By Ilaina Jonas

NEW YORK | Wed Jul 27, 2011 7:44pm EDT

(Reuters) – Two of the largest U.S. apartment owners posted higher funds from operations fueled by higher rents, as the sector continues to be one of the brightest spots in commercial real estate.

Real estate investment trusts Equity Residential, whose chairman is real estate mogul Sam Zell, and AvalonBay Communities Inc posted higher year-over-year revenue and profit as stronger demand allowed them to raise rents.

Many Americans have soured on home ownership because tighter lending standards have made owning a home more difficult.

That reduced the U.S. apartment vacancy rate to 5.9 percent in the second quarter, a level unseen since 2006, according to real estate research firm Reis Inc. It also has made the market for apartment buildings just about the hottest in commercial real estate.

“Obviously, the operating environment on apartments continues to be positive,” said Luis Sanchez, vice president of Adelante Capital Management, which has $2.5 billion of real estate assets under management. “They’re both maintaining high occupancies, both getting strong year-over-year and sequential revenue growth.”

For properties Equity Residential has operated for a year or more, average monthly rent rose 4.5 percent to $1,490. Occupancy rose to 95.5 percent from 95.1 percent a year earlier. Revenue was up 4.9 percent.

Its second-quarter funds from operations rose 6.6 percent to $186.7 million, or 60 cents per share, excluding non-recurring items. That met analysts’ average forecast, according to Thomson Reuters I/B/E/S.

FFO, a REIT performance measure, removes the profit-reducing effect that depreciation has on earnings.

The Chicago-based company raised the amount of non-core properties it plans to sell this year by $250 million to $1.5 billion because of the high prices they are commanding.

But the market also is making it more difficult to deploy that capital, and Equity Residential now expects to acquire only $1 billion of property this year, down from $1.15 billion.

That prompted the company to trim the top end of its full-year FFO forecast to a range of $2.40 to $2.45 per share from $2.40 per share to $2.50 per share. Analysts expect $2.46 per share.

Virginia-based AvalonBay reported second-quarter FFO of $100 million, or $1.13 per share, up from $87.8 million, or $1.04 per share, in the year-earlier quarter.

Analysts, on average, expected $1.12 per share, according to Thomson Reuters I/B/E/S.

For properties owned at least a year, revenue rose 4.5 percent, while expenses fell 2.5 percent. Occupancy slipped by 0.3 percent, but average rental rates rose by 4.8 percent.

AvalonBay raised the lower end of its outlook for full-year FFO, giving a $4.60 to $4.75 per share range. It previously said it would meet or exceed a forecast of 2011 FFO of $4.50 per share to $4.75 per share.

Analysts expect $4.78 per share for the year.

The companies issued their quarterly reports after the close of the market. The benchmark MSCI U.S. REIT Index fell 2.9 percent on Wednesday.

In after-hours trade, Equity Residential shares were unchanged at $62.49, after falling 1.6 percent on the New York Stock Exchange. AvalonBay shares were at $135.90, up from their close of $134.36 on the Big Board where they had fallen 2.4 percent.

(Editing by Steve Orlofsky)

Popularity: 17% [?]

By ANNA MARIA ANDRIOTIS

Five years into the real-estate bust, the market for single-family homes seems weaker than ever. According to the most recent S&P/Case-Shiller housing data, prices fell 3.3% nationwide in February from a year earlier.

The ongoing malaise, paradoxically, is only boosting the opportunities for investors in multiunit rental properties.

The days of buying and flipping a property for quick profit are long gone. But investors who purchase apartment buildings, perhaps as part of a retirement portfolio or estate plan, are seeing better deals now than at any time in the past decade, says Dan Fasulo, managing director at Real Capital Analytics, a real-estate research-and-consulting firm. On the cost side, housing prices are low and falling in many areas, while mortgage rates are near historic lows. On the income side, apartment rents are near all-time highs.

“As an asset class, it looks awfully attractive,” Mr. Fasulo says.
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Nationwide, rents now average $991, compared with $930 in 2006, and are expected to rise to about $1,025 by 2012, according to Reis Inc., which tracks rental-performance data. In part, that is because there are fewer units: The national vacancy rate for apartments dropped to 6.2% during the first quarter of 2011, from 8% a year ago.

Rental demand should remain strong for several years, experts say. The housing-market crash and shaky job market have made more would-be homeowners gun-shy about buying, says Paula Poskon, a senior research analyst at R.W. Baird, a wealth-management company.

Demographic trends also are favorable. Roughly 3 million young adults had been living with family during the past five years, according to data from the Census and real-estate investment brokerage firm Marcus & Millichap, and housing experts estimate that they now generate about one-third of rental demand.

Still other renters have no alternative. Some 2.8 million homes were foreclosed on since 2008, with another 5 million expected to enter foreclosure or be repossessed by the banks by the end of 2012, according to RealtyTrac.com. Many of those former homeowners will have to rent until their credit score recovers, which typically takes seven years.

Such factors have sparked a bull market: Sales of multifamily units priced at $500,000 or above surged by 28% in the first quarter of 2011 from a year earlier, according to Marcus & Millichap. The dollar volume surged 44% to $11.2 billion.

The key for investors, of course, is to find a property that generates enough rent to cover the operating costs. Annual expenses, including property taxes, insurance, water, heat, maintenance and occasional repairs, shouldn’t eat up more than 40% of a property‘s annual rental income, says Jim Scofield, senior investment adviser at Apartment REP, a multifamily brokerage and advisory firm in Raleigh, N.C.

Factoring in maintenance costs and other variables, an investment property should produce at least a 6% return on the initial cash investment in the first year after it is purchased, Mr. Scofield says. For example, an investor who puts down $250,000 in cash on a $750,000 property would need to clear at least $15,000 in the first year.

There are, to be sure, drawbacks to this kind of investing, from repairs to delinquent tenants. Laws vary by state, but typically tenants could end up staying for up to four months without paying rent before the eviction process is completed, says Hessam Nadji, managing director of research and advisory services at Marcus & Millichap.

Investors who don’t want to fix a broken toilet on a Saturday night can pay a property-management company to handle everything from leasing apartments to making repairs. Fees, which generally run about 5% to 6% of total annual rents, often decrease as the number of units increases, says Tony Drost, president of the National Association of Residential Property Managers.

The big payoff from property investing comes when the mortgage is paid off. For a conservative investor, assuming a 15-year mortgage, the influx of extra income could arrive just in time to subsidize retirement, rising health-care costs or children’s college tuition.

That has been William King’s strategy for some time now. The 43-year-old owner of an audiovisual production company in Morrisville, N.C., has used real-estate investments to save for college tuition for his two children, ages 9 and 13, accumulating more than 20 properties.
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In March, Mr. King dipped into his savings to buy a $550,000 multi-unit dwelling nearby, this time with an eye on retirement. The property generates about $50,000 a year after expenses and financing, and Mr. King plans to own it outright before he is 60. At that point, he says, it will probably yield about $80,000 at today’s rate.

For investors who want exposure to income-producing properties without getting their hands dirty, there are alternatives. Real-estate investment trusts, or REITs, pass along at least 90% of their taxable income, typically rent from tenants, to shareholders in the form of dividends. They perform better when the rental market picks upin 2010, the average REIT returned 27.5%and during inflationary periods, since rents tend to increases with inflation.

Investors also can pool their moneythe minimum investment required is typically $250,000into private-equity groups that in turn buy large properties, many of which are distressed, and hold them for five to 10 years with the aim of selling at a profit, says Jack McCabe, a housing analyst in Deerfield Beach, Fla., and consultant to private-equity groups.

But these options don’t offer leverage. An investor can buy a property outright with a mortgage and a down payment of around 25% to 30% in cash. Any capital appreciation magnifies the returns on that investment.

“You can’t beat the real-estate angle right now,” Mr. King says. “I’m more excited about it than I’ve ever been.”

Write to Anna Maria Andriotis at editors@smsmallbiz.com

Popularity: 21% [?]

(CNNMoney) — Renters beware: Double-digit rent hikes may be coming soon.

Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years.

“The demand for rental housing has already started to increase,” said Peggy Alford, president of Rent.com. “Young people are starting to get rid of their roommates and move out of their parent’s basements.”

By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode.

Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years — to a national average that will top $800 per month.

In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years, according to Lesley Deutch of John Burns Real Estate Consulting. In San Diego, she anticipates rents will rise more than 31% by 2015. In Seattle rents will climb 29% over that period; and in Boston, they may jump between 25% and 30%.

This is a sharp change from the recession, when many Americans couldn’t afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Deutch. Many others doubled up together.

As a result, landlords had to reduce prices and offer big incentives to snag renters.
We paid cash for our million-dollar home

Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, the foreclosure crisis continues unabated, and the millions losing their homes are looking for new places to live.

Apartment developers many not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends.

“There will be an envelope of two or three years,” said Macke, “when the rise in demand for rentals will exceed the industry’s ability to meet it.”

Plus, Alford added, “there’s been a shift in the American Dream. We’re learning from our surveys that a huge proportion of people are choosing to rent.”

They’ve experienced the downsides of homeownership — or seen friends and family suffer — and don’t want to take the risks or pay the higher costs of homeownership.

Where homeownership costs are particularly high, there are many more renters than owners. In Manhattan, for example, only about 20% own their homes; in San Francisco, about of third of the population does; in Los Angeles, less than 40%; and in Chicago, about 44%.

There’s one factor that could rein in rent increases: the huge number of foreclosed homes that could hit the market over the next few years.

In many markets, like Phoenix and Las Vegas, there are neighborhoods filled with recently built, single-family homes going for fire-sale prices. When the cost of owning homes falls well below the costs of renting them, more people will buy.

“That’s always been the biggest competition for rentals,” said Deutc

Popularity: 18% [?]

Learn about the many tax deductions available to rental property owners. Every year, millions of landlords pay more taxes on their rental income than they have to. Why? Because they fail to take advantage of all the tax deductions available for owners of rental property. Rental real estate provides more tax benefits than almost any other investment.

Often, these benefits make the difference between losing money and earning a profit on a rental property. Here are the top ten tax deductions for owners of small residential rental property.

1. Interest
Interest is often a landlord’s single biggest deductible expense. Common examples of interest that landlords can deduct include mortgage interest payments on loans used to acquire or improve rental property and interest on credit cards for goods or services used in a rental activity.

2. Depreciation
The actual cost of a house, apartment building, or other rental property is not fully deductible in the year in which you pay for it. Instead, landlords get back the cost of real estate through depreciation. This involves deducting a portion of the cost of the property over several years.

3. Repairs
The cost of repairs to rental property (provided the repairs are ordinary, necessary, and reasonable in amount) are fully deductible in the year in which they are incurred. Good examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows.

4. Local Travel
Landlords are entitled to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to deal with a tenant complaint or go to the hardware store to purchase a part for a repair, you can deduct your travel expenses. If you drive a car, SUV, van, pickup, or panel truck for your rental activity (as most landlords do), you have two options for deducting your vehicle expenses. You can:
* deduct your actual expenses (gasoline, upkeep, repairs), or
* use the standard mileage rate (51 cents per mile for 2011; up from 50 cents per mile in 2010). To qualify for the standard mileage rate, you must use the standard mileage method the first year you use a car for your business activity. Moreover, you can’t use the standard mileage rate if you have claimed accelerated depreciation deductions in prior years, or have taken a Section 179 deduction for the vehicle.

5. Long Distance Travel
If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other expenses. If you plan your trip carefully, you can even mix landlord business with pleasure and still take a deduction.

However, IRS auditors closely scrutinize deductions for overnight travel — and many taxpayers get caught claiming these deductions without proper records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you need to properly document your long distance travel expenses.

6. Home Office
Provided they meet certain minimal requirements, landlords may deduct their home office expenses from their taxable income. This deduction applies not only to space devoted to office work, but also to a workshop or any other home workspace you use for your rental business. This is true whether you own your home or apartment or are a renter.

For the ins and outs on taking the home office deduction, see Home Business Tax Deductions or Every Landlord’s Tax Deduction Guide, both by Stephen Fishman (Nolo).

7. Employees and Independent Contractors
Whenever you hire anyone to perform services for your rental activity, you can deduct their wages as a rental business expense. This is so whether the worker is an employee (for example, a resident manager) or an independent contractor (for example, a repair person).

8. Casualty and Theft Losses
If your rental property is damaged or destroyed from a sudden event like a fire or flood, you may be able to obtain a tax deduction for all or part of your loss. These types of losses are called casualty losses. You usually won’t be able to deduct the entire cost of property damaged or destroyed by a casualty. How much you may deduct depends on how much of your property was destroyed and whether the loss was covered by insurance.

9. Insurance
You can deduct the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as landlord liability insurance. And if you have employees, you can deduct the cost of their health and workers’ compensation insurance.

10. Legal and Professional Services
Finally, you can deduct fees that you pay to attorneys, accountants, property management companies, real estate investment advisors, and other professionals. You can deduct these fees as operating expenses as long as the fees are paid for work related to your rental activity.

Did You Know?
* Landlords can greatly increase the depreciation deductions they receive the first few years they own rental property by using segmented depreciation.
* Careful planning can permit you to deduct, in a single year, the cost of improvements to rental property that you would otherwise have to deduct over 27.5 years.
* You can rent out a vacation home tax-free, in some cases.
* Most small landlords can deduct up to $25,000 in rental property losses each year.
* A special tax rule permits some landlords to deduct 100% of their rental property losses every year, no matter how much.
* People who rent property to their family or friends can lose virtually all of their tax deductions.

If you didn’t know one or more of these facts, you could be paying far more tax than you need to. For more information, see Every Landlord’s Tax Deduction Guide, by Stephen Fishman (Nolo).

Popularity: 23% [?]

President Obama signed a sweeping health reform bill The Patient Protection and Affordable Care Act on March 23rd. According to the Congressional Budget Office, it is expected to reduce the federal deficit by $124 billion.

Meanwhile its long term impact on landlords, property managers, property management companies and real estate professionals is not clear. If you fall into one of the above categories, you have to consider whether you are an independent contractor, employee or employer as it has different impact on you.

How Health Care Reform rolls out and what happens to who and when:
In 2010

1. Insurance Companies
1. Insurance companies have to remove life-time caps on illness costs, cannot drop you if you fall ill and cannot deny coverage to kids with pre-existing conditions
2. Independent Contractor Property Managers, Real Estate Professionals and Employees
1. Children up to the age of 26 can stay on their parents plan.
2. Medicare D participants receive $250 credit
3. Retirees between age 55-64 are offered re-insurance program
3. Employers Property Management Companies
1. If you own a property management company that offers health insurance, you get a 35% tax credit from premium paid
2. Small employers can get tax credit up to 50% of premium paid

In 2011

1. Insurance Companies
1. Insurers cannot raise premiums without providing justification or will be taken out of state insurance exchange pool
2. Independent Contractor Property Managers, Real Estate Professionals and Employees
1. Medicare D participants receive 50% off brand name drugs while in doughnut hole
2. Employees contributions to Flexible Spending Plans are capped at $2,500 limiting the amount that can be used to purchase health care with pre-tax dollars.
3. Penalty for non-qualified withdrawals from Health Savings Account (HSA) increases from 10 to 20 percent and 15 to 20 per cent for Archer Medical Savings Accounts (Archer MSAs)

In 2013

1. Independent Contractor Property Managers, Real Estate Professionals and Employees
1. If you are single filer and earn at least $200,000 per year or a joint filer earning at least $250,000 you will pay additional Medicare tax of nine-tenths of one percent called Hospital Insurance tax on income above these amounts.
2. Itemized deductions for unreimbursed medical expenses rises from 7.5 to 10 per cent. It has an impact on individuals who itemize deductions.
2. Employers Property Management Companies
1. New Medicare tax is to be withheld by property management companies

In 2014

1. Independent Contractor Property Managers, Real Estate Professionals and Employees
1. All individuals are required to carry health insurance or pay an IRS penalty of $750 per individual or 2% of income whichever is greater
2. Subsidies for payment of insurance cost are offered and family of four earning up to $88,000 (four times the federal poverty level) will get a subsidy.
2. Employers Property Management Companies
1. Employers or property management companies with 50 or more employees are required to provide health insurance or pay a penalty of $2000 per employee per year. State exchanges enable employers like property management companies to purchase insurance at rates similar to employees of big companies.

In 2018

1. Insurance Companies
1. All insurance plans offer preventative care with no co-pays and no deductible

This blog post for Real Estate Professionals, Investors, Landlord, Property Manager, and Property Management Companies is brought to you by SimplifyEm Pay Rent Online and Property Management Software

Popularity: 76% [?]

In a recent survey completed by Rentbits.com of 1000 people were who were in the process of finding a rental home, people were asked a series of questions about their process of finding an apartment or house. The results will surprise you.

Apartment vs. House

One of the first surprises was that 83% of people were looking for houses versus apartments. It would seem that people’s interests has migrated away from small apartments towards houses. This change should have some major impact on apartment builders who have been increasing the number of new apartment buildings in 2008. For investors, it should highlight the need for investing in houses versus duplexes, triplexes or small apartment buildings for long term value.

Rental Advertising

Another surprise was the large impact of the internet on how people look for rental housing, with 72% of people saying they start their search on the internet. Over 93% of people visit at least 2 different rental sites during their rental search. Landlords need to understand this trend and start to use the internet to advertise your open rentals. There are free sites such as craigslist and many paid sites that offer great exposure. Pick a few sites and sign up for accounts and get your advertising onto the internet.

This is exactly what we have seen in our business as older methods of advertising, such as newspaper and locator companies, have become less effective in recent years.

We have moved heavily to the internet for advertising to be out in front of this trend.

Key Words

In these Internet searches, people are using search terms that are between 3 to 6 words with “location” and “price” as the primary key words. It is important that people understand the importance of key words in your ads including the city, the zip code, the area code and neighborhood names such as “South Philly”. Be sure to use shorter versions of city names such as “Philly” for Philadelphia. Anything that people might type should be in your ad to be sure to capture as many people as possible with your ads.

Other Terms

After the two most important elements of an advertisement including price and location are a number of additional elements such as pictures, lease terms, deposit amounts, pet friendly and appliance that are important to people. People are looking to “rule out” certain properties if they do not fit their needs. These additional elements allow them to rule out certain houses without having to waste their time or your time visiting properties they will never rent.

We have recently started filming videos of our rental properties, producing a “Virtual Tour”. This tour allows prospective tenants to see a 2 to 4 minute video of the entire property, allowing them to make a decision about renting the property, whether positive or negative, without actually having to visit it. Obviously, this is a huge time saver for both potential tenants and we are finding that everyone gains from the benefits.

Gender Gap

Another surprise was that 82% of respondents were female. Conventional wisdom says that 80% of home buying decisions are done by women. Landlords need to cater to women and make sure your kitchens and bathrooms are the highlights of your property to ensure a quick rental process.

I invite you to learn more about Real Estate Investing and become a member of our FREE weekly tele-seminar class where we teach tips and strategy on how to grow your real estate investing business and how to raise Private Money by going to http://www.realestatewealthtoday.com/TuesdayTipsSignUp.html

Mike Lautensack is a full-time real estate entrepreneur, coach and mentor in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE eBook go to Real Estate Investing Blog.

Popularity: 75% [?]

Historically, once the holidays have passed and January arrives, there is an immediate increase in people on the move, which translates to an increased demand for available rental properties. According to Google’s search analytics, web searches for rental housing in the first week of January 2010 were at their highest level since the first week of August 2009. Online rental searches on Monday, January 4, 2010 were 39% greater than on Monday, December 7, 2009 and continue to show a positive increase over December.

Popularity: 42% [?]

A number of things likely come to mind when you think of real estate investing. You might immediately leap to real estate investing being real estate portfolios and real estate retirement plans or you may think instead of short sales, bulk reo investing and virtual real estate investing. Likely you also wonder how these things will factor into your life as a real estate investor in the current economy.

You can learn a lot about real estate investing. The best way to optimize your real estate investing education is to know the basics ahead of time. You will get the most out of anything to do with short sales, bulk reo sales, virtual real estate and just improving real estate investor abilities by knowing some real estate investing basics. Check out these three real estate investing tenets that many experts do not fully know:

1. Real estate investing education always yields positive. Every good real estate deal represents thousands of dollars in potential wealth. Getting the wealth is the key to your success. Learning as much as possible about real estate will increase your odds of success whenever you do a real estate deal. Small investments in education yield big results upon implementation.

2. You can succeed in real estate investing in any economy. Many people think (wrongly) that you can only succeed in real estate when the economy booms. You should remember that a bad economic situation is not usually bad for real estate investors. You can often buy properties at deep discounts. In addition, you can find deals that simply would not exist in a booming economy. Poor economies can turn based on active real estate investing. When an economy is less than thriving, short sales, bulk reo sales and virtual real estate can prosper. Knowing how to do these deals can create wealth for you and save others from major financial difficulties.

3. You do not need a lot of money to be a successful real estate investor. You can be a success in real estate investing no matter how much money you have on your own. There are lots of types of deals that you can perform with the money of other people. If you appear to be a solid investment you may be able to use a private lenders money. A good investment will know as much as they can about real estate investing. This will help you show private lenders that you are a good investment if they do not know about real estate investing themselves.

Real estate investing is a great way to create a good amount of wealth. You can create income regardless of the economy. You can create your own success using your knowledge of short sales, real estate investing, bulk reo sales and virtual real estate. Knowing real estate investing basics will help you succeed as a real estate investor.

Popularity: 15% [?]