Multifamily Industry News and Trends

If you have ever owned a house or duplex that you have rented out and you feel like you are ready to move to the next level I have a few guidelines to help you get started. First and foremost, you’ll need to decide what asset class you would like your next investment to be in. Here are a few different types of assets that you can focus on:   1. Office  2. Industrial  3. Retail  4. Multifamily  5. Hospitality   The Commercial Leases  You will find the commercial lease is a lot longer and much more detailed than your residential lease and it will spell out common area maintenance fees, increases in rental amounts at certain dates, concessions, tenant improvement work, and just about everything else. Even in the same building, the terms negotiated on a commercial lease can substantially vary from one tenant to the next. There is a good chance that your tenant will have an attorney review all lease documents and you will have a few revisions before the lease is actually executed. Commercial leases are either a gross lease (the owner pays all the utilities, taxes, and insurance), a net lease, or a modified gross lease. There are several types of net lease, but the one you’ll hear about most often is a triple-net lease where the tenant pays their proportional share for everything (taxes, insurance,utilities maintenance, repairs and capital improvements) on the building. A modified gross lease is where a tenant may pay their share of ......

One thing that residents will always want in an apartment is as much space as possible for a rental price that they see as justified. However, many multifamily apartment homes are not known for offering a ton of features that increase storage capacity, so when a renter finds a hidden space gem, they’ll pay more for it.    Renters are very familiar with having clutter that easily piles up because of limited storage options; a main drawback of apartment living. When renters feel the need to fill up their floorspace with extra dressers and other storage containers, the livable footage of the apartment becomes smaller and smaller and their frustration grows bigger and bigger.    Providing your renters with increased closet storage capabilities in your multifamily apartment units will not only help you attract more renters, but also make your units more valuable and keep renters leased longer.   If you are looking for an easy renovation project that will increase space and storage in the apartments you own or manage, the best way is to start optimizing your closets.  Optimizing Your Multifamily Closet Space Most closets in multifamily housing units are severely underutilized with sometimes less than 50% of the functional space available being used for storage. Master bedroom closets are where the largest waste of space usually occurs. Many apartment complexes tout walk-in closets as one of the draws to rent from them; however, these closets are not used in a way that actually maximizes storage and space.   T......

As any property & casualty insurance broker can tell you these days, commercial insurance rates are on the rise, with double-digit increases not uncommon.  A number of factors are contributing to growing premiums for insureds, among which are the following:  costly repairs from recent natural disasters, the increasing frequency and severity of auto claims due to distracted driving, economic uncertainty surrounding the Covid-19 pandemic, and nuclear jury verdicts where the awarded damages are multiples of what they used to average even a few years ago. Unfortunately the multifamily industry has not avoided these rising insurance costs.  Like all real-estate-centric companies, multifamily property coverage costs more today than it did even a year ago, particularly for those with a portfolio heavily exposed to wind, flood, and earthquake risks.  On the casualty side, rate hikes for general liability and umbrella liability (which sits over general liability and auto liability policies, providing higher limits of coverage) are also a reality facing multifamily businesses.  But there’s one facet of general liability insurance that is affecting the multifamily (and other habitational markets) in an unexpected way:  coverage for assault and battery.  Let me take you back to October of 2019.  At that time one of my clients, a large multifamily development and property management company, had advised that they’d just sign a contract to manage a third-party apartment complex.  We informed the client’s general liability carrier, Philadelphia Insurance Company, so that they could endorse the client’s policy to add the location, as we had done for all of ......

Apartment residents, like people everywhere, are absolutely crazy about their pets. Although it may sound cliché, renters feel like their dogs and cats truly are members of their families. The bond between owner and pet is unmistakable.   And a new report highlights the considerable financial benefits owners and operators can reap by being truly pet-inclusive.   According to the 2021 Pet-Inclusive Housing Report from the Michelson Found Animals Foundation and the Human Animal Bond Research Institute, residents in pet-friendly housing stay 21% longer than those in non-pet-friendly housing. This means operators can reduce their turn costs as well as their marketing spends because they're not having to fill vacated units as frequently. Similarly, 83% of owner/operators say pet-friendly vacancies are filled faster, and 79% say the vacancies are easier to fill.   Among the study's other notable findings:   ●      24% of residents say their pet has been a reason for needing to move. ●      14% have surrendered their pet as a result of their housing situation. ●      35% of non-pet-owning residents say they would get a pet if restrictions on their rental housing were lifted.   To better attract and retain pet-owning residents, the report recommends that owners and operators consider the following steps:   ●      Offer a free month of pet rent. ●      Waive pet deposits and instead rely on regular security deposits to cover the minimal damage that pets may cause. ●      Create an easy-to-follow screening process and pet agreement that focuses on well-behaved pets and owners. ●      Formalize the types of p......

In the past, the main role of a CRE Agent was to help their client find a property. This sounds quite straight forward and it typically was.  An agent would first utilize their market knowledge to see if they knew of any spaces/properties that might meet the criteria of their client, and if not, begin to reach out to all of their contacts to see if they had anything, or if there was anything new coming out. If all else failed, they would resort to sign chasing, driving the areas their clients were interested in, and call on the signs on buildings to see what, if anything, was available.  Along came the internet which dramatically changed how this works now.  The control of information no longer flowed just through the agent. Unfortunately, many agents didn’t adapt to the change and continued to see their role as just finding a property for their client. Many clients also kept this mentality, thinking that an agent's role was just to find a property. This, of course, led to many clients thinking they only needed an agent to find a property and if they could find one then they wouldn’t need an agent and could get a better deal on their own.  Good agents realize that finding a property for their clients is just a small part of what they do. Finding the right property is a bigger role, and their most value lies in negotiating the best deal for their client.  Finding the right pro......

Apartment perks for residents vary by community, from an incredible amenities package to resident events, local business discounts and everything in between. These are nice incentives for prospects to move in, but there are other ways to make a positive, long-term impact in residents’ lives that simultaneously support owner/operators. Financial amenities are emerging as the next distinct amenity offering at apartment communities. From flexible payment options and budgeting tools to credit building, financial amenities help support on-time, in-full payments and boost resident morale. These amenities provide a huge benefit to owner/operators as well by proactively reducing delinquencies. Residents are in a precarious state of financial health, especially coming out of the pandemic, and owner/operators are at higher risk of bad debt when residents have unstable finances. According to a 2020 American Payroll Association survey, nearly 69% of Americans say it would be somewhat or very difficult to meet their financial obligations if their paycheck were delayed by a week.  Here are some of the reasons financial amenities can make a positive difference for residents, and in turn, reduce bad debt for owner/operators: A Proactive Approach to Bad DebtBad debt has become an even larger issue plaguing the industry after the pandemic. According to an Aspen Institute study in August 2020, about 12.6 million households are at risk of eviction, and TransUnion estimates that it costs operators on average $3,500 to evict a resident. Based on this average, evicting 12.6 million households could cost the rental housing industry $44.8 billion. The late f......

Being a real estate investor is one of the leading wealth creators in the United States so many of us want to know how to become the next great real estate investor. Some have bought books and watched videos on how people have made their fortune in the industry, others have applied what they know to works in their business towards real estate. We have learned over the years that there truly is no better way to learn the real estate industry than simply going and being part of a property management team. PLUS…. you are getting paid to learn!  By being part of a property management team you can learn everything you should know from marketing, maintenance, leasing and operations. When you find a company that you feel is a good fit for you sit down with the management and tell them that you want to learn everything from top to bottom about real estate investing from them and if they seem receptive to your idea then jump in and prepare to learn. We would recommend you start at the bottom and work you way up.  In their leasing department, learn how a vacant unit is prepared for market. Price the unit and then learn how to advertise the unit to the right individuals. After you have spent enough time in leasing look into moving to an assist manager position, while in this position learn the ins and outs of the daily operations of the property and how you can i......

SB 1157—a new California Senate Bill—requires operators of multifamily units in California that receive federal, state or local subsidies to offer each resident in a subsidized apartment home the option of having their rental payments reported to a major credit bureau.  This is crucial for consumers, because a strong credit history is vital in today’s economy and enables a person to obtain credit cards, mortgages and auto loans on favorable terms. The typical apartment renter isn’t able to build credit history by making rent payments on time and in full. That’s because most multifamily operators don’t report their residents’ positive rental payment histories to the credit bureaus.  However, SB 1157 is aiming to help lower-income renters build their credit histories – and it’s imposing a new requirement on certain property managers in the state. This new California law, which takes effect on July 1, does not apply to operators of assisted housing communities with 15 or fewer apartment homes.  California State Senator Steven Bradford, who authored the legislation, says the new law is intended to improve the financial well-being of lower-income renters.  “This bill, the first of its kind in the nation, starts to correct the longstanding inequity where those with the least resources have to fight the hardest to establish and improve their credit scores,” he said in a press release. “Having a good credit score is the first step in helping renters achieve the American dream of homeownership. But most renters today do not receive a benefit to their credit scores when they......

  Denver says landlords should be licensed.   In early May, the city of Denver passed a law that requires all long term rentals to be licensed. The justification is that it will improve professionalism and hold landlords to a higher standard.  Specifically, City Counsel President Stacie Gilmore is quoted as saying, “This policy will help stabilize housing and neighborhoods.”   Lofty goals, for sure, and they may well be achieved with help from this policy. What seems to have been left relatively unexamined is the fact that any licensing system brings costs in addition to the potential benefits. Licensing fees ($50/unit for small properties, as little as $2/unit for large properties) are not huge, but are just a part of the cost.  There will also be periodic inspections, which will likely cost between $300 and $1,000.   In a market with average rents of about $1,700, that $350-$1,050 cost is a material increase to the cost of doing business, not to mention a significant additional compliance activity. How will this change the Denver rental market? What impacts - good or bad - will this have on the Denver rental market?   The Analogue Happily for us, licensing systems are very well studied and have been a hot topic of debate in academic and policy circles for many years.  Research is widely available from organizations like Brookings, Columbia University and the Bureau of Labor Statistics. In the U.S., there are many professional licensing systems, and almost all of them accomplish a few goals: Licensing set......

Real Estate Entrepreneurs Without This Trait Have a Much Lower Chance of Success If you truly break down the top real estate executives that have really strong, highly effective teams that love to work together you will find their leader will be, tenacious, have vision, forward thinking, team leader, good communicator but first and foremost they will have emotional maturity. If you are without an awareness of your own emotions and the ability to manage them, you won’t be able to manage other people or your business effectively. What is emotional maturity?  Emotional maturity is when someone can manage their emotions no matter their circumstances. They know how to respond to tough situations and still keep their cool. It's a skill set they can consistently work on over time. Here’s a good example- an employee makes a mistake, your immediate response might be to correct the mistake and move on. An emotionally mature leader would notice that impulse, then decide if it may be better to listen to why the team member made the mistake and walk them through the thought process and see if there is a possibility there could be a more effective method for long-term success.  Building a strong team is easier with emotional maturity.  Today more than ever your organization achieves its goals through a series of zoom calls, conference calls, daily conversations, interactions and decisions. These interactions involve humans, and the more emotionally intelligent we are, the more effective your team will be on all levels. Inv......