January 2020 Newsletter
2020 First Quarter Market Update
As another holiday season is disappearing in the rear-view mirror, we are seeing an uptick in inquiries, showings & applications which is the norm for the 2 nd week in January. This is great news for anyone with a turn-over during the November – February time frame. However, the slow down started earlier and so far, is also rebounding slower than years past. That comes on the heels of a slightly slower than normal leasing season during the Summer months of 2019.
We certainly have been spoiled with the “Hot” leasing of the last several years, so many clients & customers have forgotten what a “Cold” leasing season is like. Does this mean that the rental market is going cold? Certainly NOT, however we are seeing much more affluent and selective prospective applicants with higher expectations and demands. After the last market correction, the need for rental property was rampant and anything with an address could be leased at almost any reasonable price, within a matter of days, if you were willing to overlook a few blemishes. As the rental market conditions have continued, prices continue to increase and the selection process for prospective applicants has become much more stringent, so too have the demands of the prospects to have updated properties with higher end finish out. The days of mid-grade carpet throughout, laminate counter tops and brass & glass fixtures being enough to attract a well-qualified tenant are diminishing. Now tenants expect wood floors, granite counter tops and modern lighting packages with matching door hardware across all price ranges. For the higher end properties in the $2,500 to $4,000 price range we are seeing expectations of integrated smart devices, green features and additional perks that in the leasing world was never a consideration previously. In the past, a normal turnover consisted of spot painting walls, cleaning the carpet and plugging in an air freshener and the property could be rented at current fair market value within a matter of a few weeks. With properties turning over within the last year, if a home has not been updated, we are seeing no real activity, or the feedback has generally centered around the outdated conditions. This is certainly a concern since many of our properties were either last updated or built around the 2002 to 2006 time frame so the idea of them now being considered outdated is surprising.

Are you worried??? Don’t be!

There is good news, too… The Gen X and certainly the Baby Boomers were taught that home ownership is what you should strive for and many of them do not plan to rent unless that is the only option. Those generations are also the ones who hold the majority of the rental properties. However, that is not the case for the Millennials & Gen Z, where their expectation for their living situation does not include ownership at all. Many of them purposely plan to be renters for many years to come, if not forever. The perception of being a “Renter” has many more benefits than being a “Homeowner” for these generations, so the renter pool will continue to increase, rental rates will continue to rise and the demand for rental properties is expected to exceed supply for many years to come. Recent studies have shown that a large number of the next generations entering the work force are afraid or at the very least reluctant to be homeowners and see ownership as a burden or a liability that can be easily avoided by just continuing to rent. That is great news for the buy and hold investors and even good news for flippers and builders, but they will likely need to curtail their finished product to cater to the investor buyers instead of the owner-occupied buyers like the previous years. 

What does that mean for the rental market??? In anticipation of Millennials & Gen X entering the rental market in droves we have begun to rehab and update many of our properties which is having a significant increase on the rental rates and a shortened time on the market compared to similar homes that have not been updated. It would be wise to talk with your property manager as they are real estate professional, who understand the expectations of the upcoming renters and discuss plans to make sure your property stays relevant and high in regard to its desirability.     
Tips on Investing

The Guide to Investing in Real Estate with Limited Resources
Every real estate investor has to start somewhere. And at the very beginning, we all have different levels of resources available to us. One of the best (and worst) things about the BiggerPockets community is the diversity of experience across the board with its users.

There are so many investors of all levels that it can sometimes seem daunting for new investors. They can find great advice and plenty of tips, but what about when an investor is starting out with little-to-no resources?

Investing in real estate with limited resources can be a challenge—but it’s certainly possible!

Don’t Let Limited Finances Stop You!

For those dreaming of success in real estate investing, know that  financial freedom  is not out of your reach simply because of your current financial situation. There are not only options available for you right now to start investing in real estate (even with limited finances), but also steps you can take to prepare your finances so that you have the best foundation possible for your investment future.

Up & Coming Trends

What Co-Living's Appeal to Millennial & Gen Z Renters
Means for Investors
For investors, the future is bright based on a proven demand for co-living in all major gateway markets across the U.S. A  record number  of individuals under 35 are renters. Limited housing stock and rising prices in major U.S. markets have placed pressures upon those in the service sector (restaurant, retail and rideshare) and other key workforces like teaching, nursing and local government. The  majority of these renter segments  fall within what HUD defines as 60% to 100% of AMI. Co-living units are priced more affordably for these renters, averaging a 25% rent-to-income ratio dependent on market.

Further, the increased returns that these purpose-built assets generate compared to traditional multifamily apartment assets is attracting investment at unheard-of levels. Overall, the current supply of approximately 3,200 co-living beds in the U.S. is relatively low compared to demand.

For multifamily investors it’s imperative to look at the three C’s of co-living:

  1. Cost/affordability: Current rates for co-living units are approximately 25% cheaper than studio apartments in some gateway markets.
  2. Convenience: The ability to live within a 20-minute commute of the workplace is essential to these renters.
  3. Community: Gen Z has a strong desire to live and work in densely urban areas.

Pets, Service Animals, & Emotional Support Animals
It's A Zoo Out There: Pets, Service Animals & Emotional Support Animals
Pets bring companionship and joy into the lives of millions of Americans, and many landlords have found it is good business to allow pets on their rental properties. Since it can be difficult to rent with a pet, pet owners will often be very appreciative and very respectful of your property and rules so that they can remain there.

Most landlords who allow pets establish rules for the number and size of pets. Rules requiring leashes on the property and picking up after dogs are near universal. Breed restrictions are losing favor, being replaced with proof of training or good temperament. It is also common for increased deposits to cover pet damage and/or renter’s insurance that includes losses caused by a renter’s pet.

While many landlords have found allowing pets to be an effective marketing tool and a profitable business strategy, many others, fearful of damage or liability caused by residents’ pets, choose to make their properties pet-free.

It’s your property and you should be able to decide if pets are allowed, right? The answer depends upon what your definition of a pet is, or more specifically on the definitions established by the American with Disabilities Act (ADA) and the Fair Housing Act.