T
he apartment is clean, but modest, with two small bedrooms up, one bathroom down, a kitchen and a living room.
It’s located upstairs in a 115-year-old building, on a side street within sight of the Portland Expo. It’s in the city’s Parkside neighborhood, where “no cruising” signs are meant to deter prostitution.
But the price makes up for any shortcomings: $1,025 a month, including heat, hot water, a stove and refrigerator. In Portland in the summer of 2015, it doesn’t get much cheaper.
The owner, Carleton Winslow, posted the apartment on Craigslist in late June.
The ad went online with no pictures. It was near midnight. Within 10 minutes, he had the first two replies. The next week he held an “open house,” just as a Realtor might do to save time and attract wider interest when showing a home for sale.
Winslow rented it to the first person, who arrived before the open house was set to begin. Then he rented another apartment across the hall to a couple who came too late to snag the first unit, even though the second dwelling was still being repaired and not ready to occupy.
Winslow said he got more email queries, but didn’t bother to answer.
“Right now, Portland is hot,” said Winslow, who has been a landlord for 43 years. “Up to a point, you can pick and choose” your tenants.
That’s an understatement. By several measures, this is the best of times for landlords in Maine’s largest city. Portland’s growing national profile as a dynamic place to live, work and retire has stoked the demand for housing, while a shortage of rental units has collapsed vacancy rates.
That’s tough for tenants but great for landlords, who charge prospective tenants just for applying, require upfront lease payments of several thousand dollars and get to be highly selective about who lives in their buildings.
Average asking rents in Portland have shot up 40 percent in the past five years, and most of that growth has come in the past three years, according to historical data from the Maine State Housing Authority and a Portland Press Herald analysis of current rents. The newspaper’s analysis of apartment listings in September and October found the average two-bedroom apartment in Portland renting for $1,560 a month, up from a 2010 inflation-adjusted average of $1,115.
Strong rental growth is a national trend, but it’s unclear how it translates into profit for Portland landlords.
There are no public disclosures to reveal how much money is being made by the varied private businesses that dominate the city’s property owners. But data from a small number of Portland properties followed by Axiometrics Inc., a Dallas-based research firm that tracks housing markets, showed average rental revenue was up 8.1 percent for the year ending in September. Rental revenue for those properties climbed 13.8 percent the previous year, Axiometrics said.
Brit Vitalius, president of the Southern Maine Landlord Association, said gross income generally is up, and that many owners are taking advantage of the market to make fire code and energy upgrades, and cosmetic improvements to meet tenant demand. And, he said, the rising market value of apartment buildings has pinched overall return on investment, a key measure of the profitability of a rental property.
Vitalius said returns that had been in the 9 percent range for Portland landlords in recent years are now 7 percent or lower, meaning that a three-unit building worth $500,000 generates $35,000 or less in net annual income.
R
egardless of whether landlords are raking in cash, the escalating market has put greater power in their hands, and they are using it in many different ways.
At the same time rents are rising, some landlords are now asking tenants for the first and last month’s rent, on top of a security deposit, all of which can mean forking over an upfront sum of more than $4,700, based on median rent levels. In addition, some landlords are charging non-refundable application fees of between $25 and $50, and using Web-based background screening services such as Tenant-Net that search rental histories and financial profiles.
In June, Winslow was at a monthly meeting of the Southern Maine Landlord Association, where Vitalius was talking about how to make an apartment ad more appealing online. Cozy images of a wood floor and fireplace could help, he said.
Then, noting that the market was “insane,” Vitalius added: “You probably could paint your walls pink.”
Against this backdrop, some landlords are taking advantage of the demand by neglecting their properties, subjecting their tenants to conditions that violate city housing codes, from unsanitary buildings to missing smoke detectors. Others feel a responsibility to be flexible with tenants, and at least one said he’s making a special effort to work with housing hunters who otherwise would be priced out of Portland.
The unsatiated demand for rental housing is evident at both extremes of the market.
At the low end, Portland-based Avesta Housing, one of the largest nonprofit developers of affordable housing in New England, had 1,897 requests for apartments in Portland during a six-month period ending in July, a 27 percent increase from the same period a year earlier. The City Council voted in August to give Avesta a tax break to build a 37-unit project in Portland’s West End neighborhood, with subsidized rents ranging from $540 to $1,044.
At the high end, suburban empty-nesters and young professionals began moving last spring into West End Place on Brackett Street, Portland’s first new market-rate apartments in 30 years. Rents for the 39 one- and two-bedroom luxury units range from $1,400 to $2,500 a month.
The tight market also has created an environment in which some landlords have less incentive to properly maintain their properties, or comply with all health and safety requirements.
This approach came to a tragic head last November, when a fire at 20 Noyes St. killed six people. It was the city’s deadliest fire in 40 years. In July, the property owner, Gregory Nisbet, was indicted on manslaughter charges and safety code violations. He pleaded not guilty.
Whatever the legal outcome, the fire has been a wake-up call for landlords. A survey last spring of landlord association members found 54 percent had taken some action related to fire safety since the Noyes Street fire.
But the issue is complicated. Landlords complain, for example, that some tenants disable smoke detectors because their cigarettes or kitchen stoves trigger the alarms. Winslow said he now requires tenants to sign and date a form confirming they have functioning detectors and agreeing to notify him if they aren’t working.
The fire also has been a wake-up call for the city. Portland is creating a new database of landlords and rental properties, beefing up its process for inspecting the city’s 17,585 rental units and ramping up a new housing safety office, funded by fees on landlords.
P
ortland’s landlords are a diverse group. They range from public agencies such as the Portland Housing Authority, which operates nearly 1,000 rental units, to owner-occupied buildings with one apartment.
The Noyes Street fire and the combination of rising rents and low vacancies have increased public interest in who owns rental housing and how it is operated. In the absence of a city database, though, big gaps exist.
One example: The city’s largest private-sector landlord wants to keep a low profile.
Port Property Management operates more than 900 units in Portland and South Portland, according to its website. It also has some of the most stringent rental requirements in the area. They include a $35 nonrefundable application fee; gross monthly income of at least 2½ times the monthly rent; two recent years of rental references; and a background check/credit history showing a credit score of at least 620. Some requirements can be waived with a co-signer, who also must submit a $35 nonrefundable application fee and have a credit score above 680.
Port Property isn’t regarded favorably by people posting comments on the Yelp online review site. As of early October, it had received seven reviews. Only one was positive, for a rating of 1½ stars out of five.
Stephanie Tranter, the company’s director of leasing and marketing, said she was unable to speak to the media about the business. Port Property’s co-founder, Tom Watson, didn’t respond to phone calls or emails from the Portland Press Herald.
O
ther major landlords that didn’t respond to the newspaper include BellPort Property Management, which oversees more than 300 units in the area, and Sidelinger Apartments, which manages 227 units.
But James Ernst, a property manager who works with Sidelinger, gave some insights into how property owners operate in today’s overheated market during a presentation at the landlord association dinner. Ernst, an association vice president, offered several strategies to his fellow property managers. They included:
• Sign leases for 13 months, rather than one year. That extra month adds up over many units and provides a cushion if the tenant plans to move out when the lease expires.
• Require a 60-day move-out notice dated on the first of the month. That makes it easier to bring in a new tenant without weeks of vacancy.
• Offer cash to problem tenants to entice them to move out before their lease is up.
“You have systems and processes to be more efficient and still deliver a quality product and service,” Ernst said after his presentation.
Screening for good tenants is a major focus for property owners, who use various approaches. Some rely on Web-based research services. Some run credit checks. One owner said she just “goes with her gut.” But Vitalius warned that landlords must be consistent with how they screen every applicant, to avoid possible discrimination charges.
Maine law gives landlords latitude when selecting tenants but does not allow them to discriminate based on a list of specific reasons, such as race, gender, sexual orientation and family status.
For major landlords, the balancing act in today’s market is finding and retaining good tenants while maintaining rents that support business goals. Two companies are doing that, with different approaches.
Based in Lowell, Massachusetts, Princeton Properties Management Inc. oversees 6,000 units in four states, including 477 in Portland. They include Princeton on Back Cove and Princeton Pines.
Portland is one of the company’s highest-growth markets, said Sarah Greenough, Princeton’s chief marketing officer. Rents for a typical two-bedroom apartment have risen from $1,100 to $1,300 – or 18 percent – over the past two years, she said in an interview last summer. In recent weeks, some of the company’s two-bedroom units have been listed for $1,500.
“Portland has been extremely strong for us,” she said.
Princeton constantly is testing the market, Greenough said, analyzing supply and demand and competitor prices. It seeks to raise rents by at least 3-4 percent a year.
“We don’t tend to follow,” she said. “We try to lead.”
The company also uses “lease expiration management” techniques to avoid vacancies. It writes leases that expire in the summer, when demand is higher. It avoids winter vacancies and paying to heat empty units.
But the company also makes investments to give tenants value, she said. It offers community gardens and bike-sharing programs and keeps up with capital improvements, such as new siding. It only requires the first month’s rent and the security deposit. This formula has led to a 95 percent occupancy rate, the company’s target.
W
ith market conditions favoring landlords, some owners try to balance profit with a professional obligation to provide shelter to people who need it.
Apartment Mart is a 62-year-old Portland company with 300 units in the area. It’s a third-generation family operation that’s in transition, with Adam Rice being groomed to take over the business from his father, Jeff, who helped start the company with his parents.
Like Port Property Management, Apartment Mart has a high bar for tenants. It asks for first and last month’s rent, plus the security deposit – equal to three month’s rent to move in. It requires three years of good rental history, good credit and no criminal record.
Typical rents for two-bedroom units have gone up this year, from $1,000 to $1,100 or so to $1,200 to $1,500, Adam Rice said. Over the summer, the company took advantage of turnover when college students moved out to renovate many units “to compete with new local developers,” he said.
Several are two-bedroom, two-bath units in historic buildings. Heat and hot water are included in the rent, although parking is extra, from $80 to $120 a month.
But Rice said Portland’s overheated rental market is leading him to be more flexible and work with promising tenants.
“We always start in the same place,” he said, “but sometimes we just need to do things differently to accommodate a good person finding a place to call home. Portland is currently booming to accommodate the upper class, and forgetting the lower and middle classes.”
Rice said he tries to keep in mind his family’s humble heritage – his grandfather started out selling ice on the street.
“It takes a lot of work to make so many different special accommodations, pay the bills and ensure so many tenants are happy, but it is well worth it,” he said. “Apartment rentals cannot be just about making money. Our commodity is a necessity to life, and without making sure we are being extra thoughtful, we are not doing the best we can.”
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