Posted by Teresa on August 31, 2010 under Housing Trends, Landlord Tips | 
Landlords looking for good news, read on:
- Rent.com says that only 31% of you are reporting lowering rents this year, compared with 69% just a year ago.
- The National Housing Council reports that vacancy rates are falling throughout the rental market, while demand is increasing.
- According to a study by MPF Research, which analyzes apartment trends, June vacancy rates averaged 6.6% at the end of 2009 in the largest 64 markets in the U.S.
- The U.S. Census Bureau’s vacancy figures, which include apartments and single family units were 10.6% in the second quarter of 2010—down from 10.7 in the fourth quarter 2009 and 11.1% in Q3 2009.
As units fill, rental property owners become more confident—and less likely to negotiate or reduce rents. Also becoming a thing of the past are the incentives many landlords initiated to fill vacancies—like large-screen TVs, free cable to go with them, and free rent offers.
Rent.com’s survey of rental property owners in June and July revealed that 56% of respondents said the number of vacancies dropped or remained steady from the previous year—good news in an economy which has not seen significant employment growth. Strength of local economies, not reflected in national reports, is given as one reason for increased demand for rental housing. Even small upticks mean people are more willing to sign leases, or parents are more willing to co-sign a child’s lease.
Another factor affecting rental demand is the continued weakness in the housing market. Homeownership fell in the second quarter to 66.9%–that’s the lowest it’s been since 1999. Financing difficulties and plummeting values continue to fuel the rental market.
Rental property owners, keep your eyes on both national and local vacancy rates and market rents, and react accordingly. Keeping up with data means you won’t make the mistake of undercharging on rent because you didn’t realize your market had improved!
Pre-screen all tenants as part of your standard application process. Background and credit checks will help ensure you rent to qualified tenants. For more landlord resources, including forms and information on tenant screening, turn to E-Renter.com.
Posted by Teresa on August 20, 2010 under Housing Trends |
The cost of tuition is bad enough at colleges and universities; but did you know room and board averages nearly $8,600 at private schools and over $7,000 at public schools? Parents are increasingly looking at purchasing investment property for their kids to live in, and then to rent when the child graduates.
There are several advantages to this option:
1. Purchasing offers tax benefits that are not available when paying college room and board. The interest paid on a mortgage is usually tax-deductible; college room and board is not.
2. Owning rental property offers parents additional tax benefits, with deductions for taxes, repairs, upkeep and depreciation. Travel to inspect, purchase and check on the property is also deductible in most cases.
3. Avoiding the housing shortages that many universities are experiencing—along with the steep fees that go with them.
4. Moving a student’s possessions back and forth can be either a time-consuming hassle or a storage nightmare. Keeping it in one place year-round is much more convenient. It can save parents time and money.
5. Whether parents purchase single-family homes, condos or duplexes, there are opportunities to collect rent from other students. A multi-bedroom house means roommates—and rents. A duplex can provide additional income while providing a student a place to live year round.
There are downsides to becoming an absentee landlord, too. All factors must be considered, but owning rental property while the kids are in college is a great choice for many families. Learning all about becoming a landlord is essential, and should include visits to a lawyer and tax advisor. Property buyers should check all the applicable leasing codes in the city and state where the property would be located, and always conduct proper tenant screening on all residents. (You may decide to exempt your own child.)
The contents of this article are intended for general information purposes only, and should not be relied upon as a substitute for obtaining tax advice applicable to your situation.
Posted by Teresa on August 12, 2010 under Housing Trends |
Politicians and federal policymakers don’t always agree on how to best serve the U.S. economy and needs of taxpayers. One thing everyone can admit is that Freddie Mac and Fannie Mae nearly collapsed in the recent housing crisis, with a huge loss of taxpayer money.
Some critics think an overhaul of the mortgage giants is in order; how long, they ask, can the government sustain guaranteeing 90% of mortgages? Others say the U.S. needs to shift its emphasis away from a goal of “homeownership for all.”
Homeownership in the U.S. fell to its lowest level in 50 years and projections say it could sink even lower. It’s now at 67% and is predicted to drop to 62% between 2012 and 2020, as millions of homeowners lose their homes to foreclosure. Massive government subsidies in the form tax breaks on mortgage interest and avoiding capital gains taxes incentives have not prevented the foreclosures millions of Americans are facing.
Now, government-sponsored home ownership incentives are in question. Some say the policies are outdated and have encouraged overinvestment in housing. The Treasury Department says it’s moving toward big changes—including promoting affordable housing for owners and renters alike. More rental housing assistance for lower-income and senior citizens could be on the way, too.
- Government subsidies for home owners in 2009: $230 billion
- Government subsidies for rental market in 2009: $60 billion
Experts say there are many advantages to renting over homeownership. It’s easier to move in search of work, for example. Right now, many families are “stuck” in homes they cannot sell and therefore cannot take advantage of employment opportunities in other cities or states. The lower cost-of-entry into rental housing allows people to save more money, too. Home ownership is expensive, and not always a wise investment.
Landlords could be seeing more qualified tenants, as rental housing assstance becomes more available to folks who need it.
Posted by Teresa on August 5, 2010 under Housing Trends |
Personal finance news site WalletPop.com reports today on the ten worst places to live in the U.S., based on (among other factors) the unemployment rate, climate, health data, crime rate and number of foreclosures.
And recently, DailyFinance.com shared how 24/7 Wall St. combined unemployment rates with foreclosure figures for the first half of 2010 to come up with the ten worst real estate markets in America.
How do the two lists compare? As expected, California has a number of entries on the “worst real estate market” list, but only two for the worst place to live list—taking the number one and number six spots.
In this town, even the cemetery is bankrupt
At the top of the “you don’t want to live here” list is El Centro , CA, because it has the highest unemployment rate in the country—at 27.5%, it’s just ahead of Yuma, AZ. Of course, the city’s location just over the Mexican border means the unemployed are mostly field laborers, with fluctuating employment rates typical for that sector.
Los Angeles made the list because of its terrible pollution, but is cited for its awful traffic problems too. Perhaps the two are related?
On the top ten worst real estate markets, California can boast numbers three through seven, with Modesto, Merced, Riverside, Stockton and Vellejo, respectively. But that’s not all—Bakersfield takes the number nine spot, too. Yes, California is a mess, with state budget cuts helping to drive unemployment rates in these cities to between 15.7% and 17.3%.
What doesn’t happen in Vegas? Jobs!
Las Vegas also shows up on both lists: it’s number one for worst real estate market, and number four for worst city to live. With neighborhoods standing completely empty and a 12% foreclosure rate for 2009, home prices continue to fall. Paired with an unemployment rate of 14.5 %, there’s not much happiness going around in Vegas.
Over on the east coast, Florida is represented on both lists; with Miami number nine in worst places to live; Cape Coral-Fort Myers and Port St. Lucie showing up as numbers two and ten for worst housing markets. Miami is right behind Detroit on Children’s Health magazine as worst place to raise a family, due to crime, education, economics, cultural attractions and health issues. On top of that, there have been nearly 40,000 foreclosures in Miami. Just up the road, Port St. Lucie’s high unemployment rate at 13.4% and foreclosures at 3.05% make for one tough real estate market.
Lists like these can work to a real estate investor’s advantage. Some experienced landlords (with nerves of steel) have experienced success by purchasing investment property in down markets. Reports of $10,000 homes in Detroit, MI (number three on the list of worst places to live) are common. And as the auto industry begins its rebound, the up-and-down cycle could be turning up again. Smart investors tread carefully into depressed markets, with eyes wide open, looking for deals.
Posted by Teresa on July 23, 2010 under Housing Trends, Landlord Tips |
Regardless of the economy or the rental market, it is always a good time to retain your tenants. To keep tenants from moving out, some landlords have been offering incentives like free cable and even large-screen TVs to go with them. But is it really worth it to invest that kind of cash into keeping tenants?
Actually, yes. Savvy rental property owners know that keeping tenants is a good idea. Here are three reasons why you should retain tenants when possible:
1. Empty units cost money. Whether or not a rental unit is producing income, it is costing you money.. Mortgage payments, taxes, maintenance, lawn service, and sometimes even utilities continue to chip away at your cash reserves, while It could take one, three, four months or longer to find an acceptable new tenant. Why not do what you need to do to keep a current tenant in place?
2. Turnover is costly. There are a number of expenses associated with turning over a rental unit to a new tenant:
- Advertising
- Management fees for finding a new tenant
- Installing new carpeting, flooring, or paint
- Repairs
- Damage each time furniture is moved in and out
- Lost rental income during the changeover
- Tenant screening
Landlords are better off delaying these expenses as long as possible. You don’t want to incur these costs before you absolutely must. And don’t forget—the time needed to complete the changeover to a new tenant is lost rental income, too.
3. Reduced rents: It’s all about perception. A full building looks like a good place to be, and frequent tenant turnover looks bad. If your tenants are regularly moving out of your rental units, it can affect the rent you can charge. Think about the impact on potential new tenants if, each time they do a drive-by look at your apartment building or 4-plex, there is a moving van out front—and it’s not being unloaded. Potential future tenants will get the impression that nobody wants to live there, and the value of your rental will decline. Stability means desirability, which means higher rent.
Whether it means giving lease-renewing tenants a DVD player, a restaurant gift card, or free cable upgrades, it is usually worthwhile to invest a little to keep a tenant happy and in place.
Posted by Teresa on July 12, 2010 under Housing Trends, Landlord Tips |
When it comes to advertising a rental property, most landlords are sure to include the basics: the number of bedrooms and bathrooms, any included appliances, and of course, the area of town or neighborhood it’s in.
But you might be surprised to hear that potential tenants also want to know about an area’s walkability rating. What’s that? Walkability is a way to determine how close a property is to shops, grocery stores, libraries, and other amenities that people want. If you can get there by leaving the car in the garage, it’s walkable—and the more amenities within walking distance, the higher a property’s walkability rating.
Walkability means that tenants can avoid the congestion, parking, and pollution associated with driving—and still get their errands run. Walkability makes a neighborhood more pleasant to live in—and studies show that more amenities within walking distance can boost home values. Given that tenants want walkable residences, you might want to advertise the walkability rating for all your rental properties.
How do you know if your vacant rental is in a walkable neighborhood? It’s quick and easy on WalkScore.com, a popular site that measures how many amenities are within walking distance of any address. While the site’s algorithm gives the actual distance from an address to stores, restaurants, movie theaters and public transportation, it doesn’t factor in safety, street design or topography. So, it won’t mention any huge hills you’d have to climb to reach the nearest bookstore.
While WalkScore.com will likely add improvements like topography and presence of sidewalks, it’s still a clear snapshot of the amenities surrounding your rental property. Whether or not you include a walkability rating in your rental ads, consider using this tool to inform potential tenants of all the great stores, restaurants, and coffee shops that are close to your rental units.
Posted by Teresa on April 23, 2010 under Housing Trends, Landlord and Tenant FAQs |
Are pets welcome in your rental properties? If so, you may have noticed more tenant applicants who are moving their pets along with their kids and furniture. Pet ownership is up in the United States—and so is the percentage of rental units that are pet-friendly.
But one reason for more pet-owning rental applicants may be the increase in foreclosures in the US. A typical track for pet owners is to get that first dog or cat when they buy their first home. But what about after they lose their job and their home—and must return to a rental lifestyle? Many are finding their pets are not welcome at rental units that otherwise work—and often, these socialized, housebroken family pets are being abandoned in shelters.
The rental market is difficult enough right now—why not remove one barrier to filling those vacant homes and apartments that are not making you any money? If you are a landlord who doesn’t accept pets, why not reconsider that policy? Studies show that allowing pets helps fill vacancies—so it’s good for business. And if you create a solid rental pet policy, you may find that the reasons you weren’t accepting pets (noise, damages, liability) were not valid after all.
Besides, it’s bad enough for a family to lose their home, for kids to move away from their neighborhood friends, and possibly switch to a new school. But it’s even worse when the comfort and companionship of a beloved pet is taken away, as well. Pet owners who are allowed to bring these family members along to a new rental are often so grateful, they are more than willing to agree to even the strictest of pet policies.
We’ve written about pet policies before. Check out the basics, and consider allowing pets in your rentals. You might find that with a large enough pet deposit to cover possible damage, plus clear rules and appropriate consequences established up front, pets in your rental properties can work for everyone!
Posted by Teresa on April 10, 2010 under Housing Trends, Landlord Tips, Landlord and Tenant FAQs |
In 2007, the U.S. Census Bureau reported 62% of U.S. households used the Internet in their home. That’s an enormous increase from 18% in 1997, the first year Internet use was tracked. 82% of those users reported having high-speed access, and 17% reported use of a dial-up connection. By October, 2009, some reports stated that Internet-using households in the U.S. increased to 69%.
It’s clear that the majority of American households use the Internet. And, the majority of those users have high-speed access. Demand has been overwhelmingly established. The only question is who pays for it?
Free Internet service is a common tenant perk. In some areas, it’s a given that a rental condo or apartment will come with free Internet—even though it might be bundled into the rent. In other markets, tenants are expected to pay for all of their utilities themselves—including Internet service.
And even though the first quarter apartment rent report showed promising results in some markets, things are still tough in the rental property business. Plenty of competition means owners continue to create incentives to attract good tenants. Is providing Internet service a good move?
Look at your market. Survey Craigslist.org and other online listing services for rental housing offers in your category. If the majority of single-family rentals do not brag about free Internet, you might need to provide it in yours. But, if you own an apartment building near your local college campus, and everyone else in the For Rent category is offering free Internet, you might have just found the reason your rentals are not filling up fast enough.
Check with your local Internet service provider about the cost of wireless service. Modem leases and monthly charges vary. Ask about security, too—especially if you have a duplex or multi-family housing situation. You don’t want a situation where tenants are vulnerable to stolen information—and you don’t want to provide free Internet to the entire neighborhood! Your ISP should be able to set up a secure system for your rental units quickly.
Whether you pass the cost along to your tenants or not probably depends on the cost, right? Still, hearing “free Internet” might be the tipping point that makes a potential tenant a year-long lease-signing tenant. And if you’re in need of some more of those, you might want to at least consider providing free Internet.
Posted by Teresa on March 17, 2010 under Housing Trends |
The National Association of Home Builders recently released its Multifamily Housing Market Index for the 4th Quarter 2009. The Index shows a dampening of enthusiasm among those polled, to say the least.
At the time the data was complied, rental housing vacancies were expected to continue increasing, as was supply. Asking rent dropped from the 3rd quarter, but effective rents rose slightly over the same period.
Another troubling figure from the report is Percent of New Apartments Rented within 90 days, which dropped from 45.8 in the 3rd quarter to 34.1 in the 4th.
However, a positive note is seen in the increase in volume of calls from prospective renters. That figure was 8 points higher than in Q3 2009 and 6 points higher than Q2 2009.
What does all this mean for rental property owners and managers? Well, if you are sitting on brand new apartments, you will likely need to work harder than before to get them rented. But that doesn’t mean your phone isn’t ringing at all—in fact, the index shows a healthy increase in Prospective Renter call volume.
Perhaps more amenities, rent concessions, or lower rent will continue to be required to fill these vacant properties. Are callers finding a better deal in single-family rentals? Are they staying home with mom and dad rather than move into their own apartment? Or do renters continue to double- and triple-up with their friends, waiting to see what happens with rents?
Whatever is going on in renters’ minds, the message is clear: the multifamily rental market is expected to stay soft—and painful for those who are in it—at least for the foreseeable future. Stay tuned for more fascinating facts and figures as they are reported!
Posted by Teresa on January 7, 2010 under Housing Trends, Rental Market |
Reis, Inc., a real estate research firm just released its 4th Quarter 2009 apartment vacancy report. As expected, it hit 8%—the highest in thirty years. The poor state of the U.S. job market continues to be blamed, as job creation lags behind other positive economic indicators. Young people, who are typically apartment renters, have been hit especially hard in the job market.
A bit more positive is the news that an ever-increasing supply of newly built apartment units is starting to decline—finally catching up with the credit crunch that began in the summer of 2008. 28,000 new apartments came onto the market in the 4th quarter 2009. The total for the year: 120,000, including developments intended for condos that converted to rentals. New apartment supply should fall by half in 2011, and if jobs improve, there could be some rental market recovery by the middle of this year, according to the report.
The U.S. apartment vacancy rate rose .10 percent from the 3rd quarter, and 1.3 percent for the year, ending at 8%. Sunbelt cities like Tucson AZ, and Jacksonville, FL experienced huge vacancy increases in 2009, at 10.5% and 14.4%, respectively. Charlotte, NC and Lexington, KY were also hit hard. Nationwide, vacancies increased in 52 markets, improved in 17, and remained flat in 10.
Not only are vacancies higher than ever, but landlords are experiencing a double-whammy: both asking and effective rents are plummeting. For 2009, asking rents fell 2.3%, also the largest decrease in thirty years; effective rent fell .7% to $964 per square foot.
And while mortgage financing has toughened up, government efforts to enhance the housing market threaten apartment owners, as some renters find it easier to buy a home. In some markets, continued unrest in the housing sector and lower rents will make renting more attractive than buying.
Landlords and rental property owners will likely need to continue offering rent reductions, perks and amenities to entice new tenants—until the job market improves. And when that will happen is anybody’s guess.
Reis, Inc., a real estate research firm just released its 4th Quarter 2009 apartment vacancy report. As expected, vacancies hit 8%—the highest in thirty years. The poor state of the U.S. job market continues to be blamed, as job creation lags behind other positive economic indicators. Young people, who are typically apartment renters, have been hit especially hard in the job market.
A bit more positive is the news that an ever-increasing supply of newly built apartment units is starting to decline—finally catching up with the credit crunch that began in the summer of 2008. 28,000 new apartments came onto the market in the 4th quarter 2009. The total for the year: 120,000, including developments intended for condos that converted to rentals. New apartment supply should fall by half in 2011, and if jobs improve, there could be some rental market recovery by the middle of this year, according to the report.
The U.S. apartment vacancy rate rose .20 percent from the 3rd quarter, and 1.3 percent for the year, ending at 8%. Sunbelt cities like Tucson AZ, and Jacksonville, FL experienced huge vacancy increases in 2009, at 10.5% and 14.4%, respectively. Charlotte, NC and Lexington, KY were also hit hard. Nationwide, vacancies increased in 52 markets, improved in 17, and remained flat in 10.
Not only are vacancies higher than ever, but landlords are experiencing a double-whammy: both asking and effective rents are plummeting. For 2009, asking rents fell 2.3%, also the largest decrease in thirty years; effective rent fell .7% to $964 per square foot.
And while mortgage financing has toughened up, government efforts to enhance the housing market threaten apartment owners, as some renters find it easier to buy a home. In some markets, continued unrest in the housing sector and lower rents will make renting more attractive than buying.
Landlords and rental property owners will likely need to continue offering rent reductions, perks and amenities to entice new tenants—until the job market improves. And when that will happen is anybody’s guess.
