If You're Hesitant To Hire A Broker For Your Multifamily Property Read This

Multifamily brokers frequently hear this comment from apartment property owners: “I don’t want to list, but you can bring me a buyer.” Their reasons sometimes include previous bad experiences, fear of getting “tied up” in a formal agreement, tenants finding out the building is for sale and making anxious calls to management, thinking the commission will be halved, or not really being interested in selling. Whatever the reluctance, the reality is that if an investor wants or needs to sell, the best thing they can do is hire a broker. Let’s address a few of those common objections first.

If you had a previous bad experience, more than likely, you hired the wrong broker. The specific agent you hire or the firm they work for should have experience in both the geographic market and transaction size — ask for their track record. While you’re at it, ask for references from clients, and make sure at least one is for a listing that did not sell. These simple steps will give you insight into whether you’re working with a pro.

As for getting “tied up” or having anxious tenants because the building is selling, a professional broker typically allows you a cancellation right for the listing. If there are deadlines you need to meet, make sure your broker understands. And while no broker can guarantee tenants won’t find out the building is being sold, experienced brokers can modify marketing by limiting showings to only vacant units, specific hours for low visibility, limiting digital footprint tenants might see, etc., to reduce the probability of tenants finding out.

That said, the best course is simply to announce to tenants that the building has been listed for sale, explain the sale may not be successful, and assure them that their lease runs with the building, not the owner, and is their protection during the lease term against rent increases or being forced to move.

These are certainly not the only reasons clients are reluctant to list but whatever is yours, talk to your broker about your real concerns. A seasoned broker will most likely have previously faced a similar challenge and should be able to address your concern. But this only addresses your concerns about why you shouldn't hire a broker — it doesn’t explain why you should.

The first benefit is understanding the value of your property. A professional, qualified broker who specializes in your asset or area will be able to give you a price range to expect so that you can decide whether selling makes sense. If you move forward, this specialist will also have databases of the most qualified, active investors in the market and have relationships and influence with them. The ultimate buyer of your property will more than likely come from one of these relationships. But a broker won’t rely exclusively on these relationships. A good broker will also create a professional marketing plan with appropriate amounts of promotion across email, mail, websites, and listing services.

All this leads to the most important part of hiring a broker: competition. Trying to sell your building by letting a broker “bring you a buyer” is like having an auction for a painting, and one person shows up to bid. If the building is priced correctly, a professional marketing plan will create a competitive environment for investors so that the process itself determines not what the market wants to bid but what the market is willing to bid.

Larger portfolio owners might be reluctant to list with a specific broker because they have relationships with numerous brokers or firms in the market, and they don’t want to offend anyone by choosing a competitor. Instead, they tell every relationship to “bring me a buyer.” If this is you, think a few more steps down the chain of events.

First, this may only create chaos. You not only have brokers racing each other to bring clients, but each is advocating to you why their buyer is the best so that they can get the commission. Then you ultimately have to pick one buyer/broker anyway and disappoint the others after they’ve put work in. Alternatively, a listing agreement assures a commission for the listing agent if the property sells; therefore, there is no incentive to advocate for any one specific buyer.

An additional benefit of listing a property with a broker comes after a sale contract is signed. Any number of unexpected or challenging issues can arise during the escrow period of a sale. A seasoned broker has probably experienced something similar before. This person will also quarterback the entire process of due diligence, appraisal, and loan approval.

The most important benefit of exclusively listing your property with a broker is representation. You will have a hired gun with a fiduciary obligation to advocate for your best position in a deal. A professional broker will be ethical, transparent, and fair but will also be your personal fighter in the arena of marketing, negotiation, and escrow management.

This short list does not address every objection an owner would have for not listing, nor every benefit you receive from hiring a professional broker, but hopefully, it gives you a few things to consider. If you want to maximize your price and minimize your anxiety with the selling process, hire a broker. The benefits far outweigh the cost.

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/if-youre-hesitant-to-hire-a-broker-for-your-multifamily-property-read-this/

Chicago apartment rents cooling off? Compared to previous years, according to a new report by Apartment List

Multifamily rents cooling off at last? Compared to previous years, according to a new report by Apartment List.

While prices remain up 5.5% year-over-year, they fall behind the Illinois average of 6.6% and outpace the U.S. average of 4%.

This 5.5% growth increase seems high, but it’s significantly slower compared to what the city experienced at the same point about a year ago: 15.5% from January to December 2021.

Not to mention, Chicago rents decreased 1.1% in the past month, compared to the national rate of -0.8%. This ranks No. 69 among the 100 largest metros in the U.S., based on the report. Surprisingly, Paradise, Nevada ranked No. 1 for month-to-month rent growth (2.3%) and New York City ranked No. 100. (-3.0%).

Apartment List also found Chicago to be No. 56 in terms of the most expensive large city in the U.S. The median rent is currently $1,277 for a one-bedroom apartment and $1,386 for a two-bedroom, citywide. Across all bedroom sizes, the median is $1,375. The median rent across the nation as a whole is $1,153 for a one-bedroom, $1,321 for a two-bedroom and $1,344 overall. This means the median rent in Chicago is 2,3% higher than the national and similar to the prices you’d find in Durham and Fayetteville, North Carolina.

Zooming out a little further to include the wider metro, Apartment List found the median rent to be $1,360, meaning the median price in Chicago is 1.1% greater than the price metro wide. But Chicago isn’t the most expensive city in the area: Naperville is currently the most expensive, with a median rent just short of $2,000. Conversely, Waukegan is the most metro’s most affordable city, boasting a median rent of $1,262.

Source: Chicago apartment rents cooling off? Compared to previous years, according to a new report by Apartment List

https://www.creconsult.net/market-trends/chicago-apartment-rents-cooling-off-compared-to-previous-years-according-to-a-new-report-by-apartment-list/

How to Implement a RUBS Program at Multifamily Properties

Introduction

Record inflation means that nearly all consumer products cost more today than they did a year or two ago. Utility costs are no different. For example, electricity prices nationwide have jumped 7.5% since last year – and they’re expected to continue climbing.

Utility costs represent a major expense for landlords. This is especially true at multifamily apartment buildings where base rent often includes utility costs. When landlords must incur these costs, the cash flow impacts can be substantial.

In this article, we will look at what’s known as RUBS -or a ratio utility billing system. Implementing a RUBS program is a common way owners pass utility costs on to their renters.

What is a Ratio Utility Billing System (RUBS)?

Many properties are originally built with only one set of utility meters. The one set of meters measures electricity, gas, and water usage for the entire building.

A RUBS program is a way of allocating utility costs to tenants without submetering each unit.

In a single-metered apartment building, the landlord covers all utility costs and charges a premium rent to recover those costs. Instead, an owner can submeter the property so that each unit has its utility meters.

However, submetering can be costly and, in many cases, inefficient. Instead, owners may consider implementing a Ratio Utility Billing System – or RUBS.

A RUBS program is a way of allocating utility costs to tenants without submetering each unit. Instead, each tenant pays a certain portion of each month’s utility bills using some pre-set formula.

How to Calculate RUBS Payments

RUBS considers several factors, such as unit square footage, number of bathrooms, presence of washers/dryers, and unit occupancy. (The more sophisticated RUBS programs even submeter irrigation to pass those water and sewer costs on to tenants!

It’s important to understand that no one RUBS formula is used to account for total utility usage. Instead, each utility generally has its formula.

The gas bill may vary depending on whether the unit has a gas fireplace, gas stove, gas heat, or gas dryer.

Electricity bills include the number and type of light fixtures, electric stoves, electric heating, and electric washers and dryers.

Here is a simple example. In a 20-unit apartment building, Unit 101 might be assigned a RUBS ratio of 4% if the total water bill for the property is $1800 that month. The tenant would be responsible for $72 toward that cost ($1800 x 0.04).

Unit 202 might be larger and, therefore, may have a RUBS ratio of 5.75%. In that case, the tenants would be responsible for $103.50 toward that cost ($1800 x 0.0575).

Similar calculations would then be made for each of the monthly utility costs.

Top Reasons to Implement RUBS System at Multifamily Properties

1. Increase Revenue

Any operational cost that is passed through to tenants is essentially saving owners money. At a 300-unit apartment building, for example, the annual water and sewer savings can top upwards of $70,000.

A RUBS program is a very effective way for owners to preserve their cash flow and increase their net operating income.

Let’s say utilities represent 20% of an owner’s operational costs. Depending on the size of the property, that 20% can translate into thousands of dollars in savings.

A RUBS program is a very effective way
for owners to preserve their cash flow and
increase their net operating income.

Of course, landlords who implement a RUBS scheme may have to adjust their rents accordingly. Owners should factor this in and be sure there is a sufficient delta to justify using RUBS.

2. Avoid Costly Submetering

Ideally, the properties would be sub-metered at the time of construction. Unfortunately, this often isn’t the case. Owners who want to pass through utility costs to tenants can either submeter each unit or utilize a RUBS program.

Submetering is complicated and can be capital-intensive. Each submeter can cost upwards of $750 to install. In older buildings, especially those with several pipes feeding a single unit, retrofitting to the submeter may be extremely expensive.

Submetering can also disrupt tenants simply because their utilities must be turned off during installation. Tenant satisfaction is always an important consideration.

3. More Stable Cash Flow

Fluctuating utility prices can disrupt an owner’s original cash flow projections. For example, a 10% increase in electricity costs will quickly eat away at revenue if the owner incurs those costs.

Of course, multifamily owners can increase rent to accommodate higher utility costs. However, most tenants are on year-long leases, meaning landlords must wait until the lease expires to increase rents.

A tenant may opt not to renew their lease if rent increases are significant. Unit turnover can also cut into the cash flow of an owner.

A RUBS program ensures more stable cash flow from month to month and year to year.

4. Easier to Market Units for Rent

Some people will only look for apartments listed within a certain price range. Multifamily owners utilizing RUBS can charge lower base rent, attracting a larger audience. They can then turn around and boost revenue on the back end by passing utility costs on to their tenants.

5. Forced Appreciation

Because commercial values are largely based on net income. It is the properties with higher NOI that are considered more valuable. RUBS can increase multifamily NOI and in doing so, creates forced appreciation based on a simple cap-rate calculation.

Why RUBS is a Good Hedge Against Inflation

Economists often debate whether rising energy prices contribute to inflation or vice versa, whether rising inflation causes energy prices to surge. In any event, both are currently on the rise.

One way to offset higher utility costs is by implementing a RUBS strategy. With this strategy, utility costs become a variable expense, meaning that when costs go up, someone else pays the difference.

A RUBS system allows multifamily owners to pass these higher costs on to tenants, thereby saving money. Owners who have low fixed costs tend to profit as inflation rises. Owners can increase rent to account for inflation without incurring the expense of rising utilities.

How to Implement a RUBS Program at a Multifamily Building

Owners should start by assessing their property. Determining whether the current setup, a RUBS program, or submetering units would be the most cost-effective. Assuming RUBS is the solution, owners should begin reaching out to their utility providers to make this change.

Implementing a RUBS program is also a great time to have the utility company do an energy assessment of the building. This helps the owner uncover ways to improve the property’s energy efficiency. Subsequent improvements (e.g., installing low-flow toilets or ductless heating) will lower utility costs for the tenants.

It is important to give tenants notice that this change is coming. The best practice is to give tenants six months’ notice if possible. The notice should explain the new policy, its rationale, and how utility costs will be calculated and allocated. Clear communication is essential.

Implementing a RUBS program is also a great time to have the utility company do an energy assessment of the building.

Any new lease should include information on how RUBS will be used to charge tenants. It should also explain how tenants can pay their utility bills each month. This helps to prevent surprises or disputes down the road.

On the operational side. All building, unit, and resident information must be uploaded into the property’s billing system.

They should verify that all the information provided to tenants is accurate between notice to tenants and actually “switching on” RUBS. Property managers are typically the best source of this information.

Once the transition has occurred, owners should utilize their property management software to send tenants copies of their utility bills accordingly.

Additional Considerations for Using RUBS at Multifamily Apartments

• Not all states look upon RUBS favorably.Before implementing a RUBS program, ensure that it is authorized at the local and government level. For instance, it is prohibited in Delaware and Miami. However, California considers RUBS payments a form of rent. Therefore, in rent-controlled communities, charging for RUBS can put owners above the allowable rent increase. In such situations, multifamily owners may be better off submetering the property instead of utilizing a RUBS system.

• RUBS may not be generally accepted in the marketplaceSome nuances to multifamily investments can vary from one market to another. In some regions, for example, the Northeast. Heat, water, and sewer charges are almost always included in the rent at 5+ unit apartment buildings. Owners should carefully consider whether to proceed with a RUBS strategy in markets like these. At a minimum, check to see what local competition is doing before moving forward.

• You may incur some pushback from existing tenants.The transition to a RUBS program is sometimes difficult. Existing tenants often push back on these costs if their base rent remains unchanged. Tenants may see their utilities as something they’ve been receiving for “free” which would now equate to a major cost. Some may request a rent reduction at the outset. Others may opt to leave the property entirely. As a result, a RUBS program is most easily implemented during a change in ownership. Or after an owner has already achieved more comprehensive value-add property improvements.

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• If tenants refuse to pay their RUBS bill, you may have little recourseTypically, if a tenant does not pay their utility bills, their utilities can be turned off. This only works when a tenant has their own separately metered utilities.

  The owner cannot simply turn off service at a RUBS property since service powers the entire building. If tenants don’t pay their RUBS bills, owners may have no recourse other than eviction (another costly prospect).

• RUBS doesn’t result in any significant energy savingsContrary to popular belief, the RUBS system does not generate substantial energy savings. Tenants are charged their pro-rata share of the utilities regardless of how they consume. As a result, RUBS does not encourage water or energy conservation the way that submetering does. There may be some impact at the margins, but owners should not expect a big drop-off in total consumption.

Conclusion

RUBS utility billing can help multifamily property owners add value to their buildings. Mainly by passing on a portion of their operational costs to tenants.

This increases the owner’s NOI and enhances the property’s value. It’s a cost-effective solution that all owners should explore.

 

Source: How to Implement a RUBS System at Multifamily Properties

https://www.creconsult.net/market-trends/how-to-implement-a-rubs-program-at-multifamily-properties/

Earn MiCP Designation (Masters in Commercial Property) with eXp Realty

Are you a Realtor interested in joining eXp Realty, but would like to do both Residential and Commercial transactions? Now you can!

Earn a MiCP® Designation (Masters in Commercial Property) with eXp Realty to gain the knowledge and certification to promote your knowledge to your clients.

This is an Exclusive Offer: Only available to eXp Realty Worldwide and Commercial U.S. Agents.

Commercial real estate is a far different animal from residential real estate. But a rare opportunity – at huge savings – is now available to learn about commercial real estate and even receive certification.

The eXp Commercial Learning Center covers the basics of commercial real estate. This course includes online, on-demand training so you can go at your own pace and on your own time.

The cost is $249, a fraction of this curriculum’s value of $6,500

Instructor: Clifford Bogart, eXp Commercial Designated Managing Broker. Mr. Bogart is a Certified Commercial Investment Member (CCIM) and an instructor at CCIM. He is also a Counselors of Real Estate (CRE) member. These two prestigious designations define Clifford as an expert at a rigorous level of commercial real estate.

Anyone who completes the training can be tested and, upon successful completion, be awarded the MiCP® Designation (Master in Commercial Property). The cost to be certified is an additional $95. So for a total cost of $344, you will get CRE training AND certification for a few hundred dollars compared to thousands that it would normally cost.

eXp Commercial’s own senior instructors will teach the fundamentals of starting and building a successful career in commercial real estate. Topics include:

• Overview of Commercial Real Estate
• Property Types, Characteristics, and Transaction Opportunities
• Leasing Process: Tenant Representation Process & Documents
• Sales Process: Step-by-step Process and Documents
• Evaluating Investment Property: Underwriting and Risk Analysis

Bonus Course: Systems for Success (SFS) 10.0

As a bonus, the Systems for Success (SFS) 10.0 course will also be offered by a leading commercial real estate expert whose name we’re not allowed to reveal here. But, this person is a highly regarded and sought-after commercial real estate expert who will deliver information on business development, finance, team best practices, technology, professional development, and commercial real estate fundamentals. With more than 100 educational videos, interactive workbooks, and corresponding slideshows, this course covers topics including:

• Laying the Prospecting Foundation
• CRM: Your Bread and Butter
• Prospecting With Intent
• Selling By Phone
• Best Practices for Tenant Rep/Occupier
• Best Practices for Landlord Rep/Agency
• Winning Assignments Through Whiteboarding
• Presentations that Win
• Negotiating to Win
• And much, much more!

Commercial real estate contains a wide spectrum of types of CRE, including office space (standalone and high-rise opportunities), retail space, land, multi-family, and more. This is a phenomenal opportunity at huge savings for anyone who wants to break into commercial real estate.

Request Further Information/Join

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https://www.creconsult.net/market-trends/earn-micp-designation-masters-in-commercial-property-with-exp-realty/

2023 eXp Commercial Commercial Real Estate Symposium

REGISTER TODAY

The Commercial Real Estate Symposium will provide junior and senior agents and brokers with valuable insights on topics, including: international opportunities, capital and funding for small businesses in today’s market, how to attract investors, and much more.

Dates: April 25-26, 2023
Start Time: 9 a.m. - 4 p.m. CST
Location: eXp Commercial Campus

We look forward to seeing you in the metaverse!

Important: Please download the virtual eXp Commercial Campus prior to the event, and follow the instructions to login and create your avatar. Feel free to explore the campus before the event begins.

 

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Interested in Joining eXp Commercial as a Commercial Real Estate Agent?

Further Info

https://www.creconsult.net/market-trends/2023-exp-commercial-commercial-real-estate-symposium/

Commercial Rate Snapshot January 16 2023

Commercial Rate Snapshot 1-16-2023

These are the average available rates from eXp Commercial's Capital Partner CommLoan database of 700+ commercial lenders as of 1/16/2023 and are provided for comparison purposes only.

*Actual rates are dependent on property and sponsor.

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Receive a Loan Quote from eXp Commercial's Capital Markets Partner CommLoan Thousands of Loan Programs. Hundreds of Lenders One Commercial Real Estate Lending Platform. One-stop shopping and unprecedented access to the capital markets

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https://www.creconsult.net/market-trends/commercial-rate-snapshot-january-16-2023/

If You're Hesitant To Hire A Broker For Your Multifamily Property Read This

Multifamily brokers frequently hear this comment from apartment property owners: “I don’t want to list, but you can bring me a buyer.” Their reasons sometimes include previous bad experiences, fear of getting “tied up” in a formal agreement, tenants finding out the building is for sale and making anxious calls to management, thinking the commission will be halved, or not really being interested in selling. Whatever the reluctance, the reality is that if an investor wants or needs to sell, the best thing they can do is hire a broker. Let’s address a few of those common objections first.

If you had a previous bad experience, more than likely, you hired the wrong broker. The specific agent you hire or the firm they work for should have experience in both the geographic market and transaction size — ask for their track record. While you’re at it, ask for references from clients, and make sure at least one is for a listing that did not sell. These simple steps will give you insight into whether you’re working with a pro.

As for getting “tied up” or having anxious tenants because the building is selling, a professional broker typically allows you a cancellation right for the listing. If there are deadlines you need to meet, make sure your broker understands. And while no broker can guarantee tenants won’t find out the building is being sold, experienced brokers can modify marketing by limiting showings to only vacant units, specific hours for low visibility, limiting digital footprint tenants might see, etc., to reduce the probability of tenants finding out.

That said, the best course is simply to announce to tenants that the building has been listed for sale, explain the sale may not be successful, and assure them that their lease runs with the building, not the owner, and is their protection during the lease term against rent increases or being forced to move.

These are certainly not the only reasons clients are reluctant to list but whatever is yours, talk to your broker about your real concerns. A seasoned broker will most likely have previously faced a similar challenge and should be able to address your concern. But this only addresses your concerns about why you shouldn't hire a broker — it doesn’t explain why you should.

The first benefit is understanding the value of your property. A professional, qualified broker who specializes in your asset or area will be able to give you a price range to expect so that you can decide whether selling makes sense. If you move forward, this specialist will also have databases of the most qualified, active investors in the market and have relationships and influence with them. The ultimate buyer of your property will more than likely come from one of these relationships. But a broker won’t rely exclusively on these relationships. A good broker will also create a professional marketing plan with appropriate amounts of promotion across email, mail, websites, and listing services.

All this leads to the most important part of hiring a broker: competition. Trying to sell your building by letting a broker “bring you a buyer” is like having an auction for a painting, and one person shows up to bid. If the building is priced correctly, a professional marketing plan will create a competitive environment for investors so that the process itself determines not what the market wants to bid but what the market is willing to bid.

Larger portfolio owners might be reluctant to list with a specific broker because they have relationships with numerous brokers or firms in the market, and they don’t want to offend anyone by choosing a competitor. Instead, they tell every relationship to “bring me a buyer.” If this is you, think a few more steps down the chain of events.

First, this may only create chaos. You not only have brokers racing each other to bring clients, but each is advocating to you why their buyer is the best so that they can get the commission. Then you ultimately have to pick one buyer/broker anyway and disappoint the others after they’ve put work in. Alternatively, a listing agreement assures a commission for the listing agent if the property sells; therefore, there is no incentive to advocate for any one specific buyer.

An additional benefit of listing a property with a broker comes after a sale contract is signed. Any number of unexpected or challenging issues can arise during the escrow period of a sale. A seasoned broker has probably experienced something similar before. This person will also quarterback the entire process of due diligence, appraisal, and loan approval.

The most important benefit of exclusively listing your property with a broker is representation. You will have a hired gun with a fiduciary obligation to advocate for your best position in a deal. A professional broker will be ethical, transparent, and fair but will also be your personal fighter in the arena of marketing, negotiation, and escrow management.

This short list does not address every objection an owner would have for not listing, nor every benefit you receive from hiring a professional broker, but hopefully, it gives you a few things to consider. If you want to maximize your price and minimize your anxiety with the selling process, hire a broker. The benefits far outweigh the cost.

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/if-youre-hesitant-to-hire-a-broker-for-your-multifamily-property-read-this/