August 2022 – Page 6

U.S. Needs 4.3M More Apartments by 2035 to Address Demand, Deficit and Affordability

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Nation Faces 600,000 apartment deficit, 4.7 million fewer affordable apartments Amidst demographic shifts and lingering pandemic-impacts on the population and broader economy, the U.S. faces a pressing need to build 4.3 million new apartments by 2035, according to a new study commissioned by the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC). Based on research conducted by Hoyt Advisory Services and Eigen10 Advisors, LLC, commissioned by NAA and NMHC, the data include an estimate of the future demand for apartments in the United States, the 50 states and 50 metro areas, including the District of Columbia. For the purposes of this study, apartments are defined as rental apartments in buildings with five or more units. The data are available on the website www.WeAreApartments.org. Key findings: Shortage of 600,000 apartment homes. The 4.3 million apartment homes needed includes an existing 600,000 apartment home deficit because of underbuilding due in large part to the 2008 financial crisis. Loss of affordable units. The number of affordable units (those with rents less than $1,000 per month) declined by 4.7 million from 2015 to 2020. Homeownership. Apartment demand also factors in a projected 3.8% increase in the homeownership rate. Immigration. Immigration is a significant driver of apartment demand, and levels tapered before the pandemic and have remained low. A reversal of this trend would significantly increase apartment demand. Texas, Florida and California. These three states account for 40% of future demand and will require 1.5 million new apartments by 2035. “The U.S. has undergone tremendously difficult conditions that have fundamentally altered our nation’s demographics, but one thing remains certain – there is a need and demand for more rental housing,” said NAA President and CEO Bob Pinnegar. “Put simply, we do not have enough housing. The U.S. must build 3.7 million new apartments just to meet future demand, on top of a 600,000 unit deficit and loss of 4.7 million affordable apartment homes. It is time to reverse course after decades of underbuilding, and instead pursue responsible and sustainable policies that will not only meet this demand but address the missing middle and loss of affordable housing stock.” “The lack of available housing is holding our country back. Whether it is a multifamily residence, duplex or single-family home, we need a massive supply of new for sale and rental homes – including millions of new apartments by 2035,” said NMHC President and CEO Doug Bibby. “Making sure everyone has access to quality, affordable housing is a bipartisan issue, and the industry stands ready to do its part to help create the 4.3 million new apartment homes our country needs.” In conjunction with the study’s release, the website www.WeAreApartments.org breaks down the data by each state and 50 key metro areas. Visitors can also use the Apartment Community Estimator – or ACE – a tool that allows users to see the trends in their state or metro area to determine the potential economic impact locally. For more information, visit www.WeAreApartments.org. For more than 26 years, the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC) have partnered on behalf of America’s apartment industry. Drawing on the knowledge and policy expertise of staff in Washington, D.C., as well as the advocacy power of 141 NAA state and local affiliated associations, NAA and NMHC provide a single voice for developers, owners and operators of multifamily rental housing. One-third of all Americans rent their housing, and 40 million of them live in an apartment home.

Opportunity is Everywhere

by Carole VanSickle Ellis
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From “Dirt Poor” to Successful Real Estate Investor By Carole VanSickle Ellis When Dana Nutt moved to Afton, Michigan, at the age of 6, he got his first experience in rehabbing real estate. “We lived in a one-room schoolhouse with an outhouse,” he explained. “But we just kept cleaning and sanding and improving whenever we could.” The family made the best of the situation, and Nutt spent hours with his father working on the inside and outside of the building, eventually installing partitions and plumbing to make what had been a decrepit old schoolhouse a livable home. That was when Nutt identified a motto that has defined his hundreds of fix-and-flip deals and dozens of other real estate-related business ventures in northern Michigan: “If it looks like a lot of work, it’s right up my alley.” Keeping Both Eyes Open for Opportunities By the time Nutt was a senior in high school, he was running a nearly full-time handyman and construction business with seven employees. After graduation, he continued to grow that company, ultimately spending more than two decades at its head before selling it to an employee who had been with the company for years while Nutt was the owner. “It was a win-win situation,” Nutt explained. He owner-financed the sale of the business and receives regular payments from the new owner while freeing up his time to pursue other passions like spec houses, residential development, and running the Tower Shore Motel, a property he purchased in June 2018 after it “broke my heart” to see it falling into disrepair (see sidebar). Between graduation and the present day, he also acquired, rehabbed, and either rented or flipped more than 200 residential homes in Florida and northern Michigan, acquired a 19-lot subdivision that was ready to build, purchased and rehabbed a small multifamily property in a neighboring town, opened a party store, and, most recently, started a self-storage company. “I’m always looking for a good deal, and I’m not afraid of hard work,” Nutt explained. “That is how I went from dirt poor to where I am now.” He is intensely creative and tends to see opportunities where others might not. For example, when he acquired the subdivision where he is currently building his spec houses, he initially only wanted to buy a single lot. However, upon learning that the owner was interested in selling the entire development and willing to take payments over time, Nutt negotiated a deal that enabled him to put a percentage of the total price down, then pay off the remainder in increments as he sold lots, houses, or both. “I always wanted to design my own homes,” he explained. “This was a great way to do it.” Gain a Little Knowledge Every Time Nutt makes it a policy to take at least “a little knowledge” out of every investment and, equally importantly, is an avid reader. He recalled being inspired by Carlton Sheets in the late 1990s after reading No Down Payment and, shortly thereafter, consuming Robert Kiyosaki’s Rich Dad, Poor Dad. “I’ve read more than 200 books, and I always make sure to get a little knowledge out of each one of them,” Nutt said. The determination to put what he was learning about into prompt action played a role in his varied experiences in real estate over the years. “I’ve bought land via tax sale (once I even ended up selling it back to the town once I had purchased it), by bandit signs, and by referral,” he said. Nutt emphasized the importance of maintaining good relationships with other real estate professionals, noting the importance of trust in today’s market. “These days, you need people that you can trust because you have to get the offer in first, then do the inspection later,” he explained. “Otherwise, you miss your chance.” SIDEBAR Taking Back Tower Shore Today, the Tower Shore Motel is a log-sided building with a bright red roof, several permanent RV installations for “glamping,” a three-bedroom log cabin with a kitchen and full amenities out back, and plenty of sites for traditional camping. Guests enjoy kayak and canoe rentals in the summer, snowmobile rentals in the winter, and campfires and s’mores just about any time the weather permits. Fewer than five years ago, however, things were very different. The grounds were overgrown and the facilities deteriorating rapidly. “I used to fish on Tower Pond as a kid, and it just broke my heart as the Tower Shore Motel started to fall down,” said proprietor Dana Nutt, a local investor who acquired the property in 2018. “When I heard it might be available for sale, I told the agent to put my offer in immediately and we would figure out the details later.” Nutt and the seller agreed to a land trust transaction that enabled Nutt to retain the capital necessary to clean up the property and get it open for business quickly. Nutt dove into the project, setting an opening date just two months down the road. It was hard going. “The rooms were just filled with stuff: beds, mattresses, furniture, you name it,” Nutt recalled. Many in the community stopped to help with the cleanup, and more stayed for paid work. Nutt says one of the best things about investing in northern Michigan and owning a variety of businesses in the area is that he is nearly always able to help provide employment if a candidate is serious about getting a job. The hard work paid off, and the motel reopened on Labor Day 2018. However, Nutt was just getting started. “I wanted make it everything I thought a hotel should be,” he explained. To this end, he began acquiring canoes, kayaks, RVs, rustic furniture, and even log siding, which he bought at an auction and installed himself on the exterior of the buildings. By 2019, the hotel boasted standup paddle boards, a pull-behind float, and a playground “to keep the kids busy” near the campground. Nutt also hosted

Keeping an Open Mind

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How a Serial Entrepreneur Became a Real Estate Success A successful entrepreneur with deep experience in start-ups, as well as in executive and financial management, Derek Cook has always been open to new business opportunities. His various ventures have included mortgage lending, restaurants, automobiles, and even the ATM industry. But his most recent successes involve those in the real estate investment industry. A native Floridian, Cook got his first taste of real estate in Arizona while working in finance at Bank One (now JPMorgan Chase). Then he went to work for a mortgage broker before forming his own successful mortgage company. It was there that he had a revelation. “I was giving away so many leads to real estate agents that I decided to get my own real estate license and keep the leads myself,” Cook explained. So, he got his license in 2002 and began his real estate career first in retail then migrating to fix-and-flips. After years of being on his own and with auctions becoming increasingly difficult, a friend recommended that he investigate buying a HomeVestors franchise. At that time, Arizona was a closed market, which meant that you had to buy an existing franchise and not one from Corporate. Cook found a franchise for sale, as did Donald Juvan. Both men wanted the same franchise, so instead of bidding against each other, they became business partners. They bought the Arizona franchise in October 2015 and began focusing on the fix-and-flip niche of the industry. From the very beginning (and still to this day), Cook and Juvan enjoy the relationship, expertise and responsiveness of their Development Agent, Michael Ludlow, and Ryan Chenoweth. Both new independent business owners also took maximum advantage of the HomeVestors marketing system and the HomeVestors CRM. Cook explained, “HomeVestors has such an incredible reach, we would have been foolish not to take full advantage of that. And, we love having a national brand behind us.” Due to both Cook’s and Juvan’s previous business successes, they never needed to borrow money from outside sources to acquire properties. And owning a small lending business helped as well. The partners’ company, Cook Enterprises, buys investment properties throughout Arizona, including Tucson, Flagstaff, Maricopa, San Tan Valley, and of course the Greater Phoenix Area. In 2021, Cook bought another franchise in New Mexico and Juvan owns an additional franchise in Northern Arizona. Describing the Arizona real estate market, Cook explained that inflation and rising mortgage rates are affecting their business. “In March 2022, Phoenix had 4,000 houses on the market; today there are 16,000 houses. And they are on market for a longer period of time. However, iBuyers are canceling contracts left-and-right and leaving sellers high and dry. We are getting a lot of that business and simultaneously helping these people who have been left in an ‘ugly’ situation. HomeVestors gives me the additional tools to help people in these dire situations.” Overall, business is good for Cook Enterprises – they have a staff of transaction coordinators, three acquisition agents, and a construction crew on the payroll for the property rehabs. Cook’s daughter, Clara, just graduated from high school and has expressed an interest in the family real estate business. The Cook family lives in beautiful Gilbert, Arizona. Derek is married to Maren, and they have three children – Clara, Clay, and Janie. Homevestors What exactly does it mean to be a HomeVestors® business owner? Owning a real estate business is life changing and naturally comes with risks! When you become a HomeVestors business owner, you get immediate access to motivated seller leads, financing resources for qualifying purchases and repairs, one-on-one coaching with your local Development Agent, proprietary software for analyzing properties and deals, and access to a nationwide network of coaches and peers. Your house-buying business is yours and you run it as your own venture with a focus toward your individual business goals. If you are interested in a franchise, call 855-454-4518, email sales@homevestorsfranchise.com or visit www.homevestorsfranchise.com. Each franchise office is independently owned and operated.

Rental Property Marketing

by Kori Covrigaru
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Expanding Your Rental Pool and Decreasing Turn Time By Kori Covrigaru In any industry and in any economic climate, strategic marketing is key. This is especially true in the real estate industry, specifically with regards to marketing rental properties. With tens of thousands of rental properties on the market at any one time, and small investors competing with larger-scale investors, making a property stand out above the rest requires a strong campaign to attract qualified applicants. At PlanOmatic, we offer the tools and technology to do just that. Below are six reasons why you should include floor plans in your marketing campaigns. 1. Assure Accurate Advertising A little white lie never hurt anyone, but a little house is a different story entirely if the resident expected something larger. When you are marketing your rental, it is critical to accurately represent the size and layout of the space. Square footage alone can be misleading, but coupled with a floor plan, a renter should have a clear image of the layout of each room. 2. Quick Turns With tight inventory, the rental market remains highly competitive for residents. In this high stakes market, renters are applying without ever stepping foot in the space. This is risky… No one wants to be surprised by an open concept bathroom. Floor plans put sight-unseen applicants at ease and allow you to rent the property at record speeds. 3. Reduce Showings A floor plan shows renters immediately if a closet is not big enough or if a garage will not accommodate the beloved F-250. We know not every property is for every renter. It is best to filter out the uninterested prospects before losing time on a showing. 4. Expand Your Renter Pool Homes purchased and renovated by families often age into income properties after the children have flown the coop. This could leave investors with an over-improved home that can be difficult to rent at a recovering rate. A floor plan gives prospective renters the ability to understand the property’s layout in-depth with the flexibility of doing so on their own time. This, in turn, increases leads from out-of-range prospects who might otherwise feel uneasy about committing to a property remotely. Showing non-local prospects an online floor plan will expand your rental pool beyond your neighborhood bubble. This increases your access to a group of renters who can possibly afford to spend more monthly. 5. Showcase Unique Features At some point in the shopping process, all houses start to look the same to renters. The neutral palette and builders-grade finishes can leave prospects snow blind after a day of online rental browsing. Stand out on the market by showcasing the differences in your properties. There are important features of a home that do not photograph well like garages, closets, mudrooms, laundry rooms, or storage spaces. Floor plans allow you to show the important, but less glamorous, parts of a home that make it more valuable. 6. Promote Accessible Properties Floor plans are a simple way to illustrate handicap accessibility. A well-drawn floor plan should clearly mark all stairs and will show the size of a space. These attributes are useful in knowing if the home can be easily navigated by a wheelchair. Floor plans for rental marketing is an easy decision. Not only do floor plans attract a larger pool of quality leads, but they also shorten the turn time of the property.

New Needs For a New Era

by Brian Edwards
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Why Providers with Local Expertise and Industrial Scale are Thriving in 2022 By Brian Edwards America’s household formation has been experiencing a seismic shift accelerated by the pandemic as the nation’s population began to “de-urbanize” by looking to migrate away from densely populated cities into less populated suburban areas throughout the Southern and Western states. The effects from the pandemic fueled this migration by mobilizing a large segment of the population that found themselves suddenly untethered to the traditional centralized workforce model. No longer was it necessary to live within a commutable distance to an office that is located in a crowded population center. According to an Owl Labs study done in 2021, 55% of workers reported that they work more hours from home than in the office, and almost one-third of all employees surveyed said they would rather find a new job than to go back to a traditional office setting. With this newfound flexibility, America’s workforce is rethinking how they want to live. People are migrating away from the crowded metro areas of the Northeast and Midwest and looking to follow sunshine and open spaces to the South and West. The 2020 U.S. Census found that nine out of ten states with the highest population growth were located in the South and West. The Need for Affordable Housing This large migration creates a need for affordable housing. Potential homebuyers moving to these areas are forced to make a decision. Do they take the risk and buy immediately in a new place amid an overheated market, where rising interest rates have been eroding affordability, or should they rent for a period of time to get a footing into their new location? Capital investors have been moving in to help. The single-family rental (SFR), build-to-rent, and rent-to-own sectors have been growing rapidly since the Great Recession first created an opportunity for investors to pursue returns while helping to stabilize the housing market. Since that time, the shortage of available single-family housing and increased demand has sharply driven up asset prices which have further fueled the market. A recent Walker and Dunlop study found that 5-10% of all single-family new construction is built-to-rent. Although still representing a small minority of the overall single family rental investor profile, large investors continue to generate and hold single-family properties. Not only has the SFR asset class been outperforming other real estate sectors, it has performed as well as any asset class. And we expect this trend will likely continue for the foreseeable future. Redfin recently reported that the average monthly rent in the United States increased 15% year over year to a record high of more than $2,000 in May of 2022. What does it all mean for the housing market as a whole? There are ongoing debates about the impact of ongoing participation of institutional investors in the single-family housing rental space. But one thing is crystal clear: The size and scope of this new group of real estate investors has created an opportunity for service providers to adjust their offerings to better serve the market. Institutional investors require providers that can deliver services nationwide with an industrial approach to match the speed and scale at which they are operating. At the same time, real estate is still very much local. Rules and practices are micro when it comes to efficiently acquiring and managing real estate. In order to be effective, investors need partners that can provide the experience and expertise needed to make sure that they are adhering to all local rules and requirements. The Service Provider of the Future Service providers who can bridge these two worlds will be in high demand. Companies that can be both a master of local market knowledge and a macro-level operator with scalable, multi-geographical capabilities are poised to thrive. These dual capabilities have proven to be especially valuable in the title space, where requirements differ from state to state, and county to county level. While title insurance policies tend to be similar, the title search and examination process varies significantly depending on locale. Real estate investors who currently operate in multiple states or are looking to expand their territory need a title partner with macro and micro capabilities, including: » Centralized captive underwriting operations with local escrow officers » Digitized communication and notifications for transparency throughout the process » Modern technology and automation that enables sharing, accessing, verifying authenticity, and maintaining an audit trail for each document » Robust encryption and security to protect data and funds » Services that cover the original acquisition of the asset through securitization » Financial strength and stability to pay future claims With titlegenius by Radian, we have embraced this hybrid model to serve investors of all sizes with quality underwriting at an affordable cost, industrial-scale operations and tech, and local escrow officers that are able to efficiently manage transactions in their market. For service providers like us, a critical question for our current moment is: As market participants and market conditions change, have we adjusted our approach so that we are adding as much value as we can? And for investors of all sizes, a corollary question is: Do our providers have the adaptive mindset and multifaceted capabilities that will help us grow in this changing market? The organizations that have the best answers to those questions are the ones that will thrive in this complex and exciting new era for residential real estate.