Chicago Renters Only Make 69% Of The Income Needed To Afford Starter Homes.

The average income of renters in Chicago isn’t quite enough to allow them to afford an entry-level home. And as long as interest rates stay high and inventory is low, that will likely remain the case.

As of October, when interest rates were 7%, the average household income needed to cover a mortgage for a Chicago starter home was $63.4K. But the average income of renters was $43.6K, according to Point2Homes research.

That means Chicago renters make only 69% of the income needed to become first-time homeowners, according to Axios reporting on the study.

Point2Homes data indicates the average cost of a Chicago starter home is $204.7K, effectively pricing out many renters given rising interest rates and shrinking single-family housing stock. Only 15 of the 50 largest U.S. cities offered average starter homes for less than $200K, the traditional affordability cutoff for first-time homeowners. Rising mortgage interest rates, high housing prices, and limited inventory make it harder for people to buy their first homes. According to the report, "the modest, bare-bones homes of yesteryear have become the stuff of myths and legends." About 70% of all new builds were starter homes in the 1940s and 40% in the 1980s, but the percentage had fallen to 7% by 2019, according to Census Bureau figures. "Renters’ homeownership dreams don’t match the reality in almost any of the large U.S. housing markets," the report's authors said. Earlier this year, Business Insider reported that first-time home homeowners struggled to afford the typical 20% down payment on a home, which averaged $78.4K based on median home prices when the article was published in March.

 

 

Source: Chicago Renters Only Make 69% Of The Income Needed To Afford Starter Homes

https://www.creconsult.net/market-trends/chicago-renters-only-make-69-of-the-income-needed-to-afford-starter-homes/

Here’s What to Expect in Investment Sales in 2023

Before we welcome 2023, let’s look at 2022 and how the New York City investment sales market performed, where we are now, and where we might be headed in the new year.

Can you believe that the 10-year Treasury one year ago was 1.48 percent? Doesn’t it seem like that was years ago? I think the thing that 2022 will be most remembered for will be inflation, the unprecedented pace of interest rate increases, and the impact these factors had on the commercial real estate lending markets. To say that things are more challenging today is an understatement.

Coming into 2022, we were very optimistic. In the fourth quarter of 2021 in Manhattan, the sales market for properties over $10 million saw $8.5 billion of volume and 89 sales, both quarterly highs going back to 2016 (except the $9.2 billion total in the second quarter of 2019). Interest rates were low, metrics were moving in the right direction, and it seemed like we would be pulling out of an investment sales malaise that began in October of 2015. 

 

For perspective, in 2015, during the cyclical peak, there were $57.5 billion in sales over 484 transactions. The trough was in 2020, with $11.1 billion in sales over 104 transactions. In 2021, those numbers increased to $15.75 billion and 191 transactions. Through the first three quarters of this year, we were on pace for $21.7 billion and 215 transactions, increases over last year of 38 percent and 12 percent, respectively. However, given how increased interest rates have impacted the market, we expect fourth-quarter 2022 results to be well below the yearly trend. The optimism we went into 2022 with is absent from our perspective heading into 2023.

Inflation was tremendous in 2022, but is that a surprise to anyone? How could inflation not be impacted if the federal government pumps trillions of dollars into the economy? Notwithstanding how much you think the war in Ukraine has impacted things, inflation would still be elevated even if the war never happened. Reducing our ability to produce energy and pumping unprecedented amounts of capital into the economy was a cocktail that could result in only one outcome.

At the same time, many economists believe that the Fed has misdiagnosed the labor market. It scared some folks when the Fed announced that interest rates would “continue to increase until the labor market cools.” However, if we look at the number of jobs in the U.S. economy, there are only about 1.2 million more jobs today than there were in 2019. If we had projected where we would be at the end of 2022 back in 2019, expectations would have been that we would have 3 million to 4 million more jobs by now. The labor market is not overheated; it is undersupplied. This is evidenced by the reductions we have seen in the labor participation rate, which is tangibly lower than it was pre-pandemic. Some economists believe we are being treated for a disease we don’t have. So interest rates have risen, and, importantly, they have risen at an unprecedented rate.

In November, the Fed increased interest rates by 75 basis points, the fourth consecutive 75-basis-point increase, after a 50-basis-point increase in March. This unprecedented pace of rate increases was three times faster than the increases we saw during the period from 2004 to 2006. This pace, inexplicably, doesn’t consider that Fed action normally has a many-month lag before the economy is impacted.

For the commercial real estate market, the impact of these increases was not felt until about three months ago. At that point, the commercial mortgage market was tangibly impacted, and borrowing became much more expensive for borrowers. Interestingly, because of this, comparable sales are only starting to become valid for determining value today. Up to now, most closings are occurring based on contracts signed in the old market and do not consider the current financing market. To determine a value today, we rely much more on contract negotiation activity than transactions that have closed.

Current market conditions have highlighted the fact that cap and interest rates are not highly correlated. Most folks believe this is the case, but it is not. Interest rate fluctuations generally predict the direction of cap rates but not the magnitude of those increases. The cap rate versus interest rate relationship over the long term shows that the relationship is not highly correlated. The flow and availability of capital are more impactful on cap rates and more highly correlated over time rather than increases in interest rates. And that flow and availability of capital are most highly correlated to an age-old battle. Markets are a constant battle between fear and greed, and today fear is winning — so cap rates are rising.

As we head into 2023, refinancing risk will be the most-watched market dynamic. Unlike in 2008 and 2009, regulators won’t allow lenders to extend and pretend. So an owner with a $35 million loan on a $50 million asset will be faced with a big decision when the mortgage matures, and the refinancing proceeds available will be $27 million. The first question is, does the owner have the $7 million to put into the property to effectuate the refinancing? If the answer is no, the owner is left with a decision of whether to sell all of or a partial interest in, the property. If they have the money, will they “invest” that fresh capital into the asset? These will be profound decisions for folks with debt maturing.

Concerning product type performance, each sector will have its own drivers of activity, and there are currently more questions than answers. How will return to work play out in the office sector as leverage in the labor market shifts? How will aggregate demand be impacted as flexible working environments ebb and flow? How will consumption patterns impact the demand for space in the industrial market? Within the multifamily sector, will our elected officials change policy to promote the creation of more supply? In the land sales market, will policy impact property values such that owners are incentivized to sell? In the hotel market, we have seen a tangible reduction in the stock as many rooms have been converted to alternative uses. How will market conditions impact travel patterns? And how will the strength of the dollar impact decisions about where people go and for how long?

From a more macro perspective, will rates continue to rise, and if so, how much? Inflation, although still elevated, seems to be slowing. Sectors of the economy such as housing, construction, and manufacturing are also slowing. However, services are still seeing upward pressure on prices. So will the Fed continue to raise rates, or will it pause to let the lag kick in? And will the present yield curve inversion lead to a recession? In 14 of the last 15 times, the yield curve has inverted, and a recession has followed.

Notwithstanding these questions, one thing is certain: If you ask investors when they made the best deals of their careers, you will universally hear that they were made at times like we are in right now and are likely to see as we head into 2023. Investing in real estate takes capital and, most importantly, guts. Which investors will have the intestinal fortitude to dive in when many take a wait-and-see position? Will today's deals be the ones investors look back on fondly, years from now, when they all wish, “If I had only bought more!”

Clearly, there is an uncertainty going into 2023 — at a level we haven’t seen. Rest assured that we will continue to track all of the indicators that will provide insight into how trends will unfold and will continue to share those insights with you on these pages.

Meanwhile, best wishes for a safe, happy and healthy holiday season and a prosperous New Year!

 

Source: Here’s What to Expect in Investment Sales in 2023

https://www.creconsult.net/market-trends/heres-what-to-expect-in-investment-sales-in-2023/

Deconstruct Looks at CRE Investment Forecast for 2023

It’s the end of the year as we know it, and investors feel uncertain.

Rate hikes have slowed deals in the second half of 2022, and Federal Reserve Chairman Jerome Powell said there’s more pain to come.

But how long can investors’ ample dry powder sit on the sidelines?

The deal dam may break halfway through 2023, Moody’s senior economist Thomas LaSalvia said on the latest episode of TRD’s podcast “Deconstruct.”

“The market is going to have to adjust starting in the middle of next year,” LaSalvia said. “I have a feeling that we will start to see deal volume pick up a little bit more as prices maybe adjust a little bit and also as investors find creative ways to get deals done.”

But each sector holds its own nuance as rates keep rising, inflation remains high and recession looms. Multifamily’s record-breaking rent growth is likely to lose steam. Retail sales may finally feel the impact of heightened prices, and the fate of office could finally come into focus.

Tune into the full episode for a sector-by-sector breakdown of what research firms expect for 2023. The podcast will be back after a holiday break on January 9 with a new episode on Apple Podcasts, Spotify, Audible or wherever you get your podcasts.

 

Source: Deconstruct Looks at CRE Investment Forecast for 2023

https://www.creconsult.net/market-trends/deconstruct-looks-at-cre-investment-forecast-for-2023/

Chicago Becomes the Hottest Rental Market Amid a Nationwide Cooldown

While the autumn months brought a cooldown in rental prices across the U.S., some metro areas, such as Chicago, Boston, and New York, are bucking the trend with double-digit growth, according to a report out Tuesday.

In November, the median asking rent across the 50 largest metros tracked by Realtor.com increased 3.4% yearly to $1,712. According to the report, the annual growth rate was the slowest in 19 months.

“Many Americans’ budgets are being pulled in multiple directions as the holidays approach, bringing a more typical seasonal cooldown to the rental market that we hadn’t seen in the last few years,” Danielle Hale, chief economist at Realtor.com, said in a statement.

In the Sun Belt, where both sales and rental markets experienced a pandemic boom, rental prices saw the most significant cooldown. The median asking rent in Riverside, California, fell 5.5% in November to $2,071 per month. In Las Vegas, the monthly rent dropped 4.9% to a median $1,481, according to the report.

In major economic hubs such as Chicago, Boston, and New York, where there are more employment opportunities and higher concentrations of college students, monthly rents climbed by double digits compared to a year ago. Chicago experienced the largest annual growth, with the median rent increasing 20.8% to $1,949 monthly.

Boston’s median rent rose 11.8% year over year in November to $2,865 per month, surpassing New York’s monthly rent of $2,727, which was 9.4% higher than the same period last year, according to the report.

Also, the rental market is expected to remain competitive in 2023 as still-high inflation, and interest rates will deter potential buyers from purchasing homes.

“Despite this recent relief, renters will continue to be challenged by affordability in 2023, with rents forecasted to hit record highs,” Ms. Hale said.

 

 

 

Source: Chicago Becomes the Hottest Rental Market Amid a Nationwide Cooldown

https://www.creconsult.net/market-trends/chicago-becomes-the-hottest-rental-market-amid-a-nationwide-cooldown/

Off-Market Multifamily Sellers Are Leaving A Ton Of Money On The Table

Off-Market Multifamily Sellers Are Leaving A Ton Of Money On The Table

Marketing a property can increase the sale price by up to 23%, which runs counter to the idea that off-market deals can achieve higher values because a buyer will be more aggressive to seal a trade.

The perception is when a seller has one buyer vying for an asset, that buyer is more aggressive and willing to pay a premium because they don’t want the seller to get into a bidding war for the property. Our research found the opposite.

This is a sign it is in the best interests of owners to undergo a marketing campaign for their properties. Growing allocations from institutional investors toward real estate are still driving a sizable pool of investors into bidding for multifamily assets, and a full campaign is what drives the premiums.

The job of a broker to create a competitive environment on behalf of the seller. Putting a building on the market determines the strongest buyer.

That may not be necessarily based on price alone. If one buyer has a higher-priced offer but weak financial backing, versus a buyer with a stronger track record, taking a lower offer is the way to go. It’s our job to give the seller those options and we do that by marketing properties and generating the highest number of qualified offers possible.

There are numerous case studies where a seller received an off-market bid, put it on the market, and the off-market buyer still bought the asset but at a higher price.

 

Have you thought of selling your property and would like to know what it's worth? Request a valuation for your property below:

Request Valuation

eXp Commercial Chicago Multifamily Brokerage focuses on listing and selling multifamily properties throughout the Chicago Area and Suburbs.

We don’t just market properties; we make a market for each property we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites for maximum exposure combined with an orchestrated competitive bidding process that yields higher sales prices for your property.

 

https://www.creconsult.net/market-trends/off-market-multifamily-sellers-are-leaving-a-ton-of-money-on-the-table/

What’s the Outlook for Affordable Multi-Family Housing in 2023?

During the past two years, prices for single-family homes rose at record-breaking rates, forcing many first-time buyers to postpone their plans and continue to rent.

In addition, demand for affordable multi-family housing increased as more Generation Z renters (age 18 to 23) left their family homes for apartments.

This is good news for investors searching for affordablemulti-family housing for sale, as their cash flow will increase with the passive income generated by tenants’ rent.

However, renters and investors are still coping with the effects of runaway inflation, living and renting in an increasingly expensive world. In addition, Fannie Mae is predicting aslowdown in multi-family construction. How will this affect next year’s multi-housing outlook?

The Federal Reserve’s Plans for 2023 Interest Rates

It’s impossible to predict an accurate outlook for multi-family housing and renters without reviewing the predictions issued by the Federal Reserve, or “the Fed” as it’s commonly known.

One of the Fed’s primary responsibilities is tomonitor the nation’s financial systemsand to support a healthy economy.

This responsibility has been evident from 2020 to the current date.

• During 2020, the Fed Reserve responded to fears of a lasting recession by reducing the federal funds rate to around 0.25%.
• Fast-forward to late 2021, the national economy was hit with runaway inflation.
• The Fed responded with four interest rate hikes during 2022 that increased the federal funds rate from 3.75% to 4.00%.

The Fed hopes to discourage consumers and businesses from buying with credit by creating more expensive credit. This helps “cool” the economy and put the brakes on inflation.

This strategy has been described as "bad-tasting, but effective" economic medicine.

How lousy will rates taste next year?

Rate Predictions for 2023

During 2023, the taste of Federal rate hikes probably won’t improve. According to the President of the Federal Reserve Bank of Chicago, rates are expected to continue rising from 4.5% to 4.75%.

The question for investors financing their purchases of multi-family properties is:How many will postpone their investments in 2023?

It’s possible that, even when paying more for commercial property financing, investors who don’t postpone their expansion into multi-family property sales may still profit. This is because rental rates and demand for additional units continue to grow.

How Rising Rates May Affect Multi-Family Investors

While most developers dislike postponing a new project, higher rates create expensive credit. Some analysts predict that some 2023 apartment builds will be delayed, but not all.

For example, a developer’s financial backers may opt to raise the rental rates of a completed building, as this will help cover the additional cost of credit used to buy construction materials.

This may translate into higher rent rates for newly-built multi-family real estate.

This is only half the picture. It’s not realistic to consider how rising interest rates will affect investors without considering the effect on their tenants.

Will Renters’ Preferences Change?

It’s well worth it for investors to research potential renters in their preferred area.

• In some cities, more renters are opting for roommates.  Developers may want to add more two- and three-bedroom units to new projects.
• Not all renters plan to share, especially those who work remotely. They’re often willing to pay more for one-bedroom and studio apartments.

One example: When an NYC developer announced plans for a multi-family building composed entirely of 302 sq. ft. studio apartments,60,000 potential renters appliedfor one of the 55 units before they were completed.

Here are details of new affordable multi-family housing projects planned for construction during 2023.

Multi-Family Projects Expected for 2023

As the number of renters continues to grow, so does the demand for rental units.

During 2022, multi-family construction skyrocketed, hitting an all-time high of 841,000 units under construction. In addition, building permits rose 25.5% year-over-year.

With more would-be homeowners priced out of the market and younger workers leaving the family home, some industry analysts have identified a logjam of renters.

Rates that sidelined would-be homebuyers are also affecting developers. Some have already decided to postpone construction starts. This is evidenced by the number of multifamily units officially authorized by city officials but have not yet started.

Industry experts fear that this trend will only become worse in 2023. Will the number of renters in 2023 cause the predicted logjam? Will rents rise, and by how much? Apartment managers have their data.

Tenancy and Rent Rates: Data and Predictions

According to theresearch team at Apartment List, the national rental price index fell by 0.7% during October 2022. This isn’t a surprise, as fall and winter are slow rental months.

However, rent prices continued to pull ahead of pre-pandemic numbers. As of November 2022, rents for the year have increased by around 5.8% annually.

Researchers also found that the vacancy index grew to 5.5%.

If you’re wondering why vacancies increased, this is due to a slower rate of what’s referred to as“household formation.” More nervous, young, would-be renters prefer to stay at the family home or with roommates.

That said, today’s vacancy index remains below the pre-pandemic norm. This translates into a year of opportunities for careful investors.

One Thing's for Sure: Additional Housing Is Needed

While industry analysts don’t all agree about the current outlook for multi-family housing, the need for additional units during 2023 and beyond has been identified.

Unit shortages in many areas are due to increased mortgage costs, more first-time homebuyers being priced out of the market, and inflation.

Rising interest rates may result in some, but not all, new multi-family builds being postponed.

As with any investment plan, start with research of today’s markets and the assistance of a broker if you’re starting.

 

Source: What’s the Outlook for Affordable Multi-Family Housing in 2023?

https://www.creconsult.net/market-trends/whats-the-outlook-for-affordable-multi-family-housing-in-2023/

How to Get the Most Profit When Selling Your Investment Property

All too often I receive inquiries from a potential seller that wants to “get the highest price” for their property, but does not want to list it, or market the property. This seems counter intuitive, especially to the basic law of economics… supply and demand. Although there is not much an average seller can do to affect the supply line, they can create demand by using a good agent.

We’ve seen this over and over the last few years in this current “sellers” market. Almost to the point where we now receive as many calls from investors saying they only want to look at “off market” deals, believing they’ll get a better price without other competing investors. So, is the answer that simple? If seller wants the highest price, do they just need to make sure the property is seen by as many possible interested investors?

Not exactly, to ensure the greatest exposure for the property, and therefore the best likelihood for the highest price, a seller should make sure the agent they use to represent them does ALL of the following, not just market to their own buyers. After all, even if that agent has a buyer it doesn’t mean that the agent’s particular buyer will pay the highest price. A good agent will create a marketing plan to provide maximum exposure for the property. This plan should include:

1) Placing it in Multiple Listing Services

2) Contacting every owner of similar properties within the surrounding few blocks to see if other landlords are interested in acquiring additional investments in the area.

3) Sending out email flyers to their buyers’ lists, local brokers, and property owners.

4) Making direct contact with every client that has purchased an investment property within the last two years.

5) Making direct contact with every broker that has represented a buyer that purchased an investment property in the last two years.

This may sound like a lot of work , but a good agent will go above and beyond.

Please do realize though that no experienced real estate agent is going to do any of the above if they are not insured a representation commission. So to ensure maximum exposure, and thus maximum returns, make sure you draft up and enter into a fair listing agreement that details out what the agent will do for you, and what type of compensation they can expect from a sale

 

Source: How to Get the Most Profit When Selling Your Investment Property

https://www.creconsult.net/market-trends/how-to-get-the-most-profit-when-selling-your-investment-property/

1120 E Ogden

Retail / Office Space For Lease | 3,674 SF | $20/SF NNN
1120 E Ogden Ave, Suite 101 | Naperville, IL 60563
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441

https://www.creconsult.net/retail-office-for-lease-1120-e-ogden-ave-suite-101-naperville-il-60563/?wpo_all_pages_cache_purged=1

9301 Golf

Golf Sumac Medical Offices For Lease | 998 - 2,853 SF | $28/SF MG
9301 West Golf Rd | Des Plaines, IL 60016
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441
https://www.creconsult.net/golf-sumac-professional-building-medical-office-space-for-lease-9301-golf-rd-des-plaines-il-60016/

9 Mistakes Property Managers Make with Utility Management

Utilities are one of the biggest expenses for apartment communities. And with inflation pushing the price of utilities to record-highs, it’s even more important that you’re keeping these expenses to a minimum.

Luckily, the right utility management strategies will not only help you keep costs down, but present an opportunity to bring in added revenue. Before that can happen, you need to assess every aspect of your utility program. Because most companies usually have a few areas that need improvement. Here are the most common mistakes that result in apartment operators spending more than they should on utilities.

#1 Including utilities in the price of rent

The worst mistake you can make with utilities is including them in the price of rent. That’s because you aren’t recouping money to match your actual expenses. Plus, residents don’t receive any kind of utility bill, which does not give them any motivation to conserve.

Another problem with including utilities in the rent is that it’s difficult to raise rent and remain competitive with other apartment communities. With rents rising so steeply over the past year, apartment residents are more sensitive than ever to rent prices. A “utilities-included” model can scare away some prospective renters if other communities in the area charge for utilities and have lower rent.

#2 Charging a flat fee for utilities

Charging a flat fee is also a risky move since utility costs fluctuate. And lately, they only seem to be going up. Your fee has to be high enough that you aren’t losing money, but you also can’t overcharge either. In some states, overcharging for utilities is illegal.

#3 Neglecting inefficient features that waste energy and impact NOI

When your buildings are not energy efficient, it hurts your business in two ways. One is that you use more energy which ultimately means higher expenses (and lower NOI).

The other way is that it could detract renters. An ACEEE study found that not only were renters more likely to visit communities that advertised energy efficiency, they were also willing to spend a little more on rent. On average, renters would increase their budget by 1.8% for a one-unit increase in energy score (on a scale from 1 to 10). That generates $400 per unit in additional annual revenue for an average-priced rental unit.

#4 Overlooking important utility metrics

Monitoring data associated with utilities is one of the most effective ways to improve your overall utility program. But many multifamily companies don’t do this at all or to its fullest potential.

However, by not actively monitoring utility data, you are missing opportunities to reduce your expenses and improve revenue. Plus, many cities and states are enacting laws requiring multifamily buildings to annually assess and report their energy performance. Like it or not, reviewing utility data is more important than ever.

#5 Paying utility bills without auditing them

Many companies simply check the balance due amount before issuing a payment. That strategy can result in a mountain of unnecessary charges. According to studies done by Engie, one of the nation’s largest utility billing auditors, at least 17% of utility invoices contain an error. With all the invoices your firm receives, it’s likely many have errors that go unnoticed.

This is why utility billing audits are so important. With the help of utility expense management companies all of your utility bills are audited for errors and savings opportunities. When errors are spotted, the provider disputes the charges on your behalf until a resolution is achieved.

#6 Accumulating and paying late fees every month

Most utility invoices have a fairly short payment window. To further complicate things,  sometimes your utility invoices don’t arrive at all, forcing your associates to track down what’s missing.

Because of these two scenarios, it’s easy to get dinged with late fees. That’s unfortunate, because they can really add up. Many utility companies assess fees that are equal to a 12-, 18-, 24-, or 36-percent annual interest rate. In other words, utility late fees are steep. And they add up in a major way. It’s vital to your NOI that utility invoices are always paid on time.

#7 Paying for renters’ utilities after they move in

Utility theft can cost property management companies thousands of dollars per year. Most of the time, this happens simply because renters forget to transfer utilities into their name. Whatever the reason, this miss can lead your company to pay thousands of dollars per year in charges that aren’t yours.

#8 Failing to monitor utility regulations for your states

Each state and municipality has different rules around handling utilities. So if you operate in different regions, it’s necessary to see what rules apply to each and every community in your portfolio.

The consequences for violating utility regulations can be costly. Most states levy fines on a per instance basis. So let’s say you’ve made a minor error in billing your entire 300-unit community. That’s 300 fines imposed - not 1!

#9 Overlooking the utility payment experience

How residents receive and pay for their utility charges is often an overlooked component of a utility management strategy. But if you aren’t taking into consideration how the process goes from a resident’s perspective, you could be damaging your bottom line.

In the short term, a poor payment experience can lead to late payments and frustrated residents, particularly if they need more clarity about their charges.

In the long run, a poor utility payment process could impact resident retention. When the payment process is inconvenient, or when residents don’t feel well-informed about what they owe, it impacts satisfaction since the situation is repeated month after month.

How to overcome utility management mistakes

If your company is making any of these mistakes, don’t worry. There are several easy strategies to get you back on track. Your best bet is to consult with a utility management provider that specializes in the multifamily industry. They can advise you on the most effective ways to tighten your expenses.

 

Source: 9 Mistakes Property Managers Make with Utility Management

https://www.creconsult.net/market-trends/9-mistakes-property-managers-make-with-utility-management/

Aurora self-storage market soon to change; projected to add 243,000 square feet in 2023

With one of the most undersupplied markets at only 2.4 square feet of self-storage space per person at the moment, Aurora, Illinois, is set to benefit from very generous self-storage developments, according to a new report by RentCafe. In fact, Aurora is the second fastest-growing city for projected self-storage inventory growth, with 243,000 square feet of self-storage space to be delivered by the end of 2023, making up around 32% of its existing inventory. The list of places adding the most self-storage this year is headed by Elk Grove, California, which has, in recent years, been the fastest-growing in the U.S., and is projected to double its inventory to over one million square feet of space, based on the report. Santa Clarita, California, comes in just after Aurora at No. 3, and is expected to grow its storage space by almost 25% in 2023.

Aurora’s additions will be especially welcome, as the suburb experienced a series of rent decreases in recent periods. In March 2023, Aurora’s street rates were $91 (non-climate controlled, 10-foot by 10-foot unit), down 3.2% from February and down 9% from March 2022, which could be attributed to a shrinking customer base and market saturation.

Source: Aurora self-storage market soon to change; projected to add 243,000 square feet in 2023

https://www.creconsult.net/market-trends/aurora-self-storage-market-soon-to-change-projected-to-add-243000-square-feet-in-2023/

How Real Estate Can Beat Inflation

How Real Estate Can Beat Inflation

 

Former president Ronald Reagan once remarked, “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” While there’s a fair amount of hyperbole in that statement, the comparison of inflation to a robber is an apt one. As a market force, inflation can and will devalue your investments. Fortunately, investors have a powerful tool to restore some balance.

Understanding inflation

What exactly is inflation? The simple definition of inflation is “a general increase in prices and a fall in the purchasing power of money.” The rate of inflation is measured by the Consumer Price Index and reflects the average change over time in the prices paid by consumers for goods and services. There are three things that lead to inflation:

• A cost push, which is an overall rise in prices
• A demand pull, which is a surge in demand for something
• Printing money, which happens when a government is facing a shortfall

The housing market, like all other economic sectors, is impacted by inflation. If there’s a reduction in the available inventory or an increase in demand, prices will go up, as we’ve seen. The price of a house can rise because the actual structure itself may be worth more due to rising lumber costs, but also because people see value in it as an investment.

How to Outperform Inflation

If you were to take your money and leave it in a savings account, you wouldn’t even get a one percent return. Simultaneously, the rate of inflation between April 2021 and April 2022 was 8.3%. Your money would actually lose its purchasing power by sitting in a savings account.

An excellent way to combat inflation is through real estate investing, especially in the rental property market. Even with high inflation, real estate still appreciated well above the general rate of inflation in the past year. While that year-over-year increase in asking rents and home prices could be an anomaly, the demand for rental housing clearly is not. In a study earlier this year, mortgage-finance company Freddie Mac estimated that the national deficit of single-family homes stood at 3.8 million units at the end of 2020. While that shortfall could eventually be made up for, that’s not likely to happen soon. In the meantime, a lot of would-be homeowners will remain in the rental market.

Even if you were to finance your rental property, you’d still be better off financing a rental property than putting your money into a savings account. It sounds counterintuitive, but your debt would be fixed while the rent you could charge would increase with inflation. With tenants paying off your loan, you’d be able to capture the benefits of inflation, both in the rent you could charge, and when you eventually sell your property.

While we don’t know how long we’ll be facing high inflation, investment properties will hedge against inflation for as long as you own them.

 

Source: How Real Estate Can Beat Inflation

https://www.creconsult.net/market-trends/how-real-estate-can-beat-inflation/

Why Should I Sell My Multifamily Property?

Why should I Sell My Multifamily Property?

There are a number of reasons why people decide to sell their multifamily property, but most can be categorized into three groups: Problems, Opportunities, and Changes.

With this decision though comes the consideration of capital gains tax and how to ensure you are getting the most for the sale of your property.

There are several reasons why people do sell:

Problems:             

• Management
• Vacancy
• Maintenance
• Stress
• Health
• Debt
• Neighborhood
• Interest Rates

Opportunities: 

• Strong Market Values
• Alternate Investment
• End of the Hold Period
• Tax Savings

Changes:               

• Divorce
• Death
• Retirement
• Partnership Split
• Relocation
• Consolidation
• Diversification

What do I do with the sales proceeds? I don't want to pay Capital Gains Tax!

There are several options for sellers to defer or minimize capital gains taxes:

• 1031 Exchange
• Delaware Statutory Trust/Deferred Sales Trust  (DST)
• Tenancy in Common Investment (TIC)
• Installment Sale

How do I know I am getting the most money for my property?

We not only market properties for sale. We make a market for properties we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites with direct outreach to our investor database and an orchestrated competitive bidding process that yields higher sales prices. 

What is my property worth?

Contact Us to discuss what information is needed to complete a Complimentary Commercial Broker Opinion of Value (BOV). 

I’m not interested in selling at this time.

This is understandable as only about 5% of the market trades in any given year. We are also happy discuss any purchase or refinance interests and recommend some physical and operational changes you can make to add value to your property you will appreciate when you eventually sell.  

 

Have you thought of selling your property and would like to know what it's worth? Request a valuation for your property below:

Request Valuation

eXp Commercial Chicago Multifamily Brokerage focuses on listing and selling multifamily properties throughout the Chicago Area and Suburbs.

We don’t just market properties; we make a market for each property we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites for maximum exposure combined with an orchestrated competitive bidding process that yields higher sales prices for your property.

 

https://www.creconsult.net/market-trends/why-should-i-sell-my-multifamily-property/

NAR Chief Economist Offers Commercial Real Estate Market Forecast

WASHINGTON (May 9, 2023) – National Association of Realtors® Chief Economist Lawrence Yun presented an overview of U.S. commercial real estate Tuesday as part of the 2023 REALTORS® Legislative Meetings. Yun emphasized challenges facing the commercial real estate market brought on by tightening lending policies among many small and regional banks, which have been a key source of commercial loans. Still, due to continuing U.S. job gains, net absorption has been mostly positive nationwide, Yun said, with the apartment, industrial and retail sectors helping to keep the industry relatively stable.

"The performance of commercial real estate markets will vary across the country," Yun projected during Tuesday's Commercial Economic Issues and Trends Forum. "Markets with strong job gains will naturally hold on much better, while those with weaker job conditions will struggle to raise net occupancy."

Yun said America's apartment sector recorded 116,000 net positive absorptions in the past year, while the industrial and retail sectors added 361 million square feet and 64 million square feet, respectively, over the last 12 months. Office markets, however, saw a reduction in net absorption by 29 million square feet over the same period.

"The national office market will continue to see rises in vacancy rates due to falling demand," Yun added. "The apartment sector will record a modest uptick in vacancy due to robust new supply."

With the impact of mortgage interest rates on the housing market in focus throughout the week at NAR's conference in D.C., Yun addressed the implications of Fed decisions on nationwide commercial markets.

"The Federal Reserve's aggressive rate hikes have damaged balance sheets for regional and local banks, an important source of commercial real estate loans," he said.

Yun estimated that continual rises in rates will in part cause commercial real estate transaction volume to decline by 27% overall in 2023.

"The lack of capital, higher costs of financing and refinancing, and the weakening economy will contribute to a lower overall valuation of commercial real estate prices," Yun said. "Weaker prices will mean opportunities for those with deeper pockets to get deals done in the months and years ahead."

Yun added that appraisal values have fallen by an average of 15% from peaks in early 2022.

 

Source: NAR Chief Economist Offers Commercial Real Estate Market Forecast

https://www.creconsult.net/market-trends/nar-chief-economist-offers-commercial-real-estate-market-forecast/

Top 5 New Apartment Amenities to Budget For in 2023

Top 5 New Apartment Amenities

 

It’s budget season for most rental housing operators. Sing it with us: “It’s the most wonderful time of the year…!”  

OK, we concede that not everyone may agree budget season is the most wonderful time of the year. But hear us out.  

We’ve always loved budget season for the opportunity not only to forecast what the future may hold for a community, but also to dream about how we could kick things up a notch. Budget season provides a chance to contemplate what you could add to your apartment community, both in terms of asset and service upgrades, that would elevate your resident experience—and enable you to reduce costs or increase rental rates and resident retention. When you look at it that way, the budgeting process is like putting together your own community-focused wish list!  

While the possibilities to improve your community may be endless, we know that resources are not. With that in mind, we’ve considered the needs and preferences of today’s renters and focused on what upgrades could make the greatest impact.  

 

Here are the top five apartment amenities we think are worth considering for your 2023 community budget: 
 

1. Reconfigured Common Areas that Encourage Work-Life Connections 

The pandemic has undeniably changed how we live and work. More Americans are working from home at least some of the time, and this change is likely to be a permanent one. Says Haley Stofferahn of architectural firm RSP, “Unit layouts are becoming more flexible with details and fixtures that allow tenants to convert bonus rooms into an office, a den or a fitness area. We’re also seeing more built-in workstations within units. Outside individual apartments, what once would have been a disused business center is being replaced with comfortable, connected co-working space.”  

When planning your 2023 budget, consider the common areas in your leasing center, clubhouse, and buildings. Where can you make modifications to better accommodate your residents who are working from home? Are there spaces that are underutilized that could be reinvented as either shared or individual workstations? The National Apartment Association reports that throughout the industry, community developers and owners are adapting common areas for this purpose. “Instead of lounge spaces with soft seating, there are intentional co-working areas,” says Alison Mills, VP of Design and Development at CRG in Chicago. Reimagining underutilized or even obsolete spaces such as business centers to support how your residents live and work today will make your community more appealing to residents and prospective residents alike.
 

2. Unforgettable Resident Events  

According to a RealPage study, one of the NMHC Top 50 ownership groups found that a residents’ likelihood to renew improves by 8% if they made even one friendship or connection within their apartment community.  

If boosting renewals is your goal—and it should be—then strengthening the sense of community among your residents should be top of mind. Purposeful resident events are the ticket to fostering friendships among your community’s residents.  

Resident events have come a long way from the days of drive-through breakfasts. Today’s thoughtfully planned events are about bringing residents together to enjoy memorable, social share-worthy experiences. When planned and executed successfully, resident events can make a positive impact on resident retention and serve as a powerful marketing tool. Prospects frequently study a community’s social feeds when deciding where to live, and when your Instagram feed includes evidence of an active and fun resident community, you’ll drive leasing traffic and leases.  

Consider budgeting for professionals to help you pull of sensational resident events in 2023, such as:  

• Pet costume contest and portraits 
• Murder mystery dinner 
• Charcuterie board design 
• Dive-in disco 
• Comedy in the clubhouse 
• Flower arranging  

Enlisting the help of a professional event planner not only alleviates the logistical party-planning burden from your on-site team but ensures a top-notch event.
 

3. Fitness Center Experience Upgrades 

A new year and a new budget can be a perfect opportunity to upgrade the offerings in your fitness center. Renters’ fitness practices and preferences have changed, and yesterday’s equipment may not satisfy. Multifamily Executive reports that in place of treadmills and other more dated equipment, rental housing communities are adding yoga, barre, and cycling rooms, CrossFit training areas, and internet-connected equipment which allows users to stream classes, work with trainers, and interact with other users. Other high-tech equipment that is popular today includes Peloton bikes, Lululemon’s MIRROR, and rowing machines. And according to the National Apartment Association, “pickleball has become one new darling.” 

In addition to budgeting for new equipment and annual equipment maintenance for the New Year, consider that your fitness center also presents an outstanding opportunity for building community. Just like with your resident events, budgeting for a professional to come in and deliver high-quality, engaging fitness classes and events on-site can be a powerful resident retention and leasing tool.  You can even take the fitness out of the fitness center to an outdoor location such as a community green space, rooftop, or neighboring nature trail. Possibilities include:  

• Yoga classes 
• Fitness bootcamp 
• Zumba  
• Bend and brew (yoga and coffee) 
• Group run followed by a dialogue session with a nutritionist 

To ensure success with your upgrades and events, gather input from your residents before investing in new initiatives. It’s important to match your services to your residents’ desires in order to make a positive impact.
 

4. Upgraded Air Purification Systems 

The rental housing industry is seeing an increased emphasis on air quality both in common areas and in residents’ individual homes. As the Milwaukee Business Journal reported, “the Covid-19 pandemic has forced people to think about the world in new ways, analyzing whether that door handle is contaminated, handshakes are harmless or the air they breathe can be trusted.” In the National Multifamily Housing Council’s 2022 Renter Preferences Survey Report, 71% of respondents report interest in enhanced indoor air quality. An investment in upgraded air purification systems can drive both resident satisfaction and prospective resident demand.  

Systems to consider for your 2023 budget include bipolar ionization systems which purify building common areas such as lobbies, clubhouses, fitness centers, and other amenity spaces. According to Business Insider, this equipment can be integrated into existing HVAC systems to surround and deactivate harmful substances in the air such as airborne mold, bacteria, allergens, and viruses. Communities may also consider upgrading residents’ in-unit air conditioning filters from the standard style to a high efficiency particulate air (HEPA) filter which can, according to the US Environmental Protection Agency, theoretically remove at least 99.97% of dust, pollen, bacteria, and airborne particles.
 

5. New Convenience Services for Residents 

Finally, consider adding services that help to make living at your community both easy and convenient. What could be more appealing to your customers than a lifestyle with fewer everyday hassles?  

For example, have you noticed that residents receive a lot of packages these days? Online ordering and deliveries of perishables such as groceries and meals to apartment community residents have skyrocketed since 2020. That trend shows no sign of slowing down—especially as Amazon recently announced the addition of another Prime Day to the annual calendar, called Prime Early Access Sale (brace yourself!).  

Door-to-door package delivery services can be a huge time- and sanity-saver for both residents and community staff. Consider budgeting for this service in the New Year and removing your team from the chaos that is accepting, storing, notifying, and delivering packages to your residents—so you can focus on the activities that make a bigger impact on your community.  

A resident experience app is another enhancement that benefits both the resident and community team and makes life easier for all. Here are just some of the tasks that can be accomplished from a few of the existing resident apps in the multifamily space: 

• Communicating with residents 
• Scheduling move-ins 
• Managing, scheduling, and tracking maintenance service 
• Managing event RSVPs  
• Tracking rental payments  
• Keyless access control to apartment homes, amenities, and common areas
   

Budgeting for the addition of a resident experience app in 2023 means you can bring a whole host of convenient new services to your residents, while streamlining tasks for your team.   

Preparing your community budget for the New Year can be stressful, we know. Narrowing down the seemingly endless list of initiatives, technologies, and enhancements available to your team can be a daunting task. We hope this list of the top five amenities we think are worth budgeting for serves as a good starting point for you as you consider your many options for making a positive impact on your community.  

Best of luck to you this budgeting season, or as we consider it, the most wonderful time of the year!  

 

Source: Top 5 New Apartment Amenities to Budget For in 2023

https://www.creconsult.net/market-trends/top-5-new-apartment-amenities-to-budget-for-in-2023/

Partners

eXp Commercial Partners provide our clients with the best-in-class services needed to complete a streamlined, cost-effective, successful commercial real estate transaction and assist you throughout the ownership cycle, including Capital Markets, 1031 Exchange Intermediary, Cost Segregation, Property Tax and Title Services
https://www.creconsult.net/partners/

Foreign Investors: What Do They Need to Know Before Investing in the US

Foreign Investors: What Do They Need to Know Before Investing in the US

There are no citizenship requirements for buying real estate in the US. Foreigners who are non-citizens can even apply for a mortgage in the US. However, foreign property owners may face complex tax laws compared to US citizens.There are no citizenship requirements for buying real estate in the US. Foreigners who are non-citizens can even apply for a mortgage in the US. However, foreign property owners may face complex tax laws compared to US citizens. There are also certain factors to consider before buying real estate, such as a visa and other requirements. Here’s what foreign investors need to know before investing in property in the US:

Basic Requirements for Buying Property in the US

The following are basic requirements you’ll need to buy property in the US.

* Valid foreign passport

* US visa

* Social Security number or ITIN

* Bank statements

* Financial documents from your foreign bank

* Evidence of reserves

* Tax return

If you’re only visiting the US to buy property but have no intention of staying long-term, you must hold a B-1 or B-2 visa. The B-1 is for business visits, while a B-2 is for tourism. As a B visa holder, you can stay in the US for up to 6 months at a time, which is generally enough time for you to make any major real estate decisions. However, to secure this visa, you must be able to prove that you have reserves or sufficient funds to support yourself during your stay.

Mortgages for Non-Resident Foreign Buyers In 2021, 61% of foreign buyers made all-cash purchases for property. As a foreign national buyer, you certainly have the option to pay all cash. However, you can also obtain a US mortgage without a US credit history. There are US mortgage lenders that specialize in foreign national mortgage loans. To obtain pre-approval, you’ll need to provide additional requirements that demonstrate your ability to make payments on the property, including evidence of assets or savings that can help you make a down payment.

Because you don’t have a US credit history, the US lender will also likely use an International Credit Report. The credit report will provide data that mortgage lenders would typically need to assess creditworthiness. It will reveal your credit history in your home country, property ownership, and property tax. The lender will also investigate public records to identify if there are any liens, judgments, or foreclosures in your name for property inside and outside the US.

Taxes for Foreign Property Owners

The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) may apply to your property purchase. The tax law will impose a US income tax on you should you eventually decide to sell the property or receive income from it. In general, income from US property owned by a foreign national is taxed at a 30% rate. However, there are tax treaties that exist with several foreign countries. And if the treaty applies to you, you might enjoy a reduced tax rate. Additionally, some states may require an additional holdback from a foreign investor when they do sell a property in the United States.

Because of the complexities of investing in real estate in the US as a foreigner, it’s best to work with a reputable real estate company.

 

Source: Foreign Investors: What Do They Need to Know Before Investing in the US

https://www.creconsult.net/market-trends/foreign-investors-what-do-they-need-to-know-before-investing-in-the-us/

What Are the Top Two Real Estate Fundamentals to Keep in Mind When Investing?

What Are the Top Two Real Estate Fundamentals to Keep in Mind When Investing?

There are different ways to invest in real estate. If making money sooner rather than later is your goal, one of the key ways you can do that is by purchasing real estate that you can rent out. Another way to earn money is by buying undervalued real estate, fixing it up, and selling it for a profit. You may even be considering participating in real estate trust (REIT) exchanges. Whether you’re planning to become a landlord or a real estate flipper or diversify your portfolio, there are important factors to consider before investing in property. Let’s break down each of these:

Define your Investment purpose

Define your reasons for investing. What are your cash flow and profit expectations? Are your goals short-term or long-term?

As mentioned, there are different ways to invest in real estate. Are you buying property for self-use? This approach allows you to save on rent while also enjoying value appreciation. Or are you planning to be a landlord so that you can gain regular rental income and long-term value appreciation? There’s also the option to buy and sell or “flip a house” for a profit. There’s also the long-term buy and sell option, which means investing in real estate now in the hopes that it will appreciate over a long period and satisfy your long-term goals.

Understand the importance of location

“Location, location, location.” Location cannot be stressed enough because renters and home buyers will also be prioritizing the location of their houses. A potential tenant or buyer may love the home but will hesitate if its location is in a “bad” neighborhood or “off-grid.” Unless the renter or buyer’s goal is a secluded home in isolation, they’re likely looking for access to markets, healthcare facilities, schools, gas stations, and public transportation.

Generally, the closer your investment is to local amenities, the better. We live in a day when “30 minutes or less” and “same-day delivery” is still not fast enough for most consumers. The same goes for traveling to amenities such as grocery stores, hardware stores, restaurants, shops, and entertainment. Renters and homeowners also want easy access to public transportation to ease their commute to school and work. This includes a preference for properties closer to highways, bus stops, and train stations.

But what do you do when supply is low, and prices are high in the best neighborhoods? You do your research and look for the locations that have potential. Look for signs that a community is growing. Watch out for access to major roadways, new constructions, declining crime rates, and city development projects. It’s also a good sign if the area has popular chain businesses coming soon or if an established company has announced they’ll be opening a branch or office in the area. Any sign of new construction and businesses mean more jobs. And more jobs mean more people are moving to the area and looking for homes.

 

Source: What Are the Top Two Real Estate Fundamentals to Keep in Mind When Investing?

https://www.creconsult.net/market-trends/what-are-the-top-two-real-estate-fundamentals-to-keep-in-mind-when-investing/

Why I Want to Know More About ESG in Multifamily

Why I Want to Know More About ESG in Multifamily

Interviews for this year's 20 for 20 White Paper, ESG (Environment, Social and Governance) was an unsurprisingly common theme. Based on the 20 conversations with senior executives, it seemed that ESG was becoming a driver in many decisions, including technology implementations.

At the time, I noted that while the influence was big, it was unspecific. The parameters executives used to define potential ESG benefits of technology projects seemed extremely broad. The most sophisticated companies in the domain appeared to be at the stage of defining how they could measure ESG rather than using it as a decision-making criterion for individual projects. 

The broader media coverage of ESG in the nine months or so since those interviews has presented a mixed bag of views on ESG. It makes me want to know more about how it's affecting multifamily operations and technology. 

A Shifting Tide?

I was interested to read a recent special in The Economist (ESG Investing: A Broken Idea) that provided a detailed review of current ESG investment practices. The collection of articles referenced (and were perhaps inspired by) an essay series by Tariq Fancy, the former chief investment officer for sustainable investing at BlackRock, the world's largest asset management company. 

Fancy called into question the ultimate benefits of ESG initiatives, claiming that the profession is little more than "marketing hype, or spin and disingenuous promises from the investment community." He pointed out that investments were rendered acceptable according to the ESG narrative that could be established rather than hard facts about their benefit. 

The Economist took a similar perspective, generally calling into question the legitimacy of current ESG measures for several reasons. One, there are far too many of them. A study of six ESG rating agencies found that they used 709 metrics across 64 categories, only ten of which were common to all six agencies. 

As well as the sheer number of metrics, the Economist questioned the variety of interchangeable metrics that can contribute to ESG scores. If firms can balance poor "environmental" scores with higher "social" ones—which are heavily dependent on the prevailing political climate—it is hard to see how the scores encourage real accountability. 

The Economist strongly suggests that the ESG industry is, at least in part, driven by the need for asset management firms to identify new revenue streams. The recent apparent cancellation of "Dilbert" cartoons for ridiculing ESG culture at work also suggests a sadly familiar politicization of what ought to be a force for good.

A Multifamily Perspective

My sense from the executive interviews is that multifamily perspectives of ESG are firmly downstream of the broader investment community. Of the interviewees, public companies or anyone who has to raise capital paid the most attention to ESG. If investors look increasingly to the ESG performance of companies in deciding where they place investments, then ESG is de facto important. But details are scant.

The Economist's strong recommendation is to scrap most of what investors currently think of as ESG and replace it with just "E," which should stand not for "emissions" rather than "environmental." 

If companies were to hold themselves to the standard of trying to reduce emissions, stakeholders would at least have a chance to establish whether or not the companies were achieving their goals. There would also be a clear and broad benefit: reducing the contributions to climate change. 

The appeal of this approach is to make targets specific and measurable. The article parallels the other things we use to measure investments, most notably accounting measures. For example, the metrics included in companies' profit and loss statements and balance sheets are concrete in a way that ESG metrics currently are not. 

Towards Concrete Measurements?

If the tide were to turn in the investment community way the Economist and Mr. Fancy recommend, it is interesting to consider what it would mean for multifamily. It might tighten the scope so that only things with a direct environmental impact matter. Utility usage and the selection of development materials could become the primary or even the sole focus of the thing we currently call ESG. 

Of course, at this point, nobody knows how priorities will change. But what particularly interests me is what multifamily firms are actually doing concerning ESG. 

When I prepare to interview 20 more leaders at the end of the year for next year's paper, you can be sure I will ask them for their views on ESG initiatives. I want to know more about what went on this year, how we can expect them to change in 2023, and to get a read on where ESG sits in the priorities of executive leadership.  

 

 

Source: Why I Want to Know More About ESG in Multifamily

https://www.creconsult.net/market-trends/why-i-want-to-know-more-about-esg-in-multifamily/

Multifamily sellers: How to qualify a buyer before going under contract

Multifamily sellers: How to qualify a buyer before going under contract

Don’t waste time and opportunities: learn how to select the right buyer every time

As the seller of a multifamily asset, it’s crucial that the buyer you select is the best possible prospect for your property. Don’t waste time, money, and opportunities: you must ensure they’re qualified and can close and execute the contract as signed.

Keep reading to learn why it’s essential to qualify a buyer before going under contract on your multifamily property and how to do it.

Why do I need to qualify a buyer?

It’s important to close with the first buyer you select. If you don’t, each buyer after that will ask themselves, “What did that other buyer discover about this property that I am missing?”.

When you enter into a contract with a refundable deposit, you’re basically giving your chosen buyer a free option on your property for a period of time, typically 30–60 days. Before you proceed, you must be confident that they can close and execute the contract as signed.

What’s more, your tenants and staff will be disturbed throughout the contract process. To minimize the period of disruption, you should do all you can to ensure the transaction will close successfully at the end of the contract process.

As a seller, you’re required to provide due diligence information to the prospective buyer. When you qualify your buyer, you’ll greatly reduce the risk of wasting a lot of time and doing a lot of work only to not close on the property.

How do I qualify a buyer?

Before you sign the contract, make sure that your prospective buyer can provide certain items. Always ask them for the following:

– Proof of funds

– Lender pre-qualification

– A list of the other properties they own

– A list of the sellers and agents that they have worked with

For added reassurance, it’s recommended that you call the buyer’s lender to confirm their pre-qualified status. You can also call the agents, sellers, and buyers they’ve closed with in the past to enquire about how the transactions went.

Has the buyer toured the property in person before making an offer? Have they reviewed the due diligence information beforehand? If they have, this is a great sign. It’s proof that they have seen and have taken into account any issues with your property, and this greatly reduces the chances that they may later want to back out of the sale, saying they were unaware of the building’s condition. Be very wary of a buyer who doesn’t tour your property in person.

A prospective buyer who shows they’re motivated and wants to move quickly is also a great sign for a successful closing. The shorter the due diligence period, the better, and the larger the deposit, the better.

When you spend the time making sure your prospective buyer fulfills these criteria, you’ll put yourself in a great position to close successfully and ensure a quick and smooth transaction.

If you need help selling your multifamily property, eXp Commercial is here. Our objective as your multifamily advisor is to help you achieve your investment goals: from determining the listing price to selecting the best buyer and handling the sale process through to the closing, we’ll facilitate a smooth transaction for you.

 

Source: Multifamily sellers: How to qualify a buyer before going under contract

https://www.creconsult.net/market-trends/multifamily-sellers-how-to-qualify-a-buyer-before-going-under-contract/

Maintaining Your MultiFamily Real Estate Investments Property Checklist

Maintaining Your Multi-Family Real Estate Investments Property Checklist

Penny wise and pound foolish. Everyone has heard that old saying, but do you really know what it means. At its most basic it means to not choose to save pennys on items that if not addressed will cost you much more (back when this saying first came about, a British pound comprised 240 pennys). How this applies towards real estate investments are many fold, and specifically really seen in the area of maintenance.

In fact, most savvy real estate investors realize that the best way to maximize their returns is to make sure that their investments are well maintained. Not only will a well maintained property maximize their returns, but it will also protect their investment by at the very least maintaining their ROI.

Maintenance is as critical to your investment as any other component as staying ahead of issues can save you money, time and potential headaches. We reached out to our friends at Perma Pier to help us put together a checklist of sorts for routine property maintenance and advice on what to look for to prevent any issues getting out of hand. Here's a few of the tips you'll find:

• Walk Thru each unit at least annually to check for small water leaks, that may easily be fixed for a few dollars, vs. replacing damaged wood due to a continual leak.

• Have your electrical system inspected or tested annually: electrical issues account for 24.5% of all reported fires in non-residential buildings.

• Inspect the caulking and weather-stripping around windows and doors: finding and fixing air leaks could save you thousands in energy bills.

• keep an open line of communication with your residents and encourage them to report maintenance items they see and/or feel need attention.

 

 

Source: Maintaining Your Multi-Family Real Estate Investments Property Checklist

https://www.creconsult.net/market-trends/maintaining-your-multi-family-real-estate-investments-property-checklist/

1120 E Ogden

Retail / Office Space For Lease | 3,674 SF | $20/SF NNN
1120 E Ogden Ave, Suite 101 | Naperville, IL 60563
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441

https://www.creconsult.net/retail-office-for-lease-1120-e-ogden-ave-suite-101-naperville-il-60563/?wpo_all_pages_cache_purged=1

9301 Golf

Golf Sumac Medical Offices For Lease | 998 - 2,853 SF | $28/SF MG
9301 West Golf Rd | Des Plaines, IL 60016
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441
https://www.creconsult.net/golf-sumac-professional-building-medical-office-space-for-lease-9301-golf-rd-des-plaines-il-60016/

The Future of Multifamily is Now

The Future of Multifamily is Now

Here are three fascinating current trends in multifamily housing that are dramatically changing the rental market as we know it:

1. Build-To-Rent (BTR) Single-Family Homes Are Bringing Privacy and Backyards to Renters 

The development of new, single-family homes specifically built for the purpose of renting is a trend that Forbes says is “hot and getting hotter by the minute.” According to RentCafe, Build-To-Rent homes are desirable because “the trend combines the financial and leasing flexibility of a rental with the amenities and convenience of a professionally managed property, all while living a single-family home lifestyle.”  

Built-To-Rent single-family homes have wide appeal. Renters of all demographics are tempted by more space and privacy than can be found in a typical multifamily community. Many would-be-homeowners may not be in a position to purchase a home, thanks to skyrocketing home prices which are outpacing wage growth. Inflation and rising interest rates compound the affordability challenge. Build-To-Rent has found its sweet spot, according to Forbes: at “the intersection of desire for a home and economic reality.” 

That explains why single-family rental home construction is going gangbusters all across the country. 2021 was a record year with 6,740 new Build-To-Rent homes completed. 2022 promises to be even stronger with nearly 14,000 Build-To-Rent homes under construction as of January, according to RentCafe’s analysis of Yardi Matrix data.  

GlobeSt reports that Build-To-Rent is becoming more important to institutional investors and has in fact outperformed traditional multifamily for the past five years. Says Paul Fiorilla of Yardi Matrix, “With so much capital looking to invest in the sector, and the demand for rentals rising, build-to-rents are likely to increase rapidly for the next several years, if not longer.” It appears this housing trend will play an outsize role in the future of the rental housing industry for years to come.  

2. Co-Living Arrangements Are Making Space-Sharing Glamorous 

The term co-living might conjure up housing arrangements that are less than desirable for most adults, such as cramped college dorms, youth hostels, and co-ops. But the concept of co-living is experiencing what some refer to as a glow-up: it’s gotten better over time.  

What is co-living, exactly? According to SALTO, “co-living is when a group of three or more unrelated people live together in one place.” The concept has evolved dramatically in recent years and come to include a wide variety of living arrangements which are much more attractive than shared spaces of old. Says CBRE, modern co-living properties are much like student housing for young professionals. The purpose-built or renovated multifamily assets are designed around several unrelated individuals sharing an apartment unit, sometimes referred to as a ‘pod.’” 

The concept of co-living is gaining in popularity for several reasons, including:  

• Appealing amenities: Co-living spaces differ widely, and their amenities do, too. But most make life easier and more enjoyable with creative perks such as furnishings, bundled utilities, coworking areas, and community events. 
• Flexible lease terms: Many co-living spaces allow residents the freedom to move when the spirit moves them, whether to experience a different floorplan across town or a different lifestyle across the globe 
• Camaraderie and connection: Many co-living communities feature gathering spots such as cafes and offer social events like happy hours, comedy open mic nights, and exercise classes 

• Shared Economy: Co-living appeals to residents who prefer to rent vs. own—not just their home, but their experiences and things. Consider the popularity of other sharing solutions such as Uber, Airbnb, JUMP bikes or Rent the Runway.  
• Affordable luxury: Sharing a living space can allow renters to save money while maintaining a higher standard of living than they might enjoy on their own. 

Co-living is another rental housing trend that appears to be both heating up—and here to stay. CBRE reports that “co-living companies plan to open more than 55,000 beds in the next few years and have raised hundreds of millions of dollars of equity to meet their expansion targets.” According to Vox, major co-living companies include Common, Ollie, Quarters, Startcity, X Social Communities, and WeLive, which is run by the co-working company WeWork.

 

3. Flexible, Short-Term Vacation Rentals Are Easier to Manage 

Speaking of the shared economy, another trend we are watching in the multifamily space is how renters, owner/operators, and technology companies are innovating to get in on the unsatiable demand for short-term vacation rentals. This has been a volatile space for rental housing, with many owners’ policies and leases as well as local zoning laws regulating or even forbidding short-term vacation rentals. Despite that, PropModo reported at the beginning of 2021 that 65% of recent Airbnb bookings were in multifamily buildings—and home rentals have outperformed hotels in 27 global markets since the start of the pandemic. Clearly the appetite for short term rentals is healthy.   

The vacation rental’s most well-known player, Airbnb, has deployed various solutions in an effort to capture a slice of the multifamily rental market as vacation rentals—some more successful than others. For example, the company’s “Airbnb-friendly building program” was put on the back burner in March 2020 according to Rental Scaleup.   

In June of 2021, multifamily software and data analytics provider RealPage announced an exclusive partnership with Airbnb to launch an apartment home sharing solution called Migo. According to a RealPage press release on the launch, “residents can recoup a portion of their monthly rent depending upon how frequently they home share exclusively on Airbnb. Owner can differentiate their apartment offering and share the financial benefits of home sharing with residents.”  

Benefits of offering home sharing as an amenity for rental housing communities include: 

• Financially advantageous for both renters and building owner/managers 
• Added incentive for real estate investors 

• Higher stabilized occupancies, faster lease ups, and enhanced property NOI 
• Improved resident satisfaction 

Home sharing may not be suitable for all communities. It is most desirable and practical in urban core areas with high walkability. Newer communities equipped with smart access technologies are particularly well-suited to home sharing.  

The pandemic caused a shift in the way people live, work, and travel. Many who formerly reported to an office setting daily have transitioned to hybrid work or permanent work-from-home arrangements, allowing more time and freedom to travel. According to Forbes, “with more people working remotely now, renters can travel more and not risk losing as much money on rent. It could increase listings (on Airbnb) quite substantially, with close to 50 million rental units in the U.S. alone.”  

We’ll be closely watching to see how successful rental housing owner/managers are at participating in the vacation rental economy. It seems evident that home sharing is here to stay; what’s less clear is how adept multifamily operators will be at managing the demand and accompanying challenges of short-term rentals.  

 

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It’s true that the future of multifamily may not look quite like the setting of The Jetsons. For example, we have yet to see a rental housing community with conveyer belts that take residents from point A to point B. We’re also still awaiting the flying car that folds itself into a suitcase, no garage required. Developers have not mastered the 1,000-unit community on stilts concept just yet, and while multi-use real estate is all the rage, we’re still watching for the first rental property to feature a floating shopping mall.

Nonetheless, today’s reality for owners and managers of rental housing is evolving rapidly, and we’re excited about the rapid pace of innovation and the potential that comes with it.  

 

Source: The Future of Multifamily is Now

https://www.creconsult.net/market-trends/the-future-of-multifamily-is-now/