Apartment Blogs

Embarking on renting to Section 8 tenants is one of those decisions that property managers should undertake only after thoroughly researching all the implications of renting to this very specific demographic. Following are some of the primary pros and cons to consider when evaluating whether or not Section 8 rentals are for you.

Pros: Government subsidies mean that your rental income is more assured than in other cases.

Since Section 8 tenants are by nature low-income tenants, many landlords are rightfully concerned that renting to this sector will result in difficulties with rent collection or, even worse, default altogether. The truth of the matter, though, is that in many ways Section 8 rental income is among the most reliable. Under Section 8, tenants are responsible for approximately 30 percent of their rent, while the US government picks up the balance of the rental payment. This US government balance is paid directly to the property landlord.

Across the 64 markets that form the core of MPF Research's U.S. apartment sector analysis, revenues have come down an average of 7.7 percent since the period of national job loss kicked in at the beginning of 2008. This change is calculated looking at the shift in occupancy as well as the movement of effective rents for new leases. Typical revenues faltered by 4.4 percent during calendar 2009, with nearly all of that loss focused on rent cuts. The decline during calendar 2008 was at 3.3 percent, registering mainly in the form of dropping occupancy.

Examining change on the metro level, by far the biggest winner across the country over the past two years was El Paso, where revenues actually climbed meaningfully - rising 5.2 percent. Separating El Paso from the pack, Fort Bliss is in the midst of expansion that is directly bringing about 15,000 jobs to the metro and indirectly is creating spin-off support positions needed to serve the additional populace. (Keep in mind that job info from the Bureau of Labor Statistics excludes active-duty military personnel. Thus, while the BLS is showing that El Paso lost about 4,000 positions during the past two years, the total employment count in actuality experienced a sizable bump.

Pittsburgh was the one additional market across the country where the change in apartment revenues stayed in positive territory during the 2008-2009 time span. A mild rise of 0.8 percent registered there.

 As everybody scrambles to complete their to-do lists before heading out for the holidays, let's take a moment for some jolly news. Early results from MPF Research's December survey of U.S. apartment market fundamentals show 4th quarter's performance notably surpassing expectations.

U.S. apartment occupancy normally backtracks an average of about 0.6 points between September and December, reflecting the slowdown in leasing activity that is typical at the end of the year. But in 2009, it looks like occupancy will be up a little bit on a quarterly basis, probably somewhere around 0.2 points to 0.4 points for the country as a whole. More than two-thirds of the 64 metros that form the heart of MPF Research's national coverage are exhibiting quarterly upturns in occupancy at the end of the year.

Furthermore, after operators bought demand with big rent cuts for most of 2009, pricing now appears to be moving toward stabilization. Rents still came down between September and December. But instead of slicing rates at a quarterly pace that had been averaging about 1.5 percent across the nation, it seems that 4th quarter's loss will be near 0.5 percent. There are still some markets that get big lumps of coal for the quarter ... we're looking at you Houston, Denver and Salt Lake City, for example. But in most areas, December's rents look pretty similar to September's pricing, and a few spots actually have eked out minor price upturns.

Every seven seconds someone in America turns 50.* Where will they live? The 50-plus population is the fastest growing segment of the housing market.** Adjusting to retirement and "empty nests," many will move to communities that offer lifestyle choices that meet their new needs.

Housing for the senior market includes a variety of different options, including independent living, assisted living, nursing homes, and continuing care. Whichever definition your community fits into, providing the right amenities to the after 55 demographic is essential.

According to Encyclopedia.com, many seniors like to do one of the following in their spare time: travel, walking and other light exercise, reading, going to theater (cinema and live), volunteer work, and listening to music. Knowing some of these preferences can help ensure your community offers what after 55 residents want, making your community highly desirable. Things like:

Particularly if you own a property in an urban area or near a university or center of business, many specialized tenant markets are just waiting to be captured. Specialized property management may be just the solution you’ve been looking for to decrease vacancies and guarantee steady rental income. When considering just a few of your options below, be sure that you take your property, location, property management style, and goals into consideration.

Section 8 and low-income housing

I love the "freakquel" for Freakonomics titled Super Freakonomics. It is a super interesting read and please don't let my book report replace reading the book. My hope is that it will lead you to check it out of the library, stroll on down to Barnes and Noble or download it onto your Kindle.

People respond to incentives. During 2009 the apartment industry became the perfect case study for this fact. However, what we need to be concerned with is explained in this book. "People respond to incentives, although not necessarily in ways that are predictable or manifest. Therefore, one of the most powerful laws of the universe is the law of unintended consequences." When we understand this concept, we might start to see what is next for the concession driven markets.

The book explains numerous examples of unintended consequences of from a vast number of incentives. It will certainly change your way of thinking. I found myself empowered to make better decisions understanding the true cause and unintended effect that can often result.

Too often we feel that solutions do not exist unless they are right in front of our eyes. The authors take us through history to show this is not the case.

As sales and marketing experts, we must understand how people make decisions, change their mind and act on an opportunity. Super Freakonomics teaches us how an environment and or personal motivation could create a shift to a completely different intention by a human.

Don't pick up this book if you want to understand the economy and where it is going. The book says if you "understand the incentives that lead a schoolteacher or sumo wrestler to cheat, you can understand how the subprime-mortgage bubble came to pass."

More often than we'd like to admit, we don't like who we are, we try to be more than what we are, and in the end, no one is happy. This is the way it is both personally & professionally. To top it off, they call THAT marketing. I call it "bait and switch," and as a consumer, I hate it. So why do companies do it? And more importantly, why do WE, as multi-family housing providers market this way?

Don't think you do this?

Take for example a recent advertisement I saw in a typical apartment advertising magazine, imagine: a beautiful, tranquil pool, nice pool furniture arranged perfectly and a tagline along the lines of "live at ABC Apartments and you could be relaxing at your pool!) Then imagine making an appointment and driving up to a property that looks nothing like the picture, EXCEPT you DO recognize the pool. You thought this was a classy mid-range apartment complex, but it ends up being in a questionable part of town. You are disappointed, and the whole time during your tour, the leasing looks apologetic, avoids looking you in the eye and tries to sell the pool, as if you are going to be LIVING at the pool 24/7! You realize that this is not for you, and politely decline their offers of 2 months free rent if you sign TODAY!

Do you ever wonder what your high school sweetheart, quarterback, class clown, cheerleading captain, class nerd, and valedictorian are up to these days? You may have lost touch with these people over the years but all is not lost. Baby boomers and beyond are finding social networking sites appealing for the same reasons most people do - to stay in touch with people. They are interested in reconnecting with old friends and classmates whom they haven't talked to in more than 30 years.

 Currently, 16.5 million adults age 55 and older engage in social networking, according to Internet monitoring site comScore. A consumer survey of U.S. consumers from the NPD group, Inc., a leading provider of reliable consumer research, shows that 61% of baby boomer Internet users (age 44 to 61) had visited sites that offer streaming or downloadable video, while 41% had visited social networks.

There are helpful, even enjoyable and easy-to-use, Web sites that offer social benefits such as networking opportunities, research tools, and helpful articles on everything from retirement to long term care. These sites allow you to sign up and join, meet others, post articles etc, while others provide access to useful information regarding life after 55. The industry experts at After 55^TM Housing and Resource Guide and SeniorOutlook.com continue to stay abreast of new media trends and want to provide you with a list of social networking sites that can benefit you.

I am a huge cheerleader for companies that innovate. The problem is with weak execution. Do not innovate until you truly understand your customer. So many companies today are trying to find ways to create "other income" to keep their doors open. I understand that paying the light bill is harder to do today and I caution executives to think about their customers before making decisions.

Let's look at the Web Van debacle. I loved this company. For me, a business traveler who loves a home cooked meal, I could arrange to have my selected groceries delivered with in an hour or two of arriving home from a trip. The last thing I wanted to do was to give a hour of the few I have to be at home to the chore of gorcery shopping. With Web Van, I could let my computer mouse do the shopping while sitting in a hotel room!

Web Van was one of the darlings of the techonology boom and quickly became a dot bomb. Many people wondered why and it was explained that the economics of having a warehouse and delivery trucks made the prices too expensive. It was suggested that they charge a delivery fee of $10. Web Van's CEO said that Web Van would never charge a delivery fee when it was one of the actions that might have saved the company.

As a loyal customer, I would have happily payed the $10 fee just to continue to have the service. Web Van made the mistake of not really understanding their customer and that what we benefited from the service was convenience and that was worth $10. And so today, Web Van is out of business, shareholders lost a fortune and I do not have my groceries delivered to my door. They were so wrong, the lights were out before they ever had a chance to admit it. Bottom line, know your customer or lose your business.

Another case study is USAirways who started charging for drinks and pillows. This is a company that keeps getting it wrong because they never seem to think about their customers. The funny thing about this mistake is that USAir actually thought they were wasting liquid because when they started charging for drinks, people drank less. In a matter of months, USAirways figured out that we were still drinking liquids, we just were not buying them on the plane and they still have the weight on the plane and trash to remove.

The backlash and poor publicity cost this airline that already had a bad reputation due to the fact that their employees are either indifferent or downright rude because they simply do not like their jobs. This was a serious mistake that did not help the airline in any way. Complimentary drinks are now being served once again. Can we bring back the video equipment for the long flights?

When I think about these two examples I can only say that the mistakes could have been avoided had they known their customers needs and wants.  And, if you do mistake your real customer, have the guts to say you are wrong and adjust.

 Most apartment owners and managers operating in multiple markets across the country will tell you that Houston has been a comparative bright spot for their portfolios during the national downturn. But the metro turned in a weak 3rd quarter performance, losing residents in what is normally the seasonal high point in leasing activity and suffering notable rent cuts for the first time during this cycle.

Houston apartments registered net move-outs from 2,760 units during the July-September time frame, taking the overall loss so far during 2009 to about 7,900 units. While demand is holding solid for new properties moving through initial lease-up - almost 3,900 top-of-the-market units were absorbed during the past quarter alone - this top-tier demand can't keep up with the slide occurring in the middle segment and bottom end of the market. Those resident losses reflect that this latecomer to recession now is dropping jobs at a serious pace. The Bureau of Labor Statistics reports about 95,000 jobs eliminating across metro Houston during the year-ending August, downsizing the total base by 3.6 percent.

Houston's net move-outs are coming at the same time that considerable new supply continues to reach completion. Properties totaling another 4,544 units were finished during 3rd quarter, taking year-to-date deliveries over the mark of 13,100 units.