Monday, March 31, 2014

Data Sources for Average Apartment Rents

A source of contention between 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 consider what the current market will sustain and what similar properties are renting for in the local economy. There are resources available to help you determine what a reasonable asking price should be for apartment rent and what you can expect to receive for your properties.
  • Typical residential rent prices are provided by the U.S. Bureau 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 rental 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 information to the public concerning 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 Housing 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 household income.
The use of these resources provides you with factual and immediate, 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.

Saturday, March 22, 2014

The Investment Return on Apartments

Why is investing in apartments seen as a great option? Does it really guarantee investment 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 investment 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, demographic 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 investing in apartments a good option is that they have generally lower development periods. This aspect makes it easier for support to relatively adjust to changes in demand. This then results in a reduction in amplitudes of building cycles. Finally, 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 rising 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 investment return relative to other major property types in the United States.

Friday, March 7, 2014

Top Apartment Resident Complaints

Some apartment residents have legitimate complaints about what they dislike in their apartment. These complaints need to be addressed because any business is more successful with satisfied customers, especially in the real estate business. Empty apartments not only don’t produce income but require holding costs and continued maintenance 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 complaints. 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 advertised 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 haven’t done anything wrong. Set up a separate account to hold deposits until after the tenant leaves, and make sure to use all the proper legal 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 really do is make sure the complaints are unfounded and minimal as you take care of your apartments responsibly.

Saturday, February 22, 2014

Sources That Renters Use to Find Apartments

In 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 regionally, renters tend to consistently use three main sources to find an apartment across the country.
  • The most common method remains the traditional drive by and see an apartment sign. This allows the potential renter 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 common 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 especially 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 better apartment in town. Craigslist serves the purpose that newspapers used to serve as a starting point for the search. Paid or free websites specific to property listings are also available and used when the renter needs to find a home quickly without time for an extended 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 resources available to let potential renters know about your offering and it usually gives you the option of several applicants to choose from to move in.

Thursday, January 23, 2014

Buying leverage multi-family properties

Fannie Mae will allow secondary financing behind an 80% loan to value on a multifamily purchase.

If the seller is willing to provide secondary financing of an additional 15% of the purchase price behind the Fannie Mae loan you may be able to obtain a total of a 95% loan-to-purchase price.
That means there is a way to purchase a large multi-family apartment complex with only a 5% down payment!

If you are a real estate broker and are working directly with the seller and obtain a 5% commission plus obtain the 95% financing, there is a way to purchase a large multi-family apartment complex with nothing down!  Keep in mind that these properties have to have excellent cash flow to cover the debt service, so you need to be careful in doing your underwriting.  Make sure that there is plenty of cash flow to meet the operating expenses as well as the debt service on highly leveraged deals prior to a purchase.

We still have historically low interest rates.  If you are purchasing a multi -family property that has restrictions under section 42 of the Internal Revenue Service  for the next thirty years, it is possible to obtain a thirty year fixed rate fully amortizing loan from Fannie Mae’s affordable housing loan program.  

Obtaining a fixed rate fully amortized loan over thirty years can save a substantial amount of money over time by limiting refinancing costs, and also eliminates the risk of higher future interest rates

States have low interest rate affordable housing loans available through community and economic development departments.  The loans are overseen by the federal housing trust program.  There are opportunities to assume these low interest rate loans on multi -family properties that are administered by the housing trust program.  These loans may be subordinated to new Fannie Mae multi- family loans.  The state loans are at rates as low as 2% and are also fully amortizing loans.  This is an opportunity for multi -family apartment complex investors to obtain extreme leveraging multifamily properties with fully amortizing loans at low interest rates.

The time to call on sellers is after the 15th year of the original funding of the community economic loan.  Often times the developers have operating agreements that call for the sale of these assets after the 15th year.

Keep in mind these deals are very difficult and take a lot of time to execute and usually the lenders want to get paid off, and do a new loan versus keeping their funding in the existing project.  Also there are risks associated with owning section 42 properties.  Do your home -work, and hire professional attorneys, CPA’s and brokers that specialize in section 42 properties to get the best advice.

Another advantage of obtaining fully amortizing financing is to avoid the difficulty of closing on a loan that has yield maintenance burning off and the loan has requirements to close on a specific date.  Failure to close by the exact date will throw you into default on your existing loan.  

Your existing lender may try to start charging you default interest rates around 4 percent monthly.

Your loan may automatically be thrown into default even though that you haven't you haven't missed a payment.  Please do your home-work.  Read your loan documents and hire professional CPA’s, attorneys, and loan brokers specializing in multi-family investments and seek their advice.

A reason to seek fully amortized fixed-rate financing is to avoid the risks associated with yield maintenance loans that have loans coming due after a certain period of time.

I consider multi -family investments as generational investments.   I'm happy with the principal reduction and depreciation and the cash flow from these investments.  By obtaining fixed rate fully amortized loans on apartment buildings and keeping them for the full term will assure the properties are paid off, and that you can pass them on to who you choose free and clear of any loans.  

Look to obtain highly leverage cash flowing apartment buildings that have long term fixed rate financing, and then hold for the long term.

Darrel Dickson
ApartmentsForSale.com
September 17, 2013

Tuesday, November 12, 2013

Products and Services for Apartment Owners

Real estate investors, especially those that invest in residential apartment buildings or entire complexes, have a wide range of products and services at their disposal to help ensure they keep their units filled and properly maintained.

As we all know, each time an apartment turns-over it costs money in order to prepare the apartment for the next resident. It must be cleaned, often updates may be necessary, such as replacing counter tops, appliances, carpeting and tiles. The better resident you can place and the longer they stay, the more money you save. One of the main ways to maintain residents is to provide a wide range of amenities and keep the property well maintained. Not just the interior, but the exterior and the surrounding grounds like fountains, playgrounds, pools, gym-facilities and dog areas.

There are several products and services that can help building management find the right residents. Other than screening and conducting the proper credit procedures, having a company in place to take care of the maintenance is another key area of importance.

Hiring the right property management firm can be instrumental in helping apartment building owners keep their properties attractive to the right kind of renters and maintain the property inside and out in order to maintain the integrity of the asset.

Many property management companies offer a wide range of products and services that will keep a property well-maintained. They can create a schedule of services to make sure that all units get seasonal maintenance several times a year.

If you’d like more information about available apartments or other helpful information, visit: http://apartmentsforsale.com/contact_us.cfm

Monday, October 21, 2013

Apartment Market Digital

Have you had a chance to check out the Fall 2013 issue of Apartment Market Digital? If not, follow the link below for all the latest apartment market news and a featured article by Darrel Dickson, President of ApartmentsForSale.com.