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Boeing S.C. wants to buy nearly 1,100 acres in N. Charleston

December 28, 2012 By

By Warren Wise and Brendan Kearney

The so-called Boeing effect is going to get bigger — a lot bigger.

Nine months after Charleston County Aviation Authority Chairman Chip Limehouse leaked in a public meeting that Boeing was eyeing more airport property for expansion, the aerospace giant took steps Thursday to potentially triple the size of its footprint in North Charleston, laying claims to more than 800 additional acres around its 787 plant.

The authority, which owns Charleston International Airport, voted unanimously Thursday to begin the process of selling Boeing Co. 320 acres along International Boulevard across from its existing plane-making operation. No price has been set.

The airport board also voted to offer the Chicago-based airplane manufacturer the first right of refusal on 488 acres straddling Michaux Parkway at Dorchester Road and abutting the Air Force base, as well as the option to purchase the 265 acres under its existing manufacturing campus.

“This is a major Christmas present for the Lowcountry,” said Limehouse, who is also a state lawmaker and is considering a run for Congress. “We’ve tied our hat to the rocket ship Boeing.”

Boeing did not disclose any concrete plans for the property.

Before it could build, the airport board must obtain an appraisal to compare with Boeing’s and eventually settle on a price. Then, any development plans must clear environmental and regulatory hurdles.

“I think the best thing we can say right now is anticipated, possible future growth,” Boeing South Carolina chief counsel Mark Fava said. “We don’t ‘land-bank,’ and I think our past practices will show that.”

Nevertheless, Thursday’s announcement set off speculation among company observers and analysts about Boeing’s long-term strategy.

Some believe the company will bring other commercial airplane production lines to North Charleston, while others emphasized the leverage the holdings would give Boeing in negotiations with its powerful unions in Washington and governments in other states.

“We believe Boeing is preparing to eventually locate new airplane programs in Charleston rather than Washington State,” Scott Hamilton of Issaquah, Wash.-based aviation consulting firm Leeham Co. wrote in an email Thursday.

Hamilton and others, like London-based analyst Saj Ahmad, said he would “not be at all surprised” to see the double-stretch Dreamliner, the 787-10, assembled in North Charleston.

Hamilton also floated the possibility of the 777X or the eventual successor to the 737 MAX being made in South Carolina in the coming decades.

“This is entirely our assessment; we can’t say we know anything about this,” Hamilton said. “But the old adage is that if it looks like a duck and walks like a duck, then it’s a duck. And this sure quacks to us.”

On the other hand, aerospace analyst Richard Aboulafia said “there’s a very good chance they’re going to expand, but nothing is guaranteed.”

“Basically, why not have that option?” Aboulafia said, adding that he doesn’t think anything will spring up there in the next few years. “It also sends a message to anyone you might be negotiating with elsewhere that you’re serious about keeping your options open.”

Aboulafia, vice president of The Teal Group, a Virginia-based consultancy, downplayed the idea of a major shift in manufacturing to South Carolina, and doesn’t think it has specifically to do with Boeing’s ongoing negotiations with the Society of Professional Engineering Employees in Aerospace in Washington state.

“It’s unlikely that this facility will be used to stand up a corps of engineers like they have back in Washington,” Aboulafia said. “I think it’s more of a broader message.”

“It shows their production line diversification efforts seem to be paying off,” he added.

The news of the land deal was welcomed in Columbia.

“It’s proof positive that South Carolina is a place where businesses flourish,” Gov. Nikki Haley’s spokesman Rob Godfrey wrote in an email.

A spokesman for Washington Gov. Christine Gregoire declined to say whether the deal is cause for concern there.

“Boeing has a bright future in Washington, adding more than 13,000 employees in our state in the last year to reach a new high-water mark of more than 87,000 workers,” Jason Kelly, Gregoire’s spokesman, wrote in an email, emphasizing the governor’s investment in aerospace education.

“We are focused on maintaining Washington’s position as a world leader in commercial airplane production.”

Back story

Fava said Boeing broached the possibility of acquiring more of the Aviation Authority land in a closed-door meeting “many months ago,” declining to be more specific.

“It begins with a discussion and then it goes into deeper discussions and then you’ve got to go through due diligence,” said Rick Muttart, Boeing South Carolina’s director of site services. “It’s a process that you’ve got to go through.”

The approval came a week after Boeing closed on the purchase of three neighboring office buildings totaling 178,000 square feet from the South Carolina Research Authority.

The final OK came Thursday after about an hour-long, closed-door meeting. South Carolina Speaker of the House Bobby Harrell and state Sens. Larry Grooms and Paul Campbell attended the meeting along with Boeing officials, including the company’s top in-house lawyer, former federal judge J. Michael Luttig.

Airport board proxy member and Charleston County Council Vice Chairman Elliott Summey, sitting in for his father, North Charleston Mayor Keith Summey, made the motion for the deal.

“I think it’s encouraging they believe in our community as much as we believe in them,” the younger Summey said. “This says more about our workforce than our politicians.”

Charleston Mayor Joe Riley, who also sits on the airport board, called the development “wonderful news” for the region.

The undeveloped property Boeing set its sights on contains about 20 percent wetlands and is home to the airport’s radar facility, Summey said. The Federal Aviation Administration also must sign off on the deal after considering Charleston International’s future expansion needs and whether the sale price is fair.

“Then, at the end of the day, if the parties say that’s not the price we’re willing to offer it at, or that’s not the price we’re willing to purchase it at, we at least know what the price is,” Fava said.

But it seems unlikely they won’t be able to strike a deal.

Boeing received more than $900 million in state and local government incentives to build a 787 final-assembly factory here, according to a Post and Courier analysis. The massive factory opened in summer 2011, delivered its first locally made plane in October and its second on Thursday, both to Air India.

Limehouse said the proceeds of the land sale would go to the $200 million redevelopment and expansion of the airport’s 27-year-old passenger terminal.

More than 6,000 Boeing employees and contractors work at Boeing’s local operations, which include a year-old interiors fabrication plant off Ladson Road. The company leases the land under its existing operations from the Aviation Authority. That lease expires in 2041, but Boeing wants to purchase its existing property by 2025, said Fava.

If Boeing acquires all the land it is seeking, it will amass nearly 1,100 of the 1,300 acres Charleston County Aviation Authority currently owns at Charleston International.

“It’s an exciting milestone in the development of Charleston International Airport,” Airport Director Sue Stevens said. “After two and a half years of talks, I feel like 10 pounds has been lifted off my shoulders.”

Filed Under: Blog, Charleston, South Carolina Tagged With: ,

25 Best Places to Retire

October 23, 2012 By

Summerville, South Carolina

Best if you’re looking for: Small town
Median home price: $143,000
Top state income tax: 7%

CNNMoney – In the late 19th century, medical experts deemed Summerville one of the best places in the world to treat lung and throat disorders; they credited the dry air and a plethora of pine trees.

Today Summerville offers much of the history and charm of nearby Charleston but in a smaller, more affordable setting.

And modern-day ailments are cured in the 94-bed Summerville Medical Center, which scores top points from the Joint Commission for its treatment of heart attacks, heart failure, and pneumonia.

Filed Under: Blog, Charleston, South Carolina Tagged With:

Rental Market’s Big Buyers

October 12, 2012 By

Private-Equity Giant Blackstone’s $1 Billion Bet on Foreclosed Family Homes

By Craig Karmin, Robbie Whelan, and Jeannette Neuman

The Wall Street Journal – Blackstone Group LP has become the biggest U.S. investor in single-family rental homes by spending more than $1 billion since the start of 2012 to acquire more than 6,500 foreclosed houses in eight metropolitan areas, according to people briefed by Blackstone.

The firm also is finalizing a loan for at least $300 million from Deutsche Bank to support this business, these people said.

Numerous private-equity firms have crowded into the business, some as early as last year, looking for a way to bet on the recovery of the housing market. Blackstone’s growing commitment to this strategy offers fresh evidence that the purchases of foreclosed homes, which began as a mom-and-pop pursuit, is gaining legitimacy among the biggest private-equity firms.

The demand from these firms and other investors could help strengthen the housing recovery, analysts say. Earlier this year, the Federal Reserve expressed support for the strategy as a way to clear the backlog of foreclosures that has weighed down the market.

People involved in the market estimate that private-equity firms and other investors have raised $6 billion to $8 billion to invest in the sector, as they try to take advantage of prices that have fallen nationwide on average by more than a third. That could buy 40,000 to 80,000 properties, according to a recent report from Keefe Bruyette & Woods.

Of course, success is by no means assured for private-equity firms, especially given their high targets for investment returns in general and their lack of experience with this type of real estate. Used to buying office buildings, shopping centers and other big properties, they may struggle to find economies of scale in managing thousands of individual homes in neighborhoods that were hard-hit by foreclosures, but are showing signs of price stabilization.

Skeptics also have pointed out that bulk sales of repossessed homes are rarer and smaller than many investors had hoped. In many markets, firms are battling small investors at foreclosure auctions on courthouse steps, buying properties one by one, a tedious process. There also is little precedent for selling thousands of homes en masse, something the firms will need to do to cash out.

Blackstone and other firms are expanding rapidly partly because the housing market is firming up. In some markets, home prices have risen to the point that firms might not be able to achieve their initial return objectives from renting them out.

“I believe the smart thing to do is to ramp up really quickly, because I think the dynamics are going to change dramatically in the next 12 months,” said John Burns, an Irvine, Calif.-based housing consultant. “We’re going to see a lot of price appreciation at the low end of the market, which means lower cash yields.”

Among the private-equity firms crowding into the single-family home market are Colony Capital LLC, Oaktree Capital Group LLC, KKR, GTIS Partners and Och-Ziff Capital Management LLC, which have invested less money and bought fewer homes. On Wednesday, Waypoint Real Estate Group LLC, a real-estate investment firm in the single-family rental market, said it had secured a $245 million loan from Citigroup Inc., C -2.20% to expand its portfolio of more than 2,400 homes.

“We’re finally starting to see the private sector coming in and providing a solution. It was just equity and now it’s debt. We’re seeing meaningful price appreciation in a number of markets across the country,” as investors buy up more homes, said Waypoint managing director Gary Beasley.

But Blackstone, one of the biggest buyout firms in the world, has been able to muscle its way to the front of the pack by taking advantage of the $13.3 billion property fund it closed last month, the largest of its kind ever raised, and has already spent about one-third of it, say people who have spoken with Blackstone. It has paid an average of about $140,000 for each home in Phoenix, southern and northern California, Atlanta, Miami, Tampa and Chicago. Like other investors in this market, the firm is planning to fix up the homes, rent them and eventually sell them after the market rebounds.

Blackstone has previously said it expects to achieve initial yields of 6% to 7% on the rental income. But the firm also will need rents and home values to rise if it is going to hit the double-digit returns that it typically promises its investors.

Private-equity firms also are looking to boost returns by putting leverage on their portfolios. Blackstone is close to finalizing a loan from Deutsche Bank AG for $300 million, an amount that could expand to as much as $600 million, the people said. The loan is the largest made to a private-equity fund for this strategy so far, executives at several firms say.

As private-equity firms enter the single-home market, they have partnered with local property companies to buy, lease and manage properties. Blackstone, for example, has partnered with Dallas-based Riverstone Residential Group and Tempe-based Treehouse Group to form a new company, called Invitation Homes, to manage its single-family rental business.

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Props to That: Property managers put in long days, handle brisk business in vibrant rental market

July 28, 2012 By

By Jim Parker

The Post and Courier

Debbie Miler has logged close to 30 years in real estate, yet she’s hard-pressed to remember a more active time in the leasing side of the business.

“Oh my gosh, it’s unbelievable,” says Miler, who heads up the property management division of Miler Properties in Summerville. “We can’t keep rentals on the market now,” she says. “We have people offering to pay more for rent.”

The rental spike stems from two things, she says. There’s a growing number of workers relocating to the Charleston area for large employers such as Boeing, the port of Charleston and local military bases. At the same time, the sluggish housing market has left a larger-than-normal share of properties as undervalued. “Rather than let properties sit,” she says, owners are renting them out until they can secure a decent sale price.

Miler Properties is one of the larger property managers in the Charleston area, overseeing 700 residences. “The great thing is we are getting a lot more properties as well,” she says, noting many family tenants want to move in before school starts next month.

Yet with a goodly share of homes unsold, everybody is getting into the act. “We have a lot of competition,” she says. One side effect has been an extra-worked staff that is “really stressed out,” to the point that the business is advertising for an additional full-time property manager, Miler says.

The rental blitz is taking place in various degrees throughout greater Charleston. In what’s increasingly a landlord’s market, close to 3,000 properties have been rented in the past six months at an average $1,200 a month.

Tenants are seeing an average $100 increase this year on every $1,000 they pay in rent. Finding leasable properties is more difficult since they’re being snatched up so fast. And whereas apartments were the overwhelming choice of renters in the past, more than 20 percent of leases in the Charleston area and 44 percent downtown are for houses. Yet the apartment business is hardly struggling: Developers have poured capital into new apartment home complexes in Mount Pleasant and Goose Creek among others that have brought hundreds more units to the market.

Eric Wetherington, who directs the property management division at Carolina One Real Estate, is cognizant of the revved up rental business. Carolina One’s clientele of home, condo and townhome owners who want their properties rented out has increased 25 percent from last year to more than 1,025 properties under management. Rents are up 10 percent across the board, he says.

Certain sectors of the Charleston area are stronger than others in terms of leases.

“Summerville is a very popular market,” he says. Residences fetching as much as $1,200 to $1,500 a month “are renting very quickly.”

In Mount Pleasant, some single-family home rentals are proving so popular that tenants are bidding on them, Wetherington says.

The agency’s property management chief cites two factors in the recent surge in rental business.

“We are still seeing a lot of folks coming to us to help rent homes out,” he says. At the same time, “We are starting to see more investors,” people who buy homes and condos and rent them out as income producers. Wetherington says the investor pick-up is due in part to the Lowcountry’s attractive economy.

“Charleston is a great place to live. It’s a popular market for people to buy homes and use as investments,” he says.

A beneficiary of the pick-up in rental homes, townhomes, condos and apartments has not only been the owners, who are receiving a steady stream of income. Also doing well are property management firms.

• Day-to-day managers •

While some owners self-manage their leases, many others turn the task over to professionals. Even an apartment developer typically brings in another company to take care of the day-to-day routine of screening tenants, welcoming them to the community, making repairs, fixing leaks, maintaining amenities, mowing the lawn and hosting social functions.

One local business that’s been ahead of the curve on home, condo and townhome leases is James Island-based Charleston Home Rentals.

Matt Manaker got involved in property management in 2005 and started the company the next year. Brothers Matt Azar and Josh Azar joined the company in 2009 and became partners a year later.

“We all grew up together in Connecticut,” Manaker explains.

Today, the business counts 300 owner-clients and oversees 600 houses, condos and townhomes. It handles all types of properties, charging rents from $500 to $5,000 a month.

“I think we were one of the first (in Charleston), the niche service,” Manaker says.

Along with the partners, Charleston Home Rentals consists of maintenance and cleaning chiefs and leasing agents. The business is steady year-round —- “We do a good bit for Boeing, Bosch, Blackbaud (employees),” Josh Azar says —- but also spikes at certain times or places.

One blitz of activity was earlier this month. The College of Charleston “told 1,000 students they couldn’t get on-campus housing,” he says. That sent hundred of college kids, and more-so their parents, scrambling for places to lease downtown.

One place turned out to be 35 Society St., a three-story brick residence and smaller dwelling in back divided into 10 rental units from 900- to 2,000-square-feet. A number of the tenants are college students, he says.

Charleston Home Rentals started managing the property in January, Manaker says. Just this week, Rachel Cottingham and her two employees cleaned a unit to make it ready for a new tenant, while Wes Austin fixed a busted air conditioning unit.

Cottingham says she jumped into the cleaning trade after she lost her job at MUSC during a round of layoffs. She wanted a position with flexibility, not 9-5. “I’ve been at it seven years now,” she says.

Cottingham, who contracts with Charleston Home Rentals, and her crew are thorough. They scrub and dust everything from high-up ceiling fans to the tight spaces behind the washer and dryer.

She says there’s no pattern on messiness. “I’ve gone into really expensive homes and I’m in shock,” Cottingham says.

Austin, who runs Charleston Real Estate Repairs and contracts with the home rental company to head up maintenance duties, has had his share of late night emergency calls.

Take an incident a week ago at a local residence. “The unit above flooded out the unit below,” Austin says.

He was notified at 11 p.m. Saturday. “It wasn’t resolved until 2 a.m.,” Manaker says. The culprit? “It was a toilet spraying (nonstop).”

Especially of late, Manaker and company haven’t had much time where they are totally away from the job.

“I sleep with my cell phone,” he quipped.

• Leasing the future •

Like his colleagues, Manaker notes that lease rates on Charleston Home Rentals’ properties have risen 5 to 10 percent in the past year. He believes that many properties were undervalued before that.

Wetherington, meanwhile, forecasts that the rental business will continue to extend beyond apartments.

“I think for the foreseeable future (you’ll see) more and more rental homes,” he says. Banks are starting to loosen up stringent lending requirements and taking part in short sales, where the borrower gets a break on paying off their mortgage. That’s a good thing, he says. It should help clean out the distressed property backlog. But even if the deals close today, short sellers are forbidden from buying a new home for three years. Wetherington believes the ex-homeowners aren’t likely to choose to rent an apartment for a full 36 months.

“They’re looking for homes,” he says.

Filed Under: Blog, Charleston, South Carolina, Property Management Tagged With: , ,

Single-Family Rental Houses Draw Millions Impacted by Foreclosure Crisis

July 26, 2012 By

By Teke Wiggin

After splitting from her husband, Tami Wingfield couldn’t afford to keep up with the mortgage on the home that they had shared. The monthly $1,600 bill was too much for her to bear alone, and in 2008, she lost the house to foreclosure.

Like many people who lost their homes in the housing collapse, Wingfield decided the next logical step was to rent. But that didn’t mean she had to give up the lifestyle of a homeowner. Wingfield and her three children have managed to stay in a four-bedroom single-family house all to themselves – they just don’t own it.

They’re part of a new class of American renters that has emerged in the wake of the housing bust: people who lost the houses they owned and are now renting single-family homes. Ironically, many of these rental homes are a reflection of the troubles that once plagued the renters. They used to be owned by other families who lost them in the downturn. Now they’re owned and rented out by investors who purchased them at a discount.

At least 1.75 million renters in the U.S. have gone down the same path as Wingfield, according to data from analytics firm CoreLogic.

Wingfield rents her $1,000-a-month home in Goodyear, Ariz., from The Empire Group, a development and investment firm that bought it as a foreclosure. She has a backyard where she’s planted a garden, and she’s on a desirable suburban street lined with quaint homes just eight miles from the house that she owned with her husband.

It’s as if hardly anything has changed.

Feeling Part of the Community

“I am able to provide my daughters and myself a nice home,” Wingfield said. “I don’t have to find a parking spot when I come home, tired from working double shifts at the hospital. I pull my car into the garage and walk into my house.”

Being able to maintain a homeowner’s lifestyle, even as a renter, has also helped her continue to feel like a part of her community.

“You can establish a place in the neighborhood — get a school for your children,” Wingfield said. “The buses run in the neighborhood…. There’s parks and sidewalks to walk your dog.”

Empire, which owns about 1,000 homes in the Phoenix area, spends close to $7,000 a pop to restore each of the distressed properties that it purchases. Its average rental home is 2,100 square feet and goes for $1,050 a month, said Geoffrey Jacobs, a principal at the company.

Jacobs said Empire, which started off as a developer, “put on the investor hat” in 2009. “It was an opportunity for us to take advantage of something we never thought we’d see again,” he said.

Investors provide the capital that Empire needs to convert homes into rentals, and the company turns a profit by taking a cut of the monthly rents that it collects and distributes to investors.

Empire is just one of many firms that are snapping up bargain homes and leasing them to families like Wingfield’s. And with rental rates soaring nationwide, the business strategy is currently lucrative.

As of January, investors are raking in an average 8.6 percent return on their investments annually, according to CoreLogic. That’s a 3 percent increase from 2006. And there are 21 million units in the country’s single-family rental inventory, putting the size of the market at a whopping $3 trillion, CoreLogic said.

That might be a good thing, since millions more borrowers are headed toward foreclosure and may flood the rental market. If that happens, it could continue to push up rental prices and lure more investors into the market, experts have said.

‘Conscientious People’ Coming Out of a Crisis

Many of these single-family renters are like Jacobs’ tenants, whom, he said, are “fairly conscientious people that just went through a foreclosure crisis” and want to retain some semblance of homeownership.

People like Michael Williams, who lives in Memphis, Tenn. When he couldn’t find enough work, he was forced to sell his home in a short sale in 2011 for $110,000 — nearly $40,000 less than he owed on his mortgage. Now he lives in a single-family rental, which costs him $1,025 a month. He said that he feels “blessed” to still be able to reside in a home of his own close to his old neighborhood.

“I’m partial to a home,” he said. “I have my own privacy, and [I also] have grandkids.”

rental housing foreclosed familiesWilliams rents from Memphis Invest, an “REO-to-rental company” that purchases homes in Dallas, Memphis and Phoenix and flips them to “mom-and-pop” investors. REO is real estate parlance for bank-owned properties.

“They’re looking for stability and still have pride of ownership,” said Chris Clothier, a partner with Memphis Invest, of its tenants.

But will these homeowners-turned-renters ever return to homeownership? One possible way back in is through landlords selling their tenants the homes that they occupy. Williams said that his lease agreement stipulates that he could purchase the home he’s living in if his credit score improves and he saves enough for a down payment.

HomeVestors WFI in Stafford, Texas, which manages about 600 rental properties, said it also may offer tenants the opportunity to buy the homes that they occupy.

“We would either sell that home to them or help them how we can,” said Rickey Williams, president of HomeVestors.

In fact, renters of single-family homes may need to be in the position to buy again — and soon. With home prices on the rise, many investors may want to sell, said Jed Kolko, chief economist at listing service Trulia. So if the renters aren’t ready to buy — and recently foreclosed-on homeowners may not be — they’ll have to move.

Still, the boost in the single-family rental inventory has been a positive force, experts have said. They not only offer comfort to once-beleaguered families, but they help to stabilize the housing market by chipping away at the foreclosure inventory.

“It is a good thing for people who need homes to be in homes that need people,” Kolko said.

Filed Under: Blog, Leasing Tagged With: ,

Why Rental Activity Remains ‘A Bright Spot’ for Housing

June 26, 2012 By

By: Tory Barringer

While the lights of the housing market continue to flicker, rental market activity has been a bright spot, said Freddie Mac’s U.S. Economic and Housing Market Outlook for June.

The Enterprise’s report, released Tuesday, showed that newly formed households seem more interested in renting over owning as the economy struggles to get back on its feet. Freddie Mac expects this trend to continue for the near future.

“Further increases in rental demand are likely in the coming year as newly formed households postpone homeownership decisions until the economy strengthens and they have accumulated sufficient savings,” said Frank Nothaft, VP and chief economist for Freddie Mac. “Overall apartment market trends may show further vacancy declines and rent gains, with property values improving as well.”

The report showed that over the year ending March 2012, an additional 1.5 million households moved into rental housing, a 4 percent increase in a year. The Census Bureau has also reported that rental vacancy rates in buildings with at least five apartments have dropped more than two percentage points over the past two years. In addition, both Reis and Axiometrics have reported increases in occupancy rates during the two years through the first quarter of 2012.

Rents have begun to rise in a number of metropolitan areas as rental markets tighten. A broad market measure prepared by the Bureau of Labor Statistics shows a rent increase of 2.5 percent during Q1 2012 compared to a year ago. Reis found a 2.8 percent gain in its markets during the same period, while Axiometrics reported a 4 percent rise in nominal rents. However, average rent adjusted for inflation stayed below where it was for most of the decade prior to the Great Recession.

The increase in rental demand has helped enhance property values, on average up about 25 percent during the past two years from the low during Q1 2010. This level is still 14 percent below the pre-Great Recession peak, but the increase has prompted a supply response from developers.

Starts of buildings with at least five apartments have increased 48 percent in the first five months of 2012 when compared to the same period in 2011. The National Association of Home Builders reported that its Multifamily Production Index jumped to its highest reading since 2005, and its index for market-rate rental construction reached its highest level since the series’ start eight years ago. Construction of rental apartments in buildings containing at least five dwellings is expected to add nearly 200,000 in 2012, the highest increase in one year since 2008.

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Rental Market Still Tightening: Moody’s

June 19, 2012 By

By: Esther Cho

With vacancies declining and rental prices rising, the climate in the housing industry is clearly warming up to rental properties. According to Moody’s Analytics, “weak income gains, favorable demographics, and the foreclosure crises” are all causing people to choose renting over buying, and demand for rent will remain solid over the next two years.

Between 2000 and 2008, real per capita income grew at an annualized rate of 2 percent compared to 0.8 percent in 2010 and 2011, according to the report. In addition, many households simply don’t have enough for a down payment, and until households gain more in terms of finances or confidence in the economy, fears of homeownership won’t be put aside.

A survey released by Integra Realty Resources reported 31 percent of respondents said a lack of a down payment was the main reason holding them back from making a purchase, 24 percent said it was the fear of making a bad investment, and 21 percent said the uncertainty of the economy was the main reason.

Another reason the rental market is booming is because of the emergence of a younger age group heading households. The younger age group are the least likely to own a home and more likely to rent, according to Moody’s.

While the overall rental rate is 35 percent, the renter rate for those between the ages of 25-29 is nearly 65 percent, and for those under 24 years old, it is 77 percent, according to the Census Bureau.

And, growth for those between the ages of 20-29 is not likely to slow down, either. The report stated that this group has been growing at an average pace of 0.9 percent from 2007-2011 and grew only 0.3 percent between 1990 and 2006.

Another factor helping to strengthen demand for rent is the foreclosure crises. As many former homeowners who were foreclosed on search for a new residence, single-family rentals have become the next best thing to owning a home since a previous foreclosure makes it difficult to obtain a mortgage. Foreclosures stay on one’s credit for 7 years, and some lenders do not approve of a loan within that period.

While rent is strengthening, Moody’s stated new construction is being developed that will keep rent prices from escalating. According to the report, developments with five or more multifamily units have increased from an average of 67,000 at the end of 2009 to 221,000 in the three months ending in April.

On the other hand, Moody’s waved away concerns for the increasing pace of multifamily construction and said apartment construction has actually fallen short of its normal pace. All the while single family rentals are also tightening as shown through the declining single-family vacancy rates.

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Professional Property Managers Cut Vacancy Rates In Half

June 14, 2012 By

Survey reveals that professional property managers cut vacancy rates in half

By All Property Management

While increased ROI on rental properties is far from the only reason to hire a professional property manager, many property investors want to see clear economic benefits before taking the plunge and outsourcing this key responsibility. Based on All Property Management’s recent survey of 300 property managers from around the US, it’s clear that professional property managers pay for themselves based on vacancy reduction alone.

According to the US Census Bureau, the national average rental vacancy rate hovers around 9%, while our survey reveals that the average vacancy rate for professionally managed properties is about half that, coming in at 4.5%.*

To calculate what this reduction means for the average rental property owner’s bottom line, we took a look at what it would mean for the owner of a property valued at $150,000, with a monthly rent of $1,250, assuming a 10% monthly property management fee. We found that, when you take into account both lost rent and turnover costs, each 1% drop in vacancy rate saves the property owner about $1,900 over the course of a five-year period. Thus, a reduction of 4.5% equals a savings of about $9,500 over five years. Meanwhile, at 10% per month, professional property management would cost only $7,500 over the same period, resulting in a $2,000 profit, which represents a 30% ROI.

All Property Management’s survey also confirms that average turnover costs total about $2,000 – double that when there is an eviction, or similarly challenging tenant situation, involved. Pair this with other advantages of hiring professional property management, which include time savings, the ability to command higher rents, and improved maintenance at lower costs – just to name a few – we think payoff from using a professional property manager is clear. It’s the best investment for making a solid real estate investment.

*According to our survey, the median vacancy rate reported by our nationwide network of property managers was 4.5%. Reasons cited for this performance was a) local market knowledge b) screening for high-quality tenants c) superior customer care during tenancy d) swift action against delinquent tenants and e) longer lease periods.

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How to Get Financing for Rental Properties

May 5, 2012 By

By Leonard Baron

These days, many people hear in the news that it’s a good time to buy rental property, and so they’ve decided that they would like to get started in the property rental business, (a.k.a. being a landlord).

But, in order to get into the rental property investment business, how do you obtain mortgage financing to purchase your first rental property? It’s true that it has become a lot harder to get financing these days, but for people with decent credit and sufficient income there is still plenty of money available to borrow. For terminology purposes, when you borrow for a rental property, it is called non-owner occupant (NOO) financing. Let’s run through some financing issues, items and suggestions that may help you.

Buy as an owner-occupant

The best way to get into the landlord business is to buy a home that makes sense as a rental property, but you buy it as a personal residence, and live there for the required 12 months that an OO loan requires a borrower to do. As an owner-occupant, you get the best financing terms and you may be able to put down as little as 3.5 percent with FHA financing. The loan stays in place with the original terms when you move out and make it a rental. It’s the best way to go!

Other reasons this makes sense:

  • You move into the property and learn the property specifics, issues, kinks, etc. and have them fixed before you move out and make it a rental property.
  • You also do any renovations and upgrades you need while not making two housing payments like someone would do if they bought a property and were simply rehabbing it to rent it out.
  • Lastly, you are more selective and only buy properties that you are willing to live in, and that’s a smart way to go for investors; don’t buy properties that you wouldn’t live in.

Then, after 12, 24 or 36 months, buy your next owner-occupant property and rent out the original one. Then repeat, and repeat, and repeat again once every one to three years.

Buy as a straight rental property

Let’s say you just want to buy it as a straight rental property. First up, you need a 20-25 percent down payment for most lenders (Fannie Mae and/or Freddie Mac may have some 10 percent investor properties, so check those out, too). And that 20-25 percent, plus closing costs and renovation costs, might add up to 30-35 percent cash upfront to close escrow and get a property rental ready. So, for a $120,000 property, that could easily be $40,000 cash needed. That owner-occupied 3.5 percent FHA loan sounds pretty good right now, huh?

As noted above, you also need to have good credit and qualify for a bank’s financing for an investment property. One nice thing about rental properties is that the bank may include some estimated net rental income from the property to help your debt-to-income ratios, especially if you buy something with a tenant already in place. Discuss this with your lender.

Speaking of tenants already in place, there are some significant advantages therein, too! For example:

  • You get the security deposit from the seller at closing and some pro-rated rent
  • You probably collect the first month’s rent a month before your first mortgage payment is due
  • There is no vacancy, so you don’t need to find a tenant, and
  • You probably won’t have to rehab the property until they leave.

The negative could be a lower-than-market rental rate or a tenant who pays late, doesn’t pay, or doesn’t take care of the property. But he or she could be a great tenant, too! Once in escrow, do a little looking around the apartment and talk to the tenant to make a determination if you want to keep them or terminate their lease when it ends. Convey this to the listing agent so that agent can alert the tenants either way.

Rates, costs, fees on investment properties

The costs of doing any mortgage loan these days are much higher than they used to be just a few years ago. And non-owner-occupant (NOO) investment properties are even higher. Small dollar loans, like under $100,000, have very high fees as a percentage of the loan amount. Possibly up to 5 percent when you add in the loan origination points, fees, appraisal, underwriting, title insurance, escrow costs, etc. But the present rates are really very competitive and you can get NOO financing at 4.5 percent on a 30-year amortizing loan these days. And that is dirt cheap, locking in a 30-year low-interest-rate loan on a rental property.

Where can you find loans?

Right when you start you should meet with two to three lenders and see what NOO loan programs they have for what you plan to buy. Try a bank or two, plus a mortgage broker or correspondent lender, and an online lender. Different lenders have different programs, and a bank may reject you but a mortgage broker might have a program that works for your situation, so check around. Loan costs and rates will also vary, so get a couple of estimates and compare them to find the best deal.

How many properties can you buy? If you have the credit score (estimate your credit score), and the debt-to-income ratios (which change with each property you buy), you can pretty easily finance up to four properties. Once you go over four and up to 10, the number of lenders who can finance you gets much lower, but they are still out there. The underwriting criteria also may get much tougher, but still possible. Once you go over 10 loans, it’s really hard to find lenders who will finance, and the loan costs, interest rates, and terms will be less appealing, but still relatively reasonable. Lenders who do over 10 loans are called portfolio lenders.

In summary, this is a very good time to buy property, but you must educate yourself on rental property ownership, do your due diligence, and don’t think everything is going to be rosy and hassle-free, because real estate is hard work! Hopefully, the hard work you do and issues you have to handle over the years will just be distant memories when you retire with a nice rental property income stream.

(Note: Many thanks to Robin Hill who contributed her guidance for this article. Robin is a San Diego-based mortgage lender for First Cal. She specializes in residential purchases and refinances for owner-occupied and non-owner-occupied properties. She’s been in the mortgage business for the past 14 years).

Filed Under: Blog, Property Management, Tips and Advice Tagged With:

Boeing 787 Dreamliner to make tournament flyover

April 10, 2012 By

The 44th annual RBC Heritage Presented by Boeing is taking place April 9-15, 2012 over the Harbour Town Golf Links on Hilton Head Island and those attending the tournament on Friday will experience the thrill of a lifetime.

At 12 noon, Friday, April 13, a Boeing 787 Dreamliner will make a low-altitude flyover approaching from the South from tee to green over the 18th fairway, pending FAA final approval and clear weather. The flyover will occur during the second round of the PGA TOUR event.

“The RBC Heritage offers the perfect spot to showcase the 787 Dreamliner in South Carolina,” said Jack Jones, Boeing South Carolina Vice President and General Manager. “I’m always excited to offer an opportunity for people to view first-hand our company’s most technologically advanced airplane.”

“This is the same airplane model that South Carolinians are building at Boeing’s South Carolina facility.  We are so excited to be able to showcase the tremendous work that people in the Palmetto State are now accomplishing,” said Tournament Director Steve Wilmot. “We are equally as excited for our spectators and PGA TOUR golfers to be able to witness this amazing sight.”

Filed Under: Blog, Charleston, South Carolina Tagged With: ,
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