Posts Tagged ‘Real Estate 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

Millennials Actually Like the Suburbs

Written by Apartment Management Magazine on . Posted in Blog

By Tierney Plumb | Shared Post from the Hightower Blog

millennials in the subs

For the past few years, the media has churned out a steady stream of stories describing how city-loving millennials are driving a re-urbanization of the U.S.

But not so fast. As it turns out, the white picket fence life is still desirable for the young age group, according to a new report from CBRE.

Census data shows domestic net migration out of cities and into suburbia. We chatted with the author of the report, CBRE director of research and analysis Darin Mellott.

By the numbers

The most recent annual data from 2014 shows that 2.8 million people moved from the suburbs to cities that year, but 4.6 million did the opposite. That means the death of suburbs isn’t nigh.

“This news is quite shocking to some people because of how much life that prevailing narrative that has taken on its own,” he said.

Millennials, or those mostly born between 1980 and 1995, make up the largest age group in the country and the biggest segment of the U.S. workforce. But census data does disagree with the media when it comes to where they actually live and where they have been moving to.

About 30% of millennials live within urban areas. The remaining balance doesn’t appear to be rushing to city centers; in 2014, 529,000 people between 25 and 29 moved from cities to suburbs, while only 426,000 did the reverse.

For the younger end of the spectrum (ages 20 to 24), the flow’s direction was even more pronounced, with 554,000 becoming city dwellers and 721,000 trading cities for ‘burbs (keep in mind some of that represented relocation into parents’ basements).

Among the oldest millennials and the tail end of Gen X, negative net migration was even more: 1.2 million people aged 30 to 44 moved from cities to suburbs, while 540,000 did the contrary.

So what do they want?

Space and an urban feel rank high on the list. A recent survey showed that 81% of young people (classified as millennials and those born in the late 1970s) want three bedrooms or more in their place.

That preference means suburbs would be the more likely pick when it comes down to family formation and affordability, he said. “It’s hard to afford a three-bedroom in Manhattan.”

In another study, nearly two-thirds of millennial-aged respondents self-identified as suburbanites or rural people.

Still, country mouse types aren’t everywhere. Millennials love urban perks, like access to public transit, shops, restaurants, and offices. Just because millennials appreciate city living doesn’t translate into demand for downtown real estate.

Suburbs can grow on younger demographics once injected with urban qualities.

In San Jose, for example, mini mixed-use developments like Santana Row have plunked down a myriad of restaurants, bars, and housing that replicate the environment found an hour north in San Francisco. Similar redevelopments on the outskirts, dubbed “hipsturbia” and “urban burbs,” are popping up more and more.

Why the increase? As millennials leave cities, they still crave certain amenities and more developers are reacting to that request, he said.

Western cities like Phoenix and LA are seeing pockets of strong suburban activity, he said, and that same phenomenon is occurring in suburbs of New York and New Jersey.  “Those pockets share common characteristics—that is suburban areas with urban qualities,” said Mellott.

Exceptions to the rule

Of course, the report doesn’t aim to make a blanket statement across the board about millennials and suburbia; keep in mind no two property markets are created equal, and each market has its own dynamics that play out on various levels and in unique ways,

And there are definitely downtown markets across the country that have outperformed—and will continue to outperform, in some cases—suburban markets.

For example, McDonald’s Corp. recently announced plans to move its headquarters from the suburbs to downtown Chicago.

“While we are continuing to suburbanize, that doesn’t mean dynamics are negative in cities,” Mellott said.

Some big firms are realizing that an urban setting is a big selling point when it comes to attracting and retaining new talent. And in San Francisco, Silicon Valley-based Facebook is considering adding a ton of square footage in San Francisco. And LinkedIn recently tacked on an entire office building in downtown San Francisco to appeal to city lovers.

While there’s some truth to the idea of the resurgent urban core, it is also fair to say the extinction of the suburbs and millennials’ love of cities have been “greatly exaggerated,” he concluded. His study aims to dispel erroneous thinking that millennials are anti-suburb.

“We are trying to form a more informed and intelligent conversation around these topics. Suburbs aren’t dying,” he said.

ABOUT
Tierney Plumb
Tierney Plumb is a former reporter for Bisnow San Franscio. She previously worked with the San Diego Daily Transcript and the Washington Business Journal.

Seven Under-The-Radar Cities For Renters

Written by Apartment Management Magazine on . Posted in Blog

By Carl Whitaker | Axiometrics Real Estate Analyst

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San Francisco. Los Angeles. New York. These are just a few metros that are constantly brought up in conversations regarding the apartment industry due to their high demand among renters.

But what about other metros not at the forefront of international – or even American – consciousness? “Under the radar” metros, if you will. Some metros such as Chattanooga, Ann Arbor and Reno may not have the same clout as the larger metros mentioned earlier, but would still make wonderful places for many people.

So from an apartment renter’s perspective, what are some of these under the radar metros?

Axiometrics has compiled a list of metros fitting this criteria. Whether it be their affordable rent, strong economy – e.g. strong job growth – or a certain je ne sais quoi,these metros are surely worth an under the radar discussion.

They’re also less expensive for renters than the national average.

Under the Radar

Athens, GA: Those familiar with the college football landscape immediately recognize Athens as the home of the University of Georgia. While it may seem as though this quintessential college town is a one-trick pony whose economic prosperity depends solely upon the university, recent job growth figures suggest the Athens metropolitan area has far more working in its favor.

In fact, Athens has seen some of the strongest job growth in the nation – an estimated 4.0% job growth between June 2015 and June 2016 – which means those looking to rent an apartment in the area probably won’t have much trouble finding a job. Music lovers will find more than their fair share of concerts to attend as well, as the city has a thriving music scene – not an uncommon phenomenon in college towns.

Savannah, GA: Located on the Georgia coast, Savannah is steeped in history and is one of the oldest cities in the southern U.S.

Much like the other Peach State city on this list, the Savannah metro has enjoyed healthy job growth over the past year (approximately 4.1% from June 2015 to June 2016), which of course makes the task of finding a job much easier. Furthermore, the 10% job growth within the Professional and Businesses Services sector suggests jobs coming to the area are higher paying jobs – another indicator of a strong local economy.

Given its antiquity, history buffs looking to rent an apartment might not have to look much farther than Savannah. As an added plus, Savannah’s proximity to the beach means you’re a history buff and a beach-goer, Savannah just might be your perfect city.

Cape Coral, FL: Cape Coral is included in this list because many people may overlook the coastal city in favor of larger Florida cities such as Miami, Orlando, and Tampa.

Make no mistake, though, that the Cape Coral area has plenty to offer those looking to rent an apartment. Job growth figures since 2015 suggest the area’s economy is doing well, and finding a job won’t prove to be too problematic.  Cape Coral’s job growth of 4.2% over the past twelve months – driven primarily by growth in the Leisure and Hospitality sector – places the city among the nation’s fastest job growth markets.

Baseball fans will be especially endeared to the area. With four minor-league baseball stadiums within a two-hour drive and the month-long sanctuary that is spring training, taking in a few dozen baseball games every year is as easy as can be.

Ann Arbor, MI: Ann Arbor is another city often associated with a university (the University of Michigan), but the city’s sheer size and importance for the region this means Ann Arbor is a town bustling with activities for residents. The low unemployment rate (3.2% according to the latest figures) and high job-growth rate (4.4% from June 2015 to June 2016) reinforces Ann Arbor’s importance as a regional employment hub.

Word to the wise – those looking to catch a college football game at Michigan’s stadium, “The Big House” (an appropriate name seeing that it’s the largest stadium in the nation), may want to consider buying tickets well in advance, as the stadium is consistently filled to capacity.

Reno, NV: Reno is yet another city enjoying its fair share of recent economic prosperity. The northwestern Nevada city can boast about its recent job growth, which is among the nation’s best since the beginning of 2015. Multiple employment sectors including Mining, Logging, and Construction, Professional and Business Services, and Trade, Transportation & Utilities have all grown more than 4% since June 2015.

Those looking to rent in Reno will also find plenty to do throughout the year. The city’s close proximity to the Sierra Nevada Mountains means renters can spend their winters skiing and the rest of the year enjoying an array of entertainment options around the city.

Chattanooga, TN: Tucked in between a few of the many ridges created by the Appalachian Mountains, Chattanooga is one of the nation’s most scenic cities. In fact, the official nickname of the city is the “Scenic City”.

Chattanooga, though, has far more to offer than just its natural beauty. Chattanooga was the first city in the nation to implement fiber optic internet service, which means residents have the luxury of incredibly fast internet speeds. This fiber optic network is helping spur the city’s economy forward as well.

Tacoma, WA: Tacoma may get overlooked in favor of nearby Seattle, but Tacoma has plenty to offer potential renters. For one, the rent in Tacoma is much cheaper than Seattle. While the average rent in Seattle will cost you almost $1,700 per month, the average rent in Tacoma is about $500 less.

A drive of 40+ miles may scare off some folks, but other transit options such as SoundTransit are viable options to cut down on the commute hassle. In addition, Tacoma has been adding a healthy amount of jobs – 3.5% job growth from June 2015 to June 2016 – so a commute to Seattle may not be necessary. Nearby Mount Rainier is also a plus for any outdoorsy types.

Axiometrics’ specialty is monitoring the apartment and student housing markets to provide a granular view of volatile market trends through the interactive AXIOPortal.

Fannie Mae has its Say: Multi-family Overview for 2014

Written by Apartment Management Magazine on . Posted in Blog

shared post from Class A Management

AccountingImage_1Healthy in 2014. That’s the report from Fannie Mae on what’s to be expected of the Multifamily Property Market in the coming year. It’s a trend we saw in 2013, even at times when it was least expected. In fact, the Federal National Mortgage Association reported continued rent growth and sustained occupancy levels through the end of the year, a time when both have a tendency to dip.

Keeping with the trend, Fannie Mae says 2014 holds much of the same, with both tenants and property owners demonstrating a continued demand for the industry. The best news? Looking at the graph provided by the agency, vacancies from now until 2018 are predicted to see very little change, with the first multi-year sustained vacancy rate since 1995.

What’s the Driver?

Wondering about the source of this trend? Job growth, of course, takes the bulk of the credit. The following numbers have been forecast by Fannie Mae’s Economic & Strategic Research Group:

  • 6.4 percent unemployment rate by the end of 2014
  • 1.9 percent increase in nonfarm payroll in 2014 and up to 2.0 percent in 2015
  • An increase in household formations is expected to increase demand for rental units

Some More than Others

As Fannie Mae details—and from what we know to be true—not all areas of the country have seen or will continue to see this positive trend. In fact, particular areas of the country that ‘carrying’ others—bringing up the average for the whole.

What’s interesting is comparing the metropolitan areas expected to see positive job growth with those that aren’t. For instance, Cleveland, St. Louis, Detroit, Philadelphia, Boston, and Washington, D.C. are forecast to miss the mark on unemployment. This is while areas such as Austin, Houston, Dallas, Orlando, Louisville, Palm Beach, and Portland make the top of the list for most promising economies.

To owners and managers in the aforementioned cities expected to see growth, the question is clear: How are you going to differentiate your property to ensure your piece of this action?

Real Estate Trends | Real Estate Crowdfunding: An Easier Way to Raise Money for Companies

Written by Apartment Management Magazine on . Posted in Blog

RealEstate CrowdingOne of the biggest problems facing today’s entrepreneurs is the lack of access to financing. In fact, 98% of the businesses that are able to secure an appointment with a venture capital firm fail to secure financing often as a result of a single element in their business plans.

The Small Business Administration reports that, regardless of the level of legitimacy of the business’s need, banks in the United States are lending less often. In 2011, banks had over $607B worth of outstanding American business loans, all of which were for $1M or less. In comparison to the same period of time in 2008, that’s a reduction of about $100B.

As discussed earlier in the week, crowdfunding, is the practice by which informed investors pool their money together into a single deal. For real estate investors, that would be to acquire property. In return, the investors earn a share of the profits once the deal is complete. Aside from the smaller risk, the “crowdfund” investor is able to benefit from having other informed investors involved in ensuring their deals’ success.

It’s clear that the advancements in technology have revolutionized the ways in which we access and gather information. Researching an investment was once more of a cumbersome process that took not only time and money, but know-how and access to previously publicized resources.

These days you can research everything from property profile data and lean information with nothing more than an address or parcel number. Once you’re invested, there is technology available that allows you to track and manage all the deals in your portfolio without missing a beat.

Now, thanks to the JOBS Act that President Obama passed in spring of 2012, the general public is now allowed to obtain actual company equity in exchange for funding a company’s efforts.

And the timing for such an act couldn’t be better. With all the communities that have been hit by the housing crisis and unemployment trends, crowdfunding has the potential to become one of the primary means for boosting the overall economy.

Through these types of investment opportunities, we can see a new surge of investing for our nation’s small businesses. After all, in the past two decades, small businesses have been responsible for creating 65% of the new jobs in the country.

As far as the public’s acceptance of the crowdfunding platform, statistics gathered by Massolution Research show that the funds collected on the current platforms have grown by a whopping 524% to fund over a million new projects with the $1.5B they raised.

“Yesterday, it was a big deal if you could get Intel to invest in your company. Tomorrow, you will seek funding from 500 Intel employees, who are all better qualified to vet your technology startup than 90% of the people in Intel’s investment arm,” says Fred Trotter from O’Reilly’s Radar. “These crowdfunders are also willing to make a decision to invest in six hours rather than six months.”


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.

 

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