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How to Make Money in Commercial Real Estate

When it comes to investing wealth, real estate has proven itself time and time again to be a reliable way to make money. With $32.6 trillion up for grabs globally, many are turning to commercial real estate to bolster their investment portfolios. If you want to try your hand in commercial real estate, here are a few ways to enter the market.

Become a Broker

One of the ways to make money in commercial real estate is to become a broker and help developers and investors find the perfect properties to suit their needs. While this bears some similarity to residential realtors, it is significantly more involved.

In residential real estate, clients are looking for one thing: a place to live. A commercial real estate broker’s clients will be looking for unique elements that suit their business or investment needs, including:

  • Parking
  • Proximity to public transportation
  • Highway access for commuters
  • Storage space
  • Foot traffic (for retail spaces)
  • Space to grow
  • And more

Once you find the right property, commercial mortgage brokers will also need to help developers or investors identify and secure funding for their projects by working with different financial entities. Like residential real estate loans, commercial real estate loans come in many shapes and sizes. You’ll need to learn about all the different ways to secure funding and help clients navigate the commercial real estate financing process.

It might sound like a lot to juggle, but if you can do it, you can easily make over $100,000 per year—with some brokers reaching seven figures annually! Of course, commercial real estate brokers work on commission, so don’t expect to make much in your first few years as you build your reputation.

Invest in Commercial Real Estate

If the commission life isn’t for you, commercial real estate investment is another great way to earn money. Two of the most popular ways to invest in commercial real estate are::

  1. Buy a property, make improvements, and sell for a profit 
  2. Buy a property and rent it to tenants 

Real estate investing has the potential to generate a strong stream of income if you’re able to capitalize on market trends. Of course, there’s also plenty of risk involved, so make sure you do your research before applying for a loan and purchasing your first commercial property.

Work as a Commercial Real Estate Developer

Becoming a commercial real estate developer might take the most time and capital, but it has the potential to generate the most return on your investment.

Commercial real estate development is like starting from the ground up—quite literally. A developer buys a plot of land, builds a commercial property, and either sells it or rents it to tenants for income. Because you’re not buying an existing property, you can make it into whatever you need it to be to suit local business trends. Plus, brand-new buildings can typically be rented out for more money!

Since you are starting from scratch, commercial real estate development takes a bit more effort (and capital) to get started. Luckily, there are plenty of financial institutions that offer loan programs for each phase of the development process:

  • Construction loans
  • Land development loans
  • Bridge loans
  • Rehab or redevelopment loans

On average, commercial real estate developers earn around $80,000 annually, but that number can increase drastically depending on the real estate market and the choices you make. Many successful commercial real estate developers earn annual salaries in the millions of dollars.

Start Your Commercial Real Estate Journey

Are you ready to start your exciting journey in the commercial real estate market? No matter which path you take, it’s important to have enough capital to fund your business.

At Broadmark Realty Capital, we specialize in construction loans designed to suit the needs of commercial real estate investors and developers. With flexible loan terms and ample experience, we can get you the funds you need quickly, so you can capitalize on the next opportunity. Contact us and get your next commercial real estate project off the ground in no time.

How to Capitalize on a Hot Housing Market

How to Capitalize on a Hot Housing Market

The housing market isn’t just hot, it’s on fire. As the nation continues to make progress on its recovery from the pandemic, both demand for homes and a supply shortage have pushed median sale prices soaring, according to the National Association of Realtors. Median sale prices were up 16.2 percent year-over-year during the first quarter of 2021.

To navigate a market like this, investors and developers need to understand what buyers are looking for, how to capitalize on stable or growing asset classes such as build-to-rent homes, single-family rentals and multifamily properties, and how to obtain flexible real estate financing. Here are a few tips to help make the most of today’s housing market.

single-family rentals

What will homebuyers be looking for in a home post-pandemic?

People have begun to view their homes differently since the onset of the pandemic. Homebuyers now seek a home with features that accommodate new hobbies and daily functions that previously were not performed as often within the home. Long-lasting lifestyle changes due to the survival mechanisms put in place by extended periods of lockdown will likely mean that people will be searching for spacious safe havens and remote work or education environments.

Here are three features that homebuyers and renters are now more likely to want in their future homes:

  1. Dedicated spaces

After spending a lot of time at home, people naturally start to crave larger spaces; but residents aren’t just looking for more square footage. While an open floor plan is great for entertaining and making a space feel larger, homebuyers have recently found that having multiple separate rooms can be both comfortable and functional. This can include a home office, closed-off living room, media room, etc.

Separate rooms still provide options for family time and entertaining, but also allow everyone to do their own thing. This is important for those who have family members working or doing schoolwork from home.

  1. Energy efficiency

Energy-efficient features have been upgraded to the “must-have” list. Not only are we spending more time at home, but we are using our utilities more, which can get expensive. Energy efficiency is a win for homeowners’ wallets and for the environment. Improvements like tankless water heaters, LED lighting, double-paned windows, and energy-efficient appliances are a few options for builders to include in newly constructed homes.

  1. Storage

For many, it can be difficult to find storage space for emergency supplies or essential products. Plus, more time spent at home helps people realize how important it is to keep things organized and clutter-free. Extra pantry and closet space will likely be more “must-haves” for the rest of 2021 and beyond.

How investors are capitalizing on for-sale homes, single-family rentals, and multifamily properties in today’s market

single-family rental home

For-sale homes, single-family rental communities, and multifamily properties have all displayed strong performance compared to other asset classes throughout the pandemic. This has allowed investors to capitalize on increased demand for these property types by putting their capital to work in high-growth secondary markets across the U.S. These include cities such as Coeur d’Alene, Idaho; Tampa, Florida; and Salt Lake City, Utah, to name a few. Many of these markets were already seeing a high amount of in-migration prior to the pandemic and have seen even more because of the public health crisis.

Each of these asset classes possess unique qualities that have made them strategic investments throughout the pandemic. Since people will always need a place to live, they are likely to remain viable investments for the foreseeable future. Reasons for this include the following:

  • For-Sale Homes

Mortgage rates have reached record lows, thereby causing demand to skyrocket and drive up median home prices. As the pandemic sped up the flight from large, coastal cities, markets with already tight housing supply were constrained even further. This has led to a surge in construction and an accentuated need for high-quality, for-sale homes.

  • Single-Family Rentals

Single-family rental communities have emerged as an increasingly popular option for those who want the amenities of a multifamily building with the breathing room afforded by a single-family home. Single-family rent growth more than doubled in April 2021, with prices increasing by more than 5 percent year-over-year.

  • Multifamily Properties

The multifamily market has enjoyed a strong 2021 thus far. The asset class remains an attractive option for those looking for best-in-class amenities without the hassle of owning a home.

How to obtain construction financing for your project

With the housing market surging, there have been more commercial real estate construction lenders entering the market, creating more competition. Therefore, to win business, some commercial real estate lenders may not be enforcing the same rigorous underwriting standards as their peers, which could result in riskier loans. Be sure to do your due diligence when you’re looking to obtain financing for your real estate project. You want to find a hard money lender that you can rely on.

We recommend a private lender that has a good reputation, is willing to communicate and is flexible. Hard money loans are known to be more flexible than traditional lending options; therefore, if they are not willing to communicate and negotiate your terms, you might want to keep looking.

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation, or development of residential or commercial properties. The company has originated over $2.8 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one of our lending experts today.

 

What are the requirements for a commercial construction loan?

What are the requirements for a commercial construction loan?

A construction loan is a type of short-term financing to fund a new construction project. If you’re planning to construct a multi-family home, apartment building, high-rise, commercial office building, or another type of large project, you will probably consider obtaining a commercial construction loan.

Commercial construction loans are different from other loans. Most loans are structured so the borrower receives the full amount they are requesting upfront. Then, once the loan is received, the borrower makes payments over a set period of time.

However, with construction loans, the borrower does not receive the full amount upfront. Instead, you’ll work with the lender to create what is known as a draw schedule. This means that you will receive payments from the lender as your project hits new milestones. For example, the first draw might be used for the clearing and developing the land. The next draw you receive may be provided when the foundation is poured and another when the framing is complete, and so on.

construction loan

Typically, a lender will require a confirmation from an inspector that your project has hit each new milestone before releasing the next draw. This process will continue until all milestones have been completed and you have received the full amount.

When you take out a construction loan, you will only pay interest on the portion of the loan proceeds that you have received. Therefore, if the total loan amount is $600,000, but the lender has only lent you $150,000, you will pay interest on the $150,000.

Once the project is done and the full amount is due, what should you do next? Instead of making one large payment, you can look into a commercial mortgage. The property will likely serve as collateral for the mortgage, and you can use the lump sum from the mortgage to pay off the commercial construction loan.

Commercial construction loan process

1. Connect with a lender
Contact a hard money lender or traditional lender to discuss your project and find out what financing guidelines and solutions they have.

2. Commercial construction loan underwriting
After you submit your loan application, the lender will quickly evaluate the application internally to make a decision on whether or not to proceed. During this review, the lender is looking at the project cost, summary projections, underlying assumptions, and background of the developers. If the project is one the lender would like to move forward with, they will sometimes provide you with a loan term sheet. The term sheet typically outlines the terms and conditions of the loan, provided all the information that was provided is accurate and reasonable. Once the term sheet has been reviewed and accepted, the lender will move to full underwriting and approval of the proposed loan.

During the underwriting process, the lender compiles more detailed information about the project. Expect the lender to request building plans, general contractors’ bids, cost projections, construction timelines, etc. It’s also typical for a lender to ask for the borrowers’ tax returns, financial statements, and any other documents that can support the loan request.

One of the biggest differences between a commercial construction loan and investment real estate loan, from an underwriting standpoint, is that a construction loan has no operating history to underwrite. Therefore, the valuation of the property is only based on the real estate pro forma. As for the credit approval process, it’s similar to other commercial loans, but due to the extra risks involved, the development team, general contractor, and market conditions are all reviewed in more depth.

After the loan has been approved, the lender will provide a commitment letter. This is similar to the term sheet but is a legally binding contract, whereas the term sheet is non-binding.

3. Loan agreement and closing
Once you’ve committed, you’ll be provided with a closing checklist which outlines in detail what needs to be completed prior to the loan closing and funding to begin. As mentioned, additional funds are distributed on based on a draw schedule for the costs incurred in each stage.

Typical construction loan rates and requirements

Interest rates and fees vary greatly but generally increase as a direct correlation to leverage or risk. The higher the leverage or risk to the lender, the higher the cost to the borrower. Factors such as borrower creditworthiness, liquidity, and experience, also play into the cost of capital.

  • Conventional Lenders:
    • 3 – 6% interest
    • Fund 50 – 75% of project cost (“Loan-to-cost” or “LTC”)
    • 60 – 90-days to fund, typically
    • Strict financial, experience, and credit requirements, underwrite covenants, and prepayment penalties
    • Usually have additional deposit requirements and concentration limits for markets and asset classes, or for particular borrowers
    • Modifying or changing construction loan terms mid-way through with a traditional lender can be difficult or impossible
  • Private and hard money lenders:
    • 7 – 14% interest
    • 75 – 90%+ LTC, requiring much less cash at closing (“down payments”) to fund than conventional lenders
      • Broadmark Realty Capital, for example, will typically fund between 80 – 90% of project costs and can use the land as equity
    • Much more relaxed liquidity, net worth, experience, and credit requirements
    • 15 – 60-days to fund, typically
      • Broadmark Realty Capital, for example, is able to close within 1-2 weeks on most project types from the time appraisal is received (larger loans may take longer)
    • No deposit requirements and will rarely have covenants
      • Broadmark Realty Capital, for example, rarely underwrites covenants or prepayment penalties and has no deposit requirements

While conventional lenders may have lower interest rates, they also have lower leverage (requiring you to have more cash and equity), more difficult and longer approval and closing processes, and strings attached. Private and hard money lenders have higher interest rates but lend more towards the project’s costs, requiring you to contribute less cash upfront, making loans easier to qualify, faster to close, and have fewer strings attached.

Types of commercial construction loans

There are a few different scenarios in which developers and investors can use commercial construction financing solutions. These include land development, vertical construction, and acquisition and development projects.

Conclusion

Commercial construction loans can become complex and tough to secure. However, understanding how they are evaluated by lenders can help clarify the funding process. Broadmark Realty Capital has specialized in commercial construction loans and real estate development loans since 2010. Whether you’re looking for financing or have questions, call one of our loan specialists today!

Co-Living: What Is It and Will It Survive COVID-19?

Co-Living: What Is It and Will It Survive COVID-19?

A housing option that was once utilized primarily by college students is becoming more popular among young professionals across the globe. With rent prices rocketing in many primary-market cities like New York, San Francisco, Seattle, Washington D.C., and Chicago, urban life is out of reach for many, unless they pool their living resources in a co-living situation. This trend can be a good opportunity for investors as well as a great way for young people to live in urban centers. But will it survive the pandemic?

What is co-living?

Co-living isn’t what it used to be – it’s evolved from a few friends sharing a home to strangers sharing fully-furnished apartments. Landlords have found that by fully furnishing apartments and renting them out by the room, renters have the opportunity to have a nicer home (and better amenities) without breaking the bank.

In this new take on co-living, residents get a private bedroom in a fully furnished home but share common areas like cooking and living spaces. Co-living became popular in major cities as a form of affordable housing for students, young workers, digital nomads and city newcomers. Residents are attracted to this way of living due to the affordability, flexibility, included amenities, and sense of community.

Co-living was first popular in cities such as New York and London. Over the past few years, it’s now spread to other areas including San Francisco, Los Angeles, Chicago, Seattle, and Washington D.C. It may soon be coming to a city near you.

Why did co-living become so popular?

The increase in co-living springs from high costs of living in major cities, but also from the sense of community and belonging that is inherent in this form of living—qualities that are important to millennials. As you would expect, this trend has been most popular with younger generations, especially digital nomads who want to travel often and don’t want to worry about the upkeep of a home. This is the ultimate free lifestyle.

Benefits of co-living for investors

One reason co-living has become a popular choice for investors is the hope for higher rates of return on their properties. Real estate investors get higher net rent premiums, net operating income, and occupancy rates.

Higher rent premiums
Co-living floor plans hold nearly twice the number of bedrooms as traditional apartments, resulting in residents occupying less square footage in areas where space is at a premium and property values are high. According to JLL research, “co-living assets can capture a more than 30% net rent premium.”

Higher net operating income
By increasing the density in units and renting by the bedroom, property managers can secure higher rents per square foot, resulting in higher net operating income

Higher occupancy rates
Another reason why investors have been attracted to this trend are the high occupancy rates. As previously mentioned, multiple factors contribute to these higher rates, including the lifestyle’s affordability, flexibility, and better amenities. Even when there are vacancies in co-living spaces it’s still possible for the unit to produce anywhere from 30-50% higher than normal rent for a similar, single-occupancy unit.

Reduce the risk of sub-letting
In areas where rent is high many tenants sneak in a roommate without making the landlord aware. Co-living spaces all but eliminate this common risk of sub-letting since tenants don’t need to fill open bedrooms. Instead, the property manager or landlord can vet applicants.

What are the disadvantages of co-living for investors?

Investors can be wary of investing in co-living properties due to higher turnover rates, non-standard lease terms, and the expenses related to turning traditional apartments into co-living spaces. Some may find it a challenge to create and organize the events that support the best communal living experiences, as well.

COVID-19 and co-living spaces

Industry analysts remain optimistic about the co-living sector. A lot of co-living companies and complexes are in highly populated cities, and near major universities. Gregg Christiansen, president of co-living company Ollie, stated in a Fox Business interview that “Most of this demand came from students that didn’t have the opportunity to go home to their families or another location to go to when the campuses closed. It gave accessibility and a seamless transition for a lot of people that were displaced when college campuses closed.”

Co-living spaces have created an alternative to studio apartments, which are typically 30 percent to 40 percent more expensive. In fact, the social atmosphere that residents enjoy in co-living environments help bring a sense of normalcy while many are by themselves at home.

It may seem counterintuitive to quarantine orders to be sharing spaces with others – yet many co-living companies have found ways to ensure safety for their tenants. In addition to these new safety measures, they have also employed new methods to entice renters throughout the pandemic. One called Starcity, for example, has been offering concessions for housekeeping, access to online workouts, and rent discounts.

The future of co-living spaces in commercial real estate

While co-living hasn’t quite disrupted the multifamily sector, it could be a trend that steadily increases in popularity. Reza Merchant, founder of UK-based co-living company The Collective, told Forbes “The pandemic is going to be good for community. People are appreciating the value of connection more than ever and will look for it in the way that they choose to live in the future.”

 

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.

Single-family homes in high demand due to COVID-19

Following the Great Recession, the single-family rental (SFR) market experienced solid growth. In fact, the SFR market expanded by more than 3.8 million households between 2006 and 2016. Now, with COVID-19 a part of everyday life, this trend has continued as Americans rethink the kinds of lifestyles they want. With social distancing and stay at home orders in place, densely populated areas are losing their appeal to many, creating an uptick in interest for single-family homes.

Single-family homes are in demand

Demand for single-family homes was already a rising trend prior to the onset of the global pandemic. Experts are now predicting that the impact of COVID-19 could make homeownership more difficult for those who have suffered job losses, reduced salaries or potential decreases in credit scores. This means we may see an increase in demand for rental homes.

Whether renting or buying, data suggests that nearly one-third of Americans are considering a move to less populated cities, and in some regions, they’ve already relocated.

Real Estate Market Differences

Despite COVID-19, real estate investors continue to find profitable deals across the US. For 2020, experts have marked states such as Texas, North Carolina, Florida, Georgia, Tennessee and Arizona at the top of the list. Additional secondary markets have picked up steam, while expensive fees and high land costs have slowed others.

On the other hand, COVID-19 has created labor shortages in some markets, which means that some investors can’t get approval for property inspections while others have had job sites shut down. This all can mean delays in construction.

Why renters prefer single-family homes

Investors should consider what amenities will be in high demand, given the way COVID-19 has altered how people approach living and working. Outdoor living spaces, for instance, will be more appealing and having a home office will be a top priority for many.

Additional amenities that will likely attract long-term renters even after the pandemic is no longer an issue are:

Privacy – There are no other tenants right above, below or beside single-family inhabitants. Renters prefer this privacy. They don’t want the sound of their neighbors blaring music or TV coming through the walls, or of kids running and jumping in the unit above them. 

More space than a townhome, condo or apartment – Tenants have a lot of stuff! A single-family home provides more storage, with larger closets, basements, attics, and garages. Single-family homes could also provide space for a home office, washer and dryer, shed, and/or an outdoor living space.

Feels like home versus a rental – As mentioned before renters tend to feel more permanently set up in a single-family home where their pets and children can play in a backyard. In addition, it allows families with children to have school stability. Moving a child in and out of schools is hard for both kids and parents – and is preventable if they stay in one place.


Renters are paying their rents amidst COVID

Real estate investors across the country were expecting a period of increases in unpaid rents due to COVID-19. Surprisingly, this has not yet been the case. In May, Multi-Housing News reported that 87.7 percent of renters paid full or partial rent. For comparison, 89.8 percent of renters paid their rent during the same time period last year. Multi-Housing News goes on to say that as of July 5, 2020, 77.4 percent of renters made payments, and as of July 13, that number was up to nearly 88 percent.

The data doesn’t show any difference in payment trends between property types – it is largely the same between apartment, condos, townhomes, and single-family rentals. 

Advantages of investing in single-family homes over condos, townhomes, and duplexes

Appreciation – Single-family homes tend to appreciate faster than multi-unit properties. A single-family home is valued on supply and demand, while other rental properties are valued on rents and market condition.

Monthly cost savings – The monthly cost of owning a single-family home versus owning a multi-unit investment property can be significantly less. They’re typically easier to finance, carry lower interest rates, and don’t carry the burden of monthly condo fees. In addition, HOA fees are less common and lower on single-family homes, depending on your local market.

Liquidity – Historically, there’s a higher interest in living in a single-family home rather than apartments or multi-unit properties. Most of the market for live-in homes is due to people seeking to escape a shared wall with another person.This can make it easier for investors to collect income from their investments, potentially resulting in higher profits and more liquidity. 

Easier to manage due to longer leases – Turnover costs time and money. Updating, cleaning, repainting, and attracting new tenants can be expensive and exhausting. Tenants looking for a single-family home are more likely to sign longer leases. They tend to become more emotionally attached due to the ability to add their own touches to the property – planting flowers, adding their own patio furniture, watching their kids and/or pets play in the yard, etc. This reduces costs caused by vacancies. 

Even with the uncertainty of the market during the pandemic, investors have continued to flock towards single-family homes. They’ve noticed that owning a large pool of rental homes is allowing them to weather the crisis far better than initially feared. Many investors assume single-family homes will become more desirable to live in, but also more expensive to buy. 

Housing trends are likely to change or fluctuate as the U.S. recovers from COVID-19. While some variations may be subtle, staying acutely aware will help real estate investors make informed decisions.

 

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.

Keeping Employees Safe: How to Successfully Re-Open Your Job Sites

As states begin the slow, careful process of reopening, many of you might be wondering what your construction site will look like or what additional steps you can take to ensure your employees remain healthy. We’ve put together a list of ways you can help ensure your site is reopened safely.

Start by creating and posting a COVID-19 exposure control, mitigation, and recovery plan at each job site.

Next, designate a COVID-19 supervisor at every job site. They should be responsible for monitoring the health of employees and enforcing the job site safety plan.

a COVID-19 supervisor

Safety Training

Conduct a training on your job sites on the first day of returning to work, and weekly thereafter, to explain the new procedures and protective measures that are in place for all workers. Maintain social distancing during these training sessions. In addition, post the safety requirements in highly visible areas at each of your job sites.

Social Distancing

Ensure employees are able to maintain at least six feet of separation. Mandate that workers take breaks and lunch in shifts, minimizing the possibility of large group gatherings. Identify and control “high-risk areas,” such as those where workers typically congregate, to ensure they are practicing proper social distancing.

Minimize interactions between those picking up or delivering equipment and/or materials. Try to restrict the number of job site visitors and screen those that do come prior to their arrivals.

Personal Protective Equipment (PPE), Sanitation and Cleanliness

Provide employees with personal protective equipment such as gloves, goggles, face masks, and face shields.

Post information on hygienic practices, including:

  1.   Don’t touch your face with unwashed hands or while wearing gloves
  2.   Wash hands as often as possible with soap and water for 20 seconds
  3.   Use hand sanitizer
  4.   Clean and disinfect frequently touched objects and surfaces such as workstations, phones, machines, shared tools, and doorknobs
  5. Cover your mouth with your inner arm when coughing or sneezing

If an employee reports feeling sick and leaves the job site, immediately disinfect the area(s) where that person was working.

Employee health

Start each employee shift by taking temperatures and asking if they have a fever, cough, shortness of breath, fatigue, muscle aches, or new loss of taste or smell. Use a thermometer that is no-touch. If a no-touch thermometer is not available, the thermometer used should be sanitized between each use.

Encourage employees to stay home or leave the worksite when feeling unwell or if they’ve been in close contact with someone who is confirmed to have COVID-19. If an employee has a sick family member at home, he or she should inform his or her supervisor and that employee should follow the isolation/quarantine requirements set by the State Department of Health.

Don’t force employees to come back to the job site. If they don’t feel it is safe to return to work, they should be allowed to leave and stay at home.

These are some of the best practices that have been put into place where construction projects are up and running. The challenge for the construction industry will be to ensure workers can effectively do their jobs, sometimes in close quarters, while also protecting the health of everyone else on the job site.

For more information, updates and additional recommendations, visit the CDC website.

This blog was written as useful information only; use of the content provided herein is at your own risk.

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.

 

Resources:

https://abc.org/Portals/1/Documents/COVID/Phase%201%20Construction%20COVID-19%20Safety%20Requirements%20–%20Adopted.pdf?ver=2020-04-29-110843-967&timestamp=1588173670969

https://www.michigan.gov/coronavirus/0,9753,7-406-98158-528335–,00.html

https://www.cdc.gov/niosh/

 

 

The growing impact of Gen Z on the Multifamily Housing Industry

What Gen Z renters are looking for in their community and from property managers

 

Watch out, there’s a new generation defining the future of the multifamily industry. While millennials make up 56 percent of the rental market, Gen Z comprises 74 million people, making it equal in size to millennials and baby boomers. Even though they may be young, they have money to spend. They contribute $44 billion to the U.S. economy and it’s only a matter of time before they head into the rental market.

If you rent to college students, you might already be familiar with the preferences of Gen Z renters. If not, you may ask yourself how different are their preferences from those of the millennials? The primary difference is their relationship to technology. Gen Z relies on social media and the internet to make purchasing and lifestyle decisions more than millennials. They understand how to leverage technology to benefit them and find the information they need.

Personalization

Gen Z is used to having everything personalized just to their liking. From their playlist to their newsfeeds, their world is designed to their tastes and interests. Look further and you’ll see that this generation is the most connected to brands through which they can build experiences. For commercial real estate, this means cultivating individualized tenant experiences.

Affordability

Finances are often front and center for most generations, but even more so for Gen Z. They would rather put their money into their businesses and savings accounts than into rent. Rental prices that allow them to do this while not feeling house poor are ideal. Longer term leases, 18 to 24 months, are more attractive to this group than 12 months. They appreciate the stability and they want to know what their rent will be over a year from signing to avoid worrying about what their next step is.

Human interaction

Gen zers having a game night in apartment complex

Community. Gen Z craves community, one that helps build a creative network. Incorporate resident events and other activities such as movie night, pool parties, and game nights. If your apartment community hosts property-wide events and spaces, make sure you promote them. This will help attract Gen Z renters and help build your commercial real estate community.

Positive messaging

88 percent of Gen Zers invest in companies that share their values. Have you sponsored a charity event or local sports team? To attract these renters, use social media to share your apartment community’s involvement in the neighborhood.

Authenticity

As mentioned before, this generation craves a company they can connect with and trust. Figure out your community’s brand and core values, then start building an authentic marketing campaign around it. Share residents’ stories, educate renters and provide them the opportunity to build relationships.

Energy-efficient amenities

 

Again, this generation is passionate about environmental causes. In fact, the majority of them define success as having made the world a better place. So, investing in green amenities is worth the upfront costs. Whether you’re building new or updating older units, make more sustainable choices. For example, upgrading the windows to energy-efficient panes and installing eco-friendly appliances are good places to start.

Consumers drive the market, and the best businesses are the ones that meet and exceed those needs. Gen Z may be new, but they are making a large impact on the multifamily industry. So get social and start reeling in new residents!

Broadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed real estate investment trust (“REIT”) offering short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. The company has originated over $2.2 billion in loans since its formation through a rigorous and responsive underwriting process. Have questions? Contact one our lending experts today.