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/

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/

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/

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/

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.

 

+ Add to Google Calendar   + Add to iCalendar

 

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/

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/

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/