Real Estate Market Analysis Tips

Knowing how to conduct a real estate market evaluation is indispensable when navigating the investment landscape. If you’re thinking of investing in a particular area and you want to ensure you’re using your money wisely, you need to understand the regional economic trends, the average home or apartment size, demographic facts, crime statistics, and other market data. On the other hand, if you’re looking to sell a property, understanding the current market climate may help you maximize your potential gain.

Learn from the Experience of Others

I can help you to better understand the complexity and trends, while improving your overall knowledge of real estate market analysis. This may just help you learn how to evaluate the market, and using the proper methods will help you to avoid the pitfalls that many new investors face. Real estate investing can be an art and a science, but with the right mentoring, you can make your investment dreams a reality.

After reading some of the posts below, where I provide more detailed advice and share the advice of others I have interviewed during my podcast, the Best Ever Show, you may decide you want to passively invest with me. To apply for a chance to get involved in one of my apartment syndication deals, please complete this form.

10 States With The Most Net Migration in 2020

Tennessee ranked number 1; Arizona, Colorado, Nevada on the rise.

Each year, U-Haul ranks each state based on the net gain of one-way U-Haul trucks entering a state versus leaving that state during the calendar year based on over 2 million one-way U-Haul transactions. U-Haul states, “While U-Haul migration trends do not correlate directly to population or economic growth, the Company’s growth data is an effective gauge of how well cities and states are attracting and maintaining residents.”

As commercial real estate investors, one the the major factors we take into account then deciding where to invest are the population trends.

Generally, the more people moving to an area, the more demand for real estate. Therefore, using U-Haul’s annual migration trends report, you can determine if you are in the right market or if you should consider to transitioning to or focusing on a new market.

One of the most interesting changes in 2020 was the state that topped the list. For the first time since 2015, a non-Florida, non-Texas state had the greatest gain in one-way U-Haul trucks entering the state – Tennessee. One-way trips were up 12% year-over-year, resulting in Tennessee jumping from 12th in 2019 to 1st in 2020. Texas was number one for three straight years (2016-2018) before falling to number 2 and being replaced by Florida in 2019. In 2020, Texas held the number 2 spot while Florida dropped to number 3.

Other markets with large jump in the rankings were Arizona (20th in 2019 to 5th in 2020), Colorado (42nd in 2019 to 6th in 2020), and Nevada (24th in 2019 to 8th in 2020).

Which states had the most net loss of one-way U-Haul trips? California was ranked the worst, followed by Illinois. California has ranked 48th out of 50 or lower since 2016, and Illinois has been 49th or 50th since 2015. Other markets with large decreases were North Carolina (3rd in 2019 to 9th in 2020), South Carolina (4th in 2019 to 15th in 2020), Utah (8th in 2019 to 17th in 2020), Alabama (6th in 2019 and 22nd in 2020), Vermont (10th in 2019 and 26th in 2020), Idaho (11th in 2019 and 30th in 2020), and Washington (5th in 2019 and 36th in 2020).

 

 

Click here to see how all 50 states ranked, and here are the 10 states with the most net migration in 2020:

10. Georgia

2019 rank: 16th

9. North Carolina

2019 rank: 3rd

8. Nevada

2019 rank: 24th

7. Missouri

2019 rank: 13th

6. Colorado

2019 rank: 42nd

5. Arizona

2019 rank: 20th

4. Ohio

2019 rank: 7th

3. Florida

Florida

2019 rank: 1st

2. Texas

2019 rank: 2nd

1. Tennessee

2019 rank: 12th

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

Find the True Value of Real Estate Markets

“Is the real estate market currently overvalued?” Many active investors and entrepreneurs are asking this question, and you probably are as well. The housing sector is strong despite the fact that the U.S. is officially in a recession. Home prices and rental rates are jumping in many metro markets. During unpredictable times, wise investors take cues from historical patterns. Market analytics expert Stefan Tsvetkov talks with Joe Fairless on The Best Ever Show about the power of quantitative analysis to help you find undervalued opportunities. As with other markets, your best bet is often to focus on value rather than attempting to time cycles.

About Stefan Tsvetkov

Stefan owns the data analytics firm Envvy Analytics, which specializes in business and market analysis. Its mission is to help real estate investors find exceptional opportunities and leverage market inefficiencies. Stefan brings ten years of experience in financial engineering, a field that develops and applies quantitative techniques to tackle financial problems. Stefan is passionate about using data analytics to help investors make better decisions.

Stefan has three years of personal experience as an active investor. He has privately purchased multifamily properties and knows firsthand the impact of current market trends on individual owners and businesspeople. His portfolio includes a New Jersey triplex and fourplex and a New York duplex.

Stefan found early inspiration for an analytical approach to real estate in the work of hedge fund manager John Hussman. Hussman developed a predictive metric for stock market drops by determining whether the stock market was overvalued. Stefan contrasts this valuation measure with the typical Wall Street emphasis on price-to-earnings ratio. He determined that Hussman’s metric outperformed the price-to-earnings ratio, which further motivated him to deep dive into market valuation analysis.

Look Beyond Demographics

When considering a potential real estate market, you probably look at job and population trends. You’re in good company, as commercial investing advisers stress demographics when evaluating opportunities. However, Stefan advises people to focus on market valuation. Why? For one thing, he notes, real estate markets are inefficient. It’s challenging to get a qualitative read on values for a given market.

Another compelling reason is that historical market cycles are best analyzed quantitatively. Data analytics finds patterns that qualitative analysis might overlook, allowing financial engineers such as Stefan to develop predictive models. Critically, data analysis can validate models for robustness. When you use a metric such as the one Stefan recommends below, you know its performance history. You are not guessing.

A Gold Standard Metric

Stefan’s research has yielded one metric he considers the gold standard for valuing markets. The ballpark measurement to start with is the historical ratio of housing prices to income in a given market. You then determine the current ratio and calculate its deviation from the historical norm. Typically, the metrics refer to household income and the price of single-family homes rather than commercial properties.

As an example, let’s assume that the historical housing price-to-income ratio in Texas has averaged 5. If today it is 8, you should consider whether that market is overvalued. If it is 4, perhaps the market is now undervalued. You would then consider other potential factors such as housing shortages, employer flight, or other socioeconomic influences.

Does Stefan’s metric hold true for larger investors? Whether your interest in commercial properties is via active investing or passive investing, the good news is his measure still applies. Stefan explains that the price-income formula is about 95% accurate for multifamily units. Over time, differences in appraising and returns even out. Household income still drives valuation, however, and so the metric best suits commercial investing in one-to-four-unit properties.

Lessons from the Great Recession

Stefan’s interest in quantitative real estate valuation was partly inspired by a seeming prophet of the big crash, Ingo Winzer. As early as 2005, Winzer declared on CNN that specific markets were significantly overvalued. A year later, he reiterated his belief that certain metro areas were dangerously overpriced.

By 2007, the most overvalued U.S. real estate markets were Arizona, California, Florida, and Nevada. These states ranged from being 49% to 68% overvalued. Stefan estimates that the subsequent market falls correlated 83% with these markets’ deviations from their historical price-to-income ratios. Their prices plummeted 45% to 56% after being overvalued and held steady when their values aligned with historical norms.

According to Stefan, the median market deviation from historical ratios preceding the crash was 26%. A 22% price plunge followed this peak in value. In contrast, real estate markets with variations under 10% could be considered fairly valued. Price drops in these areas averaged only 11%. A clear correlation seems drawn between the percent deviation of a given market from its historical price-to-income ratio and its percent drop in a recession.

Overlooked and Undervalued

The Great Recession has lessons for investors seeking quality undervalued markets. Stefan emphasizes that it’s easy to forget that some state markets were undervalued during this time. About 12 states, including Texas, experienced price drops in line with their undervaluation. Texas was undervalued by 5% in 2007 and dropped only 4%, in contrast to the historic losses experienced in many other regions.

In parallel, national income declined 4%. This loss of household spending power hit over-leveraged homeowners particularly hard. However, the story isn’t as bleak for undervalued states. When considered with single-family home prices, income and homeownership costs kept pace in many regions.

Stefan believes these historical patterns still apply, and today’s markets offer opportunity. Regardless of whether the overall market peaks next year or in five, undervalued markets should resist the steep losses of a correction.

Scaling Market Peaks

How do you identify a market peak, especially in today’s volatile landscape? Stefan insists that you can’t. He explains that a market peak is when prices top out and then drop significantly. Prices can plunge quickly or bottom out over two to five years. We identify market peaks in hindsight. We can’t predict them, and even an active investor shouldn’t hinge a strategy on timing.

Quantitative market valuation offers tools to navigate cycles in the absence of timing peaks. In consideration of complex housing markets in certain metro regions, Stefan is refining the price-to-income metric. He cites San Francisco as an example of a complex housing market. San Francisco housing is expensive due to supply and demand and thus should not be assumed to be overvalued. Prices there are driven by a housing shortage.

People often discuss historical market peaks as singular events. In reality, market cycles vary regionally. During the Great Recession, some areas peaked in 2005 while others topped out in late 2007.

Does this uncertainty mean that you should stay out of hot markets? Not necessarily. Large, strong markets in areas such as Texas tend to hold their value across cycles. Stefan believes that large states with robust economic activity offer the best opportunities. What you need to watch for is significant overvaluation that could signal a powerful forthcoming correction.

How to Find Undervalued Opportunities

According to historical performance numbers, undervalued markets are less likely to drop substantially in a downturn following a peak. If you want to invest cautiously, focus on identifying undervalued markets. You can work with a financial expert like Stefan or do your research based on Stefan’s guidelines.

Your investor profile matters when deciding on potential markets. If active investing, you have more control over responding agilely to changes in markets or investing goals. If passive investing, you generally have little say in the timing of market exits. You want an undervalued but strong market that lets you sleep soundly at night.

Your investing scope matters as well. Buying a triplex in a residential neighborhood differs from investing in retail shopping centers.

Along those lines, Stefan notes that we should distinguish between metro and state scope. Though an undervalued state such as Texas may hold reasonably steady, specific communities may fluctuate more widely. Factors such as employment and migration affect individual cities and counties.

The key is to find strong markets that are undervalued and weigh their strengths against weaknesses. Many U.S. states are undervalued by Stefan’s criteria, but not all of them offer equal opportunity. Currently, Stefan names the most undervalued states as being Arkansas, Connecticut, and Illinois. However, Connecticut has issues that make it unattractive to investors.

In contrast, Indiana is 6% undervalued and up 27% from its 2007 peak. If you are an investor starting small, you would most likely consider Indiana over Connecticut. Larger investors looking at retail shopping centers or other commercial investing should consider big markets.

The Bottom Line

When overarching factors such as the current pandemic muddle qualitative analysis, a quantitative view brings objectivity and historical context. Rather than try to guess the market’s peak, focus on identifying undervalued yet strong markets. If you’re a larger investor, choose big metro regions. Accurate market valuation supports portfolio growth while buffering against plunges. It outlasts rollercoaster cycles, and so can you.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

Residential Lenders Tighten Their Lending Standards – Why This Is Good News for Multifamily Investors

A little more than a year before the onset of the coronavirus pandemic, I wrote a blog post entitled “Why I Am Confident Multifamily Will Thrive During and After the Next Economic Correction” (which you can read here).

The economy was experiencing a record long expansion and showed no signs of stopping. However, like most economic expansions, various economic and real estate experts were warning about an impending recession.

“The stock market is inflated” and “real estate prices and rents will not increase forever” they said. 

However, whether the economy continued chugging along or experienced a minor or massive correction, I was confident is multifamily real estate’s ability to continue to perform. 

My confidence was not emotionally driven or biased because I am a multifamily investor. It was based on my analysis of the facts. The most telling fact was the change in renter population

Historically, more people rent during recessions (which is one of the reasons why I was attracted to multifamily in the first place) and more people buy during economic expansions. The former held true for the 2008 recession as more people began to rent. However, during the post-2008 economic expansion, the portion of renters continued to increase (more US households were renting in 2016 than at any point in 50 years). 

Therefore, I predicted that the portion of renters would increase or, at minimum, remain the same during and after the next correction. 

Then, coronavirus hit and induced an economic correction (or a temporary slowdown, depending on who you ask).

But, sure enough, a study published on June 17th, 2020 projected a decline in homeownership and concluded that  “the demand for rental housing will increase somewhere between 33% and 49%” between 2020 and 2025.

In both my January 2019 article and the June 2020 study, one of the reasons why more people are renting is due to tightened lending standards (other reasons were student loan debt, inability to make a down payment, poor credit, and people starting families later).

A metric that is used to measure lending standards is the Mortgage Credit Availability Index (MCAI). The MCAI is based on a benchmark of 100 set in March of 2012 and is the only standardized quantitative index that solely focuses on mortgage credit. A decline in the MCAI indicates that lending standards are tightening while an increase in the index are indicative of loosening credit.

Between December 2012 and November 2019, the MCAI was steadily trending in the positive direction, increasing from the high-80s to the high-180s.

  

However, starting in December 2019, the MCAI began to decline. The three largest drops were in March 2020 (decline of 16.1% to 152.1), April 2020 (decline of 12.2% to 133.5), and August 2020 (decline of 4.7% to 120.9, the lowest since March 2014).

Joel Kan, Mortgage Bankers Association’s Associate Vice President of Economic and Industry Forecasting said in the August 2020 report, “credit continues to tighten because of uncertainty still looming around the health of the job market, even as other data on loan applications and home sales shows a sharp rebound. A further reduction in loan programs with low credit scores, high LTVs, and reduced documentation requirements also continued to drive the overall decline in credit availability.”

People will always need a place to live. Their only two options are to rent or to own. As indicated by the massive MCAI declines since the end of 2019, less and less people will be able to qualify for residential mortgages. The programs available to people with low credit or who cannot afford a high down payment have disappeared. 

Therefore, by default, more people will be forced to rent.

One last interesting thing to point out is how the MCAI during the current economic predicament compares to the 2008 recession. 

Here is an expanded MCAI graph that shows credit availability back to 2004. The pre-2011 data was generated biannually, making it less accurate than the post-2011 monthly generated data. However, the graph still highlights an important point. At least as it relates to the availability of credit at the time of this blog post, the current economic recession is nowhere near as severe as the 2008 recession.

To receive the monthly MCAI report, click here.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

Top 10 Markets with Greatest Forecasted Migration in 2020

Each year, Marcus and Millchap releases their Multifamily North American Investment Forecast. You can download the full 2020 report by clicking here.

Last week, I wrote a blog about Marcus and Millichap’s top 10 forecasted multifamily markets for 2020 based on their National Multifamily Index (NMI), which you can read here.

They also forecast the net migration into each of the major metros. The net migration is the total number of people moving into an area minus the total number of people moving out of an area. It is a measure of how well a market is at attracting and maintaining residents.

As real estate investors, the more people who are moving to and remaining in our target investment market, the more demand there is for rentals, flips, and other real estate related products.

Here is a map from Marcus and Millichap indicating the net migration for the largest markets in the country.

As you can see from the map and the title of the map, Marcus and Millichap predicts that migration will favor the south and southwest over other parts of the country.

Here are the 10 states with the greatest forecasted net migration in 2020:

10. Seattle-Tacoma

10Best

Forecasted Net Migration: 33,400

Net Migration as a % of Population: 0.8%

 

9. Austin

Visit Austin

Forecasted Net Migration: 36,300

Net Migration as a % of Population: 1.6%

 

8. Tampa-St. Petersburg

Parade

Forecasted Net Migration: 40,800

Net Migration as a % of Population: 1.3%

 

7. Orlando

10Best

Forecasted Net Migration: 48,400

Net Migration as a % of Population: 1.8%

 

6. Las Vegas

Destination360

Forecasted Net Migration: 48,700

Net Migration as a % of Population: 2.1%

 

5. Houston

Visit The USA

Forecasted Net Migration: 54,800

Net Migration as a % of Population: 0.8%

 

4. Atlanta

Atlanta Narcity

Forecasted Net Migration: 55,400

Net Migration as a % of Population: 0.9%

 

3. Southeast Florida

Expedia

Forecasted Net Migration: 68,700

Net Migration as a % of Population: 1.1%

 

2. Dallas/Fort Worth

D Magazine

Forecasted Net Migration: 69,600

Net Migration as a % of Population: 0.9%

 

1. Phoenix

TripSavvy

Forecasted Net Migration: 77,600

Net Migration as a % of Population: 1.5%

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

Top 10 Forecasted Multifamily Markets for 2020

Each year, Marcus and Millichap releases their Multifamily North American Investment Forecast (you can download the full report here). Their annual report includes National Multifamily Index (NMI).

The NMI is based on forward-looking economic indicators and supply-and-demand metrics, including projected job growth, vacancy, construction, housing affordability, rents, historical price appreciation and cap rate trends. These are the same economic and supply and demand metrics we use to select our target investment markets.

Here are the top 10 forecasted multifamily markets for 2020:

10. New York City

Business Insider

2019 Rank: 3

2019 to 2020 Change: -7

9. Sacramento

Opendoor

2019 Rank: 11

2019 to 2020 Change: +2

8. Boston

The Boston Globe

2019 Rank: 8

2019 to 2020 Change: 0

7. Minneapolis-St. Paul

Pioneer Press

2019 Rank: 1

2019 to 2020 Change: -6

6. Phoenix

TripSavvy

2019 Rank: 13

2019 to 2020 Change: +7

5. Tampa-St. Petersburg

Parade

2019 Rank: 12

2019 to 2020 Change: +7

4. Riverside-San Bernardino

Flickr

2019 Rank: 7

2019 to 2020 Change: +3

3. San Diego

Wikipedia

2019 Rank: 2

2019 to 2020 Change: -1

2. Seattle-Tacoma

10Best

2019 Rank: 5

2019 to 2020 Change: +3

1. Orlando

10best

2019 Rank: 6

2019 to 2020 Change: +5

 

Are you a newbie or a seasoned investor who wants to take their real estate investing to the next level? The 10-Week Apartment Syndication Mastery Program is for you. Joe Fairless and Trevor McGregor are ready to pull back the curtain to show you how to get into the game of apartment syndication. Click here to learn how to get started today.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

Texas and Florida Add The Most New Jobs in 2019

Each month, the US Bureau of Labor Statistics (BLS) releases a monthly Metropolitan Area Employment and Unemployment Report, which includes the current total number of civilian labor force and unemployment by state and metropolitan area (MSA), as well as the same metrics 12 months prior in order to determine the change in the labor force and unemployment over the past year.

The employment situation in a market is an indication of the demand for real estate. People need jobs to pay living expenses, which includes paying for rent. The more people with jobs in the market, the more potential “customers” for us as apartment investors.

BLS releases a lot of relevant economic data on a month basis, which can be found here. You can also view archived new releases for previous years here.

50 states, the District of Columbia, Puerto Rico, and 396 MSAs are included in the data.

Currently, we focus on the Texas and Florida markets for our deals. Here are some interest highlights from their December 2019 report about those two states:

  • 10 states added over 100,000 jobs
  • #1 was Texas (253,056 jobs) and #2 was Florida (178,978 jobs)
  • 31 states had a reduction in unemployment
  • 19 markets added over 25,000 jobs
  • The #2 market (Dallas-Fort Worth-Arlington) added more jobs than the total number of jobs added in 40 out of 50 states
  • The #10 market (Orlando-Kissimmee-Sanford) added more jobs than the total number of jobs added in 34 out of 50 states
  • The #19 market (Tampa-St. Petersburg-Clearwater) added more jobs than the total number of jobs added in 26 out of 50 states
  • 275 out of 396 markets had a reduction in unemployment

Here is the BLS data for our markets from December 2018 to December 2019

State of Texas

Visit Austin

  • New Jobs Added Ranking: #1 out of 50 states
  • Total Jobs 12/2018: 13,975,415
  • Total Jobs 12/2019: 14,228,471
  • Total Jobs Added: 253,056
  • Job Growth: 1.81%
  • Total Unemployment 12/2018: 501,787
  • Total Unemployment 12/2019: 470,429
  • Unemployment Rate 12/2018: 3.6%
  • Unemployment Rate 12/2019: 3.3%
  • Change in Unemployment: -0.3%

State of Florida

Florida Politics

  • New Jobs Added Ranking: #2 out of 50 states
  • Total Jobs 12/2018: 10,284,492
  • Total Jobs 12/2019: 10,463,470
  • Total Jobs Added: 178,978
  • Job Growth: 1.74%
  • Total Unemployment 12/2018: 338,922
  • Total Unemployment 12/2019: 265,350
  • Unemployment Rate 12/2018: 3.3%
  • Unemployment Rate 12/2019: 2.5%
  • Change in Unemployment: -0.8%

Dallas-Fort Worth-Arlington MSA

D Magazine

  • New Jobs Added Ranking: #2 out of 396 MSAs
  • Total Jobs 12/2018: 3,956,122
  • Total Jobs 12/2019: 4,054,399
  • Total Jobs Added: 98,277
  • Job Growth: 2.48%
  • Total Unemployment 12/2018: 128,944
  • Total Unemployment 12/2019: 117,547
  • Unemployment Rate 12/2018: 3.3%
  • Unemployment Rate 12/2019: 2.9%
  • Change in Unemployment: -0.4%

Orlando-Kissimmee-Sanford MSA

10best.com

  • New Jobs Added Ranking: #10 out of 396 MSAs
  • Total Jobs 12/2018: 1,348,435
  • Total Jobs 12/2019: 1,386,798
  • Total Jobs Added: 38,363
  • Job Growth: 2.85%
  • Total Unemployment 12/2018: 40,421
  • Total Unemployment 12/2019: 33,987
  • Unemployment Rate 12/2018: 3.0%
  • Unemployment Rate 12/2019: 2.5%
  • Change in Unemployment: -0.5%

Tampa-St. Petersburg-Clearwater

Parade

  • New Jobs Added Ranking: #19 out of 396 MSAs
  • Total Jobs 12/2018: 1,531,930
  • Total Jobs 12/2019: 1,558,569
  • Total Jobs Added: 26,639
  • Job Growth: 1.74%
  • Total Unemployment 12/2018: 49,086
  • Total Unemployment 12/2019: 41,111
  • Unemployment Rate 12/2018: 3.2%
  •  Unemployment Rate 12/2019: 2.6%
  • Change in Unemployment: -0.6%

You can view the full report for all US states and markets by clicking here.

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

10 Large Cities with Most Explosive Rent Growth in 2019

One of the most important factors used to evaluate a potential target investment market is supply and demand.

The demand side of the equation is measured in part by the change in median rent year-over-year – an increase in median rent indicates an increase in the demand for rental properties in a particular area, and vice versa.

Ideally, the change in rent for your target market is positive (obviously) and is greater than the average national change in rent. From January 2019 to January 2020, the average national change in rent was +1.6% (compared to +1.6% and +2.6% over the same time period in 2018 and 2017 respectively). This would indicate that rent growth is continuing to be sluggish on a national scale compared to previous years. However, the top markets in the country are continuing to outpace the current and past two year averages.

Overall, 217 of the 712 US cities experienced rent growth of 2% of more. 96 had rent growth of 3% or more. 36 had rent growth of 4% of more. And 12 had rent growth of 5% or more. The city with the greatest rent growth was the city of Madison in Alabama (population of 47,959) – 6.9%.

Here are the top 10 large US cities where rents increased the most from January 2019 to January 2020:

 

National Averages

  • Median 1 BR Rent: $962
  • Median 2 BR Rent: $1,193
  • Y/Y Change: 1.6%

10. Arlington, TX

Loews Hotels

  • Median 1 BR Rent: $1,016
  • Median 2 BR Rent: $1,262
  • Y/Y Change: 2.6%

9. Plano, TX

NCTCOG.org

  • Median 1 BR Rent: $1,186
  • Median 2 BR Rent: $1,474
  • Y/Y Change: 2.8%

8. Stockton, CA

Downtown Stockton Alliance

  • Median 1 BR Rent: $994
  • Median 2 BR Rent: $1,304
  • Y/Y Change: 2.8%

7. Las Vegas, NV

Destination360

  • Median 1 BR Rent: $963
  • Median 2 BR Rent: $1,193
  • Y/Y Change: 3.2%

6. Austin, TX

Visit Austin

  • Median 1 BR Rent: $1,191
  • Median 2 BR Rent: $1,470
  • Y/Y Change: 3.3%

5. Nashville, TN

Andrew Jackson’s Hermitage 

  • Median 1 BR Rent: $947
  • Median 2 BR Rent: $1,163
  • Y/Y Change: 3.3%

4. Colorado Springs, CO

DowntownCS.com

  • Median 1 BR Rent: $986
  • Median 2 BR Rent: $1,272
  • Y/Y Change: 3.3%

3. Phoenix, AZ

TripSavvy

  • Median 1 BR Rent: $883
  • Median 2 BR Rent: $1,101
  • Y/Y Change: 3.7%

2. Henderson, NV

 

Wikipedia

  • Median 1 BR Rent: $1,127
  • Median 2 BR Rent: $1,397
  • Y/Y Change: 4.2%

1. Mesa, AZ

 

  • Median 1 BR Rent: $915
  • Median 2 BR Rent: $1,140
  • Y/Y Change: 5.1%

If you are investing in one of these markets, do not assume that the future rent growth will be the same. Always conservatively estimate the annual income growth factor – 2% to 3% maximum. That way, if the rental rates slow, you’ll still hit your projections. And if the rental rates continue or increase, you’ll exceed your projections, which means more money for you and your investors.

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

2019 H2 Cap Rates of the Nation’s Top 50 Multifamily Markets

Every 6 months, CBRE releases their bi-annual North American Cap Rate Survey, which calculates cap rates and expected return on cost based on recent transactions and interactions with active investors in markets across the country.

Download CBRE’s second half of 2019 report here.

The cap rate is the rate of return based on the income that an asset is expected to generate More specifically, it is the ratio of the net operating income and the current market value of the asset (cap rate = net operating income / current market value). Generally, at the same net operating income, the higher the cap rate, the lower the property value.

In multifamily investing, the cap rate is used by appraisers in order to determine the value of an apartment building being purchased or sold. Therefore, as investors, the cap rate can be used on the front end to help us determine a fair purchase price – although it is not as important as cash-on-cash (CoC) return and, if you’re an apartment syndicator, the internal rate of return (IRR). However, the cap rate is very important on the back end, because it is used to determine how much the investor or syndicator can sell their asset for, which determines how much profit they can make at sale.

 

Here are the cap rates at the end of the second half of 2019 of the nation’s top 50 tier I, II, and III multifamily markets for Class A, B, and C asset classes .

 

Tier I Markets

Tier 1 multifamily cap rate

CBRE Research

 

Tier II Markets

Tier 2 multifamily cap rate

CBRE Research

 

Tier III Markets

Tier 3 multifamily cap rate

CBRE Research

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

9 Large Cities with Greatest Economic Diversity

One of the metrics that my apartment syndication company has found to be the most valuable when evaluating new target investment markets is job diversity.

Job diversity is based on the percentage of jobs in each industry in a market. A market with one sector employing a large percentage of the population is less diverse than a market with multiple sectors employing a smaller percentage of the population.

My company’s rule of thumb is that we don’t want to invest in a market that has one sector employing 25% or more of the population, with 20% being the ideal target.

To determine the most diverse economies, WalletHub ranked 501 cities across three economic metrics: industry diversity, occupational diversity, and worker-class diversity.

 

Here are the 9 large cities that topped their list:

 

9. Long Beach, CA

  • Industry, Occupational, Worker-Class Diversity Score: 75.35

 

8. Los Angeles, CA

  • Industry, Occupational, Worker-Class Diversity Score: 75.42

 

7. Oklahoma City, OK

  • Industry, Occupational, Worker-Class Diversity Score: 75.57

 

6. Virginia Beach, VA

  • Industry, Occupational, Worker-Class Diversity Score: 75.67

 

5. Corpus Christi, TX

  • Industry, Occupational, Worker-Class Diversity Score: 75.90

 

4. El Paso, TX

  • Industry, Occupational, Worker-Class Diversity Score: 75.99

 

3. Bakersfield, CA

  • Industry, Occupational, Worker-Class Diversity Score: 76.40

 

2. Fresno, CA

  • Industry, Occupational, Worker-Class Diversity Score: 76.43

 

1. Sacramento, CA

  • Industry, Occupational, Worker-Class Diversity Score: 76.59

 

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

 

 

 

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

10 Best Places to Live for Tech Jobs in 2019

If you were to ask the average person “where is the best place to live if you are interested in the tech field?,” they will most likely say Silicon Valley. Google, Apple, Facebook HP, Cisco, Tesla, Oracle, Intel – even Netflix. The list goes on and on.

Consequently, real estate is in extremely high demand in Silicon Valley and the surrounding areas. Locations with high paying jobs generally result in higher demand for homes and rentals, which results in higher home and rental rate prices.

This is great news for real estate investors – but of course there is a catch. The cost to acquire an investment is significantly higher and the amount of available single family and multifamily properties to purchase is significantly lower. And the homes that are available will have a lot of competition.

What if I told you that Silicon Valley, albeit the nation’s primary hub for tech jobs, isn’t the only location that provides strong opportunities for tech workers and, subsequently, real estate investors too?

Each year, SmartAsset analyzes governmental data to determine the best places to work in tech based on the average tech salary, cost of living compared to the national average, the percentage of workforce in tech, the unemployment rate of residents with a bachelor’s degree, and the ratio of average pay to tech pay in the city.

Check out SmartAsset’s full study here.

Here is a breakdown of 10 cities that have high paying tech jobs and low cost of living:

 

10. Temple, TX

Percentage of workforce in tech: 2.09%

Average salary: $78,770

Ratio of tech wage to average wage: 1.79

Cost of living index: 85.1

Unemployment rate: 2.6%

 

9. St. Louis, MO

Percentage of workforce in tech: 3.55%

Average salary: $84,140

Ratio of tech wage to average wage: 1.67

Cost of living index: 87.9

Unemployment rate: 3%

 

8. Huntsville, AL

Percentage of workforce in tech: 6.77%

Average salary: $97,340

Ratio of tech wage to average wage: 1.78

Cost of living index: 93.6

Unemployment rate: 3.6%

 

7. San Antonio, TX

Percentage of workforce in tech: 2.7%

Average salary: $84,790

Ratio of tech wage to average wage: 1.82

Cost of living index: 86.9

Unemployment rate: 3.2%

 

6. Des Moines, IA

Percentage of workforce in tech: 4.44%

Average salary: $83,820

Ratio of tech wage to average wage: 1.61

Cost of living index: 90.6

Unemployment rate: 2.3%

 

5. Davenport, IA

Percentage of workforce in tech: 2.88%

Average salary: $83,090

Ratio of tech wage to average wage: 1.76

Cost of living index: 94.6

Unemployment rate: 1.4%

 

4. Cedar Rapids, IA

Percentage of workforce in tech: 4.14%

Average salary: $83,260

Ratio of tech wage to average wage: 1.69

Cost of living index: 93.9

Unemployment rate: 1.8%

 

3. Raleigh, NC

Percentage of workforce in tech: 5.69%

Average salary: $91.680

Ratio of tech wage to average wage: 1.75

Cost of living index: 91.6

Unemployment rate: 2.6%

 

2. Dallas, TX

Percentage of workforce in tech: 4.23%

Average salary: $93,820

Ratio of tech wage to average wage: 1.78

Cost of living index: 90.9

Unemployment rate: 2.7%

 

1. Columbus, OH

Percentage of workforce in tech: 4.21%

Average salary: $92,440

Ratio of tech wage to average wage: 1.80

Cost of living index: 90.9

Unemployment rate: 2.3%

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

 

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

2019 H1 Cap Rates of the Nation’s Top 50 Multifamily Markets

Every 6 months, CBRE releases their bi-annual North American Cap Rate Survey, which calculates cap rates and expected return on cost based on recent transactions and interactions with active investors in markets across the country.

Download CBRE’s first half of 2019 report here.

The cap rate is the rate of return based on the income that an asset is expected to generate More specifically, it is the ratio of the net operating income and the current market value of the asset (cap rate = net operating income / current market value). Generally, at the same net operating income, the higher the cap rate, the lower the property value.

In multifamily investing, the cap rate is used by appraisers in order to determine the value of an apartment building being purchased or sold. Therefore, as investors, the cap rate can be used on the front end to help us determine a fair purchase price – although it is not as important as cash-on-cash (CoC) return and, if you’re an apartment syndicator, the internal rate of return (IRR). However, the cap rate is very important on the back end, because it is used to determine how much the investor or syndicator can sell their asset for, which determines how much profit they can make at sale.

 

Here are the cap rates at the end of the first half of 2019 of the nation’s top 50 tier I, II, and III multifamily markets for Class A, B, and C asset classes .

 

Tier I Markets

CBRE Research

 

Tier II Markets

CBRE Research

 

Tier III Markets

CBRE Research

 

Are you a newbie or a seasoned investor who wants to take their real estate investing to the next level? The 10-Week Apartment Syndication Mastery Program is for you. Joe Fairless and Trevor McGregor are ready to pull back the curtain to show you how to get into the game of apartment syndication. Click here to learn how to get started today.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

7 Markets with Record Breaking Multifamily Occupancy Levels

According to RealPage, the national apartment occupancy rate is at an 18-year high.

This is fantastic news for apartment syndicators and passive apartment investors. The higher the occupancy rate at an apartment, the higher the net operating income. Also, higher occupancy rates result in higher rental rates due to the lower supply of available units.

While the overall market is at an 18-year high, seven markets either achieved an all-time high or a 20-year high. Here is a breakdown of the seven MSAs with record breaking occupancy levels in the second quarter of 2019:

 

All-Time High Occupancy Levels

 

1. Cincinnati, OH-KY-IN

2Q19 Occupancy: 96.7%

Cycle Average: 95.1%

 

2. Phoenix-Mesa-Scottsdale, AZ

2Q19 Occupancy: 96.2%

Cycle Average: 93.1%

 

3. Greensboro/Winston-Salem, NC

2Q19 Occupancy: 95.8%

Cycle Average: 93.1%

 

20-Year High Occupancy Levels

 

4. Detroit-Warren-Dearborn, MI

2Q19 Occupancy: 97.1%

Cycle Average: 95.0%

 

5. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

2Q19 Occupancy: 96.5%

Cycle Average: 95.2%

 

6. Raleigh/Durham, NC

2Q19 Occupancy: 95.5%

Cycle Average: 94.3%

 

7. St. Louis, MO-IL

2Q19 Occupancy: 95.1%

Cycle Average: 93.4%

 

Bonus: 10-Year High Occupancy Levels

 

8. Washington-Arlington-Alexandria, DC-VA-MD-WV

2Q19 Occupancy: 96.2%

Cycle Average: 95.3%

 

9. Virginia Beach-Norfolk-Newport News, VA-NC

2Q19 Occupancy: 96.1%

Cycle Average: 93.1%

 

10. Las Vegas-Henderson-Paradise, NV

2Q19 Occupancy: 96.0%

Cycle Average: 93.1%

 

11. Baltimore-Columbia-Towson, MD

2Q19 Occupancy: 95.5%

Cycle Average: 94.8%

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

 

 

 

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

9 Metros with Highest Multifamily Rent Growth in First Half of 2019

Rent growth forecasts can be great tool when selecting a target investment market or underwriting a potential deal. However, if you are a Best Ever Listener, you’ve heard me strongly encourage you to take these rental growth projections with a grain of salt.

Rather than assuming your rental rates will organically grow at the forecasted rate (or even the historical rate), I recommend conservatively underwriting a 2% to 3% annual income growth factor. In doing so, if the forecasted rent growth rates are indeed a reality, that’s extra money in your and your investors’ pocket. If the forecasted rent growth rates do not come to fruition, you’ll still hit your return projections.

Yardi Matrix just released their Summer 2019 US Multifamily Outlook report (which you can download here). One of the factors they track is the year-over-year actual rent growth compared to their 2019 projections.

The national forecasted percent rent growth for 2019 was 2.6%, but we’ve actually experienced a growth of 3% so far (hence, the 2% to 3% annual income growth assumption).

Here are the 9 metros with the highest rent growth so far in 2019:

 

9. Winston-Salem, NC

  • YoY % Change as of June 2019: 4.8%
  • 2019 Forecasted % Change: 4.7%

 

8. Austin, TX

  • YoY % Change as of June 2019: 4.9%
  • 2019 Forecasted % Change: 3.7%

 

7. Long Island, NY

  • YoY % Change as of June 2019: 5.1%
  • 2019 Forecasted % Change: 4.3%

 

6. Colorado Springs, CO

  • YoY % Change as of June 2019: 5.1%
  • 2019 Forecasted % Change: 4.3%

 

5. Sacramento

  • YoY % Change as of June 2019: 5.3%
  • 2019 Forecasted % Change: 3.8%

 

4. Tacoma, WA

  • YoY % Change as of June 2019: 5.7%
  • 2019 Forecasted % Change: 4.9%

 

3. Tucson, AZ

  • YoY % Change as of June 2019: 6.1%
  • 2019 Forecasted % Change: 5.1%

 

2. Phoenix, AZ

  • YoY % Change as of June 2019: 8.1%
  • 2019 Forecasted % Change: 5.3%

 

1. Las Vegas, NV

  • YoY % Change as of June 2019: 8.4%
  • 2019 Forecasted % Change: 5.4%

 

Setting the conservative 2% to 3% annual income growth assumption for investments in any of these 9 metros would result in extra money in your and your investors’ pockets. While all top 9 metros experienced an actual rent growth that was greater than the forecasted rent growth, that wasn’t the case for all metros. For example, Miami only experienced a 0.9% rent growth whereas 4.1% was forecasted.

Imagine what would have happen if you invested in Miami and rather than projecting a conservative 2% rent growth, you projected 4.1%. Instead of only being slightly behind on returns, you would be in a significant hole.

That is the power of conservative underwriting.

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

 

 

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

What Are The 10 Most Expensive Markets in The Country?

Generally, the costs of housing – either a monthly mortgage or monthly rent – is the most expensive ongoing expense, making it a good indicator for comparing the demand for fix-and-flips or rentals across multiple markets. However, an even better measurement of demand is when you combine the costs of housing with other living expenses, like utilities, groceries, transportation, healthcare, and other miscellaneous goods and services.

This aggregate metric is commonly referred to as the cost of living index. Each quarter, The Council For Community and Economic Research (C2ER) calculates a cost of living index by measuring regional differences in the cost of consumer goods and services, excluding taxes and non-consumer expenditures. The calculation based on more than 90,000 prices covering 60 different items for which prices are collected quarterly by chambers of commerce, economic development organizations, and university applied economic centers in each participating urban area.

C2ER recently released the cost of living index for the first quarter of 2019. Here are the 10 most expensive urban markets compared to a national average of 100:

 

10. Arlington, VA

Cost of Living Index: 151.1

 

9. Orange County, CA

Cost of Living Index: 151.4

 

8. Boston, MA

Cost of Living Index: 153.5

 

7. Oakland, CA

Cost of Living Index: 158.2

 

6. Washington, DC

Cost of Living Index: 158.4

 

5. Seattle, WA

Cost of Living Index: 159.4

 

4. Brooklyn, NY

Cost of Living Index: 186.4

 

3. Honolulu, HI

Cost of Living Index: 192.9

 

2. San Francisco, CA

Cost of Living Index: 200.1

 

1. New York City, NY

Cost of Living Index: 238.4

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

11 Cities That Are Attracting The Most Renters From Other Cities

If I were to ask you, which city is a better target investment market: one that a large amount of people are moving to or one that a large amount of people are leaving? A smart investor would likely select on the former market. More people moving to a market not only means more demand for real estate – both rentals and residential – but also indicates an increase in jobs in that area, since most people who move do so for a new job.

Apartment List recently released the first edition of their Renter Migration Report. The report analyzed data on millions of searches from January 1, 2018 through May 1, 2019 to see where their uses are preparing to move. More specifically, they calculated the share of inbound searches coming from outside the metro (i.e., someone who lives in Cincinnati, OH searching for an apartment in Tampa, FL). They also did the reverse to determine which cities their users were looking to leave.

Click here to read the full report, and here are the top 11 cities that are attracting renters from elsewhere:

 

11. Dallas, TX

  • Share of inbound searches coming from out-of-metro: 39%

 

10. Los Angeles, CA

  • Share of inbound searches coming from out-of-metro: 42%

 

9. Portland, OR

  • Share of inbound searches coming from out-of-metro: 43%

 

8. Orlando, FL

  • Share of inbound searches coming from out-of-metro: 43%

 

7. St. Louis, MO

  • Share of inbound searches coming from out-of-metro: 44%

 

6. San Francisco, CA

  • Share of inbound searches coming from out-of-metro: 44%

 

5. Charlotte, NC

  • Share of inbound searches coming from out-of-metro: 48%

 

4. San Diego, CA

  • Share of inbound searches coming from out-of-metro: 49%

 

3. Baltimore, MD

  • Share of inbound searches coming from out-of-metro: 52%

 

2. Denver, CO

  • Share of inbound searches coming from out-of-metro: 55%

 

1. Tampa, FL

  • Share of inbound searches coming from out-of-metro: 63%

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

 

 

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

12 Markets with Best Supply-and-Demand Metrics in 2019

Each year, Marcus and Millichap releases their Multifamily North American Investment Forecast. The highlight of this report is the US Multifamily Index (NMI), which ranks 46 major markets on a collection of 12-month, forward-looking economic indicators and supply and demand variables, including job growth, vacancy, construction, housing affordability, and rents. The purpose of the NMI is to show relative supply-and-demand conditions at the market level.

One of the most important factors when selecting a target investment market is supply and demand, because they indicate the ability to find a deal, the cost associated with buying the deal, and the occupancy and rent levels that are achievable once the deal is acquired.

Click here to download Marcus and Millichap’s full report to see how all 46 markets were ranked.

Here are the 12 markets with the best supply and demand metrics in 2019:

 

12. Tampa-St. Petersburg

  • 2018 Rank: 21
  • ’18 to ’19 Change: +9

 

11. Sacramento

  • 2018 Rank: 8
  • ’18 to ’19 Change: -3

 

10. Portland

  • 2018 Rank: 5
  • ’18 to ’19 Change: -5

 

9. Oakland

  • 2018 Rank: 10
  • ’18 to ’19 Change: +1

 

8. Boston

  • 2018 Rank: 6
  • ’18 to ’19 Change: -2

 

7. Riverside-San Bernardino

  • 2018 Rank: 9
  • ’18 to ’19 Change: +2

 

6. Orlando

  • 2018 Rank: 17
  • ’18 to ’19 Change: +11

 

5. Seattle-Tacoma

  • 2018 Rank: 1
  • ’18 to ’19 Change: -4

 

4. Los Angeles

  • 2018 Rank: 2
  • ’18 to ’19 Change: -2

 

3. New York City

  • 2018 Rank: 7
  • ’18 to ’19 Change: +4

 

2. San Diego

  • 2018 Rank: 4
  • ’18 to ’19 Change: +2

 

1. Minneapolis-St. Paul

  • 2018 Rank: 3
  • ’18 to ’19 Change: +2

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

 

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

What Are the Cap Rate Trends in Your Target Apartment Investment Market?

Each year, Integra Realty Resources (IRR) releases their ViewPoint report, which analyzes commercial real estate trends and forecasts performance for the coming year. One of the factors they track are the market cycles for the top MSAs (which you can find here). Another important factor they track are cap rates.

The cap rate is the rate of return based on the income that an asset is expected to generate More specifically, it is the ratio of the net operating income and the current market value of the asset (cap rate = net operating income / current market value). Generally, at the same net operating income, the higher the cap rate, the lower the property value.

In multifamily investing, the cap rate is used by appraisers in order to determine the value of an apartment building being purchased or sold. Therefore, as investors, the cap rate can be used on the front end to help us determine a fair purchase price – although it is not as important as cash-on-cash (CoC) return and, if you’re an apartment syndicator, the internal rate of return (IRR). However, the cap rate is very important on the back end, because it is used to determine how much the investor or syndicator can sell their asset for, which determines how much profit they can make at sale.

IRR tracks the cap rate for urban and suburban Class A and Class B multifamily products both nationally and regionally, as well as the year-over-year change (measured as BPS, or basis points, where 1 BPS is equal to 0.01%).

Here is the most recent cap rate data for multifamily real estate from IRR’s 2019 ViewPoint report:

 

National

  Cap Rate YoY Change (BPS)
Urban Class A 5.30% +2
Urban Class B 6.11% -3
Suburban Class A 5.47% +2
Suburban Class B 6.32% 0

 

 

South Region

  Cap Rate YoY Change (BPS)
Urban Class A 5.39% -1
Urban Class B 6.23% -4
Suburban Class A 5.54% -8
Suburban Class B 6.48% -2

 

East Region

  Cap Rate YoY Change (BPS)
Urban Class A 5.33% +14
Urban Class B 6.28% 0
Suburban Class A 5.70% +27
Suburban Class B 6.60% +5

 

Central Region

  Cap Rate YoY Change (BPS)
Urban Class A 5.97% -2
Urban Class B 6.83% -2
Suburban Class A 6.01% -2
Suburban Class B 6.85% -2

 

West Region

  Cap Rate YoY Change (BPS)
Urban Class A 4.52% 0
Urban Class B 5.12% -4
Suburban Class A 4.71% 0
Suburban Class B 5.34% 0

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

 

 

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

What Stage in The Market Cycle is Your Target Apartment Investment Market?

Each year, Integra Realty Resources releases their ViewPoint report, which tracks major trends and development in the commercial real estate industry.

One of the data points in this report that is relevant to you as a multifamily investor is their categorization of the major cities into their respective stage in the market cycle. That is, which markets are expanding, which are recovering, which are experiencing hypersupply, and which are in a recession.

Based on the most recent multifamily market data, 83% of the markets reviewed are in the expansion phase and only one is in recession. According to IRR, most markets are in the expansion phase because debt capital for new development has been very disciplined and builders have been focusing on highly demanded niche products like senior housing, student housing, workforce housing, etc. Also, employment and unemployment trends have been the best demand indicator for apartments over time, and the number of jobs have been steadily increasing.

Before showing you which stage in the market cycle your target market is in, let’s first define the four stages:

Market Cycle Expansion Hypersupply Recession Recovery
Vacancy Rates Decreasing Increasing Increasing Decreasing
New Construction Moderate/High Moderate/High Moderate/Low Low
Absorption High Low/Negative Low Moderate
Employment Growth Moderate/High Moderate/Low Low/Negative Low/Moderate
Rental Rate Growth Medium/High Medium/Low Low/Negative Negative/Low

These four categories are a part of a cycle, which goes like this: recovery to expansion to hypersupply to recession back to recovery:

IRR also broke each of these four categories into three sub-groups, which for the purpose of this blog post I will label as 1, 2, and 3. Using expansion as the example, markets in the 1 subgroup have the strongest expansion market factors (i.e., vacancy rate is decreasing the most, new construction is highest, absorption is highest, employment growth is highest, and rental rate growth is highest), whereas markets in the 3 subgroup still meet the expansion criteria but not as much as the 1 subgroup (i.e., vacancy decreasing at a slower rate, moderate new construction, high absorption, moderate employment growth, medium rental rate growth).

Since this is a cycle, markets in subgroup 1 are closer to the previous market stage and markets in subgroup 3 are closer to the next market stage. So in reality, the market cycle looks more like this:

That said, here are the market cycle categorizations for all of the major cities/markets:

 

Expansion

Expansion 1

  • Jackson, MS
  • Las Vegas, NV

Expansion 2

  • Austin, TX
  • Cleveland, OH
  • Dayton, OH
  • Greensboro, NC
  • Indianapolis, IN
  • Long Island, NY
  • Los Angeles, CA
  • Nashville, TN
  • New York, NY
  • Orange County, CA
  • Orlando, FL
  • Sacramento, CA
  • San Diego, CA
  • Sarasota, FL
  • Tulsa, OK
  • Washington, DC

Expansion 3

  • Birmingham, AL
  • Boise, ID
  • Broward-Palm Beach, FL
  • Charlotte, NC
  • Chicago, IL
  • Cincinnati, OH
  • Columbia, SC
  • Columbus, OH
  • Dallas, TX
  • Detroit, MI
  • Fort Worth, TX
  • Greenville, SC
  • Hartford, CT
  • Jacksonville, FL
  • Kansas City, MO
  • Louisville, KY
  • Memphis, TN
  • Minneapolis, MN
  • Naples, FL
  • New Jersey, Coastal
  • New Jersey, No.
  • Oakland, CA
  • Phoenix, AZ
  • Pittsburgh, PA
  • Portland, OR
  • Raleigh, NC
  • Richmond, VA
  • Salt Lake City, UT
  • San Francisco, CA
  • San Jose, CA
  • Seattle, WA
  • St. Louis, MO
  • Syracuse, NY
  • Wilmington, DE

 

Hypersupply

Hypersupply 1

  • Atlanta, GA
  • Baltimore, MD
  • Charleston, SC
  • Denver, CO
  • Miami, FL
  • San Antonio, TX

Hypersupply 2

  • Boston, MA
  • Providence, RI
  • Tampa, FL

Hypersupply 3

  • Philadelphia, PA

 

Recession

Recession 1

  • None

Recession 2

  • Little Rock, AR

Recession 3

  • None

 

Recovery

Recovery 1

  • Houston, TX

Recovery 2

  • None

Recovery 3

  • None

 

What Does This Mean For Me?

Each of these markets are categorized based the following factors: vacancy rates, new construction, absorption, employment growth, and rental rate growth trends. So, one thing to think about is if you can find a submarket or neighborhood within one of the hypersupply or recession markets that have expansion or recovery factors. In other words, just because the overall market isn’t in the expansion or recovery phase doesn’t mean that you should abandon that market nor that you won’t be able to find great investment opportunities. In fact, you’ll likely be able to find more deals and have less competition when not pursuing expansion markets.

Additionally, if your market is in the 1 or 3 subgroup, you’ll want to monitor those market factors to see if the market has moved to another stage. This would be a good thing if your market moved from hypersupply 1 to expansion 3, and it would be concerning if your market moved from expansion 3 to hypersupply 1.

Lastly, just because your market is in the expansion phase doesn’t mean that every deal is a good deal. You should still complete a full underwriting analysis based on your business plan and perform the proper due diligence on all prospective deals.

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

7 States With The Most Net Migration in 2018

Each year, U-Haul ranks each state based on the net gain of one-way U-Haul trucks entering a state versus leaving that status during the calendar year based on over 2 million one-way U-Haul transactions. U-Haul states that “while migration trends do not correlate directly to population or economic growth, U-Haul growth data is an effective gauge of how well states and cities are attracting and maintaining residents.”

As real estate investors, the more people migrating to our target investment market means more demand for our flips, rentals, or other real estate related products or services.

Click here to see how all 50 states ranked, and here are the 7 states with the most net migration in 2018:

 

7. Vermont

Vermont

iStock

  • 2017 Ranking: 10

 

6. Maryland

Choice Hotels

  • 2017 Ranking: 42

 

5. Idaho

Idaho

No Man Before

  • 2017 Ranking: 14

 

4. Utah

Utah

The Crazy Tourist

  • 2017 Ranking: 21

 

3. South Carolina

South Carolina

University of South Carolina

  • 2017 Ranking: 4

 

2. Florida

Florida

Kiplinger

  • 2017 Ranking: 2

 

1. Texas

Texas

Forbes

  • 2017 Ranking: 1

 

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

10 Markets with More Than 4% Rent Growth in Last 12 Months

Another important factor to analyze when you’re evaluating potential target investment markets is historical rent growth, which is also tied to supply and demand.

A strong year-over-year rent growth indicates a strong multifamily market.

Additionally, one of the important assumptions set when underwriting an apartment deal is annual income growth. That is, how much will my revenue naturally increase each year? Generally, somewhere between 2% and 3% is a solid, conservative assumption, due to being close to the national and historical rent growth and inflation averages. Therefore, if you are investing in a target market with a true rental growth that is greater than 2% to 3%, you are able to automatically add value just by selecting the right market!

Each quarter, CBRE gathers the most recent multifamily data and releases it in their U.S. Multifamily Figures Report (click here to view their most recent report, Q1 2019). The national year-over-year rent growth was 3.0%. But here are the 10 markets that saw a rent growth greater than 4.0%:

 

10. Jacksonville, FL

Y-o-Y Rent Growth: 4.1%

 

9. Raleigh, NC

Life Storage

Y-o-Y Rent Growth: 4.1%

 

8. Charlotte, NC

Greyhound

Y-o-Y Rent Growth: 4.2%

 

7. Tampa, FL

Parade

Y-o-Y Rent Growth: 4.3%

 

6. Austin, TX

GrandView Aviation

Y-o-Y Rent Growth: 4.7%

 

5. Riverside, CA

AreaVibes

Y-o-Y Rent Growth: 4.8%

 

4. Sacramento, CA

Y-o-Y Rent Growth: 5.1%

 

3. Atlanta, GA

Y-o-Y Rent Growth: 5.4%

 

2. Phoenix, AZ

Y-o-Y Rent Growth: 8.0%

 

1. Las Vegas, NV

Booking.com

Y-o-Y Rent Growth: 8.0%

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

8 Metro Markets with Most Multifamily Completions in 2018

One of the most important factors to analyze in order to select a target real estate investment market is supply and demand.

In general, the more demand there is for your product, the more you can charge. In the context of multifamily investing, the more demand there is for rental units in your target market, the higher the occupancy rate and the higher the rents.

One great way to measure the demand of multifamily rentals in your market is to determine the number of new units completed and the number of completed units that were rented. This measure is known as the absorption rate. The absorption rate is the ratio of the number of completed units rented to the total number of completed units. For example, if 100 units were completed and all 100 of those units were rented, the absorption rate is 100%.

Each quarter, CBRE releases their U.S. Multifamily Figures report, which tracks the absorption rate (among other factors) nationally and by metro. Click here to view the full report.

In 2018, the total number of completions was 267,900 units and the net absorption was 286,600 units (which was the highest new absorption since 2000). That gives us a national absorption rate was 107%.

Here are the 8 markets with the most multifamily completions in 2018, along with the net absorption:

 

8. Miami/South Florida, FL

  • 2018 Completions: 9,500 units
  • 2018 Net Absorption: 8,000 units

 

7. Boston, MA

  • 2018 Completions: 9,700 units
  • 2018 Net Absorption: 10,800 units

 

6. Denver, CO

  • 2018 Completions: 11,700 units
  • 2018 Net Absorption: 11,500 units

 

5. Washington, D.C.

  • 2018 Completions: 13,600 units
  • 2018 Net Absorption: 15,200 units

 

4. Seattle, WA

  • 2018 Completions: 14,400 units
  • 2018 Net Absorption: 13,500 units

 

3. Los Angeles/Southern California, CA

  • 2018 Completions: 20,000 units
  • 2018 Net Absorption: 20,400 units

 

2. Dallas/Ft. Forth

  • 2018 Completions: 20,500 units
  • 2018 Net Absorption: 19,800 units

 

1. New York, NY

  • 2018 Completions: 32,300 units
  • 2018 Net Absorption: 37,800 units

 

Are you an accredited investor who is interested in learning more about passively investing in apartment communities? Click here for the only comprehensive resource for passive apartment investors.

 

 

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

How to Invest in Apartments Like a Pro

You’ve had some experience with investing in homes, but now you’re ready to take your real estate investing efforts up a notch by taking the plunge into apartment syndications.

The question is, are you truly ready to enter the “deeper end” of the real estate investing pool?

Investing in apartments is a major commitment; in fact, it’s often viewed as more than just a passive investment strategy: it’s a career. To invest in apartment complexes, you’ll likely need more commitment than you would with a single-family home, both financially and physically. At the same time, investing in an apartment building offers benefits that you won’t get with other kinds of real estate investment strategies.

Here’s a rundown on how to invest in apartments like a pro.

Steps for Investing in Apartment Syndications

Assess if Apartment Investing is the Proper Fit for You

First, make certain that this investing approach is really right for you. This is critical, whether you are totally new to investing in real estate or you already have a massive portfolio of investment homes.

One of the main reasons you need to be confident you’re making the right move is that working with multifamily properties requires two valuable commodities: time and cost. Those interested in mastering how to invest in apartments must be prepared to meet the upfront capital requirements. They’ll also need to become accustomed to managing multiple units simultaneously to generate continuous cash flow.

Some unique challenges that come with choosing to invest in apartment complexes include addressing tenant turnover, maintenance issues, and leasing paperwork. So, before you become involved in apartment investing, make sure that you have an idea of how you’ll secure the capital (whether that comes from financing or private accredited investors) and the schedule required to accommodate such a large endeavor.

Consider Your Target Apartment Building Type

Apartments, much like homes, come in a wide range of sizes and shapes. For instance, if you’re exploring how to invest in apartments, perhaps you’re eyeing a community that is actually a rehabilitated Victorian home that someone has divided into multiple units. Or maybe you’re looking for a modern building with multiple stories located in a metro area.

To make your choice easier, first, determine your target asset class. This will help you narrow down your search for new deals and help you pinpoint what kinds of buildings would give you the greatest return on your investment based on your budget. You must also consider how much you’ll need to charge in terms of rent in light of the property purchase price and the cost of renovation and repairs.

Identify Your Target Property

After you’ve settled on a certain type of community to invest in, you can start looking for properties. As you explore how to invest in apartments like a pro, it may behoove you to consult with experts who have experience investing in apartments, as this may help you to avoid making costly mistakes from the start, especially when it comes to financing (more on that later) and setting post-acquisition income and expense assumptions.

You could also connect with local industry professionals, such as fellow investors, property management companies, or real estate agents, through a community club focused on real estate investing. Networking with these types of professionals may help you to connect with an investor who knows about certain properties for sale. Agents could also point you to potentially lucrative properties, since they can easily access commercial brokerage listings and multiple listing services.

Practice Due Diligence

If you’re interested in learning how to invest in apartments, note that exercising real estate due diligence is one of the most important steps you can take. In other words, you need to analyze a potential deal in depth before moving forward with it.

Your Analysis

To invest in apartment complexes, you need to take into consideration factors like location, available amenities, the condition of the target building, how many units the building has, and the historical and current market rents and expenses. All of this information can help you to calculate what your rent amount should be and how much you’ll have to pay for necessary improvements and repairs.

The building’s overall condition could tell you how frequently you’ll need to perform repairs, which will impact your cash flow each month. In addition, your property’s location will point you to the socioeconomic factors in the local area that will impact your long-term profitability. These factors include, for example, capitalization rate, rental growth, population trends, and occupancy rate.

Other Considerations

Furthermore, to invest in apartment complexes successfully, make sure that you hire a reputable inspector to check out an apartment complex before you buy it. At the same time, you’ll want to secure copies of legal documents, such as leases and tax returns, from the complex’s previous owner. These documents will be most helpful for discovering hidden problems with the property.

Finance the Deal through Syndication

As you explore how to invest in apartments, note that an important part of this process is financing the deal. A smart way to do this is through apartment syndication. Syndication is where you pool money from multiple passive investors and use this capital to acquire a property; you can use the money to purchase an apartment community outright or to cover part of the cost of the property while using a commercial mortgage to cover the remainder of the purchase price.

The benefit of syndication is that it offers a rapid way of purchasing apartment complexes and producing profits from them. The investors with whom you work will cover various apartment syndication expenses, and you’ll receive this money since you’re assuming responsibility for managing the deal.

Master Your Portfolio Like a Pro!

If you’re ready to elevate your real estate investing income, now is an excellent time to learn how to invest in apartments like a pro. Get in touch with me, Joe Fairless, to find out more about how you can make your first apartment investment deal, the first of many successful ones in the years to come.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
people in an auditorium for a Real Estate Investor meetup

Real Estate Investor Meetups You Should Attend

The good news? You’ve got the passion and determination to succeed in the competitive and constantly evolving real estate investment world. The not-so-good news? You may have no clue where to start or how to continue to expand your business.

Fortunately, you don’t have to embark on the path to a thriving real estate investing career all on your own. You can surround yourself with experts who can guide you each step of the way, whether you’re starting from ground zero or simply looking to restrategize and network with high net-worth individuals.

Here’s a rundown on a few real estate investor meetups you should attend this year.

Cincinnati Real Estate Investor Meetup: Best Ever Cincy Meetup

If you reside in Cincinnati or plan to visit the area soon, you can’t go wrong with the Best Ever Cincy Meetup. Regular attendees have repeatedly praised the meetup for being one of the highest-quality real estate conferences around.

At this meetup, you’ll have the chance to talk with real estate investing experts and fellow investors, like myself, about the latest trends and goings-on in the real estate industry. You’ll also learn how you can maximize both your assets and your time to get the biggest return on your investment.

To take advantage of this real estate investor meetup and build your real estate investment network, you can stop by Deer Park’s Francis R. Healy Community Center between 6:30 p.m. and 8:30 p.m. on the final Tuesday of each month. The conference costs $2.50 each time, with the majority of the proceedings being used to cover appetizers and raffles for the group. A tenth of the proceeds is donated to a nonprofit organization called Junior Achievement of Cincinnati.

Networking in Indianapolis: Indiana Real Estate Investors Group

If you live in the Circle City, the Indiana Real Estate Investors Group is an excellent place to come into contact with aspiring investors and high net-worth investors alike. This group has made it its mission to help their fellow investors.

The creators of this real estate investor meetup have emphasized that they are all about sharing stellar content with attendees, rather than selling a product. In fact, you can discuss what you are interested in buying or selling during a segment of the meeting called “Buy, Sell, Trade.”

This event takes place at Indianapolis’s Broadmoor Country Club on the second Tuesday of each month. If you are eager to expand your real estate investment network, you can start networking with other investors at 6 p.m. before the meeting commences at 6:30 p.m.

Atlanta Real Estate Investor Meetup: Atlanta Real Estate Investors Alliance

The Atlanta Real Estate Investors Alliance is an attractive event for investors looking to tap into a robust network in The Peach State. This membership-based networking and education club is designed for investors as well as other professionals in the real estate world.

The creators of this group pride themselves on catering to every level of experience and knowledge. So, it’s a fitting group for you, even if you’re just getting your feet wet in real estate. During their real estate investor meetup, you can access local experts and even international and national investors and trainers. You can also get connected with local service providers and vendors who could help you with your future deals. In addition, you can use the meetup as a platform for marketing your properties or buying other investors’ properties.

The Atlanta Real Estate Investors Alliance holds its main meetings on the very first Monday of the month. Then, specialty meetup groups get together at various times of the month in select locations throughout the city. You can attend the meetups for free, but if you wish to become an official member of the alliance, the fee is $100 per year.

Dallas Real Estate Investor Meetup: CashFlow Renegades Real Estate Entrepreneurs

Maybe you consider yourself to be a “cashflow renegade” in Dallas, meaning you’re passionate about making money in unique ways while simultaneously impacting people’s lives for the better. If so, the CashFlow Renegades Real Estate Entrepreneurs meetup may be appealing to you.

What’s unique about this group is that it is set up to help beginning investors to earn money, even as they learn how to invest. It is also helpful for those who have already begun to invest in real estate but do not want to hurt their current lifestyles as they strive to achieve that next level of wealth. The event is additionally helpful for those who want to raise money to invest in real estate and need help finding the perfect deals.

This group is known for its regular fix and flip tours, where you get to take part in a home walk-through and learn firsthand what you need to do to make any residential real estate investing deal work.

Participate in a Real Estate Investor Meetup and Start Making Money Today!

If you are serious about making more money —and not at a 9-to-5—now couldn’t be a better time to join real estate group or event in your local area. The right meetup will introduce you to a top-tier real estate investment network, which will allow you to grow your connections, your knowledge, and even your investing opportunities.

You can expect a high-quality group to teach you skills related to flipping foreclosures, finding money to do investing, short sales, and finding a cash buyer. Other subjects you can explore at these groups include marketing techniques, rehabbing, and even property management.

I can also provide you with an additional layer of support thanks to my extensive experience with generating wealth through real estate investing. In fact, I can even show you how to create the largest real estate meetup. To earn more about how you can take your real estate investing venture to the next level, apply to my private program or become a passive investor with me on one of my apartment deals.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this: