Rent growth hit a record high for the first quarter, according to Yardi Matrix, as multifamily rents surged again in March.
However, concerns about the economy going forward show the potential for headwinds to rent growth and inevitable decline in some markets.
“Demand is expected to remain healthy, but rent growth is likely to decelerate as concerns grow about the economy. Inflation is moderating slowly, and rising rents and energy prices may keep it elevated longer than expected,” the report says.
Here are highlights from the report:
Multifamily performance was strong once again in March, though rent growth has decelerated slightly from 2021 levels. The average U.S. asking rent rose $14 in March to an all-time high of $1,642, with year-over-year growth dropping 50 basis points to 14.8 percent.
Asking rents increased by $34 nationally, up 2.1 percent, in the first three months of 2022, which is record growth for a first quarter. However, rent growth is unlikely to keep pace with 2021, as last year’s explosive movement started in the second quarter. Plus, economic growth is set to slow as inflation takes hold and the war in Ukraine pushes energy prices up and creates an element of uncertainty.
Rents for single-family rentals continue to rise, though the rate of growth is decelerating. The average U.S. rent rose $14 to $1,999 in March, while year-over-year growth dropped 90 basis points to 14.1 percent.
“The big picture that emerges from March multifamily data is that the market remains healthy, though signs point to the inevitable deceleration in some markets. Meanwhile, economic conditions and global events contain headwinds that justify the expectations of moderation and caution,” Yardi Matrix writes in the report.
Rent Growth Continues Strong in the Southwest and Southeast
Rent growth continues to be a national phenomenon, led by the migration to the Southeast and Southwest. The top five metros—Miami, Orlando, Tampa, Las Vegas and Phoenix—all showed asking-rent increases of 23 percent or more.
“Demand for housing continues to be robust, led by young workers whose rapidly rising wages provide the wherewithal to form independent households apart from parents and roommates.
“Household growth and absorption are likely to slow to more normal levels in 2022, to about half of last year. That would presage healthy—albeit more moderate—gains in multifamily fundamentals,” the report says.
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.
A landlord wants to know what to do if tenants lie about having pets in her rental property is the question this week for Ask Landlord Hank. Remember Hank is not an attorney and he is not offering legal advice. If you have a question for him please fill out the form below.
Dear Hank:
What can I do when tenants lie about having pets?
-Rachelle
Dear Landlady Rachelle,
This issue goes back to your lease.
Many leases have a clause that deals with pets along these lines: Tenants shall not keep any animal or pet in or around the rental property without LANDLORD’S prior written approval and a pet addendum attached and made part of this lease.
As you know, pets can be destructive to your property and I’m sure that is why you don’t allow a pet. I would get photographic proof that the tenant has a pet and then put a 7-day notice on the door. That is a legal notice that lets the tenant know they are in serious violation of the lease and has 7 days to “cure” or fix the violation by getting rid of her pet or pets – or you will file an eviction.
Don’t be soft here, or accommodating, as this could be the tip of the iceberg as far as violations of the lease is concerned. Best of luck!
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/
Landlord Hank says, “I would get photographic proof that the tenant has a pet and then put a 7-day notice on the door.”
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.
Choosing the right flooring for your rental property gives you several important options to consider so here are six things to look at for your property flooring.
By Lillian Connors
Choosing the best flooring for your rental property differs greatly from going with your personal preferences. It’s very different from furnishing your own home.
Rental spaces face a lot more wear and tear. Many tenants don’t take care of the flooring as the owner would. In addition, you’ve invested in the rental to make money. The choice of the floor should follow the line. In short, an ideal rental flooring needs to be affordable, durable, and low-maintenance. Too it must be easy to install and aesthetically pleasing. Let’s review the options.
No. 1 – Affordability
The cost of a new floor depends on three factors. These are the cost of material, the cost of installation, and cost of maintenance. Just like with every kind of product, there are high-end and low-end versions of each type. For the greatest part, the floors that lean toward the affordability end of the scale include tile, cork, wood tile, vinyl sheets, vinyl tile, laminate and linoleum.
No. 2 – Ease of maintenance
A floor that is easy to keep clean and good-looking is the one that doesn’t need regular maintenance, such as waxing, oiling, or buffing. This is an important consideration for a rental property. There are tenants who completely forgo regular maintenance. In addition, maintenance often requires that all furniture is removed from the room, which means the best time to do it is between tenants. This increases your workload at tenant turnovers. As the ease of maintenance is concerned, the list goes like this: engineered hardwood, cork, vinyl sheets, vinyl tile, laminate and linoleum.
No. 3 – Aesthetics
Naturally, your primary goal is to rent your unit easily. So the aesthetic aspect of your floor needs to go hand in hand with the affordability and ease of maintenance. For a more cohesive, upscale look, it’s always recommended to go with the same flooring throughout the unit, except the bathroom and the kitchen. Bathrooms and kitchens require water-resistant flooring. In addition, having the same flooring in the entire apartment helps it look bigger and more up-to-date. On the aesthetics side, the winners are vinyl tile, laminate and linoleum. Let’s look into each option separately.
Three types of flooring for your rental property
Linoleum hues and patterns extend down through the wear layer, so there is no risk of fading or discoloring.
No.1 – Vinyl flooring
For many landlords, vinyl is an absolute favorite, not only because it comes in tile, planks or sheets, but also due to the fact that it resembles raw materials. Also, vinyl floors are highly water-resistant, which makes them suitable for kitchens as well. Another bonus is the fact that it doesn’t require prepared subflooring, which makes the installation easier. If you decide to go with contemporary vinyl planks, you’ll be surprised by the amazing range of natural looks of wood, stone and ceramics, now made possible with 3D printing techniques.
No. 2 – Wood laminate flooring
Another affordable option, wood laminate is easy and quick to install. Unlike vinyl, however, it’s best that you apply a tough finish layer to protect the floor from fading, staining or premature wear from traffic. As a cost-effective hardwood alternative, laminate floors are an ideal option for landlords on a budget who believe in the undisputable charm of wood floors.
No. 3 – Linoleum
From its invention in the mid-1800s to the early 1950s, linoleum was among the most popular flooring materials in the world. This naturally sourced material has anti-static properties that prevent dust particles from sticking to its surface, while its anti-microbial properties make it a popular choice for kitchens and kids’ rooms. Although early forms used to be much more brittle, manufacturing processes (along with watertight installation) have made this durable material popular again. On the aesthetic side, its hues and patterns extend down through the wear layer, so there is no risk of fading or discoloring.
The maintenance checkup this week, provided by Keepe, looks at 7 types of kitchen countertops for your rental properties and apartments and which works best for you.
Appliances aren’t the only thing that can make or break an apartment property’s kitchen: countertops take up the majority of the kitchen space, affecting the look and feel of the room but also its functionality.
In most cases, property managers and landlords tend to opt for countertop materials that either look appealing or that are most affordable or easy to repair. While this is understandable, it is important to keep in mind that the best kind of home design – from furnishing and decor to basic construction – should aim to thoughtfully combine aesthetics, practicality and affordability. The following guide reviews the qualities of common countertop materials and their pros and cons to help you choose the best material for your kitchen countertops.
7 Types Of Kitchen Countertops For Your Apartments And Rental Properties
Quartz (or Engineered Stone)
According to the National Kitchen and Bath Association, man made quartz (not to be confused with natural Quartzite) is now the top selling material for kitchen surfaces.
This is likely due to the fact that it is more stain and scratch-resistant than granite, the second most commonly utilized material. Quartz is made by combining mineral fragments with heavy-duty resins. It is durable and chip resistant, and it’s fairly priced at slightly above granite but still below marble. It’s also considered to be environmentally-friendly as it is created by combining waste stones and not mined. Overall, quartz is functional, affordable and practical. The only downside to note is that some people find the look of quartz to be too uniform, which can miss the mark for those who like the natural irregularity of marble; this being said, new improvements in manufacturing technologies have actually allowed quartz production to become more advanced and create more sophisticated patterns.
Granite
Granite is a natural stone, which is appealing for those preferring its naturally occurring, more variegated look.
Granite is not as durable as quartz, but it is still scratch, stain and chip resistant. Manufacturers explain that darker-colored granite is denser, which increases its durability due to the fact that it is less permeable. For this reason, lighter-colored varieties might require sealing procedures, which also means that those varieties are going to be more demanding when it comes to upkeep over the years.
Marble
Marble is a timeless favorite when it comes to kitchen countertops because of the way it adds a unique touch of elegance.
Marble is also fairly affordable – often being considerably cheaper than quartz and granite – and is widely available, which makes repairs and maintenance easy. Additionally, those who are passionate about cooking, baking and particularly pastry-making are drawn to marble’s naturally cool temperature. Unfortunately, marble is quite porous, which makes it vulnerable to scratches and permanent staining. Opting for marble countertops means having to be very careful and mindful of which foods and condiments one might want to avoid exposing marble to, and always ensuring that surfaces are thoroughly cleaned.
Solid Surface
Solid surface is specifically made to resemble natural stone while being actually composed of artificial polymers and resins that are mixed with mineral dusts.
This makes solid surface affordable and easy to maintain, requiring no sealing procedures and with most technicians having access to readily available materials for replacements and patch-repairs. Unfortunately, solid surface countertops are vulnerable to high heat and scratches: manufacturers encourage paying close attention to what the countertops are exposed to, especially when it comes to sharp tools or hot cookware. Generally, scratches and surface damages can be repaired by buffing the surface, but this implies having to hire a technician on quite the regular basis.
Tile
Ceramic tiles are easy to replace when broken or damaged, and allow for plenty of customization.
One of the main downsides to ceramic tiles is the grout in between them, which tends to easily collects dirt and stains that are often hard to successfully clean off. While they’re easy to replace, it can be easy for tiles to exhibit chipping and cracking over time as a result of accidental impacts. Tiles are generally covered with a glossy protective enamel that can rub, chip or fade off over time, which is why it’s best to avoid aggressively scrubbing the tiles.
Laminate
Laminate became quite popular during the 1960’s and 70’s, when the idea of “plastic everything” started taking over.
Laminate is created by layering sheets of paper and resins, with pressed Kraft paper layers (the same paper material as grocery bags) being the most common: it is inexpensive and extremely easy to replace on a tight budget. However, the advantages of low costs come with a series of disadvantages: laminate melts and scratches easily, and overall, opting for laminate countertops does not add value to the property. Laminate cannot be recycled and its production features the use of numerous chemicals, making laminate not very “green”.
Butcher Block
Butcher block countertops bring the warm and rustic look of natural wood to the kitchen.
To make butcher block countertops, thick slabs of wood – generally maple, bamboo, cherry or red oak – are assembled with heavy-duty glue, and their different arrangements create different surface patterns. Butcher block is very difficult to care for as experts recommend avoiding covering the wood with sealant, to both maintain the natural look of the wood but also to avoid exposing food to the chemicals used for sealing.
The issue with having unsealed wood is that discoloration and even rotting can be very likely to happen due to water and moisture exposure. To best protect the wood, butcher block surfaces need to be oiled every six months: manufacturers warn against taking the “DIY” route as many have damaged their countertops by opting for cooking oils, instead encouraging the scheduling of regular oiling procedures by professional technicians. Even when oiled, wooden countertops are not scratch or heat proof: very minor damages can be fixed by sanding the wood and re-oiling the area – again, a procedure that is best left to professionals. Over time, they will develop a natural patina: some really enjoy the look of “aged” wood while others do not, so it’s important to keep this aspect in mind.
Other recent maintenance Keepe posts you may have missed:
Keepe is an on-demand maintenance solution for property managers and independent landlords. The company makes hundreds of independent contractors and handymen available for maintenance projects at rental properties. Keepe is available in the Greater Seattle area,
Here are three steps to becoming a successful “lazy” landlord that you can implement starting today to begin the process of transforming your management style.
On my first trip to the doctor’s office this year I went through that painful experience that we all must endure… updating my personal and health information. My brain immediately goes into shut down mode as I am trying to conserve the calories that my mind is going to consume filling out paperwork. I profess to the receptionist that nothing has changed but she insists they need t for “their files.”
Reluctantly, I sit down with the plastic clipboard and begin to slog through the same questions I filled out last year. Name, Date of Birth, Insurance Info (didn’t you just take a copy of my insurance card?) and a complete health history later, I flip the paper over and realize they want all this information again on the next page. My pace quickens and my handwriting worsens as I go into the “power through it” mode.
Finally, with the completed packet in hand I return the information to the front desk and sit down waiting for my name to be called. It’s enough to make me forget why I am even there in the first place. It reinforces this truth; when you don’t Like to do something, you don’t do it right.
Then my mind starts thinking, there must be a better system, a better way, to make this process less painful and feed my need to thrive and not just survive. Let’s face it, most of us want to take the easy or lazy way when it comes to moments like this. Then when I step back and look at how we as landlords handle our own paperwork and process, I see some of the same stumbling blocks in the way we do things. The big difference is, I know there is a better way because I use Rent Perfect every day.
There are three major tools that every landlord can implement starting today to begin the process of transforming their management style to that of the “successful lazy landlord.”
Tool #1- Check your checks
At a bare minimum, every application you receive for a potential tenant should include a thorough check of each applicant’s identity, credit, criminal, and eviction history. Just like your favorite weatherman, we forecast the future by examining the past.
Identity- How sure are you of the identity of the person applying for your property? It’s easier than ever to fabricate your identity, create fake social security cards and identification documents. If you don’t really know who is applying, how could you possibly trust the results of any future behavior?
Credit- The financial past of your applicant is usually indicative of their future behavior. Few things impact a person’s decisions more than their financial strains, so knowing how your applicant has behaved in the past is a great indicator of how they will honor their commitments to you moving forward.
Criminal- While the courts across the country continue to soften their stance on criminal behavior, does that mean you should do the same for your applicants? Statistics show that over 90 percent of offenders have repeatable criminal habits that don’t go away. And guess what, criminals tend to hang out with others who are involved in criminal behavior. Actively protecting your investment property should always include a criminal background check of EVERY applicant on the lease.
Eviction- Although the courts have tried to make this more difficult, there are still ways to see if your applicant has a history of leaving their landlord high and dry. An applicant with more than one eviction should be a red flag to you to exercise great caution when considering them as a tenant.
The more you can know about the past, the better decision you can make to find success in the future.
Tool #2- Throw away the manila folder!
And while you’re at it, toss that big metal filing cabinet too. Gone are the days of processing paper applications and leases. It’s time to embrace the digital world in regard to being a “successful, lazy landlord” as you can now manage everything right from your favorite device.
Online applications- In the past, I would collect a paper application from an applicant and then go to my office and spend hours taking their written information and re-entering it into a word processing program. I was operating more like a data entry employee than a landlord. Programs today allow the applicant to login, supply the required information, and complete the application process all on their own. All I have to do is go and review their supplied info.
Lease- After you have collected all their information digitally, it is simple to take that information and add it to your leasing documents, with many programs being able to automatically generate a lease at the click of a button. Again, not having to re-enter all of this information is a huge time and energy saver.
Move-In Inspection Process/Pictures- With a digital move-in inspection process, your tenant can document the condition of the property exactly as it was at time of possession. No more guessing or relying on memories at the end of a lease; you have it fully documented and stored for easy access and comparison.
The days of gathering and keeping track of paper throughout the entire rental process are over. Toss that manilla folder and embrace technology in your quest of becoming a “successful, lazy landlord.”
Tool #3- Make Collecting Rent Easy
There’s nothing a landlord loves more than seeing the rent paid in-full and on-time every month. Technology has made it easier than ever to make this process seamless for the landlord. Find the right technology partner that can help you in the following ways:
Send upcoming rent notices- Your rental collection program must be able to begin notifying your tenant of rent due at least five days in advance. Ideally, they should receive a reminder that your rent is due in five days… your rent is due in four days…etc. Take away the excuse from your tenant that they “didn’t know” ever again.
Receive rent right into your bank account- Rid yourself of running to the mailbox in hopes of finding that rent check. Have the funds directly deposited into your account.
Automatically track late fees and payments- No one wants to be the nag when it comes to getting paid. The right program will track late fees, send “late rent’ notices automatically, which frees you up to do other things. Collect and track payments to ensure you are getting the rent and late fees paid in full.
This step in becoming a “successful, lazy landlord” might be the most critical as you collect rent 12, 24, 36 or more times every month for the term of the lease.
I invite you to step back and look at your current practices from both the landlord and tenant perspective. Are there tweaks you can make that will benefit both you and your tenants in terms of making the process a little less painful for both of you. Nobody wants to just survive as a landlord and by putting some of these tools into practice, you’ll see your business (and you personally) thriving in no time.
About the author:
Scot Aubrey is Vice-President of Rent Perfect, a private investigator, and fellow landlord who manages short-term rentals. Subscribe to the 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.
Property management software is changing the way that landlords, property managers, and real estate investors do business–and it’s all for the better. With powerful software solutions at their fingertips, real estate stakeholders streamline their operations, get more done in less time, and grow their businesses by working smarter, not harder.
David Bitton is the co-founder and CMO of DoorLoop, the highest-rated property management software online. We got together with him to explore the many ways in which property management software solutions are working wonders for real estate businesses.
David Bitton, DoorLoop CMO and Co-Founder.
We talked about how software addresses the most important obstacles faced by property managers, which features are the most useful and why, and the qualities every real estate business should look for in order to choose the right software. Take a look at David’s (often surprising) insights below.
What are some of the most important issues that property managers and landlords experience today?
Managing any number of properties means having to stay on top of dozens (or even hundreds) of tasks, requests, and deadlines all at once. Without some way to streamline and complete all of these tasks in a timely manner, it becomes extremely difficult to achieve scalable, sustainable growth.
Managing leases and tenants is difficult on a good day, and it becomes even more so when issues arise. Some of the most common issues we’ve seen landlords and property managers experience with their tenants include:
Not being paid rent on time (or in full)
A lack of adherence to community rules
Submitting insufficient information on maintenance requests
Broken lease terms, especially when it comes to ending a lease or vacating the unit.
How can a rental property management software solve these issues?
Most property management companies and landlords use a bunch of different systems to run their businesses: QuickBooks for accounting, DropBox for file sharing, Excel for tenant rosters and deadline management, and maybe Asana or Trello for task management.
The most useful thing about a comprehensive property management software is that it has all of those functionalities–and more–in one place. Instead of shuffling between browser tabs or desktop apps to get daily tasks done, users can complete their tasks in seconds and store all of their data in one place.
Here are some easy but massive benefits of property management software that solve most business’ biggest issues:
Automated payments – You can get paid automatically and on time every month when you offer your tenants the option to pay their rent and recurring fees online via credit card or ACH payment. If someone happens not to pay in full, you can add automated late fees at intervals of your choosing. You can also track upcoming, due, and overdue payments right from your software dashboard.
Streamline maintenance requests – Streamlining maintenance requests (and addressing them in a timely manner) is a major pain point for thousands of property managers. With software, you can automatically accept maintenance requests from your tenant portal. Then, you can create work orders, assign them to vendors, and track every step of their process to make sure everything is done on time.
Lease alerts – You don’t have to count on your tenants to notify you about lease renewals or unit vacancies. Instead, you can set up automatic alerts for yourself and your tenant about upcoming lease expirations and renewals. This will help you make sure you always know who is occupying your units and when.
There’s an undeniable pattern when it comes to the biggest issues rental property managers experience: miscommunication. When you use a bunch of different platforms to manage your properties, important tasks or details are bound to fall between the cracks. This leads to disappointed tenants, inconsistent occupancy rates, and poor reviews.
Miscommunication is a serious issue for landlords and property managers, but it’s also one that can be resolved easily with the right systems and software.
What portfolios are supported?
Every software is different, but the majority (and, in my opinion, the best ones) support any type of portfolio–including mixed-use portfolios. This includes:
Residential properties (single-family homes, condos, apartments, senior living facilities, and other options)
Commercial properties (office spaces, retail storefronts, medical spaces, etc.)
Student housing (dorms, student apartments, and more)
Manufactured homes (also known as mobile homes)
Affordable/Section 8 housing
Self-storage facilities
Community associations and HOAs
Who can (or should) use property management software?
It doesn’t matter if you manage 1 unit or 1,000; property management software is an incredibly useful tool to help you get more organized, spend less time on administrative tasks, eliminate double data entry, and grow.
With that said, I’d say the professionals who benefit most from property managers are landlords (or investors who manage their own properties), property managers who manage properties for other owners, and property management companies with several clients.
What does the future of property management look like?
That’s the big question! I wish I could glimpse into the future and provide a surefire answer, but the truth is that nobody knows for sure. What we do know is what data tells us–especially when it comes to the huge amount of money that private equity investors and venture capitalists are dedicating to property management software. That alone bodes extremely well for the future of property management software.
Over the past decade or so, there’s no denying that we have collectively sought out automation tools at higher and higher levels. From simple every-day tools like the “Reminders” app on our iPhones to powerful tools that save major companies millions of dollars every year, getting things done in less time is the bread and butter of technological innovation.
When it comes to property management software, automation can help you dramatically cut down on time spent on administrative tasks. Some of those automation possibilities include:
Maintenance requests. Automatically receive requests from tenants. Create workflows for each type of maintenance request that you can easily apply to specific work orders. These workflows will include all of the tasks associated with the project, the vendor responsible for the project, and the urgency level. From there, the software will automatically track each step of the process until the job is done.
The entire rental process. You can list your properties on a custom website, receive applications from tenants, run background checks in one click, select the tenant of your choice, send them a lease, collect eSignatures, and set recurring payment deadlines–all in one place.
Another crucial piece of the puzzle that goes hand-in-hand with automation is artificial intelligence. It seems like you can’t throw a metaphorical rock on the Internet without hitting a think piece about how AI is shaping our future–and that’s for good reason.
When it comes to property management software, AI is an incredibly powerful tool. With AI, computers use data to run all kinds of projections and predictions. The more data you have in one place, the more accurate these predictions will be. AI in property management software, for example, can help you determine critical elements of your business, including:
How much to charge for rent based on your location, property size, and market demand
Which applicants will make the most reliable tenants for your property
Which tenants are likely not to renew their leases or even cancel early
Property management software is perhaps the most powerful tool available to real estate property managers and landlords right now. If I had to guess, I’d say that its usefulness will only continue to grow in the future.
What is DoorLoop, and how does it help property managers and landlords?
DoorLoop is the easiest-to-us property management software (and I may sound biased when I say that, but our five-star reviews don’t lie).
We believe that property management software should be stacked with a full suite of powerful features–but, at the same time, that those features are useless if they’re difficult to access and implement. That’s why we’ve spent so much time making the software as user-friendly as possible.
Though we work hard to make sure you don’t really need it, we also have a responsive, world-class Support team to help our users every step of the way.
Everything I talked about in this article is featured on DoorLoop, and the best way to see them at work is to set up a demo with us. You’re also welcome to reach out to us if you have any questions before taking that step.
Our team of Loopers is pretty amazing (again, I may sound biased, but I stand by that statement). If you let them know you came from Rental Housing Journal, we’ll get you set up with a special deal.
If you couldn’t already tell, I’m super passionate about helping real estate businesses become more efficient, effective, and successful. If you have any questions about the tools I mentioned above or simply want to talk about automation strategies, please don’t hesitate to contact us!
Landlords need to carefully consider all the options for protecting their rental property and thus their income – which will most likely require a different kind of insurance than a typical homeowners policy. Also called rental property insurance, landlord insurance is a very sensible investment for property owners, whether they’re only looking at a series of short-term rentals for a single-family unit or long-term rentals for a large apartment building.
A landlord’s insurance policy covers a variety of situations, including paying for the replacement cost of the building in the event of a fire as well as legal fees if a tenant sues for damages. Provided that it is considered a covered loss, an insurer will provide funds according to the amount of coverage a landlord selected.
Determining if you should get a landlord insurance policy is something that most first-time rental property owners will debate. Lenders will often require this type of insurance before lending the money necessary for purchasing a rental property.
If the property is your primary residence, you’ll need a homeowners insurance policy. If you’re renting it out, you’ll need to buy landlord insurance.
Homeowners Insurance
This insurance is only for your primary residence and covers the building and covers personal property damage, liability, and a few other things. See also Incidental Occupany.
Landlord Insurance
Specifically, for property owners who plan on renting out a family home, apartment, or condo for an extended period and covers damages for events such as fires, burst pipes, or some natural disasters. Landlord insurance will also provide liability protection if a tenant or guest sues, and the property owner needs to pay for legal fees or medical expenses.
Generally, a landlord insurance policy costs about 25% more than a homeowners insurance policy for the same property. This might sound like a large price increase when compared to homeowner insurance. But insurance providers can deny you a claim if you are renting out your property and do not have the appropriate insurance coverages provided by landlord insurance. The upside is that you are permitted to make a tax deduction for the entire landlord insurance premium for your rental property. The IRS considers this a normal business expense when renting out real estate.
Some people own real estate in their own name and manage it personally, then claim the expense on their personal tax returns. Others choose to hold property in an LLC as a business entity. Either way, all insurance premiums associated with the rental property are tax-deductible.
Landlord Insurance providers like Steadily offer online landlord insurance in minutes, making the process simple, easy, and affordable. You can get a quote with coverage as early as the next business day. With national coverage and service for all types of properties – single family homes, condos, apartment buildings, vacation rentals, Airbnbs, and more. With landlord insurance, you can focus less on claims, and more on what matters: growing your rental property business.
About the author:
Datha Santomieri is the co-founder and vice president of Steadily, a national insurance agency focused on providing a tech-forward experience for landlords to secure a quote for their properties within minutes. Before founding Steadily, Datha spent ten years at Brown & Brown in the National Programs Division leading operations and implementing key programs and acquisitions. Her early career was spent in GEICO’s management training program in Lakeland, FL. Datha studied at Richmond American International University in London and American University in Cairo before graduating from the University of Tampa. She is a CPCU and a CIC, so she loves to talk insurance.
How does Delaware Statutory Trust Syndication benefit investors?
Why Real Estate Syndication via a DST can potentially reduce risk for investors*?
What is the Portfolio Optimization and Diversification Theory?
How real estate syndication and DST investments can help investors access larger real estate assets?
Delaware Statutory Trust 1031 exchanges have never been more popular, and one of the reasons behind this growth and investor appeal is the power and flexibility of real estate syndication. Real Estate syndication is a major underlying principle for how a Delaware Statutory Trust 1031 investment is structured, and why they continue to grow as an alternative investment for accredited investors.
“A lot of people still don’t know about the potential benefits of the 1031 DST syndication structure. Last year, we helped our clients complete more than $600 million of equity investments in these 1031 DST vehicles,” explained Dwight Kay, the founder and CEO of Kay Properties who is a prolific author on the subject including authoring multiple white papers and what some consider to be the first book ever published on the subject.
What is Syndication and How Does it Work within the Real Estate Investment Arena
Generally speaking, syndication is the process of organizing a group of individual investors or an organization for the purpose of collectively investing in an asset that requires a significant amount of capital. When applied to the world of real estate investments, syndication refers to the process of organizing a collection of investors to combine their financial resources in order to purchase one or more real estate assets. Real estate syndication means investors are issued beneficial interests or shares of real estate. Profits and losses are usually split according to their respective percentage ownership interests.
The concept of syndication is especially relevant when discussing Delaware Statutory Trusts because not only do DSTs qualify for 1031 exchanges as outlined in Revenue Ruling 2004-86 of the Internal Revenue Code Traditional 1031 exchanges often involve a sole investor exchanging investment real estate into another like-kind real estate asset. A Delaware Statutory Trust 1031 exchange allows multiple investors to own real estate for their 1031 exchange or cash investments. In addition, unlike other group investment structures such as Tenant in commons (TICs) which limit the number of investors to 35, DSTs allow for a much higher number of investors (typically up to 499 investors), creating an ideal choice for investors who want to access larger and potentially more diverse real estate assets.
What are the Benefits of a Delaware Statutory Trust Syndication?
Benefit #1: Passive Ownership
One of the most attractive aspects of DST 1031 exchange investments to many investors is that they eliminate the challenges associated with active ownership and management. In DST investments, a sponsor creates the DST and has the responsibility of managing the entire business and assets of the trust. These responsibilities can include the following:
Underwriting the real estate deal
Conducting all the due diligence on the property (ies)
Arranging the necessary financing – although some DST 1031 investments are debt free with no loans on them
Creating a business plan for the property (ies)
Finding a property management team.
Coordinating investor relations and potential monthly distribution checks to investors.
In this way, the Delaware Statutory Trust syndication provides investors a passive ownership structure.
According to Kay, in exchange for giving up active management, the passive investor of a DST 1031 property will typically receive 100 percent of the pro-rata portion of any potential principal pay-down from the loan on the property, thereby potentially building equity. In addition, DST 1031 properties are structured so that the investors in the DST receive 100 percent of their pro-rata portion of the potential rental income generated by the property’s tenants.
“Furthermore, although appreciation is never guaranteed, DST 1031 investors receive 100 percent of their pro-rata portion of any potential net appreciation of the property over the hold period,” said Kay.
Benefit #2: Access to Larger, Institutional Grade Assets
Another attractive element for investors of syndicated Delaware Statutory Trust 1031 exchanges is that they provide investors within the trust the opportunity to access large, institutional grade real estate assets that would otherwise potentially be outside of an individual investor’s price point. With a typical investment minimum investment of $100,000, individual investors in a DST can purchase an ownership interest in large industrial distribution centers, medical buildings, self-storage facilities, and even large $50 million-plus apartment communities. In this way, the syndication structure of Delaware Statutory Trust 1031 exchanges allows investors to access a level of real estate that they oftentimes would not have been able to buy before.
Benefit #3: The Potential to Reduce Risk Through Greater Diversification*
A third advantage of the Delaware Statutory Trust syndication structure compared to a normal 1031 exchange is that it increases the ability of investors to invest in multiple properties, thus potentially reducing individual risk. Beyond the ability to allow investors to participate in multiple investment properties, DST syndications also allow investors to invest in multiple asset classes (multifamily, commercial buildings, self-storage, medical facilities, industrial distribution centers, etc.) as well as in multiple geographic locations. Portfolio optimization and diversification was first recognized by Nobel-Prize winning economist Harry Markowitz, and continues to be one of the most proven economic theories for success today, including its application in Delaware Statutory Trust 1031 exchanges. * It is important to note however that diversification does not guarantee profits or protection against losses and that investors should read each DST offerings Private Placement Memorandum (PPM) paying attention to the risk factors prior to considering a DST investment.
Obviously, as with all forms of real estate investments, there is an underlying level of risk that investors should be aware of including things like economic downturns, vacancies, tenant repairs, etc. Investors should not invest in DST investments or real estate syndications if they are unable to sustain the loss of their invested principal.
Benefit #4: Ability to Work with and Learn from Syndication Experts
Commercial real estate investing requires years of experience and lots of resources. Even for experienced investors, the ability to source, inspect, underwrite, and close on large institutional properties within a 1031 exchange timeline is often beyond their reach. However, for Delaware Statutory Trust syndications, the investor can work with highly specialized team members at Kay Properties & Investments. Kay Properties is a national Delaware Statutory Trust expert advisory firm. They have created the www.kpi1031.com platform that provides investors access to the marketplace of DSTs from more than 25 different DST sponsor companies. In addition, they have custom DSTs available only to Kay Properties clients and provide investors independent advice on DST sponsor companies as well as full due diligence and vetting on each DST investment.
About Kay Properties and www.kpi1031.com
Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com 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 150 years of real estate experience, are licensed in all 50 states, and have participated in over $30 Billion of DST 1031 investments.
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 read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily 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.
Ask Bill Exeter
Ask Bill Exeter and his team your questions about 1031 exchanges and he and his team will get back to you.
Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. Securities offered through FNEX Capital , member FINRA, SIPC.
About the Author:
Matthew McFarland
Matthew McFarland is vice president and DST 1031 specialist with Kay Properties & Investments, where he works out of the Kay Properties’ headquarters in Los Angeles, helping clients with their 1031 exchanges and direct investments.
Prior to joining Kay Properties, Matt worked at a national commercial real estate tenant representation firm where he helped national firms find Class A and Class B space in commercial office, industrial, and flex spaces throughout Southern California.
Since joining Kay Properties, Matt has participated in over 1,000 transactions and over $6 Billion worth of real estate. Matt works hand in hand with all the Kay Properties’’ Senior Vice Presidents, educating clients on what particular investments make sense for their situation.
A graduate of the University of California, Los Angeles, Matt holds a Bachelor of Science in Physiological Science from the UCLA Department of Integrative Biology and Physiology.
Respected economist Jay Parsons says science and history show why rent control does not work and hurts the affordability of rental housing.
In a long Twitter thread, Parsons says, “Lots of articles of late are saying things like ‘rent control remains rare due to landlord opposition.’ This is very misleading. Sure, landlords oppose it. But who cares? More importantly: The SCIENCE of economics opposes rent control. And history, too.
“It’s disingenuous to say, ‘landlords argue rent control reduces supply and backfires on low-income households.’ Science and history show us the facts, and that’s more important than whatever landlords say,” Parsons explains. You can follow him on twitter @jayparsons. Here is what Parsons writes:
Rent control is rare because history shows us it doesn’t work as intended. Rent control is a short-term fix for current residents, at expense of long-term affordability for a much broader population. This from a Stanford economist.
You might argue: We’ll exempt new construction from rent control, so it’s OK! But the science says otherwise.
The science of economics also tells us that rent controls not only limit new supply, but also lead to removal of existing supply, New York being a case in point.
That science also tells us that rent control provides benefit to a share of households but at enormous cost, one being inability to fund maintenance. Rent control often leads to poorly maintained, outdated housing — and battles between tenants and landlords over upkeep.
One important note that is often overlooked: Rent control primarily benefits wealthier households who do not need the benefit. Case in point: Former NYC Mayor Ed Koch for decades kept a $475-a-month bargain in high-end Greenwich Village, which meant he (and many others) received benefits others need more — which means wealthier households are either squatting in affordable units or squandering benefits that could otherwise be spent on lower-income households in need.
Historically, price controls in the United States were associated with the Soviet Union– which made it a “red flag” for many Americans. For Soviets, price controls led to severe supply shortages, a runaway black market and depression… but three decades later, memories and lessons are fading.
Rent-control proponents point to Europe as models, but fail to point out the resulting disaster of a supply shortage. Read this quote from an economist in Sweden: “Five percent of the entire population is on a waiting list for a rental.” Wow!
In Toronto, rent controls sharply reduced new construction to only pricey units and gave way to a surge in for-sale condos as “shadow” alternatives, bought by small investors and rented out individually, ultimately making affordability worse.
In Cambridge, Mass., research showed the city benefitted from the removal of rent controls in the 1990s. A Harvard professor noted more supply, more maintenance/upgrades, and less crime.
In an IMG survey of economists, only two percent said rent controls in places like New York and San Francisco have had a positive impact on affordable housing.
Opposition to rent control is not a partisan issue. Economists on both sides of the aisle oppose it, from right-wing Milton Friedman to left-wing Gunnar Myrdal (both Nobel winners).
Myrdal stated: “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.”
The science of economics tells us the best solution to affordable housing is supply. Harvard’s Ed Glaeser: “The most natural tool towards affordability is supply, and to make sure that we are making it easy enough to build moderate-cost rental-apartment buildings in these cities.” But not ironically, most cities with rent control or that are seriously discussing it are themselves guilty of making it way too difficult to build housing– which makes what does get through more expensive.
Direct subsidies to lower-income renters are also effective in solving housing access issues without distorting supply, yet they’re underfunded at every level and too often entangled in red tape.
In summary, Parsons says, “Rents have kept up with incomes in market-rate apartments, which is why rent control is mostly a misallocation of resources to wrong households. The root problem is underfunding and undersupply of affordable housing by governments at every level.”
About the author:
Jay Parsons serves as vice president and head of economics and industry principals for RealPage. He is a frequent author and speaker on topics including rental housing investment and asset management strategy, rental housing policy issues, risk management and property management – covering apartments and single-family rentals.
Even though rents are growing more slowly than in 2021, national rent growth was picking up in March as rents were up 0.8 percent over the previous month, according to the latest report from Apartment List.
Over the first three months of 2022, rents have increased by a total of 1.8 percent, “but we’re just beginning to enter the busy season for the rental market, when the bulk of annual rent growth typically occurs,” write Chris Salviati, Igor Popov, Rob Warnock, and Lilla Szini in the April report.
Rent growth has slowed down notably since last summer, “but it still appears that we’re on track for another year of above-average growth.”
With the exception of December, rents continued to trend upward through the winter slow season, and “growth is now accelerating as we enter the spring and summer months, when rental activity is normally at its peak. Even if prices don’t rise as rapidly as they did in 2021, we’re already seeing signs that this year will continue to bring rent growth well in excess of the pre-pandemic trend,” the report says.
Vacancy rate continues upward
The vacancy index shows that rental market tightness is continuing to ease.
“Our vacancy index has now slowly ticked up for seven consecutive months and currently stands at 4.6 percent.
“Although the recent vacancy increase has been modest and gradual, it represents an important inflection point, signaling that tightness in the rental market is finally beginning to ease. However, the vacancy situation still remains historically tight.
“Over the past seven months, our vacancy index has been increasing by an average of 0.1 percent per month. If that pace continues, we won’t hit a vacancy rate of 6 percent – the pre-pandemic norm – until next summer. Nonetheless, the gradual increase in vacancies in recent months has likely been contributing to the slowdown in rent growth,” the report says.
Summary
“As we enter the spring and summer months, rental activity is likely to pick up, and rent growth is likely to accelerate.
Despite a recent cool-down, many American renters are likely to remain burdened throughout 2022 by historically high housing costs,” the report says.
