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The Future of Residential Rental Renovation – What’s Next

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By The Editors
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Residential property managers and landlords need to always stay current on the latest residential rental renovation technologies.

However busy residential property managers and landlords may be, it’s important to always stay current on the latest residential rental renovation technologies see the four technologies below.

By Ron Fanish

Residential property managers and landlords have notoriously full schedules. From attracting new tenants and serving existing ones, to keeping up with repairs, the days are often long and hectic.

Still, it’s crucial that property managers and landlords find time to stay up-to-date on changes to the residential renovation landscape, especially when it comes to emerging technologies.

Indeed, a suite of new tools and techniques have recently developed — and continue to evolve — that make renovation more efficient than ever before. As renters’ tastes and needs change, property managers and landlords can deploy these new technologies to remain relevant and competitive. Below, learn about four technologies that are transforming the industry.

Laser cleaning technology. Renovation projects sometimes center around returning a building to its former glory — restoring original millwork, or rejuvenating antique doors and windows. Other times, renovation projects are about erasing the damage done by fire, smoke, water, or mold. In both cases, property managers and landlords can now rely on laser cleaning technology. How does it work? Precise laser beams are shot at a damaged surface. The contaminants on the surface then absorb the laser, and either fall free or transform into gas. This process is able remove blemishes, patinas, and other imperfections from materials, leaving them looking brand new. A laser approach is much safer and cleaner than previous technologies, like sand blasting or dry ice pellets, which can be loud, hazardous, and incredibly messy.

Administration software. Restoration projects don’t just entail building materials. Equally important are the processes, like keeping track of job timelines, deliveries, equipment, and correspondences with tenants and contractors. This is where cutting-edge admin software comes in. These new tools can streamline and automate many administrative duties, freeing up precious time. They can also make communication between all the different parties lightning fast and efficient, since multiple people can log in to a program and access information. Further, many of these tools now incorporate AI, which can send reminders and alerts if tasks are falling behind or not being completed correctly.

3D scanning software. In the past, residential renovation professionals had to spend a great deal of time on site while drafting their plans, and also craft detailed sketches by hand. But the advent of 3D scanning software means much of the renovation planning can be done anywhere with computer access. 3D scanning software allows every nook and cranny of a space to be captured in vivid detail. With this in hand, plotting the changes becomes far easier. This software also allows clients to peer into the future, envisioning what the final product will look like before work even begins. Floor plans can be created in careful detail, testing out everything from colors to furniture arrangements.

Risk management and preventative solution tech. Sometimes, a renovation project is a necessity — it’s done not to update a property, but to restore it after a fire, flood, or other catastrophe. The latest risk management software can help property managers and landlords avoid this situation entirely. These tools allow you to collect, store, and share essential building information, like electrical and plumbing layout, utility locations, construction materials used, and more. If a disaster occurs, this information can easily be shared with insurance carriers, first responders, contractors, and other parties. As a result, the damage inflicted by the disaster can be greatly reduced, saving significant time and money. These tools can do even more, too — like track worksite safety, and ensure that all proper permits are filed.

However busy residential property managers and landlords may be, it’s important to always stay current on the latest renovation technologies. Take the time to learn about these new developments and how they may be of use for your projects in 2023 and beyond. These tools and techniques are transforming the industry, and can make your next renovation project safer, more efficient, and more effective.

About the author:

Ron Fanish is co-owner of Rainbow International Restoration of Westchester, a full-service, one-stop-shop for restoration, cleaning, and reconstruction based in Westchester County, NY. For more information, visit www.RBWWestchester.com.

9 Key Rental Market Trends From 2022 and Impact on 2023

Multifamily Outlook Generally Positive For 2023

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18 Months of Outstanding Rent Growth Coming to An End

The Multifamily Book Is Closed On 2022–What’s In Store For 2023?

By
John Triplett
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Multifamily rent growth had its second best year this century in 2022, though it finished the year on the downside due to weakening demand

Multifamily asking rent growth recorded its second best year this century in 2022, though it finished the year on the downside due to weakening demand and robust supply growth that has occupancy rates sinking, Yardi Matrix writes in a year-end report.

“What do we expect in 2023? Despite headwinds, the market has positive drivers,” Yardi Matrix writes.

Highlights of the report:

  • Multifamily rents fell again in December under the strain of weakening demand. U.S. asking rents dropped $4 during the month to $1,715, while year-over-year growth declined by 80 basis points to 6.2 percent, the lowest level since May 2021
  • For the full year in 2022, rents increased by 6.2 percent, the second-highest annual growth this century, only behind 2021’s growth of nearly 15 percent. With the market entering 2023 with a variety of concerns about the economy and affordability, we expect rent growth in 2023 will be closer to historical levels.
  • Deceleration is also hitting the single-family rental market. The average U.S. asking rent dropped $8 in December to $2,083, while the year-over-year increase fell by 100 basis points to 4.8 percent.
Chart courtesy of Yardi Matrix

The 2023 National Market To Behave More Traditionally

“Asking rents should remain flat or fall slightly through the spring, when growth typically is strongest,” Yardi Matrix writes. “Then rents will rise moderately, though nowhere near the outsize levels of the last two years.”

The 2023 outlook however is influenced by demand and supply issues in many markets as demand for apartments is declining for several reasons:

  • The economy is cooling
  • Excess household savings are depleted
  • Affordability is stretched
  • The post-pandemic migration is played out

“Despite headwinds, there are positive forces that will keep the industry healthy in 2023,” the report says.

The story on lease renewals

Nationally, renewal rents were still surging in the fall, rising 11.8 percent year-over-year through October, up 30 basis points from September. The growth reflects property owners continuing the process of bringing rents of existing tenants closer to asking rates.

“October’s renewal rate growth is likely at or near its apex, since asking rents have been negative since November,” the report says.

National lease renewals were 64.9 percent in October, down slightly from the prior month. Renewal rates have settled into a range near 65 percent after peaking in the fourth quarter of 2021. Lease renewal rates varied much by metro, led by Philadelphia (77.8 percent) and Baltimore (70.2 percent), while they were less than half in San Francisco (48.5 percent) and Los Angeles (49.3 percent).

Chart courtesy of Yardi Matrix

Reaction to Changing Conditions

Yardi Matrix writes that the biggest issue is how multifamily fundamentals will react to higher short-term interest rates in the post-pandemic world.

  • The multifamily market is starting the new year with rapidly evolving conditions that in some ways are unprecedented.
  • The multifamily industry reaction to the rapid increase in interest rates and resulting weakening of the job market will be closely watched.
  • 2023 could see weaker household formation and demand. Meanwhile, transaction activity will be affected by uncertainty about values.

“Multifamily performance in 2023 will be studied for many years because it is at the intersection of multiple trends involving the economy, rents, demand and the capital markets,” the report says.

Read the full report from Yardi Matrix here

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.

Multifamily Rent Growth Turned Negative In November

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Multifamily Rents ‘Hit the Brakes’ in September

Rental Price Drops Around The Country

Can I Monitor Tenant Smoking In My No-Smoking Rental?

By
Hank Rossi
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How to keep tenant smoking out of no-smoking rentals is a constant issue for many landlords but how to monitor tenant smoking is the question

How to keep tenant smoking out of no-smoking rentals is a constant issue for many landlords. So how to monitor tenant smoking in non-smoking rentals is the question this week for Ask Landlord Hank. Remember Hank is not an attorney and is not offering legal advice. If you have a question for him please fill out his form below.

Hello Landlord Hank,

I put no smoking clauses in leases also we don’t allow burning of incense for that would qualify as smoking in our book.

Are there any devices that can be installed to detect cigarette, smoke and the like remotely.

And can they alert you if they have been tampered with?

-Trevor

Dear Landlord Trevor,

Yes, Aretas Sensor Networks has a smoke monitoring device that you can monitor wirelessly.

I don’t believe it is tamper proof though.

This could be a good option for your rentals and you could tell tenants it is a safety device, smoke detector that works remotely to help keep your property and the tenants safe.

Sincerely,

Hank Rossi
Each week I answer questions from landlords and property managers across the country in my “Dear Landlord Hank” blog in the digital magazine Rental Housing Journal.  https://rentalhousingjournal.com/asklandlordhank/

How to keep tenant smoking out of no-smoking rental units is a constant issue for many landlords. So how to monitor tenant smoking is the question
On dealing with tenant smoking Landlord Hank says, “Yes, Aretas Sensor Networks has a smoke monitoring device that you can monitor wirelessly.”

Ask Landlord Hank Your Question

Ask veteran landlord and property manager Hank Rossi your questions from tenant screening to leases to pets and more! He provides answers each week to landlords.

  • This field is for validation purposes and should be left unchanged.

Here is a recent Landlord Hank answer concerning tenant smoking in no-smoking rentals and how to prove it.

Dear Landlord Hank,

My lease specifies no smoking in the unit and even goes so far as to state that tenants may be responsible for all costs to repaint/clean if they do smoke in the unit, but I am struggling with how to enforce this clause because it’s difficult to prove.

When my latest tenants moved out I found the entire inside of the unit had a grey haze on everything (walls, ceiling, doors, and cabinets). They insist they didn’t smoke in the unit and suggested that it may have been caused by candles.

I’ve had tenants who used candles regularly before and have never seen this kind of thick haze. I’m certain they were smoking in the unit, but don’t have any evidence other than photos of how bad the haze was and my receipts for painting the walls/ceiling.

Is this sufficient if they challenge my deductions from their security deposit or is there a better way to prove this in the future?

-Gordon

Dear Landlord Gordon,

Usually, tenant smoking is easy to detect by the distinctive smell on walls, in carpeting and furniture, signs of ash or cigarette butts, and yellow or brown discoloration on walls, counters, cabinets, doors and trim.

Even with camouflage, you can usually find enough signs to prove indoor smoking.

If you want to know for sure if the haze you are finding is related to smoking, there are air-quality detection companies and devices that can confirm the presence of smoke residue from cigarettes.

You may also try a home air-quality test, but the accuracy is not as high as with a professional assessment. The Bosch Macurco D381 Air Quality Detector can detect cigarette smoke.

There are also smoke detectors available to alert you to someone smoking in your property, and a new “smoke sensor” should be coming to market this year.

Detection may be tougher to do now though since you’ve tried to erase all signs of this issue, including painting your property. Have you checked your vents and ducting for signs of smoking?

We deal with companies that have “ozone” machines that will be attached to your ducting and clean ducting and air handler as well as your unit to get rid of the smoke smell, and this is a great and cost-effective way to take care of the issue.

-Hank Rossi

Do I Have to Paint and Replace Flooring for a Long-Term Tenant?

A Tenant Poured Grease Down Drain Who Is Responsible?

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AG Says City’s Source Of Income Law Unconstitutional

By
John Triplett
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The Arizona Attorney General says Tucson's source of income protection ordinance for renters is unconstitutional and must be rescinded.

The State of Arizona and City of Tucson have gotten into a spat over the city’s source of income protection ordinance for renters passed in September of 2022.

Former Arizona Attorney General Mark Brnovich ordered the City of Tucson to rescind a law that prohibits landlords from discriminating against renters who receive government assistance, after he deemed it unconstitutional in a non-binding legal opinion, the Arizona Republic reported.

“As mayor and council, we unanimously approved the source of income protection because we know we need a layered approach to find solutions for homelessness and lack of affordability in our state,” Tucson Mayor Regina Romero told Kgun9.com.

Romero says they have plans to meet with the newly elected Attorney General Kris Mayes, to discuss a hopeful reconsideration of Brnovich’s call on the 1487 complaint.

“To put out such a complaint, a 1487 complaint, when in fact the City of Tucson is trying to house more individuals – I thought it was very heartless and cold,” Romero said.

If Tucson does not rescind its ordinance, the attorney general’s office will notify the state treasurer, who will withhold the city’s portion of state shared revenue until it comes into compliance, said Brittni Thomason, a spokesperson for the Arizona Attorney General’s Office.

In the meantime, Romero says to protect the state-shared revenue, the ordinance will not be in effect.

Romero says oftentimes people confuse the source of income protection with the City of Tucson forcing landlords to rent to anyone when in fact it prevents landlords from denying Tucsonans just because they have a Section 8 voucher or receiving social security.

“Without even looking at their background, many people were being denied for the only reason of them having vouchers and that’s why the source of income protection is important for Tucsonans,” Romero said. Once the order of protection was passed, Romero says they saw an immediate increase in landlords accepting renters who had vouchers.

The investigation into the legality of the ordinance began in November from a request made by House speaker-elect and state Rep. Ben Toma of Peoria, who is a real estate agent.

Read City of Tucson response to Toma complaint.

Multifamily Rent Growth Turned Negative In November

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Multifamily Rents ‘Hit the Brakes’ in September

Rental Price Drops Around The Country

5 Main Culprits Causing Rental Property Sewer Line Issues

By
By The Editors
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Sewer line issues to your rental properties can get very expensive, very quickly and the city is not going to come fix them for free

Sewer line issues to your rental properties can get very expensive, very quickly and the city is not going to come fix them for free, so here are some things to know about the trouble sewer lines can cause from Leak Locators.

No. 1 Roots: Fast-growing roots seek out moisture and water. It will find its way to cracked main line sewers, creating a total blockage to sewer lines. It’s so important to have regular sewer scope inspections to help prevent repairs that will be more expensive over time.

No. 2 Settling: Sewer lines can gradually begin to sag due to age. This will create a belly where sewage can build up and create blockages.

No. 3 Ground shifting: Excavating and seismic activity can cause misaligned sewer lines.

No. 4 Sewer pipe materials: Pipe clay and concrete pipes in older homes are much more susceptible to issues than plastic pipes used in newer homes. To spot poor pipe materials, schedule a sewer scope inspection.

No. 5 Poor installation: This can also lead to crack pipes and pipe collapses. It’s important to identify if your sewer line is poorly installed and schedule a repair as soon as possible.

Sewer line inspections ensure you find potential sewer line issues and problems before they cause costly sewer backups, giving you the information needed to schedule estimates for sewer line repairs.

Many rental property insurance companies offer landlord insurance to cover problems with sewer line issues so best to check with your insurance company.

Blocked drains and clogged sewers in rental properties are some of the most common areas of dispute between landlords and tenants because it can be very difficult to apportion blame or responsibility in terms of how the blockage was originally caused.

These issues can worsen over time. It is always best to consult with a professional.

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Why are Build-to-Rent Homes a Top Choice in Phoenix?

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By The Editors
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Phoenix’s build-to-rent communities are filling the space between renting and owning, and it is growing by popular demand.

By Natalie Jones

Phoenix’s build-to-rent communities are filling the space between renting and owning, and it is growing by popular demand.

Commonly referred to as single-family rentals, they offer another option for renters who do not want to live in traditional multifamily housing, without the commitment or responsibility of home buying.

Here are the top reasons why build-to-rent homes have become a popular choice in Phoenix metro.

The best of both worlds

Build-to-rent communities offer renters everything they need for a modern and worry-free lifestyle. Like an entry-level starter home, these housing communities are the perfect solution for many residents. Combining convenience and style, these homes were designed to streamline everyday living experiences. They offer a lock-and-leave, maintenance-free, resort-style environment with all the amenities of traditional multifamily housing options.

With single-family rentals, residents can enjoy the same amenities and quality of apartment living, while having the space and privacy of having a home. That said, it is important to keep service quality the same as if they were renting a traditional apartment. Here are some things to prioritize when managing a build-to-rent community:

  • Uphold the same high standard of customer service
  • Remember that the resident comes first
  • Although they are renting, this is still someone’s home – treat it as such

A shift in market trends

Population growth has been an influential component of Phoenix’s latest market trends. In turn, many up-and-coming submarkets have developed throughout the Metro area which is causing the need for more housing options. Rising interest rates have led the home buying environment to shift, driving demand for multifamily options like build-to-rent communities. Additionally, it continues to be difficult for some to qualify for mortgages as home prices remain at an all-time high. Build-to-rent communities have become an ideal option for many as an alternative.

Unique investment opportunity

Build-to-rent communities are a new space where competition is different, drawing the attention of investors alike. With a market that has consistently performed in recent years, it has set the stage for innovative investment opportunities to succeed.

Build-to-rent is the hottest development sector in the Phoenix metro, accounting for nearly 40 percent of all new products anticipated in 2023. Other markets have yet to explore the build-to-rent segment to this extent, making this area a sweet spot and a unique investment opportunity. Furthermore, these communities are seeing a significantly lower turnover rate compared to traditional multifamily housing because of the high-growth segment that is generating higher rental rates.

Geographical advantages

Phoenix has the luxury of building out, as opposed to east coast cities that have no other choice than to build up. Simply put, there is more opportunity for it here than in other markets because of the combination of geographical and market advantages.

About the Author

Natalie Jones, Managing Director of Multifamily Investments at Mark-Taylor, is a trusted leader within the industry. Handling the investments and assets of our clients, Natalie offers consistent communication to achieve optimal financial success across the Mark-Taylor portfolio.

Investments Growing In Build-To-Rent Single-Family Homes

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Rent Growth Continues to Slow, but Demand Remains Strong

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Time To Let Landlords Be A Partner In New Approaches To Housing

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By The Editors
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It is time to let landlords be a partner in the housing crisis process as renters and landlords want the same outcome, affordable housing.

It is time to let landlords be a partner in the housing crisis process because renters and landlords want the same outcome, affordable housing.

By Renee Larsen and Josh Lloyd

A recent poll commissioned by The Oregonian/OregonLive.com showed homelessness and cost of living were among the top issues for voters in the November election. Rightly so.

Oregon is growing less affordable for families, and we are seeing the impacts of housing instability play out. People are relocating to places farther from urban centers, are moving in with family or taking on roommates. We’re seeing maxed-out shelters and camps under bridges. The signs of our region’s housing crisis are all around us.

As an association representing nearly one thousand members with a collective 275,000 apartments, condominiums and homes that are rented out to Oregon tenants, we have a vested interest in stabilizing housing. But to do so, we need a fresh approach. Oregon is preparing to swear in a new governor – one who pledged to tackle this issue with the urgency it demands. We applaud Tina Kotek for that. Our request to her, and the record number of new lawmakers coming to Salem next year, is simple.

Bring everyone to the table. Rather than dismiss landlords with valid concerns about new rental regulations, include them – as well as economists, land-use experts, and tenants – in crafting new approaches.

Renters and landlords want the same outcome: Affordable homes for Oregon families. While we might have different ideas on how to achieve that goal, we encourage our elected leaders to solicit feedback on policy solutions from stakeholders across the spectrum.

Rental housing providers would not be in this business if we did not want to house Oregonians. Contrary to popular belief, landlords are trying to act judiciously. Although state law has allowed rent increases as much as 9.9% in 2022, the most recent Multifamily NW Apartment Report, shows that rents increased at an average of about 5% last year.

And we have much to offer in helping explore innovative solutions to housing instability – just look to the north, where the Alaska Housing Finance Corporation is providing low-interest loans for affordable housing development and significantly contributing to the state’s General Fund through an inventive public-private partnership. We are also aligned strongly with tenant organizations advocating for increased rental assistance programs.

While any economist will tell you that rising rents stem from a lack of new home production, as leaders in the state’s rental housing industry, we know there are several factors that contribute to the state’s undersupply.

Well-intended programs and new policies designed to make housing more affordable for Oregonians are instead driving away existing housing providers and discouraging potential ones.

Statewide rent control, new rules around security deposits and screening fees, ineffective rent assistance programs – compounded by steady increases in the cost of insurance, utilities, payroll, and local tax burdens have created the situation we find ourselves in. Indeed, a growing number of rental housing providers in the Portland-metro area are selling their units as the business of renting has become overly complex and burdensome. An economic study released last March found a nearly 4,000-unit reduction in the number of single-family rentals between 2017 and 2020 in the tri-county region – that’s not housing stability.

But elected leaders don’t need to take our word for it. On the heels of these problematic trends, comes a clarion call for an urgent course correction.

The Oregon Housing Needs Analysis, produced by the Department of Land Conservation and Development and Oregon Housing and Community Services for the Legislature, sounds the alarm on our lack of supply. It recommends clear, necessary regulatory fixes that are designed to boost housing production in communities across the state. The report states: “Our current system plans for and invests in too little housing. The outcome is undersupply, rising home prices, segregation and displacement in some communities, and deepening inequities across all communities.”

But policymakers must recognize that ensuring a sufficient supply of housing also means keeping the hundreds of thousands of rental units we already have.

All of these problems – lack of supply, patchwork overregulation, lack of ongoing rental assistance and insufficient collaboration on how to address these issues – culminate in the serious housing crisis our families are experiencing right now.

Oregon families can’t afford another legislative session where those in power listen to just one side of this issue. Housing providers stand ready to make real progress on stabilizing housing for Oregonians.

About the authors:

Renee Larsen is the vice president at Capital Property Management and the outgoing president of the Multifamily NW Board of Directors. Josh Lloyd is the senior vice president at Wood Partners and the incoming president of the board.

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

Dealing with Habitability issues and Substitute Housing

 

Six Potential Benefits of Exchanging into a Delaware Statutory Trust Property

By
By The Editors
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six benefits of exchanging into a Delaware statutory trust property

By Dwight Kay
Founder and CEO Kay Properties & Investments

There are a number of potential benefits associated with exchanging into a Delaware Statutory Trust (DST) 1031 property Kay Properties
Dwight Kay

There are a number of potential benefits associated with exchanging into a Delaware Statutory Trust (DST) 1031 property.

However, it is important to note that these potential benefits should also always be carefully weighed with the potential risks that are possible with DST investments, and as with all real estate investments, investors should consult their tax attorney and or Certified Public Account before investing in DSTs.

Still, DSTs continue to grow in popularity especially among aging baby boomers who are tired of managing their own properties and are looking for a way to transition into a passive income stream. DST investments not only provide investors the potential for passive income, but also the following six benefits as well:

Benefit One:

Tax deferral using the 1031 exchange

Many real estate investors have wanted to sell their apartments, rentals and commercial properties for years but haven’t been able to find a property to exchange into and just can’t stomach the tax bill after adding up federal capital gains tax, state capital gains tax, depreciation recapture tax and the Medicare surtax. The DST 1031 property solution provides investors an ability to move from an active to a passive role of real estate ownership on a tax-deferred basis.

Benefit Two:

Eliminating the day-to-day headaches of property management

Because many DST investors are at or near retirement, they are simply tired of the hassles that real estate ownership and management often bring. They are tired of the tenants, toilets and trash and are wanting to move away from actively managing properties. The DST 1031 property provides a passive ownership structure, allowing them to enjoy retirement, grandkids, travel and leisure, as well as to focus on other things that they are more passionate about instead of property management headaches.

Benefit Three:

Increased cash flow potential

Many investors are receiving a lower amount of cash flow on their current properties than they could be, due to their properties having under-market rents, properties that have multiple vacancies and/or that are raw or vacant land sitting idle. DST 1031 exchange properties provide an opportunity for investors to potentially increase their cash flow on their real estate holdings via a tax deferred 1031 exchange.

Benefit Four:

Portfolio diversification by geography and property types

Oftentimes, 1031 investors are selling a property that comprises a substantial amount of their net worth. They want to reduce their potential risk and instead of buying one property (such as another apartment building) or one NNN building (such as a Walgreens pharmacy or Taco Bell restaurant) they decide that investing into a diversified portfolio of DST 1031 properties with multiple locations, asset classes (property types) and tenants is a better fit for their goals and objectives.

This is similar to how investors tend to invest retirement funds in mutual funds and Exchange Traded Funds (ETFs), as opposed to placing their entire retirement savings into the stock of one particular company. However, it is important to note that there are no assurances that diversification will produce profits or guarantee against loss.

Benefit Five:

Long-term non-recourse financing locked and in place to satisfy debt replacement requirements of the 1031 exchange

One of the requirements for a 1031 exchange is to take on “equal or greater debt” in the replacement property to what you had in the relinquished property (the property you are selling). In today’s lending environment, it is often hard for investors to obtain non-recourse financing at an acceptable interest rate and terms. Due to the DST 1031 properties’ sponsors typically having strong lending relationships, they are able to secure non-recourse financing at some of the best terms available in the marketplace. The DST 1031 investors are the direct recipient of these financing terms that they would otherwise often not be able to obtain on their own.

Benefit Six:

Access to Institutional Grade Real Estate

DST 1031 properties provide access to large, institutional-grade real estate that is often otherwise outside of an individual investor’s price point. With the typical minimum investment of $100,000, investors are still able to purchase an ownership interest in large $20 million-plus apartment communities, $5 million-plus pharmacies or $15 million grocery stores, for example. This allows investors access to a level of real estate that they just would not have been able to exchange into before.

That being said, we also have had many clients with very large 1031 exchanges opt to invest in DST 1031 properties because they did not want to place “all their eggs into one basket” by purchasing one single, large investment property.

Please scan the QR code to learn more about Kay Properties, receive your FREE 1031 exchange Toolkit, and review a current list of 1031 Exchange eligible properties:

Please scan the QR code to learn more about Kay Properties, receive your FREE 1031 exchange Toolkit, and review a current list of 1031 Exchange eligible properties

Ask Bill Exeter

Ask Bill Exeter and his team your questions about 1031 exchanges and he and his team will get back to you.

Name

About Kay Properties & Investments

Kay Properties & Investments is a national Delaware Statutory Trust (DST) investment firm. The Kay Properties platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market. Kay Properties team members collectively have over 400 years of real estate experience, are licensed in all 50 states, and have participated in over $30 Billion of DST 1031 investments.

Disclaimer: This material is not to be considered tax or legal advice. Please speak with your own CPA and attorney for all tax and legal advice prior to considering an investment. All real estate and DST properties contain risk.

Securities offered through FNEX Capital, member FINRA, SIPC.

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Market Cooldown Continues With Rents Down In 90 Of 100 Top Cities

By
John Triplett
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The market cooldown remains widespread, with rents down in 90 of the nation’s 100 largest cities in December of 2022

The market cooldown remains widespread, with rents down in 90 of the nation’s 100 largest cities in December of 2022, Apartment List says in their January report.

National rents dropped 0.8 percent in December, the fourth straight month of decline.

The national month-over-month rent change is plotted in the chart here, shows how this winter’s price declines are steeper than those of previous years, the report says.

“We expect that 2023 will see bargaining power shift back to renters, and that rent prices this year will grow only modestly, if at all,” the Apartment List research team writes.

The market cooldown remains widespread, with rents down in 90 of the nation’s 100 largest cities in December of 2022

“The recent slowdown has been geographically widespread. Rents decreased in December in 90 of the nation’s 100 largest cities. New York City saw the nation’s sharpest decline, with prices down by 3 percent month-over-month.

“And over a longer horizon, we are continuing to see an ongoing cooldown in many of the recently booming Sun Belt markets. Las Vegas, Phoenix, Jacksonville, and Riverside all rank in the top 10 for fastest rent growth since March 2020, but none of these metros has seen rents increase by more than 1 percent over the past twelve months.

Vacancy rate continues to rise

The cooldown in rent growth is being mirrored by continued easing on the supply side of the market.

The market cooldown remains widespread, with rents down in 90 of the nation’s 100 largest cities in December of 2022

“Our vacancy index now stands at 5.9 percent, after more than a year of gradual increases from a low of 4.1 percent last fall. And in the past four months, this easing of the vacancy rate has picked up steam again, after plateauing a bit over the course of last summer.

“Today’s vacancy rate still remains slightly below the pre-pandemic norm, but is quickly approaching that benchmark,” the report says.

In the most recent four months from August through November, the vacancy rate has increased by 0.8 percentage points, reaching 5.9 percent in December 2022.

“After a prolonged period of skyrocketing rent growth, and with non-housing related costs also getting more expensive as a result of broad-based inflation, it seems that some Americans are moving back in with family or roommates, or delaying striking out on their own. At the same time, new apartment construction is picking up steam again after facing pandemic-related delays in recent years,” the report says.

Conclusion

“This seasonal dip is likely to persist through the winter, but as moving activity picks back up in the spring and summer, we are likely to see a return to positive rent growth. We expect that 2023 will be a year of flat to modest rent growth, but it is unlikely that prices will fall significantly throughout the year,” the report says.

Read the full report here.

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Non-Seasonal Rent Decreases on the Horizon

By
John Triplett
-
Non-seasonal decreases in average asking rents are coming, Yardi Matrix says in a special multifamily rent forecast for 2023.

Non-seasonal decreases in average asking rents are coming, Yardi Matrix says in a special multifamily rent forecast for 2023.

Yardi Matrix says interest rates that continue to rise, “will, eventually, take their toll on the job market, and rather than adding more jobs than economists expected every month, there will almost certainly be job destruction and the requisite pothole in household formation, leading to a non-seasonal decrease in average asking rents.”

Highlights of the report

“We now find ourselves at a juncture where more companies are pushing for at least a partial return to office,

  • Layoffs are broadly hitting the tech sector
  • Interest rates have been hiked dramatically
  • The single-family housing market is paralyzed
  • Yet the job market continues to beat consensus expectations almost every month.

“Household formation is intrinsically tied to job creation, so a robust job market fuels demand for housing, and conversely, a weaker job market depresses housing demand,” Andrew Semmes, Senior Research Analyst, writes in the report.

“Our view is that we are likely to start seeing job destruction and experience a recession beginning in the third or fourth quarter of next year, but that it will not be particularly deep or lengthy. At that point we will likely start to see broad declines or stagnation in average asking rents, but not enough to offset the gains that we expect in the first half of 2023,” Semmes writes in the report.

Rent Forecast for 2023 revised downward

Yardi Matrix has revised their 2023 forecast downward to 3.1 percent from 3.5 percent.

“We expect to see all of that growth in the first two to three quarters” of 2023, the report says.

“We have revised 2024 upward to 4.1 percent from 3.3 percent, as we expect economic growth to pick back up in the beginning to middle of the year.”

Read the full report from Yardi Matrix here.

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.

Multifamily Rent Growth Turned Negative In November

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Multifamily Rents ‘Hit the Brakes’ in September

Rental Price Drops Around The Country

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