WATCH: Why Silicon Valley and Wall Street agree on real estate tech’s value

Inmannews - Mon, 07/30/2018 - 3:02pm
Silicon Valley and Wall Street agree when it comes to the high value of real estate tech. According to panelists at Inman Connect San Francisco, this is because of a combination of perfect timing, opportunity and the reliability of housing as an investment.
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Broker says Northern California wildfire has made town ‘smokier than hell’

Inmannews - Mon, 07/30/2018 - 2:59pm
The Carr wildfires raging through Shasta and Trinity counties near Redding, California, have killed at least six individuals.
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WATCH: The new business models shaking up real estate

Inmannews - Mon, 07/30/2018 - 2:47pm
Purplebricks CEO Eric Eckardt, eXp Realty CEO Glenn Sanford and Trelora CEO Joshua Hunt, took the stage at ICSF to discuss alternative business models and how new ways of thinking about real estate are stirring things up.
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Exit Realty names first CTO, aims to enhance agent technology experience

Inmannews - Mon, 07/30/2018 - 12:30pm
Exit Realty has its first chief technology officer. Last week, the nation’s 12th-largest real estate franchisor according to the Swanepoel Mega 1000 ranking, announced John Packes would be stepping into the role
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Product Hub Spotlight: Marketing Tools

Inmannews - Mon, 07/30/2018 - 12:23pm
Showcasing some of the currently featured Marketing Tools in Inman's Product Hub, powering the future of the industry.
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Home search portal Truepad shutters operations after funding issues

Inmannews - Mon, 07/30/2018 - 11:50am
Home search portal Truepad shuttered operations after expected funding failed to materialize, according to an employee's Facebook post.
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Uber and Lyft are adding to traffic congestion, not reducing it: study

Inmannews - Mon, 07/30/2018 - 11:46am
As Uber and Lyft have skyrocketed in popularity in recent years, they are increasingly reaching people who would otherwise not drive, according to report.
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Industry vet Russ Cofano joins app-based brokerage Real

Inmannews - Mon, 07/30/2018 - 11:38am
Industry veteran Russ Cofano is joining app-based brokerage Real as its president and co-founder, the company announced on Monday. “Real has been spending the last four years building a really really significant piece of technology in its app and it’s got an amazing team and a culture that I align with from CEO Tamir Poleg […]
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The No. 1 Way To Build Healthy Tenant Relationships: Communication

American Apartment Owners Association - Mon, 07/30/2018 - 10:43am

It’s no secret that communication is the key to any successful relationship, whether it’s with family members, a partner you’re romantically involved with or colleagues at work. Open and direct communication between tenants and property managers is no different. Establishing a strong foundation of communication is important from the start, even when someone is still a prospective renter, because it helps rental issues get solved quickly and mitigates future problems.

So how can property managers best communicate with their residents?

Use Tech To Communicate More Effectively

Luckily, technology advancements have made communication between property managers and tenants quicker and easier. Mobile usage is so much a part of our everyday lives that it has changed tenant expectations — including how they expect their property managers to get in touch with them. Text messaging is commonplace and allows property managers to quickly send important, personalized updates to tenants, including package delivery notifications, late rent reminders or community announcements.

Property managers are also utilizing software portals to set up and send emails and text messages to help streamline the maintenance process, which creates more proactive communication with tenants. Today, people tend to screen or ignore calls, but a text from their property manager that more information is required on their maintenance request will likely get their attention and prompt response.

In addition, many property managers are embracing social media to communicate with residents. Creating custom Facebook pages, Twitter accounts and building websites have supplemented, and in some cases replaced, the mailroom bulletin board as a way to share resident-related information. This method ultimately allows property managers to communicate to a broader reach of their residents with the click of a button so they get more done in less time and tenants get the benefit of enhanced updates.

Hone-In On Core Communication Skills: Listening

Technology has enabled property managers to build more open lines of communication with their tenants. However, without demonstrating core communication skills, the technology will just fall flat.

We learn one of the first (and most important!) rules of communication when we’re children: To be a good communicator, you must be a good listener. Property managers must ensure they’re actively listening to their tenants’ complaints, notifications and preferences — and then responding. This will foster trust with your residents and create an approachable relationship without tension, which is the engagement property managers are striving for.

Purposefully listening to tenants can also save property managers time if, for example, a tenant calls with a maintenance request or lease updates. Listening saves property managers unneeded follow up communication with tenants and, in some cases, can prevent costly litigation if details were discussed but not paid attention to.

Fast Follow-Up

Some maintenance issues can take a while to resolve. As a property manager, you have to clarify details and gather data that can take several calls, emails and follow up messages, especially if you’re working with an outside vendor to fix the problem. And, any missed calls and unanswered emails during this time will just add to the tenant’s wait time for the issue to be resolved.

Although a maintenance problem itself may take a while to get fixed, tenants will get even more frustrated if they feel like they aren’t being updated on where things stand. It’s the property manager’s responsibility to keep the tenant updated on all they’re doing to remedy the issue in a consistent manner. For instance, through text messaging, a property manager can reduce the need for tenant follow-up since they can receive steady maintenance updates.

Personalize Your Message

Using technology, property managers can now automate a number of the messages they send to residents but must be wary of form notes being seen as generic or coming off as inauthentic. A little personalization goes a long way.

For example, it’s important to add the first name of residents to email blasts instead of just the standard “Hello.” Note how your tenants like to be contacted, whether it be via phone, text or email, and stick to these preferences whenever possible. Does a tenant work the night shift and can only be reached via phone during certain hours? Does another travel a lot for work and want to be reached via text messaging due to the different time zones they’re in? Knowing these preferences creates a better customer experience.

Open Lines Of Communication = Resident Retention

Property managers need to be in regular contact with their tenants to build a trusting relationship, not only when there’s a maintenance issue or its lease renewal time. An open line of communication leads to an overall better customer experience, and this leads to residents who want to stay put at their properties, as well as recommend them to friends and family. And in a competitive market, this positive word-of-mouth can be the best marketing tool a property manager has.



The post The No. 1 Way To Build Healthy Tenant Relationships: Communication appeared first on AAOA.

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Expert Advice on Investing in Vacant Land

American Apartment Owners Association - Mon, 07/30/2018 - 10:35am

Investors looking for creative ways to maximize returns in a competitive, hot-selling real estate market may be interested in buying vacant land, which has the potential to create outsized returns when held or improved.

“A client of mine purchased a downtown Atlanta vacant lot in 2012 for $1,500 and was recently offered $80,000 cash and decided to hold out for more,” says Bruce Allen, a real estate agent and attorney for Re/MAX Town and Country in Atlanta.

But experts say the asset class is unique and requires utmost caution and diligence. Unpredictable market trends over the long-term with few opportunities to earn income from vacant land make investing risky if not done right.

Experts offer the following advice before investing in vacant land.

Have a shorter, rather than longer, exit timeline. Sitting on land for the long haul is risky because it could go down in value, says Michael Ross, vice president of asset management and entitlements for Rockspring Capital, a private equity firm that specializes in land investment in Houston, San Antonio, Austin, and Dallas.

“Time is our greatest risk,” he says; that’s why Rockspring’s exit horizon is targeted at 18 to 36 months from purchase to resale once it’s ready for development.

Look for an income producing use pre-development. If your goal is to develop the land, look for ways to make money on it while that process is under way, says Danny Mulcahy, director of equity for Northstar Commercial Partners, a commercial real estate firm in Denver. Leasing the land or using it for agriculture, self-storage, parking or billboards can provide income during pre-development.

Get the right entitlements. Development-readiness involves doing the leg work to get the property zoned, cleared, subdivided and/or permitted for builders, also called entitlements, Ross says.

Entitling can add value to land and lead to big returns, but only if you’ve obtained the right entitlements for the marketplace, says Russ Moroz, first vice president of investment properties at Marcus & Millichap, a commercial real estate investment brokerage.

“Obtaining the wrong entitlements can make land virtually worthless,” he says. “Or leave you in a worse spot than if you sold the land without them, like if you agreed to certain obligations with nearby property owners in order to get your entitlements.”

Due diligence is necessary. It’s a good idea to do a title search and purchase title insurance, which protects the holder from financial loss due to defects in a property’s title, says Jordan Barkin, a real estate agent with Harry Norman Realtors in Atlanta.

If your goal is to build a single property, make sure the lot is actually buildable and qualifies for permits, says Matthew Briggs, chief executive officer of Briggs Acquisitions, a private real estate investment firm. Check for environmental restrictions or issues and planned zoning changes that could affect the property, he says.

You need to understand the utilities’ capabilities to handle the proposed development and how adjacent uses may affect your property. Research prior uses in case something was buried there or caused contamination, Mulcahy says.

Barkin advises also having a plot survey and percolation test performed by a licensed professional.

Buy in a high growth location at the right time. The key to successful land investment and development is buying where there is high demand and growth, Ross says. If you don’t have individual knowledge about areas to target, a third party market analysis is a good idea, he says.

Buying land within 15 to 30 miles of major urban growth centers is a good benchmark, says Edward F. Del Beccaro, senior managing director of Transwestern in Walnut Creek, California.

Investors can consider tech cities such as Seattle, San Francisco, Oakland, Denver, Austin and Los Angeles, where economists project 10- and 20-year job growth horizons, or land within three blocks of major highway interchanges, ports and mass transit. Underutilized, rather than vacant, land in these areas can be a great way to turn a profit while you work on redevelopment, Del Beccaro says.

Because land parcels and lots can decline by 75 percent or more in recessions, buying land at the right time is critical to making outsized returns, Allen says.

“Buying land at the bottom of the market and selling in the recovery offer the best opportunity for high returns and lower carrying costs,” he says. “Buying at the top often means having to carry through a recession, which adversely impacts returns.”

Take your time. A land purchase requires careful consideration and planning, so learn the ropes beforehand. Know your market at a granular level.

“It’s very specialized knowledge,” Ross says of land investment, noting investors in land development have typically worked for builders or in real estate beforehand.

“It takes years of learning to not walk into every bear trap that’s been laid out,” Ross says.

“Don’t let anyone pressure you into buying anything,” Barkin adds. “Deadlines are important but take the time to discuss your goals with your financial advisor. Do not expect to ‘flip’ land overnight for a profit.”


The post Expert Advice on Investing in Vacant Land appeared first on AAOA.

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6 ways homeowners can conserve energy in hot climates

Inmannews - Mon, 07/30/2018 - 10:34am
Between rising global temperatures, rising fuel costs and rising demand for indoor space, home energy efficiency is more important than ever before.
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What to Look For in a Fixer-Upper: Signs the Home Isn’t a Money Pit

American Apartment Owners Association - Mon, 07/30/2018 - 10:28am

Renovating a fixer-upper is not for the faint of heart. It takes money, hard work, and patience. But if you’re able to pull off a successful transformation, you’ll reap the benefits.

“Fixing up a house is an incredible opportunity, but should never be viewed as a TV show. It’s real life,” says Elizabeth Enright Phillips, a financial coach at Running Creek Properties in Lancaster, OH, who has renovated nearly a dozen properties.

Best-case scenario: You’ll end up building your dream home and increasing the value of the property. But fixing up a ramshackle house can cost a fortune. Unforeseen problems can surface that will make your fixer-upper a real money pit.

When looking at real estate listings, you’ll notice that no two fixer-uppers are the same. One may have sat vacant for a while, another may be in desperate need of a new roof, and another may have a mold infestation. Each of these scenarios will cost money to rectify, but some situations are more manageable than others.

To help you out, we tapped experts to identify the features and characteristics you should look for in a fixer-upper, to make the renovation go much more smoothly. On your hunt for that hidden gem of a fixer-upper, keep your eye out for the following signs.

Strong structural elements

A solid structure is ideal for any home, but it’s especially critical when you’re buying a fixer-upper. If the home has a crumbling foundation or serious roof problems, you’ll have to decide if you’re willing to pay to repair this type of damage.

These are the five important structural elements:

  1. Roof
  2. Heating, ventilation, and air conditioning (HVAC)
  3. Plumbing
  4. Electrical
  5. Foundation

Mike Coughlin, owner of Summit Design Build in Stoneham, MA, says you can get a good idea of the house’s structure by exploring the basement, attic, and unfinished areas. Focus on those areas rather than the pretty, recent additions to the home.

“You want to look at the basement rather than the granite counters and new bathroom fixtures. All of that shiny stuff is really easy to fix,” says Coughlin, who is working on a nearly 300-year-old home that he bought with his wife, Francine. “The stuff behind the walls is what’s more important. As long as the bones are good, you can pretty much do anything.”

Only minor plumbing problems

There’s a good chance that your fixer-upper will need plumbing work. Depending on the scope of the project, the work will be either a quick fix or a significant undertaking that will eat into your budget. Some fixer-uppers may have low water pressure (fairly minor problem), while others may have pipes that need to be replaced (a big problem).

Before buying a fixer-upper, make sure you’re comfortable with the amount of plumbing work required to bring the place up to snuff.

That said, you shouldn’t immediately flee any fixer-uppers that need plumbing work. If you really love the house, it’s all about balancing costs and diverting money from one project to another.

A sound layout

A logical layout is important in any home (no one wants to walk down a long hall to get to the guest bathroom), but it’s especially critical when you’re looking at an old home. Older homes are often divided into small rooms, but many people in this decade favor an open floor plan.

“The entire family wants to be connected; no one wants to be stuck back in the kitchen when everyone else is hanging out. With an open floor plan, there is no separation between the zones of the house,” says Jean Brownhill, founder and CEO at New York City–based Sweeten, which matches people who have major renovation projects with general contractors.

If you envision needing to knock down walls to create a more open, airy interior, know that the job can be expensive, time-consuming, and dusty.

Little to no infestations

It’s not uncommon to encounter a fixer-upper that has an infestation, be it mice, termites, mold, dry rot, or asbestos. A minor issue such as mice can be resolved by putting out traps and filling holes in the house. However, severe termite damage could require a costly solution, including lifting the house (yes, right off the ground) to access the foundation and check for further damage.

A seller is required to disclose such infestations, but a home inspector will also uncover any issues during the inspection that may occur after the house goes into contract.

If you find any of these problems in your fixer-upper, it’s a good idea to get an estimate from a contractor to resolve the issue.

Recent occupation

Buying a foreclosed home that’s sat dormant for a few years might get you a low sale price, but it may also present a challenge when you start renovating it.

“You never know what’s going on with plumbing behind the walls,” Coughlin says of homes that stand empty for an extended period of time. Maybe the water wasn’t turned off properly in the winter, which can cause the pipes to freeze, split, and leak.

A home without humans can also become a refuge for critters such as squirrels and bats.

“We have found dead mice and rats and a live mother possum feeding her two babies in attics,” says William Begal, president of Begal Enterprises, a disaster restoration company in Rockville, MD.

All of these problems can be fixed—they’ll just add more to your bottom-line costs.



The post What to Look For in a Fixer-Upper: Signs the Home Isn’t a Money Pit appeared first on AAOA.

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Forget a Garage—Buyers Won’t Budge on High-Rated Schools

American Apartment Owners Association - Mon, 07/30/2018 - 10:25am

Buyers have their eyes on schools, and with the irrefutable link between the quality of schools and values, a district with high ratings trumps all—even coveted features of a home, according to a new®survey.

To get into their desired district, 78 percent of the homebuyers surveyed had to let go of something on their wish list. When asked what they would compromise on, approximately one-fifth (19 percent) of respondents would forgo a garage, while 17 percent would go without a kitchen that has been remodeled. Another 17 percent would settle for less bedrooms.

Being within an in-demand district is “important” to 73 percent of respondents to the survey, and even more so to those with children, and those who are younger. What are the characteristics of a “good” school? Accelerated programs, arts and music and diversity are all factors, but the most important is test scores, according to the survey.

“Most buyers understand that they may not be able to find a home that covers every single item on their wish list, but our survey shows that school districts are an area where many buyers aren’t willing to compromise,” says Danielle Hale, chief economist at “For many buyers, ‘location, location, location,’ means ‘schools, schools, schools.’”

Generally, homes in proximity to sought-after schools move quicker than others, and are pricier.



The post Forget a Garage—Buyers Won’t Budge on High-Rated Schools appeared first on AAOA.

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Behind the scenes of Netflix’s new real estate reality show ‘Stay Here’

Inmannews - Mon, 07/30/2018 - 10:03am
Popular video-blogging agent Peter Lorimer will help struggling Airbnb hosts alongside ‘Trading Spaces’ designer Genevieve Gorder
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BoxBrownie rebrands, rolls out features that give listing photos and headshots a new look

Inmannews - Mon, 07/30/2018 - 9:21am
Australian real estate image editing and enhancement company BoxBrownie announced at Inman Connect San Francisco a major branding overhaul in conjunction with new features for real estate agents.
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When the Wall Street steamrollers come for real estate

Inmannews - Mon, 07/30/2018 - 9:21am
The writing is on the wall for real estate companies today: you need to be ready to pivot hard and keep up with a constantly shifting landscape of well-moneyed players, or get into another business entirely.
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40 percent of Seattle landlords are selling due to new rental rules

American Apartment Owners Association - Mon, 07/30/2018 - 9:20am

Landlords are a bit displeased with the Seattle City Council at the moment, and they are taking their investments and going home. A recent University of Washington study on Seattle rental housing found that 40 percent of landlords have sold or are planning to sell their properties as a result of the new rental rules.

“Don’t think of an apartment or house or dwelling as anything other than a place where one can put your money, like a stock,” said KIRO Radio’s John Curley. “A building is an investment, and one wants to have a return on their investment.”

But Seattle landlords don’t find the new rental rules to be worth it. Those rules include expanded source-of-income protections, a ban on using criminal records as a determining factor, restricting the size of security deposits, and the First-in-Time law, which forces landlords to take the first renter that applies and meets the criteria. It was recently struck down by a Superior Court judge, but the City of Seattle has filed an appeal.

“All the noise we had heard from the wonderful, illustrious city council was about tenants’ rights, and about how horrible landlords are,” Curley said. “And we’re going to come down with one after another regulation on you because you have a bias, and don’t rent to this person, or you charge them too much money.”

Not only are landlords finding it difficult to maintain their properties under all the new ordinances, they don’t believe any of them are actually making Seattle more affordable. According to the report, one in five increased their rent in the past year in response to new city ordinances. And 40 percent reported that they have already adopted stricter rental requirements as well.

Seattle landlords and social expectations

For Curley, government interference and the demonetization of landlords is suffocating the rental market.

“The market will dictate the price of the apartment,” Curley said. “But once the government gets in and says, ‘Oh, that’s too much money to charge, or that’s unfair to somebody who has a right to live in this apartment.’ At that point everybody says, ‘You know what? I’m not going into Seattle. I will not build apartments in Seattle because they’re going to restrict how much money I can make, and therefore I’ll go build somewhere else.’”

KIRO Radio’s Tom Tangney doesn’t believe the ordinances are driving all landlords away.

“There are plenty of people who are willing to rent in Seattle, and those 40 percent may sell to people who are willing to rent them,” Tom said.

“The reality is that we have certain social expectations of landlords, and yes, I’m sure it bites some landlords. But the idea that you can’t have rent increases on substandard housing units seems like a fair deal.”

From the renters’ perspective, the city-funded report indicated that the biggest issues with housing are affordability, discrimination, a lack of adherence to and awareness of rental laws, and limited transparency in the application process. Rental prices remain high, but have been gradually flattening out, according to Zillow.

Perhaps most striking of the statistics gathered is that 89 percent of landlords believe their perspectives are not even being considered by local government.

“Part of their problem is who you have to rent to, first person in, and when you can take the security deposit. The majority of landlords said that the city council is against them,” Curely noted.

“So congratulations city council, you’re getting what you want, which is driving landlords out. But what you didn’t intend for was to have the rents go up, which is what’s going to happen.”


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Five Steps To Avoid Illegally Evicting Your Tenants

American Apartment Owners Association - Mon, 07/30/2018 - 9:16am
One of the biggest risks related to owning investment properties is dealing with an eviction. If a tenant doesn’t pay rent, the simple answer is to evict him.

To a seasoned investor, however, it’s never that simple. Actually evicting a tenant is an extremely complicated and expensive process, and one that should always be avoided.

An eviction is an official legal proceeding, complete with a formal process that needs to be followed exactly in order to have your tenant move out and relinquish the property back to you. Failure to follow your state’s laws on a legal eviction can result in delaying the eviction date, losing a court hearing or owing the tenant money.

Rental property owners will benefit from understanding the legal eviction process in order to protect themselves from breaking the law should they ever go through the process. I also hope to instill the idea that addressing an issue with a bad tenant takes a lot more energy than simply evicting him. I want all investors to understand  and sticking to the lease terms, so you can minimize the risk of dealing with an eviction.

Let’s first take a look at the difference between an illegal and a legal eviction.

An illegal eviction involves:

• Changing the locks.

• Putting your renter’s belongings on the curb or in the garbage.

• Threatening the tenant with an eviction or increased fines.

• Turning off utilities or other services.

A legal eviction includes:

• A court order.

• Official notices.

• Appropriate communication.

• Adherence to state laws.

• Patience.

What Is An Eviction?

An eviction is a lawsuit, sometimes known as an unlawful detainer lawsuit, that a property owner files against a tenant in order to regain possession of a property. Once an eviction lawsuit is filed with the court and a judge rules in favor of the eviction, the property owner can work with law enforcement to remove the tenant by an agreed-upon date per the eviction ruling.

In order for a property owner to win an eviction ruling, the property owner must prove that the tenant violated a lease term, that he gave proper notices to the tenant to fix the violation and that the proper eviction process was followed.

Reasons To Evict A Tenant

A tenant can lawfully be evicted for:

• Failure to pay rent.

• A lease violation (like illegal use, subleasing, unauthorized pet, etc.).

• Damaging the property.

• Threatening the safety of other tenants, neighbors, the property or community.

• Breaking other local housing laws, as outlined in the lease agreement.

A property owner cannot evict a tenant because of personality clashes, minor disagreements or annoying behaviors. If you establish a reasonable need to evict a tenant, you should act immediately and follow your state’s guidelines for a legal eviction.

The Eviction Process

Here is a general overview of the standard eviction process:

1. Establish a legal need to evict a tenant:

Tenant violates a lease term, like failing to pay rent.

2. Notify the tenant:

Landlord provides an official notice to Cure or Quit to the tenant. A Cure Or Quit Notice notifies the tenant of the violation and tells the tenant to either fix the violation within a certain amount of time (cure) or move (quit). This notice should be taped to the door and mailed via certified, first-class mail. You will need to prove in court that you did your best to notify the tenant of the potential eviction proceedings.

In some cases, a property owner or manager can file an eviction with the courts without giving the tenant time to remedy the problem. Such is the case if the property or other people are in immediate danger.

3. File with the court:

If the tenant does not fix the violation outlined in the notice and does not voluntarily move out, the landlord can proceed with filing an eviction lawsuit.

After filing an unlawful detainer lawsuit with the local courthouse, you will receive a date for your eviction hearing and the court will notify the tenant of the summons. Depending on which state you live in and how busy your local courthouse is, this hearing can be anywhere from one week to a few months from your filing date. If it takes a few months for your eviction date, you have to let your tenant continue to live at the property until a judge rules otherwise. Often, a tenant will not pay rent during this time. If this is the case, let’s hope you have a good lost rent policy with your .

4. Court hearing:

At the court hearing, you will need to provide proof of the reason for eviction, and that you gave the tenant an official notice to cure or quit. It is also a good idea to bring copies of the lease, rent payment records and records of all communication you have had with the tenant.

If the judge rules in your favor, you will be able to move forward with an eviction by contacting your local law enforcement to escort the tenant out on an agreed-upon date, if needed.

5. Regaining possession of the property:

On the date determined by your eviction hearing, you will officially regain possession of the property. You are allowed to change the locks and proceed with managing any abandoned tenant property per your state’s laws at this time.

As you can see, moving forward with a legal eviction involves a lot of time spent dealing with your local courts. You have to be patient with the court’s timelines and rulings. You also must keep all your communication with your tenant professional during this time, which can be challenging if you are frustrated with your tenant’s behavior.

Evictions are risky because of the unknown timeline from the filing date to the date a tenant will actually be required to leave the property per the court order. The time and money associated with moving forward with an eviction demonstrate the need for approving only the most qualified tenants for your property, minimizing the risk of eviction.


The post Five Steps To Avoid Illegally Evicting Your Tenants appeared first on AAOA.

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The Pros & Cons of Owning a Rental Property

American Apartment Owners Association - Mon, 07/30/2018 - 9:09am

Being a land baron — it’s an appealing idea, isn’t it? Real estate is a notoriously stable long-term investment, but it’s not for everyone. There are both advantages and disadvantages to owning a rental property – here are a few to consider when considering owning a rental property.

Pro: You Get Multiple Sources of Revenue

Even a single rental property will increase your net worth in several different ways. You’ll get income from your tenants and your property will appreciate in value over time. Any improvements you make to the property yourself will further increase the value of the asset.

When you have multiple properties, the income potential is even more considerable. You will be able to diversify your assets in terms of properties and tenants. The more properties you’re able to purchase, the more consistent your revenue will be.

Con: You Also Have Multiple Sources of Expenses

If your rental property needs a new HVAC system, you’ll need to find a way to pay for it. Rental properties require a lot in upkeep and maintenance. You need to keep them clean and habitable and may need to renovate them occasionally to ensure that they are still marketable.

Other expenses can include legal expenses, as it’s possible that tenants may need to be evicted. Tenants can also cause expensive damages.

Pro: You Can Sell Your Property for Profit

If you want to sell your property later, you can. In nearly any market, property values are going to rise steadily. Once you no longer want steady revenue from your rental property, you can choose to cash out. This could be used to invest in a business or retire. You can also leverage your properties to buy additional properties.

Real estate does give you some flexibility, as you can borrow against the equity that you have at any time.

Con: Your Money is Tied Up in an Asset

Becoming a landlord does mean that your money will be tied up in real estate, which could ultimately lead to a lack of diversification if you don’t have enough invested in other areas. If you want to start a business or are interested in other aspects of investing, you might be looking for a less expensive investment. It is possible to invest in real estate through other means, such as REITs or investing in stocks for real estate focused companies.

Get Started Today

Whether a rental property is right for you depends on your own financial goals. Rental properties make you money, but they also take some work — unless you engage with a property management company. You can get started by investigating the real estate available in your area.




The post The Pros & Cons of Owning a Rental Property appeared first on AAOA.

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Future Renters and Apartment Demand Factors

American Apartment Owners Association - Mon, 07/30/2018 - 9:02am

As the apartment industry runs through its cycles, changes in apartment demand and demographics are fostered by economic fluctuation. And with the expectation that the economy is on the cusp of a new direction, multifamily strategies are likely to shift.

Various factors dictate apartment demand and how future renters look. In the current cycle, the industry adjusted to historic household changes and embraced young, single renters and empty nesters looking to downsize. But as younger renters finally start to marry, settle down and have kids and the working-age population growth slows, the nation’s apartment makeup is bound to look different over the next few years.

The strength of the economy is sure to be a factor on just how multifamily is reshaped. It’s likely going to be sooner than later that the already softening industry shifts focus with maturation of some demographics and depletion of others.

Economists predict the economy will recede by 2020

Economists say conditions for a recession are edging closer and that markets will start feeling the squeeze in earnest by 2020.

A signal, notes RealPage Chief Economist Greg Willett, is that the gap between interest for long-term and short-term treasury notes is tightening. Typically, long-term rates are higher than short-term but when the two intersect conditions have historically been ripe for a recession.

The gap has steadily closed since the fall of 2013, according to the Federal Reserve Bank of St. Louis, and dipped to its tightest in July. This fall, when the Federal Reserve is expected to boost interest rates by 25 basis points, it could get even tighter.

“In the best case, that’s going to put us at even at that point,” Willett said at RealWorld. “For the last seven times you’ve had this inflection between these two measures, we’ve had a recession within 18 months.”

Willett said it’s not a guarantee but multifamily investors and operators should nonetheless be prepared that one of the longest, most fruitful cycles the apartment industry has enjoyed is approaching the finish line.

“You can make arguments why it doesn’t matter to the degree this has occurred in the past, but I think if you’re planning for business strategies, given indicators out there at this point, it’s irresponsible to assume everything is still hunky dory two years from now.”

For the short term, indicators point to healthy apartment market

Willett said indicators continue to point to a healthy apartment market at least for the short term. A large block of additional apartment deliveries lies ahead and apartment demand appears favorable to cover the new inventory.

New supply volumes are likely to continue at an annual pace above 300,000-320,000 units through mid-2019, levels last seen in the 1980s, according to RealPage Analytics. RealPage analysts expect that plateau to remain for the foreseeable future.

Helping to fuel demand is that employment growth is pointing to new household formation. U.S. monthly job production, is healthy and on pace with 2016-17 levels despite tapering from its peak in 2014 when 2.5 million jobs were added.

Willett notes that the return of manufacturing growth is a key storyline in the recent overall employment picture but another is that increased investment by smaller businesses points to significant confidences in the economy’s direction.

A National Federation of Independent Business survey that measures small business expansion and investment posted its highest readings beginning in the fall and they’ve carried into 2018.

“Jobs being created now are actually coming in small businesses rather than corporate employment,” Willett said. “Small business owners tend to like some of the policies we’re seeing now and expanding.”

Also, solid consumer confidence is helping to spur retail spending, a key component of economic expansion.

Demographics and misaligned employer needs could signal change

But the demographics and misalignment of employer needs could make it tough to maintain today’s economic expansion pace in the next couple of years.

AARP and the Census Bureau report that 10,000 Baby Boomers are turning 65 each day, which means growth in the working-age population is slowing meaningfully. Also, today’s 6.7 million job openings slightly exceeds the number of unemployed people who are looking for work.

In addition, wage growth at 2.7 percent, as reported by the Bureau of Labor Statistics, is topping rent growth.

Willett reminds that a growing segment in rental housing is single-family homes. Build-to-rent space could play a meaningful role in inventory growth for the nation’s institutional capital firms, according to Rick Palacios, Jr., Director of Research at John Burns Real Estate Consulting, in a recent podcast on the rise of the single-family home rental industry.

The impact of prevailing conditions means total housing demand should remain robust for the next couple of years, although some expected cooling in the pace of job production points to demand off a bit from recent highs, Willett said.

“The apartment sector’s share of total housing demand should be solid, although some headwinds not seen earlier are now developing,” he said. “We think demand will slow down from where it has been, but still will be pretty substantial. And that begs the question, who will the renters actually be.”

Analysis reveals interesting trends in future renter makeup

RealPage applied data science and clustering analysis among more than five million apartment lease transactions across the country to get a picture of future renter makeup. A portion of the analysis looked at individual households and characteristics like age, income, pets and children in 25 major markets and 25 smaller markets.

Willett anticipated the individual makeup of the markets would compare to the current U.S. renter household segmentation, which is based on eight demographics. The top four are renters just starting out (29 percent), followed by young adult roommates (21 percent), “Perma Renters” (16 percent) and middle-income Baby Boomers (11 percent).

Of the major markets studied, Minneapolis looked most like the U.S. average in household makeup, and segmentation in Philadelphia and Charlotte was similar. But in most places across the 50 metros examined, the story wasn’t the same.

“The big takeaway is that in almost every other metro there was something different about one or two segments relative to what you saw in the U.S. average,” Willett said. “And there wasn’t an especially pronounced pattern in how they were different. You really have to deal with each one as a separate entity.”

Couples and renters moving up in the world fueling new product demand

Young adults are key components of the renter audience but in some markets they are an out-sized portion of the total. In Indianapolis housing is so affordable that older dwellers are purchasing homes, leaving a plethora of young renters. Similarly, Salt Lake City, San Jose and San Diego have high concentrations of younger renters.

Also, the data shows that roommate households have a large share in expensive metros but San Jose was well above the norm. There, 41 percent of households living in roommate arrangements are roughly double the U.S. norm.

Willett said the real fuel for new, luxury apartments comes from the “Moving on Up” and “Young Couple” segments. Groups consist of fairly affluent singles in their early 30s and couples in the mid- to late-30s that live close to jobs in the urban core and suburbs. Most are living in the fast-growing metros that have high home prices.

The biggest concentration of these demographics are out west, primarily in San Francisco, Los Angeles, Denver and Seattle.

“These are the people who have the incomes to really fuel that demand for the new product that we’re building,” he said. “It’s a stretch for these folks to actually get out there in the marketplace to buy some homes.”

Small metros with affordable single-family product had very few households for these groups, likely a byproduct of positive economic growth.

“They are not great choices for new apartment development,” Willett said.

‘Perma Renters’ an attractive segment for the future

Willett noted that one of the industry’s more interesting and under-appreciated segments of the renter population is the “Perma Renters,” households o

f one person at a median age of 42. They have a median income over $50,000 and rent-to-income ratio of 22 percent. Typically, “Perma Renters” live in Class B apartments in the suburbs and tend to renew a lease at least once. As Millennials get older, this segment is sure to grow, Willett said.

“To me, if I’m an owner and operator, this is a really easy segment of people to keep happy,” Willett said. “That makes them attractive.”

They’re also in pretty appealing markets like Washington, D.C., Atlanta, Dallas, Houston and Las Vegas.

Willett also noted that middle-income Baby Boomers − older singles with moderate incomes − only exist in limited numbers. Also, renters with kids tend to prefer single-family homes.

An interesting stat from the analysis is that although people with pets isn’t a huge demographic in the overall U.S. renter household segmentation, Denver is going to the dogs. More than 8 percent of households have multiple pets, compared to the U.S. norm of 3.5 percent.

“Denver looks nothing like the U.S. average at all,” Willett said. “It’s probably the most different from the U.S. norm. It’s an interesting economy and population in Denver. Look for that to be an outlier compared to the rest of your portfolio.”

Younger renters will continue to maintain grip on households

Willett said younger renters will continue to maintain a hold on the U.S. household renter segmentation for the future. While they don’t have high credit card debt, younger renters could be slowed in home-buying pursuits by high student debt. But how that plays out is an unknown.

“It’s hard to get a handle on that,” he said. “Are students paying off the debt or is mom and dad? While student debt is much bigger than it used to be, credit card debt among those households is much smaller. If I’m qualifying for a home loan, I’m looking at all debt. We’ll see how that comes together.”


The post Future Renters and Apartment Demand Factors appeared first on AAOA.

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