LANDLORD QUARTERLY NEWSLETTER
February 2022
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We hope you have had a great start to the new year! Wishes for you and your family to have a prosperous and healthy 2022.
Valentine’s Day It’s that time of year where we tell our landlords how much we care about them.
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10 Markets Called ‘Hidden Gems’ for Real
Estate in 2022 | Realtor Magazine
December 15, 2021
Many of the housing markets to watch in the new year are located in the South, says the
National Association of REALTORS®, which released its top picks for the markets that
likely will see some of the strongest price appreciation in 2022—the “hidden gems,” as the
association says.
NAR released its top 10 list during its third annual year-end Real Estate Forecast Summit, where economists weighed in on the trajectory for the 2022 housing
market.
“The housing sector performed spectacularly in 2021 in many markets, with huge gains
achieved in places like Austin, Boise, and Naples,” says Lawrence Yun, NAR’s chief
economist. “Several markets did reasonably well in 2021, but not as strong as the
underlying fundamentals suggested. Therefore, in 2022, these ‘hidden gem’ markets have
more room for growth.”
The top 10 markets topping NAR’s “hidden gem” list for 2022 are:
• Dallas-Fort Worth, Texas
• Daphne-Fairhope-Farley, Ala.
• Huntsville, Ala.
• Knoxville, Tenn.
• Palm Bay-Melbourne-Titusville, Fla.
• Pensacola-Ferry Bass-Brent, Fla.
• San Antonio-New Braunfels, Texas
• Spartanburg, S.C.
• Tucson, Ariz.
Source: National Association of REALTORS®
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Investors on Record Buying Spree
November 23, 2021
Taking notice of the increased appetite for U.S. real estate, investors are building up their portfolios of properties looking to cash in on the higher housing and rental prices. Investors purchased a record $64 billion of homes in the third quarter.
Single-family homes comprised nearly three-quarters of investor purchases in the quarter, an all-time high, Redfin reports. In October alone, investors made up 17% of buyers, up from 14% a year earlier, the National Association of REALTORS® reported in its latest existing-home sales report. All-cash buyers, the category that investors tend to land in, accounted for 24% of home sale purchases last month.
Overall, investors purchased a record high of 90,215 homes in the third quarter, up from 80.2% a year earlier. That is the second-largest year-over-year gain on record, Redfin reports.
“Increasing home prices fueled by an intense housing shortage have created opportunities for investors to reap big profits,” says Sheharyar Bokhari, Redfin’s senior economist. “Those same factors have pushed more Americans to rent, which also creates opportunities for investors because investors typically turn the homes they purchase into rentals and can now charge higher rents.”
Average monthly rents climbed 10.7% annually in September. Median home prices increased 13.1% in October year over year to $353,900, according to NAR.
Where Investors Are Targeting
Atlanta had the highest share of homes sold in the third quarter that were purchased by investors, the highest share of the 40 U.S. metro areas that Redfin tracked. Rounding out the top five are Phoenix (31.7%); Charlotte, N.C. (31.5%); Jacksonville, Fla. (28.3%); and Miami (28.1%).
Source: “Real Estate Investors Bought a Record 18% of the U.S. Homes That Sold in the Third Quarter,” Redfin (Nov. 18, 2021) and “Home Sales Rose in October as Investors Rushed Into the Market,” CNBC (Nov. 22, 2021)
How High Inflation Is Affecting Real Estate
December 13, 2021
Rising inflation is pressing on Americans across the economic spectrum with costs for groceries to gasoline increasing. In November, consumer prices increased by 6.8% compared to a year ago, the largest annual gain in the past 40 years.
Some of the highest increases have occurred for energy, shelter, cars, and food—these comprise about 61% of consumer purchases and account for 81% of inflation over the past 12 months, MarketWatch reports.
Renters may be feeling the impact. Rents are up 3% and accelerating at about 5%
annually, notes Lawrence Yun, chief economist of the National Association of
REALTORS®.
Also, heating bills are increasing; natural gas prices have jumped by 25%.
Yun also warns that the increase in inflation is a primary reason that mortgage rates will likely rise in 2022. The 30-year fixed-rate mortgage is predicted to reach 3.7% by the end of 2022. Rates averaged 3.10% last week, according to Freddie Mac.
“One aspect of inflation is that real estate has proven to be a good hedge,” Yun says.
As he explains in a recent statement:
“In the 1970s, a high inflationary period when [the Consumer Price Index] averaged 7.1% per year, home price gains outpaced inflation with a 9.9% gain. Even when interest rates soared in the 1980s and thereby crushed home sales, home prices still held up to consumer price inflation: 5.5% versus 5.6%. That’s because rents are soaring. Other decades also show similar patterns. Therefore, for those concerned about the loss in purchasing power of money and savings, be assured that real estate has proven to be a good hedge against inflation.”
Source: “Instant Reaction: Consumer Price Index, December 10, 2021,” National
Association of REALTORS® Economists’ Outlook blog and “Inflation Is Running
INDUSTRY TRENDS
Should single-family landlords raise rent to keep up with inflation? 4 considerations
Motley Fool
Now is a great time to be a landlord, but take a breath before you raise the rent too much.
Jan 4, 2022 at 9:30AM
Key Points
Rents have risen over 9% for single-family homes from August 2020 to August 2021, and they're not done rising.
Before you raise the rent, you would be wise to consider your expenses, market rate rents, your property's condition, and your tenants.
Rents for higher-priced detached single-family homes increased the most.
Rents have risen like crazy in 2021. They were up 9.3% nationally for single-family homes from August 2020 to August 2021, according to CoreLogic. This has been the biggest year-over-year increase in over 16 years. And more of the same is expected for 2022. So should you raise your rent to reflect these massive increases?
Should you increase rent?
The big advantage mom-and-pop landlords have over institutional investors is that we can be flexible. Just as one-size-fits-all medicine isn't typically as good as individualized care, a one-size-fits-all approach to rent increases isn't usually the best way of doing business.
Instead of raising rents across the board just because you might be able to, a better approach is to first consider your particular circumstances. This will help you determine how much you should increase rent or even if you should increase it at all. Getting top dollar and making as much as possible is certainly a goal, but it's not the only goal landlords should have. Never forget the biggest profit killer is vacancy. Before you raise the rent, you would be wise to consider the following.
1. What you're currently charging
A landlord's fixed expenses typically go up each year: property taxes, insurance, etc. So that you aren't taking a pay cut, it's good practice to include a rent increase at each lease renewal period. (This assumes you aren't subject to rent control laws, which would take precedence over what you can or can't do.)
It's usually best to raise the rent about 2% to 5% each year. So if rent were $1,500 a month, the increase would be somewhere between $30 and $75 more per month -- probably not enough to cause anyone to move. Any more than that and you might lose a tenant.
2. Current market-rate rents
If you haven't been raising the rent and you find that you're charging well below market rate, you probably should consider a tenant rent increase. You most likely won't be able to spring a massive rent increase on a tenant without having them leave, though. A better course of action would probably be to gradually raise the rent at each renewal period until you're receiving closer to market rate.
3. Whether your property warrants top dollar
If you haven't done a walk-through of your property in some time, now's the time to schedule one. You might find that you haven't been keeping up with maintenance or that your rental is dated compared with your competition. If so, you should be prepared to spend what could amount to a substantial amount of money to bring your rental up to the condition that would warrant market-rate rent.
Run the numbers to determine which option makes more sense: keeping a reliable tenant who pays less than market rate or sinking some money into the unit to modernize it, and then, of course, being prepared to market the unit and screen tenants.
4. What sort of tenants you have
Having long-term tenants who pay the rent on time every month and keep the place in good condition is worth something (a lot if you ask me). If you're making money on the property, even though not as much as you could in this inflated market, you have some thinking to do.
If you raise the rent substantially, such as around 10% or more, you risk losing steady tenants you've been doing business with for years. This might be a risk worth taking. A lot depends on your rental unit. A highly rentable property would probably warrant the rent increase. If your property is in good condition and in a desirable area that's close to amenities with good schools, low crime, and little competition, you should probably be getting top dollar. A property like this would likely not stay vacant too long.
Rental types that experienced the biggest increases
Although rents increased across the board, higher-priced rentals increased more than others -- 10.5% from August 2020 to August 2021. These are rentals that cost more than 125% of the median for the region.
The biggest increase of all was detached versus attached rentals. Detached rentals, or single-family homes, increased 11.7% from August 2020 to August 2021.
So if you have a higher-than-median-priced (for your area) detached single-family home, it looks like you might be getting a pay raise of sorts.
Market Reports
December 2021
(January not available yet)
Click HERE for Market Reports!
February also hosts President’s Day on February 21st.
President's Day, also known as Washington's Birthday, is on the third Monday of February each year and is a federal holiday in the United States. The day not only honors George Washington (born February 22), the first President of the United States, and Abraham Lincoln (born February 12) whose birthdays are both in February, but honors all the presidents who have served in the United States.
Celebrate President's Day
Celebrate United States history with some tasty recipes from some of our past Presidents and other political figures. George Washington was known for his eggnog recipe and Mamie Eisenhower for her fudge. But did you know that Thomas Jefferson had a favorite Chicken Fricassee recipe? Check out these recipes:
Mandatory Flood Disclosure Effective 01/01/22
Please return the new Flood Disclosure that was emailed to all Landlords on 12/21/21. We are unable to renew your Tenants without this new mandatory document that went into effect on 01/01/22. If you did not receive the document or have misplaced it, please email Rosemary Croney at office@3gpropertiesgroup.com.
Please bear in mind 3G Properties Group handles basic maintenance requests and is not a general contractor or construction company. We are happy to work with YOUR preferred vendors as long as 3G obtains proof of their liability insurance, copy of their W9 and coordinates the repairs. As your property management company, we are charged with coordinating all maintenance with your resident as part of our liability protection for both you and 3G. If the owner, resident and vendor are communicating outside of our Maintenance Coordinator and/or 3G team, this can cause significant problems. We expect to pay your vendor through our system so all of your annual expenses are reflected on your 1099. 3G Properties Group strives to provide you with a “hands off” experience as much as possible, relieving you from maintenance burdens and headaches!
Notes from a few of our residents!
My husband and I have been living in one of 3G Properties for over 2 years now. James dropped by this past week and conducted a routine maintenance request. He's always so friendly and helpful! All of the 3G Properties team...Ovel, Rosemary, Sarah, James and Oscar are consistently friendly, courteous, timely and thorough in answering our maintenance needs. Thank you all for all you do! Especially during this COVID outbreak!
Annette
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