Friday, October 25, 2019

A Higher Ceiling For Drones In Real Estate

The contribution of drones to the real estate industry continues to grow even though not enough people within the industry have embraced it as of now. You might say there is no ceiling on how much of a difference maker they are becoming.

What the University of Michigan has just unveiled is nothing short of amazing. Using what it terms “autonomous drone software”, they have demonstrated a drone add-on which appears capable of finding where to nail shingles on a roof (or comparable surface) with or without a human presence.

This does not mean that drones will be replacing humans on construction sites within a matter of months, if at all. Based on the progress to this point, these drones only operate for short period of time. While the skill or skills demonstrated are incredible, there are operational and time restrictions which may or may not be able to reach higher limits as the technology grows.

Consequently, the role of drones in real estate is more likely to be helping with short term projects and solutions. Examples might be using in situations where it is a higher level of challenge for a human to reach or access a corner or higher point due to wind, weather, or slope conditions.

Additional challenges include drones needing to comply with FAA guidelines above a specified height and on larger construction projects. These considerations are in addition to technical challenges.

I’m already seeing drones being used in conjunction with “Virtual Reality For Real Estate”. Residential and commercial builders working on high rises or projects where a view of the waterfront, skyline, or other consideratios important to the price and the sales process. For example, a drone is sent to the exact point of where a 30th floor ocean front condo will be built to photograph the specific view which will be available upon completion of construction.

By doing so, a potential buyer has the ability to see exactly what the view will be from the living room looking out toward the ocean before the building has reached the 30th floor. This provides the builder with an advantage toward getting the property sold well before the ready date.

Like with the nailing on the roof, it involves utilizing a drone for a short period of time for a purpose which greatly benefits execution of a real estate project.

There is a long way to with developing this technology. Yet, it is a huge positive that we have these uses available within our industry.

Check out the video: 

Friday, October 18, 2019

The Rise of Renters

The article in the WSJ earlier this week is just one of several recent ones talking about renters in a totally separate forum than the Rent Control concerns.There is more to the rental preferences that need to be addressed by real estate professionals, especially those who do not deal with helping renters for commission.

Some cities are showing a decrease in the cost of rentals, while some age groups are showing a stronger preference to rent rather than buy. What these separate trends show is that more than just the monthly cost is factoring in to the decisions people are making when it comes to renting.

To put it less diplomatically, the real estate professionals that say "You are crazy to pay rent instead of owning" are going to have to come up with a stronger argument to support that claim.

In many areas of the country, home prices have still not returned to the levels they were at prior to 2008. Those long time home owners don't care that, for example, home sale prices in their neighborhood "increased 3% per year for each of the past five years". Those owners will tell you that the 15% "increase" still leaves their home value below the 30% decrease suffered from the crash of 2008. 

Consequently, many long time home owners still do not see enough appreciation in the value of their home over the years to justify selling. Let me put that a different way. If they were to sell, it's really about justification of buying again. 

With the real estate market staggering in many cities, even the most recent to become home owners are not "assured" of appreciation and an increase in the value of their home even by doing only the most basic of maintenance. You could say it's not your parents' home ownership anymore.

While some real estate professionals remain in denial about this, the point is that they need to come up with more solid reasons why renters should be buyers.

More and more home owners are not seeing enough of an increase in the value of their home to consider a mortgage as an "investment" that will pay off for them some day. 

Consequently, they see renting as having more advantages. They do not have a commitment to a property from five to thirty years (length of mortgage) to worry about. There are not thousands of dollars in property taxes, dealing with home owner association decisions and fees, and in some cases, a lot less time and money spent on routine maintenance.

Having the ability to move within a matter of weeks or months due to family, school, or career issues also comes with renting. 

Renters, whether apartment or single family homes, can have the location and amenities they desire, and without having to come up with thousands of dollars for a down payment and the commitment of a mortgage which follows.

They feel like they are working for themselves and not the bank or mortgage banker. If life happens and they can't afford where they are at, they can end their lease within a few months and relocate to what they can still afford.

This is much different from 25 years ago when they could purchase a home, stay for five to seven years, sell for a profit, and then rinse and repeat.

Given the rising number of people in their 20's and 30's who still live or who have returned to live with their parents, adding them to the mix shows that there is a much stronger need to "sell" the overall benefits of home ownership.

The next time a real estate professional tells you "It's crazy to rent instead of own", you need to ask them why they say that. He or she needs to "own" a much stronger response.

Wednesday, October 16, 2019

Impact of Rent Control - Part 4

All things considered, Rent Control has its purpose, which should be to prevent outlandish rent increases. However, as discussed in this series, the current format enables some landlords and tenants to take advantage of the situation.

Not being able to increase the rent for “current” tenants often leads to lesser living conditions for tenants and savings and tax advantages for landlords. The larger scale impact is often the prevention or limitation of neighborhood growth and/or improved property values.

One solution for Rent Control is to allow for small percentage increases on an annual or bi-annual basis, with specified standards being met in order to do so.

For example, a 10 or more unit apartment building could increase 5% every two years (for continuing tenants) upon proof that landscape upgrades were installed. This concept would help to assure that upgrades and improvements are part of rental facilities. Perhaps meeting specified safety requirements could impact a landlord’s ability to raise the rent.

To take this a step further, a reduction in or maintaining low levels of crime or vandalism statistics could be a reason for a rent increase to existing tenants. Many tenants would be willing to pay extra with the knowledge that their overall safety is a consideration.

As it stands now, this is not always about creating or maintaining affordable housing. This all feeds in to the “renting vs. buying” debate in many communities. Some people look at having a Fixed Rate mortgage as a form of Rent Control, keeping the resident at the same rate for up to 30 years. One important difference is that the home owner chose the monthly payment based on the price of the property and their financial status at or after the time of purchase. Apartment living, however, could be due to geographic, financial, or logistical concerns.

Our hope is that more states or municipalities considering implementation will look at ways to modify existing regulations and learn from other parts of the country. The system needs to be changed before it should be expanded.

Tuesday, October 15, 2019

Impact of Rent Control - Part 3

When thinking about Rent Control, most people do not consider the impact it could have on public safety.

Without incentives for landlords and potential landlords to upgrade or build on to existing properties, there is less likely to be change for the better. We won’t find new gardens being nurtured or new plants or trees being grown because the tenants aren’t going to leave.

As a result, keeping the same look without proper care invites weeds and other undesirable growth. This often leads to more pests in the area, sometimes where children tend to play.

Landlords and their property managers have fewer reasons for urgent maintenance. Failure to replace light bulbs or light fixtures in common areas increase the risk of injury and in some communities also invite crime.

Amenities such as laundry rooms or basement storage may not be as well maintained as expected since tenants are far less likely to move out and face higher rent payments.

With no reason to increase property values in the community, there are fewer incentives for new investors to enter the community. Real estate investors tend to look at communities with obvious potential to grow their portfolios.

Having the same older buildings stay in place year after year with little to no hope for redevelopment can negatively impact some cities. School districts might also be impacted since Rent Control often leads to fewer and fewer children of different ages being added into class sizes. Smaller class sizes usually results in less funding for the schools.

Some businesses, such as convenience stores, local grocery stores, gas stations, and local services, often benefit by having a steady flow of local customers. It also means they may not need to advertise as aggressively since the local residents already know them.

Either way, the overall lack of turnover has a definite impact on future years within the economy of a neighborhood.