How Sustainability Helps in Enhancing Property Values

Written by Landlord Property Management Magazine on . Posted in Blog

By Michael Lanning | National Real Estate Investor

There was a time when we spoke of green buildings, and it was a conversation focused in large part on the building envelope. Over the years, that conversation has advanced; in a sense it has been turned inside out. Today we speak of high-performance buildings measured by their degree of sustainability and their ability to maintain and enhance the comfort, health and productivity of those occupying the space.

In this ever-advancing field, the ongoing education of property and asset managers is key. As IREM stated in last year’s “Building Performance That Pays,” a report on the Institute’s first Energy Efficiency Survey, “The on-the-ground activities that contribute to building energy efficiency put property managers in an ideal position to impact operational efficiency, in conjunction with their teams and in cooperation with tenants.”

There are multiple goals in the practice of sustainability. As we have said, there is the professional and personal well-being of the tenants. This, in turn, supports long-term occupancy and for commercial buildings in particular, the ability of corporate occupiers to hire and maintain employees. This leads to the ultimate goal of the asset and property manager: value enhancement.

We are seeing the industry respond to that multifaceted outcome. First, more and more practitioners are investigating our educational offerings to enhance their understanding of the issues involved with sustainability. In addition, the number of properties that have achieved their IREM Sustainable Property Certification continues to grow.  (The Institute also hit a major milestone this year. We are proud that IREM has earned the U.S. Environmental Protection Agency’s 2017 ENERGY STAR Partner of the Year Award.)

 

Recently in this space I wrote about the intricate and subtle relationship between asset and property managers. Both disciplines have indeed been early adopters of sustainable best practices. Asset managers are being driven by their portfolio managers and shareholders to drive value for assets in their portfolios. They recognize that to stay competitive and increase the value of the assets, sustainability needs to be near the top of their to-do list.

That cannot be done without the presence of property managers to provide the building analytics that support sustainability initiatives. As Sara Neff, Kilroy Realty’s senior vice president of sustainability, stated in the Building Performance report, “Property managers are a great group to do these analyses. They understand the full benefits of a project because they know their buildings so well.” Indeed, asset managers look to property managers to create a baseline of sustainable property operations and management.

In most cases the asset managers set goals for resources and cost reductions and task the property managers to meet those goals.

Of course, there are many variables in this scenario. Different buildings demand different solutions to the sustainability question. Not every asset needs to perform like a trophy tower in Midtown Manhattan.

Then there are the mindset and capital considerations of ownership. Obviously, if the owner supports the program, it will be easier for the asset manager to implement those processes. If they do not, the on-site manager simply cannot make those upgrades.

Also, smaller shops might find it hard to develop that in-house understanding because of restraints in time, manpower and focus. But sustainability is a critical expertise, no less than the need for HVAC or roofing expertise. If that knowledge does not exist in-house, that’s when you have to look to an outside contractor to provide it. One way or another, today every management concern needs a sustainability expert as part of the team.

 

Whatever the needs of the building, whatever the mindset of ownership, whatever the business restraints, the marching orders remain the same. All property managers today need to be knowledgeable about best practices and the products and services available to them that will best fill their shared goal of value-enhancement.

Michael T. Lanning is 2017 president of IREM. In addition, he serves as senior vice president and city leader for the Cushman & Wakefield, AMO, office in Kansas City, Mo.

Why Rent Controls Will Create Another Monster

Written by Landlord Property Management Magazine on . Posted in Blog

RentReport

Calls for rent controls to be enforced on Auckland’s heaving rental market to stop price gouging will only create another beast, says Auckland’s landlord association.

Auckland Property Investors Association is responding to this week’s news of a rental agency hiking its rents on vacant apartments by 5 per cent a week during a period when pressure from students surged to record levels.

APIA vice president Peter Lewis says despite people thinking rent control provides long-term security for tenants, and tilts the balance of power away from landlords towards the tenants, they also create a Pandora’s Box.

“People who advocate for controls think they make for a fairer market in which households with lower incomes cannot easily be pushed aside by landlords keen to upgrade their property to a higher specification with a commensurate rent increase,” says Mr Lewis.

“In our opinion, controls reduce the supply of lower-end property to the market because there is no money in creating affordable housing if landlords can never raise the rent to market rates.

“Slower supply growth then exacerbates the basic pricing problem. Those landlords who do rent out rent controlled properties tend to do minimal maintenance because, when supply and turnover in the market are limited by rent caps, landlords have little incentive to compete to attract tenants. Rent controls also mean that landlords may also become choosier, and tenants may stay in properties longer than makes sense as when they move to another rental property they may lose the benefit of the less-than-market rent that they have been paying.

“Once people move into a rent-controlled place, they are incentivised to never move out, because it is so cheap. A family may move into a large rent-controlled property. Over the years the kids grow up and leave, the husband dies. But the widow stays on alone in the property that is now far larger than what she needs, she stays on because it is cheap. In doing so she denies that property to another family that actually needs the space. Rent control doesn’t work. It doesn’t help the poor. It helps the middle class. There is some evidence that those living in rent-controlled flats in New York tend to have higher median incomes than those who rent market-rate apartments.”

Mr Lewis says that overseas experience shows stringent enforcement of rent control results in largely adverse outcomes such as undersupply, long waiting lists for tenancies, black market activity, little maintenance of rental properties, urban decay, and sometimes even eventual abandonment of such buildings.

Not convinced, take a look at the video below by Nicole Gelinas from the Manhattan Institute on why price ceilings on rent will only hurt renters. https://www.youtube.com/watch?time_continue=312&v=oJvTTGOHFkU

“In the local context, this proposal ignores the current law that restricts landlords to only charging a rent that is commensurate with other rents for a similar property within the area, and that tenants have the statutory right to appeal to Tenancy Services if they feel that their rents are unreasonably high.”

 

How to Find and Keep Great Tenants

Written by Landlord Property Management Magazine on . Posted in Blog

by Kathy Fettke | RealWealthNetwork.com

HappyTenants

Finding a great tenant begins with having great information — and lots of it. Information is a landlord’s crystal ball. And the best time to get this information is “before” the tenant signs on the dotted line.

One of Real Wealth Network’s preferred property managers calls it the “honeymoon period” because tenants will tell you more about themselves when they want something from you — such as the keys to your property. And it’s not just important for the selection process. This information can be critically important a year or two down the road, if your rental situation suddenly goes south.

This property manager, who prefers to remain anonymous, owns hundreds of properties herself. After years of dealing with both good and terrible tenants, she is a wealth of knowledge about what it takes to select the right tenants. Here is some of her advice:

Tenant Screening Priorities

1. Begin with a criminal background check and a civil background check.
Criminal background checks are good for things like arrests, convictions, and warrants, while civil background checks will let you know if applicants pay their bills on time or have any judgements against them. Civil background checks tell you more about whether they will make “good tenants” and not just “law abiding citizens”. Lexus-Nexus allows you access to a more comprehensive database of information.

2. Credit checks are important for different reasons.
Credit checks are useful, but less important than background checks because they generally won’t tell you much about the tenant’s rental history. It is useful for understanding the applicant’s credit “load” and whether bill collectors are chasing them. Even if you don’t plan to do a credit check, always have prospective tenants sign a release form for obtaining one in case you need it in the future.

Bad credit does not always mean a potential tenant won’t pay their rent. For example, someone who lost their home to foreclosure during the housing crisis may have bad credit today but if the rent is less than their mortgage was, they could become very good tenants.

3. Current landlord information is helpful but you may learn much more from previous landlords.
Current landlords may not tell you if someone has been an excellent tenant because they don’t want to lose them — or they may not tell you if they are horrible tenants because they want to get rid of them. So talking to previous landlords may get you more honest information. Ask for information on two previous landlords.

4. Make sure they are who they say they are.
Request a photo ID and several pay stubs to verify source of income. Ask about next of kin and emergency contacts.

5. Be sure understand Fair Housing rules so you don’t discriminate.
Protected classes include: race, color, sex, religion, national origin, familial status and disability. In Ohio, military personnel are also protected. So know your state rules. Attorneys and paralegals are “not” a protected class. Renting to them could put you at a disadvantage in the event of a future court battle because the landlord would have huge legal fees while the tenants would not need legal advice, or would have access to “free” legal advice. Talk to an attorney on your side to protect yourself in advance with a bullet-proof lease agreement.

The Importance of Good Marketing

It’s also important to be able to attract a large pool of candidates so you can find the right tenant and not feel desperate to just take anyone. To do that, you need quality advertising. Another property management company, Renters Warehouse, offered advice on that:

Place your ad on a website that will display contact information accurately and consistently. Renters Warehouse uses proprietary software to spread the word on hundreds of websites.

Your ad needs to be impressive in order to attract the right tenant. Use high quality or professional photos of both the inside and the outside of the rental property. The photos should be taken with good lighting, and the unit should be spotless. A video walkthrough is also a great idea along with plenty of details.

Renters Warehouse says that most prospective tenants want to know everything about an apartment before they decide to call for a viewing. If you have a pet policy, say so in the ad. If you don’t allow smoking or you need a 2-year lease, spell it out in the ad. You could also include interesting details about the rental or the neighborhood and information about an HOA.

You should also have an eye-catching headline that will showcase a few desirable or unique qualities about your rental. Use well-chosen adjectives that represent your property truthfully. If it’s a recently-renovated older home in a happening neighborhood, the title could read: “Amazing, Upgraded Home Near Shopping & Entertainment.” Or if you expect to attract a younger crowd, cater to them with “happening” words or phrases. Just be sure your description is accurate.

One final point — If you are worried about current tenants making a unit look presentable during the tenant screening process, make sure you require their cooperation with a clause in the lease. For Renters Warehouse, that clause requires cooperation within the final 60 days of the agreement. It also says that most tenants are willing to work with you on those showings, so don’t be afraid to ask. It’s important that prospective tenants get a good impression.

Renting to People Who Plan to Have Roommates

Real Wealth Network has a hot tip for landlords renting to tenants who who plan to have roommates at some point. By requiring the lessee (the person signing the main lease) to inform the landlord of any potential sublessees (people who sublet from the lessee) the landlord can know who’s living in their home at all times.

The landlord then also has a “point person” to talk to about issues.

A clause about rules in regards to renting the property on VRBO or Airbnb would also be useful so you can control if your property might have complete strangers living there for the weekend.

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The Real Wealth Network is a real estate investment club that educates members on how to diversify their real estate portfolio nationwide by sharing information on the best US markets for cash flow and future appreciation. The company also offers referrals to experienced and highly-rated brokers, property managers, and real estate professionals in those markets. You can join for free at www.realwealthnetwork.com.

10 Tips for Successful Real Estate Property Investment

Written by Landlord Property Management Magazine on . Posted in Blog

by: Agustin Diaz & Christine Collura | Keller Williams & Estates

shutterstock_46944721

Just because real estate prices seem to have hit a temporary ceiling in many countries around the world, that doesn’t mean that profits from property investments are hard to come by.

Even during a real estate market slowdown, stagnation or depression profits can be made locally and overseas. This article shows you the top ten tips that real estate investors apply to their property portfolio building strategy to ensure success from their investments.

1) Research the curve – the concept of a property market cycle existing is not myth it’s a fact and is generally accepted to be based on a price-income relationship. Check the recent historical price data for properties in the area of the country you’re considering purchasing in and try to determine the overall feel in the market for prices currently. Are prices rising, are prices falling or have they reached a peak. You need to know where the curve of the property market cycle is at in your preferred investment area.

2) Get ahead of the curve – as a basic rule of thumb, professional real estate property investors seek to buy ahead of the curve. If a market is rising they will try and target up and coming areas, areas that are close to locations that have peaked, areas close to locations experiencing redevelopment or investment. These areas will most likely become ‘the next big thing’ and those who by in before the trend will stand to make the most gains. As a market is stagnating or falling many successful investors target areas that enjoyed the best levels of growth, yields and profits very early on in the previous cycle because these areas will most likely be the first areas to become profitable as the cycle begins turning towards positive once more.

3) Know your market – who are you buying property for? Are you buying to let to young executives, purchasing for renovation to resell to a family market or purchasing jet to let real estate for short term rental to holiday makers? Think about your market before you make a purchase. Know what they look for in a property and ensure that is what you are going to be offering them

4) Think further afield – there are emerging real estate property markets around the world where countries’ economies are going from strength to strength, where a growing tourism sector is pushing up demand or where constitutional legislation has been or is about to be changed to allow for foreign freehold ownership of property for example. Look further afield than your own back yard for your next property investment and diversify that real estate portfolio for maximum success.

5) Purchase price – set yourself a budget that will realistically allow you to purchase what you’re looking for and profit from that purchase either through capital gains or rental yield.

6) Entry costs – research fees, charges and all expenses you will incur when you buy your property – they differ from country to country and sometimes even from state to state. In Turkey for example you should add on an additional 5% of the purchase price for all fees, in Spain you will need to factor in an average of 10% and in Germany fees and charges can be in excess of 20%. Know how much you will have to incur and factor this amount into your budget to avoid any nasty surprises and to ensure your investment can become profitable.

7) Capital growth potential – what factors point to the potential profitability of your real estate property investment? If you’re looking overseas at an emerging market, which economic or social indicators exist to suggest that property prices will increase? If you’re buying to let out are there any indications to suggest that demand for rental accommodation will remain strong, increase or even decline? Think about what you want to achieve from your investment and then research and find out whether your expectations are realistic.

8) Exit costs – if you will incur substantial capital gains taxation liability if you sell your property investment for profit, will that render the investment profitless? In Spain a foreign buyer can incur up to 35% capital gains tax, in Turkey on the other hand property sales are capital gains tax free if the underlying real estate has been owned for four or more years.

9) Profit margins – what levels of capital growth can you realistically gain on your property investment or how much rental income can you generate? Work out these facts and then work backwards towards your initial budget to work out your potential profit margins. At all times you have to keep the bigger picture in mind to ensure that your real estate investment has good potential for profit.

10) Think long term – unless you’re buying property off plan and intending to flip it for resale and profit before completion you should view real estate investment as a long term investment. Real estate is a slow to liquidate asset, cash tied up in property is not simple to free up. Take a long term approach to your property portfolio and give your assets time to increase in value before cashing them in for profit.

Property News Reports – Is the Bubble About to Burst?

Written by Landlord Property Management Magazine on . Posted in Blog

Kathy specializes in teaching people how build multi-million dollar real estate portfolios through creative finance and planning. She is passionate about researching and then sharing the most important information about real estate, market cycles and the economy. Author of the #1 best seller, Retire Rich with Rentals, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR and CBS MarketWatch. Learn more about Kathy & the Real Wealth Network at http://www.RealWealthNetwork.com

Why are so many 1031 investors choosing to 1031 exchange into Delaware Statutory Trust (DST) properties?

Written by Landlord Property Management Magazine on . Posted in Blog

By Dwight Kay | Kay Properties & Investments

From eliminating the struggles of property management to owning investment grade real estate, the potential benefits of opting to 1031 exchange into DST properties are many. At Kay Properties and Investments, we’re specialists in the DST 1031 exchange marketplace, and provide our clients with superior, knowledgeable advice to help them make informed decisions about their investments. We also are careful to help our investors understand the risks and disadvantages of real estate and DST properties.

Understanding Delaware Statutory Trust Real Estate

Real Estate investors all over the country are choosing 1031 exchanges into DST offerings as a way to defer their capital gains tax, diversify their real estate portfolio, increase the possibility of increasing their cash flow and much more. But what is a DST 1031 Property exactly? With a minimum investment of $100,000, DST 1031 properties give investors more leeway to spread their proceeds into multiple properties. Some call this similar to 1031 exchanging into a REIT however, a REIT is not like kind for a 1031 exchange and yet a DST is. With the DST we are able to create a broadly diversified portfolio of between 1-50 properties for our investors. Understanding the current DST properties for sale and how to construct a quality portfolio for our clients is what we do best. Contact us today to learn how we can help you with a free consultation. (www.kpi1031.com or info@kpi1031.com)

Types of DST Listings

The types of DST 1031 properties available can vary greatly, with the common properties being triple net (NNN) leased single tenant retail, apartment communities, medical properties, office properties and all-cash/debt-free properties. With a NNN leased property, tenants are typically responsible for taxes, maintenance and insurance, potentially leaving the investor with less responsibility in terms of property management and costs and a “net” amount of rent each month.

At Kay Properties we typically have access to 15-30 different DST listings from many of the DST sponsor companies in the industry as well as our own proprietary Kay Properties client exclusive DSTs just for our clients. If you’re interested in learning more about how 1031 exchanging into Delaware Statutory Trust properties could potentially work for you, give us a call today! 1(855) 466-5927

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This website contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment. Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes, therefore, you should consult your tax and legal professional for details regarding your situation. Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado. Kay Properties & Investments, LLC, is registered to sell securities in all 50 states. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

BEWARE. Fed Rate Hike Could Burst Bubbles

Written by Landlord Property Management Magazine on . Posted in Blog

By Kathy Fettke | RealWealthNetwork.com

FedRateHike

The Federal Reserve followed through on its latest promise to raise interest rates. Fed Chief Janet Yellen announced a quarter point hike in the federal funds rate Wednesday. But the increase has little to do with the ripple effect on mortgages and consumer loans, and more to do with a message from the Fed about the economy.

This is the first rate hike of 2017 and the third since December of 2015 when the cycle of monetary tightening began after the Great Recession. The first rate hike brought the overnight lending rate a quarter percent off zero. The second rate hike three months ago, raised it another quarter point. The latest increase brought it to a range of 0.75% to 1%, which is still quite low historically.

Consumer loans may notch up a bit because of the rate hike but economists say with so much talk about the increase, many lenders have already priced it in. And some economists say the hike has more to do with Yellen’s desire to portray the economy as “healthy” than it does with monetary policy.

She said during a press briefing: “We have confidence in the robustness of the economy and its resilience to shocks.” And that: “It’s performed well over the past several years. We’ve created, since the trough in employment after the financial crisis, around 16 million jobs.”

Raising the Fed Fund rate is supposed to correspond with a robust economy. Increases are meant to keep inflation in check. If economic growth and inflation are rising too quickly, a rate hike helps slow them down as it tightens the money supply.

Core inflation is about 1.9% right now. Up slightly from the previous forecast and right in the 2% range that the Federal Reserve has been targeting.

But there are big questions about U.S. economic growth.

If you focus on the stock market, you might think the economy has been advancing rapidly. Wall Street has been on a bull run since President Trump was elected with the Dow hitting over 21,000 for the first time ever.

There’s also been a steady increase in jobs with unemployment dropping from the double digits during the recession to under 4.7% right now. That’s giving consumers confidence about the economy, despite flat wages. The February report on consumer confidence says it hit a 15-year-high of 114.8.

But what some economists are pointing out is the troubling lack of economic growth. Chief investment strategist at Clarity Financial, Lance Roberts, wrote in a blog, that: “Outside of inflated asset prices, there is little evidence of real economic growth.” And that’s one thing that Janet Yellen said a rate hike would be tied to — economic growth.

The gross domestic product, or GDP, is our economic report card. And the Atlanta Fed just downgraded the first-quarter GDP to just .8%. That’s well off the 2% that Janet Yellen said is needed for a rate hike, leaving some economists wondering why the central bank went ahead and approved the increase.

Just weeks ago, the GDP was closer to the central banks rate hike comfort zone, at 2.3%. It also increased to 3.4% briefly last month after positive news about manufacturing and construction spending. But when disappointing data on retail sales and consumer prices came out a few days ago, the Atlanta Fed lowered its estimate to the .8% level.

Roberts says that charts show a rate hike at a time like this could actually push us into another recession. He told Market Watch that raising interest rates from ultra low levels at a time of slow economic growth could impact spending and that charts show this type of situation has lead to recessions in the past within three to nine months.

Nobel Prize-winning economist Robert Schiller is also warning people that Wall Street exuberance has gone overboard. He told Bloomberg that traders are captivated by President Trump’s bold plans to slash regulations, cut taxes, and “turbo-charge” the economy with an infrastructure building-boom.

He warns that when situations like this have happened in the past, it hasn’t ended well for the investors. Think dot-com bust and housing meltdown. Both experienced sharp drops in the stock market.

Schiller says investors are shoveling money into the market with the hope that President Trump will make good on his campaign promises. But they are also ignoring the enormous amount of uncertainty associated with getting those new policies through Congress and the legal system.

The Trump Administration is proposing some extreme budget cuts that may not sit well with some of his own constituents. A preliminary budget was introduced that slashes $54 billion from most federal agencies including the EPA, HUD, and Health & Human Services. That money will then be spent on defense. There’s also the affect of the Obamacare repeal. Depending on how many people lost their healthcare coverage, there could be a lot of unhappy voters. And if this political turmoil jostles the stock market, we could see a reversal that could happen quickly, and without mercy.

There has never been a slow letting out of air from a bubble. It usually bursts.

Kendrick Wakeman, the CEO of financial technology and investment analytics firm FinMason, told CNBC that investors are in for a rude awakening. He says no one knows when the stock market correction is coming. But, he says on average, the stock market crashes every eight to 10 years. And when it does, the average loss is about 42%.

He told CNBC that stock market investors need to ask themselves: “Would you hang yourself in the closet if the market crashed and you lost 35 percent?”

I have been warning investors for over a year now that a recession is coming. I’m sure some people think I’m crazy since the stock market has made significant gains since I gave this warning.

But remember, the same thing happened before the Great Recession and the Great Depression. In January of 2008, Ben Bernanke, the Chairman of the Fed said, “The Federal Reserve is not currently forecasting a recession.” 9 months laterin September of 2008, Lehman Brothers collapsed and the financial markets worldwide came tumbling down.

The Federal Reserve is supposed to be in charge of regulating the economy. It’s terrifying that they couldn’t see that recession coming… and even more frightening that they may have seen it coming, but didn’t warn us.

Be extremely defensive in your investing strategies today. Make financial decisions as if it were 2006. People who were prepared fared very well during the subsequent recession.

Rising interest rates can be the exact prick needed to pop the stock market bubble. That may be the very reason the Fed is raising rates – to slow down the irrational exuberance that taking the bubble to new heights.

A slowdown could turn into a meltdown, depending on how big that bubble has become.

How would a slow down in stocks affect real estate?

1. Cities that are more dependent on stock market fluctuations would be more affected by a stock market crash (SF, NY, Seattle).

2. Mortgage interest rates would decline if there were a correction in the stock market as more investors flock to the safety of bonds – which are more tied to the 10 year Treasury bond market.

3. Commercial real estate would get hammered while landlords could fare well as more people are forced to rent, driving rents up.

Now would be a very good time to “cash out” and sell your high priced assets while the market is hot. You can exchange those properties for low-priced, high cash flow properties in recession-proof markets.

If you have concerns about your portfolio or would like to speak with one of our investment counselors about how to find out which markets are best for investing today, visit www.RealWealthNetwork.com.

Kathy is an active real estate investor, licensed Realtor, certified coach, and former mortgage broker. She specializes in helping people build multi-million dollar real estate portfolios through creative finance and planning. With a passion for researching and sharing the most important facts on real estate and economics, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR, CBS MarketWatch and the Wall Street Journal. She is the author of the #1 best seller, Retire Rich with Rentals, and is host of The Real Wealth Show – which is a featured podcast on iTunes with listeners in 27 different countries.

Avoid Common Marketing Mistakes By Using These Ideas on Your Path to Community Success

Written by Landlord Property Management Magazine on . Posted in Blog

by Elaine Simpson, President of Occupancy Solutions, LLC

marketing mistakes

To be successful, multifamily professionals must recognize common marketing mistakes and know how to avoid them.  We must first understand what marketing is and is not.

Marketing is an essential element for every business.    Marketing and advertising for rental housing has gone beyond the classic printed ads, billboards and rental magazines.  Thanks to the rise of technology and social media, the world of marketing and advertising has become bigger than ever.   Unfortunately, all of these resources can cause confusion and intimidation, but if we learn the right strategies and use the right tools, we can handle our marketing without fear or hesitation.  Marketing is the first step in building a relationship with the customer and building brand recognition.

First things first.  Marketing is not the same as advertising.  Similarly, marketing is often confused with the simple act of selling.  Marketing is made up of the activities companies use to attract the attention of their potential residents and lead them to the sale or purchase.  Marketing starts with the process of identifying potential customers with the interest and income to rent from you.  This is known as your target market.  It involves understanding who your potential residents are and what they want from your community.  Colors, logo and other design elements help to align the image of your community with the interests of your target audience.  It is marketing that defines your brand and attracts the potential residents you want.  Advertising is the process of making your community known to the marketplace and is essentially spreading the word about what you have to offer based on what you know about your audience.  Put another way, marketing is the way in which you convince potential renters that you have the right apartment for them.  Advertising is how you communicate to them the existence of that perfect apartment.

As professionals we must understand what to do right and what to avoid in order to successfully market our communities and management companies.

Things to avoid:

Using just one marketing type;

Thinking marketing, selling and advertising are all the same thing;

Placing advertising that does not contain a “call to action”;

Using the same old methods of yore;

Ignoring current residents as a source of promotion;

Using social media inconsistently and/or without tracking efforts, monitoring or maintenance;

Creating a marketing campaign without doing proper market research.

Defining and building a target market requires extensive market research.  In the rental housing industry, we can create and utilize a market survey of nearby rental communities with rental rates and amenities similar to our own to assist us in defining our market.  Once our market survey form is created, one need only update the data on a monthly basis.  The data collected allows management to adjust rental rates and gauge occupancy levels of the competitors.  Many large management companies today have special computer programs that analyze various factors such as availability of specific floor plans and rental “specials” within submarkets and then set rental rates that can change daily.  Smaller companies must rely on their staff, managers and corporate representatives to use the data collected in the periodic calls and visits to the competitors.  Data collected is used to set marketing goals and marketing strategies.

Things to do:

Train Your Employees – Every interaction counts in a successful marketing campaign so it is important to train your employees how to communicate with your prospects in face-to-face encounters, over the telephone and on the internet.

Set Appropriate Marketing Goals – This is important in order to provide direction for your campaign.  You must also create specific objectives and plans to reach your goals.

Inform and Educate Your Target Market –  Concentrate on relevant content through the use of different media such as blogs, webcasts, social media, newsletters, etc.  Choice of media also depends on your budget and target market.  Consider only specific publications, banner ads and use of search engine optimization (SEO) for the internet.

Create advertising that focuses on how your clients’ lives will improve by living at your community.  This is usually accomplished by using “Feature Benefit Closing” techniques and should be used throughout your marketing campaign.

Give your residents and prospects a voice by creating an outlet for communication through the use of surveys, focus groups, interviews and reward programs.

Be consistent in your image, product and customer service.

Anticipate customer needs and understand customer wants.

Keep up with market trends.

Practice “the pitch” after making it concise and focused.

Sell value and lifestyle, not the price.

Offer extraordinary customer service.

Keep it fun or entertaining to create and hold attention.

Be confident in your presentation.

Integrate the “four P’s” – product, price, place and promotion to support your branding & campaign.

Understand the different types of marketing and mix them to be most effective:

Direct Marketing – emails, phone calls or texting to a captured list of prospects with a call to action.  Also use interactive web pages, promotional letters and offers.

Active Marketing – approach and follow up is important when using on-line blogs and forums, instant chatting and cold calling.

Inbound Marketing – use of Search Engine Optimization, web pages, FaceBook, Twitter, etc. to bombard prospects with information then wait for return responses.

Outbound Marketing – this is the most traditional method and is easy but you may spend more time and effort casting a wide net rather than reeling in the fish.  Examples are television, magazine ads, some internet ads, some web pages and grass roots outreach efforts.

Guerrilla Marketing – use of unconventional methods to “wow” prospects by creating unique visual perspective and engage their imaginations.  Examples are public relations stunts such as forming flash mobs or interactive advertisements such as dinosaur footprints leading from public places to your community.

Promotional Marketing – holding contests, sweepstakes, giveaways, or raffle tickets for free gifts.

Smaller companies generally do not have the benefit of having a marketing director telling them what to do and how to do it and must come up with ideas on their own or turn to outside marketing consultants and companies such as Occupancy Solutions  for guidance and training.  Occupancy Solutions offers in-person training, consultations to review and develop individual marketing plans, on-line e-learning webinars and training courses and much, much more.

 

 

 

 

 

 

 

 

DST 1031 Exchange Case Studies

Written by Landlord Property Management Magazine on . Posted in Blog

By Dwight Kay

DST property

Challenge: The client was looking for specialized and focused help in evaluating DST 1031 properties for her 1031 exchange. She had been introduced to a financial advisor that not only did not fully understand how 1031 exchanges and investment real estate work, but also only had two DST properties available.

The client was then introduced by a family friend to Kay Properties and Investments, LLC. She was relieved to find a group that truly specialized in DST 1031 properties, had answers to her specific real estate related questions, had access to a full menu of over 20 DST 1031 properties and lastly was able to construct a portfolio that met her needs and objectives as opposed to what met her financial advisor’s.

Result: In the end, the client was grateful to Kay Properties for helping her to avoid the higher risk asset classes in the marketplace such as student housing, hotels, oil and gas and saltwater drilling. The client was able to successfully complete her 1031 exchange into a diversified portfolio of DSTs that did not expose her to additional risk factors entailed in the exotic asset classes just mentioned.

Challenge:

The client was a real estate investor that had paid off his rental properties completely over the years. When researching DST properties, financial advisors pitched a handful of properties with large balloon mortgages that would ultimately come due in 5-10 years. What the “financial advisors” failed to mention was that when those properties were sold he would then not be able to purchase any property at any loan-to-value, but that he would then have to take on “equal or greater debt” per the 1031 exchange IRS guidelines.

Result: The client was thrilled to have been introduced to Kay Properties and Investments, LLC by his CPA, as he was able to learn the ramifications of going from an unleveraged position in his rental properties to a leveraged position in DST properties with 5-10 year balloon mortgages. At best he would have had to replace the mortgages with equal or greater debt upon the DSTs sale. At worst he would be looking at a potential foreclosure if things didn’t proceed as planned at the property and with the economy.

The client opted to invest in a diversified portfolio of Kay Properties’ all-cash/debt-free DST properties. He now had the peace of mind of NOT having to take on debt upon the sale of the DSTs, NOT having the risk of a lender foreclosure and NOT having the risk of a 5-10 year balloon mortgage upon the DST’s sale. Through Kay Properties’ debt free DST properties the client was able to stay in a completely debt free position as well as increase his projected cash flow considerably.

Challenge:

The client was a real estate investor that had previously invested in a basket of student housing, senior care, hospitality, regional mall and oil and gas 1031 properties in 2005 with a broker that touted his group’s due diligence as being second to none. Fast-forward to 2009 and 2010 and the investor lost millions of dollars of equity due to the higher risk nature of these asset classes combined with the great recession and credit crunch.

Result: The client was introduced to Kay Properties and Investments, LLC by a CPA who had been working with Kay Properties for years. The client was able to build a diversified DST portfolio consisting of all-cash/debt-free properties, multifamily apartment properties in growing locations and long-term corporate-backed single-tenant retail properties leased to credit tenants. The client said over and over that he had wished he had been able to invest with Kay Properties the first time around. Since his first 1031 exchange with Kay Properties the client has done multiple subsequent 1031 exchanges into Kay Properties recommended DSTs.

Past performance is no guarantee of future results.  This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

This material contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, Colorado Financial Services Corporation and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment.

There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment.

Please read carefully the Memorandum and/or investment prospectus in its entirety before making an investment decision. Please pay careful attention to the “Risk” section of the PPM/Prospectus. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, you should consult your tax and legal professional for details regarding your situation.

Securities offered through registered representatives of Colorado Financial Service Corporation, Member FINRA / SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado.

Kay Properties & Investments, LLC, is registered to sell securities in all 50 states.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than $5 million dollars). If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor.

 

 

RED FLAG WARNING for Commercial Property Owners – a $45B Problem

Written by Landlord Property Management Magazine on . Posted in Blog

By Kathy Fettke | RealWealthNetwork.com
Commercial Building

This may be the year that billions of dollars in commercial mortgages go belly up. These loans were financed in 2007 and are maturing this year. That means some commercial property owners will be faced with huge balloon payments and for some, a major headache to pay them off.

The Federal Reserve stated in its semiannual Monetary Policy Report to Congress on Tuesday that commercial property prices were becoming a “growing concern.”

Specifically, the report said, “”Commercial real estate (CRE) valuations, which have been an area of growing concern over the past year, rose further, with property prices continuing to climb and capitalization rates decreasing to historically low levels,”

While commercial property debt remains small compared to the overall economy the report said that the rising “valuation pressures may leave some smaller banks vulnerable to a sizable CRE price decline.”

According to Reuters, commercial real estate loans by U.S. banks surpassed their pre-financial crisis levels in September 2015, and at last reading for January stood at a record $1.97 trillion. Small banks hold nearly two-thirds of that total, some $1.22 trillion.

Commercial property values in the U.S. have more than doubled from their 2009 low, according to Green Street Advisors’ Commercial Property Price Index. Things started slow down in 2016, with just a 3% rise in values.

And this all comes at a time when there’s also a concern about a tidal wave of commercial loans that will come due this year. Lending standards in 2007 were lax and real estate investors jumped in with both feet, taking on huge amounts of debt in that red-hot market. Back then it was difficult to see anything but skyrocketing real estate market.

Then, the impossible happened. The residential real estate bubble burst, and property valuations plummeted back to earth, and even below the water line. We know now that many homeowners lost their property because they couldn’t make the payments or because banks simply failed.

This is the year we could begin to see the same fall-out on their commercial loans.

While commercial property in the most populated metro areas like New York City and San Francisco are seeing record high prices for real property,  the real-estate recovery has been a little lopsided.

There are many U.S. markets where valuations have not caught up yet. It’s those landlords who might have trouble refinancing their monster balloon payments, and if they can’t refinance because they are underwater on the loans, they might have to sell at a loss.

Bloomberg says that prices for suburban office buildings are still 4.8% below their peak compared to Manhatten skyscrapers that have surged 50% higher than they were at their previous peak. So when it comes time to refinance loans for buildings that aren’t worth as much, lenders may want landlords to cough up the difference… and that may not be easy to do.

Borrowers may also have to pay higher interest rates, or they may run into lenders who are now pickier about what the buildings they are willing to finance. Bloomberg writes that lenders may not be eager to finance retail properties, especially malls, as e-commerce takes a bite out of their sales.

Lenders may also have to retain a 5% stake in any loans they make to comply with the risk retention rule under the Dodd-Frank Act. That prevents them from making risky loans and selling 100% of the risk. It also makes banks more selective about the loans they grant.

The fate of the Dodd-Frank Act is uncertain however. President Trump has signed an executive order to begin the unraveling of those regulations and the risk retention rule is sure to be reviewed. But those changes won’t happen over night and maybe not in time.

So just how hard will commercial property owners get hit?

Bloomberg says the delinquency rate is expected to hit 5.75% this year,  after several years of declines. Because these mortgages are packed into bonds, there could be more bondholder losses as well.

According to Bloomberg, banks sold $250 billion worth of commercial mortgage-backed securities to institutional investors in 2007. But not all of them are maturing this year because many have already been refinanced or the properties sold. Property owners with less desirable properties and weak financials have already defaulted.

Using data from Morningstar, Bloomberg says the amount of debt that will actually come due this year now stands at about $90 billion dollars. From there, Morningstar is estimating about “half” of those remaining loans will run into refinancing roadblocks!

For people faced with this situation, it’s critical to have a back-up plan. You shouldn’t wait until the last minute or you might end up losing your property. It’s best to start working now on refinancing, or selling the property before you run out of time.

If you are looking for commercial investments, be careful about paying too much and accepting low cap rates. If you just wait a bit, you could find much better deals.

And all this is happening just as the economy is in a major shift. Baby boomers are turning 65 at a clip of 10,000 per day. Their spending habits will change and that will affect commercial property. Plus, technology and innovation is quickly making some industries obsolete practically overnight.

A commercial builder asked me if we’d like to finance the construction of an auto dealership in Sacramento, “because the auto industry has been booming.”

After researching it a bit, I told him that yes, it has been booming, but only because of easy financing. But this is the year that many leases will be returned to car dealers and we could very well see a huge glut in cars for sale. My daughter needs a new car and I told her to wait just a bit longer as we could see some steep discounts this summer.

Never base your decisions on the way things have been. In 2005, Fed Chair Ben Bernanke said, ”We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize…”

Bernanke was dead wrong, and made the fatal mistake of not taking into consideration massive debts from easy lending that couldn’t be repaid. We are seeing some of the same debt issues today, just not in residential mortgages.

We expect to see some bargains in the commercial property world over the coming year. If you’d like to be first to know about those, join the network to get on the VIP investor list.  www.RealWealthNetwork.com

Kathy is an active real estate investor, licensed Realtor, certified coach, and former mortgage broker. She specializes in helping people build multi-million dollar real estate portfolios through creative finance and planning. With a passion for researching and sharing the most important facts on real estate and economics, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR, CBS MarketWatch and the Wall Street Journal. She is the author of the #1 best seller, Retire Rich with Rentals, and is host of The Real Wealth Show – which is a featured podcast on iTunes with listeners in 27 different countries.
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