Things are looking up!

 Associated Estates is a self administered, self managed Real Estate Investment Trust that owns 13,192 multifamily units in 52 communities in 9 states.  Their CEO, Jefferey Friedman, was interviewed by Keat Foong, the Executive Editor of Multi Housing News. 

New Renters Will Outstrip the Supply of Apartments

The number of new renters will exceed the supply of apartments by as much as two times, according to the president and CEO of Associated Estates Realty Corp. Jeffrey Friedman.

In an interview with MHN, Friedman argued that demographic patterns in this and next decade dictate that there will be strong demand for apartments that will outstrip supply. 

Friedman explained that the homeownership rate is about 65 percent currently, and that the total number of households in the US is about 120 million. “If 35 percent of the population rents, we are talking about 40 million households that are renters,” he said.

According to the census bureau, there will be 15 million new households over the next 10 years, translating to about 1.5 million new households per year. If only 30 percent of these households rent, says Friedman, this will mean there will be 450,000 new rental households per year in the next 10 years. 

However, apartment starts have been hovering at around only 200,000 units from the supply standpoint. “We know there is no overbuilding,” says Friedman. If this pattern holds, “In fact, there will be half as many new apartments built as new renters coming into the market,” he says. (more…)

Beautiful, Affordable Portland

One of the metrics to look at when picking an area for a long term investment is the affordability index.  And by that I don’t mean looking soley at how much the median income is in an area…I mean:

Average Rent/Median Household Income = Affordability Index.  (What portion of your pay goes to rent?)

It’s great that some investment counselors track Median Household Income (MHI), but without the context of average rent for that area we really don’t have a way to evaluate areas that have long-term rent expansion capability.  An obvious example is New York City.  Clearly the MHI is higher there, but so are average rents.  New York has an affordabilty Index of 57.2%.  That means that between half and two thirds of the household income goes for rent.  I suggest that while NYC has posted impressive rent gains for all property types, that the pace of those increase is likely to wane…how much more than 57% of your income could you afford to pay for rent?   Years ago I had an employee that considered himself to be a real tout, a master horse race handicapper.  Mark would always tell me:  “Rick, there are horses that run fast, and horses that run long…but aint no horse that runs fast and long.”

Highly Ranked Portland

With Average Rents at $825 and Median Household Incomes at $57,757, Portland’s Affordability Index is 16.8%.  That’s fifth in the nation.  Portland-Beaverton-Vancouver “Asking Rents” jumped an average of of 3.1% in the fourth quarter of last year compared to a year earlier.   Full disclosure:  Oklahoma City had the nations best ratio at 12.3%…but the catch is that if you move there …every morning you wake up in Oklahoma.

With room for long term rents to expand and a great area to live in, isn’t this a great time to invest in Portland area multifamily properties?

This isn’t even my listing…but I’m making good on my commitment to find great deals for my investors.  This NE duplex is a great value:  for under $165k you get two residences for less than the normal price for one. My faithful readers know that I eschew residential multifamily in favor of commercial multifamily due to the usual lack of cashflow.  On most plexes you have to put huge downs just to keep from having an alligator to feed monthly.  As such, many entry level investor’s feel their sole option is  to live in one side and rent out the other.  As this is already approved for a short sale below $165K, someone else has already done the hard work of negotiating with the bank on the owner’s behalf.  That means most investors can buy it, rent out both sides and still have it cash flow.  One thing about buying distressed property…they are often older residences and trashed inside.  On their way out some homeowners remove every light bulb switch cover, and even the toilets.  The reason I am selecting this as a “best buy” is the condition of the units and their effective and actual age.  (They were built in 1997.)  Anyone who has entered an REO property will have a hard time believing that these pictures are really Short Sale Units.

Details: The large unit is 1,208 Sq. Ft. 2 bedroom/1.1 bath home with a fireplace.  It rents for $795 per month.  the smaller 1 bedroom/1 bath unit has 650 Sq. Ft. and rents for $625/month.  Contact me at 503.577.1034 if this sounds attractive.  Or e-mail me at rick@rosecitycre.com.

I will be describing cash flowing commercial deals soon!