Archive for August, 2011

water from a rock

August 25, 2011

well you never know what you will see when you own an apartment complex.   Check out this video by going to my Vimeo profile at http://vimeo.com/user8997444  and watch the video (img_1941.mov).

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jobs = rent increases

August 23, 2011

Marcus and milichap has publised their 3rd quarter apartment research report.   I says in so many words that Austin is experiencing a growth in jobs, a reduction in construction, an increase in rents and a reduction in vacancy.    Each of those things combined equals a good time to own rental property.

The report has vacancy rates of 4-6.6% depending upon the submarket and increases in rents from 2.7 to 5.6% over last years rents.   the only cloud on the horizon is contruction permits are up as they should be when things are working this good in a market.   Hopefully they will not over build the market and push it down again in a few years when more product comes
online.   For now things are looking good for the rental market in Austin and the surrounding areas.

 

Austin Investor Interests also published some data on the austin market.   Their info says that we have achieved a 95% occupancy and rental rates up over 9% to the highest rates ever for the city.    They also have a concern over what happens once the new contruction is finished and those units begin to be offered.   Normally to fill an apartment complex the tenants will get consessions.   (that is a dirty word and now I need to wash my mouth out).   In the current environment those dirty things are having an effect that is taking about 2% off of market rents in the past they have taken a bigger chunk out of the top line
when you consider them over the full year’s rent.

For more information visit the marcus and milichap website at  www.NationalMultiHousingGroup.com or  www.apartmenttrends.com or call me at my office at 512-782-8982 to talk shop!

property tax protests in austin tx travis county

August 22, 2011

Every year I protest my property tax valuations and almost every year it is time well spent. It allows me to learn something new about how my property is valued and what other property is valued at surrounding my property and is a general adventure in dealing with people.

So this year I started out with the commercial stuff. I sat down with the same guy that I talked to last year. He remembered that I had my son with me last year but this year I happened to have to go on his birthday so he did not come along (“his loss :)” just kidding son ). I asked for my property to be reduced about 15% from where the county had them appraised at. After showing him my p&l for the year he agreed to get me to a value about 7.5% lower then where the county was at. I decided that it was a good enough return and took his offer and our conversation was almost over. He began to work up the settlement and I began to pick his brain. Well it turns out that the county has produced some very important information which is used to determine property values.

One of those reports is a CAP RATE report for apartment transactions for the prior year. This report contains cap rates for sales that took place for the prior year catorgorized by the age of the complex. It can be used to determine value for your particular property and for those around you. Here is why I was surprised by the report: I was surprised because of how low the cap rates were! Or by how high the values were. For example there was a transaction on a building built in 1973 and it had a 7% cap rate. if you had a 20 unit building that was generating a 100K Net Operating Income you could in theory sell it for a prices of 100K/7%= $1,428,571.


Working backward:
If a unit was renting for about 675 per month with a 5% vacancy and the expenses averaged about 35% of revenue after the vacancy you generate a 100K net operating income.
For those of you who don’t know 7% is LOW. My first student loan interest rate was at 8%. I remember when FHA loans were are 8%. So for an older building to sell at a 7% Capitalization Rate is a really low number and a high value.
Say for example that 7% is a fluke and If you used a 8.5 rate the value would be 1,176,470 ! Which is still out of this world! I did not think that our market was that hot! Boy was I surprised!


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