Posts Tagged ‘Multifamily Trends’

Apartment Sales Prices on the Rise: Key Factors Every Investor Must Know

Written by Apartment Management Magazine on . Posted in Blog

By: Brian & Vincent “The Apartment Specialists”

apartment-for-sale

Clients are always asking us, “When is the right time to buy?” or “I really want to cash in on my property. Is this the peak of the market?” Both of these great questions are constantly coming from our clients and our overseas investors. The answer is always the same: In every market, at any given time, you will find opportunity. You see, following the trends is wonderful, but looking behind the trends, at the nuts and bolts of what drives a market is the true key to success. Anyone can follow a trend and make a couple of good real estate purchases, but the key to long term success is to continually buy and sell strategically, all the while increasing your total portfolio’s net worth.

Today’s apartment sales are moving fast, and investors from all over the globe are honing in on Southern California with the keen understanding that California will always be a great rental market in which to invest. After the Great Recession, there have been shifts in our local apartment industry and much has changed since 2008 & 2009 when vacancy rates had sky rocketed, rental rates dropped, rent concessions were commonplace and, let’s not forget, litigation was rampant.

Today, if you have your pulse on the market, you understand that values are up, vacancy rates are stable but rental rates are still a bit sluggish. It’s true, you heard that right. Values are up but rental rates are sluggish. You may debate this statement, asking if it’s somewhat of an oxymoron for apartment values to be up while rental values are sluggish. With interest rates at historic lows and Wall Street still going strong even with only a 2.6% rental growth rate from last year, apartment sale prices are up and solid, showing a steady increase since the 1st quarter of 2012.

There are key financial indicators to look at when asking why apartment prices are rising up to nearly pre-Great Recession prices and in some areas of Los Angeles County, prices are the same if not greater. The Federal Government with all their antics have actually helped to stimulate the economy with QE 1, 2 and 3, effectively generating some positive effects for the Los Angeles County metro areas.

After the beginning of QE3, unemployment rates have dropped from 8.1% to 7.6%, adding approximately 89,400 jobs to our local economy in the greater Los Angeles area, the largest growth in over ten years. Also, foreign investors causing bidding wars on single family investments are now frustrated with single family homes and are moving into the apartment investment arena.

Despite the onset of positive circumstances, there are still concerns amongst conservative and doomsday investor naysayers who look at today’s low CAP rates and ask, “Where is the upside?” To them I say, look for the silver lining and there you will find upside. The opportunity is the fact that we are living in the times of the lowest interest rates in history, and with inflation still low at only 2.1% with only a slight increase from 2013, our economy continues to hold steady. You cannot miss out on cashing-in on these rates, not to mention that Fed chairwoman Janet Yellen has committed to continue these low rates for an extended period of time. Commitment to low interest rates means we as consumers can capitalize on this low cost borrowing.

Guess who else sees the opportunity? That’s right…developers! Developers have caught on to the apartment wave and have wasted no time adding to construction jobs and building over 12,000+ new apartment units. Planning ahead is the best way to leverage your real estate investments.

In larger properties, many investors have turned to lower energy costs and water costs by shifting usage to alternative methods. Saving on these overhead costs is like adding rent valve to your investment property.  As the old saying goes, “A penny saved is a penny earned”. By retrofitting and lowering water consumption and energy costs, a San Francisco based apartment portfolio was able to save $500 million dollars annually.

More upside potential you will see in the near future that will increase the value of your current apartment purchase or long term apartment holdings is the fact that rental rates have been sluggish for the past 5 to 6 years. Next year, we are projecting a rent forecast growth of 3.3%; this during a moderate climate of economic development. Think of the long term upside on rental rate increases in a thriving and robust economy and what that means in value to you. The demand for apartments in Southern California is stronger than ever with an occupancy rate averaging 96%. Not to mention, future forecasts indicate that we will have a shortage of housing in California by the year 2016.

Knowledge is power, and educating yourself to become an astute investor will help you make calculated decisions that will insure long term growth and stability. In this market there is much opportunity to take advantage of, with a 1031 Exchange, or simply cashing out on today’s prices. No matter how you see yourself and your property in this market, there are opportunities for you to increase the value of your property. Whether through a rental increase, repositioning process, or simply taking that equity built and moving it to a more stable asset, there are more choices and options to build your investment portfolio. And if you are one of the few who opts to pay the IRS and not cash in on depreciation because of fear of not getting top dollar for your investment, perhaps this is the perfect time for you as well. No matter where you are situated in today’s market, there is opportunity.

The key to benefitting in this market is patience, a keen vision for opportunity, and the ability to work with a professional who understands this market and the operations of an apartment building. Wherever you stand, in today’s real estate market, from a small multi-family investor to a large, well seasoned investing veteran, just remember that today is filled with opportunity.

What will you do to be successful in this market? Will you sit by passively and watch? Or will you be an active participant, cashing in on these opportunities? The choice is yours.

Brian and Vincent are the owners of Lotus Property Services, Inc. and are active leaders and real estate brokers in the apartment industry. Brian frequently writes for numerous trade magazines and speaks at numerous seminars. Vincent sits on numerous industry boards and is a frequent writer and speaker for industry events. As industry experts, Brian & Vincent have sold and managed over 1 billion dollars in real estate assets. To contact Brian or Vincent, you can call or email: brian@lotuspropertyservices.net 626. 582. 8001 ext. 104 vincent@lotuspropertyservices.net 626. 582. 8001 ext. 102

Multifamily Finance Trend | Real Estate Crowdfunding: Is Technology Cutting out the Middle Man?

Written by Apartment Management Magazine on . Posted in Blog

Rentlytics_Article ImageAs real estate crowdfunding builds a head of steam behind the JOBS Act, what are the benefits and initial concerns that will make or break this budding industry?

“It is really this access problem.” says RealtyShares co-founder Nav Athwal and his partner Trey Clark. “The fact of the matter is, there is no easy-to-access marketplace for even investors to access a reliable source of quality private real estate investments and thus investors have traditionally invested in what is readily available – stocks, bonds and mutual funds.”

When President Obama signed the JOBS Act in April of 2012, the crowdfunding industry achieved what has been identified in the industry as having “potential to be a game changer” for future private equity fundraising efforts. According to RealtyShares, the JOBS Act brought about for the first time since the great depression and the enactment of the Securities Act of 1933, the opportunity for unaccredited investors to be able to participate in a private equity deal.

This is a huge step for investors looking to take advantage of the fact that private equity investments in the U.S. have traditionally outperformed the stock market. Up until the signing of the JOBS Act, these private equity deals were reserved for only for the wealthiest investors, while the average investor was left to invest in the public markets.

And while the JOBS Act is considered by most to be a step towards balancing this inequality, it does have its limits. For both investors and fundraisers, understanding these limits is crucial.  For starters, some of these limits may be prohibitive when it comes to private real estate deals and the act sets a $1 million per issuer, per year fundraising ceiling in addition to possible exorbitant compliance requirements.

One of the biggest benefits of crowdfunding real estate is that it allows investors greater access to deals and it offers a way for them to diversify portfolio.

“If you take a standard investment portfolio, allocated 60% to stocks and 40% to bonds, and reallocate a 20% portion of it to private real estate, you not only increase returns but reduce volatility.” adds Mr. Athwal.

Platforms, like the one RealtyShares operates, allow investors to invest passively in private real estate investments, all while managing the transactions as they would when investing in either stocks or bonds.

With technology, the industry is able to increase the transparency around how capital is raised for private real estate investments and the fees that real estate firms then charge investors.

According to Nav at RealtyShares, “Real estate has been operating under the country club model for too long. The fees operators have traditionally charged investors to pool their funds, acquire properties, and manage the final real estate assets are typically hidden amongst a ton of legal jargon.”

Technology makes the entire process of crowdfunding possible. Without it, this market wouldn’t be possible. Technology allows crowdfunding to adapt and overcome these shortfalls to allow prospective investors to have this desired transparency and increased accountability.

From a logistical standpoint, technology allows for not only the feasible managing of multiple transactions, but also makes it possible to reduce costs through the added efficiency. This efficiency opens up the door for smaller investors who want to get involved in deals with a minimal investment of $5,000 in most cases.

Does this spell the end of the real estate middle man?

“I think that technology enables more information to the investor and better decision making, however the middle man will still always be a part of the process,” says crowdfunding investor Justin Miller, “We will always need someone chasing and sourcing great deals.”


JustinAlanis Justin Alanis | Company Website | LinkedIn Connect |

Justin Alanis is the Co-Founder and CEO of Rentlytics Inc.  Rentlytics is based in San Francisco, CA providing deep analytics for apartment property owners and managers. View and analyze property operational and financial metrics more effectively and identify issues.

Multifamily Renters Trend | How Today’s Moving Trends Will Affect Multifamily in 2014

Written by Apartment Management Magazine on . Posted in Blog

moving-trends1

According to a press release that the U.S. Census Bureau shared late last month, 11.7% or 35.9 million U.S. residents moved their primary residence in the 2012-2013 year. This translates to a drop of about 12% compared to this same time period from the year prior.

When comparing the data found in the Geographical Mobility report published in 2013, these statistics show 2013’s numbers to be very similar to the 11.6% reported in 2011.

Researchers found that 48% of Americans claimed that the move was housing-related, 30.2% was a result of family, and 19.4% said their move was fueled by employment-related reasons.

What do these moving trends mean for multifamily?

We have three solid years in which moving trends have remained steady or improved nationally, with certain specific metropolitan areas seeing enough growth to maintain the averages for their whole region.

At 13.4%, the Western region of the United States has actually seen the highest percentage of all movers. This is followed by the South, who received 12.8% of our nation’s movers, and the Midwest who turned in an even 11%. The region with the lowest mover rate is the Northeast, who had 7.8% in the last year. According to these trends, industry professionals can expect to see at least these same percentages with a slight improvement being the most likely result of all the new activity planned for 2014.

Multifamily News identified that two-thirds of today’s movers are staying within their same county of origin. In addition, 40% of these movers are staying within 50 miles of their current home.

To the multifamily apartment owners or managers, this means that the bulk of their new renters are likely going to relocate from a relatively short distance. The method in which we’re planning to market our properties needs to hone in on this close-proximity trend.

When it comes to further segmenting this short distance market, it has been found that existing multifamily residents are more likely than current homeowners to move. Data for 2012-2013 reports that 24.9% of renters moved throughout the year, but only 5.1% of homeowners did the same during this time period.

Outside of regional differences, analyzing other areas of data gives property owners and managers a way of refocusing specific communities’ existing marketing plan so that it identifies patterns of the most likely renters in 2014. Job relocations, for example, which account for about 25% of our total movers, have a tendency to pay higher rents initially before settling into any community permanently. This should call for a differentiated marketing approach.

Is your multifamily real estate market already experiencing any of these trends?


JustinAlanis Justin Alanis | Company Website | LinkedIn Connect |

Justin Alanis is the Co-Founder and CEO of Rentlytics Inc.  Rentlytics is based in San Francisco, CA providing deep analytics for apartment property owners and managers. View and analyze property operational and financial metrics more effectively and identify issues.

Is the Multifamily Industry Facing a Skills Gap Crisis?

Written by Apartment Management Magazine on . Posted in Blog

by  | shared post from www.PropertyManagementInsider.com

skills gap in workplace

Professional Development. I’m willing to bet that at some point in the last few months, you’ve heard those words from your boss or even your local apartment association.

Maybe you’re lucky enough to work for a company that has an entire department at the corporate office devoted to it. Companies spend thousands of dollars a year on professional development programs, providing everything from internal mentoring match-ups, to online and in-person training classes, to leadership retreats, to paying for memberships in their local associations that give employees access to networking and education opportunities within their industry.

So why are so many CEOs and companies reporting that their workforce is experiencing a significant “skills gap” with the demands of their current positions and the skills needed to “compete effectively in the coming years?”

Technology Outpacing Property Management Employee Skill Sets

According to Accenture’s 2013 research, nearly half of the companies surveyed (46%) share this skill gap fear for the future. Accenture postulates that one cause behind this gap is quick changes in both the marketplace and in technology, a situation that property management professionals know all too well. If I told you seven years ago that you needed to look into hiring someone to specialize in Facebook and Pinterest postings, you’d have looked at me like I was crazy; and yet today, there are entire teams working for multifamily housing companies that are devoted to social media management.

Critical Thinking Tops the Skills Gap

It’s not just the hard skills that are missing, like accounting, capital development planning, and NOI management; what’s really coming up on the light end of the scales are the soft skills. According to the Society for Human Resource Management, the four skills that top the gap are critical thought, professionalism, written communication, and leadership. This could stem from a combination of generational influences and the myth that these abilities are “talents” that people are born with, not a skill set that can be effectively taught, but whatever the cause, we are running out of people who can captain the ship, so to speak. And, as Accenture points out, there are definite ramifications to the persistence of these skill gaps among an employee base.

Those surveyed are preparing for a potential increase in operational costs due to a drop off of critical skills–66% of them think they will lose business to a competing company, and almost two-thirds of them – 64% – are anticipating negative effects on their income and business growth goals. Most alarmingly though, will be the possible effects on employee performance and productivity. Accenture discovered that 87% of respondents “believe that a skills gap increases stress on existing employees, who need to cope with new challenges while lacking the appropriate tool set of skills.”

Closing the Gap with Employee Training

The Accenture report emphasizes education as one of the main ways to combat this growing problem. The good news is that it seems a majority of companies are willing to embrace this resolution. When it comes to education dollars in 2014, 51% of the companies surveyed are expecting to increase the amount of money they’re investing in their training departments this year.

This is positive news. Since the recession, training has topped the list of budget cuts for many companies. Of these companies, 43% aren’t planning to increase their budget for training, but they do anticipate their amount of investment to keep true to current levels.

Do you believe that the skill levels of your employees and coworkers are sufficient enough to compete effectively in the coming years? What does your training budget look like? Are you experiencing a skill-set gap in your workplace, especially when it comes to social media?

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