Category: Multifamily

3 Design Strategies for Multifamily Investors

After purchasing an older property, new owners usually look for ways to make the units and common spaces more livable and more attractive. Here are three ideas from Horizon Realty Group’s Jeff Michael.

Whether you invest in, develop or manage residential buildings, you’re always trying to make the most of your budget and invest wisely in your properties to help attract great residents. Giving a little extra attention to design can go a long way toward meeting those goals in cost-effective and eye-catching fashion.

We like to use the term “adaptive reuse” in describing much of the work undertaken by my Chicago-based company when we purchase and renovate nondescript, mid-century buildings in aging parts of the city that have fallen into disrepair over the decades.

There are things you can and can’t do. Concrete structures with units that have 8-foot ceilings can’t magically be transformed into 10-foot-high grand palaces. But we can, for example, move around interior walls to create rooms that work for today’s lifestyles, rip out carpeting that’s covering beautiful hardwood, patch and paint the walls for a major refresh and, if we happen to still encounter any in 2019, peel off aging psychedelic wallpaper.

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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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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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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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Making Their Mark: The Growing Influence of High-Net-Worth Investors in Large-Scale Commercial Real Estate

Non-billionaire HNW investors are increasingly competing on large-scale commercial assets.

Not so long ago, the vision of high-net-worth (HNW) investors in commercial properties entailed doctors and lawyers passing the hat at the country club in an effort to buy an eight-unit apartment complex in town or the retail strip across the street from church. In recent years, however, this image has been washed away in a veritable flood of HNW capital propelled by increased sophistication and growing incentives.

Billionaires have long been a fixture in this landscape. For instance, the late Paul Allen’s Vulcan Real Estate has led the redevelopment of Seattle’s South Lake Union neighborhood with billions of dollars invested in 37 construction projects. These homegrown ultra-rich are complemented in U.S. commercial real estate acquisitions by the investments of sheiks from the Middle East, Chinese billionaires and other uber-wealthy foreign nationals. However, these family offices are essentially institutions themselves.

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Eight Common Mistakes HNW Investors Make When Buying Commercial Properties

From trying to close deals on their own to focusing too much on returns, HNW investors should try to steer clear from these costly missteps.

Money mistakes are a fact of life. In a survey by consumer comparison website Finder.com, 78 percent of Americans confessed to making at least one financial gaffe.

Such mistakes typically carry greater consequences for high-net-worth (HNW) investors, though. One slip-up in a commercial real estate deal could easily cost millions of dollars.

To help HNW investors avoid expensive blunders, we’ve compiled a list of eight common mistakes they make in commercial real estate, along with strategies for sidestepping those errors.

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Rental insurance tech firm TheGuarantors raises $15 million to expand

Plans expansion beyond residential rentals into commercial real estate

TheGuarantors, an insurance technology firm that focuses on the residential rental real estate industry, announced Monday that it recently raised $15 million to help the company expand into commercial real estate.

The company launched in New York in 2016 and focused first on a single offering, a lease guarantee where the company acts as a guarantor on leases. From there, the company expanded to offer a security deposit alternative as well as renters’ insurance.

And now, with some new financial backing, the company is planning on expanding into commercial real estate, specifically office space. The company’s new product acts as a security deposit replacement for office tenants.

Beyond that, the company plans use the funding to further expand its residential platform as well.

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Developers Claim Co-Living Suites Earn More Per Square Foot Than Regular Apartment Rentals

Co-living developers in New York and Washington, D.C. report strong demand from renters.

Hundreds of co-living suites are renting quickly at ALTA LIC, a new high-rise apartment building in Long Island City, Queens.

“We are now about four months ahead of our expected pace,” says Christopher Bledsoe, co-founder and CEO of Ollie, the company managing the ALTA’s co-living apartments.

Companies like Ollie are proving that there is plenty of renter demand for co-living arrangements. The co-living spaces at ALTA are now earning more dollars per sq. ft. than the new conventional apartments in the same building. Other operators of co-living properties also report strong results at their projects.

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Underwriting, Assessing Risk, Big Data

Catastrophes have rewritten the rules of the insurance game. Before Hurricane Andrew, in 1992, insurers essentially guessed at what the financial damages would be if a disaster struck. Turns out, they drastically underestimated what the losses might be. And they suffered the consequences.

Smart underwriters don’t guess. They use the kinds of cutting-edge parcel mapping and risk assessment tools ATTOM Data Solution offers. They know the insurance industry is ripe for digital disruption. And they know the consequences of not keeping pace with technology.

How Underwriters Assess Risk

Whether they use cutting edge technology or paper trails, insurance underwriters all look for the potential risks to a property, from the probable to the highly unlikely. They look at the individual sites histories and nearby properties and play an elaborate game of “What could possibly go wrong, and how often?”

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Ranking the Top Multifamily Markets

A look at the cities that topped this year’s Marcus & Millichap’s National Multifamily Index.

Taking into account factors such as employment, construction, vacancy rates, rents and investment, Marcus & Millichap constructs its annual National Multifamily Index as part of its 2019 Multifamily Investment Forecast.

The twin cities of Minneapolis-St. Paul climbed two spots to top the firm’s index. It is the only Midwest market to break into the top 20, according to the firm. San Diego climbed into the second place spot, one of several California markets to sit near the top of the list. In addition Florida metros Orlando and Tampa-St. Petersburg posted the largest advances in this year’s index from last year’s, jumping 11 and nine places, respectively.

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