Month: August 2020

Hundreds of thousands of people looking for suburban homes — Sternlicht on exodus from cities

“I would say it’s not as driven by the Covid situation as it is safety and law and order,” global investor Barry Sternlicht told CNBC.

Global investor Barry Sternlicht told CNBC on Tuesday he believes masses of people are moving away from major U.S. cities in favor of the suburbs.

“There’s hundreds of thousands of people looking for suburban homes, and I would say it’s not as driven by the Covid situation as it is safety and law and order, and that is now pervasive across the big cities of the United States, sadly,” Sternlicht said on “Squawk Box,” referring to recent protests that have sometimes turned violent.

Tax policy is another force that could be playing into the desire for affluent people to relocate from large cities such as New York, said Sternlicht, founder and CEO of investment firm Starwood Capital, which focuses on areas such as real estate and energy infrastructure.

Although cities may be facing declining revenues as a result of the coronavirus pandemic, Sternlicht said, “if you tax the wealthy even more in New York City … and they leave, then the social net has to be absorbed by the remaining residents and you can force them to leave.”

“The Biden tax plan, which I’m happy to pay more taxes, but I don’t think this increase in the capital gains rate is a good idea for investment in our country, which we need to do,” he said. And if that passes and the the limit on state and local tax deductions is not repealed, “you’re talking 60% plus taxes on the wealthy in New York City, and they will leave.”

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    Deserted College Dorms Sow Trouble for $14 Billion in Muni Bonds

    More than $14 billion in municipal bonds were sold to finance student housing projects.

    (Bloomberg)—Less than a third of the rooms in a new $90 million dorm set to open this month at the California College of the Arts in San Francisco are taken. An opulent apartment tower financed by $228 million in municipal bonds at Florida International University, with a rooftop pool and gym, hasn’t yet met tenant projections.

    It’s a scene playing out on campuses across the U.S. as families skip the usual college move-in frenzy, leaving thousands of dorm rooms empty. That will cascade into the more than $14 billion of municipal bonds sold for student housing, particularly securities sold by private companies relying on rental and leasing revenue to pay bondholders. It’s one of the first places where investors who bet on higher education can expect trouble because of the pandemic.

    Colleges for years have been turning to private companies for student housing to shed costs and lure students with state-of-the-art facilities. The companies borrowed the money for construction from municipal bond investors, with a promise to repay with rent and lease revenue. But with schools switching to virtual learning or limiting the number of students who can live on campus, the bonds that are often already risky are facing a major threat.

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      How to Build Your Real Estate Portfolio From Scratch

      Many of my friends and colleagues are interested in owning rental properties as a way to earn passive income. I think it’s awesome that people have this goal and that real estate can help them reach it. But I also want to help people understand exactly what it takes to get there.

      Let’s say your goal is to eventually bring in $10,000-$20,000 per month, which would essentially allow you to retire from your 9-5 and start living life on your own terms. Let me be the first to say that I think this is a fantastic goal! But what’s your strategy?

      In this article, I will walk through the steps of building your portfolio, starting with your very first property. I help you build a plan that will work for you without breaking the bank in the short term.
      Let’s get started.

      Step One: Assess Your Current Buying Power

      This is going to look different for everyone, so stay with me. Depending on the amount of available cash you have, you might be looking to start with just one investment property, or a handful of them. For this example, let’s focus on just one.

      If you have decent credit, minimal debt and a little bit of cash to put down, you may be in the perfect position to purchase your first investment property. I recommend discussing your options with a few different lenders.

      Questions you should ask your lender include, but are not limited to:

      • How much can I be approved for?
      • What will my interest rate be?
      • What’s the difference in rates for investment homes vs second homes?
      • What are my options for the length of the loan and how quickly can I pay it down?
      • Are there any penalties for paying it off early?

      Once you decide on a lender, be sure to obtain pre-approval so you can confidently put an offer in on a property when you find the right one. Once you collect all the information you need to make a good decision for your current financial situation, you can move on to the next step.

      Step Two: Choose a Property in an Area That Sells

      This may seem like a no-brainer, but it often is not. You need to start your property search by looking at the different areas of town. What areas are you interested in?

      If you’re looking for a house in the suburbs that you can rent out to families, you will want to consider several factors that appeal to that audience. Most families are all about location, location, location. You want to find a neighborhood with easy access to schools, shopping, recreation and even places of worship.

      If you’re considering a condo or high-rise downtown, the conversation shifts a bit. People looking to rent these types of residences tend to be single or married without children. Sometimes they are empty-nesters looking to downsize. In this scenario, you’ll want to consider parking, storage space and the amenities of the community.

      The other thing to consider is whether or not the community you have chosen allows rentals. Whether it’s a neighborhood or a high-rise, chances are good that there are some restrictions on rentals. Be sure to do your research on your selected neighborhoods before putting in an offer.

      Step Three: Purchase the Property

      Once you’ve decided what type of property you’d like to purchase, BUY IT! Your realtor and lender will walk you through this process, but it basically entails putting in an offer, considering any counter-offers from the seller, going through the home inspection process, etc…

      If you’re working with a realtor, this will all seem like a fairly simple process. If you ARE the realtor, you already know what to do.

      Step Four: Marketing

      Now that you own your investment property, it’s time to start marketing it and finding potential renters. Finding the right tenant has a lot to do with where you purchased your property and who your target audience is. If you’re still not sure who they are, do a little more research on your area.
      You’re looking for information like this:

      • What are the market rates in your area for rentals of similar size?
      • Who are the main inhabitants in your area?
      • Who is moving in and out of the area?
      • What do people value the most about that specific neighborhood?

      Once you learn a little bit more about the people living in the neighborhood, you can start to target your marketing to find the right tenants.

      Social Media

      It’s no secret that social media is one of the easiest ways to get your product or service in front of the masses. But again, do your research first. Based on what you learned about your target audience, join some online forums and groups that cater to those specific types of people.

      You will be amazed at how much you can learn about your target audience by hanging out where they do. You’ll learn about their habits, hobbies, interests, dislikes and more. Once you learn more about them, you can craft your messages in ways that will resonate with them.

      You also need to create social media accounts for your properties or your business as a whole. Remember that the internet is a visual medium, so you need really great photos of your properties to entice people to click. Once they click, you need more photos for them to view.

      Give them more information than they need. If they feel like they have to search for it, they will exit your post and keep scrolling.

      Word of Mouth

      As antiquated as it may sound, people still take recommendations from their friends, family and even anonymous people online! Think about it… you read Amazon and Google reviews before purchasing, don’t you?
      Ask existing tenants to write testimonials for you. Or do a short 30-second video of them saying their testimonial out loud!

      Online Marketplaces

      There are tons of places online where property owners can advertise their available properties. You can look at the various platforms, their fee schedules and requirements and figure out what will work best for you. Here are just a few options:

      • Zillow
      • Hotpads
      • Oodle
      • Padmapper

      Depending on your marketing budget, some of these might be more realistic for you than others. But they are worth the time investment to at least learn what your options are.

      Your Own Website

      Whether you’ve been in business for several years, or you’re just getting started, a website can be one of the most lucrative things you can invest in. Consumers are savvy and information-hungry. They want information at their fingertips when it’s convenient for them.

      Just as with social media marketing, you want to make sure your website has fantastic images and lots of information. Have you ever been looking for a house online and you won’t even click on the ones with terrible photos? Your customers are the same way!

      Take the time to take great photos of the home. If you can invest in a professional photographer, go for it! If not, newer smart phones have fantastic cameras, so you can get some great shots on your own.

      Last but not least, consider whether or not you need to hire a professional web designer. If you have the expendable cash, it can be a great investment. If not, I recommend either WordPress or Wix. Both platforms are designed to help non-web-designers create and launch their own websites.

      Step Five: Screen Potential Tenants

      This process can seem daunting when you’re just getting started. But I recommend you to be as diligent as possible to minimize the risk to your property and your business. The following steps are critical in the process of screening potential tenants:

      Have potential tenants fill out an application. You can create one on your own, use a template or have a lawyer draw one up for you.

      Run a credit check. This will give you information on the past 7-10 years of the tenant’s payment history to other creditors, including past landlords. Depending on what state you live in, you may or may not be able to charge the potential tenant for the cost of the credit check.

      Run a background check. This will give you information about the tenant’s past. You can order these through companies such as StarPoint and ScreeningWorks. This will give you information about previous evictions, crimes committed and other public records.

      Complete reference checks with previous landlords. If your application is thorough and includes past landlords / living spaces, you can reach out to these people for information about the tenant’s behavior and payment history.

      Call the tenant’s employer. Verify the income amount that they listed on their application. You want to be confident that they can pay the rent on time each month.

      Interview the tenant. This is one of the most important things you can do. It will be mutually beneficial for both parties to get to know one another and decide whether or not the relationship is going to work.

      Step Six: Do It Again!

      Once you’ve gone through all the steps listed above and you have some renters in your first property, you can start considering what your next property will be. You can return to step one and start again!

      However, I highly recommend waiting for a little while until you’re comfortable. Get to know the process and how to manage your first investment property before going out on a limb with another one!

      Over time, your income per month will hopefully grow and you will have more to invest. As I said in the beginning, you can absolutely grow your business to the point that you can walk away from your 9-5. It just takes time, patience and smart decision-making.

      Should I Hire a Property Manager?

      Only you can answer that question for yourself. Maybe you were an executive at a company and didn’t have the available hours in the day to dedicate to your rental properties.

      You may or may not be in that situation. If you have the time and the know-how to market your properties, screen clients, handle maintenance issues, etc. then you will be fine! If not, I really do recommend a management company to handle those items for you.

      If you screen them carefully, you will find one that fits your needs and your budget. I also base a lot of my decisions on how I feel about their integrity. You need someone who will be honest and who is licensed and insured,


      Hopefully you now have a clear understanding and the outline of a plan for how to go from where you are right now to owning your first investment property. Remember that it takes time to build your portfolio. Not overextending yourself at the beginning will help you be more successful in the long-term.

      Happy investing!

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      Small landlords dip into savings as their tenants struggle to pay rent

      More renters are unable to make their monthly payments, and that is having an outsized impact on the nation’s “mom and pop” landlords.

      More renters are unable to make their monthly payments, and that is having an outsized impact on the nation’s “mom and pop” landlords.

      Nearly a third of renters who live in single-family or small multifamily properties owned by individual landlords were unable to pay their August rent, according to a survey by Avail, a technology and marketing platform for small landlords. That is up from just under 25% in July. Avail received responses from 2,225 landlords and almost 3,000 renters.

      The main reason for their inability to pay was loss of employment or reduced income. Additional unemployment benefits put in place when the coronavirus pandemic hit were helping tenants to keep up with their rent, but those recently expired, and a growing number of renters are now missing their payments during a standoff between D.C. Republicans and Democrats over a relief package.

      On the other end of the equation, about a third of small landlords rely on that rent for the bulk of their income.

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        Despite a Steep Drop in Volume, Industrial Remains the Shining Star of the CRE Universe

        The overall slowdown in investment sales activity that affected all commercial real estate assets in the second quarter is not expected to leave a lasting mark on industrial real estate.

        The industrial sector has been deemed one of the top performing commercial real estate asset classes, due to low vacancy rates, rising rents in some markets and positive net absorption.

        But despite solid fundamentals, investment sales volume in the sector decreased by 50 percent in the second quarter compared to the year before, to $10.3 billion, according to data firm Real Capital Analytics (RCA). According to David Bitner, head of Americas capital markets research at real estate services firm Cushman & Wakefield, in his team’s tally, industrial deal volume was down by about 43 percent in the second quarter compared to the same period in 2019 From the first quarter of 2020 to the second quarter, there was a 46 percent decline in industrial sales volume, he adds. Bitner attributes this to the slowdown in investment activity caused by the coronavirus pandemic beginning in March, as most deals across every property type went into freeze mode.

        “We were already anticipating a slowdown on the industrial side pre-COVID-19. People were ready for that. But coming into the downturn, we were in such a fundamentally better place than in previous downturns,” says Carolyn Salzer, director and head of industrial research for the Americas at Cushman & Wakefield. “Rents are still growing… The market is a lot smarter this time around, and with the e-commerce acceleration, it’s causing such a strong demand in the industrial market.”

        Net asking rents on industrial properties rose by 100 basis points quarter-over-quarter and 6.3 percent year-over-year to $7.96 per sq. ft. in the second quarter, according to research from real estate services fir CBRE. Rents on warehouse and distribution center properties rose by 5.6 percent year-over-year to an average of $6.68 per sq. ft. These rates are at all-time highs, according to CBRE research.

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          Is Your Rental Property Going off the Rails in the Pandemic? 4 Questions To Figure That Out

          Whether you’re renting out one floor of your brownstone or you own a bunch of rental properties, it can all amount to a lot of work.

          If you don’t want the hassles of chasing down rent and keeping up with repairs, hiring a good property manager can really help.

          Property managers are paid to manage the day-to-day aspects of rental homes. Hire the right people, and they can make owning rental properties a breeze.

          Property managers are an even bigger asset to rental-home owners these days, as we deal with the uncertainties of the COVID-19 pandemic.

          “Choosing a great property manager is the single best thing an investor can do for the success of their rental portfolio, so it’s worth it to spend the time and effort upfront to avoid headaches later,” says Eric Hughes, founder and CEO of Rental Income Advisors and owner of 16 rental properties in Memphis, TN.

          However, not all property managers are great—which means that it’s vital to keep regular tabs on their work, to make sure your rental property isn’t getting run off the rails.

          To help you suss that out, here are four questions worth asking your property manager today.

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            The Current Status of Eviction Bans by State

            Many elected leaders enacted emergency bans on evictions as part of COVID-19 relief measures. Those have now come to an end in some states.

            A big part of COVID-19 relief policy in the early days of the crisis was a ban on evictions. At the federal level that included a 120-day ban on evictions as part of the CARES Act, which has now expired.

            Separately, the FHFA has ordered Fannie Mae and Freddie Mac to keep in place moratoriums on foreclosures and evictions on enterprise-backed, single-family mortgages only. That ban is scheduled to expire on August 31. In addition, the FHFA has mandated that multifamily property owners with government-backed loans in forbearance inform renters about the eviction protections the policy extends to them.

            Aside from that, many states and cities put in place additional bans. Eventually, some of these prompted legal challenges that are still winding their way through the court system.

            Having evictions on hold was an adjustment for multifamily property operators, although by and large, the fact that many renters have been able to keep current on rents made it less of a pressing concern.

            Now, with both extended unemployment insurance benefits and eviction moratoriums expiring, the number of evictions could quickly explode.

            Legal website has been maintaining a regularly updated list of the current status of local eviction bans. Based on the information from that site, which was last updated Aug. 7, here is a list of the current status of eviction bans in states across the country. For further info on the situation by state, go here.

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              Blackstone buys South Florida warehouse portfolio for $94M

              The deal shows there remains strong demand for industrial properties in South Florida.

              The industrial properties gained in value.

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                Grocery stores might be the next big thing to move into malls

                The biggest mall owner in the U.S., Simon Property Group, hints at opening more grocery stores in its malls.

                As consumer shopping habits change, America’s shopping malls have anointed many saviors: food halls, movie theaters, gyms. Grocery stores could be next on the list.

                Simon Property Group, the largest mall owner in the U.S., hinted at the idea on an earnings call Monday evening. The comments came on the heels of a report that said Amazon was in talks with Simon to open warehouses at some of its shuttered Sears and J.C. Penney locations. CEO David Simon did not comment on the report Monday. Amazon also previously declined to comment.

                One analyst thinks that instead of opening logistics hubs at Simon malls, Amazon might be looking to open more of its own grocery stores there — which could end up working out better for both parties.

                “We understand that Amazon is reportedly looking for grocery deals in the Boston market, and grocery offerings at A-rated malls, similar to Europe and Asia, would provide essential retail use and boost shopper traffic, in our opinion,” Compass Point real estate analyst Floris van Dijkum said in a note to clients. It is much more common overseas than in the U.S. for malls to have grocery stores as anchors, he said.

                One huge hurdle with opening an industrial space, such as an Amazon logistics hub, within a shopping mall is that rezoning that would be required.

                But, van Dijkum said, a grocery store is considered a retail use and so it could be a “much easier” fill for an old department store. A grocery store in a mall could also draw more customers in and benefit the surrounding retailers and restaurants more than a warehouse, he said.

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                  Cheapest Apartments at Biggest Foreclosure Risk as Payments Fall

                  Tenants at class-C apartment buildings paid 54 percent of their total rents due for the month by the middle of June, according to LeaseLock.

                  (Bloomberg)—Covid-19 has exposed a disparity in America’s rental housing that threatens to get even wider.

                  While landlords at the priciest, amenity-rich apartments have collected most of their rent payments during the pandemic, owners of older, less fancy units — the backbone of the nation’s affordable housing supply — haven’t fared as well.

                  Tenants at so-called Class C buildings paid 54% of total rents due in June by the middle of the month, according to a study by LeaseLock. In July, even with emergency unemployment relief still flowing, the figure slipped to 37%.

                  Rent Collections Decline

                  The decline highlights how hard the lockdown has squeezed the country’s lower- and middle-income renters, who are more likely to live in Class C housing and have service jobs that have been severely cut back by social-distancing rules.

                  Further erosion in those rent payments would endanger America’s affordable housing supply and put mom-and-pop landlords at the biggest risk of mortgage default. Should their buildings go into foreclosure, the buyers may not keep them affordable, or even as rentals, said Robert Pinnegar, chief executive officer of the National Apartment Association, a landlord advocacy group. High construction costs make adding any new supply unlikely.

                  “If we lose this product through the crisis, we’re never going to be able to build it again,” Pinnegar said. “We risk making the affordability crisis much worse on the other side.”

                  Just outside Denver, Debi Stobie and her husband own a 24-unit building that’s their only source of income. It’s not a fancy place — some of the apartments still have vinyl floors and ’70s-era kitchen cabinetry, while others got some modern upgrades from Ikea.

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