Archive for 'Deed in Lieu'

Foreclosure Numbers Dropping

Foreclosure

The banks are reporting lower foreclosure numbers for the last quarter of 2011. Some of that can be attributed to the robo-signing fiasco and some to the new programs that the banks have put in place to help the home owner keep their home. The banks have become a little more flexible in dealing with these delinquent mortgages mainly because the tactics they were using before simply wasn’t working. You can read more about it here:

 

 

Bank of America Tiptoes into Landlording Business

Foreclosure properties

Foreclosure properties. (Photo credit: Wikipedia)

 

It seems like it was only yesterday that when an investor wanted to purchase a property through the short sale process, two things that the Banks demanded were that the homeowner was not to receive any cash and that they were not allowed to stay in the property after the sale. All of that has now been turned on it’s head. Some banks are now offering cash to homeowners for the keys to the property and now BoA will allow some owners to stay on as tenants. The idea is to eventually sell the properties off to investors. Good news for investors and it’s been a long time coming.

Bank of America Corp. has tentatively joined a nascent housing industry movement in which homes in or near foreclosure are sold to investors as rental properties.

The bank on Friday began a test program for 1,000 homeowners headed into foreclosure in Nevada, Arizona and upstate New York — borrowers it has been unable to help with loan modifications but hopes to keep on as renters. If successful, the program could be tried in California and rolled out nationally.

Consumer advocates maintain it often would be better for homeowners, communities and the banks themselves to keep troubled borrowers on as renters rather than kick them out. Seizing and selling empty homes creates neighborhood blight and accelerates downdrafts in housing prices, they contend.

Bank of America doesn’t plan to become a longtime landlord for borrowers turned tenants. In the pilot, it hopes to take possession of homes for no more than three months before selling them to investors making a bet on the recovering housing markets. If the program becomes established, the goal would be for the investors to take over as soon as the occupants relinquish ownership and pay the first month’s rent.

Whether this scheme can work is to be determined by the pilot, the first such test announced by any major mortgage company. The bank wants to find out whether getting a loan off its books with a quick sale at a deep discount is a better deal financially than the foreclosure process, which can drag on for months or even years in highly regulated states such as New York.

“This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support,” said Bank of America’s Ron Sturzenegger, who oversees about 1 million troubled loans inherited from aggressive mortgage giant Countrywide Financial Corp., which Bank of America purchased in 2008.

Homeowners can’t apply for the program themselves, a bank spokesman said.

The trial is limited to a tiny slice of the 1 million loans that Bank of America owns outright. It is not testing any of the additional 8 million home loans on which it provides customer service but which are owned by investors in mortgage bonds.

Bank of America executives said the 1,000 homeowners selected are all at least 60 days late on their loans and are not qualified for or not willing to accept other alternatives to foreclosure.

They will be offered one final deal: hand their property titles to the bank, which would cancel their mortgages in what’s known as a deed in lieu of foreclosure, and sign contracts agreeing to rent the home for up to three years at or below market rates.

Source

Hopefully this program works out for all parties and the foreclosure backlog starts moving again.

Mortgage Lenders vs The Scarecrow: If I Only Had a Brain

Are you kidding me? The Banks are just now paying homeowners to get out of a house they can’t afford anymore? They should have been doing this years ago instead of dragging out the short sale process and then delivering the big “No” months later. And then letting the house go through the foreclosure process, which eats up more time and costs them even more money in the process. Here’s one for you: “The banks have realized, ‘We are losing more on the foreclosures than the shorts,'” Augustyniak said. “And they are even willing to compensate the sellers, to give the sellers money to vacate the property.” Wow! What a revelation! Any half-assed Real Estate investor straight out of a short sale seminar in 2006 could have told them that. Guess it takes a while to sink in.

Chase Puts Their Money Where Their Mouth is With Large Short Sale Cash Incentive

McGeough Lamacchia Realty and Dorner Law negotiate a $35,000 payment to their short sale client at closing.

Quote startIt’s important for people who cannot pay their mortgage to be proactive with an alternative such as a short sale.Quote end

Chase Bank sent a homeowner (name withheld) a solicitation letter offering up to $35,000 to do a short sale. Back in August the homeowner called McGeough Lamacchia Realty right away and the home was listed for sale within two weeks.

Once an offer was obtained the staff at McGeough Lamacchia Realty and Dorner Law submitted a short sale package to Chase along with their solicitation letter to remind them that this $35,000 was offered. After five weeks of negotiating Chase not only offered a short sale approval and waived the entire deficiency balance but they agreed to pay this homeowner the entire $35,000.

Over the past year more major banks have realized that paying distressed homeowners a substantial sum is a great way to incentivize them to move out of the home they can no longer afford. Chase has been sending out these solicitation letters of up to $35,000 for about a year. Citi Mortgage has been paying up to $12,000 for about 6 months and Bank of America has most recently agreed to pay up to $20,000.

McGeough Lamacchia Realty and Dorner Law have negotiated large sums for its clients before, but this $35,000 is a new record that they are proud of. These programs are only offered on the loans where these banks actually own the mortgage. Most mortgages are being serviced by the large banks on behalf of one of the three GSE’s: Fannie Mae, Freddie Mac, and FHA (Federal Housing Administration). FHA does offer a $1,500 incentive to do a short sale under their Pre-Foreclosure Sale program. Fannie Mae and Freddie Mac do not currently offer any money unless the short sale is through the Treasury’s HAFA program.

Under the Treasury’s HAFA (Home Affordable Foreclosure Alternative) program which came out in April 2010, lenders are paying $3,000 to distressed homeowners who complete a short sale through the HAFA program.

“It is clear that the major banks have woken up and realized that a short sale is the best way to decrease losses and assist distressed homeowners in a graceful and dignified exit from their home. It’s unfortunate that Fannie Mae and Freddie Mac still haven’t seen the light,” says Anthony Lamacchia.

Short sales are increasing across the country for several reasons:

  •     They are becoming better known to distressed homeowners.
  •     Banks have realized that they save tremendous money through a short sale vs. a foreclosure
  •     Banks have finally hired more staff and are working hard to better their short sale processes
  •     All the major banks are now sending out letters offering short sales to homeowners who cannot qualify for a loan modification. Bank of America recently came out with a Home Transition Guide.
  •     Banks recognize that the sooner they get out of a non-performing loan the more money they save.

“I did my first short sale 20 years ago. They are a great alternative to foreclosure and it is nice to see more distressed homeowners are finally opting for them, especially now that these great incentives are being offered,” says Attorney Hillery Dorner.

Nationally short sales have increased 12% in 2011 and many believe they will increase by much more in 2012.

“One thing distressed homeowners need to know now is that banks will be foreclosing much faster in 2012 than they did in 2011 due to these robo-signing issues for the most part being worked out. Therefore it is important for people who cannot pay their mortgage to be proactive with an alternative such as a short sale,” says John McGeough.

For more on this story, visit the New England Short Sale Blog

About McGeough Lamacchia:

McGeough Lamacchia is the #1 Listing Agency in Massachusetts and named one of the Top 100 Real Estate Teams in the country by RealTrends and the Wall Street Journal. They are a full service real estate agency specializing in short sales in Massachusetts and New Hampshire.

So there you have it. All you seminar graduates, go out there and make some money.

Foreclosed Self Storage Facility Goes for $10.5 Million

Foreclosed Self Storage Facility Goes for $10.5 Million

Bancap Self Storage Group, Inc., the “#1 Self Storage Broker in California,” recently announced that the firm has successfully brokered the sale of the Casino Self Storage property located in the city of  Moorpark in Ventura County, California.  Dean Keller, the firm’s president, was the exclusive listing agent and sole broker in the transaction.  The sale was facilitated by special servicing company LNR Partners, LLC on behalf of a CMBS fund that had foreclosed on the property earlier this year.  The buyer was Public Storage, a publicly traded REIT, which will re-brand the property with its name.

“This is a classic example of a very desirable first class property that was just over-leveraged in a very difficult economic climate,” Keller said “It is the nicest storage facility in the city and it should perform very well in the long run.”

The property sold for $10.5 million on an “all cash” basis. This was much less that the property’s outstanding debt at the time of foreclosure.  Although physical occupancy was over 85%, economic occupancy was approximately 66%, offering further upside potential to the buyer.  The facility’s gross potential income at the time of closing was approximately $1,078,000 per year.

Casino Self Storage contains nearly 85,430 net square feet of self storage space divided into 822 units, including 91 climate controlled units.  The attractive two-story project was built in 2005 and is located on Los Angeles Avenue (also known as State Highway 118) on a highly visible corner in retail and commercial oriented location.  The buildings are constructed of concrete block and stucco with metal partitions, roofs and doors.

“There have only been a handful of foreclosed storage properties listed for sale in Southern California in the past few years and we have been the exclusive listing broker for most of them,” Keller said.  “There are plenty of buyers looking to “steal” lender owned properties, but we have been able to obtain very good and fair prices for the sellers – usually millions of dollars more than the “direct offers” received from potential buyers and other brokers before our listing and marketing of the property.  Self storage is such a unique property type and it takes a specialist with proven expertise and experience to maximize value for sellers in this unique property niche.”

Bancap Self Storage Group is the “#1 Self Storage Broker in California” with over $900 million in completed self storage sales, including many lender-owned “REO” properties, numerous portfolio sales, and a record setting single property sale at over $31 million.  For more information contact Bancap Self Storage Group at (949) 888-5355 or visit the company web site at www.bancapselfstorage.com

Contact: Dean Keller

Phone (949) 888-5355

Fax (949) 203-6105

Email: DKeller@BancapSelfStorage.com

Foreclosure Abuses by Banks Spurs Demonstrations

Foreclosure Abuses by Banks Spurs Demonstrations

Foreclosure Abuses by Banks Spurs Demonstrations-Image by Getty Images via @daylife

While thousands of Americans are rallying as part of the Occupy Wall Street protests, community development and consumer advocates in Raleigh are calling upon state and federal officials to protect consumers against big banks overstepping their legal authority.

The rally sponsors include Community Reinvestment Association of N.C., N.C. Association of Community Development Corporations, N.C. Community Development Initiative, and N.C. United.

While not a part of the national movement, advocates will hold a rally and march on the grounds of the state capital at noon today to call attention to the same kinds of illegal activities that are driving Occupy Wall Street and putting Americans in danger – namely, the widespread legal violations used by some banks to pursue foreclosures.

Speakers at the rally will be calling on key public officials to serve as “cops on the beat” to enforce the laws that govern the mortgage industry and to be vigilant in protecting consumers from manipulative practices that have widespread impact on local property values and home sales.

The rally coincides with a N.C. Supreme Court hearing of Dobson vs. Wells Fargo, a case in which the bank is pursuing a foreclosure without proper documentation to show its ownership of the loan. If the court finds in favor of Wells Fargo, it will overturn well-established N.C. property rights laws, place extreme burdens and inequities on low- and middle-income families when defending against foreclosures, and cause devastating decreases in property values for thousands of North Carolinians.

“Our system of protecting private property is what makes it safe to invest in this country,” said Peter Skillern, executive director of Community Reinvestment Association of N.C. “The big banks cannot be allowed to turn that system on its head by falsifying documentation in order to snatch property back from homeowners.”

Additional events will take place in cities throughout North Carolina during the month of October in order to spread awareness of the consequences of fraudulent foreclosure practices and the remedies that are needed.

CONTACT: Peter Skillern; office: +1-919-667-1557×22; cell: +1-919-667-4201; Michael De Los Santos; office: +1-919-667-1557×23; cell: +1-919-672-4755; or Susan Perry-Cole; cell: +1-919-608-1158

Web Site: http://www.cra-nc.org

Distressed Property Owners Get Some Help With HUD Grants

Distressed Property Owners Get Some Help With HUD Grants-Image via Wikipedia

Esperanza has received a $271,443 grant from the U.S. Department Housing and Urban Development (HUD) to deliver foreclosure prevention counseling and assist with application to Federal and other mortgage modification programs. Esperanza is one of 23 intermediaries awarded, and will work to deliver housing counseling through its own national network of service providers.

Nationwide, the need for assistance to obtain a mortgage modification or to avoid mortgage scams continues to rise. Hispanic individuals and families are especially at risk of a mortgage default. According to a report by the Center for Responsible Lending, Hispanic borrowers are 71% more likely to have lost their home to foreclosure than non-Hispanic white borrowers. It is estimated that 731,660 Hispanic homeowners are at imminent risk of foreclosure (“Foreclosures by Race and Ethnicity” 2010. Center for Responsible Lending). Esperanza is one of only two Hispanic HUD intermediaries in the United States, and its national network of bilingual counselors ensures that these individuals receive the full services they need without linguistic barriers.

Esperanza’s network of providers will use grant funds to support bilingual housing counselors in key markets, to conduct outreach and counseling efforts designed to identify and assist victims of mortgage modification scams, many of whom are often ashamed to seek assistance, as well as prevent new cases from occurring through vital information dissemination, and to report those cases to the applicable authorities. Between October of 2011 and 2012, Esperanza and five of its affiliates in Arizona, Florida and Pennsylvania will serve over 1200 individuals and families.

Esperanza has engaged in high quality housing counseling in Philadelphia since 1989. The Esperanza branch office in Philadelphia assists well over 600 persons each year, nearly 50% of which are foreclosure-related cases with an 80% success rate at resolving foreclosure. Esperanza has served as a HUD-approved intermediary since 2009 and administered a network of multiple housing counseling agencies since 2008. Esperanza’s local housing counseling efforts and its network have served over 11,292 families since inception.

Esperanza is the largest Hispanic faith-based community development corporation in the United States. Founded in 1987, its purpose is to strengthen the Hispanic community nationwide by raising awareness and identifying resources through a network of more than 12,000 participating Hispanic faith groups and churches in 42 states representing 27 countries of origin. Esperanza’s capacity to serve as a national housing counseling intermediary includes nearly two decades of delivering housing counseling in Philadelphia and experiences working with faith and community based organizations nationally since 2002 to provide training, technical assistance and programmatic and capacity-building sub-awards. For more information about Esperanza’s work, please call 215-324-0746 or visit www.esperanza.us.

http://www.esperanza.us

Foreclosure Numbers Keep Rising as Banks Release Inventory

Foreclosure Numbers Keep Rising as Banks Release Inventory-Image by niallkennedy via Flickr

BankOwnedProperties.org reports that Alabama and Georgia showed a drop in bank foreclosures in March of 2011 but then spiked upwards in April and continues to grow in both states. Behind this activity is the cumulative effect of foreclosure processing delays which masked the reality of the foreclosure effect. The August numbers reveal what lies behind that veneer.

Activity jolted higher in August providing evidence that lenders are disproportionately pushing batches of delinquent loans through foreclosure as they fix their paperwork and documentation actions and as some local markets are determined able to absorb more foreclosure inventory. Across the United States there are some 1.4 million more homes in the process of being listed in foreclosure.

In the Birmingham, Alabama area, home prices declined in August, pressured by foreclosure-related transactions.

In Alabama’s largest metro area, home prices, including distressed sales, fell by 9.6 percent in May from 2010. In April prices fell 9.3 percent compared to the same time in 2010. The overall decline for Alabama home prices was 8.9 percent in May.

Unemployment findings seem to mirror the volume of foreclosures. Notice the number of foreclosure properties and the unemployment numbers in close proximity of the same month for the states of Alabama and Georgia:

Alabama Bank Foreclosures
August:  1048
July: 1087
June: 1305
May: 1281
April: 1308
March: 1027
February: 1190
January: 1141

Alabama Unemployment Rate and Numbers
August: 9.9% (213,271 people)
July: 10% (215,426)
June: 9.9% (213,271)
May: 9.6% (206,809)
April: 9.3% (199,749)
March: 9.2% (195,210)
February: 9.3% (196,714)
January: 9.3% (196,125)

Georgia Bank Foreclosures
August: 7732
July: 4277
June: 6098
May: 5616
April: 3828
March: 3575
February: 4569
January: 4587

Georgia Unemployment Rate and Numbers
August:  10.2% (478,953 people)
July: 10.1% (474,258)
June: 9.9% (464,867)
May: 9.8% (460,172)
April: 9.8% (460,896)
March: 10.0% (468,550)
February: 10.2% (476,750)
January: 10.3% (483,873)

Alabama’s unemployment rate slightly dropped to 9.9 percent in August down from 10.0 percent in April, as a weak labor market was again unable to sustain the growth of people looking for jobs. And more significantly, August’s unemployment was above the 9.1 percent rate of August 2010.

The number of unemployed people rose above 200,000 for the first time since May 2010, to almost 213,271 in August 2011. Statewide unemployment peaked at 10.4 percent in late 2009, when nearly 225,000 people were jobless. But storms and tornadoes damaged areas of Alabama which also added to the unemployment numbers.

The weak national economy also affects Alabama. The national unemployment rate rose to 9.1 percent in August, from 9 percent in January.

In Georgia, more than half of the state’s 159 counties have jobless rates higher than 10 percent. In Brunswick, where the unemployment rate increased to 9.8 percent from the 9.6 percent jobless rate in April, there were 140 new job seekers and only 23 of them found a job. Fulton County, which includes the city of Atlanta, was at 10.9 percent. Georgia appears to be sustaining better employment numbers even though foreclosures continue to rise, revealing that the number of foreclosure properties in progress are about to deluge the market.

Those who have struggled over the past six to twelve months with securing employment while delinquent on their payments are exposing the backlog now of homes that will soon be available to the buyers and investors.

CONTACT: Susan Redfield, BankOwnedProperties.org, susanredfield@bankownedproperties.org, +1-347-329-4477

Web Site: http://www.BankOwnedProperties.org

UFAN: Will investigations by state Attorneys General help uncover improper practices by mortgage lenders?

In a statement released by her office, California Attorney General Kamala Harris announced recently the creation of a mortgage fraud task force. The task force is comprised of 17 lawyers and eight special agents from the state Department of Justice, and will investigate everything from small scale fraud targeting borrowers to large scale corporate practices, according to the Attorney General’s Office.

The task force created by Harris signals that California is now taking an aggressive approach to the fraud underlying the mortgage crisis seriously affecting the state, and coincides with a nationwide effort among all 50 state attorneys general to investigate the causes and effects of the mortgage crisis, as reported by the L.A. Times. Harris told the Times “California was disproportionately harmed by the mortgage crisis, and our homeowners badly need relief. We will critically evaluate every possible avenue of relief for Californians. If it will result in real accountability and real results, no option will be off the table.”

According to the Attorney General’s Office, “Last year alone, there were foreclosure filings against 546,669 California homes. It is projected that between 2009 and 2012, a total of 2 million California homes will enter the foreclosure process. In the last year, the California Department of Justice has received thousands of complaints related to foreclosure scams, mortgage fraud, and mortgage servicing practices.” These figures are distressing to say the least.

In conjunction with the announcement of the task force, the Attorney General announced the subpoena of Lender Processing Services, Inc. (LPS) in May for its role in “robo-signing” of mortgage documents. Robo-signing refers to bank employees signing documents required in the foreclosure process without verifying their content or accuracy. LPS is alleged to have prepared and recorded these false foreclosure documents on behalf of some of the major mortgage lenders and servicers in the country. The company is based in Florida but has several offices in California and, according to its website, services more than 50% of the mortgages in the US. In its press release, the Attorney General’s Office warned that the risks of robo-signing are particularly serious in California where foreclosures are mostly unsupervised by the courts.

UFAN has recently filed suit against Bank of America (case # 34-2011-00109314) and Wells Fargo (case # 34-2011-00110146) in Sacramento County Superior Court, alleging multiple causes of action related to mortgage lending practices. It is UFAN’s hope that the investigation will uncover facts that will bolster the cases filed.

ABOUT THE UNITED FORECLOSURE ATTORNEY NETWORK

UFAN Legal Group, PC dba United Foreclosure Attorney Network (UFAN) is a Roseville, California-based law firm providing mortgage litigation and other debt related legal services. The dedicated attorneys and staff at UFAN work tirelessly to seek justice and fight for the rights of its clients. For more information call toll free 1-866-400-4242.

This release may constitute attorney advertisement. The information in this release and on the UFAN website (ufanlaw.com) is for general information purposes only. Nothing in this release or on the UFAN website should be taken as legal advice. Prior successes are no guarantee of future performance. Litigation is inherently uncertain and results in litigation are never assured.

 

Fed’s Foreclosure Assistance Program Has New Life

New Ads Drive Struggling Homeowners to Call 888-995-HOPE and Go to MakingHomeAffordable.gov Website As Part of Ongoing Campaign

The Ad Council, in partnership with the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development (HUD), have joined together to launch a new phase of their Foreclosure Prevention Assistance Public Service Advertising (PSA) Campaign. The campaign aims to increase awareness of the Making Home Affordable® Program’s free resources and assistance for homeowners who are struggling with their mortgage payments.

One in 11 homeowners nationwide has missed two or more mortgage payments. Many struggling homeowners delay conversations about their mortgage concerns and enter foreclosure without ever reaching out for assistance. The new PSAs notify homeowners facing mortgage trouble that options other than foreclosure are available, and the sooner they act, the more options they have for the best possible outcome.

The Foreclosure Prevention Assistance campaign encourages homeowners to call 888-995-HOPE (4673) to speak one-on-one with a HUD-approved housing expert to discuss the solutions that are available based on their individual circumstances. In addition, the program website, MakingHomeAffordable.gov, serves as an online resource for struggling homeowners to learn about options other than foreclosure.

Created pro bono by Schafer Condon Carter, a Chicago-based advertising agency, the new television, radio, print, out of home, and online PSAs have been created in English and Spanish. The PSAs aim to inspire homeowners who are unsure of where to turn to reach out for help as soon as possible.

“The Making Home Affordable Program has already assisted over a million homeowners,” said HUD Secretary Shaun Donovan. “Housing counselors are ready to continue their work with homeowners to discuss specific solutions for their mortgage problems. Struggling homeowners do not need to work through their concerns alone. The key is encouraging homeowners to pick up the phone now to explore their options.”

Treasury Secretary Tim Geithner added: “While the housing market is still distressed, the Administration’s programs have helped establish better standards for the mortgage industry. As a result, struggling homeowners have more options today than ever before. We are continuing to do everything we can to help stabilize the market and to ease the burden on struggling homeowners. And that includes working to make sure families and individuals know about the resources available to them.”

“We are proud to continue our partnership with Treasury and HUD on this critical issue of home foreclosures that affects so many Americans,” said Peggy Conlon, president and CEO, the Ad Council. “We are confident that these new PSAs will resonate with homeowners struggling with their mortgages and encourage them to call 888-995-HOPE or visit the website to learn what they can do to prevent foreclosure.”

“All of us at Schafer Condon Carter have been honored to work with the Ad Council and its sponsors at Treasury and HUD on the Making Home Affordable campaign,” said David Selby, president of Schafer Condon Carter. “We know that the financial burdens currently facing many homeowners are paralyzing. We’ve captured this emotion with a creative treatment that shows people frozen in time while the world goes on around them. Speaking directly to these homeowners is key in getting them to get the help they need as soon as possible.”

The Ad Council will distribute the new PSAs to more than 33,000 media outlets nationwide. The new advertisements build on the successful nationwide campaign first launched between Treasury, HUD and the Ad Council in the summer of 2010. The PSAs will air in advertising space donated by the media.

The Advertising Council
The Ad Council (www.adcouncil.org) is a private, non-profit organization that marshals talent from the advertising and communications industries, the facilities of the media and the resources of the business and non-profit communities to produce, distribute and promote public service campaigns on behalf of non-profit organizations and government agencies.  The Ad Council addresses issue areas such as improving the quality of life for children, preventive health, education, community well-being, environmental preservation and strengthening families.

Schafer Condon Carter
Schafer Condon Carter is Chicago’s top independent mid-size advertising agency and one of the fastest growing shops in the United States. SCC has built its success by challenging the status quo and delivering a tightly orchestrated, fully-integrated brand vision for its clients across an infinite set of consumer touch points. A simple mission drives the agency’s entrepreneurial spirit and aggressive, growth-oriented culture: “Think Again.” SCC’s client roster includes: Allen Edmonds, Armour Eckrich, Beam Global Spirits & Wine, Brach’s, Brunswick, ConAgra Foods, General Mills, Land O’Lakes, National Pork Board, New Chapter, optionsXpress, Rotary international, and Solo Cup. The agency’s wholly owned network includes SCC|Grossman Public Relations and SCC|Digital. For more information visit www.sccadv.com.

CONTACT:
Ad Council Newsroom (212) 984-1923
Treasury Public Affairs (202) 622-2960
HUD Public Affairs (202) 708-0980

Multifamily Utility Company reports an untapped revenue stream that will increase multifamily cash flow and increase property value by allocating utility costs back to tenants through utility billing.

Over the past few years, apartment investors and property managers have had a plethora of issues. Downward pressures on rents, increased vacancies, persistent competition and decreased property values have impacted the multifamily market. Even more so, the soaring costs of utilities that continue to spike year after year. The EPA forewarn that the investment in U.S. drinking water infrastructure improvements from 2007-2027 are estimated to be $334 billion. Multifamily investors are looking towards ancillary income in defense against these rising costs and also increase their net cash flows. According to Brian Stone, President of Multifamily Utility Company, there is an untapped revenue stream many multifamily investors are turning to. That is, by allocating utility costs back to the tenants through utility billing.

Increasing multifamily cash flows can be as simple as increasing the property’s net operating income (NOI). For example, take a multifamily asset of 150 units with at value of $5 million with estimated monthly water/sewer bill of $5000, electric/gas bill of $7000 and a monthly trash bill of $1000. After removing the common area deduction (CAD) of 15%, the rest of the costs can then be reallocated to the tenants. Utilizing a resident utility billing service (RUBS) will increase the net operating income (NOI) by approximately $132,600 per year and $663,000 over 5 years.

The ancillary income from utility reimbursement can be added to the gross scheduled income (GSI); therefore increasing the net operating income (NOI), which in turn will increase the asset’s overall cash flows.

Mr. Stone recommends that a Ratio Utility Billing System(RUBS) is for situations where the constraints of space and/or construction do not allow a property to be submetered, and can be utilized for almost all utilities including water, wastewater, electric, gas and trash. It requires no initial capital investment and is based on a pre-calculated formula. The formula is determined based on several variables including the number of occupants and square footage of the unit. He also suggests that different variables may be used for different utilities and are typically determined by state and local regulations.

Increasing the NOI will also increase the overall Capitalization Rate (Cap rate). Let’s look at the difference before and after initiating a ratio utility billing service (RUBS) shown in the above diagram.

Property owners are always looking to reduce expenses, and utilities are one of the largest and fastest growing expense categories. The goal of RUBS is to help control the growth of utility expenses. A RUBS program provides investors the opportunity to control rising utility expenses. Once utility expenses are under control, apartment communities operate more efficiently. By making the residents responsible for their own level of consumption, they will conserve. Water consumption is typically reduced by up to 20%, as seen in some studies. RUBS can be initiated in as little as 30 days, providing an instant boost to your bottom line.

Multifamily Utility Company is an industry leader specializing in submetering and allocation of water, gas and electric utilities throughout the United States.

To Learn More about Increasing your Multifamily Cash Flow visit http://www.multifamilyutility.com or contact Tiffany Mittal at 1-800-266-0968 x721 for more information.

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