April 2022

Renters like to move in the spring. That’s not big news to anyone with experience over more than a couple of years. When I first started buying apartments 11 years ago I had heard this, and it made sense, but year after year this simple rule of thumb has proven extremely reliable. Even if they’re not thinking about schools for their kids, it is still the time of year when they want to make important changes in their lives.

This year those moves have been even more prevalent. In one property we’ve watched our marketing leads jump 2-3X over six months ago. Maybe there’s a pandemic affect – tired of having to stay in one place, nowhere to move because even the non-paying tenants were staying put, uncertain job situation. Whatever the reason, demand for apartment rentals has surged.

How has this affected your properties? We knew there would be a demand and we planned for it, but have still been surprised. We have units that need renovation and might have pushed harder to finish them earlier, and we have tenants who are disruptive whose lease shouldn’t have been renewed.

Now is the time for landlords to be selective if you have vacant units. Enforce your rental criteria or even strengthen it. Don’t skip the background checks. Nurture your good tenants. The tenants you place now should stay with you for a long time, so make them feel wanted.

Reno, NV – this market seems to be on fire, and not the kind of fire that just started, but the fire that has burned hot for a long time. Something is going on here. Just the last year, averaging 5% jobs growth year over year is enough to make it a top tier growth market, especially after steep declines of over 14% during the pandemic. But prior to that, from 2012 through early 2020, average job growth was 3.8%. We look for job growth over 2% and there really aren’t many markets in the U.S. that can claim that success. But Reno almost doubled that.

What’s going on in Reno? First check the map. We know there’s an exodus from California, but California is a beautiful state, great climate, mountains, lakes and the ocean. Reno sits just on the other side of the border, with Lake Tahoe and ski mountains a short drive away. If you want to get out of California, but not too far, right over the border is a great option. Reno is in a more business friendly state, no corporate or personal income tax, a right to work state, with room to expand.

Ask Tesla. Tesla employs 7,000 people just east of Reno, working on components for their electric vehicles, and plans to hire a lot more. Rail access and a low-humidity climate were factors in their choice to build there.

Ask Microsoft. Over 500 employees in an operations center. It is apparently not difficult to attract talent to this thriving oasis in the desert next to the mountains!

VentureBeat, a technology event organizer whose finger is on the tech pulse across the U.S., said Reno experienced the highest job growth of 50 metros in a recent survey, attributed to companies like Tesla, Apple, and Google building manufacturing facilities and datacenters. These jobs are firmly planted in Reno, not easily moved to another state or country, and a strong foothold for future growth.

How about rents? Top tier, no question. ApartmentGuide (Rent.com) says late last year 1BR rents increased over 38% YoY and 2BR rents 63%. That’s phenomenal, even compared to astronomical increases across the U.S.

Surveying your market
Where should rents be. That’s one of the most important questions you’ll have to answer before and during apartment ownership. Can I increase them enough to add substantial value to my investment. Are there enough similar comparable properties nearby to be confident of my projections. Is another apartment community about to go live soon right down the street.

These are all relevant factors in determining where rents could be. They are subjective, though, and you really want the objective numbers, the tangible data that will help you make good decisions.

What exactly are the rents in your area? You know about how to find them out. You can check Costar, Rentometer, Apartments.Com, and Zumper, but all of these sources use a limited number of data points, spread out over a wide area. Many times I’ve looked at the comps that Costar and Rentometer provide for their average rent calculations and saw that they were clearly not representative. They skipped properties much closer to my target and they took rents from 10 or 11 months ago.

Or you can check with your property manager. Good ones are reliable sources, but it depends on how closely they watch their market, and who on the PM team you’re talking to. In many cases they’re more motivated to get the unit filled than to maximize owner income, so if you ask them, their response might reflect that.

A more effective and reliable way to determine market rents is to survey the market yourself. It’s not hard. First find 10-15 nearby similar properties. You can do that on apartments.com or another rental site. Get their property name, address, and phone number and list it in a spreadsheet.

Then go to a freelancer website like upwork.com and post an ad for someone to call these properties. They need to present themselves as a prospective renter, not someone doing a survey. They have to be sincerely interested in renting to get the attention of the person answering the phone, because, believe me, those people are wary of their competitors doing surveys.

Make up a set of questions that your prospective renter should ask. Put yourself in their position. You want to know if they have a 2BR unit, what’s the rent, security deposit, do they have a unit available, does it have a pool, a fitness center, do they allow dogs, is there a place to walk my dog. No 2BR units? Okay how about 1BR. Has it been remodeled. I have about 20 different questions but it has to sound realistic, not like they’re reading from a script.

They fill out your spreadsheet and let you know when they’re done. They can be anywhere in the world as long as they can make a U.S. call with a U.S. area code.

Don’t do this yourself. You’ll easily find people who have already done this, who can do it better than you, and when you find someone good, you can use them again.

I can get these done for $50, so when I need it I hire two or three at a time. As a minimum it might validate information you have already collected. And you could be surprised to learn that yes their rents are similar to yours but nobody has anything available for two more months. That’s great insight you wouldn’t get any other way.

Who We Are

Cardinal Oak Investments acquires, improves, and manages under-valued commercial apartments. We buy B and C class properties of around 100 units in the Southeast and Midwest. We look for properties whose amenities, aesthetics, and appeal have fallen into obsolescence, whose care reflects tired management, and whose location is where a stable workforce wants to live.

And we partner with like-minded investors looking for stable assets that produce good cash flow and strong appreciation.

Founded and managed by John Todderud, Cardinal Oak Investments has acquired properties on both coasts and in between creating annual double-digit returns.

For more information, schedule time with me or contact us.

Please note: Past performance is no indication of future performance.