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Five Tips For A Successful Resident Referral Program

Digested from Entrepreneur

One secret to having a successful property management company in Albuquerque and Rio Rancho is to create a the big pool of quality residents to chose from when a home becomes vacant.  The best vote of confidence for our Property Management Lease-up Services comes straight from the mouth of our current residents.  I an surprised at how few companies and landlords incentivize referrals from their residents.  If you manage one property or a thousand units,

If you are considering starting a resident referral program—or already have one that isn’t as successful as you’d like—check out these five tips from Entrepreneur.

1. Make sure residents know about the program. Talk about your resident referral program in every communications channel you have—email, social media, website, leasing docs, staff interactions and text alerts. Ask new rental shoppers how they found out about your leasing services.  That will tell you which communications channels to focus on more.

2. Make it easy. Your referral program needs to be easy for residents to both make the referral and then get credit for it. If it’s a complicated or multistep process, they probably won’t bother. Test out your process on someone who will give you honest feedback.

3. Educate staff. Make sure staff understand how the referral program works so they can answer any questions about it. They can also help promote it in day-to-day conversations with residents.

4. Offer a good bonus. Residents need to feel properly incentivized to send their friends and family your way. Make sure what you are offering is what residents want—and will prompt them to act.  It is not the size of the bonus as much as the usefulness to the resident.

5. Make residents happy. The best promoted, most awesome referral program in the world won’t work if your apartment community isn’t meeting your residents’ needs. People don’t provide referrals to things they don’t like.

Albuquerque and Rio Rancho A Sellers Market

Statistics for Albuquerque and Rio Rancho Even Better Than Expected

“Albuquerque and Rio Rancho remain seller’s markets” said GAAR President Don Martindell, President of the Greater Albuquerque Association of Realtors (GAAR), in a recent statement. Martindell continues to say  “Our housing market is very fast-paced right now, “Homes that are priced right are selling fast in popular locations in Albuquerque and Rio Rancho, like the Northeast Heights, Paradise West and neighborhoods in the valley.”

According to April’s statistics from the Greater Albuquerque Association of Realtors, the metro area is experiencing a significant increase of homes under contract.  GAAR reports a 14-year high with 1,299 detached homes placed under contract in March, representing a 22.7 percent increase from the same time last year. Last month, 1,011 detached homes and 90 townhomes and condos were sold, an 8.4 percent increase from last year. Townhome and condo sales spiked in March, increasing by 48.1 percent.

Homes are also selling fast, with a 54-day average stay on the market, a 16.9 percent tick from last year. Townhomes and condos are selling in 43 days on average, 32.8 percent faster than last year. Detached homes in the greater ABQ Homes are also selling fast, with a 54-day average stay on the market, a 16.9 percent tick from last year. Townhomes and condos are selling in 43 days on average, 32.8 percent faster than last year. Detached homes in the greater ABQ market were fairly well priced in March and received, on average, 97.7 percent of the list price.

Highlights From the GAAR April sales report

  • the median detached home price rose 5.1 percent to $194,500
  • the average detached price increased 8.8 percent to $235,875
  • the number of new detached listings decreased by 3.0 percent to 1,631
  • overall inventory of detached homes for sale decreased 24.8 percent to 3,001
  • the number of closed sales for detached homes increased 0.8 percent to 981

Albuquerque and Rio Rancho Rental Investments

A plan for finding the best Albuquerque and Rio Rancho Single-family investment property

The following are a few things to consider when planning on investing in a rental home in the Albuquerque Metro Area.   People have been building wealth by investing in real estate since the beginning of civilization. In Albuquerque and Rio Rancho metro areas approximately ten percent of the single-family homes are an investment property.  Just as every market is different every single-family home is different.  This discussion is intended for the investor who wants to hold their property as a rental for at least five to seven years and not for someone who is looking to “flip” a property for a quick profit. The following are some of the things I have learned over many years of investing for myself and managing thousands of single-family rental properties for Single-Family Home Investors.   These are simply my suggestions.  Be sure to check with your financial and real estate professionals when developing your own plans and benchmarks.

Strategies for finding the right long-term single-family home investment

1. Create a plan. Include in your plan, both the local and the micro local market in which you want your investment. (All real estate is local but market rents are micro local.).

2. Be sure to factor in the vacancy time as well as the cost of getting the property in condition. Inspections are crucial to include in your plan. From the inspection you will be able to assess better the condition of the property.

3. Deferred maintenance is a double-edge sword. Limit your fix up items to carpet, paint, yard work and minor carpentry, or as I call it lipstick and eye makeup. Larger projects often cost twice as much as estimated and take longer than expected.  The loss of monthly income generation plus the remodel cost can be hard to make up in rent increases.

4. If you pay cash, remember to factor in the cost of insurance and property taxes when figuring out the net present value of the initial investment and revenue streams.  Consider using a self-directed ROTH IRA.

5.  Be conservative with  vacancy cost and maintenance cost in your calculations.  For my own calculations I use a three year block of time.  I estimate an average of 18 months leased with four weeks of vacancy and  approximately two and a half months rent as routine maintenance cost.  This does not count any capital improvements.  If you anticipate having to make a capital outlay within five years factor that cost as well.

6.  The investment return % can be calculated using many of the revenue stream present value calculators available on the internet.  I escalate my rent by 2% each year and use a 2% inflation factor from the initial purchase for sales price at the end.  I wantshoot for a 6+% net present value over seven years as my minimum benchmark.

7. There is always a risk that something unexpected can go wrong with the rental process.  People, money and many Federal, State and local regulations are involved.  You can minimize that risk when you hire a local professional property manager with great experience and enough staff.  Murphy’s law of rentals says: if you do not have an expert on your team you will need one.  My corollary to this is: if your property manager does not have enough qualified staff the person you need will be sick or out of town when you really need them.   If you want to do your own maintenance at lease hire a professional for the lease up.  It you have a quick temper, do not do your own maintenance.

 

Albuquerque Rentals And Lead Paint

Nice Homes In Lovely Neighborhoods Can Have Lead Paint

Many popular rental neighborhoods in Albuquerque have homes that can cause lead paint concerns.  Most Albuquerque pre-1977 rental homes are located in the established neighborhoods that mushroomed around the city center in the 1950’s and 1960.  These lovely older neighborhoods especially appeal to young couples who rent as a first step from apartment living and people with young children who want a large yard for the play area.   Although, the use of lead pigmented paint was banned in the US in 1977 due to rising concern over its toxicity, the possibility of lead paint toxicity still remain as long as some of the original home is standing.

Children Chewing on Window Sills Is Not The Issue

The average pre-1977 rental home in these tree shaded established neighborhoods of Albuquerque are usually in excellent repair and have been repainted outside and inside many, many times.  Many people do not realize that simply sanding or cutting into a wall painted with a lead based product can create substantial risk.  If you have owned a pre-1977 rental home for a while or have recently purchased one as an investment you may be considering doing some remodeling such as in the kitchen and bathrooms.  Remember that toxic lead paint may be lurking behind old cabinets, moldings, etc.

Lead-based paint will continue to be a concern in pre-1978 properties for many years to come, requiring diligent attention by all who work in any capacity with renovation or repair. The landlord needs to be aware of potential toxicity of the presence of Lead paint and the regulations that need to be followed.  Studies have proven that protection from the potential hazards of ingesting lead from the paint extends far beyond not chewing on window sills and that adults are at greater risk than originally believed.  The EPA web site contains vital information with which every consumer, contractor and landlord should be familiar. The following link takes you to the EPA Repair, Renovation and Painting Program page. A little time spent in educating yourself can save a lot of grief! http://www2.epa.gov/lead/renovation-repair-and-painting-program

A Little History

In January of 2011 the Environmental Protection Agency established a series of regulations regarding procedures to be followed when areas containing lead-based paint are disturbed in any way. Failure to follow these procedures creates substantial risks to health and can result in very heavy fines

The use of lead based paint came about in part as a result of public health concerns. In the late 1800’s and early 20th century, millions of people worldwide died from infectious diseases. Although the concept of bacterial and viral infections was ill understood, the medical community encouraged people to regularly wash the walls of their homes. Most walls of the day were covered with paper, a fact which made regular washing both difficult and ineffective. Enter the era of paint. People of the time most often relied on professionals to paint their houses and the products of choice by tradesmen contained lead pigments, prized for its shine and durability. The Federal Government even specified the use of lead pigmented, “lead-based”, paint in government buildings.  The detrimental effect of lead on health has long been documented. Studies in the late 1800’s showed the ingestion of lead to be the cause of a wide variety of health problems, particularly in young children. As early as 1904 a link was made between lead-based paint and health problems among children. The wisdom of the day was that even though adults are also adversely affected by lead, they were not at as much at risk since children were more likely to ingest lead. The slightly sweet taste of lead (the ancient Romans added small amounts to their wine) often tempted young children to eat paint chips or “chew on the window sills.”

 

Residential Rentals and Sales Effected by Unemployment Rate

New Mexico unemployment rate highest in the nation for second month in a row

Residential rental  and sales markets in the metro area may be affected if the regional  unemployment rate remains this high.   The unemployment rate is an economic indicator about the strength of the job market and the status of household finances. Rising unemployment can lead to reduced levels of consumer spending and higher instances of delinquency, default, and bankruptcy. Low unemployment indicates a tight labor market, where employers have a tougher time finding people to fill jobs and often must pay more to attract them.

Bernillo County’s rate is better than the state overall

The U.S. Department of Labor released a new report Monday showing New Mexico with a 6.7 percent unemployment rate for January, surpassing Alaska and Alabama. This is the second month in a row that New Mexico has posted the highest unemployment rate in the country.  New Mexico’s unemployment rate remained unchanged from December. Alaska’s unemployment rate dropped to 6.5 percent, making New Mexico’s unemployment rate the highest.   The New Mexico private-sector job market has been struggling for several years. New Mexico’s unemployment rate in January 2016 was 6.5 percent. New Hampshire had the lowest January 2016 unemployment rate at 2.7 percent, followed by Hawaii at 2.8 percent.  The current unemployment rate for Bernillo County is 5.9% according to the area specific unemployment profile published by the  New Mexico workforce Connection.  This is better than the state and  below the national average.

Residential Rentals in Albuquerque and Rio Rancho remain stable

Residential Rentals in Albuquerque and Rio Rancho are still strong.  This is driven by a lack of new apartment communities coming on line in the past couple of years.  Currently, there are several apartment communities under construction.  So far, residential sales have remained steady from last year.   Albuquerque and Rio Rancho have not been hit as hard as the rest of the state.  We are hopeful, the area  unemployment rate will start to come down as we see increased construction in the better weather.

This is the first time New Mexico has had the highest rate

According to the Albuquerque Journal, this is the first time that New Mexico has had the nation’s highest unemployment rate, however, stubbornly high unemployment has dogged the state since 2006,  Albuquerque private sector jobs have declined by almost 15,000 between September 2006 when there were 318,200 private-sector jobs and September 2016 when there were only 3o3,300 private sector jobs.

The national unemployment rate is 4.8 percent. Employers added 238,000 jobs, higher than what was expected.Employers boosted hiring in 13 U.S. states in January, while employment changed little in 36 states. , New Mexico’s unemployment insurance trust fund balance was $378 million as of October.

Single-Family Rentals 2017 Tax Strategies

Real estate investors in single-family rentals should update their tax strategies annually.  Most investors in single-family rentals include their rental income (loss) on their personal tax return (IRS 1040). The IRS recently released its personal income tax changes for 2017. Changes to personal income tax rules are important to investors in single-family rentals as they need to look at the whole individual tax return  as they develop their single-family rental tax plan for 2017.  I timed this article for the first part of March, as many single-family real estate investors put off assessing their tax strategy for the current year until they are preparing their taxes for the year just passed   Remember these changes will not affect your 2016 taxes, which are usually filed in the next 30 days.

 These changes pertain to your  2017 taxes which most of you will file in the first three months of 2018.  I have chosen only a few of the updates for 2017 that I believe may be most helpful for single-family real estate investors. Be sure to check with your tax adviser if these or any other changes effective in 2017 need to be considered in conjunction with your tax strategy for your  single-family real estate investment portfolio.  There are other changes to personal income tax as well you may need to know. For a more detailed  look at these changes and other changes check out this tax change portion of the  IRS website.

The standard deduction for married filing jointly rises to $12,700

For tax year 2017, the standard deduction is up $100 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $6,350 in 2017, up from $6,300 in 2016, and for heads of households, the standard deduction will be $9,350 for tax year 2017, up from $9,300 for tax year 2016.Tax brackets adjusted for inflation.

The individual income tax brackets have been adjusted for inflation

The good news is that inflation has been nominal, meaning there wasn’t a large shift upwards in the tax schedule. For tax year 2017, the 39.6 percent tax rate affects single taxpayers whose income exceeds $418,400 ($470,700 for married taxpayers filing jointly), up from $415,050 and $466,950, respectively.

Limit on itemized deduction rises

The limitation for itemized deductions to be claimed on tax year 2017 returns of individuals begins with incomes of $287,650 or more ($313,800 for married couples filing jointly).

Exclusion for Estate Taxes rises

Estates of decedents who die during 2017 have a basic exclusion amount of $5,490,000, up from a total of $5,450,000 for estates of decedents who died in 2016.

Changes to the AMT

The Alternative Minimum Tax exemption amount for tax year 2017 is $54,300 and begins to phase out at $120,700 ($84,500, for married couples filing jointly for whom the exemption begins to phase out at $160,900). The 2016 exemption amount was $53,900 ($83,800 for married couples filing jointly).  For tax year 2017, the 28 percent tax rate applies to taxpayers with taxable incomes above $187,800 ($93,900 for married individuals filing separately).

Tradition and Roth IRA phase-out adjusted higher

Among the various retirement tools at your disposal, the traditional IRA is among the most popular. Traditional IRAs are tax-deferred accounts, meaning you’ll pay tax once you begin making withdrawals during retirement. But, they can also provide an ancillary benefit of lowering your current-year tax liability. In 2017, the phase-out range for taking this deduction increases $1,000 to $62,000 to $72,000 for single taxpayers, and $99,000 to $119,000 for married couples filing jointly.For those of you investing with a Roth IRA — a retirement account with no upfront tax deduction, but which has the ability to grow tax-free for life — the individual phase-out to be able to contribute rose $1,000 for single filers to a range of $118,000 to $133,000, while it jumped $2,000 for married couples filing jointly to a range of $186,000 to $196,000. In other words, a few extra people should be able to contribute to a traditional or Roth IRA in 2017 because of these modest increases.

 

 

 

Know Your Renter Demographics

Renter Demographics

Millennial and Gen-Xer Renter Demographics

Before you purchase or renovate an investment rental home in the Albuquerque and Rio Rancho markets keep the renter demographics mind. Most single family home rentals are to millennials and Gen-Xers. The 24-34 year old group has a different outlook toward rental homes than the past two generation. Well-documented, this group, comprising the oldest millennials and very youngest Gen-Xers, are starting families later and still must repay college loans and face stricter mortgage-underwriting guidelines. They view the benefits of homeownership differently and are much more mobile. They also remember the effects of the great recession and housing bubble on their parents and older siblings. This has tarnished the “Home of Your Own Dream” of the past and they are very cautious of long term housing commitments.

This age group is confident, connected, tech-savvy, multitasking and high achievers. They were also more tightly scheduled as children than prior generations – think youth sports, music lessons, full-day kindergarten, etc. – and want some sort of fun activity during their off-work hours. Millennials are not interested in taking on home improvement projects or spending off-work hours on yard and home maintenance. They spend much less time inside their homes and more of their leisure time going to and participating in organized activities around town than other generations. They want a rental home that is maintenance free, has modern appointments, with most rooms light and bright, and they want it move-in ready. This group is not interested in paying less rent for a home that may need repairs or looks dated.

Live Work Play

Studies have shown, most millennials prefer the instant gratification of a new looking home. They also do not want to spend a long time commuting. That is why millennials in large urban areas prefer a “work-live-play” environment that promotes the Class A, urban-core apartment properties that have been growing along skylines across America, according to Axiometrics’ apartment market research. Smaller cities, such as Albuquerque and Rio Rancho, that do not have long commutes to the urban scene and recreational activities, continue to attract this group of renters to single-family home rentals. Often the main motivation for choosing a rental home over a luxury apartment is owning a pet dog. There are many newer rental homes in the Albuquerque and Rio Rancho markets within 30 minutes of the city centers. These types of homes rent at premium prices with less vacancy.

Millennials are not buying their own homes at historical rates and this trend is expected to continue for the next few years. The homeownership rate for the ages 25-34 age cohort was 40.4% in 2014, compared to the 20-year low overall rate of 64.5%. As more millennials graduate from college and join the workforce, the cohort’s homeownership rate is forecast to fall below 40% through 2017, then rise to 41.7% in 2020 – still more than 300 basis points below the long-term average.

Do not miss out on any homeowner 2015 tax deductions

January 21, Washington Post
The 2016 tax year officially opened Jan. 19 when the Internal Revenue Service started accepting 2015 tax returns.Despite rumors that several valuable homeowner deductionsns might be eliminated or modified, taxpayers are in luck this year. In mid-December, Congress passed the Protecting Americans from Tax Hikes Act of 2015. Many exemptions that would have expired were extended for a year or more, and others were made permanent.Spared were the exemption for private mortgage insurance to protect the mortgage holder; the tax credit for energy-efficient home improvements; and the exclusion for mortgage-debt forgiveness for owners of a foreclosed or short-sale home.The elimination of those allowances would have been a significant financial setback to many homeowners. According to a recent National Association of Realtors survey — Profile of Home Buyers and Sellers (November 2015) — 80 percent of home buyers view home ownership as a good investment, and 43 percent believe that buying a house is a better investment than putting money in the stock market.  Read more

Albuquerque’s Apartment rental rates are expected to climb 2.1 percent in 2016.

Albuquerque’s rent prices and apartment occupancy rates are expected to increase in 2016, according to a forecast by Berkadia.  Berkadia, a joint venture of Berkshire Hathaway and Leucadia National Corp., recently released its 2016 Apartment Forecast, which looked at Albuquerque’s metro area.  Berkadia predicts Albuquerque’s apartment rents will climb 2.1 percent in 2016, causing rent prices to increase from about $826 in 2015 to $843 per month by December.  The firm also predicts vacancy rates will continue to go down, and with more people renting, rental concessions such as move-in promotions will fall.

Read full article in Albuquerque Business First

What’s in your wallet.

man's walletNew Mexico Lawmakers are forced to face the Driver’s Licence REAL ID issue.  Finally!

Published: Journal staff and wire reports Wednesday, January 20th, 2016

SANTA FE — The U.S. Department of Defense says it will no longer accept New Mexico driver’s licenses at its installations nationwide.

Defense Department officials announced Wednesday that driver’s licenses from New Mexico — along with those from Minnesota, Illinois, Missouri and Washington state — can’t be used as proof of identity to enter its bases.

The move comes after the U.S. Department of Homeland Security declined to give New Mexico an extension on complying with tougher rules under the federal REAL ID Act. Those rules require proof of legal U.S. residency in order for state driver’s licenses and IDs to be valid for some federal purposes.

Some U.S. Air Force bases previously had said New Mexico licenses still would be accepted, but this new announcement makes it clear all U.S. military bases must stop accepting that form of identification.

Sandia Labs, a Department of Energy installation, as well as DOD sites White Sands Missile Range and Fort Bliss also said this month it would stop accepting New Mexico IDs.

New Mexico lawmakers are set to begin debate Thursday on a REAL ID fix.