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2015 Preparing for Climate Change as a Property Owner

ALSO IN THIS ISSUE: • Why Apartments Build Wealth Safely • Micro-unit Apartments

The Growth of Crowdfunding

Is Your Property Prepared for Natural Disasters? 1

Apartment Market Digital • Spring 2015

• Renters Insurance: What You Need To Know • Tips for Finding the Ideal Resident • For Apartment Managers: Creative Ways to Use Social Media • The Growth of Income vs. Rent in the United States • Tips for Buying Multifamily Real Estate www.apartmentsforsale.com


Why Apartments Build Wealth Safely

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f you are considering investing in real estate, you need to think about investing in apartments. Apartments are a better investment than a single residence as they have better cash flow. For example, imagine you own a ten-unit apartment block and a house. You have one unit empty and the house is vacant. When translated it means you have 10% vacancy in your apartments and 100% vacancy in the home. This means you will still be getting rent from the other 9 rental units but no money from the house. Additionally, you may force ap-

preciation. This you can do by buying an apartment complex that is poorly managed with rents that are below what is recommended. When you raise the rents to market rates and improve management, the value of your apartment complex increases and you get more returns from your investment. Apartments help you save money on taxes as you will easily write off capital expenses, mortgage interest, and depreciation every taxable year. The period of depreciation for apartments is shorter than commercial properties. The tax benefits are also

higher. Apartments are also appealing to a large population of renters. Demand for suburban houses has decreased, and many people want to settle closer to the city. Most want to live near metro stations, restaurants, and malls; apartments will easily cater for this. Furthermore, there is a staff employed to take care of the common areas and gardens, and all your tenant will pay is the maintenance fee. Demand for apartments is unlikely to decreas.

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Micro-unit Apartments

or years, young professional people have had difficulty finding affordable apartments right in the heart of the big cities in which they work. New York City, Boston, Seattle--you name the city, and living space is at a premium with rents for one bedroom units rivaling mortgage payments in less prosperous cities throughout the United States and in countries abroad, too. Real estate professionals – both those who develop and those who sell – have recognized the burgeoning popularity of micro-unit apartments, tiny, self-contained pods of living space clustered in reused buildings such as old factories and warehouses. And, the advantages

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are many: • For the renter, cost is a fraction of larger apartments, and the public transportation, cultural amenities and professional life of big urban America is easily accessed. • For the real estate developer, profits run high as multiple units are snatched up by hard-working millennials as soon as the spaces become available. • For the building reuse conscious, old buildings are rehabilitated, lively and producing plenty of income. Micro-unit apartments seem to be a win-win-win situation--except for the obvious. Renters live in real-

ly tight quarters--with 200 to 300 square feet being the norm. Renters say you have to be able to get along with people, and true privacy is at a minimum. In addition, the apartments themselves hold no more than 1 to 2 individuals. There’s room for a Murphy bed, couch, fridge and stove. Storage space? People learn to live Spartan, and shelving units work better than more expensive cabinetry. As populations shift back to urban areas where technology and healthcare are exploding, expect the trend in micro-unit housing to continue to expand. Of course, the units themselves won’t get bigger--just the number of them available.

Apartment Market Digital • Spring 2015

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Renters Insurance: What You Need To Know

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o both the tenant and the landlord, renter’s insurance is a must. Why cut down on potential applicants by requiring renter’s insurance? Because much more than just personal property is covered under most rental insurance policies, benefiting all parties. With renter’s insurance, the tenant is insured for many events, including break-ins and theft, natural disasters, fires, and visitors becoming injured on the property. This may seem all to the benefit of the tenant, but coverage is useful to you in many of these events, providing protection against several scenarios. First, the renter is less likely to

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sue you, the landlord, in the event of property damage caused by a fire or flooding if personal belongings could not be replaced or fixed otherwise. Also, coverage of injury to guests on the property eliminates the possibility of the landlord being sued by a visitor who has an accident on the premises- say a dog bite or a fall. Additionally, renter’s insurance hastens repairs to the property. In the case of fire or flood, many belongings are often ruined along with the property itself. As renter’s insurance covers repairs and replacements to the renter’s items, these are replaced faster and give you space to fix any damage to the property it-

self. Without renter’s insurance, you run the risk of the tenant leaving the damage and the property behind. Finally, with renter’s insurance it is more likely that the tenant will stay on the property after an unhappy event. Without renter’s insurance, it is easier for a tenant to leave without addressing the damage to property, and then you are left without tenant, without rent, and with a lot of damaged items to be discarded or fixed. Clearly, renter’s insurance benefits everyone. If the tenant is covered by renter’s insurance, so are you.

Apartment Market Digital • Spring 2015

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Preparing for Climate Change as a Property Owner

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limate change refers to the changes in the global climate due to the increasing global temperatures caused by the emission of greenhouse gases into the atmosphere. It is characterized by increased droughts, change in climatic patterns, flooding, and other extreme weather forms. Property owners are increasingly becoming aware that the effects of climate change are here with us, and there is need to erect sustainable buildings that enhance our safety and survival. Fortunately, there are a number of possible interventions that you as the property owner can adopt to develop sustainable buildings that can thrive in the changing future cli-

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mates. 1. Embracing green infrastructure in your property. This involves incorporating nature into your buildings as a way to protect against excess heat and flooding. That could be in form of; (a) Green roofs and green walls – This helps to reduce excess runoff by retaining rain water and purifying the local air as well as improving the soil quality. (b) Rain garden and rain barrel systems in buildings – To reduce the effects of stormwater runoff, these two approaches enable you to collect and filter runoff hence reduce flooding.

Apartment Market Digital • Spring 2015

(c) Permeable pavements in the parking lots and alleys. 2. Developing safe and energy efficient building practices through; (a) Using local resources like in compact building and use of solar power. (b) Fitting your apartments with energy saving compact fluorescent bulbs. (c) Installing thermostats that can be programmed to adjust automatically your temperatures at minimal energy. (d) Using energy star rated air conditioners that can minimize the emission of greenhouse gases that contributes to global warming.

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Tips for Finding the Ideal Resident Presentation and Marketing Message Of course the best way to attract the most ideal residents is to offer and present a clean, updated apartment with fully functioning in-unit and on-site appliances. Amazingly, according to numerous reports, there are actually a great number of property managers who fail to properly prepare their units for viewing and move-in. Marketing messages and advertisements should be professional, polite, informative, and proofread statements that reflect the quality and stature of the building, as well as the hospitality of the staff. First Impressions Once you have established that

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your building’s appearance is immaculate, completely in order, reflects well on the apartment owners, and on your abilities as the attendant in charge, you will be ready to meet and make visual and verbal assessments about your potential clientele. Taking notes on your initial impression of an applicant over the telephone is always advisable, as persons will sometimes provide additional information about themselves over the telephone. When meeting in person, you will want to notice the person’s dress and grooming, the car that they drive, and well as their manners, punctuality, and overall behavior. These characteristics can often reflect on the amount of respect and consideration the occupant will have with the property and the staff.

Official Screening Process Conducting an online search is a fast and easy way to initially screen a resident. Occasionally information about individuals will pop up through a simple Google search; sites such as Linked In and Facebook often provide detailed profiles for example. During the application process, advise the applicants to fill in as much information as possible. Following the interview, you’ll investigate your applicant’s financial status; judgments, liens, collection accounts, credit history, and bankruptcy filings, while keeping federal, state, and local laws in mind.

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The Growth of Crowdfunding

rowdFunding is the act of requesting funds from outside sources, spreading the total cost amongst a large number of willing participants to support projects that might otherwise be out of the requester’s reach. There is no limit to the reasons someone might start a crowdfunding campaign other than what will attract donations, and a number of websites have cropped up that make running one infinitely easier. These include well-known sites such as GoFundMe, Kickstarter, IndieGoGo, Crowdfunder, and RocketHub. A frequent tactic is to offer incentives for different levels of investment, encouraging more donations on top of those that might

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come from altruism alone. A branch of crowdfunding focusing on real estate has emerged recently, and it functions similarly to an open call for investments that offers tiered returns. Most of the websites are still in the early stages of refining their processes, but the list is growing rapidly as the concept solidifies. Sites focused on real estate crowdfunding include iFunding, Fundrise, and Realty Mogul. This model is incredibly attractive for MultiFamily housing and apartments, pulling in startup money while obliviating or mitigating the need for loans from a bank. By skipping the middleman in the money lending process, developers can increase their profit margins. For the

Apartment Market Digital • Spring 2015

investor, it provides a way to achieve a much more attractive rate of return on investment than a savings account while remaining within reach for a much larger list of potential donors. An additional benefit of real estate crowdfunding is the direct connection between the investor and the property, allowing small donors to support renovations and developments for their local communities in ways previously reserved for large companies. Considering the low cost of real estate crowdfunding, it would behoove investors and developers to seek out their options while the market is still fresh.

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Is Your Property Prepared for Natural Disasters?

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hile you hope that you never need it, everyone needs to have a plan in case of natural disaster. If you are dealing with a multi-family property, you will need to spend a little more time planning and preparing. Reviewing the Risks The first place to start is always determining what the most likely risks are. If you live in an area that is at higher risk for earthquakes you will need a different plan than a location that is at higher risk for hurricanes. Once you know what the greatest natural disaster risks are, you need to review the different standards and requirements.

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people can check in as needed. Creating a Plan Once you know the risks and requirements, you can create a response plan to cover the most likely disasters. Here are the items your plan should contain. • A stated objective so that it is clear what the plan is meant to accomplish. This will likely be along the lines of keeping as many people as safe as possible. In the event of something like a flood though, your objectives will likely be slightly different depending on the extent of the flooding. • Determine how communication will occur during the disaster. Have a point of contact so that

• Determine which parts of the building are the most vulnerable. • Create a protocol for the actions that need to be taken. • Create an emergency checklist for each of the families on the property. • Develop a team and assign tasks in the event of a disaster. As natural disaster become increasingly common (there have been a spike in disaster types over the last 10 years), you need to start planning in case something does happen. By dedicating time to planning and coordinating, you can minimize loses.

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For Apartment Managers: Creative Ways to Use Social Media

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ccording to recent research, there is little traffic from apartment seekers on Facebook. Considering that Facebook is the largest social media network, we are safe in assuming that social media sites are not where many people are apartment searching. That being said, having a Facebook business page or community page is a must. You can still post your available units and upcoming available, because your residents will see this and may pass on the word to their friends. What better advertising than word of mouth? Things that you should be posting on Social Media: • Community news and events for your complex

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• Local area events and happenings • Photos of your complex and events hosted • Employment opportunities- free ads are awesome • Networking items for other businesses Things you should not be posting on Social Media: • Memes and irrelevant items • Personal information about staff or residents without permission and a reason Where else you should be present in Social Media: • Google My Business • Google+ Local • Pinterest

Apartment Market Digital • Spring 2015

• Twitter • Instagram You want to have a presence in social media. By using social media and linking to your website, you are creating SEO that will increase your Google and other search engine rankings. Then, when prospective residents are searching for apartments, they will find you somewhere. Use your Google tools: AdWords, keyword tools, Google+ and business pages. These all will help increase your SEO. Also, be sure to utilize business listings. If you have good branding, relevant content, and useful information around the web, it will increase your popularity and occupancy.

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The Growth of Income vs. Rent in the United States

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ultifamily real estate--it’s a whole branch of real estate investing onto itself. With all the properties out there in the urban environment, what should the buyer look for, and what’s a smart way to buy? 1. If you are just getting started in purchasing multi-unit dwellings, start small. Experienced landlords say buy a 4-apartment building or smaller. This way, you will learn the ins and outs of picking and managing tenants and also, building maintenance on a more manageable scale. Later, you can expand. 2. As your experience grows, pick buildings with a larger number of

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units--e.g. 3 or 4 units rather than, say, a duplex. More units mean more rent and better cash flow. In addition, select one large building rather than several smaller ones. This puts all your roof, lawn and other assorted maintenance chores in one location, saving you money and time. 3. As you acquire more properties, consider hiring a manager. This will free up your time to scout out and invest in more multifamily real estate. 4. When considering a property, think seriously about its condition and how handy you are. It’s great if you are skilled enough to handle a fixer upper, but if you are not

handy, you will have to hire out the work. 5. Learn all you can about the rents in the area and also the types of tenants you may expect. For instance, multi-unit dwellings near the university will attract students. Are the current tenants young families or older adults? The tenant profile impacts security deposits, upkeep, noise level and a host of issues which increase or decrease how hands-on you will need to be. Bottomline, do research, and talk to an experienced real estate investor. Learn as much as possible about multifamily real estate to maximize success.

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Tips for Buying Multifamily Real Estate

ultifamily real estate--it’s a whole branch of real estate investing onto itself. With all the properties out there in the urban environment, what should the buyer look for, and what’s a smart way to buy? 1. If you are just getting started in purchasing multi-unit dwellings, start small. Experienced landlords say buy a 4-apartment building or smaller. This way, you will learn the ins and outs of picking and managing tenants and also, building maintenance on a more manageable scale. Later, you can expand 2. As your experience grows, pick buildings with a larger number of units--e.g. 3 or 4 units rather than,

say, a duplex. More units mean more rent and better cash flow. In addition, select one large building rather than several smaller ones. This puts all your roof, lawn and other assorted maintenance chores in one location, saving you money and time. 3. As you acquire more properties, consider hiring a manager. This will free up your time to scout out and invest in more multifamily real estate. 4. When considering a property, think seriously about its condition and how handy you are. It’s great if you are skilled enough to handle a fixer upper, but if you are not handy, you will have to hire out the work.

5. Learn all you can about the rents in the area and also the types of tenants you may expect. For instance, multi-unit dwellings near the university will attract students. Are the current tenants young families or older adults? The tenant profile impacts security deposits, upkeep, noise level and a host of issues which increase or decrease how hands-on you will need to be. Bottomline, do research, and talk to an experienced real estate investor. Learn as much as possible about multifamily real estate to maximize success.

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Apartment Market Digital Spring / Summer 2015  

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