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Investing In Net Lease Properties Via Delaware Statutory Trusts

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By The Editors
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Kay Properties and 1031 and 1033 exchanges and eminent domain options details

By Steve Haskell
Vice President, Kay Properties and Investments, LLC

A CPA in San Diego contacted Kay Properties & Investments on behalf of his client, Peggy.

Peggy owned an apartment building in East San Diego that she and her husband purchased together 50 years ago. Unfortunately, Peggy’s husband passed away five years ago and the maintenance, tenants, and looming threat of rent control had become overwhelming.

She had an agent list her building and was pleased to receive the full asking price of $1.4 million the very next day. However, her excitement quickly vanished after her CPA informed her the capital gains tax and depreciation recapture will result in over 35% of her property value and prevent her from maintaining her current lifestyle. They concluded that a 1031 exchange into a passive property was critical.

Peggy’s CPA told the Kay Properties team that his first thought was to introduce her to a commercial broker that could help her find a NNN leased property. However after he did more research, Peggy’s CPA decided that a NNN leased property was highly inappropriate for her for the following reasons:

Foreclosure Risk. A NNN leased property with a reputable tenant in a populated location would be four to five times the price Peggy could afford. Peggy would then have to take on debt, which the CPA wanted to avoid at her age. Lender foreclosure would be catastrophic for Peggy at her stage in life, and the CPA believed that she should stay as debt free as possible. Kay Properties & Investments make these properties available to their clients…debt free! So Peggy invested in multiple debt free DSTs which gave her access to credit tenants in highly sought after areas with no risk of lender foreclosure!

Lack of diversification. Peggy relied almost exclusively on the income of her apartments. Exchanging into a single-tenant NNN property is risky. The CPA did not like the idea of Peggy putting all her eggs in one basket, leaving her entire livelihood vulnerable to a single tenant.

The due diligence required to responsibly make a decision was overwhelming. Peggy did not have the experience, time, or resources to conduct her own lease audits, environmental surveys, market analyses, insurance policies and building inspections. This was not the passive investment that the broker advertised.

After further research, the CPA determined that a 1031 exchange into  a diversified portfolio of Delaware Statutory Trust (DST) investments was much more appropriate for Peggy. Due diligence had already been completed, including property visits, lease reviews, market comparable sales analysis, DST offering structure, underwriting analysis, and etc.

This enabled Kay Properties Team to develop a tailored solution that spread her 1031 exchange equity among five DST investments, with Fortune 500 tenants and three multifamily DST investments. There are no guarantees in DSTs or any other real estate. However, the due diligence, diversification, and access to passive DST real estate provided by Kay Properties & Investments has allowed Peggy to enjoy the lifestyle she has looked forward to for the past 50 years, while allowing her CPA to feel comfortable in his recommendation to his client. This is an example of the experience of one of our clients and may not be representative of the experience of other clients. Past performance does not guarantee or indicate the likelihood of future results.

Please visit www.kpi1031.com for more details as well as to register for a list of currently available 1031 Delaware Statutory Trust investments, call us at 1.855.466.5927 or email [email protected].

Delaware Statutory Trust information

There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) properties and real estate securities including illiquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed. For an investor to qualify for any type of investment, there are both financial requirements and suitability requirements that must match specific objectives, goals and risk tolerances.

Diversification does not guarantee returns and does not protect against loss. This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This material contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, WealthForge Securities, LLC and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies, declining market values, potential loss of entire investment principal.

Past performance is not a guarantee of future results: potential cash flow, potential returns, and potential appreciation are not guaranteed in any way and adverse tax consequences can take effect. Real estate is typically an illiquid investment. Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. All photos are representative of the types of properties that Kay Properties has worked with in the past. Investors will not be purchasing an interest in any of the properties depicted unless otherwise noted.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, you should consult your tax and legal professional for details regarding your situation. Securities offered through registered representatives of WealthForge Securities, LLC, Member FINRA/ SIPC. Kay Properties and Investments, LLC and WealthForge Securities, LLC are separate entities.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over one million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than five million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

Five Things To Remember When Deciding To Do A 1031 Exchange

Multifamily NW and Landlords File Suit to Stop Portland’s New FAIR Rules, But Judge Denies Request For Immediate Relief

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By The Editors
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Multifamily NW and Landlords File Suit to Stop Portland’s New FAIR Rules

Multifamily NW and Portland landlords have filed suit in federal court to stop Portland’s new Fair Access In Renting (FAIR) rules from taking effect, but lost the first round as the judge has denied a temporary restraining order, according to a release.

So the new rules will go into effect in March because the judge has denied the request for a temporary injunction to halt the rules saying the landlords and organization waited too long to file because the rules were passed in 2019.

U.S. District Judge Michael Simon said the delay in filing “implies a lack of urgency or a lack of irreparable harm,” according to Oregonlive. Simon said he didn’t believe U.S. District Court was the appropriate venue to sort out the constitutionality of city policies.

“I think at some point we’re all going to be better off getting decisions on state law questions from the state appellate courts,” the judge said.

The suit was filed by landlords Janet Newcomb, Jerry Mason, and Metro Multifamily Housing Association dba Multifamily NW, against the City of Portland.

“We are disappointed that the court declined to grant temporary relief to housing providers. However, we are looking forward to continuing the next steps of this case and getting relief from this unworkable ordinance,” Deborah Imse, executive director of Multifamily NW. “This request was the first step in our lawsuit against the city. Our legal fight will continue over the next six months to a year, with the potential for a more expedited process. We will be sure to share more information on these legal proceedings as they are available,” she said in a statement.

The suit says the landlords and Multifamily NW “are suing the City of Portland because it has passed laws that make management of rental housing so costly, burdensome, and risky that plaintiffs will have to either raise rents – to cover the additional costs and risks – or sell their rentals.

“Plaintiffs are also suing the city because the new laws violate their civil rights of free speech and due process. Additionally, plaintiffs are already regulated by federal and state law, which preempts the city’s conflicting new law. Plaintiffs are concerned that the city’s additional layer of unreasonable,  unconstitutional governmental regulations will drive out landlords, which will result in reducing the supply of rental units and increasing rents in Portland,” the suit says.

Portland Fair Access In Renting ordinances provide a ‘choose-your-own-adventure’ scenario

“Without providing enough direction, the FAIR ordinance treats the serious processes of tenant screening and security deposits as a kind of choose-your-own adventure,” said Deborah Imse, executive director of Multifamily NW, in the release.

“This is unacceptable, as rental housing and finding a home is not a game to Portlanders. Portlanders deserve laws that are well-thought-out, that give enough clarity for renters to understand their rights,  and enough direction for housing providers to be able to follow them,” she said.

The FAIR ordinance consists of two ordinances “drastically changing housing-provider and tenant law in Portland,” according to the release.

“One changes the way housing providers post vacancy notices and how they process and evaluate applications; and one changes the way housing providers handle security deposits. The screening ordinance does not allow landlords who use the ‘low-barrier’ screening process from denying applicants with poor criminal history, credit history or rental history.

“The second ordinance creates new rules so stringent it discourages the use of security deposits, instead leaving tenants and housing providers to resolve disputes through the court,” the release says.

Lawsuit says the Portland Fair Access in Renting ordinances violate Oregon and U.S. constitutions in 4 ways:

  • First, the ordinances violate free-speech protections because they prohibit plaintiffs from speaking to applicants during a 72-hour blackout period. The ordinances also force plaintiffs to follow a certain script when advertising and send city-written notices to applicants and tenants.
  • Second, because the ordinances are overly vague and fail to inform plaintiffs how to comply with all the new requirements, the ordinances violate the Oregon Constitution and the due-process clause of the United States Constitution.
  • Third, the ordinances violate the due process clause because they impose arbitrary regulations that have no substantial relation to public health, safety, or welfare.
  • Fourth, the Ordinances conflict with the Oregon Residential Landlord Tenant Act, ORS Chapter 90, and are thus preempted by state law.

According to the lawsuit, Newcomb is a resident of Nevada and owns and operates 19 rental units in Portland. Newcomb owns and personally manages these units. Mason is an Oregon resident and member of Westland Partners LLC, an Oregon limited liability company that owns and manages 62 rental units in Portland.

Multifamily NW letter to members over Portland fair access in renting ordinances

Multifamily NW members own and manage more than 30,000 rental units within the city of Portland,  and these members are subject to the ordinances.

Portland fair access in renting ordinance explained
Read what Multifamily NW says about the Portland fair access in renting ordinance.

In a letter to members, the association said, “Multifamily NW took a stand against Portland’s failed housing policies. As of February 20, 2020, we have filed a lawsuit to stop and repeal the FAIR ordinance with the United States District Court, for the District of Oregon, Portland Division.

“As many of you know, Portland City Council passed the FAIR ordinance last June after a hostile and broken policy-development process facilitated by the Rental Services Commission. The ordinance is set to take effect on March 1. The chief proponent of the ordinance, Commissioner Chloe Eudaly, would later make the statement, ‘We know it will take time for tenants to understand and for the industry to adjust. We know some fine-tuning will be necessary. But we also know that research and data have laid a solid foundation for the decisions we made.’

“Economic data and industry research were not a part of that solid foundation. Representatives of the rental-housing-provider community, including Multifamily NW, could play only a symbolic role in the development of the FAIR ordinance. Despite being regularly-attending members of the Rental Services Commission and in good standing, our collaboration on this major policy initiative was consistently rejected.

“At the time of adoption, Mayor Ted Wheeler and the Portland City Council had committed to fixing the glaring errors in the ordinance during the administrative rulemaking process before the law was to be implemented. It’s now clear that commitment will not be honored, and Portland housing providers will be forced to comply with a broken law.

“Since June, Multifamily NW’s members and staff have worked around the clock to make sure our housing-provider members are prepared to meet the sweeping administrative demands created by the FAIR ordinance. The Multifamily NW’s Forms Committee has volunteered dozens of hours of their personal time to collaborate with multifamily staff and legal counsel to craft the additional forms needed to comply with the FAIR ordinance.

“With the Rental Services Commission providing only a slow drip of inconsistent and outright perplexing information pertaining to the legal compliance requirements of the ordinance, it became clear that the administrative rulemaking process was not going to fix this ordinance. Further action is required to protect Portland’s housing providers and renters from the clearly disastrous impacts of the FAIR ordinance.

“We want to thank all our members who have worked so diligently throughout this process. Thank you for hours spent trying to guide the Rental Services Commission away from bad housing policy, speaking up at Portland City Council’s public hearings in opposition to the FAIR ordinance in front of a hostile crowd of activists, and helping guide our legal actions against the city.

“We look forward to a positive outcome for our members in this fight and for the future of rental housing in Portland. Stay tuned for more updates as they become available,” the association said in the letter.

Resources:

Get and read the full lawsuit here.

Portland’s new rental screening, security deposit rules are unconstitutional, landlords claim

Multifamily NW Files Suit to Hold City of Portland Accountable for Unlawful, Vague Housing Policy

Portland’s New F.A.I.R. Housing Ordinance

Portland City Council Approves Controversial Tenant Screening Ordinance 3-1

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January Apartment Jobs Surpasses 2019 Monthly Average

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By The Editors
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January Apartment Jobs Surpasses 2019 Monthly Average

The apartment jobs sector began 2020 by delivering a solid performance, according to the latest National Apartment Association jobs report from the National Apartment Association Education Institute (NAAEI).

Apartment jobs postings comprised more than 41 percent of the real estate sector in January, surpassing the 2019 monthly average of 39 percent.

Top cities for job openings included Kansas City, Austin, Raleigh, Nashville, and Indianapolis.

This month’s edition spotlights the maintenance technician.

Demand for these positions was more than three times the U.S. average in Denver.

The top specialized skills employers are seeking for maintenance technicians include plumbing, repair, HVAC, carpentry, and painting.

2-25-2020 NAAEI_LaborMarketReport_Jan20

Also, experience with Yardi Software and writing also have seen a significant increase in the percentage of jobs requiring these skills since 2014.

The apartment sector often competes with the hospitality and retail sectors for talent with similar experience and skills. Customer service, communication, and organizational skills are among the most desired skills across all three sectors. Since 2014, leasing-consultant and maintenance-supervisor positions had the greatest increase in demand, up by 1.9 percentage points.

National apartment association jobs report background

“Our education institute is a credentialing body for the apartment industry. They hear often that one of the biggest problems keeping our industry leaders up at night is the difficulty in finding talent, attracting talent and retaining talent,” NAAEI’s Paula Munger said.  “Labor-market issues are happening in a lot of industries, certainly with the tight labor market we have.”

Assistant Property Manager Jobs In Demand

So NAA partnered with Burning Glass Technologies. “They have a labor-job posting database that is proprietary,” she said, and they can “layer on data from the Bureau of Labor Statistics (BLS). We looked at that and thought we could do something that is really going to help the industry and help benchmark job titles and trends as we go forward.”

Apartment Jobs Almost 40 Percent Of Real Estate Jobs, NAA Says

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5 Simple Landscaping Maintenance Tips for Property Managers

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By The Editors
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5 Simple Landscaping Maintenance Tips for Property Managers
Landscaping maintenance for your rentals can be important in attracting tenants, so the maintenance checklist from Keepe this week looks at 5 simple landscaping techniques to help.

Property managers know that landscaping maintenance is often regarded as one of their required responsibilities,  and investing in landscaping is key in both attracting tenants and increasing rental-property value.

As you know, landscaping is far beyond planting shrubs or colorful flowers. It involves an understanding of what you can do to attract your desired type of tenants, to manage your landscaping through the seasons, and to streamline maintenance activities.

If you’re a property manager saddled with landscaping responsibilities, then the following maintenance tips may help you get the best out of your rental-property landscape.

What Are the Top 5 Landscaping Tips for Property Managers in 2020? 

  1. Opt-in for native plants

No matter where your property is located, there are specific plants suitable to your local weather and soil condition. They are known as native plants. This type of plant requires less maintenance and has better resistance to diseases and pests than non-native varieties. For example, if you live in a grassy area, then grassy natives like coneflower and butterfly weed will work perfectly in your landscape.

Pro tip: Each state in the United States has specific plants native to its environment. You should find out your state’s plant hardiness zone.

  1. Choose hardscape over grass 

If you are a property manager seeking to increase your property’s curb appeal while reducing maintenance time, then hardscaping may be an option for you. The use of hardscape features – such as pavers, walkways, and patios – not only saves you time but also gives your tenants an extra living space.

By choosing a hardscape over grass, you can give your rental property a nice-looking yard while reducing the time spent on lawn mowing and irrigation activities. Above all, studies have shown that properties with an outdoor living space tend to attract potential renters much faster.

Pro tip: Check in with your homeowners association before embarking on a hardscape project.

  1. Invest in landscape fabric

It is common knowledge among property managers that regular landscape maintenance can be a tedious, money- and time-consuming chore. An excellent way to save yourself the stress of regular weed removal is by investing in a landscape fabric (weed-control fabric). Landscape fabric helps to eliminate weeds, prevent erosion and split soil profiles. It is a good solution for reducing landscape maintenance.

Pro tip: Weed-control fabric will keep the weeds at bay, but not forever. It is advisable that you use it when planting annual plants. To get the best out of the option, do combine the use of weed-control fabric and regular mulching.

  1. Mulch regularly

Mulching is the process of adding material such as shredded leaves and bark, wood chips, and sawdust to the surface of your landscape. As a property manager, mulching is a vital landscape-maintenance activity that can help change the appearance of your property’s curb. This is because regular mulching helps to suppress weeds, retain moisture, and regulate soil temperature.

Pro-tip: The thickness for mulching can be anywhere from 1 inch to 5 inches depending on the size of the plant.

Install an automatic irrigation system 

The secret to any beautiful landscape is constant and proper watering. An automatic irrigation system helps you to save water, time, and money while achieving a healthy and lovely yard. One of the advantages of installing an automated irrigation system for your landscape-maintenance activity is that it makes watering your landscape easier.

Pro-tip: When choosing an irrigation system for your landscape, you should opt for a system that suits your landscape type/size and watering schedule.

Landscaping maintenance summary

Keeping your property landscape well-maintained is one of the best decisions you can make as a property manager. By making landscape maintenance an utmost priority, you, your tenants, and potential tenants will surely reap the benefits in the long run.

5 Steps To Detect Mold Problems in Your Properties

5 Steps To Get Your Property’s HVAC System Ready For Spring

The Best Appliances In Rental Property

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

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HUD Settles With California Landlords Over 2-Person-Per-Bedroom Policy

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By The Editors
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HUD Settles with California Landlords Over 2-Person-Per-Bedroom Policy

Some Upland, California, owners and property managers will have to pay $10,000, abolish any 2-person-per-bedroom policy, remove language regarding the two-person-per-bedroom policy from advertising and marketing materials, and have property managers and staff attend fair housing training, according to a HUD release.

HUD announced the settlement between the Inland Fair Housing and Mediation Board and a group of Upland, CA, property owners and managers “resolving allegations that they discriminated against families with children by refusing to rent to them and by imposing different occupancy terms and conditions to families with children,” according to the release.

The complaint alleges the owner and property managers violated the Fair Housing Act by:

  • Refusing to rent to families with children;
  • Citing different terms and conditions to families with children;
  • Implementing and enforcing an unreasonably restrictive occupancy policy.

The Fair Housing Act makes it unlawful to deny or limit housing because a family has children under the age of 18, and to make statements or establish rules and policies that discriminate against families with children. Housing may exclude children only if it meets the Fair Housing Act’s exemption for housing for older persons.

“Families looking for safe, decent housing shouldn’t be penalized because they have children,”  said Anna María Farías, HUD Assistant Secretary for Fair Housing and Equal Opportunity, in the release. The agreement “reaffirms HUD’s commitment to ensuring that housing providers meet their obligation to treat all applicants the same.”

The case came to HUD’s attention when Inland Fair Housing and Mediation Board (IFHMB), a HUD Fair Housing Initiatives Program agency, filed a complaint based on results from their fair-housing tests.

IFHMB alleged the tests showed the property owners and two property managers refused to rent to families with children and/or offered them different lease terms and conditions. The owners and managers also allegedly implemented an unreasonably restrictive two-person-per-bedroom occupancy policy at two rental properties.

The owners and managers deny they discriminated against families with children but agreed to resolve the matter through the Conciliation Agreement.

HUD Settles with California Landlords Over 2-Person-Per-Bedroom Policy
Photo by Six_Characters via istockphoto.com

HUD Charges Colorado Landlords with Discriminating Against Families with Children

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A Strong Start to 2020 for Multifamily Occupancy, Rent

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By The Editors
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A Strong Start to 2020 for Multifamily Occupancy, Rent including Sacremento

Sixteen of the top 30 U.S. multifamily markets bested the national average for year-over-year growth in January, according to the latest report from Yardi Matrix.

The report says occupancy remained near 95 percent.

While average rents fell by one dollar, “that’s a seasonal occurrence and doesn’t detract from the market’s overall strength,” the report says. “The decline in rents can be attributed to seasonality and could continue for the next few months, until we move into spring.”

Yardi Matrix expects strong growth to continue in the West and Southwest. Over the past year, rent growth in the top markets was 7.4 percent in Phoenix, 5.4 percent in Las Vegas, and 5.1 percent in Sacramento.

A Strong Start to 2020 for Multifamily Occupancy, Rent
Chart courtesy of Yardi Matrix

Watch regulatory risk in some markets

“The slowing economy has had little effect on multifamily, but one potential headwind to keep in mind for 2020 is regulatory risk, as evidenced by statewide rent control (California, New York and Oregon), increased local regulation on security deposits (Cincinnati) and resident acceptance criteria (Seattle).

“However, this risk does not present an insurmountable barrier nationally,” the report says.

Job growth remains strong

Job growth is still strong and is carrying the economy forward, as it has throughout the current expansion.

Technology has caught the headlines, but strong gains in education and healthcare, professional and business services, and leisure and hospitality have also contributed significantly to the labor force, the report says.

  • “The economy shows mixed signals of both slowdown and growth, as the job market propels forward into a new decade.
  • “Political uncertainty as the election nears will likely lead to a busy first and second quarter for transaction activity, followed by a slower summer and fall, as buyers grow cautious of a changing administration.
  • “Multifamily fundamentals remain strong and steady, despite a potential slowdown in transactions. Development is slowing modestly, but rent growth and occupancy will benefit,” the report says.
A Strong Start to 2020 for Multifamily Occupancy, Rent
Chart courtesy of Yardi Matrix

Summary

“The nationwide housing shortage continues to pro­vide wind in the sails of steadily growing rents for both high-end and workforce housing,” the report says.

“New supply remains concentrated mainly in primary and top-tier secondary markets with heavy influence from the tech sector. Expect 2020 deliveries to decline slightly from previous years, falling under 300,000 units.

“As the recovery continues and the presiden­tial race moves forward, the multifamily market remains well-balanced and poised to continue its steady march forward,” the report says.

Get the full report here.

Yardi Matrix Report Forecasts A Solid Multifamily Housing Market

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6 Tips for Setting Rents with Confidence

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By The Editors
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6 Tips for Setting Rents with Confidence

6 tips for setting rents so that you can be sure you are not over-pricing or under-pricing your rental housing in your market.

By Rentometer

Whether you own or manage one rental property or hundreds of rentals across the country, you need to be able to set fair market rents confidently.

If your rent is set too high, the property can sit on the market and you will miss out on monthly rental income.  And if the rent is set lower than the competition, simply put, you will leave money on the table.

As we know, rents vary greatly from market to market, but can even differ from one street to the next within a single neighborhood.  Obviously, numerous variables impact the rent you can charge for your rental unit, including location, type of building (duplex, apartment building, etc.), size/square feet, age of unit, number of beds/baths, and amenities (i.e. parking, AC, pool, roof deck, and so on.)

Don’t be fooled that any one rent comp, property manager, or local real estate agent can tell you the perfect fair market rent for your property.  We recommend that you tap into a handful of resources to help you set rents confidently.

1. Find some rent comps to give you a starting point

Check local apartment listings using the local newspaper, online apartment guides, or websites like Craigslist and Rentometer to get a feel for the “going rents.”  Rentometer can give you historical rent trends for the area and a good starting-point rent.  You can further refine the rent from there by using some of the suggestions listed below.

2. Stay up to date on the economic and business activity in the local market

Is it thriving? Are stores closing down?  Economic activity is one of the key drivers of rental housing demand and it can affect the rental market in unique ways. For example the current economy in Boston, Mass., is hot! Rental housing is in high demand, leading many renters to forgo amenities and perks in favor of securing a lease. This means that landlords can afford to make fewer concessions when negotiating.

3. Check occupancy rates for your area

Are the occupancy rates trending upward? Good! The stronger the desirability of a rental, or neighborhood, typically the higher the occupancy rate – and higher market rent. It’s a question of supply and demand.  Factors that can affect occupancy rates include local millennial population, employment trends, housing supply, and new construction growth, rent prices, and the location and  condition of the rental property.

4. Chat with a local real-estate professional 

Talk with an industry professional about their take on the market or a specific neighborhood. Local experts (property managers, brokers, agents, appraisers, and lenders) are especially good at identifying the drivers of housing supply and demand unique to your market – jobs, local ordinances, building permits, zoning for a new apartment building, etc.

5. Use “rent per square foot”

Whenever possible use square footage as a benchmark for searching rent comps. This allows you to encapsulate into a single number all the subjective variables of rent, and provides you with a basis for comparison across different units, locations, amenities, and so forth.

6. Check your local apartment or rental-housing association 

These are great resources for research. They may provide information about local rent levels – past, present, and future. This is especially important for real-estate investors and developers.

Making sure your property is renting at (or close to) fair market rent is as much of an art as it is a science.  However, with the 6 tips for setting rents along with good current and historical rental data and a thorough understanding of the local market and market conditions, you can set rents with confidence!

Related: Key Figures for Evaluating an Investment Property

7 Things To Check Before You Raise Rent

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National Average Apartment Rent in January was $1,463

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By The Editors
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national average apartment rent

The national average apartment rent in January was $1,463, up three percent year-over-year and the slowest pace in 18 months, according to a report from Rent Café.

The report says rents “are likely to maintain an upward streak throughout 2020, as the number of renters continues to rise in the (United States).”

The demand for apartments is high, including among those renting by choice. Statistics show that 157 percent more Americans who earn over $150,000 per year began renting this past decade, showing a preference for a more flexible and comfort-driven lifestyle, according to the report.

the evolution of national average apartment rent

Experts foresee lifestyle will drive apartment trends in 2020

Real estate and economy experts agree that the change in Americans’ attitudes towards housing is an important factor in the evolution of the apartment industry. People of all ages are increasingly being driven by mobility and lifestyle enhancement, displaying a growing preference for amenity-rich buildings in walking distance of urban centers. Experts predict this change in housing preferences will stimulate developers and builders to deliver more apartments.

However, they also note a lack of affordable housing brought on by increasing land and labor costs in the construction industry, remarking that one of this year’s most significant challenges will be achieving a balance between delivering both quality and affordability.

Not all experts agree that choice is driving rentals

“I’m skeptical of the view that the increase in rentals is driven by ‘choice.’  Respondents to Fannie Mae’s National Housing Survey consistently report that they would prefer to own rather than rent,” said Benjamin Keys, Ph.D., Rowan Family Foundation Associate Professor and Associate Professor of Real Estate at The Wharton School, The University of Pennsylvania, in the report.

“The rise in rentals is more likely driven by constraints rather than preferences:

  • “First, house prices are extremely high, especially in the places with the most desirable labor markets.
  • “Next, mortgage credit remains extremely tight, as minimum credit scores and documentation requirements remain far more stringent than they were before the financial crisis.
  • “Finally, millennials have suffered the double-whammy of entering their peak employment years during a weak labor market and bearing the burden of substantial student loans.

“All these factors are more likely to be driving increased rentals rather than changes in preferences,” Keys said.

“Going forward, I expect house prices to remain high as demand outstrips supply. Simply put, there is not enough new construction to meet demand in the cities where the jobs are. Construction shortages are a function of higher costs for materials, higher labor costs, and more onerous local political barriers to building,” Keys said in the report

 80 percent of largest renter hubs have rents below $2,000

The report on national average apartment rent says 16 out of the 20 largest apartment hubs kept rental rates below the $2,000 mark in January. Two of these cities have rates below $1,000: Indianapolis and Columbus. Indianapolis apartments are the cheapest out of all urban renter hotspots, with an $887 average rate.

When it comes to rent hikes, Phoenix takes the lead, with an 8.3 percent increase since last year, closely followed by Las Vegas, where rates grew by a lower but still significant 5.9 percent. Population migration explains the hikes in both cities — Phoenix and Las Vegas are among the most popular destinations for Californians looking for more affordable lifestyles, so rents are growing as the cities have to accommodate an increasing number of residents.

Around the country, apartments for rent in Atlanta went for $1,477 in January, apartments in Washington, D.C. for $2,233 per month, and Tampa apartments rented for an average of $1,33.

The Rental Housing Decade: 12 Trends From 2010 to 2020

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Winter Multifamily Outlook Shows No Letup in Demand

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By The Editors
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Winter Multifamily Outlook Shows No Letup in Demand

Rent growth in the coming year will average 2.7 percent nationally, according to Yardi Matrix’s multifamily outlook prediction in its Winter Seasonal Outlook for 2020.

“We expect the U.S. multifamily market’s strong performance to continue. Economic growth remains steady, supply absorption is robust in most markets, and millennials and baby boomers are fueling demand,” the report says.

The report says there is still “room to run” in the current cycle in multifamily.

Some highlights of the Yardi Matrix winter multifamily outlook report:

  • “The multifamily market has performed consistently well for several years, and little is expected to change in 2020. The healthy job market and demographics have produced robust demand. We expect economic growth to remain moderate.
  • Rent gains should remain healthy in most metros, continuing to be led by rapidly growing metros in the Southwest and Southeast. Affordability is a growing problem, however, and the cost of rents is starting to put a strain on increases in many of the higher-cost metros.
  • More than 1.5 million units have been delivered over the last five years, and we expect new supply of roughly 300,000 again in 2020. Deliveries have slowed in part because of the labor shortage that has lengthened high start-to-finish construction times.

A supply and demand issue

“Despite the current expansion running longer than a decade, homebuilders have not kept up with the demand for housing, especially on the single-family side, and as a result the nation faces a significant housing shortage. With housing production yet to fully recover from the last recession, many metros are facing an undersupply.

“The tight labor market and 3 percent wage growth have produced ongoing robust household formation.

“Job openings have outnumbered unemployed job seekers for more than a year and a half, and while the unemployed and the open positions remain both geographically and skill-set divergent, the trend of continued hiring remains.

“Even if employment were to cool and the economy to face a mild recession, we expect the housing market, and multifamily specifically, to ride through the downturn with relatively little impact,” Yardi Matrix says in the report.

Phoenix and Seattle will continue to perform well

“After leading the nation in rent gains for the past 18 months, Phoenix (7.7 percent) and Las Vegas (5.4 percent) are poised to continue their strong runs, bolstered by population growth and economic development.

“Pushing in from nearby California, residents can get more value for their dollar in markets that have consistently diversified their employment pool. Growth in Las Vegas is poised to maintain similar levels in 2020 (5.4 percent) due to continued economic development. Meanwhile, we expect rent growth in Phoenix to temper to 3.7 percent but remain well above the U.S. average.

“Technology-driven markets pulling in coastal talent will continue to perform well above average in 2020, leading rent growth. Seattle (5.8 percent) and Salt Lake City (4.2 percent) still benefit from significant demand, despite having some of the more robust multifamily development pipelines,” Yardi Matrix says in the report.

Winter Multifamily Outlook Shows No Letup in Demand
Winter Multifamily Outlook Shows No Letup in Demand

Multifamily outlook summary

“Overall, the economy continues to walk a fine line of slow economic expansion. From a real-estate perspective, especially for multifamily, the fundamentals of supply, demand and cost of capital remain very well-balanced and indicate continued steady growth for the foreseeable future, barring a major shock to the capital markets and macro economy on par with the global financial crisis,” the report says.

Yardi Matrix Report Forecasts A Solid Multifamily Housing Market

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Portland And Oregon’s Housing Affordability Challenges

By
By The Editors
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Portland And Oregon's Housing Affordability Challenges

The housing-affordability crisis is unfolding nationwide, hurting families and communities, according to Growing Homes Together, a project of the National Multifamily Housing Council (NMHC).

“While federal programs exist to help address the country’s housing needs, the crisis is largely being combatted at the state and local level — as communities face their own unique challenges,” the group says.

Growing Homes Together is a resource center designed to spark discussions at the state and local levels about policy solutions to improve America’s housing crisis.

Here is a chart outlining issues in Portland and Oregon:

2-18-20 oregon growing homes together OR-One-Pager

 

Download the PDF chart here

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