Rent growth has continued to slowly decline, but demand remains strong and vacancy rates have stayed low, Yardi Matrix says in their November national report. The report expects conditions to continue to be favorable, especially for multifamily.
“Coming out of the worst of the pandemic, the multifamily market experienced eight straight months of exceptionally high rent growth, with the average U.S. multifamily asking rent rising about $180 between March and October.
“A slowdown is inevitable, and it started in November, when the average asking rent rose ‘only’ $4. Even so, the market remains healthy,” Yardi Matrix writes in the report.
Highlights of the November report:
Multifamily rents rose again in November, but only slightly, as the anticipated deceleration in rent growth finally appears to be taking hold. The average U.S. asking rent increased by $4 in November to a record-high $1,590.
Nationally, asking rents were up 13.5 percent year-over-year in November, a slight increase over October.
Demand continues to be extremely high, with the average U.S. occupancy rate of stabilized properties maintained at 96.1 percent in October, up 1.4 percent year-over-year.
Also remaining hot is the single-family rental market, with rent growth up 14.7 percent year-over-year in November. Although the single-family rental market is more varied than multifamily, occupancy rates rose 0.6 percent nationally year-over-year through October.
Job growth and apartment supply were normally the primary economic indicators before the pandemic. However, many typical indicators of growth are now mixed, according to the report.
“The point isn’t that traditional measures of analyzing multifamily fundamentals are no longer relevant. Economic growth, cost, the regulatory environment and attractive lifestyle amenities will always be determinants of the demand for housing.
“That said, the disruption of the pandemic and social changes that it caused have created some nuances that shouldn’t be ignored when underwriting multifamily investments over the next few years,” Yardi Matrix says in the report. 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
It’s a great feeling when you sell some stock, a piece of real estate or the business you’ve poured your life into for a nice profit that puts a small fortune into your bank account. But then comes the tax bill to take a little bit of the bloom off that rose. It’s downright painful to hand your hard-earned money over to the government — even at the reduced capital gains rate.
The good news is, every now and then, the feds are willing to cut you a break. And there’s one tax break a surprising number of investors have never even heard of, let alone taken advantage of.
What Are Qualified Opportunity Zones?
Qualified Opportunity Zones (QOZ) are relatively new, and were created by Congress as part of the Tax Cuts and Jobs Act of 2017. The purpose of this new program was to encourage long-term investments in low-income communities across the United States. According to the United States Department of Treasury, there are more than 8,700 QOZs in the country, including in territories like Puerto Rico. The bottom line is that QOZs are a social program with the intent of redeveloping impoverished districts throughout the country by driving private capital to underserved communities and 35 million Americans by offering tax incentives to investors. These Zones are typically located on the outer edges of underdeveloped areas — outside the most blighted areas which investors will avoid no matter how many tax advantages they offer.
Doing Well by Doing Good
Qualified Opportunity Zones can provide qualified investors a unique way to reduce taxes while doing something good for those who are less fortunate. By simply rolling profits over from the selling of stocks, cryptocurrency, bonds, jewelry, art, or real estate into a Qualified Opportunity Zone, accredited investors can reap an array of tax benefits — assuming they make the investment within six months of realizing their capital gain.
It’s critical to note that unlike a 1031 real estate exchange, you’re re-investing your profit only — not your basis.
Three Examples of How QOZs Work (Be Warned: one of these benefits expires soon)
Let’s take a look at the three ways you can save…
Tax Saving Opportunity #1: Investors who invest capital gains income can defer their re-invested capital gains taxes until the end of 2026. In other words, you won’t owe the IRS a penny on that money until April 2027.
Tax Saving Opportunity #2 (expires on December 31, 2021): Better yet, if you invest your profits before December 31, 2021, you get the added benefit of a 10% step up on the basis of your original investment — which only adds to your tax savings.
The BIG Prize: Reduce A seven-figure tax bill down to zero
Tax Saving Opportunity #3: However, those tax savings are nothing when compared to the much bigger benefit you get if you hold your investment for at least 10 years and a day. If an investor held their Qualified Opportunity Zone investment for 10 years, that taxpayer wouldn’t have to pay even a penny in taxes on the profits they made— no matter how big they are.
Qualified Opportunity Zone Deadlines
Within 180 Days of Asset Sale
Within 180 days of realizing the gains of a sale, the investor must reinvest those gains into a Qualified Opportunity Fund to avoid capital gains taxes.
Before December 31, 2026
Until the earlier of December 31, 2026 or the date the investor pulls their interest from a Qualified Opportunity Fund, the investor can defer payment of capital gains on the reinvested gains.
Interest Held in a Fund for 5 – 7 Years by December 31, 2026
If the investor holds their interest in the fund for at least 5 years, the tax paid (by December 31, 2026 or when they pull interest in the fund) is reduced by 10%; if held for 7 years, it is reduced by 15%.
Interest Held in a Fund for 10+ years
After being held for at least 10 years, upon the sale, there is no tax on any appreciation on reinvested gains that occur while in the Qualified Opportunity Fund.
December 31, 2028
Opportunity Zone designations expire
December 31, 2047
The last date to sell interest in a Qualified Opportunity Fund.
As you can see in the chart above, the biggest takeaway of Qualified Opportunity Zone Funds is that after an investor holds their position in the investment for 10 years, there is no tax on the asset’s appreciation. That’s zero. So, if an asset appreciates 20 or 30 percent, that could translate to a significant return for the investor.
Who Might Take Advantage of this Unique Tax Savings Opportunity?
Qualified Opportunity Zone Funds are best suited for investors who have capital gains generated from the sale of an asset that may not be eligible for a traditional, like-kind 1031 exchange. So, one type of investor for a Qualified Opportunity Zone Fund could be appropriate for someone who holds shares in a stock that experienced high appreciation and now wants to sell it.
Or, another candidate who might be a good Qualified Opportunity Zone Fund investor would be someone who recently sold a business that created a potential significant long-term capital gains tax event.
The third type of investor who might be interested in a Qualified Opportunity Zone fund is a real estate investor who wants to generate some liquidity by selling their investment property. While a 1031 exchange investor is required to leave in their original principal and their gains, and even roll forward their debt, a Qualified Opportunity Zone investor is able to keep their original basis to do with as they please, and receive a tax deferral on the portion of the gains they invest in an OZ fund, resulting in instant liquidity.
The critical component for any investor is that they need to have sold the asset(s) within the prior 180 days and realized a capital gain.
Tax savings aren’t enough
As great as all this sounds, it’s important to carefully evaluate a project’s true investment potential before considering the tax benefits — especially since you’re required to keep your money locked up for at least 10 years in order to enjoy the full tax benefit. Like any real estate investment, there is no guarantee for cash flow, distributions or appreciation, and can result in the full loss of invested principal.
You see, as an investor with 20 plus years of experience in commercial real estate and investment sales who regularly advises high-net-worth investors, Kay Properties always emphasizes the importance of understanding the investment first and then the tax benefits. It’s better to look at the tax benefits as “gravy,” rather than as a reason to make an investment you otherwise wouldn’t even consider.
The good news is, plenty of development projects currently available. Plus, because many of these locations were determined to be economically challenged areas based on 2010 Census data and the Tax Cuts and Jobs Act was passed in 2017, many of these properties are now located in some of the hipster neighborhoods across the country.
How to find good Qualified Opportunity Zone projects?
Kay Properties & Investments works with a variety of carefully vetted sponsors to find the projects best suited to our clients. And we help our clients find Qualified Opportunity Zone properties that match their objectives and are appropriate for their situation.
We’re happy to introduce you to these sponsors and to help you analyze which one is the best fit for you.
Regardless of whether an investor decides to move forward with a Qualified Opportunity Zone fund investment or not, there are certain questions that each investor should ask their advisor before moving forward with this type of investment. These questions include:
Where are the real estate properties located?
Make sure you understand the underlying market fundamentals of the area. One thing in particular I advise my clients is to try and find a location where long-term demand is inherent in the market.
What is the make up of the fund in terms of diversified assets?
One of the ways to help reduce risk is to choose a property that are diverse in nature. For example, a portfolio with only one large project could be considerably more vulnerable to other competitors with the same type of building. Try to find a portfolio that has a balance of multifamily, retail, and distribution.
Who is sponsoring the investment properties, and what kind of reputation do they have?
Just like with any profession, there are quality QOZ advisors with years of experience and there are very inexperienced advisors who have very little experience. Avoid financial planners and other generalists and look for a firm that does nothing but real estate investments. Also, you will want to find a firm that is very particular about the type of properties they offer investors. Ask specifically what type of real estate assets they have previously invested in, and try to get some historic performance data.
What are the risks associated with investing in a Qualified Opportunity Fund?
It’s important to go into any investment with eyes wide open. Walk away from any firm that tells you this investment is “guaranteed” to make money. There are always 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.
Ask Bill Exeter
Ask Bill Exeter and his team your questions about 1031 exchanges and he and his team will get back to you.
About the author:
Betty Friant
Betty Friant holds her FINRA Series 6, Series 22, and Series 63 licenses, in addition to the coveted CCIM designation, that recognizes expertise in commercial and investment real estate.
She currently is Senior Vice President with Kay Properties & Investment’s Washington D.C. office where she serves as an expert Delaware Statutory Trust (DST) 1031 exchange advisor to high-net-worth investors and 1031 exchange clients. In her executive capacity with Kay Properties, Friant was instrumental in assisting the firm achieve a record $408 million of equity placements for real estate investments in 2020 and is at the forefront of helping Kay break that record in 2021.
Prior to joining Kay Properties, Betty spent 35 years in the commercial real estate industry focused on the acquisition and disposition of single-tenant NNN properties, including acting as Senior Managing Director for the Calkain Companies and co-founder of a Sperry Van Ness office in Winchester, VA.
Betty has spent her career building a reputation for providing superior client service that emphasizes transparency, integrity, and attention to details. This lifelong effort was recently recognized by GlobeSt. as one of the “2021 Women of Influence” in the commercial real estate industry.
In addition to her focus on the commercial real estate industry, Betty is dedicated to her family and is involved in the volunteer efforts of several community and civic organizations.
Kay Properties & Investments 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 115 years of real estate experience, are licensed in all 50 states, and have participated in over $21 Billion of DST 1031 investments.
* Past performance does not guarantee or indicate the likelihood of future results. Diversification does not guarantee profits or protect against losses. All real estate investments provide no guarantees for cash flow, distributions or appreciation as well as could result in a full loss of invested principal. Please read the entire Private Placement Memorandum (PPM) prior to making an investment. This case study may not be representative of the outcome of past or future offerings. Please speak with your attorney and CPA before considering an investment.
* No representation is made that any QOZ Fund will or is likely to achieve profits or losses similar to those achieved in the past or that losses will not be incurred on future offerings.
Diversification does not guarantee profits or protect against losses. All real estate investments provide no guarantees for cash flow, distributions or appreciation as well as could result in a full loss of invested principal. Please read the entire Private Placement Memorandum (PPM) prior to making an investment. This case study may not be representative of the outcome of past or future offerings. Please speak with your attorney and CPA before considering an investment.
There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) properties and real estate securities including illiquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. All offerings discussed are Regulation D, Rule 506c offerings. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential distributions, potential returns and potential appreciation are not guaranteed. For an investor to qualify for any type of investment, there are both financial requirements and suitability requirements that must match specific objectives, goals, and risk tolerances. Securities offered through Growth Capital Services, member FINRA, SIPC Office of Supervisory Jurisdiction located at 2093 Philadelphia Pike Suite 4196 Claymont, DE 19703.
State officials continue to applaud themselves for standing up for vulnerable Oregonians amid the pandemic. In a recent op-ed, (“Legislators must protect families facing eviction with special session fix,” Dec. 5,) Sen. Kayse Jama, D-Portland, and Rep. Julie Fahey, D-West Eugene/Junction City, wrote of their proposal, aimed at a legislative special session this month, to extend protections against eviction for tenants waiting for the state to process their applications for rental assistance. But what the legislators should really have focused their attention on is why another failed state software system has left as many as 10,000 Oregon families facing housing instability.
Known as Allita 360, the software for processing rental assistance applications was purchased without a competitive bidding process or stakeholder input. The state has been aware of problems with the software since February, when it launched a fund to compensate landlords for missed rent. Yet, it stuck with the software for the May rollout of the Oregon Emergency Rental Assistance Program. As with the landlord fund, the emergency rental assistance program has been plagued by system crashes, ineffective notification processes and a serious lack of clear communication from administrators. Applications have piled up, leaving renters’ requests for help in limbo for months. And landlords have spent hours — if not days – online, with no assurance that their renters’ applications had even made it into the program.
Keeping renters housed is our top priority too. That is why rental property owners have been collaborating daily with renters throughout the pandemic to navigate the complex 27-page rental assistance application and ensure their applications are moving through the system.
Leaders have called this an evictions crisis. But actual eviction filings for nonpayment of rent in November – after the expiration of the eviction moratorium were half of what they were in pre-pandemic 2019, based on our analysis of court records. Landlords aren’t looking to evict renters – they are just looking to get paid what they’re owed. The state could resolve many of the existing eviction filings by fixing the broken rental assistance software and simply providing clarity to landlords about who is in the system and where they are in the process of receiving payment for rent. If legislators want to truly help renters this winter, they need to hold the housing agency accountable and fix the barriers to accessing rental assistance.
Before the launch of the rental assistance program, the Legislature passed two bills prohibiting, at least temporarily, evictions for nonpayment of rent. In both cases, the text of the bills was kept secret and not available for public commentuntil they were voted on in committee. These moratoriums inadvertently created a legal landscape where an eviction notice became the only tool to compel a resident to apply for assistance if they have not done so on their own.
At the same time, there hasn’t been enough publicity statewide of the millions in rental assistance that people could seek.In many cases, according to rental housing providers and media accounts, renters said they were unaware of the assistance available to them until speaking with a judge at an eviction proceeding.
Even today, now that the state has paused taking in new applications, state reports show a stunning weekly decline in the number of applications processed.
The state’s housing agency and Gov. Kate Brown have stated that we have enough funding to pay every application in the system before it closed Dec. 1, including the 10,000 families whose applications have languished in administrative uncertainty for months, and are no longer covered by the eviction protections extended by the Legislature.
If the state matched court records for nonpayment eviction filings to applications in the system, and hired a qualified third-party nonprofit to cut the checks (as directed by treasury guidelines), they could pay out all of the assistance well before the new year.
Those same leaders calling on rental housing providers to “do the right thing” and not move forward with evictions should call on the state to fix the failed software and issue the rental assistance for those who have applied.
Oregon renters and rental housing providers have done their part for 18 months. Now it’s time for Oregon’s leaders to hold the agency accountable and cut the checks. No Oregonian should be evicted due to administrative mismanagement.
About the author
Imse is the executive director of Multifamily NW, an association of landlords, rental housing providers and advocates whose members represent more than 250,000 units of rental housing in Oregon.
The Oregon Legislature in special session approved the extension of the state’s eviction moratorium for tenants who have or will apply for rent relief by June 30, 2022 but have not yet received any funds.
Lawmakers and others have acknowledged the distribution of rent relief has not gone well.
The bill, SB 891, extends the “safe harbor” measure that aims to help keep those renters who have applied for assistance but are still waiting for state aid from being evicted. The safe harbor will now cover those renters who will or have applied for assistance and shown proof to their landlord on or before June 30, 2022. Protections will continue until a tenant’s application is “no longer pending,” but will be extended “no later than” Sept. 30, 2022, according to the bill.
Governor Kate Brown said in a release, “I remain focused on working with agency directors to ensure relief reaches Oregonians as quickly as possible. Every Oregonian deserves a warm, safe, dry place to call home––and I am committed to working to prevent evictions as we prepare for the transition to local eviction-prevention services after federal pandemic-emergency programs draw to an end.
“Tens of thousands of Oregon renters have applied for rental assistance. While we have made significant progress in improving the delivery of rental assistance in the last several weeks, we know that renters and their landlords are counting on these additional state resources and that we must move quickly,” Brown said.
While lawmakers signed off on the bill, both Republicans and Democrats expressed concerns about the bill.
“The thing I think is so disappointing is how poorly this has been managed,” said Sen. Bill Kennemer, R-Canby, to KATU.com.
“I share your frustrations around the challenges the program has endured, but one thing we have to remember is we are in the middle of the pandemic and none of us have faced what we are facing today,” Sen. Kayse Jama, D-Portland, told KATU.com.
Rent Relief Slow For Tenants And Housing Providers
The need for this bill came about because a program hasn’t responded to applications in a timely manner. But lawmakers agreed they needed to protect renters and landlords.
Deborah Imse, executive director of Multifamily NW, wrote in an email to members that attorneys are providing guidance on the bills, which will be provided to members. She summarized the two important bills this way:
SB 891extends eviction protection for Oregon renters who have applied for rental assistance, through their aid application process – discarding any 60-day or 90-day limit of nonpayment eviction protection.
SB 5561authorizes millions more rental assistance dollars:
$100 million for rent assistance
$5 million to OHCS to speed up aid application processing
$10 million to pay housing providers for rent balances owed – even if their tenants don’t receive rent assistance.
Another $100 million was earmarked for longer-term renter protections and eviction prevention efforts.
Interested in joining the more than 11 million real estate investors making money off rental properties? It’s a form of potentially passive income with great appeal, but like any investment, it also comes with potential risks.
One way to mitigate risk is by setting up a business that would own the property rather than buying it in your own name. Creating an LLC for a rental property can help manage income, taxes, and liability for your rental business.
If you’ve been wondering, “should I put my rental property in an LLC” this guide should help you answer that question and others related to the LLC business structure.
What Is an LLC?
LLC stands for limited liability company and is one of several business structures you could choose for your rental property. The structure ensures you are not held personally liable for any claims against the company or any debts owed. It allows you to be taxed as a partnership while getting the limited liability benefits of a corporation.
An LLC can be you alone, with a partner, or with a group, and the LLC holds ownership of any assets placed in it. It can have a separate tax ID number, open a bank account, and conduct business transactions.
Benefits of an LLC
Starting an LLC for rental property makes good business sense for four key reasons.
1. Limited Liability
When you own a property as an individual, you are personally liable for any legal actions, which means your personal assets are at stake. By operating through an LLC, only the LLC’s assets would be at state should there be any lawsuit or claim made. This is one of the primary benefits of an LLC for rental property holdings since your tenants could claim the business.
2. Separate the Assets
Because an LLC is easy to set up, creating a new one for each property makes sense. This insulates each property from liability claims made on any others. It provides the same separation protection you get for your personal assets.
3. Pass-Through Tax
An LLC allows you to take advantage of what is called pass-through taxation. A business structured as a corporation would typically be taxed on its profits, then you as the owner are taxed again when you take out income.
With an LLC, the company income passes straight through to you, and you claim it on your individual tax return. Your rental income is only taxed once instead of twice.
4. Personal vs. Business
Any corporate structure is going to allow you to keep your personal and business expenses separated. This allows you to write off and claim business expenses on your taxes since you will have separate bank statements for yourself and the LLC for investment property.
Creating Your LLC
What’s involved in setting up your LLC for a rental property? It’s important to understand when the best time is to do it, along with the potential costs in doing so.
When To Create Your LLC
The good news is whether you have your LLC set up before or after you buy, it’s a relatively simple process to transfer ownership over to the LLC. However, if you plan to finance the purchase rather than pay cash, there are definite benefits to having the LLC set up before the purchase.
Transferring a mortgaged property could result in some additional headaches and costs.
Notifying your mortgage holder of the title transfer
Mortgage holder could close the loan and issue you a new one, which creates closing costs and potentially a higher interest rate
Notifying tenants that the LLC now owns the property
Update rental agreements
Transfer could trigger new taxes like a title transfer tax
Creating the LLC first means the property deed is in the company name from the start and keeps you from dealing with these issues.
How To Create Your LLC
Because the LLC is regulated at the state level, the rules and regulations for setting up a company might vary. But the basic process involves the following:
Choose an available business name
Fill out the Articles of Organization
Create an LLC Operating Agreement
Obtain any necessary licenses and permits
Register your LLC with the state
Once you’ve done all that, you can issue leases in the business name and set up your bank account. Costs involved in setting up the LLC can come from registration fees, title transfer fees, and legal fees for creating or reviewing your operating agreement.
Pros and Cons of an LLC
The LLC is a good structure for rental property businesses, especially if you are going into business with other people or entities. But there are some drawbacks to be aware of as well.
Pros
Limit your personal liability
Separate and protect individual properties if you set up an LLC for each one
Pass-through taxation keeps your income from being taxed twice
Easily separate business and personal expenses
Cons
Additional paperwork for initial setup and bookkeeping
Can be more difficult to get a mortgage as an LLC
Potentially higher interest rates on your mortgage
Annual filings and fees
Despite the downsides, keeping your rental property in a dedicated business structure sets you up for success.
Considering Creating an LLC for a Rental Property?
Eager to get started in real estate investing? Creating an LLC for a rental property is a good way to protect yourself and your money from liability issues. Depending on the state you live in, you could benefit by making it easier to manage your income and taxes as well. Here are some good places to invest in property.
When you establish smoke-free housing, you’re protecting your home from possible damage while improving the chances of a higher home appraisal. Smoking inside a house creates secondhand smoke (SHS), which can seep through air ducts and cracks, or travel through a shared ventilation system into another person’s living space. Don’t spoil your chances of preserving your home in the best condition possible. The best way to prevent damage to your property is by going smoke-free.
Better Health/Better Housing
The choice to smoke indoors doesn’t only harm the smoker. It affects everyone. The home is the central location where many children and adults breathe in secondhand smoke. SHS can contribute to a variety of health problems, including several types of cancers; increase the risk for heart attack and stroke; exacerbate asthma; increase the incidence of illness in children; and much more.
There is no safe level of exposure to secondhand smoke. Although some residents have adopted voluntary smoke-free home rules, they may still be exposed to SHS. Recent studies estimated that over 28 million residents who live in multiunit housing are exposed to secondhand smoke in their homes or apartment. While these nonsmokers choose to live smoke-free, smoke can still waft in from elsewhere in their building, like a nearby apartment.
Adopting smoke-free policies as a homeowner in multiunit housing helps protect everyone from being exposed to SHS. At present, the only means of effectively eliminating the health risks associated with indoor exposure is to ban smoking activity. There is no risk-free level of exposure to secondhand smoke.
The Preferred Choice
Did you know that an overwhelming majority of Utahns looking to buy or rent prefer smoke-free housing? Research shows that more than 91% of Utahns prefer living in a smoke-free environment. As parents take a closer look at the dangers of secondhand smoke, smoke-free housing is steadily becoming a higher priority for many. Since 2001, the overall number of children exposed to SHS in Utah has decreased by 53%. In addition, the percentage of children exposed to SHS in rented homes decreased from 12.6% in 2001 to 5.1% in 2005.
Properly Protected
Smoke-free policies can help property managers and owners protect their residents’ health and their real estate investment. Property owners, managers and residents can all benefit from a smoke-free policy. Much like smoke-free policies in workplaces and other sites with public access, establishing a smoke-free policy does not ban someone who smokes from living there. It just requires that all residents abide by the policy while on the property. Thinking about adopting smoke-free living for your residents? Learn what you can do as a property manager and find more reasons to go smoke-free here.
A pet-friendly apartment community can mean different things due to marketing so author John Bradford explains what a truly pet-friendly apartment community looks like.
The term “pet-friendly” is often used as a marketing chip in the rental-housing world, but simply allowing pets at a property no longer qualifies as being genuinely pet-friendly.
That’s because many restrictions often accompany an apartment community’s pet policies, such as a breed, weight, number of pets and even age, as some deny puppies and kittens. So if you’re a prospective resident and the community you’re considering as your next place to live allows some pets—but not yours—it doesn’t come across as exceedingly pet-friendly.
Communities with rigid policies are not only falling behind from the standpoint of appearing attractive to pet-owning residents, but also leaving an abundance of potential revenue on the table. Data supports the ideas that shedding restrictions might not be as off-putting to residents or difficult to implement as one might initially surmise, and that increasing pet-related amenities might not be a bank-breaker.
What does a truly pet-friendly apartment community look like in the modern apartment landscape? Here are a few of the ways operators have shed antiquated policies and shifted their overall approaches to be more pet-centric:
Easing restrictions
Breed and weight restrictions are a touchy subject for many landlords and pet owners.
Weight and breed restrictions have long been standard in the industry. However, innovative operators are beginning to rethink them as they take measures to cater to the ever-increasing pet-owning demographic, which is edging toward 70 percent of residents, according to several sources.
Weight restriction is an easy one to shed, as no data supports that larger pets cause any more damage than smaller pets. In fact, starting in 2019, many apartment operators began to rescind the standard 45- to 50-pound weight limit.
Breed restrictions, naturally, are a touchier topic. Most often, property teams fear that they will alienate residents by rescinding these restrictions. But according to the Pet Policies and Amenities Survey by PetScreening and J Turner Research, a minority of residents actively support them. In fact, 53 percent of residents are against breed restrictions, and 23 percent are indifferent (“don’t care”), leaving only 24 percent of residents who are in favor of breed restrictions. When the same question was asked but for weight restrictions, residents answered along similar lines — 56 percent of residents are against them, and 24 percent are indifferent, while only 20 percent support them.
Insurance concerns are another reason that communities often balk at easing or eliminating breed restrictions. But more and more cases are occurring in which operators are discovering that their property-insurance providers do not require breed restrictions to be in place onsite. This can easily be confirmed by reviewing the actual policy and, if the provider does indeed have breed restrictions, operators then can try shopping for new policy providers that do not.
In a survey 53 percent of residents are against breed restrictions.
To be clear, communities should not be advised to haphazardly eliminate restrictions and simply see what happens. Restrictions should be eased with a measured approach, and properties should screen pets and pet owners on an individual basis to determine where they rank on a risk threshold. Then teams can make a determination based on the individual case rather than any preexisting characteristics.
Puppies, for example, naturally have a higher level of household risk due to chewing issues and potty-training. This, though, doesn’t mean you will deny a puppy, but it’s reasonable to simply cover your additional risk with slightly higher pet fees or pet rent.
In-demand amenities
While conventional wisdom would suggest that adding a slew of pet amenities to a rental property would be a large—and exceedingly expensive—undertaking, that’s not necessarily the case.
When asked which three pet amenities were most important to them, survey respondents cited an onsite pet park (65 percent), pet-waste stations (64 percent) and an outdoor dog run (45 percent). These were higher priorities to pet owners than more expensive amenities, such as a pet pool, pet spa or onsite pet concierge.
While an onsite pet park could equate to a sizable expense depending on how expansive it is, residents mostly want a shaded space for pets to roam freely. Anything else contained within the park is a bonus. As such, many communities have converted existing outdoor space into onsite pet parks or dog runs.
The desire for simple amenities also helps appease the primary concerns of non-pet owners, who cited pet waste (84 percent), barking (62 percent) and off-leash activity (37 percent) as their top three pet-related apprehensions. Stocked pet-waste stations encourage pet owners to be responsible and pick up after their pets, and pet parks and dog runs give pets an exercise outlet, solving many of the barking and off-leash issues.
Revenue benefits
We’ve outlined the cases for easing restrictions and adding cost-friendly amenities, but many property teams wonder how this can boost the bottom line. On a wide-scale basis, this helps make communities more attractive to a larger demographic of potential renters—a certain segment of pet owners who might not have considered the community otherwise.
It also keeps existing residents in the building. According to the survey, pet owners ranked pet amenities 7.3 out of 10 on the importance scale when considering whether to rent or renew at a community.
Ease restrictions and take advantage of pet revenue streams.
Then there are the increased pet-related revenue streams. By easing pet-related restrictions, more pets are permitted at the community, which leads to an uptick in pet rent. Eased restrictions also make it less likely that a resident will try to sneak a pet into the community under the guise of a reasonable-accommodation request for a service or support animal like an ESA. Operators can’t charge pet rent or other pet fees for service or support animals.
Forward-thinking policies
The days of rental communities allowing one pet that weighs less than 50-pounds and restricting 20 different breeds are becoming a thing of the past.
While we’ve outlined the cases for easing weight and breed restrictions, communities should also consider increasing the number of pets allowed per home. Not drastic changes—no one wants 15 pets in a single household—but perhaps increasing from one pet allowed to two, or even welcoming both cats and dogs.
Pet friendliness can increase the bottom line and keep everyone happy.
Apartment community teams should also consider ways to get a more accurate count of their pet population, to make certain all pets are accounted for and ensure they are not losing out on rightful pet revenue. Screening methods that require all residents—pet owning or otherwise—to formally acknowledge a community’s policies also are becoming more popular, ensuring every resident is aware of policies whether they own, acquire, foster or host a visiting pet.
Contrary to some perceptions, an increase in pet friendliness doesn’t have to be accompanied with a hit to the revenue stream. When done correctly, it can carry the three-fold benefit of increasing resident satisfaction, ensuring occupancy and having a positive impact to the bottom line.
About the author:
John R. Bradford, III, is an experienced entrepreneur and CEO with a demonstrated history of working in the property management and pet-tech industry as well as in local and state government. He is the founder of two companies: Park Avenue Properties and PetScreening. John is a strong business development professional skilled in the rental housing management industry, technology startup space, legislative affairs and legal compliance and review. He is serving a third term in the NC House of Representatives. In his spare time he likes to fish, camp and travel with his family.
Hundreds of bad checks for rent relief in Oregon were send to landlords and tenants because of an incorrect routing number on the checks, according to reports.
It was unclear exactly how many rent relief checks were cashed and how many were not as the Oregon Housing and Community Services division said they were still working to find out.
One landlord told reporters that his bad checks came from a third-party contractor the state had hired to help with the backlog of rental assistance.
Carl Benda, a Portland-based property manager who manages about 60 properties across Oregon, told Oregon Live his company has received about 10 checks through the Oregon Emergency Rental Assistance Program since mid-November that he was unable to cash with his bank.
He said they came from Public Partnerships LLC, a contractor Oregon Housing and Community Services hired in August to help the state and its backlog of rent assistance applications.
Delia Hernández, a spokesperson for the state agency, told the Oregonian there was an accounting issue with one batch of checks, and that the routing numbers were missing a digit. Hernández said the agency issued 468 checks with incorrect routing numbers. Some of the checks had been cashed and some not, she said.
Oregon Gov. Kate Brown has said the legislature will hold a special session beginning on Dec. 13 to address preventing evictions for renters. The state has announced it would stop accepting rental assistance applications until at least mid-January, as it has already spent or allocated all of the $289 million received in federal emergency rental assistance.
Hernández did not say how long it would take for people to receive new checks. The agency also asked people to mail back the bad checks.
Secondhand smoke isn’t just a nuisance, it’s a significant danger to people’s health and well-being. It contains over 4,000 chemicals and can cause cancer, heart disease, and many other health problems (4). In fact, secondhand smoke is the third leading cause of preventable death in the U.S. An estimated 46,000 Americans die prematurely each year from heart disease caused by secondhand smoke (4).
Secondhand smoke puts tenants in multiunit housing at risk due to their shared proximity to neighbors. Smoke from one unit can seep through air ducts and cracks, or even travel through a shared ventilation system. Depending on the age of the building, up to 65 percent of the air in a unit can come from other units in the building (8). Even if one tenant decides not to smoke, the decisions of another can put their health in jeopardy.
A staggering 28 million residents who live in multiunit housing are exposed to secondhand smoke in their home or apartment that came from elsewhere in their building (2). Since the dangers of cigarette smoke are widely known, consider the possible repercussions of those exposed to smoke without having made the decision to take that risk for themselves. Even short exposure to secondhand smoke can cause blood platelets to become stickier, damage the lining of blood vessels, and decrease coronary flow velocity reserves, which can potentially lead to a heart attack. Alarmingly, research says there is no safe level of exposure.
Secondhand smoke particularly affects minors. In Utah, 22,100 children live in households where someone smokes inside the home. Children are especially vulnerable to the dangers of this kind of smoke exposure, which can cause ear problems, acute respiratory infections, and wheeze illnesses, which slows their lung growth and makes asthma more severe (4). It’s evident that secondhand smoke isn’t just harmful to health, it’s outright dangerous.
Going Smoke-free Isn’t Only Safe, It’s Smart
There’s no real way to control cigarette smoke in your properties. Despite what you might have heard, commercial air-filter systems and other methods simply don’t work to control secondhand smoke. In 2006, the U.S. surgeon general’s report said that the only way to fully protect nonsmokers from exposure to secondhand smoke indoors is to stop people from smoking indoors (5). The damage to the property might be temporary, but the health effects can be permanent.
Secondhand smoke is dangerous and the best decision you can make would be to ban smoking on your property. This step is the only means of effectively eliminating the health risks of secondhand smoke (1). Not only will it benefit your tenants, it’s also proven to be good for business.
The numbers don’t lie — people want smokefree housing. Nine out of 10 Utahns say they prefer smokefree housing. That’s in large part because over 90% of Utahns don’t smoke and 93% don’t allow smoking in their home (6). In addition to creating a higher demand for a property, making a property smokefree also leads to a higher appraisal and lower cleaning costs. In fact, property managers spend seven times more, on average, to clean a smoking unit than they do to clean a smokefree unit (7). A smokefree housing policy is the best thing for a tenant’s health, and a property owner’s bottom line.
Go Smokefree Today
Secondhand smoke poses an indelible health threat. It’s dangerous. And unlike cigarette smoking, secondhand smoke exposure puts those at risk who were not able to make the decision for themselves. The dangers are well established, and so are the benefits to property owners and landlords. Make the decision to go smokefree. Find out what steps you can take to make your property a healthier place for all to live. For more information, visit waytoquit.org.
Sources
U.S. Department of Health and Human Services (2006).The Health Consequences of Involuntary Exposure to Tobacco Smoke: A Report of the Surgeon General. Washington, D.C.: Department of Health and Human Services.
General. Washington, DC: Department of Health and Human Services.
American Society of Heating, Refrigeration and Air-Conditioning Engineers. “Environmental Tobacco Smoke, Position Document,” 2010.
2005 Utah Department of Health. Utah Health Status Survey, 2001–2005. Salt Lake City: Utah Department of Health. Center for Health Data.
The Health Consequences of Involuntary Exposure to Tobacco Smoke: A Report of the Surgeon General, 2006.
U.S. Department of Health and Human Services. “The Health Consequences of Involuntary Exposure to Tobacco Smoke: A Report of the Surgeon General,” 2006.
Utah Department of Health. Behavioral Risk Factor Surveillance System (BRFSS). 1999–2010. Salt Lake City: Utah Department of Health. Center for Health Data.
National Center for Healthy Housing Reasons to Explore Smokefree Housing, Fall 2009.
Center for Energy and Environment. “Reduction of Environmental Tobacco Smoke Transfer in Minnesota Multifamily Building Using Air Sealing and Ventilation Treatments,” 2004.
Ask attorney Brad is a regular feature with attorney Bradley S. Kraus and this week the question is about whether a landlord has to pay a relocation fee in Oregon if a tenant moves out. If you have a question for Brad, please feel out the form below.
Hello Brad,
I’ve been a member for years and appreciate your articles. I know Multnomah County has differing rent-increase regulations then Clackamas County, but I do not remember the specifics. I own a single-family home in Clackamas County and want to raise the rent 9 percent. If my tenant decides to move out, am I required to pay them a relocation fee, and if so how much would it be? The house is a three-bedroom and there are three tenants living there. The rent is $2,050 per month, and the tenant’s second one-year lease will expire in June. Thanks for the help! Dan
Hello Dan,
Thanks for reaching out, and for reading the articles. It’s nice to know they’re making it to the intended audience!
As things stand now, Portland is the only jurisdiction with odd rent-increase requirements with respect to additional disclosures/documents. The rest of the state is solely focused on ORS 90.323 for requirements related to rent increases. Hence, our focus should be on that statute.
Under ORS 90.323, you must provide 90 days’ notice, and your rent-increase notice must also contain the amount of the increase, the amount of the new rent, and the date on which the increase becomes effective. With respect to the amounts, the maximum you can increase rent is 7 percent + CPI (2.9 percent), which means your maximum increase is 9.9 percent for next year. Accordingly, your 9 percent increase would be lawful, as long as the other statutory requirements are met.
Keep in mind that you cannot increase rent during a fixed-term lease, so any rent increase you serve cannot become operative until the fixed term is up. If your tenants move out, instead of staying at the increased rent amount, there is no relocation requirement.
Thanks,
Brad
Bradley Kraus, Portland attorney
Brad Kraus is a partner at Warren Allen LLP. His primary practice area is landlord/tenant law, but he also assists clients with various litigation matters, probate matters, real estate disputes, and family-law matters. A native of New Ulm, Minnesota, he continues to root for Minnesota sports teams in his free time.
Ask Attorney Brad
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