November 17, 2016

They Want To Get Their Money Back

A report from WLOS in North Carolina. “With Asheville’s lack of affordable housing preventing many from buying a home, renting becomes the next best option. But Asheville’s rental vacancy rate isn’t any better than its housing stock numbers. Both are close to zero. That’s allowed landlords to inflate rents even on older properties. 81-year-old retiree and widow Mildred Hooker looked around for a more affordable apartment when her complex upgraded her older, modest unit, and upped her $900 rent more than $300. She relayed the conversation she had with the apartment manager. ‘And I said, ‘Well that’s not right.’ She said, ‘Well, it is too. We have to get our money back,’ explained Hooker.”

From Senior Housing News. “As competition heats up within the senior housing industry, some companies are doing their best to cool down one common practice—discounting their prices. Discounting rents or offering similar financial incentives has become commonplace to persuade prospective residents into moving into a senior living community. ‘When we let price creep into the conversation, it takes away the value of everything else,’ explained William Nowell, founder of Peak Performance MS, a provider of mystery shopping, marketing improvement and sales performance improvement programs. ‘It dominates the conversation. When we focus on feelings, we’re hitting at the heart and soul of what someone wants. …We want to do our best to have price not come up or be a part of the sales conversation early. Customers that buy our product for the wrong reasons tend to be harder to satisfy and more dissatisfied as time goes on.’”

“Not only can discounting actually be a turn off to prospective residents by signaling the product isn’t worth its value, but the pricing differences can also have a significant impact on a provider’s bottom line.”

The Wall Street Journal on New York. “Sherri Shang found renters willing to pay $13,000 a month for a one-bedroom apartment in One57, a luxury skyscraper in Midtown Manhattan. The Douglas Elliman broker did it twice actually. The third time was anything but a charm. Since the latest tenants moved out months ago, she hasn’t been able to find a renter for the Beijing couple who own the 40th-floor condominium with a Central Park view—even at a steep discount. Now, she can’t find a renter willing to pay $10,000 a month.”

“Developers are offering as many as three months of free rent. Individual investors have trouble competing, even after cutting thousands of dollars from asking rents. ‘The market has changed completely,’ Ms. Shang said. ‘I never expected three years later that even with a Central Park View, that it would be so hard to rent out now.’”

“Ms. Shang’s customers bought their apartment at One57 three years ago with a long-term plan to have their children use it when they go to college. Until then, they want to rent it out. The purchase price was $3.95 million, property records show. ‘They are unhappy,’ Ms. Shang said. ‘They have to pay the monthly common charges, they have taxes and expenses. They want to get their money back as much as they can.’”

The Denver Post in Colorado. “If three months in a row qualifies as a trend, then metro Denver rent increases are softening again. The issue is that so many of the new apartments are coming in a very concentrated area and marketed as ‘luxury’ units. Metro Denver should add 7,000 apartments this year with another 10,000 slated to become available in 2017. Of those, 4,000 are coming in just one sub-market, downtown Denver, said Stephanie McClesky, vice president of research at Dallas-based Axiometrics.”

“Currently, metro Denver landlords are trying to fill 5,400 apartments, and all that supply is forcing landlords of the newest buildings to cut some deals.”

The Puget Sound Business Journal in Washington. “The law of supply and demand appears to have caught up with the Puget Sound region’s red-hot apartment market. Average monthly rents in the Seattle-Bellevue-Everett area decreased slightly in October to $1,756, according to Axiometrics. It was the fourth straight month that apartment rents declined when compared to the previous month. The downward movement comes as thousands of apartments have been built in recent years, with thousands more planned. Even in Tacoma, where rents have been rising fast, lease rates are starting to level off.”

“‘The rent declines show how competitive property managers can get when an abundance of new supply comes to market,’ Jay Denton, senior vice president of analytics for Axiometrics, said in a statement. He added that new properties in the Seattle region are offering concessions, such as free rent, at the highest rate since early 2015, and asking rent at these new properties has decreased by an average of about $180 in the past couple of months.”

From NBC Bay Area in California. “A bright orange ‘Notice of Violation’ was tacked to the front of Sondra Halperin’s Alamo Square condo building this past May. The tenant who rented her condo was illegally offering short-term rentals on Airbnb — and the city busted him. ‘It was very surprising to me,’ Halperin said. ‘And it was scary.’”

“Scary because the city was fining Halperin $484 a day until her tenant took down all rental listings from short-term rental sites and canceled all future bookings. Halperin said getting the tenant to cooperate was not easy. And in the end, her total fine was about $22,000. The homeowner was upset that she had to pay for her tenant breaking the law. ‘I was unemployed at the time,’ Halperin said. ‘I couldn’t even focus on a job search, I was too consumed with this.’”

“Vo Duong’s tenant illegally hosted paying HomeAway guests staying in his Forest Knolls home. When the city caught on, Vo says he told his tenant to move out, but he wouldn’t. The tenant had thousands of reasons to stay. ‘He was making more money staying here, knowing that the fine wasn’t going to affect him,’ Duong said.”

“Here’s the math: Vo says his tenant was paying him $7,000 a month, but was making $18,000 to $20,000 a month on short-term rentals. Duong later learned this was business as usual for his tenant. ‘This person’s notorious for doing this,’ Duong said. ‘He has multiple rental locations.’”

“City officials confirmed that Duong is not the only victim of this tenant. The city calls him a serial tenant — someone who rents one or more properties just to cash in on the short-term rental craze. All over the city, NBC Bay Area found properties that Duong’s tenant had leased, then illegally rented out short-term. We tried to track down this serial tenant, using his name and apparent alias, but we didn’t find him.”

“And even though the city knows what this serial tenant is up to, it still fined Duong $12,000 for the illegal activity at his house. Moving forward, officials plan to turn over serial tenants to the city attorney’s office. Kevin Guy runs the San Francisco office of short-term rentals. Guy said his office will give landlords a break on fines, if landlords can prove they’re actively trying to get the tenant to stop the illegal renting. Guy couldn’t comment on specific cases, but Duong’s fines were not reduced - he owes the city $12,000. Halperin, however, got lucky. She asked a supervisor to help her out, and he did. The city reduced her fine from $22,000 to $1,000.”