Arizona Rental Housing Journal October 2014 by Professional Publishing, Inc

Rental Housing Journal Arizona

October 2014 - Vol. 6 Issue 10

2. How to Use a Release Agreement

9. The Coach: 23 Property Management Tips for Mastering E-mail

7. Dear Maintenance Men

10. Shoptalk

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A Monthly Circulation To More Than 10,000 Apartment Owners, Property Managers, On-Site & Maintenance Personnel

4-Plexes Again Offer Strong Opportunities in Metro Phoenix

Market Overview Phoenix Arizona Multifamily Housing Update 2Q14 RED CAPITAL GROUP®

Payroll Job Summary

Total Payrolls Annual Change 2014 Forecast 2015 Forecast 2016 Forecast 2017 Forecast Unemployment (NSA)

1,837.4m 35.1m (1.9%) 41.0m 64.7m 73.2m 66.5m 6.3% (July)

2Q14 Payroll Trends and Forecast Metro payroll job growth decelerated in the second quarter, slowing to a 35,100-job, 1.9% year-on-year rate from 1Q14’s 42,200-job, 2.3% performance. The 2Q14 outcome was the slowest quarterly advance recorded in three years. The education, health care and leisure service sectors were Phoenix’s strong suits, collectively adding payroll employees at an 18,800-job, 4.2% annual rate, up from 1Q’s 15,400-job gain. Most other sectors were weaker in the spring, most notably construction, retail trade, finance and business services, wherein headcounts grew at a combined 15,700-job, 2.1% y-o-y pace, down from the prior quarter’s strong 26,600-job, 3.6% advance. Seasonally-adjusted data continued on page 3

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he Kasten Long Commercial Group (KLCG) has specialized in multifamily brokerage in metro Phoenix since 1998 and over the years has helped many investors significantly increase their net worth by starting with 4-plexes and then moving into larger apartment communities. The progression from small to large is obvious and 4-plexes are a great way to get started with multifamily investing. Marla and Jerry Wicks handle a portion of KLCG’s Small Apartment Division and have specialized in this discipline for more than 20 years. The following is some insight from Marla and Jerry into investing in the 2 – 4 unit apartments in metro Phoenix. The well-known general consensus has been that the best thing to invest in is income-producing real estate. We focus on an investment continued on page 6

Raising Rents

received some very good feedback on the article I wrote for the June edition of the Rental Housing Journal. That article discussed the challenges of raising rent in the single family rental market and the exposure to your revenue and profit if you were unable to rent the property for an additional month or two. While the premise of the article is correct and the math compelling, I want to expand on the long term effects. We will have a much healthier long term rental market if rents rise in a sustainable manner. I base this reasoning on looking at the long term horizon and at the level rents will need to achieve to support the

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business case of acquiring rental property. Let’s assume a $180K rental purchase with a 20% down payment leaving $144K of debt service (mortgage) on the property. I think we can all assume that interest rates will return to a more normal 8% or so over time. Since this is a long term outlook let’s assume 8% along with $2500 in taxes and $400 insurance: Monthly Payment Results

Principal and Interest Property Taxes Homeowners Insurance Total PITI Payment

1056.62 208.33 33.33 1298.28

continued on page 8

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How to Use a Release Agreement

document many landlords probably are not aware of is the release agreement. Although there are many instances when landlords can use it, many do not take advantage of it. This article will cover some of the basic uses of this document. Sometimes called a general release, a release agreement is binding, written agreement between two parties to resolve or settle a dispute. The document should describe the underlying events, as well as include a provision stating that both parties, in exchange for something of value, will not sue or allege additional claims. Management can use releases in a variety of situations to bring final closure to any real or potential claims. The documents should be in writing and signed by the appropriate parties, such as the landlord or authorized agent and residents. Failure to use this document can leave a landlord exposed to later claims filed by a renter. Situations There are several situations where releases are acceptable. The most obvious involves instances where

the landlord is at fault. These could include situations where: • Maintenance personnel respond to a work order and damage/ break a possession of the resident; • Management allows an unauthorized individual to enter a renter’s unit and that individual then steals items from the apartment; • A resident suffers a physical injury in his or her apartment and claims the landlord is at fault. As a result, the resident may have doctor, hospital or other medical bills. Two other areas to consider are special amenities and third-party services. Special amenities are services provided by the community, such as organizing a bus trip for its residents. In this situation, management should require participating residents to sign a release agreement that states it is not responsible for any injury damage a renter may sustain on the trip. Releases also cover services not provided by community employees. An example of this is an individual or organization conducting swimming lessons for resident at the community’s pool. In addition to requir-

ing the third party to sign the release, management should also require that it carry appropriate insurance. The last suggestion use of the document is for early lease termination. Landlords can use it in situations where: the resident has a legitimate or legal basis to end the lease early; or he or she wants the resident to move out prior to the lease expiration date. A mutual release agreement protects both parties since the resident is no longer liable for future rent and the landlord gets rid of a problem renter. This release should be subject to the resident leaving the unit in a clean, undamaged condition when he or she moves out. Example Consider the following: Stu Pid and M. Bee Sill sign a 12-month lease for a unit at the Low Down Dirty Shame Apartments. The two do not view the unit prior to signing the contract. Manager Meedy O. Kerr says a walk-through isn’t necessary since she personally inspected it. After moving in, Stu Pid suffers an injury when the ceiling caves in on him. The ceiling collapsed because

of an unattended water leak. Additionally, M. Bee Sill steps on an exposed nail and requires a tetanus shot. Meedy O. Kerr says that if the two are not satisfied with the apartment, they can leave and she will cancel the lease. Stud Pid and M. Bee Sill later sue for personal injuries. They win their suit since Meedy O. Kerr failed to have them sign a release agreement. Andrew M. Hull, Esq. Apartment Signs HULL, HOLLIDAY &

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RENTAL HOUSING JOURNAL ARIZONA

Market ...continued from front page also were soft. According to this series, payroll employment declined in February, April and May, yielding a -9,500-job net loss over the year’s first five months. Conversely, the data indicate that the job market regained momentum during the summer as 25,000 net jobs were created in June and July. RED Research’s metro payroll model achieves a 97.7% A-R2 using six lags of the dependent variable, U.S. job growth rates and U.S. and metro home values as predictive variables. The equation produces a favorable forecast, projecting accelerated job creation from 41,000 jobs this year to 65,000 and 73,000 jobs in 2015 and 2016, respectively. Moderately slower growth in the 55,000– to 65,000-job range is likely to evolve in the forecast out-years. Occupancy Rate Summary

Occupancy Rate (Reis) RED 50 Rent Chg. Rank Annual Chg. (Reis) RCR YE14 Forecast RCR YE15 Forecast RCR YE16 Forecast RCR YE17 Forecast

95.3% 33rd

+0.9% 94.9% 94.2% 94.4% 93.3%

2Q14 Absorption and Occupancy Rate Trends Slower job creation notwithstanding, tenant demand for multifamily space was favorable as renters net leased 934 units during 2Q14, according to Reis, the highest spring quarter absorption recorded in three years. Supply levels were readily manageable as developers added only 386 completed new units to the metro inventory, allowing the metro occupancy rate to rise 20 basis points sequentially to 95.3%, a level reached only once previously in the 24-year Reis data series (3Q00). Phoenix advanced 90 bps year-on-year, ranking fifth among the RED 50 with respect to rate growth, trailing only Albuquerque, Houston, Sacramento and the Inland Empire. Axiometrics surveys of 627 larger,

professionally-managed properties came to a dimmer conclusion. Properties surveyed continuously since 2008 were 93.8% occupied on average, up only 30 bps y-o-y. Class-C buildings enjoyed the highest occupancy (97.5%), trailed at a distance by class-B (94.3%) and classA (93.8%) assets. Among submarkets, Paradise Valley posted the highest average occupancy (96.1%), and South Mesa the lowest (91.6%). RCR’s absorption model finds that payroll job growth, vacant supply and home prices are the primary determinants of PHX demand. Heavy supply expected through 2015 is projected to overbalance demand for much of the forecast period, causing metro occupancy to decline about 110 bps by YE2015 to the 94.2% area. Effective Rent Summary

Mean Rent (Reis) Annual Change RED 50 Rank (Y-o-Y Chg.) RCR YE14 Forecast RCR YE15 Forecast RCR YE16 Forecast RCR YE17 Forecast

$751 3.4% 21st 3.1% 2.8% 3.4% 2.6%

2Q14 Effective Rent Trends Reis report that effective rents climbed an average of $7 (1.0%) in sequential quarters to $751, up from 0.7% gains in both the prior and year-earlier quarterly periods. Expressed on a year-on-year basis, rents were higher by 3.4%, the second fastest advance (after 4Q13’s 3.5%) recorded in seven years, ranking 21st among the RED 50 markets. Axiometrics surveys of 605 stabilized, larger properties recorded an $822 average effective rent, up 5.4% y-o-y; representing the fastest rent growth rate posted since 3Q11. Axiometrics report that stabilized class-B assets notched a 5.4% yo- y increase, fastest among metro classes and the strongest performance observed in three years. Class-A buildings followed closely behind with a 5.1% advance. Class-C properties trailed, gaining 4.6%. Paradise Valley (11.0%) posted the strongest rent gains among submarkets, followed by South Scottsdale (8.7%). Maryvale (-0.5%) and Chandler

(2.5%) rent trends were weakest. RCR’s rent model employs payroll, home price and personal income growth variables, as well as current vacancy and three lags of the dependent variable to achieve a 97.5% A-R2. The model produces an optimistic forecast of 3%+ growth through 2015, followed by moderately slower progress in 2016. Faster rent growth returns in 2017 to give rise to a 2.9% compound annual growth rate over a fiveyear holding period, ranking 23rd among the RED 46 peer group. Trade & Return Summary

$5mm+ Sales Approx. Proceeds Avg. Cap Rate (FNM) Avg. Price/Unit Expected Total Return RED 46 ETR Rank Risk-adjusted Index (RAI) RED 46 RAI Rank

32 $606mm 5.6% $72,256 5.7% 34th .4.82 19th

2Q14 PROPERTY MARKETS AND TOTAL RETURNS Investor enthusiasm for Phoenix opportunities grew during the spring and summer, producing phenomenal sales statistics. During the second quarter buyers closed on 32 transactions valued at $5 million or more for

total proceeds of $606mm. The subsequent quarter promises to be even larger as a total of 36 properties exchanged hands by the Ides of September for total value of $1.1 billion. Both quarters will exceed frothy 4Q12 results, which aggregated 27 transactions valued at $537mm. The average price of 2Q14 traded units was $72,256, down moderately from $74,811 and $79,852 in 1Q14 and 4Q13, respectively. But investors concentrated on newer, higher value assets during the summer, pushing the average unit price metric to a stout $99,645, just shy of 1Q13’s record$102,910 level. Cap rates on all trades averaged in the low-6% area. But institutional quality properties were priced to considerably lower yields. Most buildings constructed after 1990 traded in the high-4% to mid -5% range, with trophies universally priced at 5.2% or lower. In recognition of the powerful bid for Valley properties we chose to trim the generic cap rate from 5.75% to 5.6%. This going in yield, a terminal cap rate of 6.4% and model derived rent and occupancy forecasts produce an expected 5-year, unlevered annual expected total return of 5.7%, ranked 34th among the RED 46. High model R -squared stats and low standard errors boost the RAI to 19th rank. continued on page 4

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Market ...continued from front page

ON-SITE-NW SEATTLE

VALLEY, METRO, ARIZONA APT. NEWS

Salsbury Industries

Notable Transactions Property Name (Submarket)

Property Class/Type Feb, Apr, Jun,(Constr.) Aug, Oct, Dec Mira Santi (Chandler / Gilbert) B+ / GLR (1999) Adobe Ridge (North Glendale) B+ / GLR (2005) Parcland Crossing (Chandler / A- / GLR (2012) Gilbert) Miramonte (South Scottsdale) B+ / GLR (1981) Grigio Village (North Tempe) A- / TOD (2009)

Approx. Date of Transaction 8-Jun-2014 10-Jun-2014 18-Jun-2014

Total Price / <Appr. Value> (in millions) $33.3 $26.1 $65.0

Price / <Appr. Value> per unit $132,143 $116,295 $169,713

Estimated <Underwritten> Cap Rate 4.9% 5.3% 5.1%

2-Aug-2014 19-Aug-2014

$18.5 $47.1

$122,517 $115,319

5.4% 5.5% ...continued on page 5

ON-SITE

VALLEY, METRO, ARIZONA APT. NEWS

Salsbury Industries

Jan, Mar, May, Jul, Sep, Nov,

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$676

SUBMARKET TRENDS Effective Rent

Submarket

Market ...continued from page 4 Submarket Treands Submarket Central Phoenix North Central Phoenix South Chandler / Gilbert Deer Valley East Mesa Glendale South Goodyear / Avondale Maryvale North Scottsdale North Tempe Northeast Phoenix Paradise Valley Peoria / Sun City / Surprise South Mesa South Scottsdale South Tempe Sunnyslope West Mesa Metro

2Q13

2.4%

5.2%

East Mesa

$737

South$750 Mesa

1.7%

$637 3.0%

Glendale South

$602

South$619 Scottsdale

2.9%

$800 10.6%

$821

South$854 Tempe

4.0%

$833 4.1%

Goodyear / Avondale

Physical VacancySunnyslope

Maryvale North 2Q14 Scottsdale

$693

Change

$637 8.5% $551 $565 JOURNAL 2.6% RENTAL HOUSING ARIZONA West Mesa $947

2Q13

$995 Metro $821

Change 5.1%

$606

7.6%

3.3%-80 bps

$726

4.4%-30 bps

5.8%

2Q14

3.5%

Central Phoenix North

$612

North$625 Tempe

2.0%

$794 8.4%

Central Phoenix South

$702

Northeast $734Phoenix

4.5%

$698 5.9%

$729

5.6%

Chandler / Gilbert

$830

$865 Paradise Valley

4.2%

$668 6.1%

$702

5.1%

-100 bps 5.1%

4.2%

Deer Valley

$676

Peoria$693 / Sun City / Surprise 2.4%

$760 5.2%

$781

3.5%

2.8% -170 bps

4.5%

Effective Rent East Mesa Glendale South 2Q13 2Q14 Change Goodyear / Avondale $612 $625 2.0% Maryvale $702 $734 4.5% North Scottsdale $830 $865 4.2% North Tempe $676 $693Phoenix 2.4% Northeast $737 $750 1.7% Paradise Valley Peoria / Sun City / Surprise $602 $619 2.9% South Mesa $821 $854 4.0% South Scottsdale $551 $565 2.6% South Tempe $947 $995 5.1% Sunnyslope West Mesa $794 $821 3.3% Metro $698 $729 4.4% $668 $702 5.1% $760 $781 2.8% $637 $653 2.6% $800 $869 8.7% $833 $855 2.6% $637 $652 2.4% $606 $623 2.8% $726 $751 3.4%

4.0%

Physical Vacancy South$750 Mesa $637 3.0% $653 2.1% 2.6%-90 bps 5.9% $737 1.7% South Scottsdale $800 10.6% $869 7.5% 8.7% 3.1% $602 $619 2.9% -310 bps 2Q13 2Q14 Change South$854 Tempe $833 $855 2.6% 4.4% $821 4.0% 4.1% 2.6% -150 bps 8.4% 7.6% -80 bps Sunnyslope $637 $652 6.7% 2.4% 5.4% $551 $565 2.6% -180 bps 5.9% .6% -30 bps $606 8.5% West Mesa $623 2.9% 2.8%-60 bps 5.8% $947 $995 5.1% 3.5% 6.1% -100 bps $726 Metro5.1% $751 3.4% 5.6% $794 $821 3.3% 4.0% 4.3% 30 bps 5.2% 3.5% -170 bps $698 $729 4.4% 5.8% 5.3% -50 bps 3.0% 2.1% -90 bps $668 $702 5.1% 4.2% 5.0% 80 bps FOR MORE INFORMATION ABO $760 $781 2.8% 4.5% 2.6% -190 bps 10.6% 7.5% -310 bps $637 $653 2.6% 5.9% 5.2% -70 bps 4.1% 2.6% -150 bps $800 $869 8.7% 3.1% 8.9% 580 bps 8.5% 6.7% -180 bps Daniel-90 J.bps Hogan $833 $855 2.6% 4.4% 3.5% Director-210 of bps Research 3.5% 2.9% -60 bps $637 $652 2.4% 5.4% 3.3% djhogan@redcapitalgroup.c $606 $623 2.8%30 bps 5.8% 4.3% -150 bps 4.0% 4.3% +1.614.857.1416 oﬃce $726 $751 3.4% 5.6% 4.7% -90 bps +1.800.837.5100 toll free 5.8% 5.3% -50 bps 4.2% 5.0% 80 bps ABOUT RED’S RESEARCH CAPAB 4.5%FOR MORE 2.6% INFORMATION -190 bps 5.9% 5.2% -70 bps 3.1% 8.9% 580 bps Daniel-90 J. bps Hogan James 4.4% 3.5% Director of Research Senior Ma 5.4% 3.3% -210 bps djhogan@redcapitalgroup.com HeadTH of M +1.614.857.1416 oﬃce jphensley 5.8% 4.3% -150 bps +1.800.837.5100 toll RED free Capital Group, LLC  RED Mortgage Capital, +1.770.75 LL 5.6% 4.7% -90 bps +1.800.83

Two Miranova Place, Columbus, O

FOR MORE INFORMATION ABOUT RED’S RESEARCH CAPABILITIES CONTACT: For more information about red’s research capabilities contact: Daniel J. Hogan, Director of Research djhogan@redcapitalgroup.com +1.614.857.1416 office +1.800.837.5100 toll free

James P. Hensley, Senior Managing The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice, or recommendations to buy or sell currenDirector, Head of Multifamily cies or securities or to engage in any specific transactions. Information has been gathered from third sources and has not been independently verified or accepted by RED Capital Group. RED Originations party makes no representations or warranties as to the accuracy or completeness of the information, Daniel J. Hogan P.RED Hensley in the report. cannot be held responsible for any jphensley@redcapitalgroup.com assumptions, analyses or conclusions presented James Director of Research errors or misrepresentations contained in the report or in the information gathered from third party Senior Managing Director +1.770.753.6472 office sources. Under no circumstances should any information contained herein be used or considered as djhogan@redcapitalgroup.com HeadTHE of Multifamily Originations FACE OF LENDING offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance +1.800.837.5100 toll freeoﬃce an +1.614.857.1416 jphensley@redcapitalgroup.com upon this information is solely and exclusively at your own risk. Please consult your own counsel,

RED CapitalorGroup, LLC regarding RED Mortgage Capital, LLC Any RED Capital Markets, FINRA accountant other advisor your specific situation. views expressed hereinLLC are (Member subject +1.800.837.5100 toll free +1.770.753.6472 oﬃce to change without notice due to market conditions and other factors.toll free +1.800.837.5100 Two Miranova Place, Columbus, Ohio 43215  redcapitalgroup.c © 2014 RED Capital Group, LLC

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4-Plexes ...continued from front page

experience in the investment marketplace will be the key ingredient to making this sort of investment a success. It’s not just identifying the best property, having an agent with many years of experience assists with the ins and outs of negotiation, numbers, contracts and more. When a potential investor uses a “residential specific” realtor it often becomes problematic not just in the beginning of a commercial transaction, but after the purchase, and you do not want to be in an accident waiting to happen! Without using an agent with proper knowledge of these types of purchases - an inexperienced agent can become an investor’s greatest liability. Especially for the first time Investor who asks questions about everything from the leases, to items found during the inspections, to the differences that do exist between these loans and commercial property loans. And you want the best assistance you can get, which only comes from those who specialize in this specific marketplace. For more information on our market, please don’t hesitate to ask.

scenario that has shown to be the easiest for the new Investor to get into and understand, the 2, 3 and 4 unit building. To be certain, this is something which should be taught about in all Investor 101 classes. Think about it, your qualification and loan approval times are the same as that for a home, with better interest rates and programs. And yes, even now there are many opportunities! 4-Plex Vs Single Family Houses A scenario many broach is why not buy four single family homes as opposed to getting into a 4-plex? Well, that could work but you might want to look at the many disadvantages. First, if you have four single family homes and one tenant leaves you still have four mortgages to pay. When you have a 4-plex, if one tenant moves out or doesn’t pay rent, you still have 3 others helping to pay your mortgage. Second, you will need four separate loans on four homes all with their own percentage of money down, and that can become quite pricey when looking to invest and have your money grow. With a 4-plex, it’s only ONE mortgage with a fraction of the amount of money needed for your down payment. Third, the 2, 3 and 4 unit marketplace is seeing a steady, consistent increase in their values relative to the current home trends in Phoenix. All of this shows how this is a perfect time for

you, the investor – new or experienced-to find such a great fit for your investment cash in this increasingly strong investors marketplace. Increased rents create opportunities Rents in 2, 3 and 4 unit buildings are increasing annually. For example, two-bedroom apartments that rented for $495 a few years ago are now renting for between $550 and $600. Sometimes even higher! Prices for these properties have started to increase – but they are still at attrac-

tive levels. Current prices can range from the mid $100,000’s to as high as over $400,000 for newer or newly rehabbed buildings. Speaking of rehabbing, that’s the other fantastic thing that’s occurring in the Greater Phoenix area. With rents increasing, current owners are often making the decision to upgrade their properties with new paint, new roofs, upgraded interiors and new A/C’s. In areas that have not fared too well during the economic downturn, this is helping to restore once great rental areas back to their former performance levels. These areas again offer great investment opportunities. Investors have the ability to purchase properties, reposition the asset, increase the rents and thus add significant value. Identifying the improving neighborhoods and finding the apartments best suited for upgrading is the challenge – so having the right agent is essential.

Marla Wicks 480-343-8537 Jerry Wicks 480-228-5530 Kasten Long Commercial Group 2821 E Camelback Road, Ste. 600 Phoenix, AZ 85016 Jerry@KLCommercialGroup.com Marla@KLCommercialGroup.com The Kasten Long Commercial Group has specialized in apartment brokerage in metro Phoenix since 1998. Agents have brokerage more than 1,000 communities with gross sales in excess of 1 billion dollars. The company also provides weekly updates (by e-mail) on apartment sales and publishes an apartment market update on a quarterly basis – past issues are available on the company’s web site (www.KLCommercialGroup.com).

It’s Critical to Use an Experienced Agent The most important aspect for any investor is to be sure to work with a learned commercial realtor who’s

3334 W. McDowell Rd. Ste. 20 Phoenix, AZ 85009 Office: (602)218-8813 Fax: (602)218-8611 Email: fandihvacaz@earthlink.net 6

Rental Housing Journal Arizona • October 2014

RENTAL HOUSING JOURNAL ARIZONA

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

as follows: 1. Garbage disposal unit. 2. Vertical and horizontal blinds. Dear Maintenance Men: I understand moving in a new resident from the management’s point of view. What do you recommend as a move-in procedure from a maintenance background? I always worry about handing over a set of keys to a new resident who will now have control of a very expensive rental unit. What should I be thinking about maintenance wise for this new move-in? Tom Dear Tom: Interesting question! It’s true we sometimes think the move-in procedure is complete once the resident passes all the background checks, pays their money, signs all the paperwork and is given the keys to the unit. We believe that the move-in procedure is far from complete if the new resident is not “Checked-out” on the operation of the rental unit. A major source of maintenance issues and costs come from a new resident not knowing how to safely operate the moving parts of their unit. A short list of items that a resident may or may not know how to operate are

3. Dishwashing machine. 4. HVAC system or heating and cooling systems. 5. And anything else that could break or be a safety issue. Many of you might be saying to yourselves; “Who does not know how to operate any of those items.” You would be surprised! Top of the list of most abused items are garbage disposal units and blinds. Dear Maintenance Men: I have heard the terms “Proactive and Reactive” in connection with property maintenance. Can you explain the difference as it relates to apartment maintenance? Richard Dear Richard: We’ll start with the definitions first and then how they relate to property maintenance. Proactive: Acting in anticipation of future problems, needs or changes. Reactive: Done in response to a problem or situation: reacting to

problems when they occur instead of doing something to prevent them. How you deal with property maintenance can make a big difference to the bottom line. A proactive approach allows you to make all the decisions ahead of time. In a proactive situation you will have time to shop for the best price and dictate the schedule of the work. As an example: 1: Snaking or hydro-jetting the main sewer line before the Thanksgiving holiday removing any buildup or roots in the pipes. 2: trimming trees and overhanging branches before a wet winter storm. A reactive approach removes all control of the situation. You will have little influence over the cost of the work or when it will take place. As an example: 1: Calling out the plumber ... any plumber on Thursday, Thanksgiving evening to snake out the main line blockage because of sudden overuse by the residents . 2: Emergency roof repair during a wet winter storm due to heavy tree branches breaking or a tree falling. Residents, who live in a community that practices proactive maintenance stay longer, pay higher rent and take better care of their units and grounds. With a proactive mainte-

nance policy in place, residents are more likely to report problems before they become emergencies. A Proactive maintenance policy will save you money both in the short term and more importantly in the long term. It is a good investment. Dear Maintenance Men: I would like to find out if I have an “A”, “B”, “C”, or “D” building. I’m not sure what constitutes an A or D property. Can you shed light on the designations? Cornell Dear Cornell: This is really a real estate purchasing question, however we think it will work for maintenance as well. As in most things; “A” is the best and “D” can be seen as the worst. An “A” property will require the most proactive maintenance to retain an “A” rating while a “D” property may very rarely see a maintenance tech without direction from code enforcement or the city attorney. Below is a simple example of the A, B, C or D ratings and what they represent. • New or extremely well taken care of property with top notch ...continued from page 10

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RENTAL HOUSING JOURNAL ARIZONA

Raising Rents ...continued from front page Now factor in a 4% vacancy rate and a rent turn allowance. Where would you need to set the rent to make this a solid business transaction? No need to rehash here why distressed property was being snatched up and turned into rentals. Those days are over. Creative real estate investors will continue to find below market deals and, therefore, make the math better. However, it is debateable whether there are available numbers of property that will come on the market to fulfill the pre-

dicted long term rental demand in single family. And since the business case is different in multi-family, it is easy to see why there is such a large volume of apartments that continue to clog the pipeline. Back to my original premise… We will have a much healthier long term rental market if rents rise in a sustainable manner. Somehow, single family rental property owners and managers need to find ways to increase rents in a consistent manner. If we can’t raise rents when we have exceptionally high demand, low

supply, very low days on market then when can we? If we don’t, then the business case to invest in rental property will decline. If that happens then demand won’t be met and there is a housing issue. You can say supply and demand will take care of this scenario naturally. Well, there has been nothing very natural about the Greater Phoenix single family rental market in the 12 years I’ve been around it. So, there is nothing that tells me anything will be different, except one. I don’t believe there will be many investors, if any, willing to invest again based on tax advantages and appreciation to make their business plan work. The history of just breaking even on the cash flow and making money on the back end is over, I hope.

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RENTAL HOUSING JOURNAL ARIZONA

by Ernest F. Oriente, The Coach {Article #220…since 1995}

ccording to a recent survey by Matrix Information, three billion people around the globe have access to Internet-based services and E-mail. In addition, this report expects electronic commerce to grow from $3.2 trillion in 2013 to $6.2 trillion by the year 2015. Is your property management company ready for these exploding communication and marketing trends? Is your leasing team ready to handle the Email just sent by 15 new prospects relocating from Paris or Moscow? Read the tips in this article and learn how easy it is to master E-mail and profit from it…it’s just a few keystrokes away!

Tips for using E-mail with prospective new residents: Ask your leasing teams to always use spell check before sending an Email to a future resident • Have your teams read each E-mail twice before they send it, just to make certain it conveys exactly what they are trying to communicate and it portrays the professional image important to your property management company

Rental Housing Journal Arizona • October 2014

• When sending an E-mail, the subject line must clearly summarize what the body of the E-mail says

document signed by each person who will be accessing your E-mail software

• If your leasing teams are using the E-mail “reply” feature to respond to a future resident, make certain they reply by including the information the prospect sent in their original E-mail note. In addition, ask your leasing teams to include the name of the future resident throughout their E-mail reply.

• Explain to your leasing teams that deleting an E-mail does not remove it from their computer system nor from the system of the person the E-mail was sent to. During several recent lawsuits, damaging E-mails that had been deleted were used in the courtroom to the surprise of the individuals and their property management companies

Tips for using E-mail within your property management company: When your leasing teams are using E-mail to communicate internally, make certain they understand when to respond by E-mail and when to call the person who sent the original E-mail, depending on the tone or content of the E-mail

• Instruct your leasing teams about the extra care required if they receive an E-mail that has an attached document, as this is where most computer viruses are hidden. Many property management companies do not let their leasing teams send or open attached files

• Explain to your leasing teams how and when to use carbon copy {cc} and blind carbon copy {bcc} with E-mail • Have a written company policy regarding the use of E-mail, clearly outlining the rules and expectations of your company. Have this

• E-mail files can easily be opened and read so confidential information like salaries, financial reports, social security numbers or credit card numbers should not be sent by E-mail. Tips for using E-mail as a marketing tool: E-mail can also be used as a pow-

erful marketing tool to attract new residents or to better service your existing residents. Here are some tips: Aside from a small $15-$20 service charge per month, sending or receiving E-mail is free. When compared to other forms of marketing…having your leasing teams send E-mails to new or existing residents is their least expensive form of marketing • Imagine the marketing success your leasing teams will have if they had the E-mail address on the guest card of every future resident who visited their apartment community over the past 12 months… and your leasing teams can stay in touch with these potential new residents for free! • When your properties are using Email to handle resident questions or maintenance requests, a timely response is expected and required • Create two separate E-mail lists… one for future residents and one for current residents so you can send appropriate marketing information to each group • Create an E-newsletter which can be easily sent out on a weekly or monthly basis. Remember, since continued on page 11

RENTAL HOUSING JOURNAL ARIZONA

very apartment community has a “reputation” in the marketplace. What your community is known for is based upon a variety of factors, some of which are beyond your control; like its location and layout of the apartments. Yet, there are certain factors in which you have some measure of control; your management style, for instance, and resident profile. However, sometimes the longer a staff has been working at a community the harder it is to be objective. While long term employees can bring stability and consistency to a community, there can be a subtle tendency for the on site staff to try and lease to only those people who they believe will “fit in,” so as not to upset the “status quo.” Here is a concern that illustrates this point:

Q: I have been the resident manager at the same community for over 10 years, and have worked very hard to establish a quality clientele. I am now in a situation where I have more vacancies than I have had in quite a while, but with fewer prospective renters who match the demograph-

ics of my existing residents. I am concerned that if I start renting to everyone who comes through the door, that this will upset my current residents and that I’ll have even more vacant apartments. What can I do? A: First of all, I applaud you for your longevity in the business, especially as an on site manger! Your residents undoubtedly appreciate you and all your efforts to create a quality environment for them. However, why would you limit such an outstanding community to just a few people who you are “hand picking” to live there? Not only is this practice obviously affecting your leasing ratio, it is a Fair Housing violation! You do not have to rent to “everyone who comes through your door.” Yet, you do have to rent to everyone who “qualifies” based upon certain criteria established by your screening company. Your current method of leasing may be doing more harm than just jeopardizing the occupancy of your building: Should a complaint be lodged against your community, there is the possibility

Dear Maintenance Men: amenities in the best areas. • Newer property that may be slightly dated, but well taken care of in a good area. • Older property, clean, middle of the road building with limited amenities in a fair area. • Older property, no or few amenities, basic design, could be run down and often in a bad area.

that you, your employer and also the building owner could be sued for discrimination. By renting to all types of people no matter their family or marital status, their race, religion, age, etc., you will be in complete compliance with the Fair Housing Act, AND you will create the type of diverse community where everyone feels welcome and wanted. Remember: a quality community + satisfied residents = higher occupancy

month or if you would like to inquire about leasing training, please ASK THE SECRET SHOPPER by making contact via phone or e-mail. Your questions, comments and suggestions are ALWAYS welcome! ASK THE SECRET SHOPPER Provided by: SHOPTALK SERVICE EVALUATIONS Phone: 425-424-8870 E-mail: joyce@shoptalkservice.com Web site: www.shoptalkservice.com Copyright © Shoptalk Service Evaluations

If you have a question or concern you would like to see addressed next

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...continued from front page 7 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

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Rental Housing Journal Arizona • October 2014

RENTAL HOUSING JOURNAL ARIZONA

The Coach:

...continued from front page 6

sending E-mail is free, your leasing teams will have lots more flexibility. In addition, E-newsletters portray a professional image about your property management company and are quick to be passedalong to others, thus expanding the reach and exposure for your marketing • When sending E-mail, have your leasing teams develop a five to seven line signature which is automatically placed at the bottom of every E-mail they send out. This signature line will further promote their apartment community, your corporate website and can be changed on a daily basis, if necessary • Use E-mail to stay in touch with the media in your area, especially if your apartment communities have any exciting events or community projects to announce • The E-mail address at each of your properties should be included on every business card, every brochure, on any sales information and with all print advertising. Want to hear more about this important topic or ask some additional questions about how to use E-mail as a powerful marketing tool? Send

an E-mail to ernest@powerhour.com and The Coach will E-mail you a free PowerHour invitation. Author’s note: Ernest F. Oriente, a business coach/trainer since 1995 [32,320 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 build-

ing 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

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Rental Housing Journal Arizona • October 2014