Tag: Apartment building investment

The secret about home ‘affordability’ they don’t want you to know- Good for Apartment Building Investment

Home prices have crashed. Interest rates are at all-time lows. If you’re in the market to buy, homes are more affordable than they’ve been in years. Or are they?

From a WSJ report posted by Motley Fool:

The median down payment in nine major U.S. cities rose to 22% last year on properties purchased through conventional mortgages. … That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.

The average down payment for a US home is now 20%

Up 22%! yowza! More from MF:

The average home in America now sells for $272,000, so a 20% down payment totals about $55,000. The median household net worth, meanwhile, was $67,000 in 2010, suggesting the average homeowner needs to tie up a tremendous amount of their net worth in a down payment. Can you really Continue reading The secret about home ‘affordability’ they don’t want you to know- Good for Apartment Building Investment

2,000 unit Apartment Management Co. goes smoke free, gets 2 complaints, 1 move out.

As reported by MHN Online. The Towbes Group, a Santa Barbara multifamily company has imposed a no-smoking policy in the 13 multifamily properties it manages in the Santa Barbara area. Common areas and individual units will be smoke free in 6 months.

Why?

  • We had received an increasing number of concerns from our residents regarding second-hand smoke
  • The percentage of Californians who smoke is down to around 15 percent
  • Recent California legislation allows landlords and property owners to offer “smoke free” living environments at their apartment communities.
  • We are committed to giving our residents the best living experience possible in their homes.
  • The cost to turn an apartment that has been smoke free is significantly less than that of an apartment that has been smoked in.
  • The most important reason is the ability to give our residents a ‘healthy’ option in multifamily housing.

And the results: “Out of those numbers [2,000 units in 13 communities], I received two complaints from residents who were not in agreement with our new policy. In addition, we did have one resident let us know they would be moving out of one of our communities. If anything, that very small number validated our decision to go smoke free. We really believe that we will attract a greater number of prospective residents by offering a ‘smoke free’ living experience.”

Not bad eh? Create a more healthy living environment for your residents while reducing turnover costs. Have you done this with your apartment buildings? If you have please share your experiences with us.

Net Worth Falling + 20% Down Payment = 1 Million Renters Added in 2011 #Multifamily

In yesterday’s MFE article What Does the Fed News Mean to Apartment Owners?: “the median net worth of middle class families plunged by 39 percent in just three years.

The Fed used a hypothetical family with $126,400 in 2007 to prove that point. In 2010, that same family’s net worth dropped to $77,300. Median family income also fell—from $49,600 in 2007 to $45,800 in 2010. The number comes from the Fed’s Survey of Consumer Finances, due out this coming Monday.”

Then in a WSJ article Why Housing Affordability Is a Mirage: “Home prices and mortgage rates have made monthly mortgage payments lower than at any time in the past decade. But housing isn’t any more affordable than it was five years ago… the total cost of homeownership, as a share of a borrower’s income Continue reading Net Worth Falling + 20% Down Payment = 1 Million Renters Added in 2011 #Multifamily

Private Equity Has Too Much Money to Spend on REOs-to-Rentals Via Bloomberg

An interesting piece from Bloomberg entitled: Private Equity Has Too Much Money to Spend on Homes talking about how hard it is for large funds to buy foreclosed homes in bulk and turn them into rentals reminded me of a conversation I had with one of my private equity clients who was consulted by Tom Barrack’s Colony Capital about doing just that (and he said don’t).

“Funds planning to invest more than $6 billion to buy and rent foreclosed homes are finding it easy to raise money. The difficulty is spending it… The folks that raised capital are worried about under- accumulating properties and how to get capital out in an efficient way, Richard Ford, a managing director in the real estate investment banking group at Jefferies Group Inc., said in a telephone interview. A lot’s being raised. Less than $2 billion of institutional capital has been spent.”

It seems like between the banks’ increasing Continue reading Private Equity Has Too Much Money to Spend on REOs-to-Rentals Via Bloomberg

Handy Apartment Building Investment Market Reports- interactive one-pagers from Reis Reports.

Reis puts out these really handy one page reports with all the major QoQ changes broken out by sub-market. Here’s the latest on Portland, OR:

Apartment Builiding Investment Metro Reports by Reis Reports

Click on the image above to go to a list of  markets then select Continue reading Handy Apartment Building Investment Market Reports- interactive one-pagers from Reis Reports.

Biases That Cripple Smart Decision-Making; Great behavioral economics intro- but I’m biased.

Psychologists claim that many of our biases are evolved mental processes which at one point may have been adaptive to our environment. Because the mind is not a perfectly calculating machine, it uses many different heuristics (or “rules of thumb”) that help guide the decision-making process. Although this process isn’t perfect, it often gets the job done in terms of survival and reproduction. Many of these biases may still be functional in today’s world, but others can greatly inhibit us from making rational and intelligent decisions.

avoiding flawed thinking in apartment building investment

Starting with the Bias Blindspot which is our tendency to think we are less biased than others the article lists the different types of biases investors (and everyone) face and more importantly how to overcome them:

Rising rates won’t necessarily lead to higher cap rates on CRE, apartment building investments. CBRE debt & equity podcast.

Great podcast on the financing market for CRE and apartment building investment with a look at potential impacts from events around the world.

“In this Global In-Sights podcast, Spencer Levy, Executive Managing Director for CBRE Capital Markets, shares his view on the commercial real estate debt and equity finance markets. What are current key sources of capital, what is the current pricing of CRE debt, and what are expectations going forward?  Are there key sectors that are attracting most of the capital flows? What are expectations for interest rates and how are investors underwriting the possibility of an interest rate spike in the next 2 to 3 years?  What are some of the key positive trends that we suggest our clients look out for when selecting markets in which to invest?”

Podcast Link

A few bullet points: Continue reading Rising rates won’t necessarily lead to higher cap rates on CRE, apartment building investments. CBRE debt & equity podcast.

Portland OR Q1 Apartment Building Investments Now Posted.

Here are some interesting transaction statistics for 1st Quarter apartment building investment transactions:

  • Average price per unit was up 11% from Q1 2011
  • 6.86% was the average cap rate, vs. 7.07% in 2011
  • 77% of properties sold had between 5-50 units

Click on the image to see the list of Q1 apartment building investment sales in Portland:

Portland Apartment Building Investment Sales Q1

For more on PDX apartment building investment see City Rents Rise As Buyers Wait Out Housing Bust from Joseph Bernard Investment Real Estate.

 

Why now is the right time for CRE and Apartment Building Investment. Video via Tom Barrack at Colony Capital

Tom is one of my mentors and I follow what he’s doing closely to learn from a pro in apartment building investing. Here’s a video 3fer with Tom on why now is the time, if you have any contrarian testosterone as he puts it (in other words you are a true value investor). See also my notes below with the exec sum in bold.

1st Video:

Tom Barrack on Commercial Real Estate and Apartment Building Investment

Tom Barrack on CNBC last week

Stock markets rise and fall, but investors with a long-term view will make money, real estate investor Tom Barrack of Colony Capital is a “slow money guy”.  Barrack has $27 billion invested in real estate and $45 billion in assets around the world.

Overall in the US

Where I think we are is actually a great Continue reading Why now is the right time for CRE and Apartment Building Investment. Video via Tom Barrack at Colony Capital

Now you can watch the Apartment Building Investing Cycle Unfold In Real Time- Much easier than deciphering technical stock charts!

Successful apartment building investing is about knowing where and when to buy and when to sell. The apartment building investment cycle sends very clear signals to those paying attention and one of the biggest and clearest is when existing properties begin to sell for more than the cost of building new apartments. As I mentioned here this line was crossed about a year ago in the Seattle market and now we can see how the peak is formed, when every developer and their brother starts building new apartments.

From Bloomberg:

The biggest surge of Seattle-area apartment construction in a quarter century is threatening to undercut the growth in rents. Seattle went from “dead last” in rent increases three years ago to 13th out of 88 markets last year. “We went from almost a desert to a big pipeline” in two years, said David Young, the Seattle-based managing director who oversees western U.S. apartments for commercial broker Jones Lang LaSalle Inc.

Apartment building investment in Seattle

Encouraged by hiring at local employers such as Amazon.com, Boeing and Nordstrom, developers are building almost 10,000 apartments in Washington state’s King and Snohomish counties,  Three- quarters of the total are in Seattle, with 4,619 of those units in or near downtown.

Dupre + Scott Apartment Advisors Inc. said the building boom may last through 2016.

“If in fact we come to market when there’s excess supply, we’ll just have to be aggressive on rents,” said Continue reading Now you can watch the Apartment Building Investing Cycle Unfold In Real Time- Much easier than deciphering technical stock charts!