VALLEY
Professional Publishing, Inc www.TheLandlordTimes.com
Vol. 17 Issue 1
January 2013
EUGENE • SALEM • ALBANY • CORVALLIS
MONTHLY CIRCULATION TO MORE THAN 5,000 APARTMENT OWNERS, PROPERTY MANAGERS, ON-SITE & MAINTENANCE PERSONNEL Published in association with: METRO Multifamily Housing Association & Rental Owners Association
Multifamily Markets Salem-Keizer 2012 Summary By Anita Risberg, CCIM Senior Broker, HFO Investment Real Estate, Apartment Specialist From the start of 2012 SalemKeizer has continued to experience a decrease in vacancy rates. The vacancy factor has adjusted from a low of 2.95% in 2007 to a high of 6.13% in 2010 back to 3.07% by fall of 2012. Average rent in Salem-Keizer for a 2 bedroom 1 bath unit with no amenities built 1990 or newer is $678.00. Likewise average rent in SalemKeizer for a 2 bedroom 1 bath unit with no amenities built after 1990 is $601.00. Landlord concessions have decreased. Some landlords are starting to bill back to tenants charges for water, Continued on page 7
Apartment Insurance Costs Increase for the Second Consecutive Year According to National Multi Housing Council Report The cost to insure apartments increased by 9.5 percent between 2011 and 2012, marking the second consecutive year of rising insurance expenditures according to the National Multi Housing Council’s (NMHC) Apartment Cost of Risk Survey (ACORS). The survey covers data from more than one million apartment units, the largest number of units covered by the survey to date, operated by 55 apartment firms, tracking three principal components of insurance premiums: property, general liability and workers’ compensation. The 9.5 percent increase in 2012 came entirely from property
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risk costs, with general liability and workers’ compensation costs staying virtually unchanged from 2011. “Respondents noted that their greatest challenges in 2012 came from obtaining adequate and affordable coverage in traditional catastrophe risk zones. In fact, catastrophe exposed properties were the major drivers of the increase in premium costs and higher deductibles,” said Rick Haughey, NMHC’s Vice President of Property Operations and Technology. “With U.S. catastrophe losses in 2012 expected to be moderately higher than average due to Hurricane Sandy, the outlook for
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insurance costs in 2013 remains uncertain. This uncertainty mitigates what would be downward pressure on 2013 catastrophe rates due to strong underwriting capacity for primary insurers and reinsurers.” Additional key findings: The mean (nonweighted) average for the total cost of risk increased 9.5 percent in 2012, driven by an increase in property cost of risk, which accounts for 70 percent of the average apartment firm’s total cost of risk. The mean average property cost of risk increased by 10.4 percent and average per occurrence deductibles increased to $118,000 from the unusually low average deductible of $66,000 in 2011. The mean average general liability cost of risk remained virtually unchanged in 2012 after a 9 percent increase last year. The mean average workers’ compensation cost of risk in 2012 also Continued on page 5
The Tax Man Cometh for Your Real Estate Income By Jeneé Hilliard As part of the financing of Obama Care, Congress created Internal Revenue Code Section 1411, which created a new 3.8 percent Medicare tax. The new Medicare tax will take effect on January 1, 2013, and will apply to net investment income of individuals with a modified adjusted gross income of at least $200,000 ($250,000 for couples filing jointly). The tax will apply to the lesser of (1) the taxpayer’s total “net investment income” for the year, or (2) the amount by which the individual’s total income exceeds $200,000 (or $250,000 for married couples filing jointly). This new tax will hit real estate investors hard. Investment Income Includes Rental Income Under the new code provision, “net investment income” is defined to include “gross” rents. Even though “gross” rents are subject to the new Medicare tax, the “gross” rents can be reduced by deductions properly allocable to the rents. We expect that this will allow an individual to deduct depreciation, interest expense, property taxes, insurance payments, and other rental property expenses before determining the amount of “gross” rents subject to the new Medicare tax (although it does cause concern that Congress used the term Continued on page 3 Page 2
PRESIDENT'S MESSAGE Page 4
A MESSAGE FROM YOUR PRESIDENT …