Investors and Renters Drive Single Family Demand
23 Apr 2012 | No Comments | posted by jacobgrant | in Investment, Local Info Idaho Falls
Zelman and Associates’ most recent survey shows investor and renter demand continuing increase for single family rental homes.
Our single-family rental survey, which draws upon feedback from property managers managing an estimated 3% of professionally-managed single-family rental units and REO investors pursuing a single-family rental investment strategy, indicates a continuation of healthy demand trends on behalf of both tenants and investors. An increasingly imbalanced rental market is best evidenced by property managers’ rating renter demand at 84 on a 0-100 scale and rental supply at just 21. Several experienced managers commented that demand is the strongest seen in decades. At the same time, REO investor contacts, who stated that they target unleveraged IRRs averaging 15% and holding periods of 5-7 years, rated investor demand at an equally impressive score of 87 and noted that Fannie Mae’s bulk portfolio sale has generated a lot of excitement as investors “chase” single-family rental investments. In fact, we found investors’ tone to be increasingly mindful of potential risks as greater competition has resulted in compressed yields.
Note that targeted internal rate of return is around 15% with a 5-7 year holding period! Interestingly, local market conditions are similar, especially with small multi-unit 4 plexes and duplexes. Increase in renter demand is generally pressuring rents upward, and investors are seeking to take advantage.
Investors and developers can take advantage of Zelman and Associates’ detailed research regarding construction, development, vacancy, and other rental market components.
Jacob Grant Property Management can help you assess similar properties for acquisition with a pro-forma analysis.
Boise Real Estate News
22 Mar 2012 | No Comments | posted by jacobgrant | in Local Info Idaho Falls
Seems like we have been seeing an increase in construction vehicle traffic. I think I am seeing lots of cement trucks and many other construction vehicles. I wondered if I was “seeing what I wanted to see,” but this article suggests that it may not just be in my head.
Ada County (Boise Market) is seeing a large pickup in house sales. Is it likely that this market improvement will spread east into the Idaho Falls market?
Multi Family Foreclosures in Idaho Falls and Pocatello
27 Feb 2012 | No Comments | posted by jacobgrant | in Local Info Idaho Falls
Historically eastern Idaho is known for its moderate fluctuation in the local economy. Unemployment rates are almost always lower and declining real estate value has been much less than the national average. However, this time around the downturn has hit the local market hard. Building permits issued by the planning and zoning department have decreased significantly. In 2011, one building permit was issued for construction of a multi-family building. Compared to 207 in 2005, this was a significant decrease.
Multi Family Properties Lost to Foreclosure in Idaho Falls
Locally, there have been several foreclosures. Some larger multi-family foreclosures include Benton Street Apartments in Idaho Falls, Maple Street Apartments in Idaho Falls, and Fairway Estates in Pocatello. The common thread in all of these properties was significant deferred maintenance and very low occupancy. The approach to selling and marketing the property is similar between the banks that we have worked with. They start high and inflexible and end up low and flexible after 6 months to a year.
Different Asset Management Styles
The Benton Street Apartments (29 units) were foreclosed on by Citibank. Their approach was to put the absolute minimum into the project. Commendably, Citibank had a very high priority on safety of the residents. Beyond that, they were very resistant to any kind of updating or repair. The result was financial loss (over $150k).
The Maple Street Apartments (21 units) and Fairway Estates Apartments (49 units) were foreclosed on by Beal Bank. Their approach was much different. Their focus was to prepare the property for an investor. They were proactive and logical. Reasonable updating and repairs were a priority. The result was a loss reduction of approximately $150k at Maple Street. Six months after Fairway foreclosed, there were 3 investors vying for the property. Beal Bank, the asset manager and Jacob Grant Property Management teamed up to create an attractive investment.
What Does This Mean for Real Estate Investors
When structuring your real estate investment, do not underestimate ongoing maintenance expenses. In Idaho, the average cost per square foot is $.25/foot. Older or distressed properties can easily exceed $.50/foot Deferring the maintenance will work for awhile, but will eventually spiral into lower quality tenants, even more maintenance, high vacancy, and eventual decline in the property value. If your maintenance numbers are lower than the average for your area, ensure that you are not missing needed repairs and start setting aside reserves for capital repairs such as roofs, siding, appliances, or other foreseeable repairs. Ensure that you have a preventative plan. Prevention saves tens of thousands of dollars.
If you are involved with managing a poorly performing asset or you have more questions regarding a rental property in Idaho Falls or Pocatello, don’t hesitate to call 208-522-3138 or email support@jacobgrant.com
View Jake Durtschi’s profile
