Arizona - Rental Housing Journal - September 2014 by Professional Publishing, Inc

Rental Housing Journal Arizona

September 2014 - Vol. 6 Issue 9

2. Benefits of Hiring a Property Manager to Manager Your SingleFamily Investment.

9. Three Important Steps For Building Property Management Compensation Plans

3. Mind Your Business

10. Fund your Retirement with Seller Carry Back Financing

7. Dear Maintenance Men:

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My Pet Peeves Could Save You Thousands

By Alan Langston

have a few pet peeves relating to owning and operating rental property. One is generic and the others are very specific. These pet peeves come from years of supporting AZREIA and ARPOLA members and seeing the same unnecessary costs, losses and exposure. Generically, making uninformed decisions about a highly valuable asset (rental property) leads my pet peeve list. It falls in to that old saying, “ignorance of the law is no excuse”. Not knowing the what and how on everything that affects your rental property and its profit/loss consequence should be unacceptable to you. It is NOT okay to stick your head in the sand and hope everything will be alright. Unfortunately, I see this every day especially in the single family rental space. It is beyond me how anyone could ignore easily obtainable information that could possibly prevent huge losses. Or said in a positive way, provide many years of profitable returns with very little stress and worry. Here are three of my specific pet peeves that fall under the generic one above: continued on page 8

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Scottsdale Dominates Up-Scale New Apartment Construction in Metro Phoenix

he Kasten Long Commercial Group specializes in multifamily brokerage and has been providing apartment market updates for metro Phoenix in quarterly newsletters since 1998. Past issues and detailed market data are available on their web site (www.KLCommercialGroup.com). Within metro Phoenix, at the end of Q2, there were28 projects under construction totaling 7,494 apartments and an additional 67 possible projects totaling 15,950 apartments in the pipeline from initial rezoning to final permitting. Scottsdale represents 24.6% (1,842 u) of the apartments under construction and 25.8% (4,116 u) of the possible additional apartments in the current pipeline. Many of the new projects in Scottsdale are up-scale, four-story, with undercontinued on page 6

Five Ps for Your Social Media Marketing Success By: Jeremy Juhasz

mall businesses and nonprofits face a different set of circumstances when it comes to social media marketing than their larger for-profit counterparts, namely,

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smaller budgets, fewer employees and a greater priority on traditional forms of marketing. For those charged with marketing, the biggest first step toward making social media an integral component of the plan may be convincing your

organization. Despite widespread use of social networks for personal connections, the leadership of smaller organizations often questions its effectiveness as a marketing tool and whether they’ll see a return on their continued on page 4

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Benefits of Hiring a Property Manager to Manager Your Single-Family Investment. By Cliff Hockely

uying real estate as an investment has been a well-established investment strategy for thousands of years. You purchased or inherited a home or condominium and now you have to figure out how to get your arms around it. Perhaps you were transferred and don’t think it is time to sell the home yet, you want its value to appreciate more. From a management standpoint, you have two choices, manage the property yourself or hire a property manager to take care of it. This article will help you make a decision on which way to go. Setting investment goals First of all, realize that you need to set investment goals. In other words, ask yourself what you intend to do with the property. If it is free and clear you could save the money you earn and invest in more real estate… or pay for college tuition for your children. When they are done with college you could use the cash flow to prepare for or amend your retirement plans. If you have a mortgage you have less cash flow to meet your needs which will affect your

decisions. A few investments goals to consider: • • Hold the property until it is paid off and use the income for retirement • • Hold the property until the marketplace appreciates – then sell the property and: • • Reinvest in another property/ properties (maybe in better locations) • • Take the money to the bank. • • Spend the money you made. • Sell the property and use it to: • • Buy another home in another part of the country. • • Refinance the property after some of the equity has grown and buy an additional home.

Making the decision If you have time and are a handson investor, you will want to screen the tenants, make the repairs, complete the tenant turns and do the accounting yourself. More often than not, you get busy with life and don’t want to deal with the investment yourself.

If you hire a property manager they deal with the myriad issues involved with property management for you.

Property managers handle: Rent collection: They know what it takes to get the monthly rent collected from tenants. They deal with the tenants that won’t pay/ can’t pay, up to and including tenant evictions, something most landlords are unfamiliar with and very nervous about. Tenant selection: More often than not they have screened the tenants before move in, evaluated their rental history and their credit history and established their ability to pay. Property managers are like you, the fewer tenant turns they have the better, and the more money you make. Dealing with problem tenants: Sometimes a tenant goes through a divorce, a loss of a job, or some other crisis that turns them from being a cooperative tenant to an uncooperative tenant. Property managers know how to handle those situations and can typically solve problems related to difficult tenants. Maintenance:

Most property management companies handle property management emergencies 24 hours a day. They either have their own maintenance department to take care of your property or they have a vast pool of vendors that are prequalified to take care of your property issues. These vendors deal with many property issues from basic carpentry to plumbing, electrical, roofing and mold remediation. Vendor selection: Property management companies have an extensive list of vendors they have good experiences with. Property managers need good results for their clients and take time choosing the vendors they work with. In addition, property managers are sensitive to property maintenance costs and look hard to find cost effective vendors. Bill paying – financial reporting: Not only are property managers required by licensing laws to submit monthly financial reports to their clients, it just makes practical sense to know how your property is performing on a monthly basis. Marketing of vacant units: Property managers have a deeper continued on page 10

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RENTAL HOUSING JOURNAL ARIZONA

Mind Your Business Tia’s Tips for better rental management By Tia Politi Damages, Depreciation, and Normal Wear & Tear

ssessing charges to a tenant’s deposit is fraught with peril for many landlords. What are damages? How do you calculate depreciated damages? What is normal wear & tear? These questions are common to our business as landlords and I hope that the following will help guide you in assessing fair and reasonable charges you are owed, without ending up losing a court battle because you assessed improper charges. Damages in the context of landlord-tenant relationships are related to actual failure of the tenant to take ordinary care; accidental or intentional acts of violence to the premises by tenants or guests; or unpaid tenant charges related to the tenancy, such as rent, fees, and unpaid bills. Damage charges can also encompass items which a landlord chooses not to repair, loss of use of the rental dwelling during repairs (as long as repairs are performed in a “timely fashion”), and depreciated value of the rental dwelling as a result of ten-

ant destruction. So, for example, say your tenant punched a hole in one of the walls. You can patch it so that it is useful for another tenant, but your property has suffered depreciated damage as the wall will never be the same unless you take a large section down to the studs and repair it properly. You may charge the full repair cost for this damage even if you choose not to fully repair it at this time. I had a tenant who moved in to a unit with brand new linoleum, and when she moved out a year later, we discovered a large crescent-shaped burn in the new flooring. The owner chose not to replace the linoleum as it still had a lot of wear left in it, but we did fairly charge her as though we had replaced it. A tenant can also be financially responsible for failing to disclose repair issues that result in ongoing damage to the property from things like leaks; however, landlords can also bear at least partial responsibility if they fail to perform reasonable inspections during which damages could be noted and mitigated. So, if your tenant lived in your property for eight years and you never inspected, but discover a leak on

ditions. In this case, we charged the tenants 40% of the replacement cost of comparable carpet. You may not use a tenant’s responsibility for damage to upgrade your home at their expense. So, if we had decided to replace the living room carpet with a high-end wool carpet, for example, we would have gotten a bid for replacement of the normal carpet, charged that amount and the owner would have absorbed the rest. If you’re not sure what a fair charge is for a specific repair, contact an experienced contractor for advice. Normal wear and tear first of all, depends on the length of the tenancy. In a tenancy of 10 years, there will be much more wear and tear than there would be with a tenancy of only one year. Other factors would include the number of residents or animals living in a unit, the quality of the materials used in the property, the condition prior to move in, and the age of things like carpet and paint. A good interior paint job can be expected to last 5-7 years, with some minor touch ups between tenancies. The lifespan of flooring depends on its quality as well. Your average car-

move out that has completely rotted the kitchen floor, how is it reasonable to charge the tenant 100%? What is reasonable in a case like this is a difficult question to answer, but I always say that you should imagine explaining yourself to a judge in court, which usually clarifies the issue to some extent. Depreciation is an honest attempt to assess charges for damages to a tenant while considering the age and prior condition of the damaged item. So, in one case, I had tenants who left two damaged items in the house they rented: the kitchen counter and the living room carpet. The counter was brand new on move in and absolutely perfect on move out except for a large circular burn adjacent to the cook top where apparently the tenant set a hot pan. As this was a laminate counter, there was no way to effect a repair and the entire counter needed to be replaced at a cost to the tenant of 100% using comparable materials. The living room carpet had been burned when hot coals had popped out of the fireplace. There was no way to repair it; however, the carpet was six years old and had a lifespan of ten years under normal wear con-

continued on page 5

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Five Ps ...continued from front page investment. I’ve developed and implemented social media strategies for a variety of organizations -- for-profits, nonprofits, and individuals. For all of them, I’ve discovered, when it comes to social media, it’s important to remember the 5 P’s: Plan Identify what you hope to accomplish and create a strategy to take you there. Too many nonprofits and small businesses dive into social media because they “have” to and don’t consider a plan of action before they do so. Make a list of what you want to accomplish. Is it to gain more donors? Get a higher attendance at your annual fundraiser?

Increase sales? Make it a priority to identify goals so you can create the social media strategies for meeting them. Patience Nothing happens overnight. It takes time to develop relationships and establish credibility with your brand and your target audience. Over time, events and a steady pace will win out. Rushing leads to mistakes. The type of patience I’m referring to is a long-term mind-set. When day-to-day activities seem arduous and, at times, unfulfilling, know that each day builds to the greater goal. March on. Persistence

You must be stubbornly committed to your goals and your strategy. Keep plugging away and give your plan a fair amount of time and analysis before you pull the plug. If you know the plan is a good one, it’s not a good ideas to panic and change course simply because you’re not seeing results as quickly as you’d like. That said, circumstances change, not every strategy works, and you need to also be willing to recognize that it is time to try something new. Be persistent in implementing your plan and in monitoring whether you’re reaching the objectives that will take you to your goal. Pay (what you can) These days, especially on Facebook, it’s a pay-for-play landscape. Pay where you can, if you can. The results can provide the spark you need to drive a specific campaign or to increase your overall visibility to your target market. It can also be a very affordable alternative to other digital advertising options. Prioritize I can’t stress enough the importance of time management. If your marketing staff consists of only one or two people, it’s essential that you stay on top of your social media strategy by prioritizing your quar-

terly, monthly, weekly and daily objectives and goals. Nonprofits and small businesses face countless new daily challenges. Sometimes we lose track of what’s most important. Take the time to identify those tasks critical to your success and make them a priority. You can succeed with social media even if your organization doesn’t have the brand recognition of a multi-billion dollar corporation. If you remain even-keeled and set realistic goals, the return on investment will follow. Jeremy Juhasz is a social media strategist at EMSI Public Relations and a panelist for the Tampa Bay Marketing Summit, (www. tampabaymarketingsummit.com) on Aug. 8. Jeremy has years of experience managing social media marketing for the nonprofit sector, including launching social media and online strategies for Feeding America Food Bank and Goodwill affiliates. His multi-media background includes work as a newspaper reporter and as a marketing professional. He’s a graduate of Alfred University and attended Kent State’s School of Communication and Information, public relations.

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Mind Your Business ...continued from page 3 pet can be expected to last between 7-10 years (or more for high quality carpet) of normal usage. Hard flooring can have a lifespan of 7-25 years, again depending on quality.

• Broken window seals

• Chunks of drywall broken off

• Aged fixtures

• Multiple or extra large holes in walls, ceilings, or trim

• Replacement seals on appliance doors • Mold/mildew/peeling paint related to failure of housing components such as fans, leaky window, leaky roof

Normal Wear & Tear – Includes, but is not limited to: • Minor scuffs on floors or trim

• Damage to floors, counters, etc., from poor caulking

• Nicks on corners of walls • One or two pictures holes on walls • Minor scratches around knobs or handles

Damages – Includes, but is not limited to:

• Wear patterns in flooring in hightraffic areas

• Filth, grime, staining, trash inside or out

• Dingy paint (depending on lifespan of paint & tenancy)

• Gouges/scratches/burns/stains on floors, trim, counters, appliances, cupboards, walls, ceilings, etc.

• Cupboard finish deteriorating • Caulking

• Bent or missing hardware • Dented metal doors • Ripped, gouged, stained or frayed flooring • Unauthorized tenant “improvements” • Urine/feces • Unkempt yard • Broken globes or wrong wattage bulb in fixture that causes it to fail • Broken shelves, door guards, drawers on appliances

• Mold/mildew related to tenant lifestyle (lack of ventilation, heat, circulation) Figuring out what is fair for each situation is at best an imperfect science. So, be reasonable and act in good faith and you should avoid many troubles. Please call the Help line if you need assistance with a specific situation. Tia Politi, ROA Board Member, Rental Owner, Lead Property Manager at Acorn Property Management

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Scottsdale Dominates ...continued from front page ground parking and plenty of amenities. Advertised rents are more than $2.00/sf, and this increases with fees for water and common area. Most of the projects are in and around downtown Scottsdale but north Scottsdale will soon see significant new construction. South Scottsdale Activity – Alliance Residential’s Broadstone Waterfront (259u) is nearing completion on their two projects on Stetson Drive (Broadstone Industries East (183u) and West (133u)). Note that Alliance Residential’s 270u Broadstone at Camelback, adjacent to the Esplanade in central Phoenix, sold in July for a record setting $276,817/unit. Wood Partners’ 218u, five-story Alta Scottsdale on Granite Reef and Indian School Road is scheduled to open at

the end of this year. JLB’s 369u Portales Place on Goldwater, a bit north of Scottsdale Road, should be leasing soon. Mark Taylor’s huge, 440u, San Travesia l at 75th Street and McDowell Road hopes to be open early next year. They are working with COX to be a test case for their new, very highspeed internet. In addition to these apartment projects, Optima is going strong with their 781u, 11-story, Sonoran Village Condo/apartment community located at 68th Street and Camelback Road. These will be condos but rented as apartments. Deco Communities previously announced the plan to build a 90 unit condo project (Envy) at 75th Street – just south of Camelback, in downtown Scottsdale and recently announced a 2nd condo project with

100 units planned at 7300 E Earll Drive. Trinsio Venture recently purchased 3 acres with the intent to build 134 apartments at the SW/Cor of Main and 69th Street. Transwestern is proposing to build 416 units at the SW/Cor of Osborn and Scottsdale Road. iStar recently announced that they would expand their 480 unit Artesia project located on Scottsdale Road, just north of Indian Bend. The expansion will include an additional 204 condo and brownstone units. North Scottsdale Activity – P.B. Bell’s 240 unit LIV Scottsdale project, located just north of the Scottsdale Quarter at 15509 N Scottsdale Road, is nearing completion. Optima has proposed to develop a 9.4 acre site at the NW/Cor of Kierland and Scottsdale Road with four, 12-story build-

ings to provide 286 hotel units and about 700 luxury apartments. Mark Taylor has proposed 252 apartments at the former Rawhide site and TDI RE Holdings should commence construction soon on their The Jefferson on One ll, 289 unit apartments located just north of the 101 on Scottsdale Road. Jim Kasten, CCIM 2012 and 2013 Chairman, SAAR’s Commercial Services Committee Owner / Designated Broker Kasten Long Commercial Group 2821 E Camelback Road, Ste. 600, Phoenix, AZ 85016 Jim@KLCommercialGroup.com 602 677 0655

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ROC 273992, ROC 274062 5:47 PM Rental Housing Journal Arizona •9/10/14 September 2014

RENTAL HOUSING JOURNAL ARIZONA

Dear Maintenance Men: By Jerry L'Ecuyer & Frank Alvarez

Dear Maintenance Men:

Can graffiti scratched windows be repaired? I have a number of windows that have been scratched or etched by graffiti vandals. Replacing the window is very expensive. Do you have any recommendations? Jessie Dear Jessie: Yes, graffiti damaged windows can be repaired. It is often a two step process involving removing the scratches or etching with a buffing compound and using anti-graffiti film over the glass. Cerium Oxide rubbing compound is typically used with an electric buffing wheel for getting the scratches or etching out of the glass. Cerium Oxide can be found on the internet, glass & stone shops or good hardware stores. 3-M makes a very good anti-graffiti film that can be used as preventive protection or as a sacrificial layer. If you decide to do the work yourself, be careful with the electric buffing wheel. Keep the buffing wheel moving over the scratches and never concentrate on one spot for long as it will burn the glass. Removing

scratches from glass is a bit of an art and we recommend contacting a repair firm specializing in glass graffiti removal.

face. Our recommendation for peace of mind would be to repaint the patio floors using the above information as a guide.

Dear Maintenance Men: While getting a unit ready for rent, I painted the concrete patio with flat concrete paint. The patio looks much better; however I am worried the surface may be slick when wet. Should I be concerned and what can I do about it now? Kristina

Dear Maintenance Men: I have a number of patio decks coved in artificial turf. Because of the sun and use, the “turf” is looking worn and tattered. What can I do to make it look better? Do I need to remove the old turf before putting down new artificial turf or

Dear Kristina: Concrete patios can be slick when wet and more so after they have been painted. A simple solution is to use grit mixed in with the paint to give the concrete surface a bit of grip when walked on. Look for a clear non-slip polymer grip additive. The additive is mixed in with the paint or sealer and applied to the concrete with a roller. The polymer grit can be found at any hardware store in either the concrete or paint departments. Polymer grit infused paint can also be purchased if you do not want to mix in the grit. Avoid using silica sand or aluminum oxide; they both work, however they may change the appearance of the sur-

can I glue down over the old? How do I remove the old turf and is it difficult? If I want to go back to a natural surface, how do I remove the adhesive? KC Dear KC: Sounds like you have your work cut out for you! In order to get the new turf/carpet to look good on Continued on page 11

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Pet Peeves ...continued from front page Tenant Screening: In this world of instant information, owners and property managers tend to get complacent. We have come to expect everything immediately and believe most, if not all, products and services are the same. Nothing could be further from the facts when it comes to tenant screening. First, not all instant tenant screening products are the same. As I understand it, each company providing an instant search has their own database which is updated when it is updated. The outcome of the screening is only as good as the information in the database. Well, when was the database last updated? Many court records are not available electronically across this country. Those that are may be weeks or months behind getting the information online. How do they get that information? What about the perspective tenant who is just now in the process of eviction from his current rental? How will that information be picked up? How will identity theft be uncovered? Do you know if the perspective tenant is who they say they are? Will you get the full credit report to help you make the decision or is it just a pass or fail decision provided by the screening company? Is it only an instant database product or are there other aspects to the screening process that provide additional information and make the screening process more thorough? (Yes, this level of service exists.) As in most things, you get what you pay for. As an effective landlord or property manager you have to realize that a complete and thorough tenant screening on every adult who will be occupying the property is important. I can’t think of any single act more important in operating a rental

property than the screening of tenants. You need to learn the difference about available tenant screening products and services in the market and make an informed decision. If you are an owner using a property manager you are not off the hook. You need to be informed as well and use a property manager who screens your tenants as effectively as you want them to. Putting your head in the sand and saying that my property manager takes care of that is NOT being an effective owner. Ask yourself one question, “What do I stand to lose if a mistake is made in the tenant screening process?” Answers: Best Case: A couple of months of lost rent while you evict. Depending on your state’s Landlord Tenant Act, the time will vary from a month to several months. Do the math. Worst Case #1: You get a squatter. Worse yet, a professional squatter who understands the laws in your state better than you. In this case you probably never received any rent and it will take months to get them out. Worst Case #2: Significant damage is done to your property. This is the trifecta. You lose potentially tens of thousands of dollars on repairs. You lose months of rent. The impact to your cash flow and profits takes years to recover. Bonus #1: Your insurance rates might go up. Do the math and don’t forget to place a value on your time for dealing with this situation. Yes, I know that no tenant screening product or service is fool proof and 100% certain to filter out the wrong tenants. But, don’t you want the odds in your favor and high as you can get them? I trust you do. Insurance: I covered this in last

month’s article, so I won’t fully repeat it here – just the highlights. You must know what your policy covers. Said a different way, you must know what your policy doesn’t cover. Just believing your insurance agent is a good guy and is taking care of you isn’t enough. At a minimum, you need to find out: Are you covered when the property is vacant? If so, for how long? Do you have any requirements to notify your insurance company when it is vacant? What isn’t covered when the property is vacant? Is the pool covered? If so, are there differences in liability protection for the pool versus the rest of the property? Is the policy replacement cost or actual cash value? Are you covered for acts of your service providers or others you authorize to be on the property? Asset Protection: I covered this topic last month, as well. You need to be protected from your property and your property from you. Asset protection can be as little as having the right insurance coverage to very complex multi-level protection. It all depends on your needs and your level of risk tolerance. Once again, it shouldn’t be acceptable to you not to understand how to protect your very valuable assets. High quality information on asset protection is available. Usually, at least for our members, there is no cost to receive what I consider to be exceptional education

in this important area. Be sure you work with an attorney who understands rental property. ARPOLA and AZREIA are not tenant screening companies, insurance companies or attorneys. We always suggest our members get professional counsel on these important topics. We do have conversations with our members on these topics every day to help them understand what they need to know, arm them with effective tools to interview potential providers of these services and assist them with the process. We strongly feel that you need to make informed decisions on complex topics that have huge consequences. Smarter investing, Alan Langston Executive Director Arizona Real Estate Investors Association – AZREIA American Rental Property Owners & Landlords Association - ARPOLA 480-990-7092 www.AZREIA.org www.ARPOLA. org AZREIA serves its 1700+ members through chapters in Phoenix, Tucson and Prescott providing extensive market information, education, networking events and support. ARPOLA serves members in all 50 states providing assistance with ownership and operational aspects of rental property.

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Rental Housing Journal Arizona • September 2014

RENTAL HOUSING JOURNAL ARIZONA

uring the course of your professional career as a property management executive, building new compensation plans will be one of the most important projects you ever undertake. In fact, this project has the potential to be an explosive issue for your team of SuperStars and must be designed with great care. The information in this article will outline three important steps for building powerful compensation plans and will share many secrets for your success. When a compensation plan is built right, your team will love you and your company success will soar! Gathering information and setting objectives: Start by evaluating your current compensation plans to see how closely it aligns with the critical success factors for your property management company and your historical financial performance. Next, review what percentage of each person’s compensation is salary versus commission/bonus and compare this to competitive positions within the geographical locations you manage. Lastly, develop specific compensation objectives, such as: performance to budget or

By Ernest F. Oriente, The Coach {Article #221…since 1995} goals, occupancy for each apartment community, fiscal performance of this quarter compared to the same quarter last year, resident retention and/or resident satisfaction surveys. Tip From The Coach: Remember, each person on your property management team must see a direct connection between their efforts and their compensation plan. In addition, how you define the objectives for your compensation plans will be a direct reflection of the exact individual or team performance you will receive. Developing performance measurements and plan options: Once you have defined your compensation objectives, the next step is to determine how you will measure performance. For instance, will your new compensation plan reward individual performance, team performance or a blend of both? In addition, your compensation plans should also consider how often commissions/ bonuses will be paid and what will be the impact if an individual or your team does not meet or exceed their compensation objectives. Next, design several compensation models

on a spreadsheet so you can see how annual compensation will vary as you change or modify the performance/pay variables. In addition, calculate the range of income your SuperStars will be able to earn over the next 12 to 60 months. Lastly, test and run your historical results through your new compensation plans to verify performance levels and income expectations. Tip From The Coach: Some of our property management clients like to confidentially share preliminary compensation models with just a few SuperStars in their company to gather some additional insight before finalizing their new compensation plans. In addition, some of our clients will grandfather the compensation for their current team but all newly hired team members will be paid based on the new compensation plan. Remember, there is no such thing as a perfect compensation plan, but there is a compensation plan that is well-suited for your property management company. Lastly, just because a compensation plan has worked in the past, does not mean it will work in the future

as the property management profession is changing and evolving rapidly. Selecting and evaluating your options: Once you have tested your compensation plans for accuracy and performance expectations, select the plan that most closely aligns with your company objectives. Sometimes it can be helpful at this point to have another set of eyes, outside of your property management company, review your new compensation plan to ensure it’s clear and reasonable. Next, consult with your internal resources to be certain they can design and produce the information required by your new compensation plan. In addition, your team will need a written description of their new compensation plans and a financial spreadsheet detailing exactly how this compensation will impact them over the next 12 and 24 months. Tip From The Coach: Once you have presented your new compensation plan to your property management team schedule a monthly appointment over the next six months to vigorously review and evaluate continued on page 11

Rental Housing Journal Arizona • September 2014

RENTAL HOUSING JOURNAL ARIZONA

Fund your Retirement with Seller Carry Back Financing By Jade Bossert

ulti-family property owners have several options, to generate passive income in retirement, that are unique to owners of income property. They include placing your residential income property under professional management and forgoing the day to day management duties, effecting a IRC 1031 exchange into a commercial triple net leased property, or taking on the role of a lender by providing seller financing, to the buyers of your income property. Seller carry back financing is the most popular vehicle active owner/ managers of multi-family properties use to fund their retirement. The major benefit is“mailbox money”, which is a monthly check sent electronically or by mail to the seller every month, for a set period of time. The current market interest rate for seller financing is 5.5% to 6.5% inter-

est. A strong down payment, of 20% to 30% of the sale price, is recommended when financing a buyer. Property tax, insurance and the monthly payment should be collected by a title company or bank and disbursed to the seller. The property should be collateralized by a note and deed of trust that detail the terms of the carry back. The terms should include a late fee. In the event the seller is concerned about being paid off, a steep prepayment fee of 12% to 20% of the principle balance should be detailed in the note. If the property is 5 units or larger, it is considered a non-consumer transaction and not governed by federal Dodd Frank Laws. Sellers are often able to get a sale price premium, when offering seller carry back financing. The loan can have a balloon payment or can be fully amortized. Fifteen year fully amortized loans are a great option

for owners liquidating in their mid sixties. The monthly payments to the owners would probably be between 40% and 50% of the current gross rents. The first ten years of retirement are considered the go-go years, with retirees traveling, golfing and pursuing activities that are relatively expensive. Usually, by their late seventies retirees slow down. A fully amortized fifteen year loan could provide the income for active retirees to pursue many of their dreams worry free. Just as you pay mostly interest in the beginning of paying on a mortgage, when financing a buyer, you collect mostly interest. Therefore, the principle of the loan is preserved for an extended period of time. It is important to review a buyer's credit report and financial strength, just as would any prudent banker. Once you sell the property, you don't want to foreclose and revert back to being a landlord. Put your-

self in the buyers' shoes and structure the deal so it is a win-win. If you know the property will need a new roof in the next couple of years, put it on before offering it for sale, Likewise, if a few units are ready for new air conditioners, replace them before selling. You can recapture the cost in your sale price. For generations, many people have funded their retirement and enjoyed their golden years by benefiting from seller carry back financing. It is one of the unique“ exit strategies” of real estate ownership.

tising including our website which easily guides prospects to our available units. vFlyer pushes out gorgeous digital flyers to many welltrafficked rental websites such as Craigslist, Hotpads, Zillow, Trulia and more. We also upload flyers to Postlets, Rent.com, etc. Good property signage draws many inquiries as well. Tenant discrimination: Property managers are focused on equal housing opportunity. They do not discriminate on the basis of race, national origin, color, religion, sex, familial status, handicap, source of income or sexual orientation. This protects the landlord from federal, state, county and city fair housing investigations and litigation. Watching Your Property: Property managers have local offices so they can take care of your property and your interests when you are not available. Compliance with laws: Property managers work hard to comply with

the many federal and state laws. In that vein they have hundreds of forms that meet current regulations that are used in the day to day operations of managing properties. Value: Property managers deliver a huge value for the small amount they charge. They pay for themselves every day the investor owns the property.

Jade Bossert has sold real estate in Arizona since 1979. She is an Associate Broker with Tierra Antigua Realty in Tucson and specializes in the sale of apartment complexes. Contact her at 520-797-6900 or tucsonrealestate@ mindspring.com

Hiring a Property Manager ...continued from page 2 pool of tenants looking for rentals, enabling them to rent units faster than an individual owner can. It is good to find a company that invests in its website and search engine opti-

mization (SEO) to find as many tenants as quickly as possible for their clients. However it is good to diversify your presence with a wide variety of digital and traditional adver-

Choosing the right property manager Making the decision to manage a single family property is not easy. If you have the time and skills it clearly makes sense to manage your own property, but it is challenging and you would want to become a member of a local landlord association to stay on top of the ongoing business changes. If you don’t have the skills, consider hiring a property manager.

Rental Housing Journal Arizona • September 2014

RENTAL HOUSING JOURNAL ARIZONA

Dear Maintenance Men: the deck, the old must be removed. The new turf/carpet will not stick to the old carpet and the old glue will need to be removed as well. If you have a small area of glued down turf/carpet to remove, use a hand scraper to pry the carpet off the surface. If you have a large area; use a roofing scrapper to quickly remove the carpet. The old glue can be removed using a scraper and applying an adhesive removal solvent or a heat gun. Never combine the heat gun and the solvent as the solvent is flammable. The solvent can be found at any hardware store and should be used in a well ventilated room. If you don’t want to use a solvent; use a heat gun to soften the glue and use the scraper to remove the glue. Both methods are messy and labor intensive; however the heat gun is the less toxic of the two. If you are not replacing the carpet

The Coach:

...continued from front page 7

and want to return to a natural surface; power sanding or media blasting may be needed to remove any trace of the glue. The surface will need to be sealed to complete the job.

Please call: Buffalo Maintenance, Inc for maintenance work or consultation. JLE Property Management, Inc for management service or consultation Frankie Alvarez at 714 956-8371 Jerry L’Ecuyer at 714 778-0480 CA contractor lic: #797645, EPA Real Estate lic. #: 01460075 Certified Renovation Company Websites: www.BuffaloMaintenance.com & www.ContactJLE.com www.Facebook.com/BuffaloMaintenance

www. re nt alh o u sin g jour na l.com

...continued from front page 6

the results. In addition, ask for feedback on your new compensation plan and swiftly address any problems you or your teams discover. Want to hear more about this important topic or ask some additional questions about how to build powerful compensation plans? Send an E-mail to ernest@powerhour.com and The Coach will E-mail you a free PowerHour invitation. Ernest F. Oriente, a business coach/ trainer since 1995 [31,500 hours], serving property management industry professional since 1988--the author of SmartMatch Alliances™, the founder of PowerHour® [ www.powerhour.com ], the founder of PowerHour SEO [ www. powerhourseo.com ], the live weekly PowerHour Leadership Academy [ www.powerhourleadershipacademy.com/pm ] and Power Insurance & Risk Management Group [ www.pirmg.com ], has a passion for coaching his clients on executive leadership, hiring and motivating property management SuperStars, traditional and Internet SEO/SEM marketing, competitive sales strategies, and high leverage alliances for property management teams and their leaders. He provides private and group coaching for property management companies around North America, executive recruiting, investment banking, national utility bill auditing, national real estate and apartment building insurance, SEO/SEM web strategies, national WiFi solutions [ www.powerhour.com/

propertymanagement/nationalwifi.html ], powerful tools for hiring property management SuperStars and building dynamic teams, employee policy manuals [ www.powerhour.com/propertymanagement/employeepolicymanuals.html ] and social media strategic solutions [ http:// www.powerhour.com/propertymanagement/socialmedialeadership.html ]. Ernest worked for Motorola, Primedia and is certified in the Xerox sales methodologies. Recent interviews and articles have appeared more than 8000+ times in business and trade publications and in a wide variety of leading magazines and newspapers, including Smart Money, Inc., Business 2.0, The New York Times, Fast Company, The LA Times, Fortune, Business Week, Self Employed America and The Financial Times. Since 1995, Ernest has written 225+ articles for the property management industry and created 400+ property management forms, business and marketing checklists, sales letters and presentation tools. To subscribe to his free property management newsletter go to: www.powerhour.com. PowerHour® is based in Olympic-town…Park City, Utah, at 435-615-8486, by E-mail ernest@powerhour.com or visit their website: www.powerhour.com p

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Rental Housing Journal Arizona • September 2014