Property Management Blog

Rising rents pushing millennials to become homeowners

System - Tuesday, April 3, 2018
SANTA CLARA, Calif. – April 2, 2018 – This year, the typical spring buyer is on the hunt for a three bedroom, two-bathroom home with a garage and up-to-date kitchen, according to a new survey released from realtor.com. The survey also found that family needs and rising rents are motivating millennials to get into the market, while 55+ buyers are looking for privacy and comfort in their new home.

"Although record-low inventory and high prices make this housing market unique, some classic features still top most shoppers' wish lists," says Danielle Hale, chief economist for realtor.com. "At the same time, we found some clear differences in priorities. For instance, older buyers are concerned with privacy and being able to age comfortably, while millennials place more emphasis on family needs, stability and personal expression."

Based on an online survey of more than 1,000 active buyers conducted in early March by Toluna Research, the survey provides insight into both the most sought-after homes as well as the motivations underpinning what shoppers are looking for.

Majority of buyers want space, multiple bathrooms and a garage
The survey found that 44 percent of all respondents said they are looking for a three-bedroom home, and 93 percent of respondents want at least two bathrooms. Additionally, 27 percent of all buyers rate a garage as one of the most important home features, ahead of an updated kitchen (24 percent) and open floor plan (20 percent).

Older buyers want privacy & comfort; millennials favor family & self-expression
 More than 20 percent of buyers 55 years and older said that privacy – having a space solely of their own – was their main goal for purchasing a home. That was followed by their motivation for physical comforts (18 percent) and stability (5 percent).

Fulfilling family needs took the top spot for millennial buyers (17 percent), followed by stability (14 percent) and personal expression (13 percent); only 12 percent of buyers younger than 55 cited privacy as their chief priority. However, 9 percent of 35- to 54-year-old buyers and 6 percent of 55+ cited personal expression as a main goal for purchasing a home.

For millennials, the rent is too high
Twenty-three percent of buyers between 18 and 34 years old reported rising rent as a trigger for their desire to purchase a home – more than any other option. This corresponds with steep increases in rents across the country in recent years, especially in many high-cost urban areas that have become magnets for millennials. HUD data shows that rents were up in 85 of the top 100 metro areas, including 9 metros where rents rose by double-digit percentages from a year ago.

Millennials like contemporary and colonial homes; older buyers prefer ranches
Among millennials who expressed a home-style preference – 11 percent didn't – contemporary and colonial homes took the top spots, each favored by 10 percent of respondents. On the other hand, ranches are the most popular home style for buyers 55 and older, favored by 28 percent, followed distantly by contemporary homes at 12 percent. Only 6 percent of millennials favor ranch homes.

© 2018 Florida Realtors®

Why does my HOA need to buy liability Insurance??

System - Friday, March 9, 2018

As a member of your homeowners association you may ask, "Does my HOA need insurance?" The answer is a big yes! The more pertinent inquiry would be, "What type of insurance does our HOA need?" It is vital that your organization has the proper insurance coverage for all possible types of problems. 
The fact is insurance is one of the best investments an HOA can make. It is up to you and your board to make sure your Association is properly covered for all contingencies. 
There are insurance agents and agencies that specialize in HOA coverage. These professionals can work with you to tailor a plan that fits the unique needs of your homeowner’s association. There is no better peace of mind than knowing your organization has adequate insurance coverage in force.

What types of insurance do you need?

There are several types of insurance coverage that your homeowner’s association should carry. If you maintain this coverage your Association should be protected from almost all issues that may arise. Let's take a look at some specific coverage types:

Property Insurance

If your HOA owns property, especially structures, then it should protect it. This type of coverage does just what is says; insures the property. This policy will cover against vandalism, theft and damage from fires, storms and natural disasters.

Liability Insurance

This will cover things like accidents or injuries that take place on the property. Your HOA could be liable for actions it took, or did not take. Associations should take actions to correct any safety issues, especially in today's world where lawsuits are all too common.  

Directors and Officers Liability Insurance

This is more commonly known as "D&O" coverage. This protects officers and trustees from being held liable when performing their duties for the Association. The D&O policy helps fund this requirement. It protects officers and trustees when they err accidentally and without malice. It does not cover willful acts of wrongdoing.

Fidelity Insurance

This coverage protects the organization from theft committed by employees, contractors, Association members/volunteers, or even management companies. This should be part of your Association’s overall insurance package.

Worker’s Compensation

There is also worker's compensation insurance that should be considered if your HOA does not already have it. This insurance type will cover HOA volunteers, like Board members or other members that give of their time to do something positive for the Association without pay, like changing light bulbs for instance. HOA Worker’s Compensation will not take the place of the worker’s compensation insurance that any HOA maintenance contractors should carry; it is specific to HOA non-paid volunteers.

A View From the Board Member's Perspective

When a member of your association made a decision to represent their neighbor’s common interests in their Home Owner's Association and become a Board member, they made a basic promise to the Association: To serve the association including protecting it from future risk. A Board Member has a duty to ensure that the association has properly consulted with an insurance professional and adopted the appropriate kinds of insurance products at the appropriate insurable levels to protect the association and its membership from reasonably foreseeable risk.  If you doubt your Board is serving your association’s best interests by allocating some of your HOA funds to insurance purposes, don't.  Those Board members are prudently attempting in good faith to manage tomorrow's potential unknown risks with a purchasable insurance product today.
The types of coverage listed above should protect your homeowner’s association from most insurance issues it can run into. It is better to have more coverage than not enough.  Of course, you and your Board members may not be insurance experts. It is essential that you consult and get counsel from a licensed insurance agent, or agents, to help put your insurance plan in place. There is no substitute for proper insurance coverage!


Our Favorite New Review!

System - Tuesday, August 15, 2017

Property Insurance for Rental Property

System - Thursday, March 23, 2017

Owner occupied homeowner hazard insurance is not sufficient to secure your financial interest in your rental property.

New Retirement Plan For Baby Boomers

System - Tuesday, August 9, 2016

Investors are joining the ranks of what Redfin Chief Executive Glenn Kelman calls Landlord Nation, a group of mom-and-pop investors who have seized on low mortgage rates and robust rent growth to plow savings into rental properties. Together, they’ve lifted the percentage of single-family houses used as rental properties to stratospheric heights, even as many would-be first-time home buyers struggle to reach ignition.

The number of starter homes on the market dropped by more than 44 percent from the first quarter of 2012 to the first quarter of this year, according to research published by Trulia. With entry-level homes in short supply, median prices in the category increased by nearly a third.

The share of single-family homes used as rental properties, meanwhile, has surged to a 30-year high, according to a Zillow analysis of data from the U.S. census. Separate data provided by RealtyTrac show that only 65 percent of homes purchased in 2015 are owner-occupied.

“If credit is tight, it doesn’t matter if it’s also cheap, because the people who can get it don’t need it,” Kelman said. “The haves in our society are renting homes out to have-nots, and they’ve been able to do that at increasingly high rents.”

The seeds of Kelman’s Landlord Nation were planted in the boom times before the last recession, when easy credit helped millions of Americans buy their first homes, pushing home ownership rates to all-time highs. Then the housing bubble burst. Rampant unemployment and exploding interest rates pushed millions of homeowners into foreclosure, creating a ripe patch of cheap housing for would-be landlords—and a new pool of renters to absorb the supply.

Wall Street firms, among the first to recognize the opportunity, poured billions of dollars into single-family homes. But by 2014, rising home prices led the largest single-family investors to scale back the pace of acquisitions and, in time, to start selling off homes to trim their portfolios.

Now smaller landlords are emerging in Wall Street’s wake, taking advantage of low mortgage rates and steady rent growth, as well as property management infrastructure built to serve the larger investors. New tools include companies that collect rents and make repairs, and new lenders willing to risk capital, said Dennis Cisterna, chief revenue officer at Investability Real Estate, which offers another new resource for single-family landlords: an online marketplace for buying and selling rental homes.

“It is easier to be a landlord now than it has ever been in the history of the U.S.,” Cisterna said.

Even with favorable interest rates and new technology, the ranks of U.S. landlords wouldn’t have grown so fast without another key condition. The same low interest rates that made mortgages affordable for those who can get them squashed traditional investor income, said Troy Lewis, a certified public accountant who has worked through many real estate deals at his tax practice in Draper, Utah.

“If people felt they could get a reasonable return on money in the traditional way, then these nontraditional ways would have no appeal,” he said. “But savers are getting killed and looking for ways to increase cash flow. There aren’t many ways to do that right now.”

That doesn’t make rental properties a sure thing—far from it, said Lewis. Unlike an investment-grade bond held to maturity, a rental home provides no guarantee that an investor will even earn back his or her principal. Renting out homes is also complicated from tax planning and property management perspectives, said Jon Strandlie, a financial adviser with Edward Jones in San Antonio, Texas.

It’s too simple to say that the influx of new landlords has been a bad thing for home buyers, said Svenja Gudell, chief economist at Zillow. When banks were hesitant to lend, cash buyers helped resuscitate comatose markets. Even now that investors are competing with would-be buyers, it’s not clear to Gudell that they’re taking precious housing stock off the market.

“We can all agree that there aren’t enough homes to buy, but if you look at rental rates, you can also say there aren’t enough homes to rent,” she said.

During the dark days of the Great Recession, it was fashionable to wonder whether the housing crisis would sour an entire generation on the idea of home ownership. That hasn’t quite come to pass, at least not according to a bevy of surveys reporting that the vast majority of millennials still aspire to home ownership.

At the same time, the share of U.S. households that rent is at its highest level since 1965.

“The interesting thing to me is that when investors were buying up property in 2011 and 2012, there was all this anxiety about what will happen when they sell,” Kelman said. “Now everyone is surprised to find out that they’re not flippers, but given where rents and mortgage rates are, it makes sense. We may have to acknowledge that there’s only one shoe, and it dropped in 2011.”

– Bloomberg.com

Martin County Home Prices Soar while Inventory Drops

System - Saturday, October 10, 2015

There is relatively little housing available in Martin County, where the average single-family home sale price is nearly $100,000 higher than elsewhere on the Treasure Coast yet where about half as many homes have been built since 2000.

The trends could impact Martin County's future population numbers. Growth in the past decade has been the slightest on the Treasure Coast, and experts predict it will continue to slow. Available housing stock is at an "all-time low," according to John Slivon, the Stuart-based treasurer of the Realtors Association of the Palm Beaches.

There were 1,000 homes for sale in Martin County at the end of August - about 30 percent fewer than one year ago, Slivon said.

Meanwhile, the average sale price rose nearly 12 percent, to $364,000, according to Realtors of the Palm Beaches. "Buyers must be aware that we are firmly in a seller's market," Slivon said about Martin County.

Data indicate that available housing in Martin·County could become even scarcer in coming years.

Martin County had the fewest homes built on the Treasure Coast between 2000 and 2014. Indian River County –where the population is slightly less than Martin's – had about twice as many single-family housing units built than Martin, and St. Lucie County built about 30 times as many. These housing trends could be affecting demographics now and in the future.

Among the Treasure Coast counties, Martin has the oldest median age and the lowest percentage of families living with children 18 and younger, according to data from the Shimberg Center for Housing at the University of Florida. Experts predict Martin County's estimated 18 percent population growth between 2014 and 2040 will be the lowest on the Treasure Coast; Indian River County is predicted to increase by about 34 percent; St. Lucie by about 56 percent.

Martin County's housing trends may be at least partially propelled by its strict· slow-growth regulations, including large tracts of low-density and conservation lands.  Available land for single-family home building is scarce in Martin County possibly ensuring the continued strong valuation of Martin County residential properties.  Condos and town houses - not single-family homes - could even become increasingly popular for developers in the future with the lack of buildable single-family home sites locally.

Families, in particular, may struggle to find housing in Martin County where the average per capita income is about $39,000. Statewide, it's about $44,800, according to the Florida Office of Economic and Demographic Research.

But the average home in Martin County is valued much higher than the average home in Florida. Last year, the average Martin home was valued at about $290,000, while statewide that figure was about $185,000, according to property appraiser data. St. Lucie County-where the average home value was about $108,500, according to the property appraiser - may be the wiser choice for buyers trying to avoid Martin County's high demand and low inventory.

Martin County has about 10 times more houses valued at more than $300,000 as does Indian River County and about twice as many as St. Lucie County.


BY THE NUMBERS

MARTIN COUNTY

2014 population: 153,391
2020 population: 157,451
2040 population: 181,558
Predicted population increase: 18.4 percent
2014 median single-family home value: $167,000
2014 median single-family home sales price: $260,000
Number of units created since 2000: 12,300

ST. LUCIE COUNTY

2014 population: 291,028
2020 population: 330,374
2040 population: 454,077
Predicted population increase: 56 percent
2014 median single-family home value: $88,636
2014 median single-family home sales price: $138,000
Number of units created since 2000: 43,700

INDIAN RIVER COUNTY

2014 population: 144,755
2020 population: 155,602
2040 population: 193,700
Predicted population increase: 33.8 percent
2014 median single-family home value: $102,500
2014 median single-family home sales price: $177,500
Number of units created since 2000: 21,500

Source: Shimberg Housing Research Center, University of Florida

Why You Need a Strong Lease for Your Stuart, Florida Rental Home

System - Wednesday, May 13, 2015

No landlord wants to think about the worst case scenario when they hand keys over to a tenant, but it’s important to be prepared for what can and will go wrong. One of the best ways you can protect yourself and your property is by having a strong lease in place. A good lease agreement will ensure that every possible problem has a solution.

A strong lease will prevent a tenant’s problems from becoming your problems. When a tenant loses a job or has his hours cut at work, it might be hard for him to scrape together rent by the first of the month. However, a strong lease will keep you protected by outlining what the late fees are for late rent and what the process will be if rent isn’t paid. Everyone is on the same page and everyone understands the procedures that are followed.

Liability is a big problem or landlords and if you don’t have a strong lease in place, you could be putting yourself in legal danger. Your lease needs to spell out exactly what you are responsible for and what your tenants are responsible for, and it has to be compliant with all local, state and federal laws. The laws change regularly, and that’s why it’s not a good idea to use any random lease template that you find on the Internet or at Office Depot. You need a Florida lease that will protect you against tenant claims in a Florida court. If your lease isn’t enforceable in Florida, you will have a lot of liability and risk associated with your rental property.

Security deposits can often be problematic for landlords, especially if your lease isn’t clear about what is expected at the time of move out. In your lease, you can stipulate what you expect the tenant to do and how you expect the property to look in order for the entire security deposit to be returned. When your lease is clear about damage and the requirement that the property be returned in the same condition that it was handed over to the tenant, you will have far fewer security deposit disputes.

Why You Need a Strong Lease for Your Stuart, Florida Rental HomeA strong lease will leave no doubt about what is allowed and what is prohibited. It’s where you can explain whether pets are allowed, how long guests can stay, what a tenant needs to do if maintenance is needed and who to contact in case of an emergency. All of the expectations are clear and a tenant will know exactly what happens in the event of a lease violation.

If you have any questions about why you need a strong lease or you need help putting together a legally compliant rental agreement, please contact us at South Florida Realty Management, and we’d be happy to help you.

Lovley 3BR, 2BA – Jensen Beach

System - Tuesday, February 17, 2015

This 3/2/2 split plan home is in excellent condition and is well located in the Jensen Beach/Rio area of Stuart. The property owner has recently renovated this unit and it looks great! Includes a fenced yard with extended BBQ area off of screened porch. All tile and newer carpet in bedrooms. New paint on walls! Must see inside to appreciate this gem!

Well located, this Jensen/Rio address is just a short drive to restaurants, a new Publix plaza, and the Treasure Coast beaches.

Schedule a Showing Online

Newly updated 3BR, 1.5BA in Stuart’s Fisherman’s Cove

System - Monday, January 26, 2015

This newly refreshed unit is a three bedroom, one and a half bath, half duplex in the Fisherman’s Cove community. Open floorplan, tiled throughout, split bedrooms, separate dining room, which could also serve as a family room. Main bathroom has combo tub/shower. Unit also has a large air conditioned bonus room! Most small pets allowed with non-refundable pet fee.

Schedule a Showing Online

Use the Cap Rate to Determine ROI of Your Single-Family Rental Investments

System - Thursday, January 15, 2015

The capitalization rate, or cap rate, is the rate of return on a real estate investment property based on the income the property is expected to generate.

It is an important consideration for investors looking to buy rental homes.

Let’s look at an example.

A three-bedroom/two-bath single-family home is listed for sale for $200,000. You’ve done your research on the neighborhood and have determined that the home can command a monthly rent of $1,900. You’ve also viewed the home in its current condition and you have estimated that your annual expenses will be about $9,100.

In considering your annual expenses, you should take into account these items: annual real estate taxes for the property, property and liability insurance, any utilities that you will be paying, repair and maintenance costs; HOA dues, management fees and projected vacancy expenses.

In this example, we estimated annual real estate taxes at $4,500, insurance at $1,000, vacancy costs at $1,100 and maintenance expenses at $2,500 for a grand total in annual expenses of $9,100.

To figure out the cap rate, we are going to take the income that we expect the property to generate ($1,900 x 12 = $22,800) and subtract our annual expenses ($9,100) to get an expected annual net operating income of $13,700.

We then divide $13,700/$200,000 to get a cap rate of 6.9%.

Using the cap rate is a good way for a SFR investor to compare multiple properties in a given market against one another to see which one might offer the best rate of return.

The higher the cap rate, the better the annual rate of return. Based on the investor’s objectives, a home with a 10% cap rate might be a better investment opportunity than a home with a 3% cap rate. Keep in mind that higher cap rates can indicate increased risk as well. Investors will have to decide for themselves the minimum cap rate they are willing to accept. Is a 5% return sufficient or will a 7% or 8% cap rate be your floor?

In our example above, let’s say you’ve decided that the minimum cap rate that you are willing to accept is 7%. Take your annual net operating income/cap rate or $13,700/7% to get the amount you should pay for the property you are considering.

In this example, you would need to offer $195,715 on the listing to reach a 7% cap rate.

To review, the cap rate equation is yearly income/purchase price. Remember to factor in expenses.

It’s also important for investors to realize that this isn’t a fail-proof equation, as unforeseen expenses can occur or your estimates can be off. Make sure you have a cushion of funds after the mortgage is paid for unexpected expenses that could cause your cap rate to be lower than what you calculated.

Say, for example, the property sits vacant for longer than you anticipated or that a tenant causes expensive damage. It’s important that you consider your rate of return against worst-case scenarios to make sure that you don’t end up with a negative rate of return.

Cap rate isn’t the only thing real estate investors should consider when investing in single-family rental properties, but it is certainly an important one to recognize.


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