August 29, 2009

Increase Rental Income and Lower Your Vacancies

In keeping with the article on the walkability survey and how convenience increases home value, I thought that looking into what renters are willing to pay for now would be useful. The ability to rent fast and for more money should be as important the single family home owner as it is to rental property owners. Many home buyers dont really think of the rental qualities of their home purchase, yet property is holds more value partly based on rent and vacancy rates. Single family homes are, or should be, more highly valued if they can be rented fast. This economy drives home the point that the rental factor is important to home owners too. Many home owners are unable to sell and find themselves reluctant landlords. Being able to rent well counts.

Whats Renters Want Now
Think Life Style

Some of the new developments are trying to compete with single family homes, in that they are providing the space and amenities of a single family home without the maintenance. The idea is to combine family style living with an apartment community. To fuse the best of both worlds and provide a good alternative to home ownership.

On Site Services

Many of us are either telecommuting or somehow tethered to some digital other words we are always working. Its become part of our lifestyle. Multi family is tuned into this change in our behavior and is bringing business related facilities into the home space. The highest rents and lowest vacancy rates are going to multifamilies that are responding by building:

1.Business centers or private meeting rooms, so that groups can meet at a members home facility rather than a coffee shop. These conference rooms are plugged! They have video feeds and big plasma screens
2.Small gym facilities. I have seen smaller rooms built out with some weights and a hand full of Nautilus machines really do the trick
3.Billiards and games tables
4. A public Internet network for tenants
5 A common area where neighbors can get together
6.Consider inviting local services, such as dry cleaners to provide building services at a reduced rate

The idea is to create a sense of community. Taking a page from the retirement community, apartments are being reimagined to include more lifestyle living to reduce tenant churn. In these tough times tenant retention is just good business.

Re-purpose Existing Space to Increase Income

1. Revenue Sharing Arrangements. Consider leasing your washer dryer machines for a revenue share. The company will maintain the machines and share income with you.
2. Consider fencing off some basement for bicycle storage or other storage for a monthly fee.
3. Vending Machines and other ancillary services. You can affiliate with local dry cleaners etc to provide a service for a small fee.
4. Get wired! As units become vacant, add cable, more phone lines and high speed Internet connections
5. Go Green: As units become vacant install low flow shower heads, energy efficient lighting and low flow toilets. The water savings to the owner is well worth it and good Eco citizenship is a plus. Programmable thermostats can save as much as $160 annually per unit. Its a tenant savings, but tenants will be appreciate it.
6. Check out Zip Car offer high competitive rates for parking space in some cities. You might want to see what they can do for you.

Get Tenant Centric

1. A good web site template with slide shows and online apartment applications for new rentals. Also use the free listing services, such as craigs list
2. Online rent payments include tenant accounts with individual passwords. Train your tenants to go there before calling for any rent discrepancies.
3. Create an on line calendar for all building events and whatever you can think of that creates a go to place for communications. Its a good idea to have important phone numbers such as fire and gas and electric etc on line. The more information you can put on line the less nuisance phone calls you will receive
4. Keeping it simple for the renter is good business and generally means simpler for management too. Add the ability for online maintenance request forms to save phone time and provide you with the paper trail you need to stay on top.

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Apartment Buildings as Investment Property Thanks for Reading

August 27, 2009

Home Values Boosted by Walking Convenience

CEOs for Cities is a national network of urban leaders dedicated to building and sustaining the next generation of great American cities. They just produces a study based on data from 94,000 real estate transactions in 15 major markets provided by ZipRealty

Here is What They Discovered

Homes within walking distance of schools, parks and shopping were worth more than homes in neighborhoods where you need a car to do anything. Typically, the study revealed equity premium for homes with higher Walk Scores ranged from $4,000 to $34,000.

Not long ago all you had to do was buy a home and you would profit, now the easy money is gone. Investment value and future return have to part of the purchase decision. According to CEOs for Cities, Walkable places have some of the best chances of perfoming.

Here is How it Works

A mathematical algorithm was developed that measured the walkability of a home. It graded the home based on how close it was to shopping, schools etc and scored them from 0 to 100.

Allowing for other factors such as home size, bath and bedrooms etc, the study found that a one-point increase in the Walk Score is linked to an increase in home value between $500 and $3,000.

The premium isn't quite the same from place to place. It seems that urban densitiy showed higher price gains based on higher Walk Scores. In smaller cities, like Tuscon and Fresno, price sensitivity to the walk score wasnt as great.


It wasnt covered in the study, but my experience tells me that I can rent a home in the flats where you dont need a car to do anything faster and for more money than a comparable home in the hills. Home buyers need to consider the rentability factor as well. It compliments and confirms that being close to amentities is important to people and that they will pay more for the convenience.

Long Run Implications
Reshaping the Dream

We may be in a generational shift regarding how people will live and how we define place. People everywhere are returning to our cities because the suburb hasnt fulfilled us. Its a place of spatial separation. And it is short on amenities and long on fuel costs and commute time.

Suburban living is losing its shine. Its quite possible that placing a higher value on walkability is a reflection of the roll up of the suburb as we know it. The housing bubble encouraged unsustainable growth in places where land was cheap shaping a low-density sprawl of single family homes.

The higher value we now place on walkability reflects new priorities like saving energy, commuting less, better mass transit, conserving land and walking more. My money is on the city

Thanks for Readimg

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August 26, 2009

Case Shiller Finally Looking Better

The prices of single-family homes in 20 major cities rose 1.4% in June,Thats two in a row. After three years of declining prices its a welcome reprieve. Prices rose in 18 of the 20 cities in June. I dont think of this as recovery yet, what we have is a bad situation looking a little better, but prices and growth are still negative. Its not exactly party time. Reminds me of a Billy Holiday tune....I been down so long it looks like up to me

Price Action

Homes down 15.4% year over year but better than the 19% year over year drop in January and own 31% from the crest of the bubble topping out in 2006. More foreclosures and problems in the commercial sector will keep the lenders on the margins and without them either the Govt steps up with more stimulus or we will have a few flat years.

70% of our economy is Consumer driven and we arent ready or able to step up. The job loss spooks all of us and the fear of catching a falling knife is very strong. Besides, we arent as rich as we were.

What Does Shiller Have to Say

He is impressed with the turn around, but very cautious. Job loss, more foreclosures and a commercial property mix that is now as big a loan problem as homes. The commercial problem will continue to play out through 2010. Between now and 2012 most of the commercial loans made during the boom, when prices were at their highest, w2ill need to refinance. I cant imagine the banks are very happy to oblige. With the banks looking at large future loans, its fair to expect tight credit and this will keep growth low and slow. There are a few good articles on the apartment sector here

August 20, 2009

Freddie Mac Weekly Update: Mortgage Rates Down to Lowest Level in Three Months

30-year fixed-rate mortgage: Averaged 5.12 percent with an average 0.7 point for the week ending August 20, 2009, down from last week when it averaged 5.29 percent. Last year at this time, the 30-year FRM averaged 6.47 percent.

The 15-year fixed-rate mortgage: Averaged 4.56 percent with an average 0.7 point, down from last week when it averaged 4.68 percent. A year ago at this time, the 15-year FRM averaged 6.00 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.57 percent this week, with an average 0.6 point, down from last week when it averaged 4.75 percent. A year ago, the 5-year ARM averaged 5.99 percent.

One-year Treasury-indexed ARMs: Averaged 4.69 percent this week with an average 0.5 point, down from last week when it averaged 4.72 percent. At this time last year, the 1-year ARM averaged 5.29 percent.

Freddie Sayz

U.S. Treasury bond yields fell nearly a quarter of a percentage point over the week, and other long-term yields followed suit, said Frank Nothaft, Freddie Mac vice president and chief economist. Interest rates on 30-year and 15-year fixed-rate mortgages fell to the lowest level since the end of May, while initial rates on 5/1 hybrid ARMs declined to levels not seen since January 2005.

Low mortgage rates are helping to reinforce the housing market. New construction on one-family homes rose for the fifth consecutive month in July to an annualized pace of almost 500,000 homes, the most since October 2008. In addition, homebuilder views of housing market conditions for the remainder of the year rose for the second month in a row in August to the most positive reading since June 2008, according to the National Association of Home Builders

Thanks for Reading
Howard Bell

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August 15, 2009


30-year fixed-rate mortgage: Averaged 5.29 percent with an average 0.7 point for the week ending August 13, 2009, up from last week when it averaged 5.22 percent. Last year at this time, the 30-year FRM averaged 6.52 percent.

The 15-year fixed-rate mortgage: Averaged 4.68 percent with an average 0.7 point, up from last week when it averaged 4.63 percent. A year ago at this time, the 15-year FRM averaged 6.07 percent.

Five-year Treasury-indexed hybrid ARMs: Averaged 4.75 percent this week, with an average 0.6 point, up from last week when it averaged 4.73 percent. A year ago, the 5-year ARM averaged 6.02 percent.

One year Treasury-indexed ARMs: Averaged 4.72 percent this week with an average 0.4 point, down from last week when it averaged 4.78 percent. At this time last year, the 1-year ARM averaged 5.18 percent.
Freddie Sayz

Long-term fixed-rate mortgage rates rose slightly over the past week while initial rates on adjustable-rate mortgages were little changed, said FrankNothaft, Freddie Mac vice president and chief economist. Last week's release of July’s employment report showed a slight improvement in the declining labor market. The unemployment rate ticked down to 9.4 percent in July, representing the first monthly decline since April 2008. Approximately 247,000 jobs were lost, fewer than the market consensus and the smallest loss since August 2008. In addition, revisions added 43,000 employees to payrolls in May and June.

Declines in some local housing markets may be nearing an end as well. Median existing home prices rose among 17 percent of major metropolitan areas in the second quarter from the same period last year, up from 12 percent showing gains during the first quarter, according the National Association of Realtors®. This represents the greatest number of areas experiencing annual growth since the third quarter of 2008. Moreover, 81 percent of major cities had house prices rise between the first quarter and second quarter of this year, owing in part to seasonality

Howard Bell

August 12, 2009

Apartment Vacancy Rate Hits Two-Decade Record

The economy’s decline leveled off significantly from April through June, confirming that the worst is behind us. GDP declined at an annualized rate of 1 percent in the second quarter, after shrinking an amazing 6.4 percent earlier this year.

But consumer spending, 70 percent of economic activity, continues to fall as Americans continue to save and reduce debt. Economists express concern that our basic spending habits have been permanently altered by this great recession. This is also having an effect on rentals as renters downsize or insist on rent reductions.

With this as a backdrop we looked at rental rates which a are a prime factor in evaluating a property. We clearly have a long way to go. The Dept of Commerce chart indicates we are at a fragile beginning of a recovery. The key to successful property ownership now will be to keep it occupied and ride this out. Study

Rent reductions at a 22 year high

In the second quarter the vacancy rate of 7.6% was an increase of 1.5% YOY. Landlords have been facing rising opposition to rent rates agreed to during the boom years. Tenants everywhere are asking for and getting rent reductions. Rents are in decline in every market nationwide in the current quarter with three with marginal exceptions, Tampa, Kansas City and San Antonio.

According to an study: For the first time in six years, rents are down nationwide and vacancies are up.

  1. Adding to this market pressure is competition felt from the shadow market or a surge of investor owned homes and condos that account for almost half of the rental stock, expanding the national rental supply.
  2. Despite these recent obstacles, a national survey found that an overwhelming majority of renters are still looking for a new place to live this year and more than half are planning to pay the same or more in rent. (via Reuters)

What To Do About Rent Reductions

Tenant Retention

If your are facing rent reductions and you want to retain the tenant, then ask for a new lease. In the 2001 recession, unemployment didnt really recede for 18 months after the recession was technically over. Tenant retention locked in with a new lease is good strategy and will help you ride out this great recession.

How to Rent it Faster

Stage it. Home staging for a rental plays the same role as staging for a sale. Painting the interior a light neutral color, is an inexpensive way to get a new and clean look and feel. Tired looking places take longer to rent. Leave lights on in each room, and leave blinds open to make rooms look brighter and larger.

Sell it. Renting your unit or home is a sales process. Walk through the house as if you were a renter. Consider the negatives and be ready with answers that overcome its shortcomings. Be ready to talk up its features. Create a checklist of the things you like about the house. Use it to sell potential tenants. Check comparable rents with listing sites such as or Craigslist. Consider consulting with a professional property manager to determine the right rent range if you still have difficulty.

Focus Your Advertising

Use Print Too

Consider the profile of the people you are trying to reach and then advertise in the places where they would be likely to look for a rental unit. If you are renting that basic apartment or studio, you have a good chance of attracting people in need of a lower monthly rent. Think students or people starting out or starting over.

Targeting your advertising you will save days on market. University campuses, free neighborhood papers, postings in local supermarkets or coffee houses might be the best place to reach that person.

Of Course, the Internet

If you don’t have a professional website you could use the blogs. Sites such as blogger or even Facebook have become so easy to use that you might consider a page for your rental property that features a slide show of vacancies as they come up.

As you receive phone calls you might ask them to go to your marketing page slide show and create an interactive conversation right there.

Thanks for Reading
Howard Bell
A web site of over 450 articles related to real estate focused primarily on property management.

August 9, 2009

Apartment Market Conditions Stabilizing

The National Multi Housing Council’s Quarterly Survey of Apartment Market Conditions.

All measurements, occupancy, sales volume, equity and debt finance remained below 50. A reading below 50 indicates that conditions are worse than three months ago. Its not surprising that as long as we continue to lose jobs rental properties will remain in doubt. What the market will bear in terms of rent rates will obviously be under pressure and that impacts value and that impacts sales.

All is Not Grim

Three of the four indicators tracked by the NMHC survey were higher than last quarter, with only the debt index still declining. The survey also suggests that transaction activity is mainly being restrained by uncertainty in apartment property values and not financing constraints. Only when uncertainty fades are we likely to see a significant upturn in apartment transactions (via

After 15 consecutive quarters of declining sales volume, sales have ticked up. 76% of those surveyed indicated that it is the uncertainty of property values in a difficult economy, rather than the lack of financing that is holding back sales volume.

*Tight indicates markets a with low vacancies and high rent increases.
*Sales volume indicates the number of deals.

Thanks for Reading
Howard Bell
A web site of over 450 articles related to real estate focused primarily on property management.

August 6, 2009


30-year fixed-rate mortgage: Averaged 5.22 percent with an average 0.6 point for the week ending August 6, 2009, down from last week when it averaged 5.25 percent. Last year at this time, the 30-year FRM averaged 6.52 percent.

The 15-year fixed-rate mortgage: Averaged 4.63 percent with an average 0.6 point, down from last week when it averaged 4.69 percent. A year ago at this time, the 15-year FRM averaged 6.10 percent.

Five-year Treasury-indexed hybrid adjustable ARMs: Averaged 4.73 percent this week, with an average 0.6 point, down from last week when it averaged 4.75 percent. A year ago, the 5-year ARM averaged 6.05 percent.

One-year Treasury-indexed ARMs: Averaged 4.78 percent this week with an average 0.5 point, down from last week when it averaged 4.80 percent. At this time last year, the 1-year ARM averaged 5.22 percent.

Freddie Sayz

Better-than-expected economic reports helped to keep mortgage rates low this week," said Frank Nothaft, Freddie Mac vice president and chief economist. "The economy slowed by an annual rate of 1 percent in the second quarter, which was more positive than market forecasts.

Homebuyer demand improved as well, aided by high levels of housing affordability. The first half of this year contained the top six months with the most affordable housing conditions since NAR began calculating its Housing Affordability Index in January 1971. As a result, pending existing home sales rose for five consecutive months ending in June, a trend not seen since July 2003. In June, a typical family would have devoted 15.7 percent of their gross income to mortgage principal and interest payments, the NAR explained

Thanks for Reading
Howard Bell
A web site of over 450 articles related to real estate focused primarily on property management.

August 1, 2009

The Role of Fannie Mae and Freddie Mac in The Multi Family Sector

Most of the mortgages in this country are indirectly held by the US Government, since the demise of the secondary markets.

A quick look at how these institutions have helped provide liquidity in this crises is interesting. Whether you think that they have done a good job by providing liquidity in this crises or whether they have absorbed a level of debt that is unwise remains to be seen.

Here is what they have done

These Government Sponsored Enterprises (GSE) were created in 1938 to provide liquidity to the real estate markets so that people could buy a home. Of course, it was never intended for them to own most of the countrys mortgages...but here we are.

Many of the lenders got in trouble for a few reasons. Bubble thinking or what Greenspan called irrational exuberance. Another reason that the lenders became reckless is the lenders business model changed. It went from lend to hold to lend to sell and so the need for good and detailed due diligence was lessened. If you intend to loan and then sell it, your risk is off loaded to other investors. Lenders got sloppy. An unintended consequence of a good system designed to spread the risk and keep liquidity in the marketplace created a mind set that fueled a bubble and crashed the system. Result? A 22 month great recession.

This opened the door for many investors without deep pockets to get loans to speculate. When the markets turned they didnt have the deep pockets to hold and and when equity evaporated so did the reason to carry the loan.

So Where Are We Now

According the the National Multi Housing Council, 53% of their multifamily total is held in their portfolio and Freddie Mac, 86% of their multifamily in portfolio. 62% of the Fannie and Freddies' multifamily business is retained, while 93% single-family loans are sold off.

From October 2007 through September 2008, multifamily mortgage debt outstanding grew by $83 billion, $68 billion (82 percent) was provided by Fannie and Freddie. When the markets collapsed Fannie and Freddie did what they were created to do... provide a liquidity.

How this will unwind is anybodys guess, whats clear is we own it now...all of us, and that we cant let this happen twice.

Thanks for Reading
Howard Bell
A web site of over 450 articles related to real estate focused primarily on property management.