Fall 2014 Multifamily Market Report
ALSO IN THIS ISSUE: • How to Safeguard a Community Against Crime • The Importance of a Response
Retaining Tenants
• Tips for Improving Maintenance • First Impressions Matter • Approaching Rules with Flexibility
Using Social Media to Connect with Residents
• Pros and Cons of Artificial Grass • Tips for Selling Multifamily Real Estate
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Apartment Market Digital • Fall 2014
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Multifamily Market Report
ob growth is holding relatively steady, which is good news for the multifamily market however, national trends do indicate several items of concern for property holders. Unit Completions Rentable multifamily locations are expected to rise by 49,938 units throughout the US in 2014, reaching a total of 264,253 units across the board. This surge was caused, in part, by the moderate recovery after the Great Recession, and younger tenants are beginning to have more access to the finances needed for rental units. In general, unit completions are occurring above the rate of the rest of the economy’s recovery, which is a direct contributor to the
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lower occupancy rates discussed below. Occupancy Rates Occupancy rates for multifamily units are rising in the absolute sense, but falling as a percent of total units occupied. Rent growth has been steady for some time now, linked to the economic recovery, and has been a little ways above the growth of the consumer price index throughout the year. However, the unit completions explained above mean that more units are being built than rented - hence the fall in total occupied units. Owners looking for expansion may want to consider focusing on vacant units, rather than ordering new ones built, even if this means spreading the business
Apartment Market Digital • Fall 2014
across a greater geographic area even if all construction on new units ceased now, it will be some time before renters are able to fill them. Vacancy rates are not expected to deviate from their historic averages during the next few years. Overall Momentum As you can see from the completions and occupancy rates, the overall momentum for the multifamily market is accelerating at a reasonable pace. Growth isn’t fantastic, but it is steady, and that’s more than enough for the market to be considered healthy for the foreseeable future. p
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How to Safeguard a Community Against Crime
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riminal activity in apartment complexes has its own nuances in comparison with a city’s overall crime rate. The proximity of neighbors can be a deterrent to some types of crimes while making others easier for criminals to accomplish. A major disadvantage for tenants is that people tend to feel secure at home, even while an apartment community allows for outsiders to have access to the area. Nobody knows for certain whether strangers are simply having trouble finding a friend’s home or are wandering around seeking criminal opportunities.
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The most common crime is simple theft. A tenant feels secure in their home and leaves an item on the patio, in plain view in an unlocked car, or unsecured in the bed of a pickup truck. The next most common crime is burglary. Whether a criminal breaks into an apartment or just walks into an unlocked apartment, this scenario is far more frightening due to the potential results should a tenant come home while the burglar is there. The ultimate solution to neighborhood mischief is constant surveillance. This can take the form of strategically placed security cameras as well as personnel on the premises working as security
guards. Security cameras, being advertised by the entrances and around the property, can serve as a deterrent to crime, although their real value is to help catch the criminal after the fact. Security guards, on the other hand, deter crime by their very presence and can stop a criminal in the act using the methods with which they have been trained. A final aspect to consider is that the tenants know their neighbors and have an idea who is supposed to be there. Any further security measures are supplemental to being aware of one’s surroundings. p
Apartment Market Digital • Fall 2014
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The Importance of a Response
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esponding to your tenants is one of your most important jobs as the manager of a residential complex. In fact, failure to respond to questions or concerns in a timely manner could lead to your residents looking for another home - and the people who replace them may not be the type of resident you’re looking for. What’s going on here, and what makes responding to your residents so important? Tenant Expectations Your tenants do not see you as their friend. You are, first and
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foremost, the manager who collects their money - and they have certain expectations when they hand you a check each month. Among these expectations is a feeling that you should be available for a reasonably quick response whenever they have a question or complaint - and every single time they contact you, they care about the response they get. If you fail to respond to a complaint in a timely manner, then your tenants will begin to see you as part of the problem - and they won’t be nearly as forgiving of mistakes as they might be otherwise.
Apartment Market Digital • Fall 2014
Improving Responses Fortunately, improving your responses is actually very easy. Set your office hours and let your tenants know that you can be reached in-person or by telephone during those times. Outside of office hours, ask them to send a message to your email instead - be sure to check at least twice a day, and be completely honest with your tenants if a full reply will take some time to give them. Most people will be understanding if they know the reason for delays, and knowing that you are working on solving their problem will ensure their continued goodwill. p
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Tips for Improving Maintenance
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aintenance is critical if you want to continue renting the units of a multifamily complex, but it can be easy to fall behind when you’re busy trying to run the place. Here are some tips for improving the overall maintenance of your facility. Offer an Emergency Number This is a given - you (or a manager you trust) should always be available to deal with emergency situations. This is especially true for maintenance issues, because small problems can quickly grow to become larger, more expensive issues. In other words, being available to solve emergency problems can actually save you a lot of money over time.
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To speed the process, you should make a list of at least five contractors who can deal with each type of problem (plumbing, roofing, mold, etc.), sorting them by their rates and general availability. This should ensure that you can reach someone to help repair a problem as quickly as possible, regardless of the time or date. Allow Online Requests This is especially valuable if you operate many locations - managers of smaller units can make do with a mailbox by the office. Either way, you should have a simple, straightforward way for people to make
maintenance requests that doesn’t involve trying to find you (as their free time may not match yours). Some kind of messaging system, especially with the ability to track completion rates, can improve the confidence your tenants have in your ability to support them and solve their problems. Keeping It Simple Consider the following checklist for your properties, and review your answers on a regular basis. • What is the average time between requests and response for each unit? • Do your tenants know how to request repairs and assistance? • Who can deal with issues if you are not available to solve them. p
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First Impressions Matter
irst impressions can make or break a deal for renters - and that’s a big problem when you have empty units that you’re trying to fill. This is particularly important for multifamily complexes, since the majority of families with children are looking to get a unit that’s safe, clean, and relatively nurturing. Fortunately, there are some easy ways to improve your first impressions and start getting the types of tenants you really want to have. Basic Landscaping Bark is better than dirt, especially when used on narrow patches that separate walking areas - but
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weeds are a big problem. Invest in some heavy-duty landscape fabric to stop weeds from growing, then work to make sure the rest of your area is clean and presentable. You should also consider reducing the amount of lawn space your unit has - filling some of that space with large planters can give a structured, clean look to any complex. Office Space You should have at least two office rooms, ideally connected to one another. The outer room is for meeting with your tenants, and should be kept as clean as possible. Install a variety of storage units (file cabinets, shelves, etc.) to help manage the area. Your rear area
Apartment Market Digital • Fall 2014
can be messier, though you should strive to keep that clean as well tenants will immediately respect any landlord who appears tidy and in complete control of things at all times. Units Set, and enforce, minimum levels of cleanliness throughout the units. Examine the units on a regular basis to be sure your regulations are being followed, and use this as an opportunity to talk to your tenants about other improvements they’d like to see. Making a good first impression takes effort, but it can be surprisingly rewarding when you begin to attract better tenants to your location. p
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Approaching Rules with Flexibility
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very apartment manager has at some point had to enforce a rule they didn’t agree with. Perhaps the rule didn’t seem to make much sense, or in a specific situation it didn’t accomplish the intention it was designed to perform. There are some cases which require leniency in order to accomplish the goal of the rule rather than indiscriminately enforcing it. Flexibility with rules requires the manager’s discretion, a scenario of extraordinary circumstances, and the knowledge that you are dealing with a “good” tenant: One who doesn’t cause
trouble or complaints in the community, pays rent on time every month, and keeps their unit well maintained and presentable. The most common reason to bend the rules concerns a late rent payment. Every apartment has regulations for a fine and eviction process when the payment isn’t received on time. These may on occasion need to be softened in the interest of maintaining tenant relations. It usually involves a single event involving loss of work, typically a case of illness or injury. The tenant should make a partial payment in show of good faith and
present a plan to get caught up. Other rules don’t generally provide for the same amount of discretion. If there is a fine for leaving trash outside an apartment, there really isn’t much flexibility to such a rule, other than if the dumpster is full and the tenant is only waiting for it to be emptied. The general concept is that the formal rules were written to conduct the broader set of rules of common sense and courtesy. Document exemptions as proof that you aren’t using favoritism and do what is best for the tenant and the community as each situation dictates. p
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Retaining Tenants
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very property manager knows the difficulty of maintaining an empty unit. Beyond regular maintenance for a current tenant, between tenants nearly always requires painting, at least carpet cleaning if not replacement, and minor repairs that have built up over time that weren’t serious enough for the previous tenant to report. This added expense is in addition to the regular mortgage payment and is not recompensed through rent payment, demonstrating the importance of tenant retention. There are several proven methods you can use to increase retention rates. They nearly all involve making the tenant feel appreciated on some level.
• Respond quickly and efficiently to all complaints. Make sure your maintenance staff understands the importance of courtesy when making a call. Although they’re working on the unit you own, they are also going into your tenant’s home. • Good communication without overly intruding in the tenant’s life is important. Nobody likes a landlord who shows up twice a week, but everyone wants to know their landlord is available when needed. • Along the same lines, any policy changes should be announced with a courtesy letter. The letter should focus on how the change benefits the tenants rather than
the rental company. A topic as difficult to broach as rent increase should focus on the tenant and the services provided with their unit rather than the explanation of investors’ needs of keeping up with inflation. • A holiday gift, in the form of a card usable at a local business or a discount on monthly rent, goes a long way toward making the tenant feel appreciated. Happy tenants stay in their current home. It saves them the problems of moving and saves you the problems of carrying an empty unit. Use these tips and watch your retention rates soar. p
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Pros and Cons of Artificial Grass
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hen you’re looking to improve the landscaping of your apartment complex, grass is one of the first solutions that will come to mind. Artificial solutions have become more popular in recent years due to durability and ease of upkeep. However, using artificial solutions has both its pros and its cons. What follows is a brief look at both. Pros Easy Upkeep: Once installed, artificial grass requires very little upkeep. There is no need for trimming or lawn mowers. This helps save on landscaping costs and it doesn’t require yearly replanting.
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Saves On Water: Water can be very expensive, and in certain parts of the country, water shortages are common. Just to give you an idea, a grass soccer field can require up to 50,000 gallons of water a week. No Need For Chemical Treatments: Unlike the real thing, artificial grass does not require protection from certain pests or weeds. This saves on pesticide and weed killer expenses. Cons Gets Hot: Artificial grass is prone to absorbing heat during the warmer parts of the year. Artificial turf can easily reach 120 degrees during the hottest days of the year.
Initial Investment Costs: The initial installation costs for artificial landscaping can be expensive. Depending on the size of your property, it can easily run into the six figure range. Now, it will save on upkeep over the life of the installation, but the initial cost cannot be overlooked. Long Lasting Choice: While very practical, long lasting, and nice to look at artificial turf is a permanent choice. When replacing it due to age, you’ll need to use a new artificial turf. This is because the subsoil loses its ability to grow plant life without years of recovery once artificial grass is installed. p
Apartment Market Digital • Fall 2014
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Using Social Media to Connect with Residents
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ocial media is one of the best ways to connect with the residents of any multifamily complex. Here are some basic strategies for ensuring that things go according to plan. Choosing Your Platform There are many types of social media programs available - Twitter, Facebook, Instagram, and so on. However, your residents aren’t guaranteed to be on each platform, so you’ll need to sign up for many different accounts if you want to be sure of your ability to reach them. Ask your residents about their preferred platforms, then ask them to follow you once you have an account established. These accounts
can be used for providing basic information to residents, giving reminders about upcoming events, or simply sharing entertaining content to give them a laugh. One post on each account every week or two will normally suffice - you do want the accounts to remain inactive. What NOT To Do With Social Media • Avoid following your residents on social media. Instead, ask them to follow you - point out the ways that this will help to protect their privacy. You do not need to know about their personal lives as long as the rules of your complex are being upheld, and not following them will help you avoid appear-
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ing intrusive. Content should only flow from you to them (assuming this is possible). While you’re at it, remind your residents to check their security settings and ensure the information they post online only goes where they want it to. • Never use social media for negative things, such as a notice that someone is late with their rent. Your residents will simply stop following you and start nursing a grudge - remember, people besides your residents will see the things you post, and nobody appreciates the entire world knowing about their personal problems. p
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Tips for Selling Multifamily Real Estate
re you looking to sell one or more units of multifamily real estate? There is a very specific process to doing this, and it’s important that you market the property correctly if you want to get a sale in a timely manner. Here are some tips for doing things right. • Make use of Search Engine Optimization. However, you should be sure to indicate that you’re selling ownership of the entire property, not looking for individual tenants. Make use of longer keywords and carefully evaluate your content to be sure it’s absolutely clear on what you’re doing - this will help you avoid overlap and ensure that you’re able to
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reach the types of buyers who could actually afford to purchase the entire complex. • Run a Blog. This will help potential buyers understand more about who you are, what living in your complex is like, and what they can expect from the area. Place an emphasis on local living, and try to highlight the activities of your current tenants. This will help potential buyers get a better feel for whether or not they’d like to own property in your area. • Clean the property. Hire a professional firm to thoroughly clean the area before you take pictures and make advertisements - this can help you get a better price
for the property once you have a buyer. • Provide an Online Brochure. This should cover the important details of the property, including the number of housing units, any recent improvements, and evidence that the purchase will be financially rewarding for the buyer. • Create a listing on ApartmentsForSale.com. These listings are free, but more importantly, they’re placed in a location where potential buyers are actually looking - remember, your buyer could come from anywhere in the country, so you cannot limit your marketing to the local area. p
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