Renovator

SECOND QUARTER

BIG RETURNS FROM SHORT STAYS

LET YOUR MODEL UNIT SHINE

SEND IN THE B TEAM FOR BIG GAINS

A CULTURE OF COMPANY TRUST

2017 PRESENTED BY UNITED RENOVATIONS

SECOND QUARTER 2017

VOLUME

1, ISSUE 2

RENOVATING TO BUILD COMMUNITY Resident Retention Through Relationships

LETTER FROM THE EDITOR

PHOTO DAVID HALLORAN

The capabilities and scale we can offer is because of the incredible people we have.

Taking a Moment

S

ometimes you lose sight of the main thing as you go about your day to day operations, successes, and challenges in business. The main thing is not money. It is people. Employees, renters, vendors and clients constantly intersect in the multifamily industry. To lose sight of this is to miss the incredible opportunities we have daily to change and impact lives.

Community spaces and amenities are not just a means to achieve ROI, they are vehicles for human connection. Reading through some of the articles in this issue, it was a helpful reminder to always be thinking about the people who are enjoying your updated property. The families laughing in the pool, the kids playing on the playground, the young professional enjoying a walk with the dog around the dog park. These are all people we may never know but will impact through our work.

This type of thinking is constantly challenging us as a company. United Renovations has worked hard over 15 years to provide our clients with the most valuable partnership. As we have built the largest national foot-

print among multifamily renovation companies, we realize our success is all about our people. The capabilities and scale we can offer is because of the incredible people we have. We are always working to get better at keeping the main thing in view. We are thinking differently to ensure our people and our customers continue to embrace UR as a best place to work and a best partner to have.

Now, think about your residents and the potential impact your projects have on their lives. And yes, think about the money. At that intersection, you may just find the most value and greatest return on investment personally and professionally.

JR Bolos Executive Editor

2

TA B L E O F C O N T E N T S

30 BUILDING A SENSE OF COMMUNITY Building a sense of community is harder with multifamily housing. Take the initiative to connect residents and create a neighborly feel with these creative community spaces.

36 NEW SHARING COMPANIES AND THEIR INDUSTRY IMPACT Sharing companies such as Airbnb are changing the apartment renting game for the better. Owners, take notes.

42 BRING BACK THE MODEL UNIT It’s said that people eat with their eyes first. Well, people also buy with their eyes first. Having a model unit in place is a critical selling point in multifamily units.

48 THE B TEAM In terms of property class, owners should look for Class B apartments rather than Class A to save money and maintain returns.

52 ISSUE OF TRUST Creating trust between employers and employees is crucial for business growth and success. Use these ideas to work toward a more trustful, open work environment

09 BUSINESS Check out the hot (and not so hot) emerging markets for multifamily housing, see how elections affect the housing industry and write your own stories for units before someone else does

17 PROTECTIONS Be proactive instead of reactive about roof maintenance, and protect yourself when hiring general contractors 20 HOW-TO

12 INTERIORS Create must-have storage space with these innovative ideas and give tenants more control of their units with tech amenities

Add value to kitchens with paint, create high-value design with low-budget impact, and install siding properly

3

27 ASK AN EXPERT Common issues that occur during renovations and maintaining occupancy during renovations 56 ON YOUR WAY OUT Take caution when fixing renovation problems. You just might cause another you never dreamed of tackling.

MEET THE TEAM

MARY ANNA EVANS Mary Anna Evans’ work has appeared in The Atlantic, Dallas Morning News, Seattle Times, EarthLines and many other publications. She is the author of the awardwinning Faye Longchamp archaeological mysteries, and her latest book, Burials, was released in March 2017.

DAVID HALLORAN David Halloran is a freelance photographer and writer and the former photo editor for American Airlines’ in-flight magazines. In addition to published work, David also has images in museums and teaches photography workshops in the wilds of West Texas.

JAN HUBBARD Jan Hubbard is a freelance writer in Dallas.

He previously worked at Newsday in New York, the Dallas Morning News and the Fort Worth StarTelegram. He also spent three years at American Way magazine and wrote cover stories on Harrison Ford and Steph Curry. He has written three books on the NBA. Find him on Twitter: @whyhub

MOLLIE JAMISON

AMANDA OGLE Amanda Ogle is a freelance writer and editor based in Fort Worth, Texas. She was a former editor at American Way magazine and loves to spend her time traveling, reading, playing with her dog and being outdoors.

SAM OSTERLING Sam Osterling is a freelance writer from Huron, Ohio. Passionate about movies, hunting, reading and Cleveland sports, he’s currently based in Norman, Oklahoma.

ADAM PITLUK Adam Pitluk is an award-winning journalist.

Formerly, he was the Director of Publishing at American Airlines, a reporter for Time and People magazines and an adjunct professor at the University of North Texas and the University of Texas at Arlington. He’s the author of Standing Eight and Damned To Eternity.

ALYSON SHEPPARD Alyson Sheppard is a writer and editor based in Dallas. Her work has appeared in Popular Mechanics and Celebrated Living magazines, among others. You can find her on Twitter at @amshep.

JR Bolos Steven Kirlin ART DIRECTOR Shawn Willis ADMINISTRATIVE MANAGER April Woods

Mollie Jamison is a fulltime freelancer and native Texan. She has published stories in Cowboys and Indians magazine, Dallas Observer, DFW Child Magazines and West Fort Worth Lifestyle Magazine.

She enjoys running, hiking, wine tasting and contemporary art.

Adam Pitluk David Halloran EDITORIAL DIRECTOR Amanda Ogle SALES DIRECTOR Bob Grossman

EXECUTIVE EDITOR

GROUP PUBLISHER

EDITORIAL DIRECTOR

CREATIVE DIRECTOR

EDITORIAL OFFICE

ABOUT MIDWEST LUXURY PUBLISHING

3200 Earhart Dr. Carrolton, Texas 75006 972.848.1001 renovatormagazine.com LETTERS TO THE EDITOR

editor@renovatormagazine.com

Midwest Luxury Publishing is a full-service communications outfit made up of experienced industry experts. Based in Dallas, let us be your turnkey outfit for all your communications and publishing needs.

CONTACT THE PUBLISHER

midwestluxurypublishing@gmail.com midwestluxurypublishing.com 972.378.4845 FOR ADVERTISING INQUIRIES

bob@groomlakemedia.com

4

STEVEN KIRLIN Steven Kirlin joined UR in 2014 and is the Marketing Manager, supporting digital/print media, graphic design and marketing strategy across all UR companies and the UR Hope Foundation.

He is actively involved in expanding UR’s reach.

AJIA MEAUX Ajia Meux is an Oakland, California, native by way of Washington, D.C. She is a freelance writer and her work has been featured in the Dallas Morning News. She can word-smith just about any topic, but her focus is culture writing.

ELANIE STEYN Elanie Steyn teaches journalism, media management, business of media and leadership at the University of Oklahoma. Her research interests focus on women in media leadership, international media studies and media management.

BRIGETTE WALTERMIRE Brigette Waltermire is a public affairs specialist with the Air National Guard. She writes and edits for Air Observer, the journal of the 137th Special Operations Wing, which was voted best digital publication by the Department of Defense.

Renovator is published quarterly on behalf of BNB Publications, LLC by Midwest Luxury Publishing, a subsidiary of Midwest Luxury Rentals, LLC. All material is strictly copyright protected and all rights are reserved. No part of this publication may be reproduced in whole or in part without written permission of the copyright holder. All prices and data are correct at the time of publication. Opinions expressed in Renovator are not necessarily those of Midwest Luxury Publishing, and Midwest Luxury Publishing does not accept responsibility for advertising content. Any images supplied are at the owner’s risk and are the property of the owner.

Printed in Dallas, Texas, USA ON THE COVER

Indigo Creek Apartments Glendale, AZ

indigocreekapartments.com Photo by Mark Zemnick

Congratulations

Renovator issue one is a finalist* for best new publication/trade & consumer and best quarterly/trade at the 2017 Western Publishing Association MAGGIE Awards. *WINNERS WERE NOT ANNOUNCED AT PRESS TIME

MIDWESTLUXURYPUBLISHING.COM

6

NON PROFIT

Changing Complexes to Communities Non-profit Apartment Life gives a neighborhood feel to apartment complexes

BY BRIGETTE WALTERMIRE

A

would be effective when planning community events like networking opportunities, social hours at local restaurants and exercise classes.

“They have to choose to come out initially, but being proactive on our end is what starts it,” says Dalrymple. “It’s rewarding in the sense that we get to have more of a community around us.”

It is important to Apartment Life to place CARES Teams with faithbased values, but their operations within the apartment complex are not religious in nature. They hire people who have people skills and a “warmth and love and desire to care for their neighbors,” says Dobbs.

Having that internal community increases retention rates and referrals for complexes and improves staff relations with residents, according to Apartment Life. A survey conducted in Florida and Texas showed around one-third of 415 residents credited CARES teams with their decision to renew their lease. “[Apartment Life] succeeded because the business aspect doesn’t pay attention to the human dimension by really serving the deeper needs of their residents,” says Dobbs.

Apartment Life typically has a presence in mid to upper-class complexes, but is looking to expand its product of creating neighborhood communities by developing a way to blend the goals of the current CARES program in a way that would allow people to successfully serve the needs of lower income apartments, in addition to senior and student housing.

partments tend to be thought of as transitional spaces by residents. Communities do not naturally develop, and residents can go their entire lease without knowing anyone else in the complex.

Apartment Life, a faith-based nonprofit organization, has been changing apartment complexes to communities since 2000 by placing people in the complex with the specific goal of creating opportunities for residents to connect with their neighbors and fellow residents, according to Stan Dobbs, founder and CEO of Apartment Life.

Apartment Life started with a CARES Team at one property in north Texas and has since grown to encompass 25 cities and nearly 400 communities.

CARES Teams consist of married couples, a family, or two single adults that serve “to build community and serve residents by doing things that flow naturally out of the Christian lifestyle,” according to the Apartment Life website. The complex owners invest in the team by providing a unit, paying a monthly management fee and providing a budget for on-site activities and social events. In return, teams live in these complexes and work to help owners and managers cultivate a connection among residents.

Matt Dalrymple and his wife joined CARES because they wanted to help change the disconnect in today’s apartment culture. They were placed in a complex where demographics match their hobbies and interests. Once moved in, they reached out to residents to gauge what

They hire people who have people skills and a “warmth and love and desire to care for their neighbors.”

7

BUSINESS

The Hot List

If you build it, will they come? Emerging and de-merging markets in multifamily housing.

BY AJIA MEUX

L

ast year was a successful year in the multifamily housing industry with most markets seeing heavy supply and solid absorption rates. Industry experts are predicting that even though supply is likely to continue in 2017, rental rates will slowly decrease, leading to oversupply. This trend is likely to impact Class A inventory, where construction has been concentrated, leaving opportunities for Class B and C units in higher demand, according to Yardi Matrix’s U.S. Multifamily Outlook Winter 2016 report. This is a great opportunity for investors still looking for emerging markets where rent growth and absorption rates remain strong. So, where are those markets?

Yardi predicts a 5.3 percent increase of supply from 2016, with a total of 320,000 new units.

The new supply will be led by Dallas (25,000), which has a strong apartment absorption rate due to its diversified economy, and Houston (15,000). The report, however, highlights Houston’s vulnerability to vacancy rates due to oversupply.

JLL’s Q4 2016 report indicates that, at the close of 2016, Nashville, Charlotte, Raleigh-Durham and Atlanta outperformed national average annual absorption rates, with Charlotte and Nashville outpacing markets for

recent development activities. In addition, the report points to Austin (3.6 percent) and San Antonio (3.4 percent) as markets that have seen sizable development gains and resilient absorption over the last year.

Experts suggests that strong construction has increased supply in Washington, D.C. (13,700), Denver (12,000), Atlanta (11,100) and New York (30,000). The increased supply presents a concern since it could impact rent growth and ultimately increase vacancies. In California, the Bay Area market is working on absorbing new, high-end supply, while Los Angeles is seeing construction only at 2.1 percent.

Research is clear, however, that the west will lead the industry with a mix of secondary and tertiary markets due to strong economy and income growth. Sacramento (6.4 percent) will lead the market due to the Bay Area’s need for greater affordability. Seattle (5.9 percent) is followed by neighboring Tacoma (5.8 percent). Portland (4.9 percent), Colorado Springs (4.7 percent) and Phoenix (4.5 percent) round out the top six in the west, with Tampa (4.4 percent), Chicago (4.4 percent), Jacksonville (4.3 percent) and Los Angeles (4.2 percent) completing the list. As local economies strengthen and income grows, potential renters will be attracted to these areas leading to higher demand in housing.

9

THE IMPORTANCE OF GROWTH About 90 minutes north from the Bay Area, Sacramento boasts a diverse population of approximately 400,000 residents and a steadily gaining median income of approximately $63,000. California’s capital city outpaces Yardi’s national rent averages, with the most expensive neighborhoods in Midtown, Campus Commons, Creekside neighborhood in Natomas and downtown. The increasing rental rates is due to the lack of new housing units.

BUSINESS

ILLUSTRATION BRIAN SMITH

Multifamily real estate market in the post-election era Either positively or negatively, elections always affect the market.

BY ELANIE STEYN

F

or decades, U.S. presidential elections have impacted the economy, including the real estate market.

While some citizens benefit from opportunities to, for instance, become firsttime homeowners, others suffer significant losses due to declining markets and a drop in property prices.

Even in the run-up to the recent presidential elections, commentators predicted that the outcome was set to have a profound impact on local economic trends.

This inevitably included the real estate market. As both presidential candidates hinted toward implementation of new economic policies, investors were likely to become more hesitant to look toward expanding their real estate portfolios.

Now that the election is over, analysts are debating the potential impact of the results and the current Trump administration on various sectors of the real estate market.

These include tax reform that is most likely to benefit investors, looser regulatory oversight that could potentially encourage developers to expand their market activity, an increase in investment that could positively affect productivity levels, job creation and the national economy in general but at the same time proposed tariffs and trade restrictions that could delay economic growth over the longer term.

Focusing specifically on multifamily markets, recent CBRE Research showed that investors can expect a slower growth in rate-related income and rises in vacancies in the upcoming year. Similarly, predictions show that high-end development in this market might be stabilizing in 2017 as more affordable developments in downtown areas becoming more of a trend.

These trends have led economists to believe that multifamily lending is currently one of the two greatest risks to financial institutions in the country. In spite of this, lenders seem to still believe that issuing new loans to this sector is something they feel very strongly about. So strongly, it seems, that as of mid2016 the country saw half a million apartment units under construction. The highest since the mid-1980s, according to CoStar. However, warning signs indicate investors are overpaying for properties and are overestimating what they can get from these properties in the form of rental income.

There seems to be no clear answer to the question of what the effect of the 2016 presidential election will be on the multifamily real estate market in the U.S. While some investors and commentators seem highly optimistic, others are playing it safe. It seems that only time will tell.

10

As both presidential candidates hinted toward implementation of new economic policies, investors were likely to become more hesitant to look toward expanding their real estate portfolios.

BUSINESS

Relationships in Brokerage: Community Storying Now and Future

This apartment draws influence from the art deco styling that Miami is known for.

Tell the story of the city

BY ELANIE STEYN

E

very community has a story. A past. A future. Today’s consumers, including apartment renters, allow a product’s narrative to inform their decisions and build loyalty. Multifamily properties have an incredible opportunity to leverage buyer behavior and community storying to maximize renters and guide renovations.

Property owners can leverage storying in every phase of their business: buying, selling, and during management. The unique elements of their city and/or property historically should speak to them as they explore and invest, as they grow with the city and ultimately become a part of its larger story.

If your property is in a historical area, tie value to the history. If it is in a new area, tie value to the future. What are the city’s plans for future growth? Often these plans can provide a way to leverage your property’s value and position it strategically among future renters.

Apartment communities are interwoven into the fabric of cities. They are communities within a community. Viewing your asset from property name to design as a part of a local story can give you a creative and competitive

advantage. If your city is known for music, consider integrating elements of local musicians into your design. If you are near a major sporting venue, incorporate some design theme around the team. Make connections to the community and to the renters who live there.

As technology develops, becomes more personalized and accessible, you have the tools to better tell and discover the story of a city than ever before. Through visuals, infographics, statistics and more, “storytellers” can showcase a message tailor-made to their audience. Technology can become the platform through which owners establish relationships with future renters and form networks that would multiply the power of the story they tell about their city.

If property owners and managers are successful in storying, their properties will be more competitive, create renter demand, and establish themselves as an integral part to their communities. If not, the story of your property, for better or worse, will be told by someone else regardless of concern for your property’s reputation.

11

The unique elements of their city and/or property historically should speak to them as they explore and invest, as they grow with the city and ultimately become a part of its larger story.

INTERIORS

Storage, Out in the Open Americans love their space, so utilize it with proper storage options

BY MARY ANNA EVANS

R

enters like storage. But will they pay for it?

As it turns out, renters like storage even more than they like money...when it comes to the rents they pay.

A recent Concept Community survey reported by Multifamily Executive asked American renters how they felt about closet space, tackling the all-important concept of Return on Investment (ROI). The surveyors asked more than 84,000 American renters how much they would pay in extra rent for expanded closet space, and the results were clear. Nearly half of all renters — 49 percent — were willing to pay an extra $75 per month to trade a standard four-foot by six-foot master bedroom closet for one that measures ten-by-six feet. Even more notable from the standpoint of ROI, almost as many of them were willing to pay an even higher premium for that big closet, with 45 percent willing to pay $100 more per month for that extra storage space.

But the willingness to spend more on storage ends somewhere, whether it be at $100 or $200 per month, and closets have a cost beyond dollars and cents — floor space. Does our

focus on storage space miss the point? Does it cause us to overlook storage possibilities that organize our stuff without requiring a closet with a square-footage-hogging footprint? Perhaps the “tiny house” movement has a message for everybody when it proclaims “Hang everything on the walls!”

Installing simple, inexpensive products designed to use walls for storage — shelves, hooks, bulletin boards, and the like — has the potential to yield an even higher ROI than building yet more closets. Carefully chosen wall storage can be a decorative asset when prospective tenants are touring, and wall storage units require no sacrifice of floor space.

Decorative shelving, which ranges from open shelves in a European-style farmhouse kitchen to floating shelves hung in a minimalist office, has an additional psychological benefit beyond its ability to organize books and mementos. It allows prospective tenants to visualize their prized possessions in your unit as part of a personalized décor.

Add a wall-based mail-sorting unit, bulletin board, and phone center to those shelves, and the home gains much of the functionality

12

of the kitchen desks that are rapidly losing popularity. Popular wisdom has decided that office space in the kitchen takes up too much space for too little benefit, but that is not a problem when the bill-paying station is hung at eye level.

In the living area, a set of decorative hooks near the door adds style, while expanding capacity for jackets and sweaters beyond the standard coat closet. The same hooks hung in bathrooms and closets will enhance your tenants’ private space as well.

Off-the-floor storage stirs enthusiasm in followers of the tiny house movement, boat owners, RV owners, and anyone for whom space is a premium. In the end, though, isn’t space a premium for all of us? Your tenants will appreciate creative ways to make existing space do more, and so will the future tenants who admire your properties’ space-efficient storage as they decide which home to call their own.

INTERIORS

DON’T STUFF IT, HANG IT These products from ILoveHandles marry wall-based functionality with a pop of style (clockwise from top left): • Switchboard’s wooden expanse stands in for minimalist art until transforming into a coat rack.

• Keep Track organizes office supplies.

• Smorgas is a customizable bulletin board with minimalist chic.

• Plank holds everything people want to leave at the door.

Co-owner Rich Moore says, “We make everything as clean and minimal as we can, but clean describes it a little better for us. We’re not reducing for the sake of reducing. We’re getting to the most elegant solution we can.”

ILoveHandles uses in-house designers, so Moore can describe their products’ evolution. Smorgas happened when an architect experienced with wood and magnets decided he didn’t like any available bulletin boards. He describes Plank as an elegant solution to the car key dilemma. “It’s a shelf that holds everything when you walk in the door.

It’s no bigger than it has to be.”

13

INTERIORS

What’s Your Apartment’s IQ? With technology constantly evolving, renters want convenience when it comes to apartment amenities

BY MARY ANNA EVANS

A

partment renters want control and convenience. They want smart features that make life easier. Online retailers are changing retail and package delivery is changing the apartment industry.

It is critical to remember what is driving the trend toward online shopping: a desire for convenience. With packages arriving in a day or two, poor management at the local level can result in packages taking longer to make their way upstairs to the recipient’s apartment than it took those packages to make a cross-country trip.

Package lockers are a workable solution made more efficient by technology, and they can now offer the personal control that tenants desire.

When a package arrives, tenants can be alerted by text, and they can then unlock the locker from their cell phones or tablets.

While a number of these package locker companies exist, Amazon is now testing the

multifamily market with their services. Amazon Locker is a self-service delivery hub to pick up and return your Amazon.com packages. At package delivery, an email notification is sent with a unique pickup code to residents. Residents have access 24-7 to the lockers but must pick up their packages within 3 days.

Residents no longer have to visit post offices for package pickup and return. Packages from other vendors would have to still be picked up in the leasing office.

Consider how an Amazon Locker or other package systems could free up additional space to create another amenity for residents: With a package locker outside, you could renovate the old storage area to create a small business cen-

14

COMMON TECH FOR HIGH RETURNS Dr. Clark Hodge, who owns and manages properties in Gainesville, Florida, that total more than 200 units, offers a point-of-view that differs somewhat from those who enthusiastically promote high-tech products as a means to attract and keep tenants. While he agrees that tenants in high-end units expect cutting-edge amenities and services, his position is that income from less expensive properties cannot easily support those services. Dr. Hodge’s experience provides a useful guide to discerning what tenants want without spending money on what they don’t care to pay for.

He reports a simple strategy that virtually eliminated vacancies in his 30-year-old units. “The thing that really helped me was realizing that internet service cost $50 for individuals, but $25 per unit in bulk. I raised the rent by $25, put out a sign that said ‘Free Internet,’ and occupancy went from 80 to 90 percent right away.” May we all be so shrewd as to find a business-building strategy that is this straightforward and this profitable.

One of Amazon’s bright orange Amazon Locker self-service parcel centers

ter, coffee or wine bar, or anything else you can dream up. This doubles your value to renters and gives them ease of access to their deliveries.

Tech amenities that can be controlled from mobile devices are a common theme throughout the industry. Tenants want to be able to control their lights, adjust their apartment’s temperature, schedule maintenance and pay bills, and they want to be able to do these things remotely with the devices in their pockets. Of all these features, the remote bill-paying feature is a strong candidate for being the most cost-attractive. There is no downside in making it quick and easy for people to send you the money they owe you. And since the research shows that tenants will pay more when their apartment is smart, installing tech amenities will yield a solid increase in the amount of money they’ll be paying.

15

PROTECTIONS

Raising Your Roofing Game

Having a proactive approach to roof maintenance can lead to a big ROI, and save you a headache down the road

BY ALYSON SHEPPARD

A

s spring is now in full swing, your roof’s winter damage comes to light.

This is when you want to do a thorough roof inspection, according to Scott Page, vice president for the central region at SRG Roofing. “You want to make sure that roofs are clean and free of any obstacles that may cause water to back up on it,” Page says.

“Anytime that you have standing water on a roof, it is a potential leak issue.”

You can do a visual inspection yourself. Look for any excess debris — like tree branches or leaves — that may have fallen on the roof, become lodged in your drains or clogged your gutter systems. Sweep them off or flush them out. “If those aren’t cleaned out properly they can certainly back up and cause an issue on the roof,” he says. This is also the best way to prepare your roof for inevitable spring storms: Clear the gutters so water can flow through them and away from your property freely.

If your property is in a cold region, look for storm damage. As temperatures change, snow and water freezes and melts, expanding and contracting. This rubs against hard roofing surfaces and can crack them, leading to leaks. If

water gets under a seam, it can freeze, expand and cause that seam to burst open. Those are issues you can probably spot on your own, but you should always schedule a professional, general inspection of the roof twice a year, in the mid-fall and early spring.

“We can come out and inspect the roof system, make sure everything is working as it’s supposed to, and provide you with a maintenance plan,” he says. If your property is in a hail-prone area, have SRG Roofing take a look after every major storm. “If there is visible damage, we can get up on the roof, investigate further and, if you need it, give you the procedures for how to contact your insurance company to make a claim.”

Being aggressive with your maintenance plan can save your return-on-investment. “Taking a proactive approach instead of a reactive approach is really what it’s all about, especially in a multifamily scenario,” Page says. “If you let it go too long then you have tenants who are getting leaks and property damage that can come into play. The more you maintain the property, the longer you can maintain the value of the property.”

17

THORNS IN THE SIDE Watch out for these common roofing disasters lurking about: • Clogged or damaged gutters • Missing or cracked shingles • Loose flashing around vents, pipes, skylights or joints • Crumbling mortar or missing bricks in chimney • Fungus or algae • Rusted metal • Dark stains • Low-hanging branches • Water pooling in areas *Roof inspection is dangerous work and best left to a professional roofing contractor

PROTECTIONS

Mitigating General Contractors’ Financial Risks Protect yourself (and your wallet) by following these steps in securing the right general contractors

BY ALYSON SHEPPARD

W

hen preparing to hire general contractors for a job, owners have to consider the worstcase financial scenario. Marc McKerley, partner at the corporate advisory firm Crowe Horwath, says contractors often fail because they run out of cash. “If the contractor defaults, the owner could be on the hook to hire someone else to finish the job,” McKerley says. “That’s what you’ve got to protect against.” For a new contractor to take over a job quickly, there can be mobilization costs and other issues. Often, with an accelerated timeline, the new contractor may not be able to meet the existing budget.

To protect yourself, first vet your general contractors’ paperwork extensively before hiring them. You can ask for audited financials.

Ensure the contractors have their licenses and certificates of insurance. Even after hiring them for a job, continue to check these documents to make sure they are up-to-date through the end of the project. “A prequalification process is something that’s not one and done,” McKerley says. “It’s something that’s done on, hopefully, an annual basis.”

Next, review their financial capabilities. Do they have adequate working capital and equity sufficient for the job? And do they have the adequate experience to handle a project of

this size? You’ll also want to check their references and safety records. “A wide variety of things come into play to make sure financing is in place for the overall project,” McKerley says. “An owner can utilize the surety industry’s ‘three Cs’ concept when trying to evaluate whether this is a general contractor they should be working with.”

Financial underwriting for contractors is normally performed by the surety bond industry. That industry deploys the three “Cs” of underwriting when evaluating the risk of a contractor: Capital, Character and Capacity.

The contractor should be profitable and have credit lines with a bank (capital), the business should be up-to-date on its bill payments (character), and its management team should have experience and manpower to complete the job (capacity).

And just like you check your contractors’ licenses and insurance certificates on an annual basis, you’ll want to stay on top of your contractors’ finances if you are using them for repeat jobs or extended periods of time. “Do they have the liquidity they need to handle the growth they may have going on in their business?” McKerley asks. “When determining whether or not a contractor is financially viable, it’s going to depend on the overall volume of work that that contractor is doing.”

18

THREE Cs OF A TRUSTWORTHY GC: Capital: Plenty of money and financial resources to work with Character: Good personal credit and standing in the community Capacity: Capable and responsible management team

HOW TO

Choosing Sides

The ins and outs of putting up siding

BY ROBERT HUNT

O

ver the past two decades we have installed millions of feet of siding and have seen the good the bad and the ugly. Consider the following as you side your next property: • We recommend using James Hardie Siding. They supply siding for over 80 percent of all the projects done in America and it comes with a 30-year warranty (15-year for their ColorPlus materials).

You might save a few dollars but be careful because it’s not the same quality that Hardie produces (no, we are not getting paid by Hardie to say this.)

• Hire a trained expert. Your facilities manager might be able to replace a toilet blindfolded with one arm tied behind his back, but exterior work is very demanding and simple mistakes can be very costly. Whoever is overseeing the work and representing the owner should be properly certified by James Hardie to insure your warranty stays intact. Trust but Verify. Your asset or project manager should look over the work being done to ensure that the following is being done properly.

Here are a few things to look for: • Each state will have its own standards that allows installers to use a variety of weather-resistant barriers like 60-minute paper

or HardieWrap.

• Stagger the siding when using HardieShingle to make sure keyways do not line up on subsequent layers.

• Are they using a sharp blade and vacuum system to meet PEL standards for dust contaminant? You don’t want fiber cement dust all over your property.

• Siding needs to be able to expand and contract an experienced installer knows where to use caulking and where not to. There are many variables that affect when to use caulking or not so we recommend you consult the Hardie installation standards for clarity.

• In most cases, the siding is installed using a nail-gun but if the installer doesn’t control the pressure, the nail will not be flush with the surface that can cause defects in the future, and void the warranty.

• Have they installed a Z-flashing where required? This is required between horizontal panels to prevent water from sitting on top of the lower panel and creating rot or mold.

It’s our goal to equip and inform owners to help them make the best decision possible. We are here to help you best protect your multifamily investment.

20

HOW TO

A wood wall is a very popular look that adds a custom feel to your units. However, the costs can be from $13-$15 per foot. By utilizing vinyl plank, UR can achieve this look at a cost of less than $3 per foot. This is a low-cost way to achieve a great look that renters will pay to have in their unit.

High Value Design with Low Impact to Your Bottom Line You don’t have to break your budget to create attractive apartment spaces

BY JAN HUBBARD

T

here is often a trade-off when it comes to design. Great designs mean big money. If you want to have your multifamily property stand out among the competition, bring a creative designer and your wallet.

Jimmy Croteau, Director of Design Services for United Renovations, knows the costly pro-

cess for owners and investors. “Most general contractors are hired to do the bids,” Croteau says. “Then you hire an architect or design firm to do the design and come up with the concept.

But here, you can have it all.” Croteau’s goal is simple: Give the client the greatest possible return on investment. The unique structure and philosophy employed by UR makes that possible.

21

DESIGN ON A DIME When United Renovations updates an apartment complex, it utilizes techniques that satisfy, yet save.

“In an apartment, the bathroom and kitchen cabinets are the same. It’s easier and less expensive to buy every cabinet that looks alike,” says Jimmy Croteau, UR’s Director of Design Services. ”But if you paint the bathroom cabinets a chocolate brown and leave the kitchen cabinets white, it feels like two different rooms. Often, just a coat of paint makes it more appealing.”

HOW TO

Painting Kitchen Cabinets: The Fast Fix

Add extreme value to your kitchen with just a coat of paint

BY ROBERT HUNT

O

ne of the fastest and most cost-effective ways to improve the look of the kitchens on your property is paint.

Paint is like a new shirt that makes you feel better about yourself the moment you put it on, and it can be a low-cost improvement that adds great value to your units.

The type of material and design of your kitchen cabinets should be considered when choosing to paint. Flat panels, raised panels or doors with windows can limit your options.

Consider the overall look and feel of the unit and even the entire complex before trying to paint a modern feel into a rustic designed apartment. With all that in mind the main question remaining is what type of paint to use.

Type of Paint Most painters are familiar with using oilbased paints because they provide a harder and more stain resistant surface than latex.

Water-based Acrylic Alkyd paint is an option that goes on like an oil paint to leave a nice smooth surface but cleans up like a water-based paint. Sherwin Williams ProClassic Waterbased Acrylic Alkyd is an option we prefer that combines a great performance-to-cost ratio. This paint also has less odor to reduce complaints while painting and meets environmental regulation of less than 50g/L VOCs. ProClassic does cost more but will last longer than latex and keep the cabinets looking nicer while you save the environment.

22

THE PERFECT SHADE White is traditional for so many apartments but a bit of color can be a strong selling point for prospective tenants. Bold is beautiful these days and a vibrant accent color on one wall may be enough to allow you to use a softer tone on the cabinets. Maybe bright red kitchen cabinets is over the top for your property and you prefer a soft yellow or gray for your new look. Consider the community where your property is located and use colors that will connect with renters. The design team at United Renovations has great tools and ideas that can help you see beyond your traditional perspective, land more renters, and increase your revenue.

Oil Based Paint PROS

• Durable finish with higher sheen • Thicker base that fills in uneven surfaces CONS

• Challenging to use with a spray gun (requires a pro) • Long cure time (up to two weeks) • High VOC

Water-based Acrylic/Latex PROS

• Lower cost option • Low VOC • Shorter cure time • Limited prep CONS

• Moderate durability • Occasionally requires second coat • More expensive than oil-based

WE RECOMMEND

• Sherwin Williams Industrial Enamel

WE RECOMMEND

• Sherwin Williams ProClassic

Epoxy PROS

• Super resilient finish • 24 hour cure time CONS

• Extensive prep • High VOC • Higher cost solution WE RECOMMEND

•A local resurfacing company for suggestions

WIRELESS HEADSET

Because this is not the only thing you have going on in your business you will have to take phone calls as you work through the day. Time is precious and you want to avoid stopping for every call. I always keep a headset around to help me multi-task.

HOW TO HEAD LAMP AND SMALL FLASHLIGHT

If you do this enough you will wind up in a situation where you work in a dark space like a unit with no power or a crawl space. Having a light will save you and ensure no one hides anything from you. You can carry a small flashlight but it is hard to measure and write while holding a flashlight.

Becoming a Due Diligence Hero Be prepared for anything

BY JR BOLOS

D

ue diligence is usually a oneshot opportunity to find out everything you can about a property you are potentially purchasing. The last thing you want to do is miss a major issue because your phone died, your shoes caused blisters, or you forgot a flashlight. Trust me, the seller is hoping for a buyer to show up in a country club polo, dress slacks, and wingtip shoes. If you are at the due diligence stage, you no longer have to worry about impressing anyone.

Tap into your inner adventurer, and be prepared to crawl under a building in pursuit of a hidden renovation treasure.

MESSENGER BAG

I have used all sorts of bags over the years and nothing beats a large messenger bag with lots of pockets. With its easy swing-around access and quick opening flap, you have access to everything you need without taking anything off or messing with zippers or buckles.

SHOE COVERS

There are some units where you take your shoes off before you walk in and sometimes there are units you don’t even want your shoes to touch. This is where the shoe/boot covers come in. They help ensure any mold or pests don’t leave the unit with you.

24

LASER MEASURING DEVICE

The laser measure is a must if you want to keep pace with everyone else on the tour. It allows you to be quick and accurate. The 25-foot Stanley tape measure is still a must though. There are times you need that small measurement or there may not be something to shoot your laser on.

VIDEO RECORDER

All day DD tours are like holding a cup under a waterfall. To help ensure you capture as much as possible, I highly suggest a GoPro camera strapped to your chest. This allows you to catalog each unit for those tiny details that will inevitably come up later.

LAYERS OF CLOTHING

Layer up for comfort and protection. It can make your day harder than it needs to be if you are too hot or too cold. Also, being outside for hours on end can expose you to more than your normal dose of sunlight, so cover up what you can.

EXTERNAL BATTERY

No gear kit is complete without an extra battery to keep you going. I suggest nothing smaller than a 12,000mAh, and I prefer the batteries that plug directly into the wall and do not require another cable to charge them up.

SMALL SNACKS

Long days and working with other peoples’ schedules make having a snack bar and a bottle of water very handy. Plus, you need the energy and you need to hydrate.

25

COMFORTABLE SHOES

Preferably something that slips on and off easily and provides all-day comfort. Without a doubt, you will be on your feet all day so be careful not to wear a brand new pair of shoes or boots.

When a collection of award-winning communications and marketing professionals get together and cut out agency mark-up fees, you have Midwest Luxury Publishing

midwestluxurypublishing@gmail.com

972.378.4845

midwestluxurypublishing.com

ASK AN EXPERT

Renovations Gone Wrong

Insider Eric Crosland tells Renovator magazine about the three most common issues associated with large-scale renovations. Crosland works with various ownership groups as an independent renovation consultant and project manager.

BY MOLLIE JAMISON Budget Constraints “Budget constraints on hidden damages or other unexpected renovation issues can present problems. You should have good-enough foresight or reputation with the owner to say, ‘FYI if you do a, b and c, you might want to do this because when we get in here, things don’t look too good.’ The more foresight they have and understanding of their scope and what the challenges could be once they get started is very helpful. Sometimes ownership can’t look past the dollar amount. They think, ‘this guy is in my budget. I am getting a, b and c.’ Well they didn’t see d, e and f because no one knew about the potential changes to budget. Communication is key.”

Material Logistics “There are two ways that renovations can happen when it is related to material. Either the contractor buys all the materials and installs it or the owner buys it and the contractor installs it. There seems to be a trend where ownership groups are trying to buy the materials themselves and get really good bulk pricing and then put the ordering and installing on the contractor. The pro of a contractor buying and installing is that he controls everything, he knows when everything is going to be dropped and he has extra supplies in his storage container on property. If something comes up damaged or missing, he is moving and shaking because that responsibility is on him. So it is a pro and a con.”

Velocity Issues “Understand your manpower on site based on your velocity. Ten units a month requires “x” number of workers. When you don’t communicate that effectively in at least a 60- or preferably a 90-day look ahead of upcoming units, it can put constraints on both parties.

If you don’t have enough workers, units don’t get turned on time. Ownership gets frustrated and you start losing revenue. You can’t lease. If the velocity goes below, you have to lose some guys. Then you staff right back up because the velocity goes up. You have to find an even flow.

In a perfect world, static unit flow would save everyone money but that is not reality. The best we can do is communicate as early as possible to give the contractor the best opportunity to adjust his manpower.”

27

ASK AN EXPERT

Maintaining Occupancy During A Full-Scope Renovation

Keeping residents on site during full-scope renovations may seem too good to be true. But Monni Warren, regional property manager at Pinnacle, tells us how to keep residents happy during times of transformation.

BY MOLLIE JAMISON What is the key to maintaining occupancy during a full scope renovation?

The key to maintaining occupancy is to provide constant communication with the residents, like sending weekly email blasts and monthly newsletters along with having a storyboard setup in the leasing office to gain excitement. We host resident events in the model to allow the current residents the chance to touch and feel the newly renovated product. This helps to get them excited for the changes. Outside marketing is a must, as well as constant contact with the area apartment locators and promoting with the local preferred employers.

What kinds of incentives help keep renters on site during renovations?

Everyone loves improvements and changes that make life easier. With amenity areas typically the first to undergo renovation, the residents get to utilize the new fitness center, cyber lounge, pet parks, etc. without “renovation pains.” Once unit renovations start, offer waived transfer fees and/or reduced deposits. You can also team up with a local moving company and extend a free-move incentive to lessen the financial burden of moving for residents.

What are renters biggest concerns with full scope renovations and how do you combat these issues?

By far, the two most considerable complaints are, “How much is my rent going to increase?” and “Are you going to kick me out?” You can overcome both by educating the on-site team on the value of the additions and renovations. Always express excitement when speaking to a resident about the renovations

and make sure you have constant communication. It never hurts to have an incentive package to transfer on-site. You want to have a current “apples-to-apples” market comparison with rental rates, features and move-in fees. Outline what they will save versus moving elsewhere.

What is the biggest piece of advice you can offer apartment managers and owners on handling a full scope renovation properly?

Always start on the amenity areas and the exterior first. A first impression is everything and it allows residents and prospects to actually see the improvements taking place and building value. Have a great photographer who is willing to photograph completed amenities and units as soon as they become available and quickly update any and all websites. Remember to quickly respond to all negative and positive online reviews, as many residents will vent frustrations online before speaking with you in person.

How does maintaining occupancy during full scope renovations increase ROI? By maintaining a high percentage of occupancy you are still capturing rents from the current residents along with layered-in renovation premiums, which ultimately increase the ROI. Is there any other advice you would like to offer for planning a full scope renovation?

Be patient and stay positive. You will have delays and setbacks along the way.

28

*A special thanks to Chris Petty for his help with this article

Building a Sense of Community Among Residents

How to position your amenities to build community and ensures residents stay for years to come

BY SAM OSTERLING

30

31

Long-time homeowners can live next to the same neighbors for years, even decades.

They know their neighbors’ stories. They share their lives together. These homeowners often grow to care for their neighbors and neighborhoods like family and friends.

But for residents of a multifamily apartment building or complex, interaction with a neighbor may be as limited as a quick “Hello” while passing in the hallway or a polite request to turn down the music. A lease term with no sense of community can mean resident turnover and lost revenue.

How can owners and managers of a multifam-

ily asset bring a sense of community to the design or amenities of an apartment complex in a way that leads to demand retention?

“Be intentional in how you position your amenities for connection and relationships,” says Jimmy Croteau of United Renovations.

Croteau outlines six simple ways to renovate or leverage current amenities that can lead to the sense of uniqueness that a tenant wants in an apartment complex while also building a shared sense of community.

32

PHOTO DAVID HALLORAN

Timberlinks in Denton, Texas, features a nine-hole golf course and pro shop. Residents are offered a discounted rate for membership.

Dog Parks

Many complexes have a dog park these days, but Croteau points out that with a little bit of work, you can turn these parks from destinations to gathering spaces.

“You could build a trail to the dog park with stops along the way,” says Croteau. Stops might have a water fountain with drinking areas for the dogs or benches for owners to sit on while their pet drinks.

Building the trail turns the dog park experience into something more. Now instead of tenants simply heading to the centralized dog park, they’re likely to run into other pet owning residents at the drinking stations along the way. They’ll get to know other tenants, their dogs will get to know other dogs, and the dog park becomes an experience, instead of simply a destination.

If your property doesn’t have the space for a trail, consider making the space more community driven. Benches and inviting landscaping can add a more permanent feel for residents, and help encourage connection. If your dog park is only a fenced in area, it will not engage residents.

Plus, there is a nice little side benefit for owners and managers. “Having a trail to the dog park centralizes waste pickup for maintenance,” adds Croteau.

Kids Room

Most properties have a fitness room or office for residents. Croteau says that a major and unique selling point for residents could be a room dedicated to kids.

Consider a tech-savvy room, perhaps with a computer, designed for kids ages 6 to 15. Video game systems can provide a great source for connection and help kids build friendships on your property. Don’t underestimate the power of kids to help renting parents renew their leases.

If your fitness center is located in the clubhouse as well, this could be a good place for children to hang out while tenants hit the gym.

There is another option.

“If you’ve got residents who are teachers, you could discount their rent in exchange for donating, say, five hours a month or so,” he says. Instead of a simple play room, the kids room could be staffed every evening from 4pm to 7pm with a teacher. If residents are looking for half an hour to jog, their child could spend that time with a teacher working on some aspect of schoolwork.

It’s a great way to build community. Having the option of a kids room that kids enjoy means that tenants will spend more time in the clubhouse with other residents, getting to know one another.

33

Discount for Services

Similar to the teacher example, consider discounting rent for residents who are qualified, willing and able to offer some sort of service to the community.

Some ideas for discounts could be for people who work as personal trainers or fitness class instructors. If a resident teaches yoga for a living, perhaps they’d be willing to do a class in the fitness center twice a month in exchange for a discount? You could offer discounts for other careers as well: policemen, firefighters, nurses, etc.

“You want to make sure you’re being as unique as possible,” says Croteau. Having residents with expertise contributing to the health and success of their fellow tenants is quite unique and valuable for gaining and keeping residents. A small increase in rent for on-site fitness classes could go a long way toward resident retention and your ROI. Plus, any time you get a group of people together on the property, you create opportunities for community.

Outdoor Lounge

In today’s tech-centric world, people are always connected to the internet.

Consider an outdoor wireless lounge. You could put together a few tables, some soft seating and umbrellas near a garden and enable the area with wireless internet. For the fair-weather days, you’re encouraging your tenants to step out and mingle there with other residents, which can lead to community through pure sharing of spaces.

“You want to keep this adult-centric,” adds Croteau. This is a place where residents can come to get work done, study for class, or just hang out.

Clubhouse Areas

Many clubhouses have a lounge area with a kitchen. Sometimes there are TVs, arcade games, darts, pool, or shuffleboard. Consider transitioning the space to be more multipurpose and functional. Can the kitchen be converted to more of a bar-type space for events like wine tastings, private parties, or other events? Do the fixtures, furniture, and equipment help increase resident desire to utilize the space? Unique design and functionality can make a clubhouse a destination.

Bluetooth speaker systems, wireless internet, and integrated TV systems can bring people together for work or play. If your clubhouse is in demand, it will attract renters and build community. You can even consider adding a private, enclosed dining room area for larger dinner parties.

Multi-Tasking

35

What’s great about these renovations is that they can easily be combined in ways that generate not just a sense of community, but revenue for the owner/manager, and revenue for the residents themselves.

Consider the cooking class. Perhaps that class could be taught by a tenant who works as a chef and receives a discount on rent for teaching a couple of basic recipes per month.

They could cook using the fresh vegetables grown on-site. And once the cooking is done, they can go sit outside in the wireless area and post pictures of the meal to social media: free advertising for the complex.

These renovations and additions are relatively simple, but they add a real sense of sharing among residents of an apartment complex or building. And they’re unique. Not many properties can put on the brochure that they hold a free cooking class with locally-grown ingredients twice per week.

That’s the sort of hook that turns a possible tenant into an actual tenant, and your sense of community is what keeps that tenant living happily with you for years to come.

36

NEW

SHARING COMPANIES AND THEIR

INDUSTRY IMPACT Airbnb and other short-term rental sites are helping evolve the apartment rental game

BY SAM OSTERLING

37

According to a 2016 survey of the National Multifamily Housing Council, 43 percent of the nation’s apartment owners and managers state that their tenants have listed their homes on online short-term rental sites like HomeAway, Roomorama, and, most popularly, Airbnb.

And the short-term online rental industry has taken notice. Airbnb recently created a program to partner with multifamily property owners and managers. The program, called the Airbnb Friendly Buildings Program, is a partnership with the owners and managers of multifamily properties that gives residents the power and freedom to list their spare rooms or apartments on Airbnb in exchange for an agreed-upon percentage of the profit.

According to Airbnb, “a growing number of tenants and buyers view permission to home share as a valuable amenity. The Airbnb Friendly Buildings Program helps you to attract and retain these residents.”

The millennial generation is one of the largest in the country, and many members happen to be both tech savvy and low-income. Many tenants like this are already listing a spare room (or couch) on short-term sharing sites in order to make a little extra cash despite the

fact that doing so may well violate the terms of their lease.

Having an owner or manager who partners with and allows the use of these companies is a major benefit to many residents. In fact, allowing tenants to list their spare space on an online sharing site is essentially an added, visible amenity with no cost to you, the owner. And yet it still can earn you extra revenue.

For owners and managers of multifamily properties, it’s not just easy to only allow tenants to use Airbnb or other similar companies; it’s also easy to use it yourself.

Particularly in high-cost cities like Los Angeles, New York, Boston, Chicago, or San Francisco, an average room on Airbnb can cost as much as an average hotel. For owners and managers, the ability to charge as much as $250 a night for travelers to stay in vacant apartments can mitigate the loss of revenue – or even turn a profit.

And the fact that these companies are based online only makes things easier for owners. The app does most of the work for you. Booking, payment, contact, and security features are all done in-app. Even cleaning fees can be built

38

into the cost of a night’s stay, meaning that the traveler is the one paying for the cleaning required between guests.

Current residents may have concerns about the idea of unknown strangers stopping by to live next door for a few days. Airbnb’s Friendly Buildings Program puts the power in the hands of owners and managers in order to protect other residents and control who stays where.

Through the program, owners who have partnered with Airbnb to allow residents to list their space will receive regular aggregated reports with data about how long travelers stay, what they pay, and other data.

In addition, owners can necessitate that tenant hosts can only accept travelers who have verified their account with a state ID. This way, you’ll know exactly who is staying, with proof of ID and a home address. Airbnb also allows you to run background checks on incoming guests.

If you do choose to allow residents to list their homes on an online short-term sharing site or if you wish to do so yourself, there are a few changes you may wish to make.

First, you’ll want to ensure that your listing plays up the location, proximity to attractions

You could even use shared outdoor spaces as a selling point

or utilities, and your amenities. Think like a hotel. If you’ve got a shared community pool, make that a focal point of your listing. If there’s a bus stop nearby that could take travelers into a downtown neighborhood or place of interest, make sure that’s known as well.

Additionally, you’ll want to update your lease. If you don’t allow subletting, but want to allow for the use of these online sites, you’ll want to specify that in writing.

For owners considering making a unit more friendly to these online sharing companies, consider the things that will bring a traveler in.

You’ll want to ensure privacy. Make that unit feel like a resort. When selecting a unit to rent out, make sure it isn’t one in the very center of your complex or building. Keep it to one end, if possible. The fewer neighbors the better in this case. And try to make small renovations to make it feel more private: light-blocking shades and curtains, perhaps even heavier, more secure door hardware makes guests feel

40

private and safe.

You also want to make sure that your unit is allowing for as many different types of renters as possible. You’ll want to be family friendly, of course. If you’re an owner looking to rent out one unit to short-term renters, perhaps you could consider turning one bedroom of a two-bedroom unit into a kid’s room: bright, fun paint, patterned bedding, novelty décor. This is important not only for guest satisfaction, but for getting guests in the door.

You’ll also want to make sure that the rest of the unit feels grown-up. Make it feel luxurious and special. Try playing up any sort of deck or patio a unit may have, if applicable. You could even use shared outdoor spaces as a selling point. Remember, most people using Airbnb are doing so for travel and vacation purposes.

Some outdoor seating, soft lighting, and a nice table could make the difference in whether a guest chooses your property or another, and gives added value for nightly rent.

An often-overlooked aspect you can build into the rental unit is making the dining room and kitchen feel as much like a fine-dining room as you can. Soft lighting, isolation, comfortable chairs around a nice table. Even candles as a centerpiece. Create the type of dining room that feels like they should leave a tip.

Perhaps most importantly, you should try to make your property feel like the area in which it stands. Small renovations can easily make your home feel more like its habitat. Make sure that your guests wake up in the morning and know exactly where it is they’re staying.

This can be as simple as a change of paint or a framed photograph or poster of a nearby landmark. The important thing is to remember that your guests in this situation are different from your long-term tenants. You want to give them an experience.

Just remember to not neglect your current tenants as well. A lost Airbnb customer fumbling around your property looking for their

apartment can cause an unsettling commotion.

Make sure buildings, walkways and doors are well lit with clear signage. This makes life easier on the traveler and much lower impact on the regular tenants. Smart locks also insure a greater measure of safety and control while benefiting guests to your property.

These companies, Airbnb chief among them, have been growing in popularity since their inception and continue to expand. Airbnb has over 3 million current listings in over 190 countries and it’s not going away.

But for multifamily homeowners and managers, there is an opportunity involved. You can use the option of renting out space as an added amenity for current tenants, or even rent out rooms yourself. Regardless, these emerging companies will continue to have meaningful interactions with property owners and managers in ways that can be extremely profitable for all.

41

The important thing is to remember that your guests in this situation are different from your long-term tenants.

You want to give them an experience.

BRING BACK THE

MODEL UNIT Model units are meant to wow potential renters, so make sure you have one in place

BY MOLLIE JAMISON

42

43

You never get a second chance to make a good first impression – especially when it comes to selling apartment homes.

According to Jimmy Croteau, director of design services at United Renovations, viewing a model unit is the most critical selling point for renters because it takes them on a journey into what their life could look like. “People buy because they like what they see,” says Croteau. “That’s how most companies make their money. You eat with your eyes first.”

Without model units, renters are left wondering how their existing belongings will fit into a new space. These units help create a scale in their minds, which can be incredibly important for individuals who are divorced, widowed or simply downsizing in general. “As a designer, the nice thing about the model is

that you can show people how large a bedroom or living room is. If you walked in an apartment and just saw this blank room, you would wonder, ‘Where does my love seat go and can my couch fit in here?’ But when you walk into a furnished model and there is a love seat and a couch there, that’s huge. Most people don’t carry a tape measure around and most people haven’t measured their furniture.”

But model homes don’t just appeal to empty nesters with U-Hauls full of furniture. “There are kids coming out of college that don’t have a lot to their name,” he says. “They walk in and see all that they could have.”

Croteau says that the key to designing a

44

45

Perhaps the most important elements of a model unit are creative storage and seating options, which provide the functionality of the space.

well-rounded model unit is knowing your demographic. “Just recently we did a model in McKinney, Texas, and we know that there are a lot of single parents there,” he says. “So we staged it with this great master bedroom and the second room was a kid’s room. If a university was right next to the apartment complex or you knew that 60 percent of your renters were college kids, then I would take the dining room and make it an office.”

Perhaps the most important elements of a model unit are creative storage and seating options, which prove the functionality of the space. “Storage is usually a big thing in an apartment, or lack thereof,” says Croteau. “If you can get creative in the closets and maybe

46

show an artificial Christmas tree in a box, plus clothes, then people think, ‘Wow this closet is bigger than I thought. I can hang all my dresses.’”

When designing models, Croteau emphasizes the importance of recognizing them as homes and not just units. “Not everybody will have the opportunity to live in a house and not everybody wants to live in a house,” he says.

“They should be afforded the same luxuries as somebody who does. The single mother with a kid who is just trying to make it, it’s not a unit to her. I think that’s how I try and approach it.

What is that woman or man going to need?”

Sometimes, the details inside model units can be so convincing that people ask to pur-

chase their apartment totally furnished – an idea Croteau is currently launching. “We are actually marketing to models where everything has a tag and you can go online and know exactly where the coffee table came from,” he says.

“For an apartment complex, that’s a pretty cool idea. To be able to say that the metal sculpture on the dining room wall is from World Market and you can buy it for $38. We are already providing our customers with these types of links and capabilities.”Integrated marketing tactics may be one way to convince complex owners that quality model units are worth investing in. “The only challenge I can think of with model homes is the ownership not wanting to spend the money,” says Croteau. “The model is

a calling card and it’s going to bring renters to your property. You’re marketing. You’re taking people on a journey. You are telling a story that will translate into more leases.”

All in all, FFE (furniture, fixtures and equipment) for a two-bed, two-bath model unit will cost you close to $11,000 to create.

But these units include priceless details such as painted accent walls and even everyday staged items like laundry detergent, clothes in the closet, table settings, and others items guaranteed to make any apartment feel like a home.

“When you open that door, you should hear somebody say,‘Wow!’ Because if not, they’re going to get that wow somewhere else.”

47

"The model is a calling card and it’s going to bring renters to your property."

The B-Team: 48

Taking Units from Class C to Class B More often than not, a B property is an A+ for owners

BY SAM OSTERLING

49

In many ways, class B multifamily assets are the sweet spot for apartment owners and managers looking to maximize return on investment. Class B units can offer owners and managers the market’s best combination of revenue, inexpensive maintenance, demand, retention and upkeep.

Class B units tend to be occupied by tenants with enough income and stability to remain for multiple years, but who may not make enough money to move into a Class A unit. Residents of a Class A unit can spend upwards of 60 percent of their monthly income on rent, whereas Class B tenants can expect to pay 25 to 40 percent.

This is an important reason why Class B units are such a great target for investors.

They’re often at a price point that is ideal for both tenant and owner.

With a Class A unit, renovations that increase rent in any way can drive residents out – remember, they’re spending as much as 60 percent of take-home money on rent. That extra $75 per month can lead to some residents looking elsewhere to live.

Class B units prevent that danger. Residents in these units tend to be more affluent than those living in Class C, but won’t be driven off by slight changes in rent. They’re typically only spending 25 to 40 percent of take-home money on rent in the first place.

That sweet-spot also makes Class B units a smart choice for tenants. If a tenant lives in a pricier Class A apartment and finds him or herself with a pay cut, the loss of a job, or some

other unexpected expense, rent will quickly become unaffordable. In a Class B unit, tenants insulate themselves from the ebb and flow of their own income and expenses.

There are certain risks that come with a focus on Class B assets, however. While the odds are good for a greater return on investment in a Class B unit, owners need to stay on top of maintenance. According to Jason Busboom of the Busboom Group, “Class A units will break less. For Class B, preventative maintenance is really, really important.”

That extra $75 per month can lead to some residents looking elsewhere to live.

Tenants want that sweet spot. They’ll trade a perfect location for a more fringe location in exchange for lower cost of living and more square footage. But preventative maintenance on the usual suspects for breakdown ensure that rent and revenue stay high and keep Class B units from dropping toward Class C. There are certainly ways for owners of Class C units to move up into B to reap the benefits of that sweet spot.

“It’s all about generating extra revenue,”

50

says Busboom. And the first aspect of an asset for the renovator to look into should be purely aesthetic.

“If I had to pick one,” says Busboom, “it would be flooring.” There are plenty of inexpensive ways to upgrade flooring in such a way that generates an increase in revenue while also not requiring excessive maintenance.

Busboom suggests vinyl floors. It’s more durable than carpet and immediately gives residents the feeling of a more luxurious space.

Vinyl planking is more cost-affective in the long run compared to carpet and sheet vinyl.

Another place to look for simple, efficient renovations with big returns is perhaps the most basic renovation of them all: paint.

Some colors, once trendy, can now give units the feel of a building much older than they may actually be.

Busboom points out that having walls painted green may have once have seemed like a strong choice, but nowadays, owners are better off going with a more neutral tone. A classy gray or beige paint with white trim gives any room a clean look, particularly when paired with an accent wall.

There are numerous other small ways to renovate a unit so that it generates revenue and improves the asset class. As Busboom puts it, “Door hardware, paint, spraying counters, cabinets, cabinet faces—anything you can do that’s both durable and visible.”

Renovators could also make larger-scale changes to boost their assets from C to B. “We try to create as much open space as we can,” says Ryan Cummings of United Renovations. For instance, some older units may have a dining room in a more closed-off section of the apartment. By opening up the wall, maybe creating an open-top bar or nook, you can create a more spacious feeling.

“If I had to pick one way to improve, it would be wet areas,” adds Cummings. In particular, countertops and appliances are key to adding value to a C unit. Upgrading the cabinets through replacement, re-facing or painting also can add value, impress potential renters and lead to higher rents. "We have a lot of strategic relationships that allow us to bring new cabinets or refinish older cabinets at an incredible value to our owners."

Cummings also points to improvements to plumbing fixtures like sinks, toilets and showers, changing out door and drawer hardware, adding crown molding and replacing cabinetry as ways to make wet areas pop. You don’t even necessarily need to completely replace things like cabinets. A simple coat of white paint with fresh, stainless steel hardware gives a modern

look with little investment.

There are other simple improvements to generate revenue. Cummings points out that Class C units don’t have washers or dryers inside the units. Adding a washer and dryer to each unit increases the value of an apartment and, if maintained, can turn a nice return on investment.

“Door hardware, paint, spraying counters, cabinets, cabinet faces— anything you can do that’s both durable and visible.”

The most important concept for owners to grasp is to understand their market. Understand who’s living in these units. Renovations that add revenue can easily go too far.

Class B units are sometimes located in

fringe locations, saving money for both the owner and tenant. But an overzealous renovation can put rental costs up toward the Class A range, which could price B level tenants out while the location keeps the A level renters away. Units with A-level pricing in C-level locations are units with no clear tenants.

Another mistake easy to make is renovating aspects of an asset in ways that don’t generate revenue. Busboom points to one particularly easy mistake to make.

“There’s not much return at all for an expensive clubhouse renovation,” he says. So while a great-looking clubhouse is vital for a positive first impression with potential tenants, it’s much more wise for owners to invest money in the units themselves than in a clubhouse.

That’s where tenants will really like to see that pop and will be willing to pay for it.

But both Cummings and Busboom agree that the most important way to ensure a smooth move from Class C to B is for owners and managers to have thoroughly researched and understand the surrounding market.

“Ambition is good,” says Cummings. But overambitious renovation work leads to losing the many benefits of Class B assets.

THE ISSUE OF

TRUST Through the good and bad, trust builds a foundation for companies

BY JAN HUBBARD

“Trust is like the air we breathe. When it's present, nobody really notices.

When it's absent, everybody notices.”

— WARREN BUFFETT

54

THE CORPORATE COMMUNITY

T

he importance of trust between employers and employees can’t be overstated, but it can be stated simply.

“When we don’t work in a unified group because of a lack of trust," says Robert Hunt, director of marketing for United Renovations,“we’re not as productive.” Hunt has more than 25 years experience in marketing, business development and management.

The most successful companies and the best CEOs recognize the importance of trust and the need to continually build it. It is not something that can be taken for granted. “You know the difference between stress and pressure?”

Hunt asks. “It’s knowledge. When your team feels pressure to hit a goal because they know they have 30 days to launch, they get pressure to do well. But when they lack vision and clarity, it turns into stress. So if you want to build trust with your people, communication is essential.”

Early in his career, Hunt was hired by a

company that had lost its core business and had to come up with a new business model. It was a challenging process and as the money got tighter and tighter, the company instituted a series of layoffs. “Everybody was worried about getting fired,” Hunt says, “and many people did get laid off. There was a lot of fear and paranoia.”

Hunt attacked the problem in a unique way.

“Every Friday, we’d show the team all of the money the company had left,” Hunt says. “We’d say, ‘At this burn rate, we’ve got 27 days left.’ It was scary but because of the desperation and the transparency, we developed a high level of trust. The team joined us on the journey. They were excited about where we were going. They were thinking of ideas because they were part of the solution. Everybody was on the same page.”

In good or bad times, trust is an asset for successful companies. But it is not created passively. It’s something that should be worked on every day.

55

There are many different ways to build trust in organizations, but Hunt believes it’s important to be inclusive. One example Hunt shares is how UR has created a team that meets twice a month to discuss work issues.

“We call it the Culture Crew,” Hunt says. “We have a representative from every department and we also include our offices in other cities. It’s not management or department heads. It’s every level, and we talk about what’s going on.”

Recently, an employee had to be let go because of contract changes in one of UR’s regions. “He was incredibly grateful for his time at UR,” says Hunt.

“And just to hear his story – that he was challenged in his career and went back to school so he could advance in the company, because this is the place he wanted to be was inspiring. And he said, ‘As you get business back, I’m you’re first hire. If you want me, I’ll come back.’

That tells you there are a lot of good things happening here.”

O N T H E WAY O U T

The Cat in the Wall And the awkwardness that followed

BY STEVEN KIRLIN

ILLUSTRATION BRIAN SMITH

W

e felt good about the new units we had recently finished renovating. The kitchen was especially noteworthy. Having taken out a wall, we had created a beautiful and functional island that would make a huge impact to current and future residents. It was a job well done.

Until one of the new units had a leak somewhere in the new island. No problem, a leak or two may happen when renovating over 600 units. A good renovation project is not complete without a few challenges. We were prepared.

We diagnosed the source of the leak, cut a hole in the sheetrock to expose the leak, and fixed it. We just needed to let the wall dry out overnight. Easy.

The next day we returned to patch the hole.

A few minutes of work and we had successfully repaired the problem and restored the unit to its former glory. One problem. We had also unknowingly patched the wall with the resident’s cat inside it. This created a purrrfect problem.

The unsuspecting renter returned home from work, only to hear her distraught feline friend calling out for help. A frantic phone call to the leasing office mobilized the emergency response. As our account manager was driving off the property, he was blocked by the property manager and leasing agent as they tactically drove the property golf cart to intercept his exit.

“You trapped a cat in the wall!” Panic. Would we lose the client? Would we lose the cat? Re-

member the cat first. While our account manager and a few others cut into the wall, their flashlights revealed the furry victim. As the renter frantically tried to coax the cat out of the wall, despite her own hyperventilation, we couldn’t help but think about the stress this was going to cause the property.

After a few minutes, the cat was rescued and the hole was re-covered. As apology after apology flowed, we began our exit. Once outside, our account manager humbly continued to apologize to the property manager, hoping a relationship was not destroyed by a cat in the wall.

“I appreciate your apology but the next conversation is going to be worse,” said the manager. “You are not as sorry as she will be.

She hasn’t told us about having a pet or paid her pet deposit.”

Sometimes you accidentally trap a cat in the wall and still help the property manager successfully do their job. * No cats were harmed during this incident. United Renovations is committed to keeping animals out of walls.

56

While our account manager and a few others cut into the wall, their flashlights revealed the furry victim.

Let us help you create your own private resort *Cabana boys not included Award-Winning Outdoor Living

|

214.387.8333

|

AquaTerraOutdoors.com