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I seem to be starting my comments out with “I told you so” a lot lately.  In this article, we start to see where the press is beginning to differentiate between asset types and markets that aren’t necessarily the primary ones.  It is important to point out that the big hitters see opportunity in smaller markets and see rent increases continuing into the future.  Read on and I will point out some other points on the other side of the article.

CFO Survey Preview: Rent Growth Momentum in 2014

Multifamily Executive, Lindsay Machak

James Duncan knows not all markets are created equal.

The CFO of Jefferson Apartment Group (JAG) is seeing strong growth in some while others are slowing down, but he isn’t writing the slower markets off just yet.

And while some institutional investors are scaling back their appetites in potentially overheated markets, Duncan believes it hasn’t affected the liquidity for multifamily developers looking to strike a deal.

“I think they’re being more cautious relative to their investment in markets that could have some supply issues,” he said. “And where we’ve seen others get too cautious or pull back a little bit, we’ve seen other equity providers step in.

Duncan was one of about 100 multifamily finance professionals who responded to Apartment Finance Today’s annual CFO Survey. The survey was recently conducted to peek into the thoughts of the industry’s best and brightest as they rev up strategic planning efforts for the upcoming year.

“I think we’re keeping our eye on certain markets as the supply really starts to deliver into the market during the second half of this year and how that will impact our traction to raise rents,” he said.

Duncan and 77 percent of the multifamily finance professionals surveyed said they plan to raise rents in the next year, according to the survey.

Build, Buy and Operate


Since the McLean, Va.-based company’s inception in June of 2009, it has had a hand in the development of about 3,600 units. JAG expects to hit 5,000 by the end of next year with a focus on widening its grasp in the property management arena.

But that doesn’t mean the company’s acquisition activity has suffered.

“Debt rates have increased here over the last five weeks,” he said. “But, they’re still at historic lows, so if we find the right opportunities, we think it’s a good time to buy.”

And as job growth and optimism grow across the nation, demand will absorb the apartments in the current pipeline. “It may not be as robust though as over the last 18 months,” Duncan said.

As demand grows, competition to attract and retain tenants grow fierce in booming markets. Creative solutions to offer something extra, while boosting net operating income, are being added to communities.

For instance, pets have been and will continue to bring money into owner’s pockets as grooming stations, dog parks and specialized fees are added to communities.

“Somewhere between 25 and 35 percent of our tenants have a pet,” Duncan said. “We think that’s something that they value.”

Managers are also exploring options for those residents who don’t have pets. That’s where free wifi and cell phone towers come into play alongside utilities being paid by the residents.

“We’re continuing to push to make sure utility and trash costs are allocated to our tenants and residents,” he said. Lindsay Machak is an Assistant Editor for Multifamily Executive. Connect with her on Twitter @LMachak.

One of the practical take-aways in this article is hidden in the paragraph discussing how the big boys see opportunity in pets, wifi and utilities.  The point is that NOI is not just Rental Income minus Expenses, it is Total Collections minus Expenses. And there are several ways in a rental community to increase collections without necessarily increasing rent.  Remember, rental residents are keen arbiters of value and if you can add or provide value to residents you have the opportunity to increase your returns.

The other take away is that the basic concept of buying right and operating prudently is still in vogue.  Currently the ability to buy right is available in a multitude of markets and the fact that interest rates are still at historically low levels, makes having cash flow left at the end of the month much easier than at any other time in generations.

The fact that this is a very current article bodes well for the fact that there are still deals to be had and money to be made in this field for people who can spot upcoming markets and understand how to properly operate multi-family communities.  The other good news is that gaining this knowledge and understanding is something most motivated people have within their grasp if they are willing to educate themselves. Happy Investing. Michal Ballard

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Bottom line, you are not too late to the party. There is tremendous upside to the savvy apartment investor who knows how to find the right deals in the right markets, and put together the funding to make it work. This is a skill, that you can learn and master, if you follow the right direction and advice. Listen in on Wednesday to Michal Ballard, foreclosure apartment investor and syndicator expert in his “Earn Huge Profits in Apartment Foreclosures” this Wednesday at 6pm Pacific (9pm Eastern). This is his last webinar for 2013, so make sure you Register Now and don’t miss it! See you then!