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What are the must-have takeaways to prep your business for growth in 2015? If you’re running a property management business or you’re a real estate agent concentrating on rentals, join Trulia’s Housing Economist, Ralph McLaughlin PhD, to learn the largest impacts on your business as we close out 2014 and get ready for a new year.
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Don’t Go Into 2015 Empty-Handed
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AppFolio
Complete Solution Includes:
Web-Based Property Management Software
• Property management and accounting
• Online rent collection (free)
• Prospect / guest card tracking
• Marketing
• Website
• Payment processing
• Online applications
• Resident Screening
So You Run A More Successful Business
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Ralph B. McLaughlin, PhD
• Housing Economist, Trulia
• Former Professor at San Jose
State University
• Director of the Real Estate
Development Program
• Assistant Professor of Urban
and Regional Planning
• PhD in Planning Policy and
Design from UC Irvine
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Polling Question
What am I most concerned with in 2015?
A. How to capitalize on pricing trends
B. How to adjust to changing demographics
C. How to deal with turnover and slowing mobility
D. How to manage evolving leads
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2.
3.
4.
1. rental price trends
change in search behavior
turnover and mobility
evolving leads
5. top take-aways
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rental price trends
How long will the price trends continue
to last?
1.
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Polling Question
In your opinion, what do you envision happening in 2015?
A. Rents continue to rise to record-breaking levels
B. Rents increase slightly, but begin to flatten at the end of the year
C. Rents flatten and possibly decrease in certain metros
D. Rents begin to drop as home-buying picks up again
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Rents on the move
MetroRents, year-over-year
United States (100-metro average) 6.2%
San Jose, CA 16.5%
San Francisco, CA 14.4%
Denver, CO 14.3%
Cape Coral-Fort Myers, FL 13.7%
Oakland, CA 13.3%
Long Island, NY 11.3%
Baton Rouge, LA 10.4%
Sacramento, CA 9.6%
North Port-Bradenton-Sarasota, FL 9.1%
Charleston, SC 9.0%
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Most expensive rental markets
MetroMedian rent as share of average local wage
Miami, FL 61%
Los Angeles, CA 56%
New York, NY-NJ 55%
Oakland, CA 49%
San Francisco, CA 49%
Riverside-San Bernardino, CA 46%
Orange County, CA 46%
San Diego, CA 44%
Boston, MA 40%
Chicago, IL 37%
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Rising rents
Why are rents on the rise?
• Increases in income: millennials are starting to get jobs againo 37% back to normal, up from 25% a year ago
• Increases in households: millennials are starting to move out of
their parent’s basemento % living with parents is starting to decrease
• Millenials are not buying homes….yeto Down payments hard to come by
o Low-down payment mortgages make buying a home more costly
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Rising rents
Why are rents on the rise?: People are getting jobs
4
4.5
5
5.5
6
6.5
7
7.5
Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct.
Pe
rce
nt
Un
em
plo
yed
Unemployment Rate, Oct 2013 - Oct 2014
25 - 34 Year Olds
35 - 44 Year Olds
45 - 54 Year Olds
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Why are rents on the rise?: Millennials are moving out
Rising rents
http://www.trulia.com/trends/2014/09/millennials-leaving-nest/
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Millennial homeownership rate lowest in years
Why are rents on the rise?: Millennials not buying homes
http://www.trulia.com/trends/2014/09/millennials-leaving-nest/
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Why are rents on the rise?: Down payment hard to save
Rising rents
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Why are rents on the rise?: low-down payment loans are expensive
Rising rents
http://www.trulia.com/trends/2014/10/rent-vs-buy-q3-2014/
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Renting vs. Buying
Across US, buying is cheaper than renting:
• For all of the 100 largest metro areas. Baseline assumption is:o 20% down payment
o Itemized tax deductions
o Stay in home for 7 years
• But: with 3.5% down, no itemizing, and moving in 5 years:
o Renting is less cheaper than buying in 20 of largest 100 metros
o Markets on the coasts become more expensive to buy
compared to renting
• Some of this difference is due to added expense of mortgage
insurance on FHA loans
http://www.trulia.com/trends/2014/10/rent-vs-buy-q3-2014/
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Renting vs. Buying
http://www.trulia.com/trends/2014/10/rent-vs-buy-q3-2014/
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Renting vs. Buying
http://www.trulia.com/trends/2014/10/rent-vs-buy-q3-2014/
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What is happening on the supply side?
34% of new home starts 2014 YTD are multi-unit (5+ units). On track for highest annual multi-unit share since 1973.
93% of multi-unit home starts are intended for rent, not sale, 2014 YTD. On track for highest on record.
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Time to be Conservative?
Donald Davidoff, President, D2 Demand Solutions
“Property managers are pressed to achieve higher
rental growth than the historical average. It’s been
a multi-year run, so I’m seeing some PMs be
conservative on their 2015 budgets wondering how
long this will really last.”
• Watch new construction in your area for pricing
trends
• Invest in technology and process
improvements
• Monitor supply-rich metros where over-supply
is driving increased vacancies
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What does this mean for your business?
• Demand for rentals is solid:
• Millennials are getting jobs
• Millennials are forming new households
• Millennials are not buying homes yet
• New supply is increasing too: largest rental proportion of
multifamily units in years
• These factors are likely to sustain robust opportunity for
property investment/management sector
Opportunity in rental market growing
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How are renters finding your
property?
search behavior2.
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This is What Google Says
• 57% of users search for properties in their current city
• Average user searches for real estate 338 miles away from where
they are located
• Temperature seems to affect user propensity to move away from
home (smaller search radius in the south and southeast)
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Your Audience is Changing
Asset-Lite Mentality
Mobile
traffic for
rentals is
growing
62% view
other
listings
during a
tour
83% of
millennials
sleep with
their phone
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Get Mobile
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Simple, Fast, Efficient, and Now
Chintan Pathak, CMO at Marketplace Homes
“We realized that millennials want things to be
simple, fast, efficient, and now. Outdated
marketing tactics of the 90’s no longer efficiently
work to get in front of the new age consumer.”
• Created an in-house communications
department to field phone calls and make out-
bound calls
• Developed a home concierge to help residents
get accustomed to their home and
neighborhood
• Moved the leasing process online
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What does this mean for your business?
• Take advantage of online advertising, but don’t overlook local marketing (we’ll talk more about why in the next section, too)
• Remember curb appeal is just as important at web appeal
• Make consumers feel at home. Often they are beginners to the area or renting, in general
Don’t forget the neighborhood…
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At what rate, and where, are people
moving?
Mobility3.
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While the future is mobile, mobility is falling
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While the future is mobile, mobility is falling
http://www.trulia.com/trends/2014/09/american-mobility-stuck/
0.1
0.12
0.14
0.16
0.18
0.2
0.22
0.24
0.26
0.28
0.3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Pro
po
rtio
n M
ovi
ng
in P
revi
ou
s Ye
ar
Mobility Rate: Millennials vs. All Ages
Millennials
All Ages
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Lower rates of moving to buy home, not rent
http://www.trulia.com/trends/2014/09/american-mobility-stuck/
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Within county mobility is highest
http://www.trulia.com/trends/2014/09/american-mobility-stuck/
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Metros with largest Millennial Growth
# Metro Pop growth, age 20-34
1 Colorado Springs, CO 3.2%
2 San Antonio, TX 3.0%
3 Peabody, MA 2.9%
4 Honolulu, HI 2.8%
5 Denver, CO 2.5%
6 Seattle, WA 2.5%
7 Cape Coral-Fort Myers, FL 2.5%
8 Houston, TX 2.4%
9 Oakland, CA 2.3%
10 Orlando, FL 2.3%
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Higher occupancy overall
Mary Gwynn, CPM, President, Apartment Dynamics
“During 2014, we’ve seen move-outs decrease by 3% and
move-ins increase by 6% -- resulting in higher overall
occupancy. The impact has been decreased hard and soft
costs, higher occupancy and income, and higher renewal
rates with demand.”
• Although apartment turnover is much higher than the
census “everyone” stats, we still have to spend a lot
of time on moving new residents in
• Vacancies to increase slightly in certain “darling”
markets
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What does this mean for your business?
• With a smaller percent of Americas moving, may need to turn
focus on maintaining current residents
• If rent increases outpace income growth, turnover could increase
• Lower mobility may create difficulties in filling vacancies
• Mobility amongst millennials is higher – catering to their needs via
technology and amenities could be key to filling vacancies
• Good news: people moving to buy, rather than rent, is down
• Could increase in future, as millennials enter the housing market
• Proportion of within county moves is relatively stable, but
proportion of between county moves has declined
• Posting vacancies/listings in local venues may yield more success
• But don’t ignore national listing services
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Polling Question
What type of lead is most valuable to you?
A. Website or ILS lead
B. Craigslist
C. Phone call
D. Drive by
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What type of leads are three times more
likely to lease at the property?
evolving leads4.
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It’s a Numbers Game!
Leads that schedule an appointment are three times more likely to convert into paying tenants
• 6% of all leads convert
• 18% of all appointments scheduled convert
• It’s all about the appointment!
• Many landlords miss the opportunity to schedule appointments with residents
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What’s in a lead?
Three characteristics of good leads…
informed
connected
confirmed
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Prepare a Call Script
*77% of people that lease have called you first. (LTS)
1. Be proud of your property (company)
• “Good afternoon, Park Place Apartments (ABC Leasing). This is John, how can I help you?”
2. Get their name and use it
• Sure, I can help you with that, John. Where did you learn about our property?
3. Build upon their interest
• Great, I know what unit you are talking about. Why are you interested in that unit? Have you been by to visit the property before?
4. Once you’ve solved their concern, invite them to come by the property.
• Looks like this property might work well for you. I’ll be available at 5:00 today to show the unit. Will that work for you?
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What are the top takeaways for 2015?
final takeaways5.
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Top Takeaways
1. Monitor local pricing trends. Don’t be surprised if your rental price trends are flattening in 2015.
• Oncoming rental supply is largest on record
2. Take advantage of online advertising, but don’t overlook local marketing.
3. Mobility amongst millennials is higher – catering to their needs via technology and amenities could be key to filling vacancies.
4. Prepare a call script to help you optimize each lead opportunity.
Write them down…
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Thank You For Joining Us!