Posts Tagged ‘renters’
Multifamily Investing – With Caution
It depends very much on your geographical location but there are signs the multifamily sector may have peaked – at least temporarily and in certain locations. In primary markets like NYC and Washington D.C., big institutional investors have driven cap rates of return down below 4% in some recent deals. There are even reports some class A properties have been bought for negative cash flow amounts.
Additionally, most everything desirable has been purchased. Where land is available in the primary markets, the big guys are starting to build apartments again. Because land is limited in the major markets, other large investors are expanding into secondary markets like Seattle and Charlotte. There is even some renewed activity for third tier markets in the Mid West. However, these remain focused on class A properties.
Obviously, smaller investors are looking for class B and C properties. On that front, there was a 47% increase in multifamily loan originations in the second quarter of the year compared to the first as reported by the Mortgage Bankers Association. Just as important, up until recently, about the only lenders making loans in this sector where Fannie and Freddie. A significant number of the recent up tick in loan applications were accepted by regional and local banks.
While high-rises dominate the primary markets, garden apartments – low-rise buildings surrounding a common courtyard – saw a dramatic increase in sales volume. These are properties small investors can get into individually or with small partnerships. This sector accounted for a full two-thirds of multifamily transactions in July and May saw a 165% increase year on year.
Here’s where the short-term risk is in multifamily housing. Until development begins with some vigor in this sector, competition among buyers will remains strong – driving higher prices. Forecasts for more development remains very low in primary markets but is increasing in others. The other variable is the shadow market for residential houses. In markets with high foreclosure rates, the shadow inventory has the potential to affect apartment rent rates. Lenders have demonstrated they intend bringing REO onto the market gradually so as not to force prices down further.
Landlords Go Green
If you aren’t familiar with the term “going green” by now, you must be living in a deep dark dungeon and it’s time to let some energy saving sunlight into your real estate training. “Going green” is an abbreviation that stands for everything environmentally friendly.
There are hundreds of ways to make your rental properties more eco-friendly. Some are definitely more affordable than others. One of the biggest drawbacks for landlords going green is that the rewards for energy conservation go almost exclusively to the tenants unless you offer free utilities with your rent. If you do, I don’t need to convince you to go green because you’ve already seen the cash that it will save you.
In many cases, your true motivation is that a serious percentage of tenants are looking for eco-friendly landlords and expect to find green features in your rental units. This is particularly true of younger and upscale renters.
For existing properties, installing green features begin when repairs and replacements are needed:
- Installing Energy Star appliances
- Tank-less hot water heaters
- Vinyl windows
- Improved insulation
- Water barrels
A Real Estate Investment Business Must Have
If you are in the real estate investment business, you must have a strong internet presence. If you don’t have a website, you will not succeed as a real estate investor. If you don’t have a strong presence, you will not go to the head of the class.
Here are only a few of the things your website should be doing for you:
- Promote your business to create credibility
- Automate your ability to gather quality leads
- Use an opt-in form to increase your contacts
- Market your own properties
- Attract more money partners to finance your deals
- Advertise for renters
Here are a few compelling facts to back up my strong words. When buyers begin looking for a home, 87% begin their search online. In comparison, only 47% look at newspaper real estate ads.
As a result of online searches, 77% drive by a home to look at it and 63% walk through a home after first viewing it online. If you’re not online, the vast majority of the traffic is passing you by.
Unfortunately, there are no statistics about motivated sellers but I think the statistics speak for themselves when it comes to the importance of having a strong online presence for everyone in the real estate business.
With every investor and realtor online, the real question you should be asking yourself is how are you going to pull in highly targeted traffic? It’s not easy but let me show you two of the most important things you can do to improve the results.