Issue 6 • October 2012
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Apartment Outlook
2012 Demographics of Renters Technology Amenities Residents Look For
ALSO IN THIS ISSUE: • What is Looked For in Student Housing? • Handling Bed Bugs and Other Pests • How To Conduct Resident Surveys • How To Utilize Social Media • Apartment Security Solutions
Ways to Green Your Apartment Portfolio
• How To Get An Apartment Leased • Should Smoking Be Allowed?
Demographics of Renters The rental market has changed dramatically over the last several years. Because of the number of families evicted from their homes as a result of foreclosures, the renter demographics have changed as well. More and more potential renters have serious blemishes on the credit history resulting from their prior home ownership and are unable to buy again because of the increasing tightness imposed by mortgage lenders. Families and even individuals have lost their homes and have become potential renters. Landlords need to respond to this change in renter demographics by re-
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viewing their policy towards credit approval. Many of these foreclosed and evicted families do not have the more traditional credit problems involving credit cards, and bank loans, and a very strict policy towards credit approval could result in missing some valuable and worthy tenants. This does not apply to prior mishandling of rent payments. That still remains a reason to deny a lease unless there is some other compensating reason to approve the potential tenant – a significantly larger deposit, for example. A possible method that you may wish to employ is to treat past mortgage
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problems separately. You could make a credit decision by using all of the credit information except prior mortgage or foreclosure records. Another way to deal with the problem is to have a faceto-face chat with the applicant. Either you or your agent can let the potential tenant explain the blotch on their credit and you can use that information to make your decision. All told, renter demographics have changed and in many instances it is not the complete fault of the family or individual involved. You may be able to find tenants that will pay their rent on time and treat your property with respect if you are a little flexible on credit. p
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Technology Amenities Residents Look For Today, technology amenities are rapidly replacing older types of amenities. Whereas a pool was once a great amenity, nowadays a common area with wifi might rank at the same level. Almost universally, people want tech that works with their lifestyle. One tech amenity that is almost a necessity is high speed wifi. Residents like high speed and they hate wires. People love to move around the room, and this is the technology amenity that allows them to keep moving and stay connected. However, having a great place for this wifi usage is just as important.
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Technology is not a series of gadgets to today’s young people. For them, technology is all about making their lives more enjoyable and getting more done during a day. Because of this, creative common rooms are becoming all the rage nowadays. With space for people to be social and use their technology at the same time, this is the lifestyle that many residents crave. Computer based fitness equipment is another option you might want to consider. While the price tags are up there, the payoff with tenant retention is serious. Young people value fitness, and this is another example of technology
becoming an intrinsic part of one’s lifestyle. With the opportunity to use the touchscreen computers built into treadmills and elliptical training machines, tenants can customize their own fitness routines and monitor their results in real time. Featuring this type of equipment on premises is a great way for you to woo new tenants and increase your retention. Technology plays a significant role in life for today’s tenants. The important part is integrating technology into lifestyles instead of focusing on gadget appeal. p
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Ways to Green Your Apartment Portfolio Building a green portfolio is a reasonably simple matter that can be accomplished with a few common sense ideas. Depending on where you are in the process of ownership, you may either slightly tweak the way your property is set up or make dramatic changes. Some ways you can create a greener portfolio without a lot of hassle include: *Utilizing your local power company’s green or renewable power option if there is one *Installing compact fluorescent light bulbs, particularly in common spaces *Using energy star rated appliances, particularly in places such as a common laundry area
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*Install 1.5 GPM shower heads and .5 GPM sink faucets to save water Of course, there are also some more dramatic ways to create a green portfolio. The following are slightly more in depth, and are particularly useful if you are in the process of renovating the property. *Install denim fiber insulation, which is both a more effective reuse of resources and will save energy heating and cooling the property *Install air conditioning units in shaded areas so they will operate more efficiently *Use low emission or low-e, triple pane windows that will hold heat and cool-
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ness more readily than their single and double pane counterparts will. Remember to insulate around them and caulk both inside and outside, both to shed moisture and to hold temperature moderating air pockets *Put at least R30 rated insulation in upper areas such as attics so that heat and coolness will be more moderate below. You can also add insulation between the walls of the units to keep the temperate moderate in the common areas Following the above suggestions will do wonders to make your units both more comfortable for the tenants and more environmentally friendly. p
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What is Looked For in Student Housing? If your investment property or rental unit is near college campuses, a whole new segment of the rental market is available to you. Students who require housing can be a targeted segment of the renters’ market that brings stable tenants at current market rates. Students look for certain features in a rental. Here are some tips on marketing your rental property as student housing, to attract this type of tenant. The Lease In many cases, students rent a property in a group, so that roommates can share the student housing expenses. This enables them to afford a larger rental and each has their own room. Have your leases specify certain conditions so this can be controlled and the rental meets local codes and standards.
Specify the following in a student housing lease: • The amount of people allowed to reside in the rental. • A detailed policy on subletting rooms to others. • Who is responsible for maintaining the yard and other exterior areas. • What are the stipulations on noise, guests and parking. • In the case of broken items, such as fixtures and appliances, who is responsible for repair. • A thorough and comprehensive policy on security deposits. Inspection and lease signing: • Do an inspection and take pictures of the property, interior and exterior, before the students move in. • Do a walk through with all the stu-
dents on the lease and have them sign the walk through paperwork. • Review the student housing lease with all lessees at the signing. Other Tips: • Consider renting with furniture. Furnishings allow a wider base of prospective tenants. Students that typically live long distances from school do not have their own heavy furniture such as couches, beds and dressers. • Make sure the home is equipped with fire extinguishers and smoke alarms. • Make sure all students on the lease know how to get in touch with the landlord or property manager. p
is Brought to you by
888-441-7355 Publisher Darrel Dickson
Graphic Designer Andrea Coulter The statements and representations made in the news articles contained in this publication are those of the authors and as such do not necessarily reflect the views or opinions of PPI Creative.
The Apartment Market - Digital is produced monthly and is published by PPI Creative An Oregon Corporation. PO Box 30327 Portland, OR 97294-3327. (503) 221-1260 • (800) 398-6751 Copyright 2012. All rights reserved.
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Handling Bed Bugs and Other Pests Owners of multifamily housing units and apartments have to adopt different pest control procedures from those of single-family homes. The fact that apartment residents share infrastructure such as walls, hallways, ceilings, utility lines and floors means that pests such as bed bugs can spread from one unit to the next very quickly. Apartments also tend to have a high turnaround of tenants, which further increases the risk of pest infestation for the entire complex. Owners of apartments usually face various challenges when it comes to communicating policies and procedures that appertain to pest control to their tenants. Bed bugs are a common pest infestation problem in most American
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homes. According to the National Pest Management Association (NPMA), more than 95% of registered pest control firms in the country have dealt with bed bug infestation cases in the past one year. Apart from the mentioned bugs, there are cockroaches, fleas, and gypsy moths that continue to wreak havoc in most American homes. Gypsy moths usually infest outdoor furniture. Careful inspection of your outdoor furniture will reveal egg masses of this pest. Visible signs of dead bugs and filth indicate the presence of cockroaches. The extermination of cockroaches is quite easy when compared to that of miniscule pests such as fleas.
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Most state Public Health departments require apartment owners/property managers to provide access to their units for regular inspection and pest control treatment. An apartment owner should hire a licensed pest control company to carry out pest extermination from time to time. It is also the onus of the apartment owner to educate their tenants on how to identify possible signs of pest infestation. In addition, apartment owners are also required to direct their tenants on proper housekeeping procedures to improve sanitation and reduce bed bug and other pest infestations. p
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How To Conduct Resident Surveys Keeping your rental properties fully leased with few problems from your tenants is the number one objective for any property manager. And the best way to help make this happen is to know exactly what your tenants think. If you can be ahead of the curve, and address problems before they get out of hand, you will be a long way towards successful management of the property. There are several ways to measure the satisfaction of your residents. A resident satisfaction survey is of course one of the best. Directly asking your tenants what they think is always the best way to find out about problems that may be surfacing.
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Here are some key ideas: • Conduct a resident satisfaction survey regularly. You can either ask all of the tenants at the same time, and re-do the survey at regular intervals or you can conduct a rolling survey where you ask some percentage of the tenants each month. • Keep track of problems and create a feedback to your tenants. If the issue is unique to one tenant, respond to that tenant. If it is an issue that could apply to everyone, communicate the solution to everyone. Communications are very important and overkill will always be in your favor.
• Create a survey form that can be returned to you with the monthly rent. Distribute the form with any statements that you mail or leave it in the office for a tenant to complete and return. You will find that the most upset or concerned tenants will make their views known. Knowledge of problems as early as you can find out and creating a way to fix things and let your tenants know what you have done to correct the problem will create a healthier environment for everyone. p
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How To Utilize Social Media With the ever expanding role of social media in our society, and the average property managers need to get information out about their properties, it is a natural fit. Taking advantage of social media sites is a necessary step for anyone in the business today. Where to start? Facebook is the strongest starting point for anyone. Set up pages for the property and yourself. Use the property site to talk about things like events, upcoming vacancies, local news and other such topics that can attract local citizens. Set up your own site with friends
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and family. Using both sites I tandem, appeal to different audiences in a way that keeps your property at the top of the reader’s minds. A strong selling approach will likely not work, but a subtle series of postings that have interest to locals will keep your name and brand in the public’s mind. Twitter is another of the social media sites that can be of use. Make it your mission to report on local issues. Start following others and you will find that many of those will follow you. As your pool of followers grows your brand will become commonly known. Tweet local
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events, local news and local knowledge and slip in now and again info on upcoming vacancies or reasons to live in your property. The social media sites are free but time consuming. If you have a staff, have them post as well – some change in pace is always a good idea. Any marketing program is designed to put your name and brand in front of as many potential people as you can. The social media sites are perfect for that. Get in and get going before you find that your competitors have beaten you to it. p
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Apartment Security Solutions As an apartment investor or owner, you cannot afford to take the value of apartment security lightly. You are likely to lose the trust and confidence of tenants if security lapses of any nature occur under your watch. Typical security solutions for residential apartment complexes include: Secure Apartment/Corridor Doors All doors in the apartments and corridors should have secure deadbolt locking systems. During installation, ensure that the locking systems consist of lengthy lock throws measuring about 35MM (1 ½”), for best performance. Locking systems should also have a jimmy-proof strike plate, fastened to the
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doorframe and adjacent wall by screws at least 50-75 MM (2–3 “) long. Notify your tenants to shut their doors always, even when going out for just a short while. Secure Balcony Doors Instal the right deadbolt locks on both balcony doors and corridor doors. Sliding balcony doors may present a challenge, but special hardware is available to keep potential intruders at bay. For instance, a sturdy piece of wood on the sliding door’s track is effective in preventing entry. Advise your tenants to avoid leaving valuable items such as kid’s bicycles or exercise equipment on the balcony.
Windows All apartment windows should have locking systems that work. Ensure that horizontal windows are fastened tightly to their frames, to prevent burglars from attempting to pry them open. Advise tenants even in the uppermost floors to shut their windows always when they are out of their apartments. Apartment security is of utmost importance both to the owner of the building and tenants living within. Thus, apartment managers should take precise measures to ensure that the safety of their complexes is difficult to compromise. This includes installation of secure door and window locking systems on all units and corridors within the apartment complex. p
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How To Get An Apartment Leased
How do you find new tenants for an apartment lease? The secret to marketing is to put your product in front of the person who is most likely to buy. And the same is true for renting units in your property. Here are some ideas: • Use Craigslist. This is a simple, free way to put your units in front of potential renters. The listings must be renewed every week, but that takes only a minimal amount of time. • Try the social media. A program to put your units on Facebook, twitter, pinterest or even LinkedIn can poten-
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tially find a renter. • Set up accounts on Zillow or Trulia and list your units with photos and descriptions of the property.
A more expensive way to go is to use a Realtor in your area. A standard commission in many areas for a one-off listing will be one month’s rent, commonly split 75% to the listing Realtor and 25% to the renting Realtor. If you have several units in the property, and can provide a stream of listings, you can negotiate with the listing Realtor to reduce their commission. Since your interest in using a Realtor is to get the exposure on the
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local MLS, with the multitude of agents that use the MLS, this will expose your units quickly. You can conduct property showings yourself and reduce the listing agent’s time commitment. If you are willing to show the units from leads that originate with Craigslist, you should also be able to show leads that originate from this source. Getting an apartment lease quickly is the answer. An apartment that lies empty for a month is a permanent loss of income and the quicker that you can get that apartment lease signed by a new tenant, the better off you are. p
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Should Smoking Be Allowed? Should you allow smoking in apartments that you own or manage? Unless you are having trouble keeping your units leased, the usual answer is no. The problems with smoking in apartments are: • Smoking in apartments increases your liability problems. There is always the potential for a smoker causing a fire in the unit and not only does this pose a property risk, it also creates the potential for injury to your tenants or their guests • Smoking also increases your costs. Smoking requires a more extensive cleaning and may even increase your insurance costs. A strong and en-
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forced no-smoking policy will reduce those costs. • Smoking can result in fewer potential new tenants. The smell associated with smoking in the unit will be clearly noticeable to potential new tenants. It is difficult to remove that smell in the short downtime between tenants, and as a result will limit your potential tenants to those that already smoke. All of this, of course, is predicated on the fact that in many areas of the country there are fewer and fewer potential renters that currently smoke. If your units are in an area where there are a substantial number of smokers, or
if your units appeal to a demographic that includes a large number of smokers, you will have to take that into consideration when you make the decision whether or not to accept smokers. It all depends on your ability to attract renters and keep your vacancy rate as low as possible. If you have several units within the property, an alternative can be to designate some units as smoke free and depending on the flow of new tenants, assign those units to tenants that do not smoke. All in all, however, smoking in apartments should be as infrequent as you can make it. p
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Paying off Troubled Multi Family CMBS Debt at a Discounted Payoff I don’t recommend defaulting on any loans. If your property is underwater and you are in financial difficulty I would suggest that you write your lender a letter and explain your challenges. Meet personally with the CEO of the asset management company. Find out everything you can about that CEO and there strategies about getting rid of troubled debt. You want to get your property placed into special servicing. This will only happen if you are upfront and provide your personal financials, tax returns, and detailed profit and loss statements on the property. If values
have gone down, and you are truly in a hardship there is a good chance that your lender will work with you to pay your loan off at a discount even if you are current. By keeping current on your loan you preserve your credit rating and keep open the option of refinancing the property. Let’s say you have a $3,600,000 loan and that the property is only worth $2,820,000, there may be opportunity to do a discounted payoff with your lender for the amount of $2,820,000. You will have to raise fresh new cash to do so. This means you will have to
come up with fresh capital yourself or raise money from other investors. You will raise new capital plus get new debt on the property for the a loan to value based on the discounted pay off. There may or may not be phantom income associated with the pay off of the debt. You will need to discuss with your CPA any possible income tax liability you may have as a result of the debt relief. p Darrel Dickson ApartmentsforSale.com 1-360-802-0817
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