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Apartment Loans Secrets
4 min read
by Content Team

Rent Price Update June 2021

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According to the Yardi Matrix Multifamily National Report for June 2021, national rent growth metrics are showing some record highs. The increases are more or less across the board, however it is important to note that the most stunning changes can be seen in the asking rent prices for yet-unleased apartments, rather than the leases being rolled-over. As the report shows, rent prices have increased by an estimated 6.3% since this time last year. On a national scale, this is the largest year-over-year increase on record over the history of the dataset. The figure reflects a rise in national average rent price by a solid and similarly record breaking $23.

In the earliest signs of a ripe market, year-over-year lifestyle rents (up 7.2%) have been picking up a steady pace of growth, and are actually outpacing rent-by-necessity (RBN) figures (up 5.8%). This is a trend that hasn’t been seen in roughly 10 years, with 2011 showcasing similar findings. Even single family rents have risen by a record breaking 11% since last year, rounding out some key insights for the second half of 2021. 

While eye-catching, these figures mean nothing without some context behind them. The pandemic has undoubtedly upended quite a few data trends before some form of normalization could occur. We are still in a recovery phase, and last year was hopefully the worst of the whole ordeal. That said, it did leave quite a bit of room for growth.  

Still, it is a marvel to see 27 of the 30 major metro areas performing so well simultaneously, even if only from an investment point of view. And it would be a shame not to mention the rate of collections has also rebounded back to a steady and reasonable level. This may be a result of the massive government stimulus dumped into the economy in response to the economic downturn inflicted by covid-19. Both covid-era administrations have doled out a considerable volume of stimulus checks, enhanced unemployment benefits, and over $45 billion of direct renter payments alone. 

Month over month statistics help to show a more comprehensive picture, where all 30 metro areas have seen healthy rent growth over 1%. Nationally, the average is up 1.6% since last month. Urban market areas such as New York and Chicago, which suffered more during the pandemic as residents fled to areas with a lower cost of living, are making a comeback with the same gradual yet impressive increases of nearly 2%. Even in the M-o-M stats, lifestyle rents now up 2% M-o-M, have a clear lead over RBNs which only increased by 1.2% since last month. 

One of the most important factors to keep in mind is that the pandemic held up new multifamily construction projects for quite some time, and the niche is only now regaining solid footing. Limited supply of new rental units plays a huge role in the asking rent increase, and Phoenix, Arizona is a perfect example. Phoenix has seen incredible migration volume from nearby (and more expensive) metro areas, by renters from areas with much higher rents. Even so, with only 3.2% of new stock delivered over the last 12 months, there simply aren't enough new units to keep up with the migration numbers. 

This is more or less the case with markets across the board, single-family housing included, as both the construction and lumber industries were seriously impacted by covid-19 and have still not yet fully recovered. The effects are greater for multifamily, though, since the additional burden of higher single-family residential prices (due to a lack of supply for the exact same reason) has birthed a hot housing market. In turn, many homebuyers are instead choosing to rent while they await more affordable housing options.

The government stimulus programs have a part to play as well, beyond increasing rent collection. The injection of funds to the American people, combined with strict pandemic lockdowns and a long quarantine period has led to a substantial growth in household savings, estimated to be valued at roughly $2.5 trillion since the beginning of the pandemic and more renters opting to continue renting while saving for a down payment on a new home.

Related Questions

What are the current rent prices for commercial real estate in June 2021?

According to Yardi Matrix, the national in-place rents for industrial facilities averaged $6.64 per foot in August 2020, up 5.5% over the last 12 months. As of August 2020, the national vacancy rate stood at 4.1%, down 30 basis points over the previous month.

Unfortunately, there is no available data for June 2021 yet. However, you can expect rent prices to continue to increase as demand for industrial real estate remains strong.

What are the best strategies for financing an apartment building?

The best strategies for financing an apartment building depend on the expected costs of renovation and the investor's savings. If the renovation is light, such as fixing some holes in the roof and doing some new landscaping work, the investor may not need to tap into additional financing. However, if the renovation is more extensive, such as upgrading the building's HVAC systems or replacing windows, flooring, and appliances, it may be best to take out a loan or look into a line of credit to support the investment strategy.

For first-time multifamily investors, bank loans are a popular option. They may not always have the best terms on the market, but it is easier to find a lender willing to work with a first-time investor. However, loans are nearly always going to be recourse for a first-time investor, meaning if the investor defaults on the loan, the bank can go after more than just the property to cover its losses.

What are the advantages and disadvantages of investing in commercial real estate?

The advantages of investing in commercial real estate include longer lease terms, providing more stability and predictability for landlords, and the potential for tenant default. The disadvantages include higher risk due to the potential for tenant default and the longer lease terms, as well as slower leasing velocity than in multifamily or single-family residential real estate.

Sources:

  • Commercial vs. Residential Real Estate: A Comprehensive Guide

What are the most important factors to consider when applying for an apartment loan?

When applying for an apartment loan, the most important factors to consider are credit history, collateral, and financial state of the individuals behind the loan, historical financials, debt service coverage ratio (DSCR), loan ratios, expenses, debt yield, and more. Additionally, borrowers will need to have good credit (660+ is typically expected) and between 25-30% of the total loan amount as a down payment.

What are the best ways to negotiate a lower interest rate on an apartment loan?

The best way to negotiate a lower interest rate on an apartment loan is to shop around and compare different lenders. Different lenders offer different rates, so it pays to do your research and compare. Additionally, having a good credit score and a strong financial history can help you get a better rate. You can also negotiate a lower rate by offering a larger down payment, as this reduces the risk for the lender. Finally, you can also negotiate a lower rate by agreeing to a longer loan term, as this reduces the monthly payments and can make the loan more attractive to the lender.

For more information on apartment loans, check out Multifamily.loans and Apartment.loans.

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  • Rental Property
  • Multifamily
  • Landlord
  • Apartment Lease
  • Apartment Rent Prices
  • Rent Prices
  • Multifamily Rent
  • Multifamily Rent Prices
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  • National Rent Growth
  • Yardi Matrix

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