Rental Housing Journal Colorado
January 2016 - Vol. 8 Issue 1
2. Will 2016 Be A Super El Niño Year? 3. How to Dodge a Tax Hit When Selling Rental Property
5. Flipping Edges Out Renting As The Preferred Investing Strategy
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The Top Amenity Trend in 2016 for Today’s Tech-Savvy Residents:
3Q15 Market Overview Multifamily Housing Update
PROPERTY-WIDE WIFI Part I of III
By Eric Markow
Denver, CO Payroll Job Summary Total Payrolls Annual Change RCR FY15 Forecast RCR 2016 Forecast RCR 2017 Forecast RCR 2018 Forecast Unemployment (NSA)
1,391.0m 33.7m (2.5%) 39.3m (2.9%) 31.7m (2.3%) 33.3m (2.4%) 24.8m (1.7%) 3.2% (Sept.)
3Q15 Payroll Trends and Forecast Denver job trends decelerated significantly for the second consecutive quarter as metro payrolls increased at a 33,700-job, 2.5% year-on-year rate, down from 50,900- (3.9%) and 42,000(3.1%) job performances during 1Q and 2Q15, respectively. This was the slowest advance observed in nearly four years. Weaker hiring in the business and leisure service industries primarily was responsible: the sectors added workers at a 3,300-job, 0.8% pace during 3Q, down from 1Q15’s 12,500-job, 3.3% advance. Seasonally-adjusted data also exhibited weaker growth. This series recorded a net gain of 5,800 jobs during the six months ended in September, down from 29,700 during the comparable period of 2014. Moreover, the quarter ended on a sour note with the September y-o-y comparison slipping to 29,300
W
ith widespread technology use by residents of all ages and the rise of the Millennial generation, property-wide WiFi, Gigabit speeds, WiFi calling, and smart home features are what’s next in technology trends for apartments in 2016. Rental properties have to provide the technology amenities the market demands, starting with high-speed, reliable internet service. Apartment living is evolving because of shifting population dynamics. With 77 million tech-savvy Millennials (ages 18-36) entering the apartment market, they are transforming the demand for technology-oriented amenities in both private and shared residential spaces. It’s not hard to see why Internet is the No. 1 desired technology-based amenity today. In addition to attracting droves of new residents, new technologies actually have the potential of opening up untapped ancillary income for owners.
High speed access to the internet for information and entertainment is an integral part of the lives of more and more Americans, but especially the millennials who grew up with such services. Dense, bandwidth intensive content such as YouTube videos, movies, and video games is a given for this
market. Millennials want to stay connected on their devices anywhere for social media and real-time interactions on platforms like Twitter and Snapchat. Mid-life residents (36-55) are also increasingly heavy technology users. ...continued on page 4
Denver Apartment Research Report Denver Metro Area, Fourth Quarter 2015
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R
ents Soar in Denver as Demand Drivers Remain Strong The apartment market continues to perform exceedingly well amid fast-rising home values and strong household growth. While the pace of year-over-year employment growth slowed after a frenzy of new hires in 2014, rent growth is more robust than
ever thanks to a fairly tight market. Demand is high for housing in a metro where many cannot afford single-family homes. The advance in median single-family home price exceeded rent growth in 2015, increasing the gap in the cost to rent versus own. In the Denver core areas most attractive to millennials, renting is typically the only option
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as downtown and surrounding neighborhoods of Lincoln Park, Baker and Highlands have become prohibitively expensive. Builders have responded over the past couple years; thousands of rentals have come online in those areas with thousands more scheduled to be completed over the next year. This will ...continued on page 2
Rental Housing Journal Colorado
Will 2016 be a Super El Niño Year?
By Jerry L’Ecuyer and Frankie Alvarez of Dear Maintenance Men
W
e have been living with drought in the Western United States for a long time now. So the prediction of a strong, wet El Niño year is quite appealing. Will it fill our reservoirs, recharge our aquafers, and bring us back to normal? Hard to tell; many experts say we may need multiple years of El Niño to be back to predrought conditions. First a short explanation by some of the experts as to what an El Niño condition is. An El Niño is a weather pattern produced by unusually warm ocean temperatures in the Equatorial Pacific. The El Niño phenomenon is associated with extreme weather around the globe and in California it typically means a wet winter with higher than normal rain levels. As early as last spring, the National Oceanic and Atmospheric Administration (NOAA) was predicting a 60 percent chance that the El Niño conditions will continue all year. Now that we are much closer to the end of the year, the experts are predicting closer to 100% that 2016 will being a strong or super “El Niño” year. Dr. Dough Gillham a Meteorologist, PhD tells us: “We are in the midst of a rapidly strengthening El Niño event which will likely peak later in fall as one of the strongest El Niño events on record.” El Niño has a reputation for bringing mild winters to much of the country, especially across the northern States. The two strongest two El Niño events on record prior to this year (1982-83 and 1997-98) were quite mild from the Pacific Northwest to the Northeast. Only the Southwest-
ern States saw below average temperatures during those winters. However, a review of other El Niño winters shows that a strong El Niño does not guarantee a mild winter. A unique feature of the upcoming winter compared to other strong El Niño winters of the past is the expected persistence of the warmer-than-normal ocean-water temperatures south of Alaska. Some have referred to this feature as “the Blob” and it has been a key contributor to the dominant weather pattern across North America for the past two years. This pattern has been associated with extended periods of warm and dry weather in the West and two of the coldest winters in recent memory further to the east, especially in the Great Lakes and Northeast. If “the Blob” does indeed persist through the upcoming winter, then the threat for a cold conclusion to winter in the East will increase. Now that we know what an El Niño weather condition is, how do we prepare for El Niño? First order of business is to take a long hard look at your apartment building and surrounding property. Inspect your building’s roofs, gutters, drains, flashing and trim overhanging trees. In other words, don’t wait for it to be raining to find out your roof is in poor condition. Get the work done now while it is dry and the roofing companies are not busy. Don’t forget about large trees that hang over your roofs. In wet windy weather, they can cause a lot of damage to a roof if a limb breaks or a tree falls because of soggy soil.
Flat roofs are especially vulnerable to blocked scuppers and roof drains. The backed up water will find the slightest weakness in any roof system and may even cause a roof to collapse. Make sure the landscaping around your property is designed to drain away water quickly. Connect downspout extenders at the ground level. The extenders will direct water away from the building. Check for stucco cracks. A surprising amount of water can be sucked into a building because of damaged stucco. Clean out window weep holes to stop water from finding its way through window frames and damaging interior walls. If you have wooden garage doors, check that the doors are painted or sealed and that the springs are in good order. The garage doors can get quite a bit heavier when wet or allowed to soak up water. A little bit of preventive maintenance now will save both you and your residents a lot of discomfort later. And last but not least, don’t forget to turn off your sprinklers. Bio: Please call: Buffalo Maintenance, Inc for maintenance work or consultation. JLE Property Management, Inc for management service or consultation Frankie Alvarez at 714 956-8371 Jerry L’Ecuyer at 714 778-0480 CA contractor lic: #797645, EPA Real Estate lic. #: 01460075 Certified Renovation Company www.BuffaloMaintenance.com www.ContactJLE.com www.Facebook.com/BuffaloMaintenance
Denver Apartment Report ...continued from page 1 push vacancy up in the urban core submarkets while suburban areas will generally record slowly declining vacancy in already-tight markets, boosting rents even more. Favorable operating conditions across the market keep transaction velocity high, mostly in Class B/C product as Class A deals become more scarce. Sellers find motivation to cash out when they realize they have a lot of equity. Some of them choose to transfer their capital to emerging U.S. markets. Investors see continuously increasing rents and overall positive momentum in the local economy and are taking the opportunity to buy well-located older assets to renovate and reposition to command even higher rents. Cap rates have generally been falling across all sectors, though initial yields in the B/C sectors have compressed significantly, narrowing the spread between those sectors and Class A product. Class A complexes trade with cap rates in the 5 to low-6 percent range while well-located Class B and C assets hover in the low-6 percent range. All submarkets are doing well, though older product in suburban submarkets such as Broomfield and North Aurora have registered the largest percent increases in per unit prices in the past year.
2015 Annual Apartment Forecast • Employment: The workforce will expand by 27,000 workers, or 2.0 percent, in 2015, easing from the 52,500 employees added the previous year. Unemployment is under 4 percent and well below the national rate. • Construction: Developers will complete 10,300 units this year, an advance from 2014 when about 8,100 units were built. That number includes nearly 2,200 in the Downtown/ Highlands/Lincoln Park submarket. • Vacancy: The vacancy rate will escalate by 110 basis points this year to 4.8 percent due mainly to the large number of units being delivered in fourth quarter. Vacancy will fall again as 2016 unfolds, however, as completions slow somewhat over the first part of the year.
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• Rents: The average effective rent in the metro will surge 10.9 percent in 2015 to $1,347 per month, surpassing even the sizable increase posted in 2014. That said, the gap between the cost of renting versus owning continues to increase, with renting still far more affordable. Published Courtesy of Marcus & Millichap
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Rental Housing Journal Colorado · December 2015
Rental Housing Journal Colorado
How To Dodge A Tax Hit When Selling Rental Property
T
By making the right move, sellers can sidestep the Capital Gains Tax
he life of a landlord certainly isn’t easy. There are plumbing issues that eat into time and money. There are tenants who fail to pay the rent. There are broken leases and leaky roofs. And the hassles don’t even end when the beleaguered landlord finally decides to sell the property. After the deal closes, the Internal Revenue Service is waiting in the wings to collect a capital gains tax on the profits from the sale. “Depending on your situation that can definitely end up being a significant hit when tax time arrives,” says Dwight Kay, founder and CEO of Kay Properties and Investments (www.kpi1031.com). But Kay says with the right planning those landlords – and anyone who sells commercial property – can sidestep paying the capital gains tax. Here’s how: When they sell their property, they can invest the proceeds in what is referred to as “like-kind” property using Section 1031 of the Internal Revenue Code. Essentially, they are exchanging one piece of commercial property for another, but hopefully one that better meets their needs, Kay says. “A landlord who decides he’s tired of all the work he has to put in on his rental property could use the exchange to get an income-producing property
where someone else is dealing with all the problems,” he says. All types of commercial properties can be considered “like-kind,” including apartment buildings, vacant land, farmland, office buildings and warehouses among other properties.
One drawback is that the seller has just 45 days to identify what property they are going to exchange into. It’s not always easy to find 1031 exchanges quickly, but there’s also a solution to that, Kay says. If the seller qualifies as an accredited investor, which is generally defined as an investor with a net worth of greater than $1 million dollars excluding their primary residence, the seller can potentially invest in Delaware Statutory Trust properties. A Delaware Statutory Trust (DST) is a trust that lets investors buy an interest in commercial property, but managing the property is left to professional asset managers. Because Delaware Statutory Trust properties are pre-packaged for 1031 exchange investors, they provide a viable solution for those concerned about meeting that 45-day deadline. Also, despite the name, the property doesn’t have to be in Delaware. Kay, for
rents or multiple vacancies. It could example, says his Los Angeles and New be that they have raw or vacant land York City-based company works with that is sitting idle. These Delaware clients and properties in all 50 states. Statutory Trust exchange properties Kay goes on to say, “A Delaware Statprovide an opportunity for investors utory Trust property could be a propto potentially increase their cash flow erty that has a long term lease with on their real estate holdings. Costco or Walgreens or it could be a 200 unit apartment community built in 2014 and located in Denver, Colora- • Portfolio diversification. Often times, 1031 investors are selling a do. Investors are able to invest as litproperty that comprises a substantial tle as $100,000 into each DST thereby amount of their net worth. They want creating a diversified portfolio for there to reduce their potential risk and in1031 exchange.” stead of buying one property they decide that investing into a diversiKay says there a several potential fied portfolio of Delaware State Trust benefits for investors. Here are properties is a better fit for their goals just a few: and objectives. • Eliminating the day-to-day headaches of property management. About Dwight Kay The Delaware Statutory Trust 1031 Dwight Kay, founder and CEO of Kay Properproperty provides a passive owner- ties and Investments, LLC (KPI) (http://www. ship structure, allowing the inves- kpi1031.com/www.kpi1031.com), is a Series tor to enjoy retirement, grandkids, 7, 22 and 63 licensed, Registered Representatravel and leisure, as well as to fo- tive and Real Estate Professional. His firm, cus on other things that they are Kay Properties and Investments, specializes in Delaware Statutory Trust (DST) brokerage more passionate about instead of and advisory services. Kay Properties and property management. Investments currently has offices in Los Angeles • Increased cash flow potential. Many investors are receiving a lower amount of cash flow on their current properties than they potentially could be, Kay says. That might be because their properties have under-market
as well as in New York City and offers securities through Colorado Financial Service Corporation, Member FINRA/SIPC. Kay Properties and Investments, LLC and Colorado Financial Service Corporation are separate entities. OSJ Address: 304 Inverness Way S, Ste 355, Centennial, Colorado.
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Rental Housing Journal Colorado
Property-Wide WiFi
...continued from page 1
With the growth of telecommuting, more workers are based at home and demand reliable Internet. And seniors aren’t far behind, as they want to use email, Netflix, and other websites, and Skype with their grandchildren. To keep up with this societal trend, more and more properties have discovered that technology amenities have become a critical part of the mix of offerings required to attract and retain residents, especially the swelling ranks of younger residents who grew up computer literate and social media savvy. Apartment hunting priorities for these residents still include affordable price and quality living conditions, but high-speed connectivity has risen to equal importance in and plays a key role in decision making. Most apartment hunters want to know they’ll have powerful and reliable internet connectivity, delivered wirelessly and with plug-and-play simplicity. Smart home features such as USB ports, and smart phone docking and charging stations round out the complement of technology offerings that will let residents know that your apartment community is the right fit for them. Whether building a new facility or upgrading existing buildings, including property-wide WiFi that offers high speed connectivity for both individual units and in common areas is a growing trend, and is proving to be a “win” for residents and owners/managers at properties around the country. New cutting edge technologies have finally made it easy and affordable to offer WiFi solutions at a high level.
Community Space Technology One of the major trends in apartment, MDU, and condo development in 2015 has been the focus on campus-like spaces, especially for urban communities where per-unit footprint has been shrinking. Designers and builders are creating more upscale lounges, club rooms, technology, fitness, business centers, media rooms, and play spaces so residents can gather socially while remaining connected to the Internet. Millennials in particular use these public spaces for socializing with other residents and guests, or as an extension of their own living space. Implementing the newest technology trends like property-wide WiFi and smart home features allows residents to use these spaces as an extension of their home. Residents can print property wide, turn off their lights from anywhere, adjust their AC on the go, and much more. The perfect solution for a growing number of property owners has been to offer high-speed community-wide Internet service, which a recent survey by the National Multi Housing
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Council calls “one of the most desired amenities.” More than 70 percent of respondents said that fast, reliable broadband connectivity was either “important” or “very important” in their decision making. Increasingly, apartment communities are installing “bulk Wi-Fi” services and marketing this in-demand amenity as an option to create a new profit center. By eliminating the “big box” cable or DSL Internet companies from the equation, residents receive a superior service at a fraction of the market cost and MDU owners can establish a new revenue source
Conclusion Of all the latest amenities that a property can include, technology access is becoming increasingly crucial in today’s competitive rental marketplace. Highspeed Internet service options that extend from apartment units to community spaces can help set you apart, and don’t have to be an expensive solution to implement; in fact they can bring you untapped profit opportunities. If done right, Property-Wide WiFi, amongst other technologies, are a distinguishing factor for resident loyalty, retention and increased per door revenue. Look for Part II of this three-part Property-Wide WiFi series on in the January issue of RHJ, which will delve more into specific Internet technology options and provide a “how to” on selecting the best community WiFi provider and installer for your property to ensure successful deployment. Part III, appearing in February, will address how to package and market property-wide WiFi and technology amenities to maximize your attraction, retention, and revenue. Eric Markow is Chief Technology Officer of Dual Path, a provider of high speed property-wide WiFi services. Dual Path’s customers include MDU and senior living communities who enjoy fast, reliable connectivity, delivered with old-fashioned customer service. Dual Path’s unique revenue generatingARIZONA model allows VALLEY, METRO, property owners to leverage their “Internet real estate” to maximize profits, increase resident satisfaction and retention, and increase property value. Headquartered in Phoenix, Arizona, Dual Path offers property-wide WiFi, Gigabit Internet and WiFi calling solutions to properties and businesses coast to coast. For more information, visit www.dualpath.net or contact 1-800-468-6851.
Modernizing In-Unit Technology Amenities To keep up with tech-savvy residents, modernizing rental units to include additional technology features are a key trend for 2016 and beyond. Simple steps like installing wall outlet covers with USB ports can be a great starting point. Adding the latest technology amenities converts quickly into increased revenue and retention. And while quality Inter-Aug, Feb, Apr, Jun, net service may not be the only factor in a resident’s choice to move in, your bad Internet service can definitely be a reason they choose a competing property.
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Rental Housing Journal Colorado
Flipping Edges Out Renting As The Preferred Investment Strategy For The Fourth Consecutive Quarter According To Auction.com Real Estate Investor Activity Report™
A
Price appreciation and inventory constraints continue to dictate investor strategy in the second half of 2015
uction.com, LLC, the nation’s leading online real estate marketplace, today announced the findings from its Third Quarter 2015 Real Estate Investor Activity Report™, a nationwide survey of real estate investors bidding on properties offered for auction during the respective period. Survey data collected from investors bidding on property online and at live events across the country reveals that flipping is still the preferred investment strategy among investors, edging out the hold-to-rent strategy for the fourth consecutive quarter – and since Auction.com began tracking the split in investor intent. “Rising prices and extremely limited inventory make a nearly ideal environment for real estate investors who want to buy, fix and flip properties, and that is precisely where we are in today’s market,” said Auction.com Executive Vice President Rick Sharga. “But record occupancy rates in the rental market also present opportunities for investors who find moderately priced homes they can rent out at a reasonable rate of return, so it’s not surprising that we’re continuing to see buyand-hold investing activity in the Midwest and Southeastern states.” Although Auction.com’s findings for the third quarter reveal a propensity toward flipping among investors overall, investor intent varies considerably by the type of auction (live event versus online auction) and investor profile. Survey respondents who indicated that they were making a one-time purchase clearly preferred a hold-to-rent strategy, while respondents identifying themselves as fulltime “real estate investors” and those indicating that they were working on behalf of another investor strongly favored flipping.
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Q3 2015 National Findings: Investor Intent Investor Profile One-time purchase Real Estate Investor Working on Behalf of Another Investor Total
Flip 27.8% 55.1% 67.6% 53.7%
Rent 68.7% 43.3% 31.9% 45.1%
Undecided 3.5% 1.1% 0.5% 1.2%
Investors bidding at live events appear to be far more likely to flip the properties they purchase based on survey responses collected in the third quarter of 2015, with respondents indicating a preference toward flipping over holding to rent in every state where Auction.com conducted live events.
Q3 2015 Live Event Investor Data: Intent of All Investors Surveyed State Arizona California Georgia Idaho North Carolina Nevada Tennessee Texas Washington Nationwide
Flip 59.8% 67.5% 53.2% 71.6% 54.9% 87.4% 69.5% 56% 73.8% 62.4%
Rent 40.2% 32.5% 46.8% 28.4% 45.1% 12.6% 30.5% 44% 26.2% 37.6%
Undecided 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Conversely, responses given at online auctions in the third quarter of 2015 show that investors bidding online generally intend to hold the properties they purchase. This was true in every region except the Northeast, which experienced a swing toward flipping in the second quarter due to the region’s inventory constraints and higher purchase prices negatively impacting rental property returns.
Q3 2015 Online Investor Data: Intent of All Investors Surveyed Region
Flip
Rent
Undecided
West Midwest South Northeast Nationwide
45.8% 41.3% 38.6% 52.7% 43.3%
51.8% 56.6% 58.1% 45.5% 54%
2.4% 2.1% 3.3% 1.8% 2.7%
Less active investors (those indicating that they purchase one or fewer properties per year) demonstrated a strong preference for renting properties, while flipping was prevalent among investors who purchase multiple properties per year. This preference appears to be growing among investors purchasing more than 50 properties per year: nearly 68 percent of respondents in this group favored flipping in the third quarter – up from 62 percent in Q2 and 54 percent in Q1.
Q3 2015 Investor Data: Intent By Purchase Profile Purchase Profile 0-1 Property/Year 2-49 Properties/Year 50+ Properties/Year
Flip 37.3% 58.8% 66.7%
Rent 60.1% 40.4% 33.3%
Undecided 2.6% 0.8% 0%
About Auction.com: Auction.com, LLC, is the nation’s leading online real estate marketplace. Founded in 2007, the company has sold more than $32 billion in residential and commercial real estate assets. Auction. com has over 900 employees and headquarters in Irvine and Silicon Valley, Calif., as well as offices in key markets nationwide. Visit www.auction.com for more information. SOURCE Auction.com, LLC
Rental Housing Journal Colorado · December 2015
5
Rental Housing Journal Colorado
3Q15 Market Overview ...continued from page 1 jobs, a 41-month low, and the S.A. sequential month payroll add slowing to only 800 jobs. Does recent softness indicate that the Denver boom is running its course? The RED Research payroll model suggests otherwise: robust job growth is likely to continue through 2017. The model employs U.S. payroll and GDP and metro personal income growth and oil price trends as independent variables to achieve a 98.5% adjusted- R2 (SE=0.3%). The model forecasts growth in the low– to mid-2% range through YE17, weaker gains after. Occupancy Rate Summary Occupancy Rate (Reis) 95.5% RED 50 Rank 28th Annual Chg. (Reis) -0.4% RCR YE15 Forecast 94.9% RCR YE16 Forecast 94.5% RCR YE17 Forecast 94.5% RCR YE18 Forecast 94.4% RCR YE19 Forecast 94.2%
3Q15 Absorption and Occupancy Rate Trends Reis recorded a leasing surge over the summer as tenants occupied a five-year high net of 2,066 vacant units, nearly doubling 2Q15’s total. Supply pressures did not abate, however, as the service added 1,665 units to its metro inventory, the seventh consecutive quarter characterized by completions of 1,400 or more units. As a result, metro occupancy improved for the first time in seven quarters, rising 20 basis points sequentially to 95.5%. Axiometrics surveys of 452 stabilized same-store properties recorded similar
results. The inventory occupancy rate during 3Q15 was 95.4%, down 60 bps year-on-year. Rates were comparable across classes, led by class-C (95.7%), with classes-A and -B each 40 bps behind. Arvada, Aurora- Central and Englewood (96.7%) reported the highest occupancy; Aurora-North and Lakewood-North the lowest (93.7%) and the largest y-o-y declines (-3.0%/-4.1%). New properties leased an impressive 20 units/mo. on average. RCR specified a 91.8% ARS (SE=0.4%) metro occupied stock growth forecasting equation using the rate of change of payroll (+) and inventory (+) growth and home price appreciation (-) as independent variables. The model projects faster absorption through 2017, as supply increases and payroll growth remains robust. But supply consistently outpaces demand, trimming occupancy by 100 bps. Effective Rent Summary Mean Rent (Reis) Annual Change RED 50 Rent Change Rank RCR YE15 Forecast RCR YE16 Forecast RCR YE17 Forecast RCR YE18 Forecast RCR YE19 Forecast
$1,041 7.0% 5th 6.1% 4.4% 3.8% 3.1% 2.2%
3Q15 Effective Rent Trends Average effective rent increased $13 (2.3%) sequentially to $1,041, according to Reis, the strongest quarter-to-quarter gain in a year. Robust tenant demand for space in infill neighborhoods was primarily responsible: Denver-Central, and Aurora-North and Central
saw 5%-7% sequential gains. Rents rose 7.0% year-on-year: although the smallest gain recorded since 1Q14, Denver ranked 5th among the RED 50. Stabilized same-store properties surveyed by Axiometrics reported average y-o-y rent growth of 10.5%, remarkably the slowest advance in a year. Class-C properties posted the strongest rent growth for the 11th consecutive quarter, gaining 12.9% y-o-y. Class-A lagged significantly at 6.1%. Eleven of 19 submarkets notched double-digit gains, but largely class-A Downtown managed only a 3.7% advance. By contrast, Aurora-Central submarkets, featuring primarily class-B-/C product, chalked down a stout 12.4% increase. Statistical analysis indicates that 97.2% of change in y-o-y Denver rent growth can be explained by changes in the metro occupancy rate (+) and payroll employment growth (+). Unfortunately, both factors will work against rents in during most of the 5-year forecast interval. Still, healthy rent growth averaging 3.4% per annum is expected. Trade & Return Summary $5mm+ / 80-unit+ Sales
25
Approximate Proceeds
$817.9mm
Average Cap Rate (FNM)
5.3%
Average Price / Unit
$162,439
Expected Total Return
8.3%
RED 46 ETR Rank
5th
Risk-adjusted Index
3.36
RED 46 RAI Rank
39
th
3Q15 Property Markets and Total Returns
more exchanged hands, up from 19 during the previous quarter. Gross proceeds totaled $818 million (down from $897mm and $936mm during the prior and year-earlier quarters), translating to an average price per unit of $162,439. The average price per unit fell –3.3% and –12.7% from 2Q15 and 3Q14, respectively. The sequential and year-on year declines were attributable to an increased concentration among investors on class-C /–B– repositioning plays. Cap rates for class-A/B+ trophies hovered around 5%, somewhat higher than most West Coast metro areas. Class -B properties traded in the mid-5% range, while class-B– and –C assets were available for the high-5s to about 7%. Based on recent trade RCR elected to trim the purchase cap rate proxy 10 basis points to 5.3%. Using this purchase cap rate level, a model derived terminal yield of 6.2% and model generated occupancy and rent point estimates, we calculate that a Denver investor would expect to achieve a 8.3% total rate of return on a five-year hold. This level ranks 5th among the RED 46 markets. Income, demand and job growth volatility hinders risk-adjusted returns, however; on this basis Denver ranks only 39th
By Daniel J Hogan Director of Research djhogan@redcapitalgroup.com 614-857-1416 Office 1-800-837-5100 Toll Free
...continued on page 7
Transaction velocity continued at a brisk clip during the third quarter as 25 properties valued at $5 million or
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Rental Housing Journal Colorado · December 2015
Rental Housing Journal Colorado
3Q15 Market Overview ...continued from page 6
The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice, or recommendations to buy or sell currencies or securities or to engage in any specific transactions. Information has been gathered from third party sources and has not been independently verified or accepted by RED Capital Group. RED makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. RED cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third party sources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.
...continued on page 8
PROFESSIONAL PROPERTY MANAGEMENT SUPPORT COMPANIES Rental Applicant Screening Pre and Post Move Out Inspection Video Taped Reports Eviction Support Licensed, Bonded and Fully Insured National Coverage for Most Services
Special Events Vacation and Emergency Coverage for Staff Security Evening and Weekend Patrol
PO Box 33950 Northglenn CO 80233 (303) 993-4871
Rental Housing Journal Colorado 路 December 2015
7
Rental Housing Journal Colorado
3Q15 Market Overview ...continued from page 7
ARIZONA, ALASKA, CALIFORNIA, COLORADO, DELAWARE, FLORIDA, GEORGIA, ILLINOIS, INDIANA, KANSAS, KENTUCKY, MASSACHUSETTS, NEVADA, NEW JERSEY, NEW YORK, NORTH CAROLINA, OHIO, OREGON, PENNSYLVANIA, TEXAS, UTAH, WASHINGTON, WASHINGTON D.C., WEST VIRGINIA & MORE.
5 REASONS TO USE RENTEGRATION
1. Access - Rentegration.com is a web based, access to forms generation, archives, property management database, basic accounting, vendor ordering and other services. 2. Rental and Lease Forms - Unlimited use forms. All Rentegration.com forms are created by attorneys and/or local rental housing associations. OR-RTG-20 Oregon
CHECK-IN/CHECK-OUT CONDI
TION REPORT
TENANT(S): __________________ ____________________________________ _________48-H ADDRESS: ___________________________ ___ OUR NOTICE O OF ENTRY OR-RTG-24 _________ Oregon ____________UNIT: ___UNI ______________ CITY: ___________________________ ________ STATE: TE: ________TENA : _____________ ZIP: NT(S) _______________ _________ ___ __________ ADDR Rating
Scale = (E)Excellent (VG) Very Good PET AGREEMENT
WA-RTG-40 Washing
ESS: __________ _______________ _______________ _______ D (G)Good (F)Fair DATE:________ F)Fairr CITY: F)Fai (P)Poo (P)Poor _______________ : _______________ ____________ UNIT: _______________ UNI _________ ___________ STATE In Out S TE:: __________ In Out ZIP: _________ BEDROOM
IN Out TENANT INFORMATION LIVING AREAS TENANT(S): ____________________________________________________ DATE:________ A ATE:________ KITCHEN ADDRESS: ____________________________________________________ UNIT: _________ Walls Walls CITY: _________________________________________ STATE: ATE: __________ ZIP: _________ A
3
Walls alls
48-HOUR NOTICE OF O F ENTRY R
Pursuant to RCW 59.18.150, this is your 48 hour notice that g the dwelling unit your landlord or their and premises located Refrigerator agents will be _______________ at (Address) Blinds/Drapes _______________ Rods _______________ 1) Type _______________ Breed _______________ Size ______ Age __ W Weight ___ Color ____ Name ________ WA-RT Ice Trays G-20 _____ Washin _____ gton _____ Rods _____ Vaccinations: Yes____ No____ License Number: ______________ _____________ on Floor CHECK-IN/C Shelves/Drawer between the hours Weight ___ Color ____ Name ________ 2) Type _______________ Breed _______________ Size ______ Age __ W Floor HEC of K-O (Date) and UT CONDITION Vaccinations: Yes____ No____ Carpet/Vinyl/Wo License Number: ______________ od Disposal REPORT(Time) . (Time) (Time ime) Light Fixtures Weight ___ Color ____ Name ________ 3) Type _______________ Breed _______________ Light Fixtures Size ______ Age __ W DishwasherTENANT(S): __________ The entry will occur Vaccinations: Yes____ No____ License Number: ______________ Doors/Woodwo Doors/W Doors/ _____oodwork rk _____ for the following purpos _____ ADDRESS: _____ _______________ __________ Doors/Woodwork __________ __________ _____e:__________ Counter Tops Additional Security Deposit Required:$ _______________ __________ Locks ___________ _______________ _____ CITY: __________ _______________ Locks _______________ _______________ ________UN _______________ __________ IT: __________ Cabinets _____________ __________ _____ __________ AGREEMENT ____ Ceilings STATE: _____ _______________ Rating ___ ZIP: _____ Scale = (E)Excellent Ceilings ____________ __________________ Tenant(s) enant(s) certify that the above pet(s) are the only pet(s) on the premises. T Tenant(s) Sink (VG) Very Good Electric Outlets (G)Go od (F)Fair (P)Poo understands that the additional pet(s) are not permitted unless the landlord gives ten Electrical Outlets IN r Out ant(s) written permission. Tenant(s) pets in theLIVING premises enant(s) agree to keep the above-listedFloor In Landlord AREAS Out Garbage subject to the following terms and Cans conditions: KITCHEN In Windows Out Walls Phone BEDRO Windows
Stove/Racks
DESCRIPTION OF PET(S)Blinds/Drapes
TV Antenna/Cable
1) The pet(s) shall be on a leash or otherwise under tenant’s control when it is outside the Blinds/Drapes Window s tenant’s dwelling Fireplace unit. Blinds/Drapes 2) Tenant(s) enant(s) shall promptly pick up all pet waste from the premises promptly. Cleanliness 3) Tenant(s) for the conduct of their pet(s) at all times. enant(s) are responsible Rods 4) Tenant(s) enant(s) are liable for all damages caused by their pet(s). Floor 5) Tenant(s) rental enant(s) shall pay the additional security deposit listed above and/or their BEDROOM agreement as a condition to keeping the pet(s) listed above. 1 Carpet/Vinyl/Woo BEDROOM 2 d 6) Tenant(s) enant(s) shall not allow their pets to cause any sort of disturbance or injury to the Walls Light Fixtures Walls other tenants, guests, landlord or any other persons lawfully on the premises. Windows report to landlord any type of damage or injury 7) Tenant(s) caused by enant(s) shall immediately Windows Doors/Woodwork their pet. Blinds/Drapes 8) This agreement is incorporated into and shall become part of Blinds/Drapes the rental Locks agreement exe -cuted between the parties. Failure by tenant to comply with any part ofCeilings this agreement Rods shall constitute a material breach of the rental agreement. Rods Floor
_____________________________ Light Fixtures Landlord
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Shelves/Drawer
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Ceilings
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Doors/Woodwork
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Fireplace
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Electric Outlets
BEDROOM 1
Walls
Windows
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Fan (Exhaust) Dishwas
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Counter Tops
Electric Outlets Cabinets Sink Light Fixtures Floor Windows Essential Services
8
Blinds/Drapes Plumbing
Heating
Electricity
Hot Water
BEDROOM 2 ©2009 PORTION of this SmokeNO Detectors form may Walls
for each • unit, property and company. Per- only forms generation will save time and Logos are provided on the CD in all three forms: all black, to white, or inproperty PMS 280 Blue/PMS 7543 Gray spot money or 4/color applications. over other methods. Mid and small fect for mid andreversed small size managPlease see below for specific use examples. ers and independent rental owners, who size property managers and independent • No other colors are acceptable for use for the logo. neither have the need or budget for larger, rental owners can manage their entire busi• No altering of the logo is allowed. If you have a special circumstance that requires something not ness at aforfraction more expensive provided on software. the CD, please call NTN NA TIO NAL HEADQUAR TERS 1.800.228.0989 assistance. of the cost of other soft• Logos should not be put over a busy background. ware and forms. 4. Management Database - Rentegration. BLACK com is an easy to use, database driven soft- WHITE (with 40% gray circle) from the database. The modules are all integrated and work together. For example, a customer can use the rent-roll function to identify all delinquencies, apply fees, and create eviction forms with a few simple clicks of the mouse. BlueIndustry PMS 280/Gray PMS Partner 7543 Exclusive of:
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Walls Window s Post
and Mail:
Blinds/Drapes
compliance if served by
Tub/Shower ub/Shower Disposa Floor
5. Value - Large property management
OM 3
Walls
BATH ATH A TH ROOM Towel Bars Towel
* Add Sink & Vanity Vone
Rods
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Floor Light Fixtures Doors/Woodwork Locks Ceilings Electric Outlets Smoke Detector
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ton
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Rental Housing Journal Colorado · December 2015