People need a place to live as much as they need clothes on their backs. Take a moment to think about your favorite department store. Think about what makes their clothes, brands, or style so attractive to you. More than likely, your tastes are partially manufactured by the way that the brand presents their products. Your favorite pair of pants? You saw those in an eye-catching email advertisement. That coat you’re never seen without? You saw that on a website homepage. Why should your marketing efforts as a property manager be any less enticing? We’ve pinpointed a few marketing mistakes that property managers make every day when advertising their properties, and how you can save time, money, and the environment by NOT making them.

#1 – Immobile

The internet is everywhere, on almost every mobile device. Even if you have a website that looks great on your desktop, are you sure that it looks good on smartphones? Recent trends show that 84% of current or prospective renters actively search using mobile devices. In fact, 4 out of 5 millennials have smartphones and perform almost every research task on them. If your marketing efforts aren’t tailored towards people using mobile devices to find rentals, then you have a great opportunity to increase your search traffic by 30% just by having a mobile-friendly website. If you’re a property manager without a website, or if you’re looking for ways to improve your existing website, AppFolio has a dedicated team of designers that can assist you with optimizing your web layout to attract potential new tenants. For great ideas on how to optimize your website for prospective renters, check out this recent AppFolio article highlighting key strategies.

#2 – Outdated

Along the same lines as mobility, the internet is only going to be your best friend if you stay on top of things. Property managers with the most successful online presence remain vigilant in posting their current vacancies and removing them immediately after they have been filled. Out-of-date postings may detract interested parties from signing a lease with you, particularly if a potential tenant makes an inquiry only to discover their dream home has already been filled. AppFolio marketing features centralize all of your postings (even on third-party listing sites), allowing you to add or remove listings with one-click simplicity.

#3 – Expensive

Marketing can be expensive, and it’s to your benefit to make sure that every dollar you spend on advertising your vacancies counts. When it comes to print advertising in local newspapers or magazines, you’re required to pay an upfront fee for advertising space with no guaranteed return on investment. Online advertising through Search Engine Optimization is a much smarter way to capture your intended audience’s attention and have various methods of charging for advertising space. For example, some SEO services will charge you only if your ads are clicked on, which means that you’re spending only as much as you need to in order to generate business. Not only will you be spending less on ad space, but focusing your marketing efforts online means that you’re using less paper, which can have an increased benefit to your overall costs as well as our planet!

We recently teamed up with the Sprout Marketing team for a webinar on how you can improve your online presence through Search Engines and Social Media.

The next time you stop by that department store you probably love more than you should, ask yourself what strategies they implemented to capture your attention and get you through their doors. More than likely, you can apply those same tactics to drive renters to your properties as well.

You Might Also Enjoy:

How to Stand Out with Your Property Management Website

10 Best Practices for Listing Your Properties

The post 3 Common Marketing Mistakes Every Property Manager Makes (At Least Once) appeared first on The Official AppFolio Blog.

Join AAOA at the Income Property Management Expo! It’s the networking event of the season, held specifically for property owners, managers, and investors like you. You’ll have access to free seminars, new products and services, and face to face interaction with leaders in the rental industry. Visit us at this FREE event held at the Pasadena Convention Center on March 15, 2016.

Here are the top 5 reasons to attend the Income Property Management Expo:

1. Free seminars and live demonstrations:  Learn new strategies and solutions for managing your properties from experts in the industry. Topics include mixed use property investments, Section 8 housing, tax law, marketing, and tenant screening.
2. Learn about cutting edge products and services: Meet dozens of vendors that offer solutions that can make your property management more cost effective. Many vendors will have discounts or free trials for their products. It’s an easy way to introduce yourself to new technology and services for the rental industry.
3. Networking opportunities: Meet face to face with other industry professionals from all across Southern California. You can ask questions at the seminar or strike a casual conversation with like-minded property managers and investors.
4. It’s Free: There is no reason not to come! Enjoy tons of benefits at no cost to you. Where else can you find an event like this in LA?
5. Expo giveaways and complimentary food and drink tastings: Take a fun break at the Expo by snacking on complimentary food from local restaurants, breweries, and wineries or participate in free raffle giveaways!

The expo is an ideal combination of education and networking. If you are involved in real estate management, this expo is for you. Reserve your free spot here: http://incomepropertyexpo.com/los-angeles/ . We hope to see you there!

If you’re a newbie investor interested in investing in apartment buildings, you might be wondering how to go about finding deals.

Some gurus who will teach you to market to probates, send direct mail to apartment owners, or network with attorneys. All of these tactics can work. However, I’ve found that there is one specific tactic that is most helpful for me when looking for deals. So, without further ado…

Watch the video below for the # 1 way to find Apartment Building Deals

Michael Blank | Company Website | LinkedIn Connect| Michael Blank’s passion is being an entrepreneur and helping others become (better) entrepreneurs. His focus in real estate investing is buying apartment buildings by raising money from private individuals. Michael has been investing in residential and multifamily real estate since 2005 and began syndicating deals in 2010. He is the author of the Syndicated Deal Analyzer and the free eBook “The Secret to Raising Money to Buy Your First Apartment Building”.

Data from Mortgage Choice shows more than 75 per cent of investors who purchased property within the last two years bought an existing dwelling.

Of those who purchased an existing dwelling, the majority said the property was more than 10 years old and required some form of renovation or maintenance to get it “tenant ready”.

There are many benefits associated with renovating an investment property. In the first instance, simple cosmetic changes to a property can not only help it to appeal to more tenants, but it can also help improve the overall value of the property and the amount of rent an investor can comfortably charge.

But while there are benefits associated with renovating an investment property, renovation – even simple cosmetic changes to a property – doesn’t come cheap.

That said, if you are considering renovating your investment property, there are a few easy steps you can take to help reduce the financial strain associated with property renovation.

Step 1: Create a solid plan beforehand

Knowing exactly what changes you want to make to the property before you get started can reduce the chances of your renovation going off course and off budget. Ask yourself: what changes are necessary, what changes are nice to have and what can be done further down the track? The last thing you want to do is start renovating and then realise half-way through that you actually want something completely different.

Step 2: Get your finances right

Before you start calling builders or drawing up plans, you will need to determine how you are going to afford your renovation. Will you fund it out of your savings, pay for it via credit card, take out a personal loan or potentially refinance your owner-occupied mortgage? Whatever you decide, it is important to know at the beginning how the whole funding process will work.

Step 3: Be wary of over-capitalising

It’s a good idea to get an independent valuation of your property before you get started. You want to avoid spending more on your renovation than it will add in terms of value to your property. Having a valuation done at the start can help you get a realistic idea of what you can and should spend for the maximum return. Also, it is important to see what the average rental price is for similar properties in the area. If the renovations aren’t going to allow you to boost your rent, you may have to ask yourself whether or not it is worth the hassle.

Step 4: Create a budget

A budget is essential for any renovation. Once you know how much you can afford, think about all the costs involved and work out how much you want to spend. Without a budget, costs can quickly spiral out of control, leading to added stress and frustration. Remember to build a contingency into your budget to cover unexpected expenses and delays.

Step 5: Cut your living costs

This last step is pretty self-explanatory. Renovating a property can be a costly experience, so have a think about your current lifestyle and see if there are areas where you can cut back and cut costs. The less you spend each day, the more cash you will have to pay for the renovations.

At the end of the day, renovating can add significant value to your investment property, but it is important to do your due diligence and make sure it is the right financial move for you before getting started.

Source: smartpropertyinvestment.com

– See more at: http://www.american-apartment-owners-association.org/property-management/remodel-and-repair/renovate-investment-property/#sthash.KeYq0ZiX.dpuf

A sure way to keep your best tenants happy is to respond to their maintenance requests in a timely manner. This involves responding to them right away and selecting your maintenance vendors carefully so that they get the best service possible. Regardless of whether it’s a vital necessity or just a small leak, you should always provide a clear plan for a resolution as quickly as possible. There are a few simple things you can do that will prevent your tenants from becoming disgruntled.

Here are three tips for handling maintenance requests smoothly:

1. Acknowledge Receipt: Be sure to let residents know that their request has been received, even if you don’t have a solution yet. Just knowing that you will start looking for a solution will help your residents feel at ease. If you are managing several properties, you may want to use a property management software with a built in maintenance monitor, such as ManageZoom. Tenants can create an account on ManageZoom to send you a detailed request with pictures and description. ManageZoom will alert you when you get a request and you can set reminders so that you don’t forget about the request.

2. Choose Your Vendors Carefully: You want to make sure that the repair team that you hire to maintain your properties are professional and timely. The team you use is a reflection of you as a property manager. We suggest running a background check or using a company that checks their employees, to keep your property and tenants safe. Once you’ve vetted a vendor, be sure to keep their information handy for future fixes. ManageZoom’s property management software makes this much easier by giving you the option to save vendor information in your account. When a tenant sends in a request you can create a ticket and assign a vendor to it. You’ll know what vendor is servicing which property and you can track how much those services will cost.

3. Provide a Timeline: Nothing is more frustrating for a tenant than ambiguity. Granted, you may not have all the answers and you are probably depending on the repairman to give you an accurate time estimate, but if that’s the case let your tenants know. When you do get a timeline communicate it right away and follow-up with the repairman to make sure the repair will be done on time.

A major cause of tenant dissatisfaction is related to maintenance difficulties. Maintenance will always be necessary, but how you handle it will help you keep good tenants around longer. Organizing multiple maintenance requests at once can be a challenge, but subscribing to ManageZoom’s property management software can keep you on track. Sign up here to try out the ultimate maintenance monitor for free for 30 days.

With spring almost upon us, the real estate market readies for a busy season as leases end and Americans enter back into the rental market. How can property managers ensure they’re competitive, filling vacancies and giving prospects what they want in the apartment search?

AppFolio conducted a survey to uncover what‘s top of mind for today’s renters and what trends modern property managers need to adopt to meet their expectations. As an industry with one of the slowest adoption rates of technology, renters are keen to the tech trend, and online convenience can make or break a signed lease. Property managers need to be thinking about the impact and opportunities of technology to fill vacancies and remain competitive.

All Things Digital, Please

With more and more consumers renting versus buying a home, the rental market has become increasingly crowded. So how can property managers adequately market their available listings? Time to get everything online, folks! Among current renters, nearly one-third (29 percent) say they found the rental listing for their current residence online (via a classified ad or an online service). This trumps traditional methods such as finding a rental listing via word of mouth (23 percent—still a relatively big influence) or through a realtor (nine percent).

This indicates the importance of a digital presence during the listing process and, with traditional word of mouth remaining prominent, the importance of satisfied residents. This is achieved through fast response and maintenance, good upkeep of the property and an overall quality of services so that tenants will refer others to vacant units—all of which today’s modern property manager can boost through technology.

Now let’s take it one step further. Today’s renters are not only finding rental listings online, but they’re also attracted to digital conveniences in deciding which rental to move into next. From paying rent to reporting a maintenance issue, renters want to be able to do apartment tasks from their phone, iPad or computer, whether on-the-go or sitting on the couch. The majority of tenants (46 percent) prefer to pay their rent digitally—through an app, website or automatic withdrawal. Mailing a check or dropping off cash is now old school; after all, this is the digital age. If your property management company can offer these types of digital services, you’ll have a higher chance of attracting more lessees.

Virtual Assets are Key

Nearly a quarter of renters eliminate a property from their search if photos or videos of the property are unavailable. Bad reviews (of the property itself or of the property manager) are also a deterrent, with 27 percent of respondents choosing this as the top reason for eliminating a property from their search.

Bottom line: make sure to highlight your property’s value online. Don’t be shy; be transparent and show off the space.

Millennials Expect—and Are Willing—to Pay More

Surprisingly, millennials are least sensitive to price as this demographic’s expectations have been modified by the current market. Of the total respondents that cite rent being more than they want to pay as the top reason for eliminating a property from the search, only 28 percent are age 18-34. Adults age 55-64 are most sensitive to price, with 45 percent selecting it as the top determining factor. Pay attention to this market property managers—since the rental market is going gray.

Top U.S. cities such as San Francisco, Boston, and NYC are known for making residents “rent poor.” It must be true, as 32 percent of respondents said half or more of their monthly income goes toward rent. This is another reason to satisfy your residents! If they’re going to spend a large portion on rent and have an abundance of apartments to choose from, things like property upkeep and offering digital conveniences will keep current tenants happy, increase the likelihood of re-signed leases and attract new tenants.

The findings highlighted above are critical for property managers everywhere, whether you’re city or small town, 10 units or 100.

AppFolio Rental Market Survey Methodology

Commissioned survey of U.S. consumers conducted in January 2016 via Google Consumer Surveys. The survey collected responses from a representative sample of 1,500 total consumers. AppFolio was the sole investor in the study and the survey population is made up of a mix of U.S.-based consumers aged 18 and older.

AppFolio Rental Market Survey Data Points:

• How did you find your current residence rental listing?
  • Word of mouth (23.8%)
  • Classified ad (15.3%)
  • Online service (14.3%)
  • Realtor (9.3%)
  • Mobile App (3.4%)
• Assume that rent is not an issue. Which of the following would cause you to eliminate a property from your search?
  • Property rent is more than I want to pay (31.5%)
  • Lack of photos or videos of the property (24%)
  • Quality of property’s amenities (18%)
  • Property itself has poor reviews online (13.9%)
  • Property manager has poor reviews online (12.6%)
• Age Breakdown: people who picked property rent is more than I want to pay:
  • 18-24 (27.9%)
  • 25-34 (28%)
  • 35-44 (29.1%)
  • 45-54 (30.2%)
  • 55-64 (45.4%)
  • 65+ (42.8%)
• Approximately what proportion of your monthly income goes towards rent?
  • Less than 1/4 of monthly income (19.7%)
  • 1/4 of monthly income (21.4%)
  • 1/3 of monthly income (25.7%)
  • 1/2 of monthly income (18.3%)
  • More than 1/2 of monthly income (14.9%)
• Which of the following methods would you most prefer to use for paying rent each month?
  • Pay through an app or website (28.5%)
  • Deliver a check (21.6%)
  • Mail a check (18.1%)
  • Automatic withdrawal (17%)
  • Cash (14.8%)

The post Hail All Property Managers: What Today’s Renters Expect, Want & Need appeared first on The Official AppFolio Blog.

Rents seem to only continue to go up. Nationally, the median asking rent increased 5.74 percent in the third quarter of 2015, compared with the same quarter a year earlier.

But while many landlords raise the rent whenever it seems right, this isn’t the best strategy. You shouldn’t increase the rent because you’ve had an expensive year, or a major roofing job. Instead, your rental rates should be dictated by one very simple factor: the rental market.

Simply put, your rental price will be determined by how much tenants are willing to pay. Use anything other than this criterion to set your rent, and you run the risk of losing them and experiencing higher vacancy rates.

Let’s look at how you can accurately assess the market to determine the sweet spot—the best price that you can get for your property — and how to go about tactfully breaking the news to your tenants.

Ensure Compliance With the Law

First things first: Make sure your proposed rent increase is in compliance with state and regional laws, and of course, in accordance with the terms of your lease.

Rent control areas, which include Washington, D.C., and cities in California, Maryland, New York, and New Jersey, have specific requirements regarding rent increases, including the frequency of the increases and the amount of notice that you must provide. For all other areas though, you’ll still have to provide sufficient notice. In most states, 30 days’ notice is generally required for month-to-month leases. For fixed-lease properties, you’ll want to let tenants know before the lease is up. Commercial properties are usually less regulated, but still require compliance with the original lease agreement.

Give Extra Notice

Sure, you’re required to give enough notice to be in compliance with the law — but why stop there? If you can, give tenants a 60-day notice instead of just 30 days. This will give the tenant more time to prepare for the increase, and allows them a chance to shop around. If your increase is in line with market rates, they’ll see that there’s no better deal to be had. So get those notices ready early. For longer leases, this means at least 60 days before the lease is up. Timing your notices so that the rent increase will take place immediately after the lease renewal date will allow you to start collecting the increased rent as soon as you can.

When informing tenants about rent increases, make sure you put everything in writing. Without a written agreement, a rent increase will be difficult to enforce.

Try to Raise It Every Year, or at Each Lease Renewal Period

If you have a month-to-month lease, you’ll want to increase the rent once per year. If you’re on a longer lease, wait until the lease runs out, unless your rental agreement specifically states that you will evaluate and raise the rent mid-lease. Even if the market only allows for a 1 to 2 percent increase, this is a better choice than waiting years in between rent increases, and then having to raise the rent substantially. This will help tenants to get used to rent going up, and you’ll find them less likely to complain over a $20 per month increase as opposed to a sudden $200 jump.

Calculate the Rent Increase

The amount by which you raise the rent should be competitive with local rental market rates, so do your research. Take a look at what other similar rentals in your area are going for. You could also multiply the consumer price index by your current rental rate. For example, the Bureau of Labor Statistics’ most recent release indicates that the index for shelter increased 3.2 percent in 2015. Suppose your current rent is $1,200 per month. You could multiply $1,200 by 3.2 percent (or 0.032) for an increase of $38.40 per month. While a 3 to 5 percent annual increase is standard, you may want to adjust this to fit your situation and the local rental market.

Determine Why You’re Raising the Rent

Your tenants will want to know, and you’ll need an answer. Be truthful and make a list of reasons that the rent needs to go up, such as increased utility costs (if you pay them), rising insurance costs, higher taxes, and the cost of inflation, if these things have all increased in the last year. Other reasons for a rent increase may include the rising cost of maintenance and repairs or renovations or upgrades planned for the property.

Keep Your Tenants Happy

Also consider your tenants’ situation. If you have an excellent tenant who looks after the property and pays rent on time, you may want to cut them some slack as an incentive to stay. One way to do this is to show them what the rent increase was going to be, but with this number crossed out and with a smaller percentage written in instead. Communication is key to keeping the air clear, so be in touch with your tenant and be willing to talk to them about the increase.

Another option would be to consider offering your tenants a compromise. Propose a rent increase, and be prepared to lower the percentage if they are willing to sign a longer lease.

While rent increases can be stressful, they don’t have to be. Ensuring that you raise the rent in line with market values and communicate all upcoming changes with your tenants will go a long way toward making the process as simple and straightforward as it can be.

Source: realtormag.realtor.org

With 30 years under my toolbelt as a landlord, I’ve had my share of lessons learned — so I thought it was about time I put some of those learnings down on paper. Previously, I’ve written about key considerations when shopping for a rental property. Here, I focus on money lessons learned after closing the deal and actually managing the property.

The real estate properties that form the basis of my experiences are a two-family property my wife and I have owned and managed for 30 years, and a rental condo we managed for 20 years then sold. Now on to those lessons…

1. Learn to Be Handy

Owning rental properties is all about building “sweat equity.” The less you pay others to do maintenance and make repairs, the more you keep for yourself. But when you make the repairs, do buy items of higher quality that will last longer. Having to return over and over to make the same repair gets old quickly and winds up costing you more in the end.

2. Be Respectful and Responsible

Remember that both landlord and tenant have responsibilities. I try to put my best foot forward with a new tenant by making sure the unit is in excellent move-in condition, and by responding promptly when they reach out to me. More often than not, they return the favor by taking better care of the property. In other words, “What goes around comes around.”

3. Get a Good Lease (From a Lawyer)

Your lease is a legally binding contract. Make sure you read, understand, and agree to every word. Who is responsible for lawn care? Who shovels the snow? Does it require tenants to be responsible for small repairs (say, under $20) and basic maintenance such as replacement of light bulbs? How much notice do tenants need to give you that they are leaving? (I suggest at least one month.)

Consider the lease a flexible document that can be improved over time to address lessons learned. For example, we’ve found a month-to-month lease works better for us than an annual term, because it provides more flexibility for tenant changes.

4. No Pets! No Exceptions

It took a double-whammy for us to learn this lesson. The downstairs unit of our two-family has very nice Andersen casement windows with stained wooden sills. The upstairs has wall-to-wall carpeting to cushion sounds between the floors. Our very first choice of tenants to occupy the downstairs unit had two cats. Even today, if I close my eyes, I can clearly see images of the deep gouges in those (previously) beautiful sills, and the rips in the Anderson screens.

Upstairs, the culprit was a dog. He used the carpeting as an opportunity to mark his territory — and he did a thorough job, extending into the hardwood flooring underneath. After spending thousands of dollars to repair the windows, replace the carpets, and sand and refinish the wood flooring, it has now become very easy to answer the question we’ve since been asked many times: “Do you allow pets?” Without hesitation, the answer is always the same: “NO!” I take pride in even sticking to my guns when a recent prospect offered to add $300 per month to the rent if we allowed him to keep a pet piglet.

5. Check Tenant References — And Their Car

Banks and other lenders often use the “5 C’s of Credit” to determine whether or not a borrower qualifies for a loan. One of those “C’s” is Character. You want to rent to someone of strong character, who is responsible and honest. So ask for and check both employer and personal references. Do Google, Facebook, and LinkedIn searches while you’re at it. Look for other clues, as well. For example, when meeting a prospective tenant, I always look at their car to see how clean they keep it on the outside, and how cluttered it is on the inside. Unlike a banker, you’re not just lending money; you’re lending someone your house.

6. Check Tenant Finances: Trust but Verify!

Another of the “5 C’s” is “Capacity.” Capacity answers the question, “Do they have enough income to afford the rent?” As a general rule of thumb, your rent plus utilities should be no more than 30% of your gross monthly income. Ask for their most recent pay stub, and call their employer to verify their employment. It’s human nature to want to trust other people, but in this case you need to back it up by verifying.

7. Wait for the Right Tenant

This one falls under the “Pay me now or pay me later” category. I do admit, it’s easy to yield to the taunts of the devil on one shoulder (“Live for the moment and take the money now!”) rather than heeding advice from the angel on the other shoulder (“Wait for a better candidate!”). Trust me, it’s much more costly — not just financially, but also in time and aggravation — to remove a bad tenant than to forego one or two months’ rent in order to find a good one. Do yourself a favor and take the advice of your better angels.

8. Get an Umbrella Insurance Policy

Being a landlord elevates your risk of being sued. It only takes one lawsuit — perhaps involving a tenant falling down stairs or slipping on driveway ice — and you could face hundreds of thousands of dollars in damages. So take out a general liability, or umbrella, insurance policy. Don’t risk getting wiped out. Paying $50 per month for umbrella insurance is a small price in exchange for sleeping soundly at night.

9. Take an Honest Look in the Mirror

Do you have the people skills to deal constructively with tenants? Are you willing to be on call 24/7 to respond to complaints big and small, or to drop everything for the repair of a furnace, toilet, or hot water heater? At times these things are a true test of patience and perseverance.

Self-awareness is key. If you have a spouse or partner, and if the demands of property management begin to weigh more and more heavily on either or both or you over time, it could drive a wedge in your relationship. No amount of rental income is worth that price.

So, taken as a whole, has our experience been worth the effort? Yes. The two-family has worked out better, and we still have it. It generates a regular monthly stream of positive cash flow (over $1,000 per month after all expenses). Granted, it requires time and attention (isn’t everything in life a tradeoff?), but in return we’ve received the equivalent of a modest monthly pension payment since our early 40s. Not many other investments can do that.

Do you own rental property? Any of these lessons sound familiar? And if you rent, how’s it look from the other side?

Source: wisebread.com

When it comes to architecture trends, micro-apartments are all the rage. It’s hard not to be impressed when you see a 420-square-foot apartment transform into 6 functional rooms, accommodate 12 person dinner parties, and house 2 overnight guests. The question is, will it affect the multi-family industry? With New York’s city council approving the development of their first micro-apartments (against the 400-square-foot apartment minimum) in an attempt to experiment with affordable housing options, it’s safe to say it soon will be. That being said, no one will start renting out micro-apartments until some necessary changes are made.

Generally, micro-apartments are tiny one-room living spaces that are multi-purpose and self-contained. They’re like the Russian nesting doll of apartments; they’re compact but the space is utilized completely. Due to their specific design, particular furniture is needed. A renter can’t just go out and get any sofa, they have to buy a sofa that doubles as a bed, has unique storage options and has specific dimensions. While New York’s new 260 to 360-square-foot micro-apartments might leave you wondering how any renter would be attracted to the lack of space and weird furniture requirements (see for yourself), the keyword is: affordable housing.

With so little square footage, single renters will be able to afford living on their own (without packing in three or four roommates into one apartment) and landlords and developers will be able to maximize profits by putting in more rental units. At $950 per month for 55 rental units, low and medium-income applicants have been flocking to New York’s new micro-units. More than 60,000 applications have already been received. In response, the de Blasio administration is proposing to end a square-footage limit on apartments, opening the door for more affordable housing options with micro-apartments. Alongside New York, cities such as San Francisco and Boston have begun looking into micro-apartments as well. On February 1, 2015, the City of Fresno, CA even passed new zoning codes for tiny houses (the micro-apartment version of a house on wheels).

While many, including UCLA, are betting on micro-homes and apartments to combat the affordable housing crisis, critics point out the design isn’t nearly as full-proof as it seems. Since micro-units are made for single renters, questions have been raised about what will happen when a single renter wants a family and an affordable micro-unit. With designs like the Kasita, a micro-home inspired by shipping crates, many are skeptical the micro-housing won’t make renters feel isolated and thus create a high turnover rate.

In response to this criticism, designers have been experimenting with creating expandable micro-units and communal spaces. Studio P10 used Project Salva46 to tackle these challenges, creating a space that could easily house two strangers, or two different couples, with its independent micro-studios. More focused on abolishing the isolation criticism, SsD Architecture designed the Songpa micro-housing to have semi-communal spaces not just on the first floor, but in between units. They hope this effect will make their communal micro-housing make it feel more like its own neighborhood.

The idea of a cheaper and communal housing option isn’t unknown to affordable housing. In March, 2015, Boston proposed creating dorm-like villages, suggesting they build 10,000 communal units to satisfy the housing demand in the area. Although the proposed units weren’t specifically micro-units, the idea was that the communality would attract the growing number of single, millennial renters. Unsurprisingly, a micro-unit building has already been built in Syracuse, NY and is taking advantage of this idea by catering to millennial renters at a low $700 to $900 per month rent. However, unlike the New York micro-apartments and the proposed Boston dorms, CoWorks takes the communal living a step further by trying to create a specific sense of community. While CoWorks wants to foster a professional community aimed at making work connections, other affordable housing options have been targeting a more a creative community. The La Esquina micro-apartments in San Diego are an affordable housing option for professors, grad students and alumni and the co-living situation has been designed for creative collaboration between teachers and grad students.

While creating a cost-efficient solution to solve the growing need for affordable housing is a top priority, creating larger communal spaces and options for growing families should be considered. Although the necessity in creating a community in affordable housing that targets specific segments and community types is still debatable, it’s undeniable that it could be used in specific housing types like aged 65+ renters and possibly teacher affordable housing. If micro-apartments do become the affordable housing solution for big cities like New York, tenant screening will be even more important for these tight-knit and communal complexes. Before even implementing micro-apartments and micro-housing, considering all the options (design included) is apparent.

About the Author

Becky Bower is a writer for ResidentScreeningBlog.com and the Communications Executive at Contemporary Information Corporation (C.I.C), a nationwide tenant & employment screening company.  She has also spent several years in compliance and auditing.  Becky holds a degree in English with a focus in creative writing from CSU Channel Islands and is a published writer.

About CIC

Celebrating 30 years of background screening excellence, CIC is a leading provider of tenant and employment screening solutions for the multifamily housing industry. CIC offers full service background checks, credit reports from all three major bureaus, the nation’s most comprehensive eviction records database, complete nationwide criminal records search, full verification services and other specialized screening products. For more information, please visit www.CICReports.com.

Erin Maude returned to homeownership in December, three years after losing her condo in the U.S. foreclosure crisis. This time, she’s confident she’ll keep the house she bought with the help of a 14 percent raise and a Federal Housing Administration loan, which required little money down.

“I’m very lucky,” said Maude, 38, an airline marketing manager. “Without FHA, I don’t know how long it would have been before I could have saved for a bigger down payment.”

Renters gaining confidence about the economy — those buying their first home, and people like Maude who are looking for a second chance — are jumping into the property market. Many are compensating for soaring starter-home prices with FHA loans that became cheaper after insurance premiums were cut last year. And they’re giving a lift to the U.S. homeownership rate, which rose in the second half of 2015 after steadily declining for almost two years.

An increase in apartment rents — which rose 4.6 percent nationally in the fourth quarter from a year earlier, according to Reis Inc. — also is helping drive young people to buy instead of lease. They’re entering a market with few affordable houses available. The U.S. inventory of starter homes — the bottom third of the market — is down 39 percent from three years ago, according to data from brokerage Redfin.

FHA-insured mortgages, used mostly by first-time buyers, nonetheless accounted for 22 percent of all loan originations in December, up from 17 percent a year earlier, according to data compiled by Ellie Mae Inc.

Higher Homeownership

“The FHA insurance-premium cut pulled forward the day that first-time home buyers came back in a big way and turned around the homeownership rate,” Mark Zandi, chief economist for Moody’s Analytics Inc., said in a phone interview. The rate rose to 63.8 percent in the fourth quarter from 63.7 percent in the previous three months, the Census Bureau reported last week.

For the $2,400 monthly mortgage payment on her Kirkland, Washington, home, Maude gets twice as much space and is closer to the water than she was in the townhouse she rented for only $400 less — and it has a fenced-in backyard where her dog, Percy, can run. Maude, a marketing manager for Delta Air Lines Inc., put 4 percent down for her house, more than the 3.5 percent required by the FHA but less than the 20 percent typical for mortgages.

Maude lost her job and then her Atlanta condo three years ago in a short sale, a transaction in which lenders agree to accept less than what’s owed on the property. By November of last year, she was eligible to borrow again from the FHA.

She bought the Kirkland house in December, making a full-price offer of $422,000 the day after it went on the market. She knew, after six months of searching, that the supply of homes for sale was too tight to delay.

Competitive Market

“There are now only two to four houses within 5 miles even on the market in the price range I was looking at,” Maude said in an interview.

Other Americans wanting to become homeowners haven’t been as lucky. Tight credit standards prevented 5.2 million mortgages from being made from 2009 to 2014, according to the Housing Finance Policy Center at the Urban Institute in Washington. That left fewer families able to buy at an opportune time in the market cycle and build the wealth that often comes with homeownership, the institute said in a report last month.

The FHA reduced annual mortgage-insurance premiums in January 2015 to make homebuying more affordable. The Department of Housing and Urban Development estimates the decrease in costs will save borrowers an average of $900 a year.

New Buyers

As a result of the mortgage-insurance decrease, FHA purchase originations increased more than 30,000 a month last year from 2014, said Sam Khater, deputy chief economist for CoreLogic Inc. That means that more than 250,000 first-time homebuyers were added to the market.

The increase in FHA loans brings added risk that would become apparent the next time the U.S. economy tumbles, according to Stephen Oliner, a resident scholar at the American Enterprise Institute in Washington who worked at the Federal Reserve Board of Governors in Washington for more than 25 years. With prices rising, borrowers have been gravitating toward government-guaranteed loans, mainly from the FHA, that require only small down payments and allow high monthly payments relative to a borrower’s income, Oliner said.

“Since the federal government is guaranteeing these loans, there isn’t much market discipline to prevent risky loans from being made,” Oliner said.

‘Pristine’ Loans

A look at loans of all types originated in the past six years shows they are “pristine” and have the lowest default rates in almost two decades, Khater said. FHA loans that are at least 90 days delinquent were up only slightly, with an increase of just 0.05 percent in fiscal 2015 from a year earlier, he said.

Rob Nunziata, chief executive officer of FBC Mortgage LLC in Orlando, Florida, said lenders are feeling more confident as the real estate market recovers. In the past year, his firm has dropped its minimum credit score for a FHA mortgage to 580 from 640.

“Credit standards were a little too tight — now they’re easing toward a more acceptable level,” Nunziata said. “Defaults have decreased, the economy is doing better and the housing market has stabilized.”

Source: bloomberg.com