Multi-Family Housing Starts, Building Permits Soar

Building permits for single-family and multi-family construction surged to an eight-year high in June, signaling a pick up in home building is on the horizon, the Commerce Department reports.

Permits for future home construction rose 7.4 percent to a 1.34 million unit pace in June, the highest level since June 2007.  All four regions of the U.S. – Northeast, Midwest, South and West- reported gains in housing permits.

Multi-family permits posted the largest increase at 15.3 percent in June, while permits for buildings with five units or more increased to the highest level since January 1990.  Permits for single-family home building also rose, increasing  0.9 percent last month.

Economist point to a rise in household formation and an improving labor market that is prompting more young adults to leave their parents’ home and spark a rise in demand for housing, notably apartments.

A rise in multi-family production helped push housing starts 9.8 percent higher in June month-over-month, reaching a seasonally adjusted annual rate of 1.17 million units, according to the Commerce Department.  Multifamily production surged 29.4 percent last month, reaching a seasonally adjusted annual rate of 489,000 units.

“The multi-family gains this month are encouraging and show that the millennial generation continues to be drawn to the rental market,” says Tom Woods, chairman at the National Association of Home Builders.

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4 Vital Tips for Managing Contractors

Cover yourself with contracts and a paper trail.

Keep communication clear, and provide a record of who said what when- this could help iron out disputes later on.

Never pay ahead of the work.

Many contractors will tell you that they can’t start on the project until you pay them some amount of the total cost upfront.  This is backwards.   If your contractors ever walk off the job or fail to show up for work, you’ve paid more than the work that’s been completed, and you lose money. Instead, your contractors should be working ahead of your payments, not the other way around.

Make sure you visit the job site at least a couple times a day, make sure you “drop in” by surprise.

If you have a trusted crew that you’ve worked with in the past, this may not even be necessary. But, if you’re not going to be at the property full-time, make sure you at least check in a couple times a day — on surprise visits.

Go into it as a life long relationship, be a good customer and pay fast.

One of the best ways to get quality work out of your contractor is to make them enjoy working for you.  Which means being decisive with the contractor- and giving him a check promptly at the agreed-to points in the project.


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Property Investors Tilt to Flipping

Home flipping continues to inch out a hold-to-rent strategy among investors who bid on properties at auctions, according to Auction.com’s Second Quarter 2015 Real Estate Investor Activity Report, which is based on survey results of real estate investors nationwide.

ef-psef5u90 46“Rounding out the first half of 2015, most of the country and most investor segments performed in a manner very consistent with what we’ve been seeing for about a year,” says Rick Sharga, Auction.com’s executive vice president.

“We’re seeing two major trends that are driving these numbers. First, we’re seeing a return of the ‘mom and pop’ investor in the single family rental space – smaller investors with an intimate knowledge of their local markets, who are willing to buy properties that deliver long-term returns based on monthly cash-flow. Second, investors focusing more and more on flipping properties in regions where prices have rebounded from the 2008 crash and inventory of homes for sale remains scarce – an almost perfect scenario for investors looking for a short-term profit.”

The survey revealed that investor respondents who were making a one-time purchase strongly preferred a hold-to-rent strategy, while respondents who identified themselves as “full-time real estate investors” favored flipping.

Whatever your real estate need or strategy, we at Landmark Group are here to help. We are here to help you buy, sell or rent residential, retail, office, wholesale or industrial property.  We can also help you maintain, renovate or manage your property. Just give us a call.

 

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Micro-Apartments Are Coming to the Midwest

Bloomberg business contacted us in regards to the recent trend of Micro Apartments popping up in the Midwest.  See the article here: http://www.bloomberg.com/news/articles/2015-07-16/micro-apartments-are-coming-to-the-midwest

Photographer: Elaine Thompson/AP Photo

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Office Buildings Filling Up – Slowly

Reis Inc., a real estate research service, reports that companies took on 8.2 million square feet of additional office space in the second quarter, marking one of the stronger periods since the recession but a relatively modest expansion by historical standards.

The increase left the overall office vacancy rate flat for the quarter at 16.6%, which is just below the peak of 17.6% reached in 2010, according to Reis, which tracks 79 markets. Rents rose to an average of $24.60 a square foot, up 3.2% over the past 12 months.

“I don’t think we’re in the clear yet, but we are definitely heading in the right direction,” said  Ryan Severino, an economist at Reis. “It has taken a little bit longer than usual to get back to where we’d like to be.”

The still-sluggish growth contrasts to some other economic indicators, such as job growth. While the U.S. recovered to its prerecession employment level a year ago, employers occupy about 36 million square feet less than they did at the peak in 2007. That is about a year’s worth of growth at the current rate.

Many analysts believe the biggest factor in the sluggish recovery is that employers are pushing into denser spaces, jettisoning private offices and large cubicles for a cozier layout. Others believe employers simply have been more cautious about expanding in this cycle. Overall, the office market is a patchy one, highly dependent on the strength of local economies.

Leading the way in terms of rent and occupancy growth are regions driven by the technology sector. The Seattle area registered as the strongest in terms of rent growth over the past 12 months, with rents rising 7.2% to $26.84 a square foot, including landlord concessions. Seattle was followed by the San Francisco area, where rents rose 6.3% to $40.18 a square foot, and the San Jose area, where they increased 5.9% to $28.28 a square foot.

Other cities generally are experiencing slow and steady growth in rents and occupancies.

One exception is Houston, which is facing a drop in demand thanks to the fall in oil prices as well as a surge in supply from builders that started towers when the price of crude was higher. The vacancy rate climbed to 15.6% in the second quarter, up from 14.4% a year earlier.

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Key Items Investors Overlook When Performing Due Diligence

Spending copious dollars and hours on due diligence doesn’t guarantee the right decision on whether or not to pull the trigger on a transaction. It’s  about the quality and not the quantity of information gathered. very buyer is going to have their standard checklists, but persistently blending creativity with pragmatism can yield useful results in a often overly formulaic process.Capture565894

Here are some tips on overlooked items that I’ve found can  improve the overall quality of your diligence.

You will need to get the water, electricity and gas turned on if they are off. Sometimes this isn’t possible (say if the property is winterized or the furnace is missing), but for the most part, you want to check the utilities. By getting the utilities turned on, you can make sure the HVAC system and electrical work and that there are no plumbing
Sewer Lines.  I suggest scoping the sewer line on any property that is more than 30 years old. Broken sewer lines usually cost $3,000 to $5,000 to replace so you want to know about them up front. You should be able to find a plumber to scope them for around $100 to $200.

 

Old furnace or a/c
Fuse Boxes
Electrical Panels
Condition of Appliances
Dry Rot or Signs of Pest Damage

Ungrounded Electrical – You can easily tell if the outlets have only two prongs instead of the usual three. But be forewarned, some people put three prong outlet covers over ungrounded outlets. Having ungrounded outlets is not the end of the world, but if you do choose to ground it, it will cost a good amount.

 Galvanized Plumbing. This plumbing often rusts and will likely need to be replaced, but not always. If it has galvanized plumbing and the pipes don’t look corroded, check the water pressure and make sure it is sufficient.

 

 Large Cracks in the Foundation Wall.   If it is more than three inches (you can check this by running your finger along the siding outside and seeing how far the back of the siding is from the foundation wall), this is very concerning and you should get an expert out there to inspect it. If it is moving at all, there should be vertical braces or deadmen in the basement. If there aren’t, you’re going to want to put them in and epoxy any notable cracks. If you are concerned at all about the foundation, it’s worth getting a foundation expert to inspect the property.

Due diligence may be tedious, but it is vital. Any problem you find before closing can be used to renegotiate or back out. If you find it after you close, good luck getting the seller to pay for it. In other words, due diligence can save you a lot of money so don’t let it fall to the back burner. Make due diligence a top priority.

 

 

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More Renters May Be Stuck

Millions of Americans may be unwillingly stuck in rental housing. The nation’s home ownership rate has plunged for eight years, currently down to 63.7 percent in the first quarter of this year from a peak of more than 69 percent in 2004.

2242342wegAs the home ownership rate has fallen, the amount of rentals has soared, and so has the costs of renting. Last year, rents climbed at a 3.2 percent rate – double the pace of overall inflation.

Many renters may struggle to save in buying a home as rental costs continue to soar. The share of renters paying more than 30 percent of their income on rent – what is considered “cost burdened” – remains near record highs. Nearly half of all renters were in this category in 2013, according to a newly released report by Harvard University’s Joint Center for Housing Studies.

The number of new rental households has climbed by 770,000 annually since 2004, according to the report. Many of the people living in rentals were once home owners, who lost their homes to foreclosure and cannot yet qualify for credit to buy again yet.

The home ownership rate has dropped by the fastest rates among people in their late 30s to early 50s, according to the Joint Center’s report. Prior to the Great Recession, these age segments were in their prime home-buying years. But when the housing market dropped, many were left with little or no equity.

“People in their 40s and 50s were very hard hit by the housing crisis,” says Chris Herbert, managing director of Harvard’s housing center. “They’ve been a bit of a forgotten generation.”

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Summer Energy Savings: Hot Tips To Keep Cool

Summer and the high temperatures it brings increase energy usage.  Here are some tips on how to save energy in the summer:


Phantom Load is the amount of electricity that is being drained by equipment when off or in standby mode.  Homes have more than 20 phantom loads that can add up to $200 to your electricity bill each year.  Nationally, phantom loads make up about 6% of our energy consumption.  Any device with a clock display, remote control, or instant on capability may be consuming power constantly.

Tip:  Place all devices on a power strip that can easily be switched off.

Clean your A/C filter monthly.  A dirty filter slows down air flow and makes your system use more energy.  A clean filter can prevent dust and dirt from building up, which could lead to repairs or system failure.

  • Use fans, windows, and dehumidifiers use less energy than air conditioners.

Porous Ducts are often the biggest money waster.  Properly maintained ducts can save owners 25% on air conditioning expenses.  Focus first on sealing ducts that run through the attic, crawlspace, unheated basement, or garage. Use duct sealant (mastic) or metal-backed (foil) tape to seal the seams and connections of ducts. After sealing the ducts in those spaces, wrap them in insulation to keep them from getting hot in the summer or cold in the winter.

Lowering the thermostat on your water heater to 120 degrees can save you about $7 per month according to the US Department of Energy.

  • Consider replacing your water heater is if it more than 10 years old. This could increase the efficiency by 10% more.
  • Insulate hot and cold water pipes within five feet of the water heater.

Set your thermostat wisely.  When you get home after a long day at work, your instinct may be to crank up the AC and turn your house into an ice kingdom.  But, making small changes to the way you use your thermostat can go a very long way in saving energy:  each degree of adjustment has an estimated 3-5% impact on your monthly cooling costs.

Low Cost Energy Saving Options

• Wrap your water heater with an insulating blanket, especially if it is older than 10 years.
• Seal your home’s leaks around windows and doors with weather stripping and caulk.
• Keep the AC fan switch set to “auto” and save up to $25 a month versus leaving it set to “on” continuously as many people do.
• Turn off unnecessary lights, and use energy-efficient light bulbs that use less electricity and emit less heat.

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Apartment Occupancies Hits Record High

Apartments are filling up nationwide. The national occupancy rate in May reached 95.3 percent, the highest ever, reports Axiometrics, a real estate analytics firm.

“The May rate historically is the start of each year’s occupancy peak, meaning occupancy should remain at the current level or higher,” says Stephanie McCleskey, Axiometrics’ vice president of research.

Higher occupancy rates have come with higher rents. In May, rents rose 5 percent nationally, making it the fourth consecutive month at or above that mark. “Owners and investors are having a profitable start to the year,” McCleskey says.

“Rent growth is increasing in previously challenged markets in the East and Midwest, such as Chicago, St. Louis, Philadelphia, Kansas City, Baltimore and even Detroit,” noted McCleskey.

Apartment demand has been high from millennials who are forming their own households as well as baby boomers looking to downsize, CNBC reports.

Laurie Goodman, director of the housing finance policy center at the Urban Institute, recently published a paper claiming that the rental surge will only get bigger. Goodman predicts that out of the 22 million households formed in the next 20 years, 13 million will be renters. “We are nowhere near building enough to meet demand,”  Goodman says.

Some investors thought apartment demand would abate as the housing market recovered. Just the opposite is happening. Demand is coming from both ends of the age scale. Millennials, finally finding jobs and moving out of group or family homes, are pushing rental demand; downsizing baby boomers, many of them soured on homeownership by losses from the housing crash, are doing the same.

“The Great Recession lowered the home ownership rate, and it’s just so hard to get a footing from here, so you are sort of starting from a diminished base, particularly for younger people, but for all age groups,” said  Goodman.

Rising rents are continuing to put a strain on U.S. households, making up a far larger monthly share of expenses. While multifamily construction last year soared to the highest level since 1989, the timeline for these buildings is longer than for a single-family home, and the rental population is growing ever faster.

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Skills You Want Your Property Manager to Have

We recently started seeking a new property manager at Paladino Development Group, throughout our search we have brainstormed on the necessary skill set we are looking for. Finding the right rental property manager is a big deal. After all, these people are going to be your eyes, ears, hands and feet on the street.   Here are a few tips on what to look for when you are seeking someone to manage your property:

Communication.  One of the biggest complaints I hear from other investors who own multiple properties is the lack of communication from their property manager.  When you are interviewing the property manager, call the office and see how easy it is to get a live person.  If you get a voicemail, your call should be returned or acknowledged in a reasonable amount of time.

Experience.  Your best bet is to find a PM that is well established and professional that is able to make smart decisions for you.  Someone who is new to the game could easily make a mistake that costs you money.  For example, an inexperienced manager could end up calling in professionals for a minor maintenance issue that could have been fixed by a handyman.  These seemingly insignificant errors can quickly add up.

Efficiency.  If something at one of your properties breaks, you’ll want to ensure that it is swiftly taken care of to reduce of the risk of the problem getting worse.  As the property manager will be the person conducting inspections at your rental property, they will need to have a keen eye for detail.  A good property manager should be able to pick up on issues and deal with them as they arise.

Social Skills.  A property manager must be able to deal with people.  You have to maintain your composure and be a trusted advocate, both for your coworkers and for your clients and tenants.  Turning a negative into a positive requires great people skills.  If people feel they can trust a property manager and have their concerns addressed, they will more likely become long term tenants.  It is also important to be a good negotiator, which is beneficial when dealing with angry tenants.

Professionalism.  Property managers must maitnain a certain level of professionalism when dealing with tenants, clients, vendors, etc.  They must be able to separate their emotions from business decisions and treat everyone impartially.  Doing what is right, while being firm and friendly- especially when dealing with sensitive business matters is a daily task.  Property managers must be dependable, responsible, patient, and calm under

Organization.  It is vital that property managers don’t multitask, but rather prioritize the items on the to do list.  Therefore, managers must be well organized, so they can remain focused and accomplish the important issues.  Without organization, something could fall through the cracks.

If you are currently searching for a property manager, or are unhappy with your current property manager- feel free to contact me to explore your options.

 

 

 

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