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Apartments Renting For Same Price As A Year Ago

By
John Triplett
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National rent growth was flat year-over-year meaning apartments are renting for the same price as they did a year ago on average

National rent growth was flat year-over-year meaning apartments are renting for the same price as they did a year ago on average, Apartment List says in its July rent report.

“This marks a major shift from the recent past, when annual rent growth topped out at nearly 18 percent nationally and over 40 percent in a handful of popular cities,” Apartment List economists write in the report.

Rent growth in 2023 has come in at a much slower pace than previous years thanks to a combination of sluggish demand and increasing supply.

While the average rents are flat year-over-year, rents did increase in June in 73 of the nation’s 100 largest cities, but thanks to sluggish rent growth this year, prices are down year-over-year in 57 of these 100 cities.

Vacancy rate remains elevated

The supply side of the rental market also hit a major milestone this month: “Our vacancy index now stands at 7.2 percent, matching the peak vacancy rate that was measured at the height of the COVID-19 pandemic.”

With a record number of multi-family apartment units currently under construction, this vacancy rate will remain elevated and for the first time since the early stages of the pandemic and put pressure on property owners to find tenants, rather than the other way around.

National rent growth was flat year-over-year meaning apartments are renting for the same price as they did a year ago on average

Rental market slowdown in finally reflected in inflation numbers

The rent component of the Consumer Price Index (CPI) has finally peaked as is beginning to recede.

“Our index shows that the rental market has been cooling rapidly for a year, but the CPI housing component has just recently hit its peak. Despite the CPI’s measure of housing inflation remaining elevated, topline inflation has already meaningfully cooled.

“As the CPI housing component now gradually begins to reflect the cooldown that we’ve long been reporting, it will help to further curb topline inflation in the months ahead,” Apartment List economists write.

National rent growth was flat year-over-year meaning apartments are renting for the same price as they did a year ago on average

Rent growth report conclusion

June’s 0.4 percent national rent increase represents a further deceleration of the rental market, indicating that the market remains sluggish throughout what should be the busy moving season.

“Year-over-year growth fell once again, this time reaching zero for the first time since early in the pandemic. Even if the end of this summer brings a resurgence in demand, a strong construction pipeline should temper rent growth for the remainder of the year,” Apartment List economists write.

Read the full report here.

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Getting The Most Out Of Rental Property Tours

By
By The Editors
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Renters want to see a rental property before making decisions and 30 percent want to see an online tour before contacting property management

Renters want to see a rental property before making any decisions and 30 percent want to see an online tour before contacting property management.

By Kevin Juhasz

Prospective residents will examine many aspects of a property as they research their next home, and what’s important will vary based on their lifestyle.

One thing is certain: Renters want to tour a property before making any decisions. Nearly 90 percent of all renters want to see a property before signing a lease, according to research by Rent.com/research, and 31 percent want the option of an online tour before they’ll even contact the property.

With the current economic landscape and new units coming onto the market, the balance of power is shifting toward renters. That means communities will need to compete for renters more than they have in the past few years.

Rental property tours are one of the most crucial tools required to outperform the competition and how they are handled could make or break whether a prospect decides to sign a lease.

Fast and Hassle-Free Rental Property Tour Scheduling is a Must

Renters might use a variety of sources to look at communities and will likely explore numerous locations.

They possess little brand loyalty; most search at least three rental websites, according to a Rent.com/research survey, and only 15 percent use a single app. After the initial search, many prospects will choose to lease at the first property they visited. This makes easy scheduling first and foremost among the necessary features of your tour framework.

While your leasing team will still receive calls about scheduling tours, a sizable segment of your prospects will opt to schedule a tour online.

This is particularly true among younger renters, who prefer renter journeys that complement their digital-centric lifestyles. It’s possible to use an internet listing service (ILS), the preferred method of apartment searching across all age groups, that incorporates tour scheduling for prospects and calendar management for onsite teams. This feature should also be easy to locate and use on a property’s website.

Your schedule should have plenty of options for scheduling tours as well. Younger renters lean heavily toward weekend opportunities, and the preference for weekday tours increases as the age of prospects increases, according to the study.

Morning and afternoon tours are the most requested, while lunchtime and evening options are generally less favorable.

Use Feature-Rich Online Tours to Peak Interest

Photos and descriptions are helpful, but they can’t compete with a 3D tour to give prospects a feel for their future home and the community.

Nearly one-third of prospects will take an online tour before they even contact a property, so offering a comprehensive overview of the community and a desirable resident experience is a perfect way to bring them to your property.

Tours must go beyond the unit in which prospects are interested, and most will want a complete look at the property, including all amenities, pet-centric offerings, green spaces, parking and more. Almost every portion of the property should be covered.

Potential renters will likely use Google Street View for a look at the exterior building, but they won’t stop there. Information gathering has reached new heights — literally. Google’s Aerial View provides visitors with an understanding of how a community is situated within a neighborhood and its proximity to grocery, retail, restaurants, entertainment establishments, parks, transit and any other items that might pertain to their lifestyles.

Other Important Rental Property Tour Factors

In-person tours are regaining appeal to many prospects, but a significant segment still prefers self-guided tours. This type of tour requires more upfront planning and a property needs a way to provide access to a unit.

Quality tours are an amazing way to augment future retention efforts, build trust and enhance online reputation. Providing as much insight as possible in virtual tours enables prospects to formulate the necessary questions to ask during an in-person tour and confirm that the community is right for them. Knowing they’ve made the best choice will reflect well in reviews and help to keep residents beyond their initial lease. It also lets future renters know that you’re open to sharing all possible information and that level of openness will build trust that could mean the difference in a lease-signing.

Offering a property that will appeal to renters is important, but nobody will know what your community has to offer unless a solid rental property tour structure is in place.

With the competition for prospects increasing and the number of people who rely on ILSs and digital means to study a property and schedule, tours are an area that nobody in multifamily can overlook or approach lightly.

About the author:

Kevin Juhasz is a content manager for LinnellTaylor Marketing and a writer, editor, and storyteller.

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Top Considerations for Multifamily Training and Compliance

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By The Editors
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Multifamily training and compliance are top considerations as many new recruits venture from industries outside of property management

Multifamily training and compliance are top considerations as many new recruits venture from industries outside of property management and require more specialized and focused onboarding and training.

By Greg Lozinak

Multifamily is facing a hiring challenge significantly greater than in past decades.

The unemployment rate has hovered around the 3.5 percent since February 2022, making it more difficult for owner/operators to attract top talent to their communities. Companies of all sizes and in every market are continuously recruiting and onboarding new associates, hoping not only to attract them but also retain them.

Many new recruits venture from industries outside of property management and require more specialized and focused onboarding and training. To execute their programs efficiently, operators are clamoring to find a blend of technology and standard training to prepare their team members and retain them. To be successful, organizations must deliver the new onboarding processes and tech integrations seamlessly and add clarity to job roles and functions.

The real estate industry has always been people-centric.

Hiring and retaining talent is integral in growing tomorrow’s leaders and innovators in the space. Well-founded and purposeful training, in combination with today’s proptech and digital landscape, can be the ultimate catalyst for pushing our industry forward. These tools can help teams and management continue to engage and elevate the resident experience.

Create Solid Onboarding Right from Start

Starting off on the right foot is essential for a successful training program.

If your new team members have poor onboarding, this could create deficits in performance and future learning. Onboarding helps to establish your company’s goals, values and expectations, as well as provide insight into the distinctiveness of your organization. Entering a new position or joining a new company can be stressful and onboarding provides an opportunity to connect with new team members, make their transitions easier and reduce turnover risk.

Tailor Training for Your Organization’s Needs

Your company is unique, as are your teams, so a “one size fits all” approach to your training won’t work.

Tailoring your training better facilitates training materials and is more likely to keep team members engaged. A variety of methods can be used when designing training, including hands-on, virtual, individual and team-based. What’s important is crafting a program for your teams that provides a more effective outcome.

Communicating with each of them will provide insight into their preferences, and it’s important to solicit feedback after training to understand if it’s functioning to design.

View Training as a Strategic Company Investment

Training your teams well will cost money, but it doesn’t compare to how much you’ll spend recruiting and training a revolving door of team members.

The average cost to replace an employee is $4,700, according to data collected by the Society for Human Resource Management. This figure, however, does not include all the costs your HR department and leaders bear in finding replacements. This is time that could be spent training current teams or working toward the company’s goals. These real costs can soar into the tens of thousands.

Team members with high levels of engagement are five times more likely to be working at the same company in a year, according to data from the Grace Hill Kingsley Index, which can result in extensive cost savings. View your training program as an investment in your financial health, as well as your personnel.

Focus on Making Content Digestible and Retainable

Your teams have busy schedules including interacting with residents, strengthening their communities and growing net operating income.

The days of gathering your teams into the conference room for an afternoon of training are long gone.

Training should fit within the demands of your team members’ day. If you want your teams to be well-educated, the optimal approach is microlearning, which breaks training into small, highly-focused pieces of content.

Each team member will have an opportunity to apply their newfound knowledge in a real-world setting while it’s still fresh in their minds. They’ll also digest the information in a more beneficial way, and they won’t be stressed about how their training schedule will fit in with the rest of their work schedule.

Make it Easy to Access

Even if you’ve built the perfect training programs for your leasing and maintenance teams, it’s going to go to waste if they can’t use it.

Teams will be less engaged with training if they struggle to find training material, so it’s important to keep your files in a centralized location that’s easily accessible. Companies also shouldn’t restrict the devices that can be utilized during training. A digital platform makes training easy to complete at any time and on any device.

Your team members are seeking a prosperous career with opportunities for growth and advancement when they join your company. If your training doesn’t provide that, they most assuredly will move on.

Communication, feedback, support and mentoring are the key factors to grow your company and avoid the unwanted costs associated with the revolving door. Creating a solid training program that meets their desire to learn, as well as fits with their work lives, will encourage your team members to stay, providing you with a better return on the investment you made in them.

About the author:

Multifamily training and compliance are top considerations as many new recruits venture from industries outside of property management

Greg Lozinak is the SVP of Account Management at Grace Hill, joining the team in 2023. Having spent most of his career as a senior operations executive, Greg has a strong track record in commercial and multifamily real estate investment management, delivering above-benchmark investment returns.

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June Shows Unusual Softening Of Rent Prices

By
By The Editors
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June is usually a busy time for rental moves, but this June is showing a surprise as June demand typically leads to a rise in rent prices.

June is usually a busy time for rental moves, but this June is showing a bit of a surprise as June demand typically leads to a rise in rent prices.

Usually prices rise in tandem with this increased demand.  But not this June. Zumper reports, “Prices are softening across much of the country—an unexpected development given the seasonal trends we outlined in last month’s report.”

“This deceleration is, generally, good news for renters, but it does come with caveats,” Zumper CEO Anthemos Georgiades said in a release.

“Many cities are still stabilizing after long periods of sharp increases during the pandemic’s Great Migration, and though rents are softening they’re still at record highs in many markets.”

Notable trends

  1. At $1,504, Zumper’s National Index for one-bedrooms is flat over last month. The two-bedroom median is $1,891, an increase of just 0.3 percent. At 5.8 percent, the year-over-year increase in national one-bedroom rent is the smallest gain in nearly two years.
  2. Yet, renters in cities like New York and Jersey City are facing historic highs that show no sign of slowing down.
  3. San Diego’s median one-bedroom rent of $2,440 puts it slightly ahead of Los Angeles; prices in those two cities have been in close competition since early 2021.

“Of our top 100 cities, 46 are down over last month, 12 are flat and 42 are up month-over-month,” Zumper says in the release.

Here is some of what is going on:

  • Record numbers of new rentals are coming online in many markets.
  • In May, construction starts of multifamily units reachedthe highest rate since 1986.
  • However, high interest rates and a risk-averse investment climate may soften that building boom.
  • Billing at architecture firms specializing in multifamily projects is at its lowest level in two years.

Read the full report from Zumper here.

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How to Attract and Retain Team Members Within the Multifamily Industry

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By The Editors
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How to attract and retain team members in the multifamily industry as the demand for skilled workers grows.

How to attract and retain team members in the multifamily industry as the demand for skilled workers grows.

By Lauren Bland

The multifamily industry is a dynamic yet competitive field and attracting and retaining top talent is crucial for success. Between increasing competition and a growing demand for skilled workers, it is more important than ever to create a workplace culture that attracts and retains team members.

Here are proven strategies to secure top talent in the multifamily space.

Tailor recruitment strategies to meet the needs of your communities

When looking to attract new team members, it is essential to consider your communities’ needs. Understanding what each community requires (i.e. additional Service personnel) allows you to align your recruitment efforts with those requisites. This provides a candidate with clear opportunities for personal and professional growth.

Targeting top talent

Consider where candidates are likely to search for job opportunities, such as LinkedIn and Indeed. Utilizing trusted third-party resources can assist in identifying and attracting qualified professionals for positions such as Leasing Consultants and other admin-related roles. These individuals possess specialized expertise necessary for elevated, high-touch multifamily operations.

However, it is fair to say that it can be more challenging to find skilled candidates for specialized roles in the multifamily sector. Building partnerships with trade schools and participating in career fairs enables proactive recruitment of individuals with the specific skills and knowledge needed for success.

Expand your candidate pool

Did you know that your talent competitors may not always be your business competitors? Broaden the scope of potential candidates by tapping into talent from various industries or sectors. By seeking individuals who possess transferable skills, a strong work ethic and growth mindset, they are likely to bring fresh perspectives and innovative ideas to the multifamily space.

Your team members are your biggest advocate

Existing team members are powerful advocates for your organization. Encourage team members to refer potential candidates, leveraging word-of-mouth recommendations. Even if a referral is not suitable immediately, keep them in mind for future openings. It shows appreciation for team member’s suggestion but also allows for your organization to have a pool of potential candidates should a need arise.

Demonstrate commitment to their success

Actively supporting your team members’ journey towards success is essential for attracting and retaining top talent in any industry. Here are some ways to create a welcoming onboarding and career development program that actively supports your team members’ growth.

  • Provide a special day one orientation to create a warm and inclusive environment, introducing them to the company’s culture, values, and goals.
  • Implement a 14-day check-in to remind them of available support channels.
  • Invest in ongoing opportunities for growth, such as role shadowing, mentorship programs, and continuing education courses.

By intentionally implementing these suggested strategies, it empowers team members to expand their professional and personal development, leading to increased engagement and retention.

5-star employee experience

Creating an exceptional experience for your team members is essential to attracting and retaining the top-tier talent in the industry. It involves considering every interaction and touchpoint throughout their time with the organization, starting with their interview process. Paying attention to every stage of the employee experience ensures that team members feel valued, supported and motivated – leading to higher job satisfaction and long-term loyalty.

When you provide a job that feels like home, team members find themselves eager to support your organization as well as its mission, vision and goals.

ABOUT THE AUTHOR:

How to attract and retain team members in the multifamily industry as the demand for skilled workers grows.
Lauren Bland

Lauren Bland, Senior Manager of Talent Acquisition at Mark-Taylor Residential, has seasoned expertise in talent acquisition and human resources management. Her depth of knowledge includes optimizing recruitment processes, building strong relationships and implementing data-driven approaches to talent acquisition, unique to the recruiting organization.

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The Impact of Student Debt on Qualifying Tenants

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By The Editors
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Housing providers should consider three key factors when qualifying tenants when there is evidence of delinquent student loans

As a housing provider, consider three key factors below when it comes to qualifying tenants on a rental application where there is evidence of delinquent student loans.

By David Pickron

As an investor and housing provider, one of the things I fear most is a long-term vacancy.  I’m about to face the worst vacancy of my life… all three of my children will finally be out of the home, with two of them heading out over the next few weeks in pursuit of educational advancement.

In today’s world, that advancement is usually accompanied by something else we are becoming all too familiar with in the United States, student debt.  My children will leave school in three years with around $50,000 in student debt, which has become easier than ever to access.  Never before have I seen such willing lenders who are anxious to provide funding to someone who statistically is less than likely to make the lender whole.  As an industry, this overfunding of student loans, and the high volume of defaults, will begin to affect how you and I manage into the future.

Student Debt Will No Longer Be Paused

Starting at the end of June, student debt will no longer be paused as a side effect of Covid, and payments will again be called due.  Over one-third of all Americans between the age of 18 and 30 have some type of student loan.  Thirty percent of those loans were already delinquent before the Covid pause.  As a housing provider you are going to see the impact of this over the next several months and years and need to be educated and ready to make the best decision possible.

Having been a private investigator and housing provider my entire adult life, I have seen the ebbs and flows of a changing world when it comes to credit, criminal, and eviction data.

Most people see the headlines that credit scores are going up in this country.  I have to ask myself; how can that be?  Five years ago the major credit bureaus removed liens and judgements, including evictions, from their credit scoring.  Last year it was decided to remove medical debt from credit bureaus.  With removal of these, the most common factors that affect scores, it’s no wonder credit scores are going up.  I can see student loans being added to this alarming trend in the near future.  Until that happens, I would consider these three key factors when it comes to analyzing an application where there is evidence of delinquent student loans.

Three Key Factors To Consider In Qualifying Tenants With Delinquent Student Loans

  1. FINANCIAL: What is the balance of the student loan?  If my applicant ends up being garnished by the government to pay their student loan, will they still have enough to pay the rent?  Did their education put them in a better paying job, or do they have the same job as if they never went to college?
  2. MARKET CONDITIONS: How much interest is my property getting in a challenging market? A delinquent student loan will affect the applicants score and might place them in a “Conditional” range where I have to look at all the other factors, and then make the best decision possible.  If my property is not getting much action and I see the only bad mark is a student loan and the rest matches my “Approval” criteria, I might have a new business partner.  For me, if I see delinquent student debt coupled with any other negative data, my decision is almost always a “no.”
  3. TIME FRAME: How long has the student debt been delinquent?  It is not unusual to see student debt not be paid back immediately as people are getting settled into new jobs.  This is often accompanied by moving to new areas of the country, new responsibilities, and a variety of other factors.  If I see unpaid long-term student debt, that usually signals that they have little to no intention of paying it back.  Unlike other loans, student loans can be delayed, altered, or forgiven.  If I have an applicant that completely ignores a student debt, that says something to me.

For applicants who show evidence of consistently paying their student loans….you are golden in my eyes.  Living up to the promises you made as a student shows responsibility that usually bleeds into other parts of your life and shows you take care of your responsibilities.  In that case, here are the keys to my rental property.

Housing Providers May See Student Debt For Years

Most housing providers will be seeing delinquent student debt for many years to come.  I would advise you to put that data to the side for a minute and look at all the other factors in your rental criteria.  At the end of your normal onboarding process, I would then review the student debt component to help you make a better, informed decision.  Your criteria might say “delinquent student debt will not result in an automatic decline but will be measured with the entire scope of the data on the credit, criminal and eviction report.”

The reality of these students, most still developing into young adults, getting into debt at such a youthful age does not serve our society well.  Though I don’t want to say that it’s not their fault, I will say that we are allowing them to enter unknowingly into a debt that will affect their future… and maybe even their first rental.

About the author:

Housing providers should consider three key factors when qualifying tenants when there is evidence of delinquent student loans and student debt
David Pickron

David Pickron is President of Rent Perfect, a private investigator, and fellow housing provider who manages several short, mid, long-term rentals.  Subscribe to his weekly Rent Perfect Podcast (available on YouTube, Spotify, and Apple Podcasts) to stay up to date on the latest industry news and for expert tips on how to manage your properties.

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Rising Interest Rates Put Multifamily Borrowers And Lenders In a Bind

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By The Editors
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Rising interest rates put multifamily borrowers and lenders in a bind participants learned at the CREFC annual conference in June

Participants at the CREFC (Commercial Real Estate Finance Committee) annual conference in June highlighted the troubles that include weak demand, rising defaults and growing difficulty in refinancing maturing loans, Yardi Matrix writes in a special bulletin.

“No matter how well loans are performing, takeout financing will be difficult,” said one panelist at the meeting of CRE Finance Council’s Annual Conference in New York. “You can’t see (mortgage) rates shift from 2.5 percent to 8 percent and not see meaningful consequences,” said another, Yardi Matrix reports.

CREFC hosts two major industry conferences each year (January and June) that are the meeting piece for leading industry participants representing every market sector.

The Yardi Matrix bulletin says sharp increase in interest rates starting in the spring of 2022 “has left many loans underwater as property values decrease and borrowers are unable to pay off maturing loans without putting up extra cash.”

Commercial mortgage volume is down 74 percent year-over-year and “and many borrowers are trying to find ways to extend existing loans rather than take out new ones at current rates.”

Multifamily floating rate loans

Loans originated seven to 10 years ago had conservative underwriting and benefit from rent growth, and therefore have fewer roadblocks to being refinanced.

Some CREFC panelists predicted a reckoning concentrated in 2020-22 vintage floating-rate loans that financed multifamily and industrial purchases at historically low acquisition yields in hot markets such as Phoenix and Salt Lake City.

“You need tremendous growth to make the numbers work” to refinance those types of assets, said one.

Most of these high-risk loans will be coming due in 2024 and 2025, which means that the next 12-24 months will be critical in determining how the situation will play out and the severity of delinquencies.

Conclusion commercial real estate financing

“Right now, the uncertainty in pricing that has stalled deals also is preventing a wave of action on the default front.

At some point, trades will start and set pricing standards. When pricing is set, “the dam will break,” but that remains months or quarters away writes Paul Fiorilla, Director of Research, Yardi Matrix.

About Yardi Matrix

Yardi Matrix researches and reports on multifamily, office and self-storage properties across the United States, serving the needs of a variety of industry professionals. Yardi Matrix Multifamily provides accurate data on 18+ million units, covering more than 90 percent of the U.S. population. Contact the company at (480) 663-1149.

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How to Analyze Real Estate Investment Properties

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By The Editors
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Investing in multifamily real estate can present a challenging situation for those new to the real estate market so here are some key factors to analyze.

Investing in multifamily real estate can present a challenging situation for those new to the real estate market so here are some key factors to analyze.

By Catherine Schwartz

The real estate sector continues to be a personal favorite for many investors due to its potential to be very lucrative. Multifamily real estate, in particular, has become increasingly popular amongst many estate investors due to its high demand and long-term appreciation potential.

According to a report by the Statistica Research Department, the number of multifamily homes in the United States is projected to reach 155.25 million by 2023.

But even with so many great reasons to invest in multifamily real estate, it can present a challenging situation, notably for those new to the real estate market. Before investing your hard-earned funds into any property, it is vital to conduct a comprehensive assessment to guarantee long-term profitability.

Therefore, investors must grasp all the key factors and metrics when analyzing multifamily properties.

This piece will explore how to thoroughly analyze real estate investment properties, specifically in the multifamily sector.

Market Analysis

It is one of the most vital components of any solid real estate investment strategy. There’s a necessity first to understand the market circumstances and tendencies, as it can support you in recognizing the possible risks and opportunities that arrive with investing in a particular property.

Anthony Martin, Founder and CEO of Choice Mutual, adds, “When it comes to multifamily assets, the market analysis comprises assessing critical factors such as population growth, rental rates, and competition in the local market, as these aspects play a very crucial function in deciding the demand for rental assets, the possible rental fees, and the potential return on investment.”

  • Population growth: As the number of individuals in a specific locality escalates, there is an expectation of an increase in demand for rent, which can result in higher occupancy rates and rental rates.
  • Rental rates: You should initially compare the rental charges of similar properties in the same region to aid in determining the potential rental income of a property. Moreover, understanding the rental trends in the local market can assist you in recognizing opportunities to Increase rental fees and optimize your returns.
  • Competition in the local market: It is another critical factor to consider when analyzing multifamily properties. Taking time to study the number and quality of similar properties in the same area can help you identify the competition level and potential risks of investing in a particular property.

When these factors are appropriately evaluated, you will be better positioned to identify potential risks and opportunities and make better-informed investment decisions.

Property Analysis

In property analysis, you must thoroughly evaluate a property’s financial, physical, and market-related aspects to determine whether it’s worth your time and money.

When it comes to analyzing multifamily properties, there are various factors you need to consider, such as location and financing options.

  • Location: The location of a multifamily property is fundamental in determining its potential profitability and sustainability.

Andrew Pierce, Founder of Real Estate Holding Company, states, “Multifamily properties in high-demand areas with good access to public transportation, schools, hospitals, and shopping centers tend to have higher rental income and lower vacancy rates. Conversely, those in areas with poor access to basic amenities may have lower demand, higher vacancy rates, lower rental income, and slower appreciation.”

  • Financing options: As an investor, it’s crucial to assess the financial choices at your disposal, such as traditional bank loans, private lenders, and government-supported loans, to identify the most suitable option that meets your investment objectives while lessening your financial stress.

Financial Analysis

According to Jim Pendergast, Senior Vice President at altLINE Sobanco “Evaluating a property’s financial performance closely is the essence of financial analysis to ascertain if it is worth investing in. When investing in real estate, understanding the vital financial metrics and calculations for assessing multifamily properties is imperative.”

Some of the significant financial metrics that are essential to know include:

  • Net operating income (NOI): This includes the earnings produced by a property following the subtraction of all operating costs. It is a crucial metric that offers a reasonable perception of a property’s profitability and cash flow capacity.
  • Capitalization rate (cap rate): The cap rate is the proportion of a real estate asset’s net operating income (NOI) to its market value. The cap rate assists in approximating the possible return on property investment and is useful in comparing various investment opportunities. As a rule, a greater cap rate implies a more significant potential ROI.
  • Cash-on-cash return: This metric examines the return on cash invested in the property while considering the expenses associated with financing and the revenue produced by the asset. To derive the cash-on-cash yield, one must divide the annual cash flow by the total amount of money invested.
  • Debt service coverage ratio (DSCR): This metric ascertains if the property can produce adequate revenue to meet its outstanding debt obligations. A debt service coverage ratio (DSCR) of 1.2 or greater is commonly deemed satisfactory.

Risks and Opportunities

Investing in real estate properties has risks and opportunities to consider, and multifamily properties are no exception. Hence, it is crucial that you fully understand the potential risks and opportunities associated with a property before making your investment decision.

One of the most significant risks associated with multifamily properties is tenant turnover. When the turnover rate is high, and units remain vacant for an extended period, it can lead to substantial income losses for the investor.

Mark Pierce, CEO of Colorado LLC Attorney, adds, “From a legal perspective, high tenant turnover in multifamily properties can also expose investors to potential legal issues. Vacant units can attract trespassers or unauthorized individuals, increasing the risk of property damage or liability claims. It is crucial for property owners to ensure that proper security measures are in place to protect both the property and any remaining tenants.”

Another risk you should consider is the property’s location. Attracting tenants to multifamily properties in less desirable areas may be challenging, resulting in lower occupancy rates and rents. On the other hand, properties in high-demand areas may command a higher purchase price but may also offer higher rents and appreciation potential over time.

Regarding opportunities, one of the main advantages of multifamily properties is their ability to generate a stable cash flow. Unlike single-family properties, multifamily properties have multiple tenants, meaning there’s more income available, and the impact of vacancies is reduced.

In addition, multifamily properties offer economies of scale regarding expenses such as maintenance and repairs.

Another opportunity multifamily properties present is their massive potential for appreciation. Multifamily properties located in developing areas have the potential to increase in value over time, which can have you smiling to the bank if you sell the property at the right time.

Conclusion

Analyzing real estate investments is a necessary ability for any real estate investor. Given the escalating appeal for multifamily properties, it can be an incredibly lucrative field, but it requires thorough evaluation and due diligence.

You can discover potentially profitable investment opportunities and execute more knowledgeable decisions through adequate research. However, it’s vital to recall that real estate investment involves risks, and no investment can guarantee profitability. Nevertheless, with a proper strategy, you’ll be on the right track to accomplishing your objectives!

About the author:

Investing in multifamily real estate can present a challenging situation for those new to the real estate market so here are some key factors to analyze.

Catherine Schwartz is the finance editor at Crediful and is a personal finance writer covering a wide range of investment topics with the aim to help people achieve financial freedom. Passionate about financial literacy and considers it one of the most important life skills.

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Fair Housing and Hoarding – What You Need To Know

By
By The Editors
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While hoarding disorder is a recognized mental health condition, property managers must navigate legal obligations under the Fair Housing Act

While hoarding disorder is a recognized mental health condition, property managers must navigate legal obligations under the Fair Housing Act.

By The Fair Housing Institute

Hoarding disorder is a complex mental health condition that can have significant implications for both the individual and the surrounding community. By understanding the unique challenges faced by hoarders and implementing appropriate strategies, property managers can create safe and habitable living environments while upholding the principles of fair housing.

Understanding Hoarding Disorder:

According to the International OCD Foundation, it is estimated that 2-6 percent of the U.S. population, or approximately 6 to 18 million people, struggle with hoarding disorder. Hoarding disorder is characterized by persistent difficulty discarding or parting with possessions, regardless of their value, resulting in the accumulation of excessive clutter.

It affects people from all walks of life, irrespective of age, gender, or socioeconomic status. Hoarders often experience intense emotional attachments to their belongings, leading to extreme anxiety or distress when faced with the prospect of disposal. This psychological condition can pose serious health and safety risks, such as fire hazards, structural damage, pest infestations, and unsanitary living conditions.

Identifying Hoarding Behavior:

Cluttered Living Spaces: Hoarders typically exhibit excessively cluttered living spaces, making it difficult to navigate through rooms or access basic amenities.

Restricted Living Areas: Hoarders may confine themselves to certain areas of their dwelling due to the overwhelming clutter in other parts of the property.

Neglected Maintenance: Hoarded properties often suffer from neglected maintenance, such as broken appliances, faulty wiring, plumbing issues, and blocked ventilation.

Unusual Odors: Accumulated clutter can emit unpleasant odors, resulting from the presence of rotting food, mold, mildew, or animal waste.

Distressed Social Relationships: Hoarding can strain relationships with neighbors due to increased noise, pests, or odors, potentially leading to complaints and disputes.

Legal Considerations and Fair Housing:

While hoarding disorder is a recognized mental health condition, property managers must navigate legal obligations under the Fair Housing Act (FHA). The FHA prohibits discrimination against individuals with disabilities, including mental health conditions. Hoarding disorder may qualify as a disability under the FHA, thus requiring reasonable accommodations to be provided to affected residents.

Best Practices for Managing Hoarding Situations:

Early Intervention: Act promptly upon identifying hoarding behavior by engaging in open and non-confrontational communication with the resident. Express concerns about safety and property damage while maintaining empathy and respect.

 Reasonable Accommodations: Consult with legal counsel to determine appropriate and reasonable accommodations that can help hoarders maintain a safe living environment without disrupting other residents or violating local health and safety regulations.

 Referrals and Support: Connect residents with hoarding disorder to appropriate mental health professionals, support groups, or local social services agencies that specialize in hoarding disorder treatment.

 Regular Inspections: Conduct periodic inspections of the property to ensure compliance with health and safety standards. Collaborate with the resident to develop an agreed-upon inspection schedule that respects their privacy while addressing potential risks.

Documentation: Maintain comprehensive records of communication, inspections, and any actions taken to address hoarding-related issues. This documentation is crucial for demonstrating good faith efforts and compliance with fair housing regulations.

Hoarding – Final Takeaway

The economic impact of hoarding extends beyond individual households. According to a study published in the Journal of Clinical Psychology, hoarding-related costs in the United States were estimated at $50 billion annually, encompassing expenses related to health care, social services, and property damage.

Property managers play a crucial role in identifying and managing tenants with hoarding disorder while upholding fair housing laws and principles. Collaboration and training with all team members is also an essential component.

Fair housing training ensures that all staff can recognize the signs of hoarding behavior, understand the legal obligations, and implement best practices. Following these steps, property managers can create safe and inclusive living environments for all residents.

About the author:

In 2005, The Fair Housing Institute was founded as a company with one goal: to provide educational and entertaining fair-housing compliance training at an affordable price at the click of a button.

Redemption Rights Under HB 2001: An Unequitable Pill

By
Brad Kraus
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HB 2001 leaves much to be desired from an equitable standpoint when evaluated comparatively with other Oregon redemption rights

HB 2001 and redemption rights leave much to be desired from an equitable standpoint when evaluated comparatively with other Oregon redemption rights.

By Bradley S. Kraus
Attorney at Law
Partner, Warren Allen, LLP

The calendar has turned to June. The year is nearly half over, and both landlords and tenants are grappling with the new rights and ramifications within House Bill 2001. Rental assistance, one of the larger items and rights in HB 2001 as it relates to curing notices and redeeming tenancies, can be a popular item among both landlords and tenants. But this popularity only exists when it is not forced. And, when it is forced, the proposed remedy should be equitable—i.e., it should make the wronged party whole. House Bill 2001 fails on both fronts and, when evaluated comparatively with other redemption rights, leaves much to be desired from an equitable standpoint.

As noted above, rental assistance is a popular item among both landlord and tenant advocates. However, HB 2001 removes what had long been a landlord right under Oregon law. If the Notice went uncured, the landlord was no longer under any obligation to continue the tenancy, regardless of if the tenant or rental assistance could provide the money at some later date. This tracks with common law notions of property rights; it should be the property owner who controls those rights (or, in legalese, their “bundle of sticks”). House Bill 2001 eliminates any notion of what a “cure” period is in a notice, replacing it with additional redemption rights that can be invoked at any time.

Those redemption rights, however, fail when analyzed in relation to others. Under HB 2001, tenants must only pay the amount listed in the notice to cure. With the extension of filing timelines, first appearance dates, and trial timelines, by the time the first appearance date or trial comes, an additional month of rent (sometimes two) will now have accrued. Under HB 2001, the tenant does not need to pay those amounts in order to “redeem” the tenancy, creating an almost endless loop of delinquency, attorney fees, and costs that landlords need to absorb without remedy.

HB 2001 Redemption Rights Extremely Inequitable

House Bill 2001’s redemption rights in that regard are extremely inequitable. For a better example, a review of redemption rights under judicial foreclosures is helpful. A person may utilize redemption rights in the property if they pay the “purchaser at sale” (a) the amount they paid at sale, (b) interest, and (c) amounts expended to protect the property. In essence, the new “purchaser” is made whole, recovering the monies expanded. Had House Bill 2001 created a requirement to pay all amounts due and owing, including attorney fees and costs incurred, a more equitable statutory scheme would exist.

For such a statutory scheme, Oregon should look no further than our neighbors to the north in Washington. Redemption rights and forced repayment plans which the landlord must usually accept within the eviction setting exist under RCW 59.18.410. Under those statutory rights, the tenant must pay all amounts due and owing, costs incurred by the landlord to file the unlawful detainer and a statutorily defined late fee. If a forced repayment plan is invoked, the tenant is required to also pay the landlord’s reasonable attorney fees as awarded by the court. This creates a fairer scheme of redemption rights, allowing the tenant one last chance, while at the same time providing the ability for the landlord to be made whole.

As an attorney who practices in both Oregon and Washington, there is a large distinction between redemption rights in the jurisdictions. While landlords in Washington may be unhappy with the redemption rights when invoked, they can at least find comfort in the fact that they will be made whole. And, if the tenant fails to do so, they can take the final steps in the process of recovering possession. Oregon’s scheme leaves much to be desired and, much like many of the laws passed during COVID and subsequent thereto, leaves housing providers holding the bag.

About the author:

Oregon HB 2001 leaves much to be desired from an equitable standpoint when evaluated comparatively with other redemption rights
Brad Kraus

Bradley S. Kraus is an attorney at Warren Allen LLP. His primary practice area is landlord/tenant law, but he also assists clients with various litigation matters, probate matters, real estate disputes, and family law matters. You can reach him at kraus@warrenallen.com or at 503-255-8795.

Portland Update: Changes to FAIR Ordinance Bring (Some) Necessary Changes

Dealing with Habitability issues and Substitute Housing

 

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