Month: November 2018

4 Ways to Determine the Rental Fee of Your Property

Trying to make a profit on your investment property is one thing; setting the price for it is another.

With the competition as strong as it is, you need to make yours stand out and make it a desirable option for the tenants. It means pairing a high-quality offer with the right rental price. With a little market know-how, research and math, you can determine the suitable rental amount for your investment property.

Take these four tips into consideration when determining the rental fee of your property:

Consider the Market

Depending on the market where your property is located, the formula to figuring out a proper rental price is pretty simple: the higher the competition, the lower is the price. However, if you want to have the advantage compared to other properties, survey the market, see what the general prices of those properties are, then find the middle ground that appears ideal for your property.

Research Rental Prices for Units Similar to Yours

It may be a little hard to find this out yourself, as all information of this type usually is confidential (unless you are a buyer.) You can always try to find out how much rent others are charging for their units to determine the starting point of yours. You can also consult sites like Zillow, Craigslist and Trulia.
Start with practical things a rental unit should have: those that resemble yours by age, square footage, amenities, number of bedrooms and bathrooms, location, etc. Make a list of properties that you find which match yours or are similar and their occupancy rate. See if you can ask a similar rental price. If you want to be sure, talk to a property manager about the exact estimate.

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Amazon, Mass Merchants Win on Black Friday; Malls and Guns Lose

Brick-and-mortar sales during the Thanksgiving weekend went down 6.6 percent, according to RetailNext.

(Bloomberg)—The presents may not yet be wrapped and under the tree, but at least they’re in transit with a tracking number. With spending increasingly moving online, a new set of winners is emerging as the Black Friday holiday shopping weekend comes to a close.

“We are seeing a fundamental shift in who’s considered winners and losers coming out of Black Friday this year,” Bloomberg Intelligence analyst Jennifer Bartashus said. “Whether you’re talking about department stores, mass merchants or specialty apparel chains, consumers are voting with their online spending and driving this evolution.”

Prognosticators went into Thanksgiving expecting this holiday shopping season to be one of the best since the recession, possibly rivaling the boom days of the mid-2000s. The economy is growing, gas prices are low and median wages have been rising. But not everyone can come out on top. Here’s a look at who’s having a merry season — and who’s out in the cold.

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Former Urban Big-Boxes, Class-B Office Buildings Are Being Converted to Last Mile Industrial Space

Investors are redeveloping empty retail big boxes, class-B office buildings in urban locations into last mile industrial facilities.

The limited supply of urban industrial inventory available for “last mile” e-commerce distribution space is causing investors and end-users to get creative by re-positioning other types of real estate with failed uses or shrinking demand, according to a JLL report, Urban infill: the route to delivery solutions.” The report notes that annual total e-commerce deliveries have more than tripled over the past five years, but development of new urban industrial infill assets has remained relatively flat.

Despite dwindling opportunities in urban locations, investors remain interested in the 18 percent sales price premium last mile industrial assets command over “first mile” locations, and the higher rents users are willing to pay in order to be near their customer base.

Older office buildings, underused parking structures, abandoned strip centers—even former churches—are now among properties being re-positioned as last mile fulfillment centers. E-commerce fulfillment centers are actually “terminal facilities,” as trucks deliver merchandise there to be broken down for home delivery trucks and other types of vehicles, according to Mark Glagola, D.C.-based senior managing director for industrial services with Transwestern. He notes that these distribution facilities are especially critical for time-sensitive merchandise like food products.

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Foreign Investors Find Trophy Assets in Unlikely U.S. Gold Mines

Foreign investors are buying up properties in Sunbelt states.

(Bloomberg)—U.S. properties in places like Denver, Phoenix, Philadelphia, and the suburbs of Atlanta have all drawn foreign investment this year as buyers look for growth outside the biggest U.S. metro areas.

Canadian investors topped the list of foreign buyers of U.S. real estate this year, as they have for a decade. Among those was Toronto-based Starlight Investments, which purchased apartment complexes in the suburbs of Atlanta and Phoenix through its U.S. fund.

“There were really only a handful of people when we first started looking at the suburbs, and that handful is now a larger number of people that are looking at those deals,” said Raj Mehta, global head of private capital and partnerships at Starlight. “We were increasingly seeing that jobs were moving from traditional Northeast and Northwest corridors into the sunbelt states.”

In the major markets of New York, San Francisco, Washington, Los Angeles, Chicago and Boston, commercial rents are already reaching record heights, and there’s less room to grow, so some foreign real estate investors are putting money into the next-best markets where they see yields rising.

Canada, China and Germany were the top foreign investors in U.S. commercial real estate this year and are making more deals outside the biggest metro areas, according to data from CBRE. The most popular second-tier markets for foreign capital this year include Dallas, California’s Inland Empire and Philadelphia.

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How the Stock Market’s Wild Ride Could Affect CRE Investment

Stock market volatility may spur investors to allocate more funds to direct ownership of real estate.

The stock market’s recent rollercoaster, with October’s sharp correction followed by a post-midterm election surge, can put the investment community on edge, including commercial real estate investors.

“People who invest in real estate don’t invest in a vacuum,” says Mark Dotzour, a real estate economist who spent 18 years as chief economist of the Real Estate Center at Texas A&M University before opening a private consultancy three years ago.

“They are looking across the whole horizon of investment opportunities, so that includes stocks and bonds, private equity, public REITs, all of that. My belief is that stock and bond market behavior—volatility if you want to call it that—has a significant impact on real estate investment decisions.”

It’s impossible to completely separate one’s emotional reactions from financial behavior, says Mike Ervolini, CEO of Cabot Investment Technology, which sells behavioral finance software to professional equity fund managers. Ervolini previously served as a portfolio manager and CIO with AEW Capital Management.

Real estate investors pay close attention to what’s happening in the stock and bond markets and while they may be able to overlook recent volatility, they’ll need to keep an eye on longer-term trends to determine if commercial real estate investment is still the best bet for their financial portfolios, according to Dotzour. For now, it seems the answer is yes.

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Affordable Communities in Rural US: A Shrinking Inventory

Insufficient federal funding, low incomes and an aging population are some of the main factors that have contributed to many rural areas’ shortage of affordable housing.

Examining census tracts within counties that are eligible for U.S. Department of Agriculture’s housing programs, Urban Institute researchers discovered that more than 150 counties ranked as having most-severe need for affordable housing units. The number represents 5 percent of eligible counties and roughly 7 percent of all eligible rural population in the country.

The figures look worrying: 38 percent of the researched counties are having moderately severe rental housing needs and 58 percent showed less-severe needs for affordable rental housing production. Compared to national averages, counties with most-severe need had high unemployment rates, were overcrowded and had lower shares of federally subsidized rental units. Roosevelt County in New Mexico turned out to have the most severe need for affordable rental housing production, meeting the high-need thresholds across six of the report’s indicators: Population growth, persistent poverty and unemployment, overcrowded households and severely cost-burdened households.

Demand for affordable rental housing in rural communities severely exceeds supply and the existing stock has aged significantly. Corianne Scally, senior research associate in the Metropolitan Housing and Communities Policy Center at the Urban Institute, told Multi-Housing News that it is very difficult to estimate the number of units needed nationwide to meet the current demand for rural housing due to frequent demographic and market changes. However, she confirmed that “(the) analysis of more general indicators still reveals many communities exhibiting characteristics of need, such as population growth, low rental vacancy rates and many renters paying more than half of their income for rent.”

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U.S. Housing Starts Rise as Apartment Groundbreaking Gains

Residential starts increased 1.5 percent in October, driven by multifamily projects.

(Bloomberg)—U.S. new-home construction picked up in October on a rebound in apartments and other multifamily housing, offering some hope that the market is stabilizing despite rising prices and borrowing costs.

Residential starts increased 1.5 percent to an annualized rate of 1.23 million from the prior month’s upwardly revised 1.21 million, government figures showed Tuesday. While that matched the median estimate of economists, single-family home starts fell for a second month. Permits, an indication of future construction, fell 0.6 percent to a 1.26 million rate, also in line with projections.

Key Takeaways

The data suggest that builders are seeing steady demand from buyers amid a solid labor market and tax cuts that have boosted take-home pay. Those are cushioning the impact of mortgage rates at an eight-year high and home prices still outpacing wage gains. An easing in lumber prices from a record earlier this year may also be providing some relief to developers. At the same time, the figures followed a report Monday showing the biggest drop in homebuilder sentiment since 2014, indicating developers are becoming less optimistic that future demand will withstand headwinds. The increase in starts was concentrated in the more-volatile multifamily category, such as apartment buildings and condominiums, which rose 10.3 percent to an annual rate of 363,000. Groundbreaking on single-family homes fell 1.8 percent to 865,000. Housing starts rose 4.7 percent in the South, the largest region, to an annualized pace of 596,000; they also increased to a five-month high in the Midwest while declining in the West. Starts fell to 87,000 in the Northeast, the lowest since May 2017.

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Bruce Norris’ Data-Driven Real Estate Investing Strategy

Southern California real estate investor, author and trainer Bruce Norris relies on data to drive his real estate investing strategy.

That means his strategy in preparing for the next recession — which he believes is coming in late 2019 or early 2020 — looks much different than his strategy leading up to the last recession.
Norris, who predicted the coming California housing crash in 2006 and largely liquidated his inventory at the time, provided three key data-driven indicators that lead him to believe the coming recession won’t trigger a sharp drop in home prices like the Great Recession.

Negative Interest Rates?

First, the Federal Reserve’s monetary policy in recent years has set the stage for an extremely favorable mortgage rate environment in response to a recession.
“During a recession, interest rates are lowered,” said Norris, CEO of The Norris Group. “The fed fund rate, in past recessions, has been lowered by 4 to 5 percent. What makes this impending recession most interesting is the fed fund rate will stand at 3 percent or less when the easing begins. If the Fed lowers rates as aggressively as they normally do, we could end up in negative interest rate territory and have a 30-year loan that starts with 2 percent!”

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Blurred State Lines Benefit Single Family Rental Investors

The lines are becoming increasingly blurred when it comes to local versus out-of-state single family rental real estate investing.

Thanks in large part to advances in technology that allow investors to find — and easily assess — the performance of out-of-town rental properties, as well as the range of management options that landlords and investors have at their disposal, what was once an arduous task that represented considerable risk is fast becoming commonplace. Reaching outside of their own local marketplace is becoming the preferred course of action for many investors and landlords; and in most cases, isn’t that dissimilar to the prospect of managing property in their own hometown.

The freedom of long-distance investing opens up significant opportunities for institutional investors and everyday landlords alike; chiefly, the ability to take advantage of markets that are better than what’s available in their own local vicinity. Taking advantage of the wealth of diversity in various markets across the states allows an investor to handpick investments with the greatest potential; allowing them to grow their portfolio far more quickly than they’d be able to if they were limited to the pool of properties in their own hometown.

At Renters Warehouse, we’re proud to support investors who are looking to invest in out-of-town properties. Our team provides on-the-ground local support; making it far easier for investors to outsource the nitty-gritty daily activities of property management; freeing them up to instead focus on growing their portfolios.

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What Gen Z Wants in Student Housing

Location, security and activity spaces—these are the top three qualities that Bock Development Group takes into consideration when developing a student housing community with Gen Z renters in mind. CEO Tom Bock sheds light on attracting this important cohort.

Born immediately after Millennials, Gen Z has grown up with smart phones in their pockets, so their expectations and requests when it comes to student housing amenities and features substantially differ from other generations. For example, as digital natives, Gen Zers demand constant access to technology. And since they are used to getting what they want, student housing providers have to work diligently to ensure that these needs and expectations are being met.

Bock Development Group CEO Tom Bock told Multi-Housing News that “Having the most recent tech and high-speed internet is crucial, as Gen Z renters spend a lot of time online.” In an interview, he also highlighted other important aspects Gen Zers take into account when searching for on- or off-campus student housing.

How are Gen Zers different from other categories of renters?

Bock: Gen Zers put more emphasis on experiences rather than in-unit amenities than any previous generation. Other subsets of renters may place most of their value on luxury in-unit amenities and finishes, while Gen Zers seek out prime locations and walkability in their next residence. Overall, younger generations’ preference for experiential offerings and convenience in an apartment building presents an opportunity for developers to research potential up-and-coming markets in hopes of finding the perfect place for their next multifamily project targeting this demographic.

How have residents’ needs changed in the past few years?

Bock: The biggest change I’ve seen in residents’ needs over the past few years, especially for the younger generations of renters, is the need for convenience. For example, having built-in bike storage in a building or being located just around the corner from a grocery store is a huge demand driver. Also, location is a major selling point for younger generations, especially for those in cities, who rely solely on public transportation to get around.

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