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Pessimistic Glow Over Sin City As Luxury Segment Continues To Falter Falling Prices Not Helping Demand In Once Hot Las Vegas Resort Corridor One sector of the Las Vegas real estate market hit harder that just about any other is high rise luxury condominiums. At one point during the economic peak, more than 100,000 new units were on the drawing board. But only a fraction of those were ever built.

"There's very little sales activity taking place today. There just isn't a lot of product moving. There's not a lot of demand in the luxury segment today when we talk about condominiums and what is happening in the resort corridor," said Brian Gordon with Applied Analysis.

Of those 100,000 announced units, a local research group says only about 10,000 have actually been built. For those units that are on the market, sales are virtually stagnant. Actually, non-existent.

But Gordon also believes the high end segment does have a future. "Longer run, is it a viable product type? Yes, I think it does. Is it this year? Probably not - it is going to take a long time for the market to recover, generally speaking, but also specifically in this product type. So we are looking at a much longer time horizon before buyers start to come back to this type of product," he said.

A map put together by the local research firm Applied Analysis shows all of the condo projects that were on the drawing board at the peak of the market at the end of 2006. Most were never built. Applied Analysis says only 43 high-end condo units sold in the month of March, with nearly 900 units on the market. This despite rock bottom prices which may never be seen again in Las Vegas.

And just like the single-family real estate market, prices are dropping for high-end condos. The high rise association says that is brining in cash buyers and also investors who are looking to snap up bargains that are currently on the market.


TO INVEST OR NOT TO INVEST: The Long Term Prospects of Multi-Family Investments Source: Mark Alfieri, Chief Operating Officer of Behringer Harvard Multifamily REIT I, Inc.

Most experts agree that 2009 will be challenging for all commercial property types, including the market’s perennial bright-spot, the multi-family market. Although apartments have suffered less than other commercial real estate sectors, apartment vacancy rates are expected to rise an average of 130 basis points this year due to rising unemployment, according to Property and Portfolio Research, Inc. (PPR). In spite of current challenges, the long-term outlook for multi-family housing remains encouraging. Many economic and demographic trends continue to support a positive long-term outlook for apartments beyond 2009… Factors that point to long-term value creation include a significant decline in construction combined with renter demographics that will create demand similar in scope to the baby boom wave as boomers entered peak renting years (Source: Marcus & Millichap, 2009 National Apartment Report.) Constrained Supply Construction starts are declining rapidly for all types of residential units, which should translate into a quick recovery for apartment vacancy and rents once economic expansion and job growth return. On average, new supply as a percentage of existing apartment inventory is forecast to reach just 0.7 percent annually through 2010, down considerably from the late 1990s and early 2000s (Source: Marcus & Millichap, 2009 National Apartment Report). Only 80,000 apartments are slated for completion in 2009, down from 98,000 units in 2008 (Source: Marcus & Millichap, 2009 National Apartment Report). The multi-family supply pipeline will largely shut down between 2010 and 2011 with an average of only 35,000 units forecasted for delivery (Source: PPR Fundamentals, 4Q 2008). This muted construction activity, although painful in the short-term, should mitigate the potential consequences of oversupply and position the multi-family industry for another strong run when the macroeconomy recovers. The Echo Boomer Spike For the apartment industry, the baby boomers and their children, known as the echo boomers, are the largest and most influential demographic groups. However, the influence of the baby boomers on apartment demand is likely to subside during the 2

next decade, while the echo boomers’ importance is expected to increase dramatically (Source: National Multi Housing Council). Echo boomers -- the approximately 70 million Americans born between 1981 and 1999 -- are entering their prime renting years, a trend that will continue for the next five to 10 years, according to Marcus & Millichap's 2009 National Apartment Report. The prime rental age group, those aged 25 to 34, is poised to experience a strong 1.3% annual rate of growth through 2015… Longer-term demographic trends suggest that the demand for multi-family housing could grow at a rate 40 percent faster than the overall economy through 2015, notes American Realty Advisors. The echo boomers also are inspiring institutional interest in the high-end student housing niche market for which demand is likely to remain high during the next several years as the echo boomers make their way through college (Source: Marcus & Millichap, 2009 National Apartment Report).

“ This muted construction activity, although painful in the short-term, should mitigate the potential consequences of oversupply and position the multi-family industry for another strong run when the macroeconomy recovers.”

Other Key Factors In the last few years alone, a number of macroeconomic factors have placed homeownership beyond the reach of more Americans. These conditions, which are likely to persist, are swelling the ranks of multi-family housing consumers. Tight underwriting standards and a scarcity of assistance programs for first-time homebuyers are reducing attrition from the renter pool. Even higher-quality borrowers are facing tougher mortgage standards, with approximately 70 percent of banks tightening requirements for prime mortgages in recent quarters (Source: Marcus & Millichap, 2009 National Apartment Report). After reaching a peak of 69 percent in late 2004, the homeownership rate has declined since 2005 to less than 68 percent, resulting in an additional 2.6 million renter households (Source: Marcus & Millichap, 2009 National Apartment Report). Outlook Brighter in 2010 and Beyond The National Association of Home Builders expects multifamily housing to rebound in 2010. This year, many investors are bracing for a tough spell and working to emerge at the end positioned to benefit from the inevitable recovery. Mark Obrinsky, the chief economist for the National Multi Housing Council, said in January 2009 that although apartment demand was in the down phase of the cycle, “The long-term prospects for the apartment sector are strong. The number of people between 20-34 years of age is rising rapidly, and

as they enter the rental market, demand will rise correspondingly.”

Dynamic Duo? Apartments, Industrial Gain Favored Status

Finally, Some Good News For Apartment Owners Source: Ben Johnson, Condo.com

“Bleak” may be one of the most common descriptors for the national commercial real estate market outlook in 2009. But according to new research, apartment and industrial properties are expected to rebound sooner than other sectors When will that recovery occur? Not until later this year or the beginning of 2010 at the earliest. “In general, apartment and industrial markets should be less negatively impacted by market fundamentals in the near term, with strong fundamentals in the longer term making them less risky investments,” says Alan Billingsley, head of research in the Americas for RREEF.

employment centers will hold up the best of all property sectors. In the short term, apartments will compete with for-rent housing in many markets, with the national vacancy rate expected to peak at 7.4% in 2009, up from 6.6% in 2008, according to New York-based researcher Reis. But due to favorable demographic trends, coupled with recovery in most employment markets over the next three to five years, apartments should perform better than office, industrial and retail. In fact, RREEF Research projects a remarkably strong recovery for apartments between 2011 and 2015, owing much to a slowed new development pipeline. Deliveries of new apartment units are forecast to drop to 1993-94 levels of 40,000 annual units by mid-2010. Other investment managers are singing the same apartment tune. “Long term, pension funds will continue to like apartments,” says Chris MacDonald, managing director and co-founder of Newport Beach, Calif.-based Buchanan Street Partners.

The national real estate investment management firm has $2.5 billion in assets under management for institutional investors. (Buchanan Street RREEF is the alternative investment is affiliated with TCW, a large investment management division of Deutsche Asset management company with $100 billion Management, a member of the Deutsche in assets under management.) Bank Group, which has more than $67 billion in assets under management. “Over time, apartments have provided the most stable income and appreciation While nearly every apartment market is for investors’ portfolios,” says expected to post declines in rents and MacDonald. “They have proven to occupancies over the next two years due increase returns and stability of an to rising unemployment, RREEF’s overall real estate portfolio, and the research indicates that properties located demographics speak well for in supply constrained markets near apartments.” Investors should also keep their eyes on industrial investments, particularly in core markets, according to RREEF. The downturn for industrial properties is expected to be less severe than other sectors due to a general lack of overbuilding and less severe cutbacks in tenant demand for space. Industrial should also bounce back to health more quickly than office and retail. When it comes to the short haul, however, the numbers aren’t so positive. In particular, RREEF expects the U.S. industrial vacancy rate to rise from 3


11.3% in 2008 to 12.8% in 2009 and peak at 12.9% in 2010. Net absorption is expected to reach negative 143.6 million sq. ft. in 2009, which is about equal to the negative absorption recorded in 2001. By 2010, the industrial sector is expected to post modest growth in new demand, with about 16 million sq. ft. of positive net absorption. The development pipeline will shrink to record low levels over the next three years, averaging less than 50 million sq. ft. per year.

Multi-Family Sector Still Volatile Permit Issuance Declined Nationwide In March, Except For The West Source: BuildingOnline.com

At the other end of the spectrum, RREEF is warning investors to be more circumspect of office and retail properties. According to the Bureau of Labor Statistics, nearly 1.9 million jobs were lost nationwide in the first quarter of 2009, and with unemployment still on the rise companies continue to cut back on their office space requirements.

Characteristic volatility in the multi-family sector pushed nationwide housing starts down 10.8 percent in March as production of single-family homes remained unchanged, according to numbers released last week by the U.S. Commerce Department. Overall starts fell to a seasonally adjusted annual rate of 510,000 units, due entirely to a 29 percent reduction on the multi-family side that largely offset a big gain in apartment and condo building in the previous month.

At the same time, consumer spending has dried up and retail vacancies will likely increase to 10.5% in 2009, according to Reis, as retailers halt expansion and many look to bankruptcy as an exit strategy.

The "numbers are right on target with NAHB's forecast, which anticipates that housing starts will bottom out in the second quarter, after new-home sales have stabilized," said NAHB Chief Economist David Crowe.

Retail properties have already seen a significant decline in value over the past 12 months. RREEF estimates that values have fallen by 30% or more since their 2007 peak.

"Single-family starts remained virtually unchanged over the past three months, indicating that we are closing in on a bottom. Multi-family starts - which tend to bounce around from month to month - were responsible for the decline in total starts as they readjusted following a substantial gain in February." Crowe noted.

The National Council of Real Estate Investment Fiduciaries’ property index, which is typically slow to recognize market changes, provided a total return of negative 6.5% for all of 2008. For 2009, RREEF is forecasting a total return ranging between negative 9% and negative 11%.


Crowe noted that while builders have been seeing more sales office traffic and fielding more calls in recent weeks as consumers respond to historically

affordable home buying conditions, many continue to grapple with a severe credit crunch for acquisition, development and construction financing (AD&C). "A substantial recovery in housing of the kind that's required to help get the national economy back on its feet will not happen until the logjam in AD&C lending has been broken," he cautioned. While total housing starts declined 10.8 percent to a seasonally adjusted annual rate of 510,000 units in March, single-family housing starts remained exactly on par with the previous month, at a 358,000-unit rate. Multi-family starts declined 29 percent in the month to a 152,000-unit rate, erasing a large portion of the gain posted by that sector in the previous month. Housing starts were down in three out of four regions in March. The only region posting a gain was the Midwest, which was up nearly 16 percent. Meanwhile, the Northeast posted a 25.4 percent decline, the South a 16.8 percent decline and the West a 26.3 percent decline. Building permits, which can be an indicator of future building activity, also fell in March. Total permit issuance declined 9 percent to a seasonally adjusted annual rate of 513,000 units, with single-family permits down 7.4 percent to 361,000 units and multi-family permits down 12.6 percent to 152,000 units. Permit issuance declined across every region except the West in March. While that region posted no change from February, the Northeast posted a 24.3 percent decline, the Midwest a 2.3 percent decline and the South a 10.3 percent decline.

Apartment Investment Forecast for Balance of 2009


Short-Term Risks Remain in Las Vegas, but Construction Halt Sets Stage for Recovery Source: Marcus & Millichap

The national apartment market fared well throughout the downturn in 2008; however, accelerating job losses will translate into higher vacancies for the rest of 2009. The return of failed conversion projects to rental inventory and ground-up condo development, along with for-rent homes, will remain a source of competition for multi-family owners, particularly in the Class A segment. The performance gap among metros is widening rapidly. The recession in overbuilt markets such as Las Vegas, Phoenix, Riverside-San Bernardino and most of Florida will make 2009 a tough year once completed. In most metros, Class B/C properties will be the least affected by the economic downturn, as many households will continue to be forced to seek more affordable housing options. Fundamentals in the pricier Class A segment have been disproportionately impacted by eroding household credit quality, which has made it difficult for many renters to qualify for high-end units. Economic and demographic trends support a positive long-term outlook for apartments beyond 2009. In stark contrast to just a few years ago, mortgage underwriting standards are tight and first-time homebuyer programs are scarce, reducing attrition from the renter pool. Even higher quality borrowers are facing tougher mortgage standards, with approximately 70 percent of banks tightening requirements for prime mortgages in recent quarters. At the same time, echo boomers -- totaling roughly 70 million U.S. residents -- are entering their prime renting years, a trend that will continue over the next five to 10 years. On the supply side, construction starts are declining rapidly for all types of residential units, which should translate into a quick recovery for apartment vacancy and rents once economic expansion and job growth

return. On average, new supply as a percentage of existing apartment inventory is forecast to reach just 0.7 percent annually through 2010. The Las Vegas apartment market will stay in flux during the remainder 2009 due to lingering economic stresses, but signs of a recovery are starting to appear. After years of strong expansion in the housing sector and the ensuing downturn, the local economy will again rely heavily on the gaming industry to drive growth. Although several major projects on the Strip have come to a standstill, resulting in deep job cuts in the construction sector, the opening of Encore at Wynn Las Vegas helped prop up demand for close in apartment assets. The outlying areas of Henderson and North Las Vegas, where home building efforts were robust during the boom years, will record some of the market’s highest apartment vacancy rates as a result of single-family homes competing as rentals. Shadow stock may affect Class B/C operations in these areas as more lower-income residents double up. Class A units will also be impacted by shadow stock, but tenants are becoming wary of renting a home that could be foreclosed upon before the lease terms expire. Fundamentals in the local apartment market are expected to begin stabilizing late in 2009, which may present opportunities for investors waiting on the sidelines for a turnaround. Assets adjacent to master-planned communities along Interstate 215 will attract large buyers and some syndicates due to their proximity to job centers. Distressed properties in the perimeter, where many complexes were acquired by investors unable to achieve pro forma vacancy and rents, may lure bargain-hunting buyers. Investors seeking stability will likely have to stretch for well-maintained and

well-operated Class B/C complexes in the University submarket, as listings in this area tend to be limited. Valley wide, cap rates are averaging in the mid- to high 6 percent range and are projected to rise modestly in 2009. Lower-tier initial yields, however, are currently in the mid- to high 7 percent range, while cap rates for some Class C assets in the outskirts of the metro area are exceeding 8 percent. Remainder of 2009 Market Outlook ◆ 2009 NAI Rank: 16, Down 2 Places. Rent declines and rising concessions caused Las Vegas to drop two spots in the NAI. ◆ Employment Forecast: Employers are forecast to cut 7,400 positions in 2009, a 0.8 percent decline. ◆ Construction Forecast: Builders delivered 2,670 apartments to Las Vegas in 2008; production will slow to 280 units this year. ◆ Vacancy Forecast: The impact of shadow-rental stock will begin to dissipate in 2009, resulting in a 60 basis point uptick in the vacancy rate to 8.9 percent. Last year, vacancy increased 220 basis points. ◆ Rent Forecast: Asking rents are expected to dip 0.2 percent to $873 per month, while effective rents drop 3.2 percent to $804 per month. ◆ Investment Forecast: Value-add plays in North Las Vegas may surface in the coming years, stemming from plans to rehabilitate older neighborhoods along Las Vegas Boulevard North. Nearly $1 billion in gentrification projects are proposed for the 238-acre redevelopment area. 5



Las Vegas Metro Occupancy Trends May 2008 through April 2009

93% 92%

92.26% 91.76%








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Source: CB Richard Ellis (102,035 Apartment Units Surveyed in April 2009)





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Multi-Family Snap Shot

Source: Hyperion Brookfield Asset Management, Inc.

FIRST QUARTER 2009 REVIEW Continuing the trend seen in 4Q08, the weak housing market negatively affected the multi-family market during the first quarter of 2009. The relative cost of owning versus renting is swinging back in favor of homeownership in some U.S. Markets, buoyed by several quarters of sharp declines in home prices. By the end of 2008, average monthly rent for the largest 50 Metropolitan areas was $1,045, compared with after-tax mortgage payments of $1,300. That means mortgage payments averaged just 24% more than rent payments, the narrowest gap since 2001 according the Wall Street Journal. Furthermore, the shaken condo market has added a lot of phantom supply to the rental market as owners are unable to successfully sell the units. The hardest-hit markets are those that flourished during the housing boom because home prices have fallen the most in those cities. Strong-growth markets such as Phoenix, Tucson, Las Vegas, Tampa, and Orlando were a focus for residential developers. The loss of housing-related jobs and the dearth of new employment opportunities in these markets led to increases in vacancy in 2008 of anywhere from 1.6% to 3%. As a result, the Bethany Group, a multi-family borrower which had significant exposure to these markets, filed for bankruptcy in March. Slower-growth Midwestern metros and land-constrained coastal markets are still showing weaker fundamentals but are more stable. For January and February, 2009, apartment sales volume was about $600 million according to Real Capital Analytics, with the largest single asset sale representing only $40 million. Apartment sellers are capitulating somewhat, with asking cap rates up 30 bps already this year. Sellers are now getting about 90% of their asking price, which is down from 94% in 2008. Multi-family fundamentals will continue to weaken in 2009 as vacancies rise and more concessions are offered. Furthermore, Borrowers on projects that rely on converting rent-stabilized units to market rent are well behind in meeting their conversion projections and are also not meeting their underwritten rent assumptions for the units they do convert. However, with new constructions at a virtual standstill, that will help the multifamily sector recover when the economy starts to rebound.

Access Investment Offerings COMMUNITY (UNITS)



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Sin City Outlook Dims For Apartment Communities As Foreclosures Continue, Single-Family Home Rentals Keeping Squeeze on Industry

paid for property amenities, but that’s no longer the case, Castro said. “We just need to hold on to this year, and see what we can do,” Castro said.

Source: Las Vegas Sun

When the foreclosure crisis hit Las Vegas, many expected the owners of apartment complexes to benefit because those out-on-the-street homeowners needed to live somewhere.


The reality is that the shadow rental market of homes and condominiums continues to put pressure on apartment complex owners, whose vacancies are increasing. They must offer incentives and cut rents to lure tenants. “Obviously, the problem with foreclosures is they dramatically impact apartments, and the shadow rental market is continuing to grow,” said Dennis Smith, president of Home Builders Research. “The people moving out of their home because of foreclosures — they think they are going to move into an apartment, but chances are they can go out and find a 1,600 square-foot house for $1,000 or $1,100. And it is easier for them to qualify with the owner of the property than to go to an apartment and try to qualify through their process.”

John Tippins, a broker with Northcap Commercial and owner of Tippins Holdings, said he’s worried about the inventory that’s about to come on line to compete against apartments. Many condominium towers are going to provide some stiff competition, he said. “It is not the current inventory I am worried about, but the new inventory,” Tippins said. Tippins said competition is stiffer from homeowners as well. “For the first time in four to five years, you can get a three-bedroom, two-bath on the Beltway market from Summerlin to Green Valley for $1,150 a month. That is pretty scary,” Tippins said. Tippins suggested apartment-complex owners create alliances with retailers, health clubs and other local businesses and make it more attractive for people to rent their units instead of homes.

Unfortunately for apartment complex owners, home foreclosures aren’t slowing and there won’t be relief anytime soon, Smith said. The federal government’s efforts to ease the housing crisis won’t help overnight, he said. “We are in this for a number of years,” Smith said. “I don’t see anything changing until late 2010 or 2011 at the earliest for any kind of turnaround and prices to stop going down. I think you are going to see single-family (homes) put downward pressure on the apartment segment for at least another two years at a minimum.” You can’t call home rentals the shadow market anymore because it is in full-blown competition with apartments, said Frank Castro, supervisor of the Housing and Urban Development Department’s local office. With foreclosures getting worse and condominiums coming on line as rentals, more pressure is on the industry to trim rents, he said. “I think 2009 will be our worst year in every aspect as far as multi-family (housing) is concerned,” Castro said. In the past, apartment complex owners could get rents that 8

“Single-family homeowners are not going to have those alliances,” Tippins said. “They (customers) have to get more than just the complex when you are competing for the same dollar.” Castro said even though the high-end apartments are struggling, it’s the lower-end properties that are hurting the worst. When casino jobs are cut, that means fewer renters, and all anyone has to do is drive around and see vacant commercial space to see there are fewer jobs in the valley, he said. “Those were people who were renting,” Castro said. “Unlike the Arizona rental market, many of the folks here don’t have any ties to Las Vegas, and if they lose their job, they are not going to stay around and see if they can make it. They are gone.” As for new complexes, many were built when land prices were much higher than they are today, and that restricts what rents can be charged to be profitable, Castro said. Tippins said the drop in land prices, however, will pave the way for future projects. Land is cheaper today, for example, in the southwest valley than what apartment developers paid in North Las Vegas.

Las Vegas Apartment Market Sees Further Deterioration Source: Las Vegas Sun

The Las Vegas apartment market should deteriorate more in the first three quarters of the year before stabilizing in the fourth quarter, according to CB Richard Ellis in its latest review. Las Vegas is facing challenges because of job losses, home rentals and apartments construction, which will put pressure on occupancy and rental rates Investors, developers and existing owners are looking forward to a brighter 2010 with the opening of resorts on the Strip that will create jobs, said Spence Baillif, senior vice president of multi-family housing with CB Richard Ellis. In addition, the new standards to qualify for homeownership will create more demand for rentals despite falling home prices, he said. In its most recent report CB pegged the vacancy rate at 10.9 percent through the end of 2008. That broke down to 9.9 percent for high-end apartments, 11.3 percent for Class B (the second level) and 11.5 percent for the lower-end Class C apartments.

For 2009, Green Valley and the southwest valley should be the best performing areas because of their desirable master-planned communities, Baillif said. The northwest valley and North Las Vegas should be the poorest performing because of the large amount of construction and longer commute times. Rental rates should decline and concessions will increase during the first three quarters of this year before stabilizing in the fourth quarter, Baillif said.

Green Valley and the southwest valley have had the highest rents with averages of $1,006 and $968, respectively. The northeast valley, whose rents declined 2.7 percent in 2008, has the lowest rents in the market with an average of $785.

Services, the 306-unit community has managed to cut down its trash containers from three to one, saving about $2,500 a year in fees to Republic Services.

Rents fell 1 percent in 2008 and by the end of the year 92 percent of properties were offering concessions, Bailiff said. The most common was one month free rent in addition to rent reductions and reduced move-in costs. CB Richard Ellis projects 6,000 apartment units will be completed in 2009, an increase of 43 percent over 2008 when 4,200 units were completed. Over the past 12 years, Las Vegas has added about 5,300 units a year, Bailiff said. Most of the construction is in the northwest valley and North Las Vegas with 2,576 units and 1,734 units, respectively, expected to be completed this year, he said. The southwest valley and Green Valley will have the fewest units added because of the lack of land. By 2010, the amount of lending and the apartment market should limit construction to fewer than 3,000 units, Bailiff said.

Company President Bob Coyle states, "The difference there is (residents) don't have to work harder to figure out where the recycling container is. Whereas you get into the bigger apartment (communities), unless they were designed to have a trash container and a recycling container side by side, the recycle container may be 300 feet from somebody's apartment door. Most apartment dwellers don't wander around the complex looking for the (recycling) container." Apartments make up the second most common form of residence in Clark County with 155,200 units. That is more than all the condominiums, townhouses and mobile homes combined.

As for sales of apartment complexes, Jeff Swinger, a senior vice president of multi-family housing for CB Richard Ellis, said it's expected to be similar to 2008, when 13 transactions of 100 units or more were completed, down 67 percent from 2007.

At the Royal Palms apartments, Property Manager Meghann Mahathey said the original plan was for Republic Services to empty the recycling bins once a month. It took two weeks to fill up the bin the first time and soon Republic was sending trucks every week.

Valley Apartments Go Green With Recycling

"We end up having to take the top off and have one of the guys stand on it so we can push it down so we have space for a few more days until they come to empty it out," she said.

Source: Las Vegas Sun

In Las Vegas a handful apartment communities have begun recycling efforts for their residents as an alternative to taking their recyclables to either drop-off sites or the home of a friend or relative who has curbside pickup. One such program was started at the Summerlin retirement community after residents grew tired of driving recyclables off site. After contracting with Republic

The 224-unit complex is about two miles from the Strip and mainly caters to casino workers and cab drivers, Mahathey said. Some apartment seekers have asked about recycling and Mahathey said it appeals to people's desire to be "green." "People are very conscious about saving energy, saving natural resources, reusing," she said. "We want to be able to keep this on our property whether they actually go valleywide with this program or not." 9


Owners, Find Your 13th Month For Ancillary Income


Measuring Your Property Management Company: Are They Working for You or Are You Working for Them? Source: Compliments of Utah Apartment Association

Some owners feel that the greatest income limiting factor in real estate is the calendar. Owners who focus on rental income alone know they are limited to a maximum of 12 months. Yet savvy owners and investors who look for that 13th month’s income, can find it -- they just need to know where to look. Non-Rent Income While it is impossible to add a 13th month to the calendar, it is possible to create extra revenue from your apartment community. Collecting non-rent, or ancillary income, is a tactic used by many successful real estate investors to generate extra income and increase the value of their property.

higher rate charged than a identical unit that is not updated. If you find some of your units always rent quickly, this may be that they are more desirable for some reason and you may be able to raise the rent on that unit and still keep it full. Late Fees – If property owners pay their mortgage late there is a set late fee. The same ought to be true for late rent payments. Yet too many owners waive late fees in the interests of getting along with their renters. If you care about the income and value of your property you should NEVER WAIVE LATE FEES. This additional income can drive up the value of your property and waiving them potentially reduces your resale value. Many owners recommend a large initial late fee on the third or the fifth and then a smaller per day charge after that.

There are many sources of non-rent income to consider. The following list below is only a sample. The only limits to ancillary income are your imagination and the constraints of the law. Be sure you understand the legality of any charge before charging it. Rental Premiums – Suppose you have a three story apartment community. Would you charge the same rental rate for those three units? Of course not! There is a higher perceived value in being on the top floor and not having noise potential above. This is an obvious case where you could charge a higher rate, or premium, on a unit technically identical to another because of perceived value. Another example is end units in your community. With half as many neighbors and perhaps more windows there is higher value to justify higher rents. Other rental premiums include view, fireplace, and proximity to parking or amenities. Another example of rent premiums would be renovated or updated units. If one unit has newer carpet, appliances, or updated features, there should be a 10

through application fees. All owners should do background checks, and it is advised that you charge a reasonable application fee of $15-$30, or the actual cost of the checks to offset this cost. If you do the check but absorb the costs charging applicants a fee to offset this cost will generate extra income for you. Administrative Charges – Many property owners include an administrative charge with each contract they fill out. There are many names for this: lease initiation fee, cleaning fee, redecoration fee, et cetera. The purpose of this fee is to generate extra income on renters and encourage them to stay longer. Many companies base the fee on a percentage of their deposit; others make the fee a set amount, like $200. This fee can discourage turnover and is an excellent way to capitalize on the transient rental market. Washer Dryer Rent/Laundry Income – Even if you aren’t large enough to justify a laundry room, you can provide washers and dryers and raise the rent. A new set of machines for $800 can be repaid quickly with $35 - $50 extra per month. After they are paid off, the machines generate terrific extra income.

Pet Fees, Pet Rent – While many landlords refuse to rent to individuals with pets, others generate extra income off pet deposits and pet rents. Data shows that 57% of all renters will not move without their pet. Why not capitalize on this by charging extra pet rent and non-refundable pet deposits. It is not uncommon for pet owners to pay an extra $25 per pet in rent or to pay $200 non-refundable pet fees. Sure there are risks, but there are also higher potential rewards to owners who charge extra for pets. Application Fees – All across the country, smart property owners do background checks on applicants and pass on this cost

Parking and Storage Space – There is no law that says you must allow renters to have unlimited vehicles. Many owners charge extra for additional cars. Also, if you have the potential of creating storage space, say in a basement or by building a shed, there is income to be generated off of that. A $1,000 storage shed that adds $50 extra income pays itself off quickly and the future income is all profit. There are many other ways to create ancillary income from rental property. Be sure to consult a professional before trying something new in order to make sure it is legal. By employing these strategies you to can break the bonds of the traditional calendar and generate extra revenue from your rentals.

Keys To Resident Retention Begins With Employee Retention


3) Gifts - You can give people gifts without money. Years ago I created a managers grab bag with ideas that were free to reward a job well done. The ideas included coupons that simply gave them extra time off : a two hour lunch, sleep in (clock in two hours late), TGIF - get off early on Friday (clock out two hours early) and Mad time (one hour free anytime they choose).

Source: Toni Blake

Have you created an employee retention plan? Do you think in these desperate times everyone will stay to "keep" their job? How are you motivating them to perform in this new market condition. I got a sad call from one of my favorite on-site managers yesterday who told me he had to evict 8 people and was facing a huge vacancy loss. He is an example of those great people who are facing down all of these challenges on the front line. How are you helping your team? Do you have a plan in place to encourage, provide guidance, assistant them in time management and organizational skills that will keep them focused? Are you checking in and staying close to keep them on track? Even if money is tight there are many things you can do to reward good behavior and encourage your team. I read a book called the five languages of love that identify five ways to express love and build a relationship and at least four of them could be meaningful in employee relations.

Blog It ... Source: Gabriele Preston

There are thousands of beautifully designed websites for apartment communities and management companies on the Web today yet most do little to influence their existing resident base, the ‘bread and butter' of their business. Sure these websites attract prospects. They are designed to sell a company and / or apartment community(s), but the time that has been spent crafting the prospect's online experience has - slowly but surely, and perhaps unwittingly - marginalized the process of creating and maintaining content residents actually care about. Community Blogs are meant to be less formal. Although you control the content they become part of a conversation where residents can comment. They are a great way to join residents' discussions, provide tips and insights and receive

whole library of 986 ideas!! I opened a few files and was blown away. When is the last time you passed along a great resource to your team. Keep their bag of tricks fresh and innovative.

1) Words of Affirmation - I heard one time that millions of people go to bed each night hungry for food, but billions of people go to bed each night starved for appreciation. Words are free and there are certainly creative new communication tools that would help you send a word of encouragement. Send a Halmark Hoops and YoYo card, it is funny animated and a wonderful thought. Send words in a text, record a flix or just call them and tell them LIVE! 2) Acts of Service - Provide resource and input into their challenges. I rediscovered the "Idea Bank" at MultifamilyPro.com. If you add an idea you can access the


4) Acts of Service - If they live on one of your properties have their carpet cleaned, send house keepers over to touch up clean, see what services you have that you can do for them that does not cost extra. Once time we cleaned someone's car, another time we actually created a special parking space for a porter in the back of the property that said VIP Very Important Porter!! He loved it. He had worked at the property for 14 years and having his own space was a huge boost!!! Success is not an accident and without a plan you will never reach your goal. Focus some time this week on creating a plan to encourage, inspire, share create resources and reward your employees! * Build community. Through good content and discussions stronger relations develop with existing residents. * Broadcast a unique lifestyle at their community(s). Postings and comments reflect a community's personality and set it apart from other apartment communities.

feedback. When used in a forum where one's main objective is not to sell, a deeper connection forms between residents and the on-site team. The benefits of a Community Blog allow companies to: * Offer an easy way for residents to find the information and resources they want and need. * Deliver communication timely and keep the information current.

* Build creditability when on-site staff post and respond to comments. According to Edelman's 2008 Trust Barometer Report, consumers say that a company that blogs is 1/3 more trustworthy. Trustworthiness skyrockets to almost 2/3 for "people like me" that is, people who share interests and activities with the consumer you want to persuade. * Control their brand. The main advantage of a blog is that it provides a microphone for the community setting it up, offering control over the subject matter and the degree of interactivity. It’s in, it’s now ... just blog it. 11


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