staff is one thing, but being able to combine that with a knowledgeable, well-trained management team is what turns a good property into a great one. If the property staff is running like a well-oiled machine, cooperatively working towards a common goal the make ready process should be a breeze. A good way to ensure everyone is on the same page is offering the staff incentives based on how fast a make-ready is completed along with the quality of their execution. With everyone’s bonus being tied to each other’s performance, the staff is encouraged to excel as a team. Additionally, the cost of incentives is minimal compared to the loss in revenue from having a vacant unit on the books for too long.

Bonus Tip

Sometimes a staff has to start multiple make-readies at the same time, which can be overwhelming, even for the most prepared of staffs. One way management can get a head start on the make-ready process is having leases expire on Mondays. When leases expire at the beginning of a week, often times tenants will move out over the weekend. This reduces the number of days a unit is vacant, as it allows management to begin the make-ready process a few days early while the tenant is still paying rent on the unit.