Rent Payments 😶

The National Multifamily Housing Council’s rent payment tracker found that 92.1 percent of apartment households made a full or partial rent payment by August 27. The survey included 11.4 million units of professionally managed apartments across the country.

This is 210,458 households down from last August and compares to 93.3 percent of households paying last month (July 27, 2020).

When the economy collapsed because of coronavirus shutdowns, the federal government helped with additional unemployment benefits, stimulus checks, and a moratorium on evictions and foreclosures. Those who did not lose their jobs cut back on costs, paid off debts, and made home improvements 🔨🔧(WSJ.com). Those who did lose their jobs made it through the crisis but, according to Ben Eisen’s WSJ article, now are not sure they can pay their next month’s rent (WSJ.com).  

People are uncertain about the economy. Gasparro & Kang report in their WSJ article that one indicator of this anxiety is that spending on groceries 🍗🍺🧀🍦dropped sharply in mid-August particularly in states with high unemployment.  

The federal government’s $600 per week additional unemployment benefits ended July 31. People who got those benefits and the $1200 economic stimulus payment from the federal government spent that money. Another round of stimulus has been discussed in Congress, but no agreement has been reached so far.

Doug Bibby, the President of the National Multifamily Housing Council (NMHC) (nmhc.org), said “Lawmakers in Congress and the Administration need to come back to the table and work together on comprehensive legislation that protects and supports tens of millions of American renters by extending unemployment benefits and providing desperately needed rental assistance.”

Photo by Kelly Lacy on Pexels.com

“The [multifamily housing] industry remains encouraged by the degree residents have prioritized their housing obligations 🔑🏡so far, but each passing day means more distress for individuals and families, and greater risk for the nations housing sector. If policymakers want to prevent a health and economic crisis from quickly evolving into a house crisis, they should act quickly to extend financial assistance to renters.”

REI Capital Resources is a funding source for SFR Fix-n-Flip, Fix-to-Rent, and refinance projects as well as larger commercial projects such as office buildings, 5-40 door multi-family buildings, and many others.  These programs vary wide and far throughout the gamut of lending. Call or e-mail for more information.

Give me a call or send an e-mail.

Patrick StCin, 512-213-2271,

e-mail: patrick@REICapital.cash

References

https://www.nmhc.org/research-insight/nmhc-rent-payment-tracker/

Ben Eisen, “How’s the Coronavirus Economy? Great or Awful, Depending on Whom You Ask.” WSJ.com. September 2, 2020. Available at https://www.wsj.com/articles/hows-the-coronavirus-economy-great-or-awful-depending-on-whom-you-ask-11599039003?mod=hp_lista_pos4

Annie Gasparro and Jaewon Kang, With Second Stimulus Checks on Hold, Americans Spend Less at the Grocery Store.” WSJ.com August 27, 2020. Available online at https://www.wsj.com/articles/with-stimulus-checks-on-hold-americans-are-spending-less-at-the-grocery-store-11598526249

Rental Concessions

Landlords should not bear all the risk of another government shutdown, but tenants are being more aggressive about demanding pandemic language in new leases, this according to reporter Esther Fung’s article, Retail Landlords Offer Pandemic Clauses in New Leases, August 25, 2020 in WSJ.com.

Covid-19 is persisting in many parts of the country and it is hard to tell what will happen now that schools begin to open and fall and winter approach. When the government ordered nonessential businesses to shut down due to the Covid-19 pandemic, many households lost their income and businesses lost their sales. Rents became hard to pay whether you were paying rent for your home or paying rent for your retail shop or office.

Photo by Gustavo Fring on Pexels.com

Previous force majeure language in lease contracts did not specifically mention “government mandated shutdowns in response to a global pandemic” under what was categorized as an “Act of God.”  Force majeure language in lease paperwork allows tenants to terminate leases or reduce rent in extraordinary circumstances.  However, the WSJ article cited above by Fung points out that “force majeure language in a lease hurts owners’ ability to get financing for the property.”

Landlords of both multifamily units and retail units have had to offer concessions to retain tenants and attract new ones. Philippe Lanier a principal for a property developer managing retail properties in Washington DC told Fung, that as a landlord, “You have to provide the tenant an easy decision. If you make it complicated, you’re not going to get this done.” Philippe Lanier, EastBanc

Percentage Concessions and Shorter Leases

What is a simple concession in a lease agreement? Lanier offered to cut the base rent by 50% if retail stores are forbidden to operate their businesses and this same concession could apply to an apartment tenant loses their job in a mandatory shut down. In Lanier’s agreement, the difference would be repaid in 6 equal installments that begin on the first day a business can reopen, or a tenant returns to work.

In Detroit, Bedrock, offered to waive base rents in return for 7% of gross sales for eligible tenants, which include restaurants and retailers. (WSJ.com) This company was also allowing the use of security deposits for other purposes.

Some investors are signing leases with shorter terms and that are more revocable by either party.

Photo by Bich Tran on Pexels.com

With rents taking a hit in large cities across the country it is hard to tell how long it will take an investor to make a profit on a rental property. Location still seems to matter, but the location may be in smaller towns and the suburbs near large cities rather than in the large metropolitan areas themselves.

Clear, simple language in a lease is best but the concessions themselves can be as creative as you are.

If you need funding, apply now. I am working online with the rest of you.

Patrick St. Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

http://www.reicapital.cash/

Transform an Office Building into a Home

Many people are transforming rooms in their homes into home offices, but some people are transforming commercial spaces into homes.

Unused and Vacant

Today, CNN reports that outdoor retailer REI is selling their newly finished unused 8-acre corporate campus in Bellevue, WA as they redefine their experience of “headquarters.” Their new model they say will make remote working the “normalized model” for headquarters employees and the future headquarters building will be instead multiple satellite campuses in the Seattle area.

Businesses all over the US are seeing what REI is seeing and adjusting their business models. Office building occupancies are going down in the downtown areas of large cities across the US primarily because of the effect of the coronavirus pandemic and its associated lockdowns. Businesses are either moving, transitioning to remote working, or closing altogether. Landlords of downtown office buildings in big cities are in danger of losing the income from their properties as companies move to small communities or have their staff work from home. If the landlord has a mortgage and cannot keep up with their payments, they could lose the building. These buildings are then left vacant.

According to STR, a global hospitality data and analytics firm, hotels are suffering as well. Their data show that a fifth of hotel properties are still closed and have been since March. Many of these hotels will not survive the pandemic.

This devastating business and economic situation may offer a sliver of optimism if we look at investing in converting office buildings and hotels into much needed housing.  

According to an article in realtor.com (https://www.realtor.com/news/trends/office-hotel-conversions-to-housing/) office buildings and hotels in urban downtowns are attractive for conversions to apartment housing because they have wifi and cable infrastructure in place, parking areas, and common areas. While offices will require more plumbing to provide bathrooms and perhaps kitchens to each apartment, hotels can be converted less expensively because they are already divided into individual spaces with individual bathrooms.

Creating Affordable Housing

One example of a hotel converted to apartments is Plato’s Cave at 3524 Keetor St. in Branson Missouri. Repvblik (pronounced Republic) LLC, a Los Angeles based firm, converted a vacant six-building Days Inn into multi-family or workforce housing. The complex includes studio apartments, renting for $495.00 a month, and one-bedroom apartments, renting for $695.00 a month. According to its website, https://www.platos-cave.com/pictures-of-units, the complex incudes a gym, commercial kitchen, large dining area, an outdoor pool and beach volleyball on the property. There is plenty of parking and it is right on the strip within walking distance to the jobs there. It is affordable housing that is so badly needed.

Living and working in crowded downtowns were very popular until the pandemic hit these communities so hard. It is not clear how many people will be willing to move back to crowded downtowns after the pandemic ends or if it lingers for years. It looks certain that there will be many vacant office buildings and hotels around by the end of 2021 or when long-term leases run out. Landlords will have to keep their prices in line with demand and it is too soon to tell what demand will be.

Too Early to Give Up

Clare Trapasso, the author of the article, “As the Pandemic Empties Office Buildings, Can Those Spaces Help Solve the Housing Crisis” says, “… it may be too early to write the obituary of urban office buildings and hotels, as many did in the wake of 9/11.”

However, development can drive what happens, so you might want to be thinking about a strategy to help cities, people in need of housing, and your own financial security by seriously studying the risks and rewards of converting vacant downtown office space and hotel space into affordable housing in your own city.

If you need funding, apply now. I am working online with the rest of you.

Patrick St. Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

http://www.reicapital.cash/

References

Trapasso, Clare, Realtor,com, As the Pandemic Empties Office Buildings, Can Those Spaces Help Solve the Housing Crisis, August 12, 2020. com (https://www.realtor.com/news/trends/office-hotel-conversions-to-housing/)

CNN,  Leah Asmelash and Alison Kosik, August 13, 2020. https://www.msn.com/en-us/news/us/outdoor-retailer-rei-to-sell-sprawling-new-and-unused-headquarters-to-shift-to-remote-work/ar-BB17VDuG?ocid=msedgdhp

Platos Cave website: https://www.platos-cave.com/property-tour

Picture of downtown, USEPA Environmental-Protection-Agency / Public domain

Senior Renters Are Attractive

As families migrate away from the high population concentrations of the northeastern cities, looking for more space, a lower cost of living, expanding employment opportunities, and lower taxes, they are likely to bring along their senior members who tend to retire close to family. These seniors will need housing, and despite the health crisis that has occurred in skilled nursing settings across the country during the pandemic, other senior living environments, such as independent living, assisted living, and memory care communities can still claim that seniors are better off in their care versus at home (MHN article). Independent senior living is attractive because seniors can be protected from uncontrolled interaction with younger family members better in an apartment than in a single-family home where multiple generations live together.

Photo by Tristan Le on Pexels.com

For investors in and operators of senior living communities, seniors make attractive renters because they do not depend on employment income to pay their rent. According to a July 16, 2020 MHN article, rent collection in the senior living real estate sector has remained strong during the pandemic. For other commercial real estate multi-family sectors, federal unemployment benefits and loan and rent forbearance measures have bolstered rent collections for a few months, but the true rent collection and apartment occupancy picture in the long term will not begin emerging until after the end of July when government unemployment benefits expire. It is uncertain how many renters will be able to keep paying their rent, how many vacancies will be created, and how rental rates will be affected by the withdrawal of federal program support.

According to the National Multifamily Housing Council, 87.6 % of renters made full or partial rent payments by July 13. That is slightly down from a month ago and from the same period last year.

Marketing a senior living community may require appealing to the adult children of seniors as much as to the seniors themselves. According to Brett Gelsomino, Vice President of ZOM Senior Living some amenities to consider in new multifamily rental construction projects for seniors and in remodeling projects include amenities that ZOM is putting in its South Florida communities:  walkable locations nearby, pools, lounges, dining venues, library, and business centers, garage parking, valet service. He expects that there will be pent-up demand for senior living communities by mid-2022.

Demand for senior living communities could rise as soon as the covid-19 pandemic expends itself and people can move about again. Hopefully by 2021. Who knows? If you have the funds and the desire, building through low economic times is good for the economy and good for your mental wellbeing. If you need funding, apply now.

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I am working online with the rest of you.

Patrick St. Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

http://www.reicapital.cash/

References:

Laura Calugar, Multifamily Housing News. https://www.multihousingnews.com/post/close-up-on-south-floridas-senior-housing-sector/ July 16, 2020.

IvyLee Rosario, Multifamily Housing News. https://www.multihousingnews.com/post/national-multifamily-report-may-2020/ July 19, 2020.

Multi-Family 2020

Investing in, constructing, renting, and remodeling healthy multi-family living environments is still important and even more important now that the coronavirus has rubbed our faces in the dangers of living and working close to other people. Since more land has not materialized in most cities to give us more room to live on and in, builders and investors need to be creative about how to design or redesign compressed housing that will prevent and control the spread of an infection that is viable in air and on surfaces. People are and will be looking for homes that keep them safe from infection.

The Problem of Close Quarters

The necessity of elevators and lobbies, as well as the cost of swimming pools and on-site gyms they pay for but cannot use are scaring renters away from large apartment complexes. These are the places where dwellers must maneuver around each other in tight spaces, share air for minutes at a time, and touch buttons and handles others touched just moments ago.

Photo by San Fermin Pamplona on Pexels.com

Consider in Your Budget Some New Things

To update your multi-family housing project in this time of coronavirus spread, include in your remodeling budget something new, such as, touchless and voice technologies that can improve the safety of getting into or out of a home without touching contaminated surfaces, new air handling technologies that vent air to the outside and clean air within an elevator or other room after each use.

If your project has many units on multiple stories, you may need to consider some robotic or AI technology that will keep the number of occupants in an elevator down to one at a time. Perhaps the elevator itself could be modified into a capsule that only holds one person at a time, a capsule that could be disinfected and dried automatically between uses. Ah that will be expensive. Some complexes would require numerous elevator capsules.

Photo by Miguel u00c1. Padriu00f1u00e1n on Pexels.com

It looks like fighting the virus will not be energy efficient. Supplying cleaner air includes containing contaminated air or exhausting it to the outdoors, diluting the virus in the air by injecting clean and filtered outdoor air, and cleaning the air within a room. Any of exchange of air with the outside will make temperature control more difficult and less energy efficient. Thus, to make your multi-family housing as safe as possible, you will likely need to install larger electrical capacity.

Smaller Price Tag for Separate Entrances

If a large complex seems to come with a price tag that is too high, there are smaller multi-family investment projects that have designs that handle the problem of indoor common areas by doing away with them. Small apartment buildings, duplexes, and joined houses work well as rental investments. They include individual entryways and even small yards or gardens.

Small units of 2 to 5 homes can easily be designed with individual outdoor entries that meet social distancing requirements. In one design I recently studied online at http://www.houseplans.com, the complex included 5 units. Each house was three stories, but the overall complex was only one housing unit tall. All homes included a ground-floor separate entrance. Those that had garages had two entrances counting the front door and an entrance from the garage.

Although this design might not be great for seniors because of the stairways, I found it a manageable complex size that allowed each home to be independent. Each unit in this design is roughly 1170 sq. feet with 2 beds, 2 baths, 3 floors, 1 garage, 3 levels, and separate outdoor entries. The garage and second bedroom or home office were on lower level. The living room, dining room, and kitchen with washer and dryer and utility room were on the second floor. The master bedroom, bath, walk-in closet and roof-top deck were on the third story. Five printed sets of plans cost $950.00.

If you need funding for your project, apply now. I am working online with the rest of you.

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Patrick St. Cin

W – 512-213-2271

Patrick@REICapital.cash

http://www.reicapital.cash/

References

https://www.houseplans.com/plan/5850-square-feet-2-bedrooms-2-bathroom-luxury-home-plans-1-garage-33631

Investing in Apartments – Commitment and Study

Even in the coronavirus pandemic crisis investing in rental apartment property can still be a good way to add thousands of dollars to your income in the long term. If you buy apartment real estate that is in a good location with growth potential, but that is not too expensive, this real estate investment will likely recover after the crisis passes according to (Brad Hunter, Forbes.com). However, the investment takes funds and commitment over the long haul.

Appreciation

There are two way to make money from rental real estate. The first, appreciation, is a rise in value over time. This profit can only be realized by reselling the property after some time has passed or after you have made upgrades that add to the value. Generally, real estate appreciates in value over time if you are in the right location. Be sure to study employment and home buying trends in your local area before purchasing rental property.

Cash Flow & Coronavirus

You can also make money in the form of cash flow by collecting rents as income. The coronavirus pandemic is affecting the apartment rental real estate industry because many people, more people than we have ever seen before, have lost their income in only a few weeks, unemployment claims are up all over America, and tenants may not be able to pay their rents for the next couple of months. This will impact the ability of landlords to make money. Either the landlord forgives the rent and eats the loss for a while to keep the tenant, or the renter is evicted, and the property becomes vacant. In either case, the landlord is not receiving income on the property and may have to seek forbearance from their own lenders.

If a landlord has paid off his or her own mortgage on the property or if he or she has established an emergency fund as Dave Ramsey suggest (daveramsey.com), they will be able to weather the storm caused by the jobs lost in the pandemic shutdown.

Jobs and Renting

Either the jobs come back after the danger from the virus is past and businesses reopen, and the renters stay, or a new set of renters materialize because those people who are no longer able to afford their own homes move to apartments and construction of new homes slows because of coronavirus-driven delays caused by labor shortages, and supply shortages. More people may need to rent. In this case. It is likely the landlord’s income will return after some shaky months.

Photo by Michael (Black) Ritter on Pexels.com

Asset Rebound

Because the income potential should rebound, rental apartment property should not lose its value overtime as an asset. If the building itself remains sound, there is no reason why the property value will not increase as other investments tank and real estate once again looks solid and reliable compared to stocks. Also, if interest rates remain low, investors will be willing to take on more debt and are not restrained from purchasing property at higher prices. This will help investors who plan to sell their rental properties make a profit.

Single-Family Rentals

Investments in single-family rental homes may also benefit in the long run as more people work from home and need more room than apartments afford. Brad Hunter also suggests in his article on Forbes.com that the single-family-built-to rent-industry may benefit as people need that specially designed home office space with its own door and bathroom.

Due Diligence

Investment in rental real estate should remain attractive but be sure to do your due diligence.

Study everything from location, jobs, virus hotspots, distancing trends, supply chains, virus rebounds as they occur, and what the kids are doing now.

References:

Dave Ramsey online at https://www.daveramsey.com/blog/how-to-invest-in-real-estate

Forbes online: https://www.forbes.com/sites/bradhunter/2020/03/24/coronavirus-impacts-on-real-estate–why-you-need-to-think-short-term-and-longer-term/#6f2133345f6f

Investopedia, The Impact of Interest Rates Changes by the Federal Reserve. https://www.investopedia.com/articles/investing/010616/impact-fed-interest-rate-hike.asp

We have funds available so let us invest in something together.

I would be pleased to have you call or e-mail too.

Patrick St.Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

www.REICapital.cash

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55+

Renting and “aging in place,” but not alone, is a growing preference for aging baby boomers and seniors and offers a unique opportunity for investors who want to invest in and operate multifamily units.

Baby boomers are defined as those born between 1946 and 1964 while seniors are defined as those born before 1946.

According to research done by ARBOR, an increasing number of senior renters now live with unrelated adults across all multifamily property types. Small apartment buildings (5-49 units) have slightly higher shares of senior renters with roommates compared to large multifamily properties (50+ units). However, the co-living senior renter segment is growing the fastest in large-asset multifamily.

Co-living among seniors is highest in the single-family rental (6.1%), then the duplex/quadruplex (5%), next small-asset multifamily rentals (4.6%), and last, large-asset multifamily rentals (3.2%). To put this in perspective, among Millennial renters, the share of renters living with a roommate in a small-asset multifamily situation is 14.4%.

Sharing is motivated primarily as much by social connection as by income needs. According to Psychology Today, “20% of people over 60 frequently feel intensely lonely.” Loneliness can be a risk for heart disease, Type 2 diabetes, arthritis, and Alzheimer’s disease. Because of health risks associated with loneliness, seniors that share a home are actually dealing with their current and potential future loneliness.

In addition to social connection and apartment affordability, sharing is also motivated by personal security, and sharing of daily chores. The need to “age in place” is driving the increase in co-sharing seniors in the large asset multifamily rental because these buildings tend to be located near urban services and health care centers, have elevators and wheelchair lifts, and have higher levels of amenities.

Amenities Promoted in 55+ Adult Living

When looking over senior housing options available in Houston, I found most of the advertising in the higher end communities mentioned affordability, distinction, style, lifestyle, freedom from chores, and choice. Specific advantages and amenities listed by the higher end properties in the facility advertising included:

  • Independence
  • Affordability
  • Beautifully landscaped grounds
  • Luxurious and spacious interiors
  • Locations close to dining, entertainment, parks
  • Locations close to and medical centers
  • Diverse and colorful neighborhood
  • “Dynamic alternative to the ordinary”
  • “Live your lifestyle with passion”
  • Luxury
  • Style
  • Home
  • Distinctive living experience
  • Restaurant-style dining
  • Resort amenities
  • Complete freedom
  • Infinity pool
  • Court yards
  • Dog park
  • Wine tasting lounge
  • Media room
  • Chef quality demonstration living
  • It’s a lifestyle
  • Boutique, resort style

Amenities Advertised at Less Expensive 55+ Community Options

Retirement and 55+ community combinations in a lower price category advertised:

  • Activities and programs
  • Privacy
  • Aging in place
  • Gym
  • Garage
  • Outdoor grills
  • Designer living
  • “Trade your to do list for a bucket list”
  • Pet-friendliness
  • Outdoor pool
  • Yoga and art classes
  • Access to meals
  • Choices
  • Community
  • People of similar life stages
  • Leave home maintenance and yard work behind
  • Water gardens
  • Swimming pool
  • Computer room

The youngest of the baby boomers are approaching 55, and the huge number of 55+ adults who are still active but looking for reduced housing maintenance responsibilities and costs as they age and live within a fixed income makes this group a dynamic market for senior living situations. Not all are turning to apartment renting, but this tend is worth watching.

Competition for good rental properties is stiff, and in order to buy a property in a climate of competition you may need funds fast. As a broker and a direct lender, it is my job to help you get a hard money loan easily and quickly. Private Lenders, not banks, are willing to help you fund your project based on the value of the property and its after renovation value. We have money to lend. A perfect fit is out there.

Give me a call or send an e-mail. I am focused on funding your success.

Patrick StCin, 512-213-2271,

e-mail: patrick@REICapital.cash

Tech Considerations for Multifamily Housing

Just this week, I said that one of the mistakes a real estate investor can make is not seeing the property in person before buying it. I said that so I could eat my words today, at least with regard to buyers of finished properties. I still think it is unwise for an investor to buy a property to fix, flip, develop, or fund without inspecting it in person. However, Multifamily PRO is reporting that augmented and virtual reality technology is expected to increase the number of residents willing to sign leases without visiting the property in person because they will be satisfied with viewing the property using virtual self-guided tours.

New technologies are and will be changing the apartment-buying, apartment-selling, apartment-living and apartment-operating experience. Considering this, investors, builders, and remodelers need to focus on communications and electronic infrastructure to support these new technologies when planning, budgeting for, building, and marketing multifamily housing. A few areas to focus on include:

Excellent Internet Connections

The first things to think about are internet connections, their quality, number, location, and security. Smart-home technologies like smart locks, lights, thermostats, as well as visual monitors for pets, children, and deliveries will be expected in the new high-tech apartment unit. These will impact the way the resident interacts with facility operators. For the resident, chat bots may make routine maintenance requests on behalf of the resident, reserve facilities, and schedule hair and dining appointments.  For the facility operator, chat bots may provide routine information to residents and collect repair orders and  rent payments. All these electronic interfaces will require excellent internet infrastructure in the multifamily complex.

Numerous Charging Stations and Outlets

The demand for electric cars, electric scooters, and electric-motor-assisted bicycles will drive the demand for charging stations and charging outlets at multifamily properties. Planning, budgeting, and locating these facilities for convenient access, exit, and safety will be important.

Locating Autonomous Vehicle Dropoff Points and Parking

Autonomous vehicles, both driven and flown, will need places to park and drop off clients, meals, and other products. This will affect the size of the parking area you will need and the layout of delivery sites around the building. Robots and drones may deliver and pickup within the apartment.  A drone may deliver to a dropoff point with directions for a robot that will complete the delivery inside the apartment community.  Conventional vehicles will also be expected to make deliveries and pickups and need space to maneuver.

Photo by JESHOOTS.com on Pexels.com

Facial Recognition

Artificial intelligence technologies will enable facial recognition for customer identification and for criminal background checks, and these facial recognition systems can track a person as they move around a property. This will improve security but raise privacy concerns.

Planned Office Space in Apartment

People working from home will need an excellent internet connection and may want an office available as part of their apartment.

An electronic interface between operator and potential buyer may be a way to design flexible space for the customer with the hope that they will stay longer in a space that fits them well.

These ideas, with some speculations added, came from the NAA Apartmentalize conference in Denver through reporter Andrew Stephens on Multihousing PRO.

REI Capital Resources built its reputation on finding private funding for investors for quick turn purchases and difficult situations. 

Give me a call or send an e-mail and share with me your plans and needs, and I’ll see what lending solution I can generate for you.

Patrick St.Cin

W – 512-213-2271
Patrick@REICapital.cash
Info@REICapital.cash fffff

Multi-Family News on multihousingnews.com

The multi-family housing market is a viable market segment in many metro areas as people move in from the suburbs to be closer to work and to entertainment. I scanned many articles and blogs on multihousingnews.com and am here sharing with you some of the statistics I found for our Texas market.

Austin

According to the “Austin Multi-family Report – Spring 2019 and an article on the “Top Multi-family Completions in Austin,” both by Anca Gagluc in the Multi-Housing News, the Austin multi-family market had a strong year in 2018 with rent growth of 4.5% despite 11,000 units coming online. The 11,000 units that were constructed and rented in 2018 were in the upscale lifestyle segment and the 20,500 units underway in 2019 are also targeted for that same segment of the market. 

The largest multi-family projects delivered through the end of May 2019 included

  • Bexley Round Rock, 330 Units, Round Rock
  • Hillstone at Wolf Ranch, 332 Units, Georgetown
  • Latitude at Presidio, 337 Units, Cedar Park
  • Crestview Commons, 353 Units, Austin
  • Terra, 372 Units, Austin

Multi-family housing can come in several classifications, affordable, lifestyle, senior, student, or worker housing. Most of the inventory discussed here is in the Lifestyle segment. A multi-family unit in the lifestyle segment is one that offers amenities that improve your daily life. These may be as simple as open areas and great walking trails or more expensive shared amenities like a stable, fitness center, or sauna and pool. The lifestyle property is supposed to enhance your life. It is in effect a neighborhood, or a community. Lifestyle communities are generally upscale in price, can even be luxurious, and often do not meet the need for affordable housing.

Austin added 36,800 jobs in 2018, up 3.5 % from the previous year.  Occupancy rates for Austin multi-family housing rose to 94.4% as of March 2019 and rent growth was 3.7% percent through April 2019.

Dallas-Fort Worth

According to the “Dallas Multi-family Report – Spring 2019” from Anca Gagiuc in Multi-Housing News, the Texas multi-family market continued to show plenty of supply, dampening rent growth, which was 2.8% year-over-year through March, slightly below the U.S. average.

More than 26,800 units were delivered in 2018 with an additional 44,700 underway as of March 2019.  The metro remained a nation leader in job creation last year, adding 102,500 positions for 2.6 percent expansion. Last year’s multi-family transaction volume was $5 billion.  Investors have already traded nearly $900 million in multi-family assets in the first quarter of 2019 at a per-unit-price of $105,032. The average Dallas-Fort Worth rent is expected to rise 4.3% in 2019.

Houston

According to the “Houston Multi-family Report – Spring 2019” from Laura Calugar in Multi-Housing News, the Houston multi-family market showed rent growth on a downward slide, but the market was still strong, underpinned by employment gains and economic expansion. Houston’s occupancy rate was 92.4%, down 140 basis points from the previous year, fueling fears of overbuilding.

Houston added 72,600 jobs in the 12 months ending February 2019. Last year’s transaction volume was $5 billion.  Roughly 14,000 units were under construction as of March 2019, most of that geared to high-income residents. The average Houston metro rent is expected to rise 2.2% in 2019.

REI Capital Resources is a funding source for SFR Fix-n-Flip, Fix-to-Rent, and Refinance projects as well as larger commercial projects such as office buildings, 5-40 door multi-family buildings, and many others.  These programs vary wide and far throughout the gamut of lending. Call or e-mail for more information.

REI Capital Resources Long-Term Rental Program

We offer asset-based and experience-based loans for long-term rental projects, including multi-family projects with the following terms: min FICO 650, BPO required, Up to 85% of purchase price, Cashout/Refinance up to 65% LTV (BPO), Max of 80% ARV, Interest rates starting at 6.5%, and points as low as 2.25%.

Give me a call or send an e-mail.

Patrick StCin, 512-213-2271,

e-mail: patrick@REICapital.cash 00000000 00

Levin on Trade Wars and Commercial REI

According to a very interesting post written by Jeff Levin in the Forbes Community Voice, trade wars are affecting commercial real estate investing.

Jeff Levin has 3 decades of experience in the real estate arena and what he has to say makes a lot of sense to me. Of course, it should. He is a senior-level executive of the Forbes Real Estate Council and this is his area of expertise.

I want to summarize the points in his post for you here because they are so relevant to us as private money lenders and investors.

Scarce Funding Will Bring More Opportunities to Private Lenders

He first points out that the trade war between the US and China presents opportunities for those in the business of private lending because as Chinese investment decreases in the US commercial real estate market for new projects, funding is scarcer.

Levin suggests that tracking where the Chinese investment was the heaviest is where to look for projects that might need capital.

China is Selling Assets Bringing Down Prices

Beijing has apparently also mandated a sell off of asset portfolios. This is lowering prices for some types of commercial real estate.  According to Levin, “For sectors like office buildings, excess supply is depressing absorption rates, increasing vacancies and competition for tenants and squeezing rent growth.”

Levin advises that multifamily borrowers and office project borrowers refinance after construction is complete with a bank rather than relying on leasing income or sales to retire the debt.

Construction Prices Are Going Up

Construction prices are going up because the price of materials is going up due to tariffs on steel, lumber, aluminum and other materials from international suppliers.

Levin advise that borrowers put in contingency clauses that spread any unexpected risk due to the volatility of material prices among the investors.

Construction Delays

Construction delays are being caused by the tight labor market, but also because of the lead time required to obtain building materials.  Because delays increase overall risk, the number of new commercial real estate project starts are declining.

Levin says that despite more deals coming to private lenders because of the difficulty of securing financing, “Private lenders must stay on top of the collateral value in the cases where borrowers might not survive unforeseen project delays.”

I really encourage you to read this article on your own at https://www.forbes.com/sites/forbesrealestatecouncil/2019/06/04/four-ways-the-trade-wars-are-undermining-commercial-real-estate/#1c047a706957

REI Capital Resources works closely with its clients to determine the best path to take for an investment project that needs funding.  As a lender originating loans myself, I have more and improved funding solutions at my fingertips. 

Contact me at 
Patrick@REICapital.cash
512-213-2271 funding

References

Levin, J. Four ways the trade wars are undermining commercial real estate. June 4, 2019. Post at https://www.forbes.com/sites/forbesrealestatecouncil/2019/06/04/four-ways-the-trade-wars-are-undermining-commercial-real-estate/#1c047a706957ways-the-trade-wars-are-undermining-commercial-real-estate/#1c047a706957