Should you turn on the utilities for a new tenant coming from out of state is the question for Ask Landlord Hank this week.
Dear Landlord Hank,
I have someone moving in on Saturday and coming here from out of state. The tenant is saying that with the move, all the driving, etc., they haven’t had time to contact the power company to open a new account in their own name. They asked if I could keep the power on until next week and they would open a new account and pay me for power used. This seems understandable-what do you think?
-Bill
Dear Landlord Bill,
I know you’d like to be a nice guy here and help out a struggling new tenant but this is a big red flag.
Your lease should require the tenant to initiate a new account for electricity, in their own name, beginning with the first day of the lease, and require that power be on during the entire tenancy.
Tenant utilities and rules in some states
In many states, once the tenant moves in and the power is on, you as the landlord can’t just turn it off because the tenant hasn’t gotten around to opening up their own account or any other reason.
If this went to court the tenant could say you had a verbal agreement to supply power, etc. Make sure power is off prior to tenant moving in or lease start date, sometimes two different dates, or that the account is active and NOT in your name.
I’d think in this case the tenant would have loads of time to contact power company while driving or at least being in the vehicle.
I don’t know any power companies that don’t start service easily and often with just a phone call, unless applicant has poor credit, then normally a deposit is required up front.
Don’t get suckered in here. Be firm and insist that tenant abide by the lease and have power on in their name at start of lease. No legal advice intended here.
Sincerely,
Hank Rossi
Landlord Hank Rossi says tenant utilities should be connected by the tenant before move in day.
Ask Landlord Hank Your Question
Ask veteran landlord and property manager Hank Rossi your questions from tenant screening to leases to pets and more! He provides answers each week to landlords.
A research study shows that of small landlords with three or fewer properties, 56 percent are dealing with delinquent renters, according to a release.
The research from Nevada Realtors (NVR) was only for the state of Nevada, but points out how small landlords, often called “mom-and-pop” landlords, are carrying a heavier burden than larger corporate landlords. The National Multifamily Housing Council (NMHC) found that only 19.8 percent of tenants in professionally managed apartment units had not made a full or partial payment as of Aug. 6, 2021.
John Restrepo, owner of RCG Economics said his research, commissioned by Nevada Realtors, shows smaller landlords had to deal with greater disadvantages including higher vacancy rates, higher rates of delinquent payments, and more renegotiated leases.
“So, the impacts are pretty significant on these mom-and-pop landlords,” Restrepo said in the release. “It was really striking to us how much more they were affected by the moratorium.”
The survey, while small and confined only to the state, did include 140 property owners representing nearly 22,000 residential units across Nevada.
NVR President Brad Spires said small landlords have suffered more than their share of these economic hardships and typically have fewer resources than owners of multiple-unit developments and apartment communities.
“We know from experience that these state and federal eviction bans have been devastating to property owners,” said Spires, a longtime real estate agent based in Gardnerville, Nevada. “This research helps us put this damage into perspective from an economic point of view. It shows that everyone involved is suffering financial harm, including tenants and owners of apartment communities. But it reinforces what we’ve been saying throughout this pandemic about the disproportionate harm these policies have had on individual property owners who depend on rental income to survive.”
The report also estimated that the ongoing ban on evictions as still mandated by the Centers for Disease Control (CDC) has already cost Nevada and its economy at least $511 million in lost economic output.
Small landlords and delinquent renters: Highlights of report
About 41 percent of all rental properties nationwide are owned by individual investors, or what the report classified as “mom-and-pop” landlords.
According to research from the Brookings Institution, about 33 percent of these individual landlords have an income of less than $90,000 per year and rely on rent from their tenants for 20 percent of their annual incomes. “The research indicates that many of these landlords may simply lose their properties,” the NVR report found.
Nevada landlords were forced to forgo an average of $422 per unit from the beginning of the pandemic in March 2020 through February 2021.
That amount of missed rent due was much higher for owners with only a few units, who missed out on an average of $1,870 in rent per unit during this time to delinquent renters.
In addition to reduced spending, state and federal eviction bans in Nevada have resulted in a loss of an estimated 1,430 full-time equivalent jobs and an estimated $39.1 million in associated earnings to date.
Based on lost wages and economic output during 2020, the eviction ban in Nevada cost the state a projected $12.6 million in lost sales and use tax revenue last year.
The tax hit could have been even worse; despite dealing with delinquent tenants, the report found that most landlords have continued to pay their property taxes.
State and local processing delays are blocking needed rental assistance funds from getting to landlords and tenants who are trying to avoid eviction, according to a release.
Nearly 89 percent of the funds approved by Congress have not gotten into the hands of landlords and tenants due to state and local bottlenecks, according to the U.S. Department of the Treasury. Only $5.1 billion of the first round of $25 billion- passed last December – has been used. An additional $21 billion went out in March and another $1.6 billion of rental assistance went out in July.
More than 7.9 million households are behind on rent, according to the latest Census Bureau data from early August.
States risk losing rental assistance funds
Starting at the end of September, state and local programs that have been slow or unwilling to get money out are at risk of losing their funds.
“One of the biggest challenges many state and local government programs continue to face in getting assistance to renters and landlords is application processing delays. According to public dashboards, hundreds of thousands of applications are in the pipeline beyond those that have already been paid,” the Treasury Department said in the release.
“Today, based on feedback collected through site-visits and meetings with rental assistance administrators, tenant advocates, landlords and other stakeholders, Treasury is providing further policy clarity and recommendations meant to accelerate assistance to those in the pipeline in addition to those who have yet to apply.
Treasury tells state and local to do the following to speed up money
Self-attestation can be used in documenting each aspect of a household’s eligibility for ERA, including with respect to: a) financial hardship, b) the risk of homelessness or housing instability, and c) income.
During the public health emergency, state and local ERA programs may rely on self-attestation alone to document household income eligibility when documentation is not available.
State and local grantees may advance assistance to landlords and utility providers based on estimated eligible arears.
State and local grantees may enter into partnership with nonprofits to deliver advance assistance to households at risk of eviction while their applications are still being processed.
Grantees may make additional rent payments to landlords that take on tenants facing major barriers to securing a lease, including those who have been evicted or experienced homelessness in the past year.
Past arrears at previous addresses may be covered.
A tenant’s costs associated with obtaining a hearing or appealing an order of eviction may be covered with ERA funds as an eligible “other expense.”
“Treasury recognizes that early on, many state and local governments faced a difficult task in building the assistance infrastructure needed to get ERA funds quickly to eligible households from scratch. However, July data shows many have done this successfully and several communities have reported fully spending their ERA 1 resources, demonstrating that there are effective pathways to getting relief quickly to those who need it,” the release said.
Now is a good time to do your rental property roof maintenance checkup before the weather starts to turn this fall. Remember, repair crews are backed up due to the pandemic and it is going to take them longer to get to your work this year.
Here are three ways to prevent costly roof maintenance on your rental property from Keepe.
Property maintenance comes as an integral part of the general maintenance and upkeep of your property., especially regular roof maintenance which allows capital budgeting to become more predictable and simplified.
When property managers maintain a roof correctly, they prolong its lifespan – and that saves money in the long run. Here are three effective ways to do just that:
1. Roof Maintenance Extends the Lifespan of the Roof
Regular maintenance usually is the least costly option for property managers.
Manufacturers agree that customary maintenance can extend a roof’s lifespan by 25 percent. Removing snow, unclogging gutters, clearing debris, adding sealant or caulk, and assessing vulnerable perimeter terminations, all contribute to the increased lifespan of a roof. To put this into perspective, a small addition of upfront maintenance expenditures could significantly minimize the roof’s overall cost annually.
Well-maintained roofs need just a minimal level of annual repair and don’t require frequent replacement. You can defer these costs and their effect on the capital budget over additional years. Regular maintenance reduces the escalated expenses linked to older roofs and eradicates the need for unpredictable and expensive repairs.
2. Roof Maintenance Inspections Produce Information for Planning and Budgeting
Maintenance assessments disclose information that are essential to dependable capital budget planning.
With status updates at their disposal, managers can foresee most of the predictable charges. Hence, they can establish a timeline for essential repairs. Remember the delays that the pandemic can cause with roof contractors.
For example, a detailed contractor’s report may show that a roof will need to be replaced in 12 years. In addition, the report may also indicate if there is a need for specific repairs within three years. With this kind of information, property managers can plan and budget for necessary repairs and maintenance accordingly. By utilizing the maintenance reports, they can diminish the likelihood of budget shortfalls and emergency repairs.
3. Lower the Overall Cost of a Roof Replacement
Performing minor repairs and doing regular maintenance on your roof before these items turn into larger-scale projects are crucial in minimizing overall cost.
It also protects building operations from expensive interruptions. By handling small leaks, for instance, property managers can protect the deck from rusting and ensure that the insulation doesn’t become saturated.
This simple fix can save up to 30 percent of the whole re-roof expense, and more savings can be realized for decking with a well-sustained structure. On average, property managers with well-maintained roofs need to pay approximately 3 to 5 dollars per square foot for a re-roof. Structurally unsound or poorly maintained roofs, on the other hand, may demand a replacement cost of $12 per square foot. This is an additional cost that can be easily mitigated with a solid maintenance plan.
When capital planning, it’s easy for property owners to neglect roof maintenance. However, consistent upkeep significantly reduces the total expense for the roof’s replacement. It also prevents a lot of unforeseen costs and extends the roof’s lifespan altogether.
About Keepe:
Keepe is an on-demand maintenance solution for property managers and independent landlords. The company makes a network of hundreds of independent contractors and handymen available for maintenance projects at rental properties. Keepe is available in the Greater Seattle area, Greater Phoenix area, San Francisco Bay area, Portland, San Diego and is coming soon to an area near you. Learn more about Keepe at https://www.keepe.com
Making the apartment leasing process easier with ‘next-gen’ technology brings it closer to fully autonomous leasing, led by chatbots, self-guided touring, QR codes.
By Paul Bergeron
There was a time when the apartment-investment company UDR employed a full team of leasing professionals on a busy Saturday afternoon to handle a few dozen renter prospect tours for a single multifamily community.
But by adding new technology, the diversified multifamily real estate investment trust (REIT) – which owns approximately 54,600 apartment homes – has been able to increase its tour volume, conducting upwards of 40 self-guided tours per day while employing only a fraction of multi-functional office personnel at a given community. These findings have validated the belief that most prospective residents do not want to be “sold” to, but instead prefer to self-serve on their own schedules.
Today, 97 percent of the company’s tours are self-guided.
Scott Wesson, UDR’s chief digital officer, says that removing artificially imposed obstacles (such as how many leasing agents can simultaneously conduct tours) from the leasing process is a top priority. The steps the company has taken in recent years to do this have boosted its operating efficiencies and margins.
The apartment business is a customer-driven industry, and UDR’s strategy “centers on first listening to our current and potential residents, and then figuring out what works and does not work for them,” Wesson says. “We might think we know what the residents want, but we’re not always right. Observation and consistent interaction are key.”
“When it comes to shopping for apartments – or shopping for anything – we observed that prospective residents prefer privacy so they can either self-compare to other apartments they have previously toured or freely converse with a significant other on pros and cons. This is more challenging when a salesperson is present throughout a tour. The feedback we have received from prospects indicates they like this sort of lower-stress experience.”
UDR has experimented with a wide range of technologies in its pursuit of greater automation and virtual leasing techniques. These endeavors have ranged from using Amazon Echo, mapping technology, and augmented reality, among others. Not all have stuck, but trial-and-error is an important part of the process. UDR believes that building a culture that embraces innovation, whether initially successful or not, has contributed to its success and helps to enable a superior customer experience.
As COVID lockdowns eased, the company reported strong leasing demand, which led to higher physical occupancy. In June 2021, UDR enjoyed a nearly 50 percent increase in leasing traffic year-over-year.
Information ‘Addiction’
Wesson said that many consumers trying to contact a company just want quick answers to their often-straightforward questions, and most businesses are making it overly difficult to get those answers. As a result, they have moved online to efficiently satisfy their informational needs. UDR says using chatbots for “their ability to quickly and accurately serve up information that customers need to make a decision is second to none.”
“When it comes to shopping for apartments – or shopping for anything – we observed that prospective residents prefer privacy so they can either self-compare to other apartments,” said Scott Wesson, UDR’s chief digital officer.
In recent years, UDR has listened to and analyzed thousands of calls from its call center. Wesson says that 85 percent of the questions were factual, where prospects asked about pricing, availability, and applications. The other 15 percent were such questions as “Is the community safe?” or “How’s the neighborhood?”
The latter are questions that can be a challenge for even humans to answer, Wesson said, because their answers are often subjective.
To answer the other 85 percent of questions, UDR evaluated four chatbots during its selection process. Some of the criteria included were how quickly a chatbot could “learn,” which questions it can’t answer, whether it “remembers” prospects that visit more than once, and whether it can communicate via text, webchat, and email.
The chatbots are not perfect, but they do learn quickly given enough data. For example, colloquialisms within questions such as “How much do these apartments run?” can trip them up. We had to teach the bot that this is the same thing as asking, “How much is the rent of this apartment?”
UDR chose LeaseHawk’s virtual leasing assistant, ACE, because it “proved best at being able to answer the greatest number of questions quickly,” Wesson said. “If it cannot answer efficiently, prospects could leave your website, frustrated, and not come back. ACE functions so that it prompts its users to ask more questions, which improves interaction and the prospect’s experience.”
Convincing C-Suite About AI’s Value
”Some who work in the multifamily industry still need convincing that artificial intelligence is not coming for their jobs,” said LeaseHawk CEO Mike Mueller.
Mueller indicated that this stems from misunderstanding AI semantics.
“These leaders need to understand AI is about increasing productivity,” he said. “Their customers already understand AI-powered assistants, as they interact with them in other facets of their lives. Therefore, customers are comfortable with them. For executives, their response can be “AI lacks the ‘human’ touch. And Siri can be so frustrating.” They identify AI as something synonymous with “Hal,” the computer in “2001: A Space Odyssey.”
Additionally, some potential AI adopters have a false mindset that training a bot is an onerous task.
“There’s not that much required to train a bot on in apartment leasing,” he said. “Like with UDR, prospects typically ask very similar questions.”
”Some who work in the multifamily industry still need convincing that artificial intelligence is not coming for their jobs,” said LeaseHawk CEO Mike Mueller.
Leasing Transparency Wins Them Over
One intriguing aspect of chatbot communication is the ability to provide pricing information to prospective residents. Wesson said that consumers today expect websites to list current prices.
“Some sites in our industry still state ‘call us for pricing’ or give a price range or list ‘rents starting at $x,xxx’ that is not in line with customer’s other e-commerce experiences,” he said.
“We want to be as transparent as possible and decided long ago that there’s no valid reason to shield current pricing from a prospective resident. Because of fluctuating demand, prices can go up and down, but we want to give them all the facts we have about the current price and the availability of the product, and LeaseHawk’s chatbot allows us to do that quickly and efficiently.”
Price in hand, UDR customers then turn to touring.
“We’ve been doing self-guided tours (SGT) for three years. We’re a petri dish when it comes to tech…we like to experiment with the process first, then learn from the customer feedback, vs. trying to figure it out in a board room and investing in technology that will ultimately be scrapped.
“For tech like SGT, we try it out, see how the process goes, learn from it, and then key in on the exact technologies we need to make it successful. For all our technology initiatives, our finished vision is quite different from what we thought it would be when we started out. Currently, 97 percent of our tours are self-guided, so we think we are on the right track.”
Given social-distancing norms during the pandemic, many apartment companies were scrambling to get virtual self-guided touring up and running during mid-2020. “Thankfully, we were already pretty mature with our process prior to COVID,” Wesson indicated. “We were on Version 3.0 by then for a lot of technology-, virtual- and automation-based experiences.”
Likewise with smart-home technology, which includes keyless locks, Internet-accessible thermostats, and online water-leak sensors, among others. UDR has installed these packages in more than 44,000 of its apartment homes.
Wesson said UDR’s data show that less than one percent of its residents don’t want smart-home tech.
“We provided smart-home tech in our communities for a variety of reasons. First, our residents tell us they like the conveniences they provide; second, we can charge a nominal fee for it; and third, it helps us save time and money on maintenance tasks, such as rekeying locks or dealing with lockouts,” he said. UDR is getting a healthy double-digit return from the smart-home packages.
Improving Operating Margins
For REITs (such as UDR) and their shareholders, operating margin is key.
“The technology we use, including LeaseHawk’s chatbot, has made us more cost-efficient and optimized our workforce,” Wesson says. “This improves our operating margin, but it also provides UDR associates with better compensation and career-advancement opportunities, and allows them to focus more thoroughly on customer service.”
Wesson says that one technology trend that has surprised him in the past few years is how quickly today’s consumer, especially younger individuals, have transferred their communications to text from email. It’s a shift that started several years ago, he said, and was identified early on through UDR’s direct communication with prospects.
“Therefore, it was vital that the chatbot we selected could engage in texting and webchat,” he said.
Another key chatbot feature is its ability to schedule tour appointments. He finds that people today are more likely to make appointments, and not just drop-in (though UDR does still get a few of those). By planning the day based on set appointments, it’s easier for UDR’s team to conduct more property tours each day.
In the past, a prospect on an accompanied tour “would get the grand tour and would see everything whether they liked it or not,” Wesson explained. “Tours would take about an hour, on average, some even more than an hour. Our self-guided tours are taking about 23 minutes, on average, with our office associate only spending about five minutes of their time on each. Prospects who go on self-guided tours get to see what they want to see at the pace they are comfortable with.”
UDR found that the decision to lease or not was often not based on the length of the tour. It appears that most prospects tour a community to validate information they’ve already seen online, Wesson said.
QR Codes: The Public ‘Gets’ It
UDR indicated that one interesting SGT finding thus far is that it could dial down the technology needed, such as eliminating some digital maps.
“We’ve found that our communities really aren’t that hard for the prospects to navigate,” he said. The UDR team looked at augmented reality a while back but found it “just didn’t add much of anything to the experience that the customer needed to make their choice.”
In 2016, UDR tried placing an Amazon Echo in several apartment units to help answer questions. These days, the company has placed signage in an apartment that displays QR codes to answer popular questions. Prospects scan them to check pricing, appliance descriptions, smart-home tech, etc.
Unlike pre-COVID, many people now understand how QR codes work and use them because they became more popular during the pandemic. Restaurants used them to let diners peruse the menu, for instance.
Centralized Leasing Offices
Using virtual leasing assistants such as ACE is a first step toward centralized leasing offices. It’s also a component of “autonomous leasing.” Bots can handle so many of the questions common throughout a resident’s life cycle at a community.
If a prospect schedules a tour through a bot, the bot can ask, “How would you rate your tour?” If it’s a 4 or higher on a 5-point scale, the bot can ask, “Would you like me to send you an application?” Or “Can we do a credit check with you?” This is on top of the bot already confirming and reminding office associates about impending appointments.
Winners in the chatbot space are those who are first to market, like LeaseHawk. The “first mover” advantage is critical.
About the author
Paul Bergeron has been reporting on the apartment industry since 2002 and served 20 years as editor-in-chief for the National Apartment Association’s UNITS magazine. He currently is editor of his LinkedIn media platform, Thought Leadership Today, and can be reached at pbergeron333@gmail.com.
The pandemic, a shortage of workers and soaring materials costs have not deterred the apartment construction market, which has maintained a steady pace despite these challenges, according to a study from RentCafe.
“The pandemic shifts and resurgence of the residential-rental market brings new residential supply into focus,” said Doug Ressler, manager of business intelligence at Yardi Matrix, in the report.
“Lack of entry-level housing supply and rising home prices will show the multifamily rental market demand increasing as new renters enter the market and millennials extend their rental commitments,” Ressler said.
“More precisely, 334,000 units are projected to be opened in the U.S. by the end of this year, according to Yardi Matrix estimates. These figures reflect the striking difference between the aftermath of the pandemic crisis and that of the housing crisis of 2008.
“In 2021, there were nearly three times more apartments under construction than there were in 2011,” the report says.
Here are the main drivers of apartment construction this year:
Eight metro areas out of the top 20 are expected to hit a five-year high in apartment construction. Among these are two newcomers to the top builders’ club – the metro areas of Kansas City, Mo., (4,967 units), and Raleigh, NC (4,836 units).
There’s a trend shift compared to last year. In 2020, 13 metros out of the top 20 experienced decreases in apartment construction. This year, only six out of 20 metros are seeing drops.
The Dallas-Fort Worth metro area is the torchbearer of apartment construction for the fourth year in a row. Renters can rejoice knowing there are 21,173 new units in the pipeline, to be available on the market by year end.
A welcoming sight: New York metro returns to pre-pandemic levels, with 19,375 projected units. The area is expected to see an 11 percent increase in apartment construction compared to last year.
Phoenix is one of the surprising markets this year, claiming the No. 3 spot nationally. A much-needed supply of 15,846 units is planned here, creating 76 percent growth compared to 2020.
Charlotte, NC is witnessing a boom, with a 100 percent increase in apartment construction. The projections show 10,723 apartments to be delivered this year. Orlando, FL is another promising market, with 78 percent growth, projections at 8,211 units.
5-Year High in Phoenix and 7 Other Metros
Of all the metros analyzed, eight are set to hit their peaks in apartment construction this year compared to their totals from the last five years.
First up isPhoenix,the most notable metro, which is projected to build 15,846 new units this year — considerably more than its deliveries in past years. Currently witnessing a housing boom and a population increase of 2.1 percent, the metro is set to meet the demand for new apartments in the area.
“The strong demand fueled by robust inbound migration and employment growth” is the reason we’re seeing such high levels of construction in these markets, according to Ressler. “The Southwest market which meets both these conditions is Phoenix. In addition, Phoenix zoning and availability of land is adding to the attraction.”
The challenge of how to deal with unauthorized tenants who are not on the lease for your rental property is the question for Ask Landlord Hank. Remember Hank is not an attorney and he is not offering legal advice. If you have a question for him please fill out the form below.
Dear Landlord Hank:
Do you have any recommendations for detecting whether a tenant is allowing someone to live in the unit with them?
It is stated clearly in the lease that unauthorized tenants are not allowed, but….
-Valerie
Dear Landlady Valerie,
Most leases include a clause concerning Right of Entry.
This clause basically says that you can inspect whenever you wish (within reason) with reasonable notice to the tenant via telephone, note on the door, etc. that you will be coming to inspect the property.
I would put such a note on the door or call the tenant and let them know that you are coming tomorrow morning to inspect.
Then you can check closets to see if there are another person’s clothing there or multiple tooth brushes, etc. You can find out fast and easy.
I’d take photos, just in case your tenant denies someone extra is living there – the more the better, so you have evidence if you have to go to court.
If you would feel more secure you could have a “burly” co-inspector with you. Good luck.
Sincerely,
Hank Rossi
Landlord Hank says, “you can check closets to see if there are another person’s clothing there or multiple tooth brushes, etc. You can find out fast and easy.”
Ask Landlord Hank Your Question
Ask veteran landlord and property manager Hank Rossi your questions from tenant screening to leases to pets and more! He provides answers each week to landlords.
Oregon Gov. Kate Brown has extended the state’s mortgage foreclosure moratorium to December 31, according to a release.
The mortgage-foreclosure moratorium had been set to expire on September 30.
House Bill 2009 authorized the governor to extend the mortgage-foreclosure moratorium period for two successive three-month periods beyond June 30. The governor previously extended the moratorium until September 30, 2021. The extension until December 31 is the last extension allowed under House Bill 2009.
The governor said in the statement that the moratorium prevents Oregonians who own their homes from losing their homes to foreclosure if they have lost income and been unable to pay their mortgage during the COVID-19 pandemic.
“As we continue to see record high numbers of COVID-19 hospitalizations driven by the Delta surge, I am committed to ensuring that Oregonians have a warm, dry, safe place to live during this pandemic,” Brown said in the release.
“These protections are necessary as Oregon continues to deploy federal financial relief,” Oregon Governor Kate Brown said in a release.
“Extending the temporary residential foreclosure moratorium another three months will prevent removal of Oregonians from their homes by foreclosure, which would result in serious health, safety, welfare, and financial consequences, and which would undermine key efforts to prevent spread of COVID-19.”
Additionally, extension of House Bill 2009’s foreclosure moratorium “will provide necessary relief to mortgagors that are leasing property to residential tenants, allowing them needed flexibility to continue to work with tenants who are struggling. These protections are necessary as Oregon continues to deploy federal financial relief, including the Emergency Rental Assistance program and the Homeownership Assistance Fund, both of which are in the initial stages of deployment.”
Renters continue to receive protection
Similar protections are also in place for Oregonians who rent their homes. In addition to resources for landlords and homeowners, rental assistance continues to be available for tenants at OregonRentalAssistance.org. On June 25, 2021, Gov. Brown signed Senate Bill 278, which provides tenants a 60-day safe-harbor period from eviction for nonpayment of rent. In Multnomah County, the safe-harbor period is 90 days. The 60-day safe-harbor period for each tenant begins when they provide their landlords with proof that they have applied for rental assistance. Oregon’s Emergency Rental Assistance Program is still accepting applications at OregonRentalAssistance.org. Tenants who are behind on their rent or utilities or who may need help paying the current or future month’s rent should apply today.
Renters are starting to return to big-city apartments, as high-income earners were most active and among the most likely to switch apartments in 2021, according to a study from RentCafe.
The report says the peak rental season started out twice as strong as usual, with 45 percent more renters applying for apartments in March than in February. By comparison, during the same time period in 2018 and 2019, applications rose by an average of just 23 percent.
RentCafé surveys show the main reason for the move to new rentals was the opportunity to get good deals after the pandemic as well as the need for more space for working from home.
High-income renters most likely to move
Renters earning upwards of $100,000 were the most active this rental season – 34 percent more than last year.
Meanwhile, interest in big-city apartments is surging, and rental applications rose in all of the nation’s 30 largest cities.
“New York City saw the most spectacular comeback, leading the trend, with double its rental activity compared to last year, while San Francisco had the second-highest increase in renters moving in,” the study said.
The study showed that earners in the top two income brackets proved to be the most eager to switch apartments, taking advantage of deals on luxury apartments. So those most likely to move were renters who earn between $75,000 and $100,000, as well as renters who earn over $100,000. Those were the top groups, which were 30 percent more likely to move this year compared to last.
Apartments Filling Up Again in Nation’s Largest Cities
Although last year’s reports “lamented about people ‘fleeing’ the nation’s largest cities, this year’s rental stats put those worries to rest,” RentCafé said in the study.
Renting activity in all of the 30 largest U.S. cities was above that seen during the same rental season period last year and was especially hot in the most popular renter hubs on the coasts.
“New York apartments led this astounding rebound, as the number of renters moving in the Big Apple doubled in the first half of 2021 compared to 2020. Across the country, the Bay Area was in a similar situation, with 79 percent more people applying for rentals in San Francisco. Similarly, apartments in Seattle and San Jose also saw a lot of interest from apartment hunters.”
Investors in rental real estate have a lot of options when it comes to the type of properties they buy. From single-family homes to apartment buildings, rental properties vary widely in quality and the number of units in the building. We’ll discuss the differences between various types of rental properties, as well as the features of these properties that affect return on investment (ROI).
Types of Properties
Single-family homes
The most common type of rental property is a single-family home. Single-family homes are great for new investors. Many real estate investors start with single-family rental houses because they live in the house for a few years, then keep the house as a rental when they move into another home. Single-family rentals are easy to finance, and they are very desirable for tenants. Many tenants prefer single-family homes over apartments because they offer more privacy and often have additional features like fenced yards for pets and kids.
From an ROI standpoint, single-family homes have some pros and cons. On the plus side, rent rates are usually higher than they are for a similar-sized unit in a multifamily building. They may have garages or basements that provide additional storage, which is another great selling point when the rental is being advertised to prospective tenants. Re-sale is also typically easy for single-family homes, as the prospective buyer pool consists of other investors as well as buyers who want to live in the home.
One downside to single-family homes is that they don’t benefit from the ability to spread expenses over multiple units, as we’ll discuss a bit later. Many investors refer to this as “economies of scale.” Another disadvantage is that there may be some expenses, such as HOA fees or private road maintenance agreements, that aren’t as common with multi-family properties.
Short-Term Rentals vs. Long-Term Rentals
It’s worth noting that single-family homes can sometimes generate higher ROI as a short-term vacation rental real estate investments. However, this arrangement will certainly result in higher expenses, such as additional cleanings between rentals, utilities being paid by the owner, furnishing costs, higher property management fees, and more advertising costs. The rental rate will almost certainly be higher, but there may also be a higher vacancy rate.
Small Multifamily
For the purposes of this discussion, small multifamily properties consist of two to four units. This is an important distinction, because multifamily properties with four or fewer units are easier to finance conventionally.
Multifamily properties consist of duplexes, triplexes, and quadplexes, as well as single-family homes with an ADU (additional dwelling unit) such as a detached garage apartment or a studio basement apartment. You can find multifamily homes for sale from many real estate websites with MLS listings, and many are localized (like this Asheville multifamily homes page).
One of the big advantages of having an ADU is that the owner often lives on-site, making management of the ADU easy. The ADU may be a long-term rental or short-term vacation rental.
For more traditional duplexes (2 identical units under one roof), triplexes, and quadplexes, economies of scale come into play and create cost savings for landlords. For example, when it comes time to replace a roof, the cost can be spread over multiple units. The same goes for other capital expenditures, such as re-paving a parking lot. Even routine maintenance like mowing the grass and cleaning the gutters is typically less expensive per unit.
Small multifamily properties like this traditional duplex can bring good ROI in real estate investments.
Property management firms sometimes offer a reduced management fee if the rental owner has enough units under management. And the owner’s fire insurance policy can be less per unit when the property has multiple units under one roof.
Keep in mind that there are some potential added expenses for multi-family units, especially if they are under construction or otherwise required to be brought up to code. Newer multi-family building codes may require an interior sprinkler system or fire walls between individual units. It’s always worthwhile to check with your local building department to see what safety and code upgrades might be required.
Large Multifamily
For more experienced real estate investors and corporate real estate investors, larger multifamily properties (five or more units) have a lot of appeal. These properties are typically apartment buildings, but we should include mobile home parks as well.
Experienced “mom-and-pop” real estate investors can buy large multifamily properties, and may even live on the property. For buildings with five or more units, self-management is still feasible, but it also takes a lot of time. It’s certainly worth considering a property manager at this point.
If the property is large enough, there will be an on-site manager. This may be a tenant in an apartment who receives discounted rent proportionate to the number of hours worked for the landlord, or a mobile-home tenant who maintains the grounds at a mobile home park in return for lower lot rent or assistance with a mobile home payment.
Larger apartment buildings (typically 20 units and up) are usually corporately owned. These properties may be owned by real estate investment trusts (REITs), hedge funds, or other entities. Economies of scale are most effective in these types of properties. Usually, the majority of the owners never even see the properties. They are more likely silent equity partners.
About the Author
Scott Russell is the owner of Freestone Properties, an Asheville real estate brokerage. He has been a realtor since 2005, has produced well over $100 million in career volume, and has extensive experience in evaluating the condition and ROI potential of investment properties.
