How rent control can exacerbate inequality

American Apartment Owners Association - Thu, 01/11/2018 - 1:51pm

Rent-control policies are a cause célèbre advocated by progressive politicians such as New York City Mayor Bill de Blasio and U.K. Labour Party leader Jeremy Corbyn. But evidence from San Francisco shows that these laws aren’t all they’re cracked up to be.

While people who manage to secure a rent-controlled home will benefit substantially in the long run, these policies can cause landlords to make choices that can exacerbate income inequality, a new working paper from researchers at Stanford University found. The report examined the fallout from a successful 1994 ballot initiative in San Francisco that created rent control protections for small multifamily buildings built before 1980. Here is what the researchers found:

  • People who lived in homes that became subject to rent control rules were between 10% and 20% more likely to remain at that address, versus people who weren’t in rent-controlled units.
  • The economic benefit to people living in rent-controlled units averaged between $2,300 and $6,660 per person each year.
  • Meanwhile, landlords were 10% more likely to convert their building into condos if it became rent controlled. Overall, the rental supply in San Francisco dropped by 6% following the expansion of rent control.
  • Rents throughout the city increased by 5.1% as a result — the researchers calculated the total cost to tenants from rent hikes to be $2.9 billion, nearly half of which was paid by residents who moved to San Francisco following the establishment of rent control.

Given the negative repercussions of rent control policies, the researchers argued that other approaches to affordable housing that don’t inherently punish landlords might be more effective, such as creating a tax credit for rent.

Rent deregulation in Cambridge had other benefits

  • Improved public safety following rent deregulation represented an economic benefit to the city of between $10 million and $22 million.
  • Deregulation led to $2 billion-worth of property value appreciation between 1994 and 2005, findings that are supported by previous research by the newly-minted Nobel laureate Richard Thaler.

Cambridge represents a strong test subject for studying the impact of rent deregulation, according to the paper, which was distributed by the National Bureau of Economic Research. The city’s rent control policy was eliminated following the success of a statewide referendum in 1994. Nearly 60% of Cambridge’s voter’s opposed the referendum, indicating strong support for rent control at the time.

Only a third of Cambridge’s residential units were subject to rent control rules, and the ordinance only applied to buildings constructed before 1969. As a result, many of the buildings affected by the change were concentrated in the same neighborhoods, which allowed researchers to determine better the effect deregulation had. The researchers also compared their findings against the nationwide decrease in crime and to other potential causes of the lower crime rate, including proximity to public transit and public housing.

Rent control regulations are rare across the country

Only four states (California, Maryland, New Jersey and New York) and the District of Columbia have rent-control laws on the books either state-wide or at the municipal level, according to the National Multifamily Housing Council, a trade organization representing the apartment industry.

In another nine states, there are no rent control laws on the books — nor are there laws preempting rent control ordinances. The remaining 37 states either have state laws preempting rent control ordinances at the local level or require local governments to get approval from state legislatures to enact such provisions.

Even though rent control laws are rare, more cities across the country have been exploring them, likely a reflection of soaring housing costs nationwide. Voters have succeeded in putting referenda on the ballots in cities like Glendale, Calif., Newark, N.J., and Portland, Maine, that would create or strengthen rent control laws. And activists in cities like Minneapolis and Seattle are pushing for rents to be regulated, even though their state governments have been rent control ordinances.

A recent poll also found that a 55% majority of voters in California’s Orange and San Diego counties supported rent control policies, according to the Orange County Register.

Other studies show that rent control likely doesn’t work

While rent-control policies are aimed at keeping housing affordable, it often has the reverse effect in practice.

There is evidence that renters pay more in rent-controlled cities, according to the Urban Institute, a Washington, D.C., think-tank. These policies generally raise the rents in uncontrolled apartments. “Given the current research, there seems to be little one can say in favor of rent control,” wrote Peter Tatian, a senior fellow in the Urban Institute’s Metropolitan Housing and Communities Policy Center.

One theory for the increase in property values: Studies have shown that the construction of new rental units decreased in many cities after they implemented rent-control regulations, according to the National Multifamily Housing Council. Consequently, the supply of rental properties may not grow to accommodate increased demand in these cities. Many people will remain in rent-controlled apartments and pass them along to family or friends, meaning that fewer vacancies come up. That leaves people looking for housing with fewer options.

Studies have also found that rent-controlled apartment buildings are kept in worse conditions, a reflection of negligence on the part of landlords and tenants alike.

And further research has also shown that the end of rent control in Cambridge, Mass., led to a significant reduction in crime — and the improved public safety alone represented an economic benefit of between $10 million and $22 million, according to a working paper by researchers from the Massachusetts Institute of Technology.



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Investors Expect 2018 to be Another Solid Year for Apartment Sales

American Apartment Owners Association - Thu, 01/11/2018 - 1:48pm

Investors are looking forward to another strong year for apartment sales.

“Going forward, there is a bit of renewed optimism… and we are still at an elevated level when it comes to transaction volume,” says John Sebree, first vice president and national director of the national multi-housing group for Marcus & Millichap.

Investors bought fewer apartment properties in 2017 than they had the year before—but 2016 was a record-breaking year for apartment sales. The total dollar volume of apartment sales in 2017 was still greater than the historical average. And with apartment properties still desirable and yields and interest rates still relatively attractive, 2018 seems poised to match it.

“There is still a hunger for yield by investors,” says Jim Costello, senior vice president for Real Capital Analytics (RCA). “I don’t see 2018 as being that much different.”

Large volume of sales, relatively

Sales of apartment properties started slowly in 2017, partly because of uncertainty about policy after the presidential election and partly because the huge volume of deals that closed in 2015 and 2016 is naturally hard to match. Investors bought $12.5 billion in apartment properties in 2017 (as of November) in the U.S., according to the latest data from Real Capital Analytics (RCA). That’s down 7 percent from the same period in 2016.

Investors closed 2017 on a roll, partially making up for the year’s slow start. The volume of properties sold in November was the second largest of any November in history behind only 2016, according to RCA.

In 2018, investors are expected to buy and sell apartment properties in roughly the same total dollar volume as 2017. “It’s not going up a lot, though it’s not going to drop either,” says Sebree.

Investors may also be more eager to buy and sell apartment buildings now that Congress has passed its first major reform of the federal tax code since the 1980s. Tax reform didn’t change much for the apartment business, but could have created major changes. Now that it has passed, apartment experts have less uncertainty about the future.

“It eliminates some concerns, and as a result we may see more owners coming to the market,” says Sebree.

Cap rates stay low

Experts do think that cap rates for apartment properties are finally now about as low as they are likely to get. But they are unlikely to rise much either, even though interest rates are likely to rise in 2018—especially now that federal tax reform has passed.

Interest rates will continue to rise. The Federal Reserve has already raised its short-term benchmarks rates and is planning more 25-basis-point increases over the coming year, especially if inflation begins to rise after tax reform. “Tax reform is a huge fiscal stimulus. The Fed is going to have to respond with some higher rates,” says Costello.

Rising interest rates usually push cap rates higher, as investors eventually demand higher yields from their investments to make up for their higher cost of capital. But the effect is not immediate. In the short term, cap rate are likely to stay low.

“Property is a hedge against inflation. Investors want to lock in an interest rate at a low number,” says Sebree.

Investors turn to smaller markets and lower properties

More than half (55 percent) of the apartments properties bought and sold for more than $1 million in 2017 priced were located in secondary and tertiary markets. That’s up from 42 percent in 2010.

“You have got a lot of money looking for yield,” says Sebree. Because of all this additional investment, the average cap rate for apartment properties has fallen to about 6 percent in secondary and tertiary markets, down from about 8 percent in 2010. At the same time, the cap rate for apartment properties in prime markets has stayed in the 4 percent range. The difference in cap rates between apartment properties in primary markets and properties in secondary and tertiary markets is now about 190 basis points, down from 370 basis points in 2012, according to Marcus & Millichap.

“The cap rates in preferred markets really haven’t changed as much—they were already at such low levels,” says Sebree.

The cap rate for class-B and class-C apartment properties in all markets has also fallen on average to about 5 percent from about 7 percent in 2010.



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How You Should Market Your Real Estate Based Business Digitally

American Apartment Owners Association - Thu, 01/11/2018 - 1:45pm

The world of real estate marketing has changed immensely over the past decade. It seems like everyone is an expert when it comes to homes because of Zillow’s price calculator and easy to use platform. The days of purchasing ad space on bus benches or billboards being wildly successful are over. The most important part of marketing when it comes to real estate has become that of digital marketing. Not marketing in a digital fashion can have your real estate firm falling behind the competition when it comes to sales closed. The following are ways that you should market digitally to get the highest return on the money invested in the marketing strategy.

Create Useful Content The company website should have a blog where your staff and other contributors can write articles that will be of use to site visitors. These do not have to be articles as it could be a podcast or even an interactive piece of content. The useful content will help showcase the knowledge that the company has and can help develop a relationship with regular readers. Answering common problems in an easy to understand way can help develop your real estate firm as a thought leader in the industry. This will lead to sales as helping people understand something like the mortgage process will build trust that your firm will be able to help with these tough to understand parts of the home buying process.

Partner With Real Estate Aggregators People flock to sites like Zillow and Trulia when they are looking at homes they potentially want to buy. Often times you can contact an agent directly through the site as they have partnered with the site. These are leads of people that can be qualified through a simple credit check. There will be some leads of people that simply cannot afford to buy a home just yet but it is important to follow up with these people in 6 months to a year. There are some people who have the credit score but lack the down payment so keep these leads as they will be valuable to return to.

Local SEO is Important Local SEO is important in the real estate business as it will help you rank at the top of Google for a specific area. People searching for Colorado land for sale would see that the Spanish Peaks Land Company deals with these types of deals. Most people will not navigate to the 2nd page of search results so ranking on the first page could not be more important. Optimize your website and content to help garner the search engine rankings that you desire. The wrong layout or slow loading pages can hurt a website’s ranking as it stresses user-friendly sites.

Website Layout Should Be Made For Mobile Every year there is more mobile traffic than ever before so optimizing your site for mobile devices is necessary. This can help your SEO as well as reduce the number of people that leave the site as it is annoying to navigate on their phone. The layout should put your contact information at the top of the site so a call or email can be done rather than having someone fill out a boring contact form. Keep media on other pages besides the homepage to decrease loading times.

As you can see it is important to think about the details when it comes to your digital marketing. Set up a strategy that will give you a favorable return on your investment and track everything. One variable can make a huge difference so knowing which variables impact sales the most could be the most important data gathered. Optimize your digital marketing approach and watch your sales skyrocket!


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Lawsuit accuses of defrauding agents

Inmannews - Thu, 01/11/2018 - 12:52pm
In an emailed statement, spokesperson Janice McDill told Inman: "The allegations are without merit, and we will defend the case vigorously..." ...
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Cadre scores $250M deal with Goldman Sachs’ private wealth clients

Inmannews - Thu, 01/11/2018 - 11:18am
Cadre, an online investment marketplace, today announced that it has closed $250 million in commitments from Goldman Sachs' private wealth clients, a move that will enable Sachs' private clients to easily invest in Cadre's broad-based portfolio of commercial real estate assets ...
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10 ways to generate more real estate business

Inmannews - Thu, 01/11/2018 - 10:56am
Looking for more ways to get real estate business and build your client database? Real estate author Ryan Snow shared 10 of the top ways to bring in business and boost sales on a recent podcast with Pat Hiban ...
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Home prices are set to soar in 2018

American Apartment Owners Association - Thu, 01/11/2018 - 9:45am


  • Sales prices jumped 7 percent annually in November.
  • Low supply and high demand are fueling the gains and neither of those is expected to ease up anytime soon.

The temperature may be frigid across much of the nation, yet home prices are sizzling and sellers are in the hot seat.

Sales prices jumped 7 percent annually in November.

That is the third straight month at that pace, far higher than the price gains in the first half of 2017. Low supply and high demand are fueling the spurt and neither of those is expected to ease up anytime soon.

Supply is actually falling even more now, and a strengthening economy is pushing demand. This will have potential buyers out early this year, trying to get a jump on the spring market.

“Rising home prices are good news for home sellers, but add to the challenges that home buyers face,” said Frank Nothaft, chief economist at CoreLogic, in the report. Nothaft said the limited supply is the worst at the lower end, and will hit the growing number of first-time buyers hardest.

Half the homes are overvalued

The largest metropolitan areas are seeing the biggest gains.

In the nation’s top 50 markets, half of the housing stock is now considered overvalued, based on market fundamentals, like income and employment. This is defined as an overvalued housing market as one in which home prices are at least 10 percent higher than the long-term, sustainable level.

Las Vegas led the November report as not only being overvalued, but showing a double-digit annual price gain of 11 percent.

San Francisco was not far behind at 9 percent, and Denver came in third at 8 percent.

Las Vegas and Denver are both considered overvalued, but San Francisco is not, as incomes in the tech capital far exceed the national level.

Of the nation’s 10 major markets with the biggest price gains, seven are overvalued. These include Washington, D.C., Houston and Miami. Boston and Chicago are still seeing price gains but are considered at value.

Without a significant jump in home construction, prices will remain high and likely move higher. Mortgage rates could also move slightly higher, and new tax policy limiting mortgage and property tax deductions, is hitting homeowners in some states hard.

All will combine to make housing less and less affordable in the new year.


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8 Steps to Take Before Listing Your Investment Property for Sale

American Apartment Owners Association - Thu, 01/11/2018 - 9:43am

Presenting a strong, solid property is the best way to a fast, lucrative sale. But before you plant a sign in the yard, you’ve got some work to do. From assessing the state of the property and cleaning it up and getting it ready to list to speaking to your tenants so they aren’t blindsided by the sale and gathering up all the pertinent information about the property and any tenants, the work you do before the sale directly impacts how much money you make at closing.

Ready? Let’s get started!

8 Steps to Take Before Listing Your Investment Property for Sale 1. Assess the true state of your property.

A visual inspection isn’t going to be enough. A full inspection—performed by a licensed home inspector—will give you a more accurate look at the state of the property. Your buyer is going to have an inspection and will ask you to repair or give a repair credit for anything major. (In a slower market, they’ll ask for most minor things, too.) Don’t give them ammunition for price reduction or closing concession requests. Know what’s going on in your property ahead of time so you can make the repairs you’ll be asked to make anyway.

If your home inspection report turns up little or nothing, you can present it to potential buyers as a “pre-inspected home,” further providing proof that the property is a solid investment.

2. Make necessary repairs.

Once you have an inspection report, you can see what the buyers will see when they receive their inspection report. Addressing the big issues before the buyers even see the home can help bring in a higher selling price because the property presents itself as solid, so buyers aren’t asking for larger-than-necessary repair concessions—or worse, canceling the contract because they have no confidence in the property!

You can also choose not to make repairs and instead note the issue and report that these items will be sold as-is. This brings a lower upfront offer price, but you have less unknowns surrounding the inspection.

3. Clean, clean, clean.

The outside of the property needs to look great. So does the inside of the property, but if you’ve got tenants, you’ll need to coordinate with—and probably incentivize—them to clean it and keep it clean. A clean property sells faster (and for more money) than one that is less-than-tidy. Now, this may seem like a no-brainer bit of advice, but I am continually astonished by the utterly disgusting manner in which people live. You will be leaps and bounds ahead of the pack if you just have a clean home.

If you’re selling a property you have recently rehabbed, one good, deep cleaning followed by periodic maintenance through closing will suffice. Contract with a cleaning service to come in once a week to freshen up the property. If no one is living there, the cost should be minimal. You can even contract with them to clean the home after it’s sold and the new owners have moved in. An added incentive to the buyers and a bonus to the cleaning company. It’s always a great idea to be on good terms with a cleaning company!

4. Coordinate with your tenants.

If you’re selling a rental, you need to have your tenants on the same page. If you have a contentious relationship with your tenants, this is going to be just one more challenge, and you may find that waiting until their lease has expired and they’ve moved out is a better time to sell.

If you have a good relationship with your tenants, sit down with them and tell them you are selling the property. Ask if they’d like to buy it. (This doesn’t happen frequently but it’s worth asking them first.) Ask them what times would work best for their schedule to show the property to potential buyers. Also, ask what times would NOT work for their schedule, and share these with your agent – and ask them to include this in the Agent Remarks, a private section in most MLS systems.

Consider having the tenants themselves coordinate showings with the showing company. This reduces your hassle by not having to make multiple phone calls to confirm with the tenants. However, be alert and ask the showing company to report declined showings. One showing that doesn’t fit into the tenants’ schedule isn’t a big deal, but if they’re declining most showings, you could be losing sales and not even know it.

5. Find a great agent.

Residential agents can list any type of residential property—but that doesn’t mean that all agents are good at selling residential investment property. If you don’t already have a great investor-minded agent, start looking for one right now. Go to local investor meet ups and ask fellow investors who they recommend, but find someone who understands your needs—and the needs of your tenants.

6. Have excellent pictures taken.

Again, if you’re selling a rental, you’ll need to coordinate with your tenants to have pictures taken of the property. Offer to hire a cleaning crew to come in and clean their home for them, so your pictures present the home in the best light. Make sure the photographer takes pictures without fancy lenses or weird angles, so you convey the true home.

7. Gather up your documents.

Go through your records and gather up anything pertinent to the property, from repair receipts and warranties to tenant screening information, rent records, and security deposits. Ask your tenant to fill out an estoppel certificate—a testament to how much they pay in rent, when it’s due, and how much security deposit they have given you. If you have move-in documentation, provide a copy to both the tenant (as a reminder of the state of the home when they moved in) and the new landlord.

8. Remember why you’re selling.

You’re selling your property for any number of reasons: to cash in equity, move up in property size, or even to get out of the game altogether. Advanced preparation can make the entire sales process go smoother and be finalized faster. Follow these tips for a great selling experience.



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Trulia’s Hottest Real Estate Markets to Watch in ’18

American Apartment Owners Association - Thu, 01/11/2018 - 9:41am
See which cities are making the cut this year.

If you’re thinking about where to move next, you’re probably considering a wide array of factors like work, family, and the start of a new chapter. Every home purchase is also a huge investment—possibly the biggest you’ll make in your life. Looking at the markets poised for growth can ensure your new home is also a good investment. To help, Trulia looked at the 100 most populated metros in the country, then used five key metrics to determine the 10 real estate markets with the highest growth potential in 2018: strong job growth, affordability, low vacancy rates, home search rates on, and a high population of young households (you can find our full methodology below). It may surprise you—it did us—to learn that Texas and Ohio are home to more than one fast-growing city. See where else made the cut below

1. Grand Rapids, MI

On the mighty banks of the Grand River, Michigan’s second-largest city is at the top of our list largely due to its strong employment growth, which is up 2.5 percent year-over-year. Grand Rapids also has a relatively low vacancy rate (ranked 16th overall) and a high share of households with residents 35 years and under (22 percent). A full two-thirds of Grand Rapids’ residents own homes, and the median home sale price is a friendly $163,750. Living here means enjoying the waterfront, the Frederik Meijer Gardens & Sculpture Park, and the Grand Rapids Art Museum, which spotlights Michigan’s artists. A bubbling brew scene doesn’t hurt either.

2. Nashville, TN

Next on our list is Nashville, also known as Music City. But you don’t have to be in the band to love it here. Home of the famous “Grand Ole Opry,” residents in Nashville are always down for a good time. Need more evidence? Just walk through The Gulch, a trendy Art Deco-inspired neighborhood. Not surprisingly, Tennessee’s capital has a high share of households under 35 years old (23 percent) and the strongest job growth in the country (3.1 percent year-over-year), luring people from all corners of the nation to relocate. But taking the top spot in job growth may come at a price: affordability, where Nashville is ranked 58th overall.

3. Raleigh, NC

North Carolina’s capital, Raleigh, is known for the bright minds of North Carolina State University and the Research Triangle (together with Durham and Chapel Hill). But it’s also beloved for its wealth of culinary and cultural cornerstones, like the Oakwood historic district, designated on the National Register of Historic Places, where homes date back to the 1800s. This City of Oaks made our list due to its strength in two categories: job growth (ranked 3rd overall) and low vacancy rate (ranked 15th overall). Its popularity, though, leaves the city lagging in affordability—the median sales price in North Carolina’s second most popular city is $250,000—where it ranks 43rd overall.

4. El Paso, TX

This Southwestern city on the Rio Grande is loved for its incredible Tex-Mex cuisine, a wealth of locations for outdoors lovers to explore, and a rich downtown artist community and farmers market. Major employers in El Paso range from the US military to the University of Texas at El Paso, healthcare corporations to major retailers. The average price of a home here is just $186,611, and it’s a hot market for the social young and single set: the median age is 33, and 24 percent of residents are single. You’ll find many of them moving to the up-and-coming Mission Hills neighborhood. “The fantastic weather, developing downtown area, and affordable price range of housing speak to younger buyers as well as just about everyone,” says Laura Baca, an area real estate agent.

5. San Antonio, TX

San Antonio is known for its River Walk, an oasis of cypress-lined paved paths and lush landscapes where locals and visitors alike go to relax. But the city is bustling, too. In 2017, job growth rose 2.2 percent, and the national homeownership rate increased significantly for the first time in more than 10 years. In fact, homeowners make up two-thirds of the city’s population, at 65 percent. San Antonio’s top employers are a mix of military, city, and school districts, as well as private and public businesses, making this 300-year-old city flush with new job opportunities. These trends are expected to continue into 2018, with homeownership outpacing renting for the indefinite future.

6. Fort Worth, TX

This city of cowboys and culture is a hot destination in the Lone Star state, welcoming 8.8 million visitors annually. Fort Worth is comprised of seven primary entertainment districts, each offering dining, shopping, entertainment, and cultural amenities—offering mass appeal for a new generation of residents, allowing the city to lay claim to the youngest population of any major metro in Texas. It’s only 17 miles from the DFW International Airport, ensuring personal and business travel is extremely convenient. The city also has an impressive percentage of homeowners (68 percent), and with popular employers such as Lockheed Martin Aeronautics, American Airlines, the Naval Air Station, and city and school district offices, it’s a solid place to set down roots.

7. Austin, TX

Capital city Austin, with its legendary live music, burgeoning restaurant scene, cool culture, and vibrant community is a draw for everyone—even those who aren’t coming to listen to tunes in the Live Music Capital of the World. Austin’s also a university town, and many folks stay on after school. The national homeownership rate ticked up both for households under 35, as well as those aged 35-44, with the former showing a substantial increase from 34 percent in 2016 to 35 percent in the second quarter of 2017. Though home buying among millennials is likely to be sluggish in the short-run, the long-run potential for this generation to support housing consumption in the United States is big.

8. Columbus, OH

Big things are happening in Columbus, Ohio’s capital and most populous city. It’s booming, and not just in population. There are 33 acres of new riverfront parkland in downtown, cultural institutions are adding to their offerings, neighborhoods are bursting with new places to eat and shop, and the innovative food scene gives residents plenty of options. Trends in Columbus show a 12 percent year-over-year rise in median home sales price, and even with the upward trajectory, the average home comes in at just $159,900. “Our urban areas are booming with renovation and new build projects, and our suburbs maintain their investment values very well,” says Cheryl Chapin, an area real estate agent. “We have a lot of areas across the city that are walkable, have great dining and shopping, yet they’re close to downtown amenities.”

9. Madison, WI

Madison is Wisconsin’s second-largest city and state capital. It’s also home to the state government and the University of Wisconsin-Madison, the city’s largest employers. The town’s amassed a treasure chest of kudos, from most-walkable and best road-biking city, to most vegetarian-friendly, LGBTQ-friendly, and environmentally friendly city, too. Of the places on this list, Madison has the highest percentage of college-educated residents (60 percent). The up-and-coming Tenney-Lapham neighborhood houses lots of young families and hosts a popular annual art walk.

10. Cincinnati, OH

Resting along the banks of the Ohio River, the vibrant Cincinnati region spans portions of three states: Ohio, Kentucky, and Indiana. The third-largest city in Ohio has dedicated homeowners, with 63 percent of the population owning homes and its home sales price slowly growing, up 4 percent year-over-year. Cincinnati’s popular Over-the-Rhine district, which includes Findlay Market and food and craft vendors, is a favorite place for locals to spent the weekend, as is Cincinnati Zoo and Botanical Garde.


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What the 20 Most Popular Home Renovations Are Really Worth in 2018

American Apartment Owners Association - Thu, 01/11/2018 - 9:31am

Planning to remodel your kitchen, add a master suite, or undertake some other pricey home renovation in 2018? Watch out—not all of these home improvements pay off like they did in the past, according to Remodeling magazine’s latest Cost vs. Value Report.

For this much-referenced annual report, now in its 31st year, researchers pinpointed the average return on investment of 20 popular home renovations by canvassing contractors nationwide on how much these upgrades cost to complete, then compared that with how much real estate agents estimated these features would boost a home’s market price (in other words, their value).

And the news isn’t so good for homeowners looking to remodel on a massive scale: The report found that in 2018, Americans should expect to make back only about 56% of the money they spend on renovations. That’s down from 64% the previous two years.

What gives?

“This year, the most expensive projects didn’t have much of a gain,” says Craig Webb, editor of Remodeling and manager of the report. “I think it’s because real estate professionals think we’re getting close to a peak in market prices. So consequently, spending a lot of money does not automatically mean your house will just ride the escalator up and be worth a lot more.”

Current events could also play a role. New tax laws curtailing the deductibility of mortgage interest and local property taxes might be dampening real estate agents’ confidence that piling on the improvements will pay off. Plus, recent wildfires, mudslides, and other natural disasters have created what Webb calls “a freight train of extraordinary demand” on materials and labor that is bound to jack up renovation costs all round, leading to thinner margins on their return.

But it’s not all doom and gloom. As usual, this year’s report found that the ROI varied widely by project. A new garage door, for instance, essentially pays for itself, earning you a whopping 98.3% of your money back, making this the best value of the whole bunch. And the worst? Installing a back patio, which will recoup only 48% of your expenses.

Check the chart below for a full rundown of the top renovations, including how much they cost, their value at resale, and the percentage you’ll recoup. And if you’re looking for some general pointers, here’s one: If you’re going to shell out money, do it where everyone will notice—on the front of your house.

“Curb appeal projects tend to have high paybacks than inside-the-house projects,” Webb continues. “Any real estate professional will tell you curb appeal matters a lot, and these numbers prove it.”

This explains why garage doors top this list, followed closely by manufactured stone veneer (which offers a 97% ROI) and wood decks (83%).

Another golden rule of renovation?

“It’s better to replace or repair than add and remodel,” says Webb. In other words, go ahead and fix that frayed siding or replace the roof before you add a master suite or overhaul the kitchen.

Mostly, keep in mind that if your tastes are, ahem, unique, that could lead to trouble if you’re expecting home buyers to swoon over the same things.

“You may spend gobs of money on what you think is the perfect kitchen remodel,” Webb says. “But if your idea is to have something from the 1970s with avocado ovens, the next person could walk in and say, ‘That’s ugly. I don’t care that you spent $75,000 on that—let’s tear it out anyway.'”

Top 20 remodeling projects and their ROI ROI for home renovations


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Real Estate Investor Taxes What You Need To Know

American Apartment Owners Association - Thu, 01/11/2018 - 9:28am

The new tax laws do not appear to have a short term negative impact for investors. In fact it’s more likely a near term boom for investors. For one thing, if the now defunct homeowner mortgage interest deduction discourages new homebuyers, they’ll have to rent which has to be good for investors in apartments and single-family rentals. According to the Urban-Brookings Tax Policy Center mortgages and the capital gains exclusion apply to personal property, not the business of real estate investment. In fact, investors (businesses) are still able to deduct mortgage interest as a cost of conducting business (along with all of the normal and customary expenses).

There is a possibility the loss of the mortgage interest deduction could hamper fix and flip investors. But that’s unlikely considering the low inventory and pent up buyer demand. However, this isn’t likely to be universal in an industry that is all about location. Low to moderate cost markets are dominated by personal incomes that will benefit from the higher standard deduction and will no longer benefit by itemizing, which is typically triggered by mortgage interest and property tax deductions. The higher standard deduction will offset the loss of itemized deductions. However, there is the chance that the higher standard deduction will demotivate potential buyers that don’t take advantage of the long term investing that homeownership offers.

It’s the high income and high cost real estate markets that won’t benefit much from the higher standard deduction. High end markets could also suffer as a consequence of caps on mortgage interest deductibility and severe reductions in the deductibility of state, property, and local taxes.

Of general interest to real estate investors are changes to taxation of pass through business entities such as LLCs and S corporations. You’ll need an accountant to get this all straight but pass through entities will receive more favorable tax treatment. This should especially help the profitability of real estate and manufacturing businesses.

Longer term, these tax changes will have several unpredictable consequences. This tax package is designed to front load the U.S. economy. Historically, slow and steady growth has shown more sustainable prosperity that doesn’t overheat the economy. Too fast of growth results in a substantial increase in the demand for borrowed money. History also demonstrates that high borrower demand drives higher interest rates, which is never good for the real estate industry. Chances are interest rates will increase enough late in 2018 and into 2019 to significantly hamper real estate investing and the industry as a whole. Certainly the markets that are already hot won’t be sustainable if significant inflation is added to the mix.

The politics of the economy are far from finished. There was zero support by the Democrats for this tax bill. Whether the democrats return to power in 2018 or later, they will return to power at some time. Tax bills and policies are reversible. No one knows what that will bring.

The aging population also plays heavily into this complex mix. As was seen as a result of the Regan and George W. Bush tax cuts at the upper income levels, it doesn’t result in sustainable economic growth that off sets the predictable growth in the budget deficit. Unaddressed senior entitlements (hampered by the deficit) to Medicare and Social Security will continue dragging on the economy and tax policies.


The post Real Estate Investor Taxes What You Need To Know appeared first on AAOA.

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3 Tips to Prepare Your Property For Freezing Temperatures

American Apartment Owners Association - Thu, 01/11/2018 - 9:22am

The bite of cold winter air and freezing temperatures can have a lasting impact on your property’s landscape. Hard and moderate freezes can damage the foliage and roots systems of plants, bushes and grass, and in extreme cases lead to plant loss that requires a capital expense to rejuvenate the landscape before the spring.

The best defense against freezing weather is some common practices that, if applied correctly, will help ensure your landscape survives freezing temperatures:

1. Irrigate before the temperatures drop

Watering plants, trees – even grass – before temperatures drop below 32 degrees is among the first lines of defense. According to the University of Florida IFAS Extension, well-watered soil will provide its own internal heating system to protect plants. Wet soil absorbs more solar radiation than dry soil, thus radiating heat during the night when temps are typically at their lowest.

In the process, water provides a barrier between the root system and cold air. The moisture fills the numerous air pockets in the ground and prevents freezing air from penetrating the roots. The cold may damage the foliage—this is evident by wilting leaves and stems—but the roots are insulated and survive under brief freezing conditions.

To ensure the landscape gets plenty of water, run the irrigation system through its normal cycle as close to the freeze event as possible. Watering too soon will allow the water to leach the soil beyond the root zone and expose the plant to the cold.

Irrigate about 10-15 minutes on each spray station and 30 minutes per rotary station for best results.

A word of caution: Once you’ve watered prior to the cold weather event, be sure and turn off the double-check valve on the sprinkler system. Also, make sure there is no residual water on sidewalks, driveways or other areas that can freeze and make for a dangerous situation for residents and staff.

As a general rule, frequent watering is not necessary in the winter months unless there just hasn’t been sufficient moisture. Water evaporates less in the winter and therefore isn’t needed as much, like in the summer and spring growing seasons. But strategically watering before a freeze can provide a layer of protection for the landscape.

2. Bring potted plants inside

Planter pots are more prone to freezing because they are elevated and don’t have the natural heat within the ground for protection. Plants susceptible to freezing should be moved to a protected area, like a maintenance shed or empty garage, even in outdoor areas protected from harsh winds.

Bringing some plants inside the office or in indoor common areas may add a little extra foliage to the atmosphere. Just remember that climate-controlled conditions dry out the air and plants may need to be watered during their stay.

3. Cover plants and be smart about it

Can’t bring plants indoors? Covering may be an option, but there are some misconceptions on best practices. Depending on where you live, covering certain types of plants may or may not be necessary. First, know what types of plants you’re dealing with and whether they need to be covered. Your local county extension office can provide the right information.

If it’s necessary to cover plants, be very aware that they need oxygen and sunlight. Coverage in plastic is a good insulator but prolonged periods under wrap can suffocate the plant. The most common mistake that people make is leaving the plant covered throughout the winter, resulting in a dead or severely damaged plant.

Light fabrics like bed sheets or burlap are good choices and don’t add as much weight to the plant if it gets wet plus allows the plant to breathe. Like plastic, however, they can prevent sufficient oxygen from getting to the plant if left in place for extended periods of time.

There are a number of commercial products available to cover plants that are designed to protect but reduce the risk of suffocation. Some are made from fiberglass and look like a little dome that fits over the plant. These are a little more attractive than hanging a sheet over a bush.

But, again, be smart. Temperature swings, like in the Southwest when the high may reach 50 during the day yet get below freezing at night, call for a little extra attention. Covers may need to come off during the day but go back on at night to the plant isn’t damaged.

Protecting a property’s investment in landscaping often is necessary when winter weather is on the scene. Taking a few simple steps before temperatures drop and keeping an eye on things during a freeze is best to prevent long-term damage to plants, bushes and other plant life around the community.



The post 3 Tips to Prepare Your Property For Freezing Temperatures appeared first on AAOA.

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