7 Ways To Attract High-Quality Residents To Your Apartment Community

One of the main factors that will make or break your apartment budget is the quality of resident you attract. A high-quality resident is someone who pays rent on time, treats the unit and apartment community as if it were their own home and is courteous to the neighbors. High-quality residents not only make your life easier, they make you and your passive investors more money in the long run.

Sure, low-quality residents can help you increase your occupancy rate in the short-term. But they will negatively impact other important financial factors longer term. Low-quality residents lead to higher turnover costs, both due to more frequent turnovers and more expensive, lengthier turns. They also lead to more expenses associated with evictions, higher bad debt (i.e., uncollected debt after a resident moves out) and a higher amount of delinquent rent.

Therefore, the successful apartment syndicator or property manager will proactively implement procedures with the purpose of attracting the best-qualified residents in the area. This approach minimizes the number of low-quality leads and maximizes the higher-quality ones, which has a positive feedback effect: Attract high-quality residents to your apartment and they refer your apartment to others, which brings in more of the same caliber.

As a result of building a portfolio of over $300,000,000 in apartment communities, I have identified seven market strategies that attract these high-quality residents.

1. Maximize Internet Advertising

According to Zillow’s 2017 Consumer Housing Group Trends Report, online tools are the No. 1 way that renters are searching for their home (87%), followed by referrals from a friend, relative or neighbor (57%). Therefore, an online presence for your apartment community is a must. This starts with having a URL and website for the apartment community.

Next, all of your “for rent” units should be listed on a variety of online real estate and apartment listing services, with the most effective ones being Apartments.com, Craigslist, Realtor.com, Trulia and Apartmentfinder.com. You should also market your listings on social media, including Facebook, Twitter and Pinterest.

To optimize your rental listing, make sure it includes a clear and accurate description of the unit and the community, highlighting the major selling points. Invest the few hundred dollars into having professional pictures taken.

2. Hire Locators

A locator is an apartment rental agency that helps prospective residents find their ideal apartment community based on their specific needs. Therefore, locators can be great resources for finding high-quality residents.

To find apartment locators in your market, Google “apartment locators in (city name).” Then, reach out and offer them a commission of the first month’s rent for providing you with a converted lead. (Fifty percent commission is standard).

Once you’ve hired a locator, provide them with weekly email and phone call updates on your current unit availability.

3. Target Local Businesses And Employers

Use the current resident demographic data, which you should have collected on initial rental applications, and the surrounding job hubs to create a list of target businesses, employers and schools in the area. You can also add local tax preparation offices, bus stops and train stations to your list.

Print out and drop off flyers, business cards, price sheets, floorplans and site maps to your targets, always asking for permission first.

Additionally, you can send a small gift (e.g., a gift card, gift basket, wine, toolkit, etc.) to your current residents who are employed at the business on your target list. Thank them for their residency and ask if they are willing to refer the apartment community to their colleagues at work.

4. Build A Referral Program

As established, 57% of renters find a home through referrals. To capitalize on this, you should create a referral program and offer a fee to any current resident who refers someone to the apartment community. A fee of $300 paid 30 days after the execution of the new lease is standard.

To advertise the referral program, deliver notes to your residents’ doors and send out friendly emails with the details of the referral program on a monthly basis.

5. Financially Incentivize Your Leasing Staff

Most apartment owners or property management companies offer their leasing staff a small bonus for each new move-in, with $50 being the standard. In addition, you can set monthly move-in or occupancy goals and offer a larger bonus, like a $100 to $250 gift card, if they hit the specified target.

6. Hold Resident Appreciation Parties

To promote resident satisfaction and retention, host monthly resident appreciation parties. These can be as small as providing a small breakfast or wine night in a common area on a monthly basis. Another idea is to host timely or holiday-themed events, like a Valentine’s Day card-making event, holiday gift-wrapping party, back-to-school barbecue or a Halloween costume contest.

7. Encourage And Monitor Online Reviews

The online rating of your apartment community will probably be the first thing that a prospective resident will look at during their apartment search. Organic reviews are great, but you should also implement strategies to increase the number of reviews.

One strategy is to ask a resident for a review after fulfilling a maintenance request. Only use this strategy for minor maintenance requests that were addressed in a timely fashion. Another strategy is to have a laptop station set up during the monthly resident appreciation parties, which the residents can use to write a review before they leave.

All seven of these strategies have been proven to attract the highest quality residents to an apartment community and are beneficial to your bottom-line. Do not wait to come up with a marketing plan until after you close on an apartment deal. This is something that should be created prior to close so that you can account for the expenses in your underwriting.

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Appraisal Process Grows More Complicated

Real estate appraisal and real estate risk analysis are different, but the space between them is narrow and, increasingly, must be recognized as such. Where risk is involved, property appraisals become more complicated, and lenders and investors more cautious.

Anything from dirty streets and drug activity to prolonged drought (which increases fire hazards) and the growing number of mega-rain events in the Midwest can risk or stigmatize real estate, potentially affecting its desirability and value.

Appraisers know, of course, that risks and uncertainties factor into a property’s marketability. But risks also can be an opportunity, which makes the appraiser’s job even more difficult.

Leery Lenders

The proliferation of marijuana facilities in certain states is a good example of a risky business that traditional lenders tend to treat as untouchable, although it has proved to be lucrative. In states where it’s legal to grow and sell marijuana, warehouse properties zoned for cultivation shot up in value. On the face of it, warehouse space in these states is a smart investment, but it’s inherently risky to own a property with a federally illegal use.

Despite its legality in some states, as far as the federal government is concerned, peddling marijuana and cannabis products is illegal. So it follows that FDIC-backed banks that loan money to marijuana businesses are running afoul of federal law. Non-traditional lenders are popping up as a result, and some states are looking into opening their own public banks subject to less federal oversight.

Due to the banking problem, many marijuana businesses operate in cash, and to the extent that cash flow generated by a commercial property factors into its value, the potential lack of traceability and transparency makes accurate appraisals difficult.

Cash Crops

Looking at indoor agriculture more broadly, the emergence of vertical farms growing food crops in city warehouses also gives rise to appraisal difficulties. The same legal concerns do not apply to such farms, but since indoor agricultural businesses, including marijuana facilities, have operated for a relatively short time, there are fewer transactions and benchmarks for comparison.

In addition, these operations put physical strains on real estate not designed for that purpose. For example, indoor farms require irrigation, and prolonged exposure to moisture could affect the structure’s integrity and inhabitability. And when it comes time to sell, these properties might have had extensive lighting and ventilation installed that would be super adequate for those in the market for regular warehouse space.

Nevertheless, investors are betting on indoor vertical farms to revolutionize the way food is grown and brought to market. That’s because indoor farms have the capacity to grow 100 times more food per square foot that outdoor farmland; can be located as close as possible to urban end buyers; and allow for the automation of farm labor and elimination of pesticides.

A warehouse farm in New Jersey recently raised $20 million to build in cities across the U.S.; its backers include none other than Google. That’s a fairly big vote of confidence that warehouse farming may be the way of the future. For now, it’s a challenge for those called upon to appraise the properties.

Alternative Uses

Another example that’s trending in urban cores such as Detroit’s is the repurposing by landlords of apartments or lofts into corporate housing. With most tenanted properties, the cash flow at the time of appraisal is expected to remain consistent in the future. Corporate housing, on the other hand, generates much more cash flow per unit—two to three times the normal long-term housing rates—but short-term, rolling leases mean greater uncertainty, as well. According to the Corporate Housing Providers Association, the average stay or lease period for a U.S. corporate housing unit is less than three months.

The facility types discussed here are each challenging, from an appraisal standpoint, for their own reasons. What they have in common, though, is that the real estate is being used for something other than its intended purpose, so comps and relevant data are lacking. Emerging industries can also give rise to unforeseen regulatory and market responses, further demonstrating the importance and inseparability of risk analysis as part of the appraisal process.

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NY, CT, MD And NJ File Suit Against Tax Reform Law

New York Gov. Andrew Cuomo announced on Tuesday that New York State had filed a lawsuit against the federal government over what it terms as the unconstitutional federal tax reform law enacted earlier this year.

The lawsuit contends the new SALT (state and local tax) cap was enacted to target New York and similarly situated states, that it interferes with states’ rights to make their own fiscal decisions and that it will disproportionately harm taxpayers in these states.

The long-promised lawsuit filed by New York State Attorney General Barbara D. Underwood in the US District Court for the Southern District specifically points to the federal tax reform law capping the SALT deduction at $10,000 as damaging to state taxpayers. The litigation was joined by the attorneys general of Connecticut, Maryland and New Jersey.

An analysis by the New York State Department of Taxation and Finance shows the cap will increase New Yorkers’ federal taxes by $14.3 billion in 2018 and an additional $121 billion between 2019 and 2025. State officials contend “the law flies in the face of centuries of precedent, which establishes constitutional limits on the federal government’s ability to use its tax power to interfere with the sovereign authority of the states.”

“The federal government is hell-bent on using New York as a piggy bank to pay for corporate tax cuts and I will not stand for it,” Gov. Cuomo said. “Today I’m proud to announce that New York is the first state in the nation to take legal action against Trump’s tax plan that benefits the 1% at the expense of middle-class families. We will fight back at every turn against President Trump and the federal government’s partisan assault to protect the people of New York.”

Attorney General Underwood adds, “New York will not be bullied. This cap is unconstitutional—going well beyond settled limits on federal power to impose an income tax, while deliberately targeting New York and similar states in an attempt to coerce us into changing our fiscal policies and the vital programs they support.”

Some of the other issues citied in the litigation include charges that federal policymakers openly talked about coercing states like New York to change their policy choices; US Treasury Secretary Steve Mnuchin stating that the change was intended to “send a message” to states to get them to change their taxation and fiscal policies and President Trump advisor Stephen Moore, who worked on the Trump campaign on tax policy, calling the SALT changes “Death to Democrats.”

State officials said the SALT cap will depress home values in New York and other states, while also reducing state tax revenues, thus forcing states to choose between higher tax rates or cutting investments in education, public services and other vital programs.

The lawsuit also points to the 16th Amendment, which confirms that the federal government’s tax power has limits and that it cannot be used “to intrude on the sovereign authority of the states to determine their own taxation and fiscal policies.”

Earlier this year, Gov. Cuomo signed legislation aimed at giving state taxpayers some options to circumvent some of the onerous provisions of the federal tax reform law. The new options provide for tax deductible charitable donations, creates a new Employer Compensation Expense Program so employers can help their employees maximize deductibility, and decouples the state tax code from the federal tax code, where necessary, to avoid more than $1.5 billion in estimated state tax increases brought solely by increases in federal taxes.

https://bit.ly/2O3e8Hc

Ownership of 95 distressed buildings to be transferred as part of ‘co-op reform’

As the de Blasio administration contemplates reforming citywide rules that govern co-ops intended for people of modest incomes, the City Council is preparing to allow transferred ownership of 95 co-ops and rental buildings Wednesday.

The process, the tenth transfer since the program began in 1997, has been subject to heightened controversy as a coalition that organized to block Mayor Bill de Blasio’s broader reform plans is raising concerns anew. Coalition members say this round of transfers is the latest example of the administration taking away equity from struggling residents and enriching developers. The coalition has also gotten the attention of members of the Council, who worked with the city to set up payment plans for certain buildings to maintain current ownership.

The properties are part of what is known as a “third-party transfer” — a recurring process that moves multifamily buildings with outstanding municipal debt from their current ownership, by either co-op shareholders or private landlords, to developers the city chooses through a competitive bidding process.

The city’s housing department says these 95 buildings — 56 rentals and 39 co-ops spread across Brooklyn, Queens and the Bronx — are behind on water and tax bills and in substantial disrepair. Agency officials say the shareholders and building owners can no longer afford the necessary upkeep, and they promise the private buyers will be required to keep the homes affordable to the existing residents.

De Blasio’s proposal for co-ops that qualify as Housing Development Fund Corporations — a designation based on residents’ incomes and tax breaks — is on ice as the administration contemplates a plan that would not ignite the same level of outrage as his initial proposal. After catching wind of the idea last year, the New York Post panned it as “a Soviet-style takeover of 1,200 privately-owned co-op buildings” to boost the production of his affordable housing plan.

The HDFC coalition then followed the mayor to town hall meetings throughout the city and called into “The Brian Lehrer Show” on WNYC for his weekly Friday appearance to press him on the issue.

“What we don’t want to see is these buildings collapse financially, and we don’t want to see them privatized and become [market-rate] housing. So we’ve invested a lot over the years,” de Blasio said in January on the radio show. “But to be clear, the folks who live there now in affordable housing will get to keep that affordable housing under our vision.”

He also cautioned against the word “foreclosure,” saying, “It suggests that somehow that things are going to be taken away from people.”

The coalition argues that is exactly what is happening.

“These poor people who didn’t get a chance — I mean, how many generations of families lost equity because HPD [the Department of Housing Preservation and Development] was foreclosing quietly the past few decades? They have to look at their children and grandchildren and apologize, I feel,” said coalition member Anita Cheng.

She and her husband bought and merged two co-ops on West 143rd Street in Manhattan more than 10 years ago, when they were looking to start a family and couldn’t afford to buy much else.

Her 38-unit building was threatened with a transfer because it owed $3.5 million to the Department of Environmental Protection for water bills and related fees and interest. With the intervention of City Council Member Mark Levine, the property is now on a 25-year payment plan and some of the interest was waived. The building has since made a $1 million down payment, according to information Levine’s office provided.

The building also owed more than $550,000 in taxes to the Department of Finance, which will be cleared by a tax break, according to Levine’s office.

“These were designed to be home ownership for low-income and working-class people, and if they are foreclosed upon, they become affordable rentals. Sure, that’s at least a relief that no one is going to lose their apartments and there’s still an affordable cost of living there, but you lose your ownership, which is so powerful,” Levine said. “We think it should be the absolute last resort.”

Cheng described learning of the potential transfer of her building several years ago as “a shock to everyone.”

“We thought since we bought that, even though there were problems, we would work through them like a regular co-op, but this was way beyond anything that could be worked through,” she said. “We feel like we’re still struggling. We’re in a better place than we were before, but it’s really taken over our entire lives.”

“It’s like every other part of our life has stopped,” she added.

By not intervening for specific buildings Wednesday, the Council is tacitly allowing the transfers to take place. The Manhattan round of transfers is expected to take place in the next few months. Currently, there are 26 eligible properties, housing department spokeswoman Libby Rohlfing said.

“Third Party Transfer is a tool of last resort,” she said in an email. “The city has done extensive outreach to owners and residents over the past three years, offering various forms of assistance that resulted in nearly 70 percent of buildings coming out of the round. For the remaining buildings, we can’t just let them languish. This is the best path forward to improve conditions in these buildings, stabilize their future health and ensure their long-term affordability for residents.”

https://bit.ly/2uL77C0

Coworking Ascent Could Start Slowing Down In Manhattan Pretty Soon

The rapidly expanding coworking sector may soon be peaking in Manhattan, with some flexible office operators now looking at markets outside of New York as their next target.

In total, 6.6M SF across 133 different locations is dedicated to coworking in Manhattan, Bloomberg reports, citing Savills Studley data. That figure does not include office spaces offered by Servcorp, which provides high-end executive suites, or firms operating in the outer boroughs. As of early July, there were 26 new leases signed in Manhattan alone across 1.3M SF, which means the sector could break records this year. Coworking operator Spaces, for example, has reportedly leased 101K SF at 287 Park Ave. South, which is the entire office portion of the building.

But just like traditional office landlords in the city, these coworking operators are offering concessions and incentives to close lease deals.

Savills Studley predicts that while market could continue to expand to 10M SF by the end of 2019, it will then start to contract.

“The market is getting more fragmented as some hybrid models and different providers get into the space,” Savills Director of U.S. Real Estate Analytics Keith DeCoster told Bloomberg, adding that landlords are now “jumping in on the act,” which will create even more competition for coworking operators. “Many shared-office-space providers are already starting to direct their attention to other markets that are not as saturated, such as Denver, Charlotte, Miami and Atlanta,” he said.

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Rents keep dropping in New York as a new wave of retail moves in

  • Average asking rents in a dozen of 16 main retail corridors in New York decreased within the past 12 months, CBRE found in a new report.
  • Food and beverage shops accounted for the most new leasing activity, the report said.
  • New York-based landlords are more optimistic about the future in this market as rent pressures ease and demand holds steady.

Retail rents in New York keep dropping, opening up the door for a new wave of stores to move in.

Average rent prices in a dozen of 16 main retail corridors in New York fell in the past 12 months, according to a new report from CBRE. The average advertised rent fell by a little more than 12 percent to $658 per square foot and landlords are more willing to take less, the commercial real estate services firm found.

Property managers are lowering rents “in an effort to stimulate activity, while brokers report growing tenant interest,” said Nicole LaRusso, a director of research and analysis at CBRE.

Following years of sky-high rents in the city after the Great Recession that forced many businesses to either halt expansion plans or shutter their shops altogether, commercial real estate owners are more willing to negotiate today — at least until vacancies are less rampant and dealmaking activity stabilizes. There’s some evidence it may be working. Coffee Bean & Tea Leaf is mapping out plans to open 100 cafes in New York, while discount retailer Five Below plans to open its first store in Manhattan on Fifth Avenue.

The Plaza District of Midtown was the most active neighborhood for leasing activity in New York during the second quarter, CBRE found, with nearly 50,000 square feet of commercial space leased. The next most active area was Midtown West, followed by NoHo, the Upper East Side and Chelsea, the report said.

The most active types of tenants signing new leases were food and beverage shops, CBRE found. Almost 30 food and beverage deals were signed in New York’s 16 main retail corridors during the latest quarter, according to the report. Next were apparel companies, followed by entertainment, department stores and sporting goods companies.

“This is an opportunistic time, and rents have definitely softened,” Faith Hope Consolo, chairman of Douglas Elliman’s retail group, told CNBC. “There’s nothing like a New York location. … One store [in Manhattan] can make as much as a dozen suburban locations.”

Still, some storefronts have been sitting on the market for months.

Within the 16 New York corridors monitored by CBRE, 143 spaces have gone empty for at least a year. Fifty-eight percent of those locations have seen their asking rents drop, too.

According to Consolo, “there are more spaces available [in New York] today than we’ve seen in the past decade.” But companies are starting to flood in, and there are great deals to be found, she said.

In the NoHo area in particular, a flood of younger e-commerce brands that mostly sell online have moved into the neighborhood to test out adding a brick-and-mortar location. Names like street retailer Kith and women’s clothing brand Reformation have rented space there.Lululemon also has its test lab there.

“Across Manhattan there has been an uptick in interest as a growing number of tenants across sectors are shopping space in the market, and landlords are increasingly partnering with tenants on creative and flexible deal terms,” LaRusso added.

Some of the top lease transactions in New York during the second quarter of 2018 included Feld Entertainment taking a 30,941-square-foot space in the Plaza District to open a “DreamWorks Trolls the Experience” in the fall, cycling studio Peleton taking a 30,319-square-foot space in Midtown West and Target taking a 21,000-square-foot space in Gramercy.

https://cnb.cx/2uxv54i

Cities May Do Better Drawing, Keeping Freelancers, Not Giants Like Amazon

Amazon and a few other giants might spur economic development in a few lucky places, but municipalities are more likely to see sustained growth by successfully encouraging freelancers in their cities, according to a recent report.

That is because the freelance sector of the U.S. economy is large and growing larger. Nationwide, there are about 53 million freelancers, or workers on a contract basis for multiple entities, Fast Company reports, citing Upwork data.

Freelancers form about 36% of the workforce, and contribute around $1.4 trillion to the U.S. economy. According to Upwork, the majority of the U.S. workforce will be freelance as soon as 2027. A few places are taking steps to promote freelance growth. In 2017, New York City strengthened protections for freelancers in its Freelance Isn’t Free Act, which specified that freelancers have a right to a written contract and timely payment. San Francisco offers a freelance/independent contractor starter kit on its business portal website.

One important consideration for cities in promoting the freelance economy is connectivity that goes beyond mere WiFi, Quartz reports.

Sustained freelance growth requires more, such as taking idle city-owned spaces and converting them to collaborative workspaces, or supporting networks and associations that facilitate independent worker connections.

Cities must also pay attention to initiatives that serve the needs of independent workers, Quartz said. These tend to involve access to health insurance, but also tax, financial and retirement planning.

Some cities already have an advantage when it comes to attracting freelance workers. According to a 2016 report by NerdWallet, Austin, Texas, is the best place in the country for freelancers, with a monthly median income of $2,179 (after taxes) for self-employed workers, second only to San Francisco — where the cost of living is considerably higher. Nashville, Tennessee, is the second-best city, not only because of a lower cost of living, but also because of local initiatives such as WorkIT Nashville, which encourages technology workers to move there. Many of the 7.4% of Nashville’s workforce that are self-employed work in the information industry.

Other top cities for freelancers are Dallas; Atlanta; Louisville, Kentucky; and even San Francisco, though that city is the most expensive in every category. Even so, highly paid freelancers tend to cluster there: Professional and scientific services are 13% of this city’s freelance workforce, NerdWallet reports.

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