Month: March 2019

Co-Living Trend Gets Interest and Money from Investors

As co-living properties prove successful in gateway markets, they are attracting more investor money.

Investors are showing a growing appetite for co-living start-ups, though multifamily sector experts doubt the co-living trend will disrupt the housing sector.

Hundreds of millions of dollars have been invested in co-living start-ups in the last 18 months, according to Jeffrey Pang, CEO of Homeshare, a co-living marketplace. In major U.S. cities, where housing costs are high, such as San Francisco, millennials would have to spend 77 percent of their income on rent to afford the average one-bedroom, according to MarketWatch. And those rising housing costs are not changing soon, at least in major U.S. cities.

Since early 2010, apartment rent growth has far outgrown income growth, according to data from RealPageInc., a provider of property management software and services. In 2017, apartment completions in the 150 largest U.S. cities jumped to 395,775 units. Upscale buildings accounted for 75 to 80 percent of that new supply, according to RealPage. In that same span, nearly 30,000 new apartments were built in the New York area. Roughly 85 percent of them were luxury units.

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    New Opportunities Are Emerging for Industrial Investors

    Cold storage might be the new frontier for industrial real estate investors as online grocery sales grow.

    Over the last three years, nearly 1 billion sq. ft. of new warehouse space came on-line, but demand for new space continues to outpace supply, with absorption hitting a record 261 million sq. ft. in 2018, according to JLL’s 2019 Industrial Outlook.

    With vacancy nationally dropping to a record low of 4.7 percent, real estate services firm Transwestern reported that the average national asking rent, which has been on an upward trajectory for six years, ended the fourth quarter at $6.29 per sq. ft. Of the 47 industrial markets Transwestern tracks, more than 90 percent experienced year-over-year rent growth, and all but four markets posted positive net absorption for the year.

    The supply-demand imbalance, which has averaged 97.3 million sq. ft. annually for nine consecutive years, has driven rents up by 20 percent since 2014, according to a CBRE report.

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      Why U.S. Apartment Rentals Will Continue to be a Good Investment Choice

      As Americans see lower net worth and higher student debt levels, renting will continue to be a preferred choice for many.

      A major and unprecedented structural shift has occurred in the real estate market due to a variety of demographic and socioeconomic factors. Occupied U.S. rental apartment units rose by 20 percent above the prior 10-year period. Real estate investment managers’ allocations to institutional-quality multifamily product have risen on the ongoing strength in property fundamentals.

      The sector offers steady income streams with rents that adjust with inflation annually, with new opportunities in professionally-managed rental housing. Interest is rising in high-quality rentals across all price points and regions, demanding a well-diversified inventory.

      The homeownership rate across all ages is near historic lows. For-sale housing may recover, but full return to the prior peak homeownership rate is not anticipated. Apartment living is generally a more manageable expense and flexible living arrangement than a single-family home. It is now cheaper to rent than buy in more than half of all counties nationwide.

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        “Mom-and-Pop” Manufactured Home Communities Might Be the Next Frontier for Investment in the Sector

        As institutional players take over larger communities, smaller investors can benefit by looking at communities with under 100 home sites.

        Industry experts see plenty of room for growth in the manufactured home communities sector, particularly among the smaller properties.

        Often referred to as mobile homes or trailers, manufactured home communities are, in fact, a specific type of factory-built housing, constructed in accordance with the U.S. Department of Housing and Urban Development’s (HUD’s) Manufactured Home Construction and Safety Standards Code. They should be distinguished from RVs, trailers and park-model homes.

        Manufactured homes are an important source of affordable housing, particularly for rural and low-income residents, according to experts.

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          MBA: Rising mortgage rates put a damper on application volume

          Applications for 30-year fixed rate rise 2.5%

          Mortgage applications took a tumble for the week ending Mar.1, 2019, according to the newest data from the Mortgage Bankers Association’s weekly Mortgage Applications Survey.

          MBA Senior Vice President and Chief Economist Mike Fratantoni said slightly higher mortgages rates last week led to a decrease in application volume.

          “Furthermore, the average loan size for purchase applications increased to a record high, led by a rise in the average size of conventional loans,” Fratantoni continued. “This suggests that move-up and higher-end buyers have so far become a greater share of the spring market.”

          On an unadjusted basis, the Market Composite index retreated 2.5% from the previous week.

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            An Overview of the Self-Storage Market

            Highlights from a recent Marcus & Millichap report on the self-storage outlook in 36 markets across the United States.

            In February, Marcus & Millichap released its annual forecast for the self-storage market in the United States.

            Overall, the firm sees the investment climate as being robust for the sector, in part due to favorable demographic trends.

            “The self-storage industry continues to benefit from long-term demographic factors, including the aging of the millennial generation,” according to the report. “The 80 million strong population cohort represents a little less than a third of all non-commercial self-storage renters. That proportion is likely to rise as the leading edge of the demographic group enters their primary income-earning years.”

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              Hottest Zip Codes for Home Flippers

              This week ATTOM Data Solutions released its Q4 and 2018 Year-End Home Flipping report. The report showed that 207,957 U.S. single family homes and condos were flipped in 2018, down 4 percent from the 216,537 home flips in 2017.

              However, did you know that ATTOM Data drills all the way down to the zip code level for this specific report? In fact, most of ATTOMs reports consist of various granular geo levels being analyzed, but the flipping report can really help real estate investors who are looking for their next move.

              Average time to flip down slightly from 2017
              Homes flipped in 2018 took an average of 180 days to complete the flip, down from 181 days in 2017 but up from 159 average days to flip 10-years ago.

              Among 6,013 zip codes with at least 10 home flips completed in 2018 and a population greater than 5,000, those with the longest average time to flip were in zip codes 95742 located in Sacramento, California (301 days); 85935 located in Show Low, Arizona (285 days); 77441 located in Houston, Texas (285 days); 98116 located in Seattle, Washington (280 days); and 53532 located in Madison, Wisconsin (277 days).

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                Volatility in Construction Materials Pricing Is Putting Strain on Multifamily Developers

                Multifamily developers don’t know what to expect when it comes to budgeting for materials prices.

                Apartment developers continue to be stressed by the unpredictable cost of construction materials.

                Overall, materials prices keep rising faster than inflation. But what’s worse is that prices for individual construction materials are unpredictable from month to month. The price of lumber and diesel fuel has fallen sharply, for now. But new policies from the U.S. government continue to jolt the markets, from possible sanctions on oil producing countries like Venezuela to government tariffs on imported steel.

                Developers and contractors are struggling to adapt. “It’s likely that contractors will try to protect themselves from unexpected price jumps by putting contingencies into their bids or asking owners to share price risks,” says Ken Simonson, chief economist for the Associated General Contractors of America.

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                  Networking and Relationships in Your Real Estate Business

                  A real estate investor’s ability to network and build relationships will be crucial to his or her success. This is a skill that can be developed over time, but it’s something that should be focused on as an irreplaceable part of the investment business. Oftentimes, you will find the best deals through your network instead of just falling upon a great investment by chance or even through hours of research. Moreover, you can rely upon your network for a wealth of advice, support, and a second set of eyes.

                  Let’s dive into the different realms of your network and how you can cultivate a deeper relationship within each. Your network can be a source of business advice, investment opportunities, partnerships, and even friendships. Your experience as a real estate investor is greatly enhanced with the help of a powerful network, and there are several ways you can cultivate your network and build business relationships.

                  Friends and Family
                  For the beginning investor and seasoned investors alike, your friends and family are some of the most crucial aspects of your network. Oftentimes, people get into the world of real estate investment through family relationships or family-owned properties, and it’s a great introduction into a complex area of business. You likely spend a significant amount of time with your friends and family, and as a normal course of spending time with loved ones you may discuss business, investments, and your longer-term goals. Friends and family can be a great source of information for potential properties, tenants, and can even provide financial help.

                  As a beginning investor, it may seem difficult to save a significant amount of money for your first several investments. You may recall that investment mortgages typically require 25% of the purchase price of the property as a down payment, and if you think that sounds like a lot of money, then you probably aren’t in a good condition to pay all cash. This is where your friends and family can come in handy.

                  If you can get your loved ones to look past the hundreds of memories they may have of you as a child and immature teenager, they may actually be able to see you as a full-fledged professional. In fact, they may even be willing to lend or give you money towards the down payment of your investment. Be prepared for the fact that they may want an explanation or even demonstration of how your investment will pan out before they feel comfortable putting some skin in the game.

                  One of the most important things to remember when it comes to friends and family is that you should never make them feel pressured or obligated to partake in your investing habits. If they are willing to give you money towards your first few investments, be thankful and gracious. If they choose to lend you money with the expectation that they’ll eventually be repaid, set some guidelines. Decide on a timeline to pay them back and stick to it. Don’t ruin the potential for future help by taking forever to pay them back the first time around. Lastly, if they don’t choose to participate financially in your investments – that’s perfectly fine, too. These are your investments, and your risk. You can’t, and really shouldn’t, force others to take on risk that they’re not comfortable with themselves. Friends and family are no exception to this rule.

                  One final word on friends and family. As a real estate investor, you likely spend hours each week on learning and development. There is a lot to learn, and once you begin investing you continue to learn on the job. You probably spend hours analyzing each potential investment before you find one that’s profitable and feasible. You then spend weeks, if not months, pursuing the property and making your way to the closing table. You are slowly but surely becoming an expert in your field. Family and friends are more than eager to offer you advice and anecdotes that could easily deter your vision or, even worse, make you question your abilities to perform as an investor. Remain confident and use it as an opportunity to educate the people you care about, if you so choose. It’s also completely acceptable to tell them that, while you appreciate their advice and concern, you’re doing everything in your power to take calculated risks and pursue your investment goals.

                  Networking Events and Professional Associations
                  While networking with your friends and family may seem a bit forced or unnatural, there do exist many organizations whose sole purpose is to foster networking and business relationships. As a real estate investor, you may have a real estate license and belong to your local Realtor association. The National Association of Realtors™ as well as local associations often host periodic networking events for their licensed professionals for the sole purpose of gathering together like-minded individuals. If you don’t have your real estate license, you can still join a national or local real estate investment association. These events are specific to the investment realm in that they connect you with people who are interested in financing investments, people who have properties to sell, people who advise investors, people who manage properties, and many others who could benefit you in your investment goals.

                  The greatest benefit of a professional association dedicated to real estate investment is that the intention is very clear – it is meant for real estate investors just like you. Sometimes networking with individuals in other social circles can be uncomfortable because you feel like you are delivering a pitch, whereas when you meet with local real estate investment club members, the intention is very clear. Everyone is there for a common purpose and you can take advantage of the wealth of knowledge among your circle. Networking events are often free, or they may charge an entry fee or membership fee. You should weigh the benefits and costs for each association and determine where you can realize the most value.

                  Social Media Networking
                  One of the newest forms of networking occurs via social media. This is a new phenomenon given that the Internet is less than 50 years old, and mainstream social media is hardly more than a decade old. Nowadays, people advertise their homes for sale on Facebook and Twitter, a practice that was never seen before the advent of social media. Through these mediums, real estate becomes a more accessible concept to a larger audience. You can “follow” real estate investors and advisors on social media platforms like Instagram, and you’ll receive updates when they post new content. This is especially beneficial if you follow influential people that are truly successful in real estate investing, as they may divulge their knowledge and trade secrets through these informal platforms.

                  Social media networking is more informal than networking as part of an in-person association, but it also allows you to reach a wider array of people. Now you can easily connect with real estate investment professionals and potential business partners across the world and access a wealth of knowledge that would otherwise be completely unavailable to you. The informal nature of social media makes it more conducive for you to reach across the imaginary lines between you, an amateur real estate investor, and a more seasoned investor or business advisor. Using social media platforms, you can also build virtual networks of people who share advice, provide tools that are useful to real estate investors, and develop educational content to pass on their knowledge to others.

                  On the flip side, you can network yourself by posting to your social media platforms about your real estate investment successes and experiences. This will invite commentary and discussions from your group of followers, which can also lead to new and beneficial business relationships. Putting relevant content out to your social circle ensures that people are aware of your role as a real estate investor. This greatly increases the chances that someone will immediately think of you should a real estate investment opportunity arise. The more you network yourself on social media platforms and among online communities, the greater your network can grow.

                  The Art of Cold Calling
                  One of the most tried and true methods of building your network is the age-old practice of cold calling. Cold calling is the practice of calling a person without any prior communication, and it can apply to people who wish to buy or sell properties as well as professionals that are in some way related to the real estate investment sector. Seasoned professionals often enjoy spreading their knowledge and cultivating relationships with those who are new to their field. It’s not uncommon for new real estate investors to reach out to more experienced investors and ask for advice or guidance.

                  Find an established investor in your community and cold call them – offer to take them to lunch or for a coffee and pick their brain. Keep in mind that the best long-term mentoring relationships are mutually beneficial. That is, they have benefits for both parties in the relationship. Find a way to offer your services and expertise to your new mentor, and you’ll ensure that you both will find the relationship to be positive and rewarding.

                  As you build your team, you’ll likely find yourself cold calling professionals that you’ll need for each of your transactions, like inspectors, attorneys, title companies, and mortgage professionals. It’s a good idea to develop a “script” for your cold calling, or a set of questions that you’ll use to conduct a brief interview of professionals in your field to determine whether you would work well with that individual and develop a longer-term relationship.

                  Some of the best relationships can come out of a simple cold call, and it’s one of the simplest ways to start building new relationships in your field. Identify yourself as a new or emerging real estate investor who is working on building a team and identifying opportunities to serve others. Feel the other person out to determine whether or not you would work well with him or her. Does this professional seem to understand your goals? What can they do for you? Conversely, and perhaps more importantly, what can you do for them? These are just some of the questions you should explore as you dive into cold calling.

                  Building Relationships in Everyday Life
                  The final way to develop your network and build relationships is to engage in communication with everyone you encounter in your everyday life. This involves a mental shift to constantly identify opportunities and to have an open mind and heart. You never know how someone may help you with your investment goals or whether they turn out to be a business partner or advisor. When you’re standing in line at the grocery store, sitting at the airport gate waiting to board, or having a meal at the restaurant’s bar next to another person that you normally wouldn’t engage with, take a moment to introduce yourself and build a relationship.

                  Keep in mind that most people don’t like to feel like they are being “sold” on something, and they clam up if they feel you are delivering them a sales pitch. Instead, focus on just being present and having a nice conversation. If real estate investing happens to flow into the conversation naturally, use it to your advantage without being pushy. You’ll begin to see every interaction as an opportunity to build a relationship and potentially form beneficial business connections.

                  Now that you understand the importance of developing a network and building relationships, use this knowledge as you interact with others in your day-to-day happenings. Understand the benefits of a mentoring relationship, the potential that may lie amongst your friends and family, and the incredible resources that social media and internet marketing offer. Your network is your lifeblood and, as a successful real estate investor, it’s truly the foundation of your entire business. Foster it, and you’ll reap the benefits for years to come.

                  The housing market isn’t appreciating like it used to

                  But will things turn around in 2019?

                  Home price growth continues to slacken, with annual growth decelerating to the slowest pace since August 2012.

                  According to recent data from CoreLogic, home prices in January grew 4.4% year over year, increasing just 0.1% from the previous month.

                  Since peaking at 6.6% growth in April 2018, home prices have continued to slow, which CoreLogic attributes to rising interest rates.


                  (Source: CoreLogic)

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