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Apartment Articles

"Market Forecast '99 - Expenses"

Originally appeared inNM Apartment Report
Property Taxes Bernalillo County's taxable residential properties are close to $4.5B - Ohio firm has recently been awarded a $1.8M contract to reassess 13,000 commercial and industrial properties in the Country (Cole-Layer-Trumble Company) - Plan is to circumvent the 9 month reappraisal process down to 4/1/99. - non residential values increased 42% from 1988 to 1998 from $1.6B to $2.3B - Residential values jumped from 66% from $2.7B to $4.5B - the end result? Anticipate a property tax bill increase of at least 10% for 1999, with a potential similar decrease in 2000 (reflecting 1998 decreased sales volume). Property Insurance A survey of independent insurance agents indicated that they did not anticipate an increase in insurance rates. Off-Site Management Since most management fees are based on a percentage of income collected, a raise any future rates is not indicated. A couple of management companies have indicated that they are currently managing of properties at a reduced or no fee for a temporary amount of time to maintain accounts declining properties. Payroll Portfolio Manager - $40,000 to $50,000 depending on portfolio size and experience Manager (200 units) - $30,000 to $35,000 depending on experience Assistant Manager - $8-10/hr depending on experience Leasing Specialist - $7.00/hr Cleaning/Janitorial/Housekeeper - $6.50/hr Maintenance Engineer (w/o qualifications) - $10/hr, (w/HVAC certification) $12/hr In 1996 portfolio managers were in hot demand, in 1997 on-site managers were scarce (and expensive), in 1998 maintenance engineers have been difficult to find, forcing the expense for qualified engineers up dramatically. Repairs & Maintenance Historically, repairs and maintenance have been on an upward trend, especially for those older communities that were struggling to be competitive. Subject to age and condition, look for this number to remain constant. Utilities Gas/Electricity - According to the Public Service Company of NM, there are no plans in front of the Public Utility Commission to raise either gas or electrical service (although recent articles in the Albuquerque Journal indicate that the PUC/PRC is actively looking to reduce these rates) Water/Sewer/Refuse - The City of Albuquerque intends to raise these rates approximately 9% starting in July of 1999. Advertising An increase in advertising is not anticipated. Supplies As many communities become "online" look for this category to increase to cover a new internet ready computer, additional phone line, and monthly access fees. Misc. The catch all for everything missed will most likely remain constant Contract Services Janitorial - little change if any. Pest Control - The exceptionally warm winter might be an indicator of a "buggy" season - anticipate more applications. Landscaping - until a competitive firm steps forward, look for little changes here, although the recent move to "xeriscaping" should have seen a decrease in time required on site. Security - as an annual expense item, many owners are choosing to fence and gate their community with the replacement reserves to eliminate this annual expense. Unit Turnover - look for this number to remain constant, then decrease sharply when concessions are recognized for the scourge they are and finally eradicated like a bad virus. Replacement Reserves A quick survey of lenders indicated little change in this lender driven parameter. A quick survey of owners have indicated that they have been able to lower their repairs and maintenance costs by pushing some of these items into the capital replacement reserves.

Article by
by Todd Clarke CCIM (www.nmcomreal.com/nmcomreal)
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