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New Stats from HUD/Census apartment building finance survey

HUD and the Census Bureau released the latest version of the Rental Housing Finance Survey. The “Survey fills an important gap in our understanding of who owns multifamily rental housing – mostly individuals, not large companies — and how multifamily rental housing is financed, especially as the structure of finance is changing. In light of recent changes in the availability of capital for rental housing, the Rental Housing Finance Survey also provides important insight about the financial health and stability of multifamily housing properties.” said Erika Poethig, HUD’s Deputy Assistant Secretary for Policy Development.

This is one table from the xls on the Census Bureau’s site here. Note the tabs on the bottom which have the data broken out by different types.

A few bullet points from HUD’s release linked at the top of the post:

Approximately 20 percent of American households live in multifamily rental buildings.
There are 2.3 million such properties in the United States.
73 percent are just one Continue reading New Stats from HUD/Census apartment building finance survey

Single-Family Rentals Only Marginally Impact Apartment Building Investments PNC EVP says. Video via Globe St.

Scott Bassin, EVP and head of multifamily for PNC Real Estate says single family rentals will only marginally impact apartment building investment because there is a certain group of people who want or need single family homes, and everyone else. See his comments in the Globe St. video from the NMHC Apartment Strategies Conference in Palm Springs.

Single Family Rentals only have small impact on Apartment Building Investment — Scott Bassin, EVP at PNC with Globe St. in Palm Springs

MBA: GSEs vital in Ensuring Liquidity and Stability in apartment building investment finance.

The Mortgage Bankers Association is out today with a white paper “Ensuring Liquidity And Stability: The Future Of Multifamily Housing Finance And The Government-Sponsored Enterprises“. (or see the MHN exec sum here) The paper highlights the role of the GSEs (Government Sponsored Enterprises, i.e. FNMA ‘Fannie Mae’ and FHLMC ‘Freddie Mac’) in today’s multifamily finance market and presents five recommendations for the future making their points with a set of charts that demonstrate the size of their role in multifamily as well as the very low amount of bad loans they’ve made in the sector.

Our nation’s housing policies should reflect the importance of multifamily rental housing, the range of capital sources that support this market, and the need for liquidity and stability in all market cycles.

Continue reading MBA: GSEs vital in Ensuring Liquidity and Stability in apartment building investment finance.

The Federal Reserve and Beer Goggles plus what Financial Repression means for Apartment Building Investments

James Montier, who works at the intersection of value investing and behavioral investing (Author of ‘The Little Book of Behavioral Investing’ http://amzn.to/X9Olzc on Amazon among others) has a great quote in his latest white paper published by GMO Global Investment Management entitled “The 13th Labour of Hercules:Capital Preservation in the Age of Financial Repression” Note that you may have to register at the site (free).

His paper discusses the effects of financial repression on portfolio stock and bond allocations and by implication the effects on real estate and particularly apartment building investments. Financial repression is the term used to describe central bank’s strategies for forcing interest rates to zero or negative to spur investment and spending at the expense of saving. Take it away James:

William McChesney Martin was the longest-serving Federal Reserve Governor of all time. He is probably most famous for his observation that the central bank’s role was to “take away the punch bowl just when the party is getting started.” In contrast, Bernanke’s Fed is acting like teenage boys on prom night: spiking the punch, handing out free drinks, hoping to get lucky, and encouraging everyone to view the market through beer goggles. [Emphasis mine]

The paper goes into depth on the effects of financial repression on investments, which grow the longer the repression lasts, up to twenty years. Does the phrase: “… for an extended period” ring a bell? How about QE1, QE2, QE3, and now QE-infinity?

Financial Repression and Apartment Building Investment — Source: James Montier, GMO

Apartment buildings are the real estate equivalent of Continue reading The Federal Reserve and Beer Goggles plus what Financial Repression means for Apartment Building Investments

The Point of Maximum Pessimism and Apartment Building Investments via Alhambra Investment Partners

Very nice piece from Joseph Y. Calhoun over at Alhambra Investment Partners covering some of the unexpected good things that could happen to our economy entitled Looking For Silver Linings. He includes this nugget with its implication of a good apartment building investment climate continuing:

In the ten years prior to the recession, household formation averaged 1.5 million per year. From 2007 to 2010 that rate was cut by 2/3. Household formation recovered to a bit over 1 million in 2011 and probably rose more this year. Still there is a gap of about 2.5 million households between the number formed in that period and what would be expected based on demographic trends. There is pent up demand for housing (although probably primarily rental housing) that only awaits some job growth to be realized. [Emphasis mine]

Even if Continue reading The Point of Maximum Pessimism and Apartment Building Investments via Alhambra Investment Partners

The Seasonal Effects on Apartment Building Effective Rents, Occupancy and Revenue Growth. Plus much more…

Axiometrics’ monthly apartment building investment report has a great chart showing the seasonal effects on effective rent, occupancy rate and revenue growth. How do you model seasonality in your budgets? What do you think is the best way to do this?

Seasonal Effects on Apartment Building Investment Results — Source: Axiometrics Inc.

Their report this month also has a very Continue reading The Seasonal Effects on Apartment Building Effective Rents, Occupancy and Revenue Growth. Plus much more…

College towns are top destination for Gen Y job hunters…. and renters.

Where are Gen Y students most likely to find jobs? If you guessed New York or San Francisco, you’d be wrong. This year, small towns led the way as larger cities were more susceptible to economic downturns and only ranked outside of the college towns division on the index. As the report suggests, many small towns are essentially recession-proof since they house a consistent population of spenders.

Apartment building investments are good in small college towns — Cornell University in top rated Ithaca NY. Photo credit: campustravel.com

See the whole MFE piece with the list and a link to cool map here.

Those small college towns, or tertiary markets as they’re called, often fly below the radar of institutional investors and therefore dodge the cap rate compression that bigger markets suffer when institutions start buying up properties. Send me a message to find out how we analyze these markets for apartment building investment and some of the towns we like today. Continue reading College towns are top destination for Gen Y job hunters…. and renters.

What Gen Y Wants in Apartment homes and How They Find It. New Research via Multi Family Executive

No real new news but good reinforcement on Gen Y prospects and renters:

They search using their phones, tablets and laptops so your marketing sites have to be readable by all three.
They use social media to check the vibe of your property.
They want a good location.
More than tanning beds, pools or other amenities they demand reliable wireless connection, cat5 wiring in the walls and cell reception in the unit. If you’ve ever lived somewhere that had bad cell reception you can relate.

If you are acquiring property these last two items should be high on your list. Making sure that your existing property has a consistent web presence is becoming more and more important to attract this growing demographic. Finally, making the wireless connection throughout your property is worth the effort.

See the whole MFE article for the results from two different research studies published this year.

What do I do with my retirement money, one investor’s answer (with charts). Think apartment building investment-

Good charts on long term returns in this piece from Glenn R Mueller, PhD.:

I recently met with my financial advisor to “rebalance” my … retirement portfolio. Based on my “age and stage of life” his allocation model showed a 50% bond allocation. I laughed and asked him if the company allocation model assumed interest rates would rise over the next 10 years? His answer was “yes- of course.” I showed him the graph below which shows lower than average TOTAL returns in a rising interest rate environment and he checked his long-term data and found that bond holders between 1953 and 1980 had actually lost money. We all know that as interest rates rise, bond values decline and thus the total return can be small or negative. Not to mention that a 10-year treasury at 1.5% is below expected inflation and thus a NEGATIVE REAL RETURN. He agreed that a bond allocation did not make much sense, but since my investor profile was conservative what was the alternative?

Dr. Mueller is Continue reading What do I do with my retirement money, one investor’s answer (with charts). Think apartment building investment-

What is the average annual per unit expense for an apartment building investment? Great reader question answered.

Mike in Milwaukee, WI, that is a great question. Answer: $3,000- 5,000/unit/year. How’s that for an accurate but relatively useless answer? The real question is what is the annual expense per unit of the property you are looking at? If you are a large institutional investor like a REIT looking at national or regional averages like those published in the NAA Annual Survey (See the included charts for results from the 2011 survey) can give you an indication but you can bet the institutional players know their own costs to the penny.

Apartment Building Operating Expenses Per Unit 2011 — Source: NAA 2011 Survey of Operating and Income Expenses in Rental Apartment Communities

In most larger metros there are also companies who collect and publish apartment surveys showing the areas average rents, occupancy, expenses, etc. One thing to make sure of is that the survey is based on properties similar to yours. There are a number of national companies doing multifamily research but they tend to focus on institutional sized properties 100 units and up so their numbers wouldn’t be comparable for a smaller property. For instance the average property in the NAA survey has about 250 units.

The most important number is the actual Continue reading What is the average annual per unit expense for an apartment building investment? Great reader question answered.