Great stuff if you’re thinking of getting into apartment investing or already are!

Some highlights…

* All 44 markets tracked in the National Apartment Index are forecast to post continued employment growth and effective rent growth in 2012. Recovery has moved beyond the cyclical surge in demand to a more sustainable expansion, as remarkable shifts in demo- graphic, economic and social patterns underpin demand for rental housing.

* U.S. vacancy should reach 5.0 percent by the end of 2012, a 40-basis-point decline since 2011, and resulting in 4.8 percent effective rent growth. Forecast completions will total nearly 85,000 units, still critically short of a conservative demand forecast for 120,000 units, initiating a new development cycle.

* Household formations are forecast to increase by 29 percent to an annual average of 1.4 million through 2015, aided by rising im- migration and 2.1 million echo boomers entering the prime renter age cohort.

Rents are up. Vacancies are down!

And here is the index..

This is all great news for us multifamily investors!  To download your copy of the 2012 National Apartment Report register for free with Marcus & Millichap here: https://www.marcusmillichap.com/services/research/reports/Default.aspx

And, it should go without saying but NOW is the time to get into multifamily investing. And there is no better way than with my Master Lease Option Method. Click here to register for my next free Master Lease Option webinar!

The Strategy: Convert Commercial Properties to Schools

The investment opportunity lies in converting commercial properties to “state-of-the-art-schools” and holding long-term leases or lease options. For instance one investment trust group in the article converted warehouses to schools in Milwaukee and Philadelphia. They plan to expand to other markets including New York and Houston.

The Return: Around 9-10% on Rental Incomes

Investors generate their income from rent and often use a lease option or master lease option to exit the deal. One of the companies in the article has a master lease on their properties and charge enough rent to cover the risk of charter schools closing (which is the biggest investment risk here), reports Bloomberg.

The return on these properties is around 9-10 percent, according to an analyst quoted in the Bloomberg article. That’s comparable with the November 2011 average of 7% return on commercial investments over $5 million, according to another analytics group in the story.

The Market: 500 Charter Schools Opened Last Year; 400K Kids on Waiting Lists

Charter schools are a hot alternative to traditional public schools. Parents are seeking schools that offer longer days, more emphasis on the arts or a different academic focus. The key here is that a charter school is an affordable alternative to private schools.

According to the National Alliance for Public Charter Schools, there are around 5,600 charter schools in the U.S. right now and more than 500 opened last year. More than 2 million kids attend charter schools today and more than 400,000 kids are on a charter school waiting list nationwide.

The Risks: Charter Schools Are Limited in Funding; Graded on Performance

According to the Bloomberg article, charter schools receive funding from federal, state and local entities just like other public schools, which means limited budgets. In addition, they are held to the same academic requirements as other public schools. The limited funding and academic requirements can put the schools at risk of closure, which can put the investment at risk.  As we saw earlier in the return section, making this investment requires the right deal and exit strategy (master lease option, for instance).

The Outlook: “A Bigger Piece of the Business”

Craig Mailman, an analyst with KeyBanc Capital Markets, Inc., told Bloomberg that these schools will be a “bigger piece of the business” in the long term.

What do you think? Is this a strategy worth pursuing?

Water issues. Water damage can cost a ton of money and issues with your properties. A good property manager will inspect tenant complaints of burst pipes, wet basements, wet carpet and wet walls immediately and take measures to prevent damage.

Rotten wood, mold, pests and heating/cooling issues. Regular property inspections and routine maintenance can turn these realities of property management into better properties and higher rents. When properties are well-maintained, you have less shocking repair costs. I like the sound of that.

Pesky tenant disputes. In any close quarters, tenants are going to have disagreements on the noise level of footsteps overhead, television volumes and the sound of kids. That’s something I don’t want to deal with and a good property manager will stay on top of complaints and deal with problem tenants effectively.

Locked out tenants. The last thing I want to do at 3 a.m. in January is let someone into their apartment. Yet another reason I’m glad I have a good property manager. These calls will never hit my phone.

Late rent. I’m not into pestering people to give me money. I just want my statements emailed over monthly and the proceeds going into my bank account. Yes, late rents are a ding in my cash flow, but it’s the property manager’s job to take care of this; not mine. A good one will never let this slide.

Want more tips on property management? Stay tuned to the Investor Insights this month for tips on hiring the right management and ideas for generating more value from your properties.

Use that blank brick wall facing 5^th Street to generate tenants or funds. Is your property tall and on a heavily trafficked road? Rent out the space. Of course, you should check out local ordinances before you put up a banner. But, this is an ideal way to earn money for yourself in vacancy advertisements or in leased ad space. Look at what billboard advertisers charge and knock 25% off the cost. Then, start contacting businesses in the area. Cha-ching.

Invent some storage space. Apartment dwellers don’t have a lot of storage space, so you have some opportunities with your existing structures to help them out and earn more money. If you have a basement or warehouse area, it’s easy to add some storage lockers and generate an income on your tenants’ stuff. Advertise the convenience and price the rent slightly lower than the mini-storage places nearby to gain tenant interest.

Turn that empty office area into a laundry facility. Add a few coin-operated washers and dryers to the place to generate some revenue. And, don’t forget to put up an advertising board like you see in restaurant bathrooms. Sell some advertising in exchange for a captive audience – tenants doing the wash.

Charge for toys. Got some extra space in the lot? Let tenants store their boats, jet skis and recreational vehicles onsite for an additional rental fee. Again, play it up and price it slightly lower than nearby storage facilities.

Create a recreation space. If you have a club house or roof deck, charge a fee to reserve it. It’s also a perk for your residents.

Charge for additional parking. Someday you’ll have to pay for parking maintenance. You can charge for all parking or rent out spaces beyond the two allowed spaces per unit.

Set up some office space for lease. Got an empty office? Got an empty apartment area that would make excellent consultant or executive office space? Put an ad on Craigslist and generate some additional rent in property you already own.

These are just a few ideas for generating more cash flow and value for your properties. Stay tuned to the Investor Insights for more tips on property management this month.

This ended up costing him a lot in cash flow and time. The moral of this story is that you need to fire bad property managers immediately. Your cash flow depends on it.

Here are my top six reasons you would kick a property manager to the curb.

Tenant complaints reach you

I don’t want my property tenants to know I own properties. That’s why I show up as Susan, not the property owner. It’s also the reason I pay a property manager.

If a tenant discovers who I am and the complaint gets to me, there better be a darned good reason. I consider this a serious violation of our arrangement.

Lack of upkeep

If your properties look bad, tenants won’t want to lease from you. If you visit on more than a couple of occasions and your properties look uncared for, I would consider this a breach of contract.

Lack of communication

This is the biggest red flag for me, and it should be for you. Not reporting or responding in a timely manner is unacceptable. You trust them to take care of your properties, the financials and tenants. If you don’t get regular updates or responses, this is another sign they need to go.

Late reports

In property management, you should receive monthly reports on time every month. If reports are late more than once, it could the property manager is overwhelmed, lazy or unorganized. You want a professional running your properties. After all, you are paying a significant amount of rental income to them.

Violations in compliance

Part of the property manager’s job is to maintain properties and inspect them for compliance issues. If a regulatory authority comes in for inspections and finds your properties in violation, it’s a sign your property manager is slacking. Now, you should give them the benefit of the doubt if it’s a minor issue.  However, if it happens repeatedly or if it’s something obvious and preventable, it’s a sign they need to go.

Cash flow is not consistent

If your property manager is marketing your properties effectively, screening tenants and showing properties consistently, you shouldn’t have vacancies. Some fluctuations are to be expected. However, if your cash flow is dipping every month, it’s time to think about a new property manager. Your cash flow depends on it.

Stay tuned this month for more on property management on The Investor Insights.