Arizona Rental Housing Journal - January 2015 by Professional Publishing, Inc

Rental Housing Journal Arizona

January 2015 - Vol. 7 Issue 1

2. Commercial Property Winterization 3. Mitigation: What it Means to Landlords 4. Innovators Beware: Dangerous Intersection Ahead 5. Five Tips to Full Occupancy 6. Multifamily Green Light

7. Metro Phoenix New Apartment Construction 8. Is Print Advertising Dead? The Evidence Says No! 9. The Coach: Property Management Reference Checks… Are They Really Necessary?

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Well it’s the first of a new year. I bet you are expecting me to write about planning for the New Year. Isn’t that what everyone should do? A new year, a new beginning – right? Set your goals and objectives, write down you action items, promise to do better, etc. Nope. Not going to do it with one exception. While the seasonality of our market is somewhat predictable, as an investor there is nothing about your investing that is seasonal. Why in the world would you plan only once a year? Why would you only adjust your strategy once a year? Why would you only rededicate yourself once a year? It’s just silly. If you are looking for a New Year’s resolution that converts into actual success try this one: I will state “my purpose – my why” out loud every day. I will review my objectives to ensure they support “my purpose – my why” every quarter at a minimum. I will write down my action plan on a quarterly basis including measureable items. I will write down and execute the necessary activities weekly to ensure I achieve my quarterly action plan. Here is the beauty of this resolu...continued on page 4

ost will likely occur in the Phoenix area while Tucson continues to lag in recovering from the 2008 recession. In the race of states to attract new business, Arizona is gaining ground on its economic development efforts and looks good for greatly improving its economy in the next five years, according to recent magazine rankings. Sadly, Tucson is not pulling its share of economic development for the Grand Canyon state. Both Forbes and Area Development Site and Facility Planning magazines give Arizona high marks for its efforts to attract companies with high-quality economic development. Arizona in Top Half of Forbes List Forbes magazine ranked Arizona 22nd in its annual “Best States for Business” list for 2014. We at Commercial Real Estate Group find that just about right, in line with Arizona’s 19th ranking in the Pollina Corporate Top 10 Pro-Business States for 2014. “The Grand Canyon State’s job

and economic growth forecasts over the next five years are among the best in the United States,” says the Forbes ranking based on six factors. “Population growth through 2018 is expected to be the fastest in the country.” This is how Arizona fared in the six factors based on historical data:

• 5th in growth prospects • 17th in labor supply and in re ulatory environment • 25th in business costs • 40th in quality of life • 47th in economic climate. While Arizona’s economic climate was dismal in the last five years, ...continued on page 11

Negotiating the Sale of Your Apartments

Benefits of IRC 1031 Tax Deferred Exchanges for Apartment Complex Sellers

uch has been written about the benefits of selling a property and utilizing the proceeds to “1031” into another property. As a real estate broker, who has been on every side of IRC 1031 exchanges, this article is devoted to seller's negotiating techniques, when 1031 tax deferred exchanges are utilized. Experience Arizona listing agents know that Arizona apartment complexes look like a “bargain” compared to income properties in other

states. Arizona cap rates are in the 7-10% range, and for the price of a California four-plex with a 2% cap rate, you can often buy 20+ units in Arizona. Statistically, buyers utilizing IRC 1031 exchanges normally pay higher prices for properties, compared to non 1031 purchases. The reason for this is that a buyer, wanting the 1031 tax deferred benefit of an exchange, has only 45 days after closing the sale of their property, to designate a ...continued on page 7

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Commercial Property Winterization How to Prevent Winter Emergencies - The Real Deal: A Worst-Case Scenario

By Cliff Hockley President, Bluestone & Hockley Real Estate Services

t was cold, really cold. Let’s just say that it was below freezing. News reports had been reporting for hours that the roads were icy and that everyone would be better off staying home. Our property managers and maintenance team had been preparing for days for this cold snap. Property inspections had been scheduled to make sure that all rented and vacant commercial spaces we managed would be weatherized. Nevertheless we had a few problems. First off, the ice storm downed tree branches and trees. This meant that many of our buildings lost power (and no power means no heat and a higher likelihood of frozen pipes). At one of our smaller twostory buildings the waterlines in the attic were not insulated and broke. When the thaw came a couple of days later, water was everywhere and we had to relocate a couple of tenants for a week until we dried things out. Finally, to add insult to injury, a riser froze in the sprinkler room of

one of our retail strip shopping centers. When that began to thaw out we had a huge problem with flooding and no fire protection. The Fire Marshal learned about this (because an electronic monitoring alarm went off) and insisted that we post a 24-hour fire watch. Did I mention that these events occurred after we prepared all of our properties for the cold snap and went through our checklist ahead of time? Before the Storm For reference, I have summarized that checklist for use at your properties. Winterization Checklist • Fire sprinkler systems: • Dry systems: check operation of air compressors/gauges and verify the system is completely drained down. Note: if a water flow fire alarm is received on a dry system and not due to an actual fire, the water flow is oftentimes caused by a compressor failure and therefore the system will need to be drained down once the compressor is repaired or replaced.

• Wet sprinkler systems: check to ensure they have antifreeze in them. • Vacant tenant spaces: • Those with operable HVAC systems: set the thermometer to at least 40 degrees. • Those without operable HVAC systems: provide space heaters to maintain a temperature of at least 40 degrees. • Fire riser/valve rooms: verify that the heat is turned on to at least 40 degrees to prevent freezing pipes. • Irrigation system: verify that the landscape contractor has fully drained down the system to prevent freezing pipes. • Exterior water faucets (hose bibs): shut off the water source, drain and cover with insulated covers. • Basement crawl spaces: inspect to ensure exposed domestic water lines are insulated to prevent freezing. Close any openings exposed to the outside, consider insulation, and/or a heat source. • Canopy/soffit crawl spaces: inspect to ensure that exposed domestic water lines are insulated to prevent freezing. Close any openings exposed to the outside, consider insulation, and/or a heat source. Refer to the above regarding canopy fire sprinklers. • Snow plowing/sanding/shoveling/de-icing service: contact the landscaping and/or parking lot sweeping companies to arrange for sidewalk, parking lot and drive lane snow services. Define

the scope/level of service ahead of time and arrange for auto-deployment. • Store snow shovels, a supply of granular de-icer and a spreader onsite so that the maintenance staff is able to clear snow on the sidewalks. • Roof drains/downspouts: ensure that roof drains and downspouts are clear and in working order so that snow melt is able to appropriately drain from the roofs. • Disconnect all outside hoses: anytime outside weather is freezing all hoses on the outside of the building should be disconnected. How to Respond Once the snow and ice hits, tenants may be calling to report broken pipes, property conditions and other issues. It is important to have an office open and staff on standby to receive those calls and coordinate additional services. Verify that your snow service vendor has in fact dispatched a crew to your property. Maintenance staff needs to be prepositioned with snow blowers, chainsaws and vehicles with studded tires allowing them to travel to properties so they can provide the required service. You may want to consider having a supply of sleeve clamps or “Shark Bite” couplings on hand for repairing pipe breaks in addition to a heat gun to melt frozen pipes. If the snow is very heavy and icy crews need to be dispatched to clear the snow from buildings with flat roofs, in particular the drains need to be cleared so the water can drain off ...continued on page 10

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RENTAL HOUSING JOURNAL ARIZONA

Mitigation: What it Means to Landlords

roperty management professionals should be familiar with the term “mitigation.” You can find the term not only in the Arizona Residential Landlord and Tenant Act (ARLTA), but also throughout appellate case law that interprets landlordtenant issues. • A.R.S. § 33-1305 states: • A.R.S. § 33-1305. Administration of remedies; enforcement • A. The remedies provided by this chapter shall be so administered that the aggrieved party may recover appropriate damages. The aggrieved party has a duty to mitigate damages. Mitigation is a legal term that has always been a part of basic contract law. It means that you, as a landlord, have to take all reasonable steps to reduce or limit your damages. This usually occurs in two sets of circumstances. Circumstances The first is during the tenancy or lease term. For example, the air conditioning goes out in the renter’s apartment at approximately the same time his or her rent is due. The resident refuses to pay the rent

RENTAL HOUSING JOURNAL ARIZONA • JANUARY 2015

because management has yet to correct he problem. The landlord could not refuse to fix the air conditioning because the individual has not paid the rent, just as the resident could not refuse to pay rent until the property makes repairs. Management must take all reasonable steps to make the repairs, just as the renter would need to follow the notice and remedy ARLTA provisions if the landlord did not address the issue in a timely manner. The second instance involves renters who breach the lease. This is the most common situation. A resident vacates the unit prior to the end of his or her lease term. It could be an eviction, a situation where the individual no longer can afford the rent and moves before any court action occurs or a renter illegally terminating the lease by not giving proper justified notice. In any case, management is left with a vacant apartment. The law requires the landlord to now use all reasonable steps to rerent the apartment, as the renter remains responsible until the lease ends or a new individual enters into a new lease for the unit. It only requires management to do what it normally would to rent the unit.

This could include putting up a “For Rent” sign, running an advertisement, and either showing the vacant apartment to prospective renters or letting them know if is available. A potential problem for management occurs when the resident says it did not take reasonable steps to re-rent the apartment. The individual will instruct someone to either visit the community or inquire on availability to see if the landlord mentions the unit or offers it as available. The former renter could also demand to see advertisements and records on how the landlord showed the unit. The burden to prove reasonable marketing is on management, so good record keeping is a must. Keep in mind the law only requires a reasonable effort to mitigate, not, as on court stated, a “heroic” effort. If a landlord can re-rent the apartment, but the market dictates a lower rate or additional concessions, he or she should be able to prove mitigation and be entitled to loss of income suffered on the new lease. Example Consider the following example: Jay Lowe and Ben Afflicted rent a

unit at the Star Gazing Apartments. Manager Tom Cruzin has the two sign a one-year lease with monthly rent of $800. Jay Lowe and Ben Afflicted have a falling out and decide to go their separate ways. They move out without giving proper notice. Tom Cruzin immediately puts the apartment back on the market, set up a “For Rent” sign, and adds the unit to his list of available apartments. Every time someone wants to see this particular apartment floor plan, he notes it in his vacancy log. Due to poor credit, Leo Decapitated, Drew Barryless and Justin Timberpond do not qualify to rent the unit. Tom Cruzin is finally able to re-rent the unit to Kelly Ripoff, but her lease only requires her to pay $700 per month. Tom Cruzin can now charge Jay Lowe and Ben Afflicated the lost rent from their departure to the new lease date with Kelly Ripoff, plus the extra $100 per month loss on the new lease. Andrew M. Hull Hull, Holliday & Holliday, PLC www.doctorevictor.com 602.230.0088

RENTAL HOUSING JOURNAL ARIZONA

Innovators Beware: Dangerous Intersection Ahead By: Neal Thornberry, Ph.D.

nnovation is not for the faint of heart, as Galileo learned when he said that the Earth revolved around the sun. He was scorned, threatened with death and eventually put under lifetime house arrest. Innovators are not always welcome guests even within their own organizations, and their challenges are heightened by a dangerous organizational intersection: where Complexity meets Wackiness. The

Resolution

were losing a month of selling each year because of the time spent filling out reports required by the finance department. This example of complexity gone awry drove the organization into Wackiness -- sacrificing revenues for reports. There are many other examples of Wackiness getting in the way of innovation – and examples of stealth innovators circumnavigating them. One of my favorites is the tale of Jim Repp, head of Jeep design at the old Daimler Chrysler Corp. Jim knew that many Jeep lovers

spent thousands of dollars upgrading their Wranglers for serious offroading. This gave him the great idea for a mass-produced Jeep with all the upgrades built in at half the cost. When he shared his idea with marketing, they said there was no market for that type of vehicle and besides, you’re an engineer, not a marketer. Undeterred, Jim and a small band of innovators I call Innovation Judo masters built a secret prototype. They took it out on the Rubicon Trail in California for off-road trials and ...continued from 10

sometime and now is the best time. The fact that it coincides with the New Year really doesn’t matter. But, if the New Year gives you the reason you need then great! Just do yourself a favor. Make this the last time you use the first of a year to get re-motivated as it relates to your real estate investing.

& Landlords Association ARPOLA480-990-7092www.AZREIA. orgwww.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.

...continued from front page

tion. Even if you only do the first part and say out loud your purpose/ why then you will be more successful. Your success will only increase as you are able to hold yourself to the other three parts. As you are able to do each part your success increases. Don’t believe me? Try it! What do you have to lose? Let me ask a different question, do you believe that doing all or part of the above could possibly make you less successful? So, come New Year’s Day 2016 you aren’t starting over as it relates

more complex an organization, the more difficult it is for the innovator to figure out where to go with a good idea and how to weave it through the organization to implementation and eventually value creation. Growing organizations cannot avoid complexity. They add processes and people, divisions and specialists. Since we can now measure almost everything, they often believe if one measurement captured in a report is good, then more are better. One company, with whom I worked, learned that its sales people

to your real estate investing. You aren’t rethinking everything. You are on cruise control, making adjustment as you need to. You have maximized your time, energy and you have accelerated your success. Okay, I said there was an exception. If you are just now coming to real estate investing as a way to achieve your purpose and haven’t had a chance to complete your planning or for some reason have never properly completed your planning, then you’ve need to get started

Alan LangstonExecutive DirectorArizona Real Estate Investors Association – AZREIA American Rental Property Owners

RENTAL HOUSING JOURNAL ARIZONA • JANUARY 2015

RENTAL HOUSING JOURNAL ARIZONA

Five Tips to Full Occupancy at their highest level of efficiency. We discuss real world issues in multifamily management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. We discuss best practices in multifamily management and methods related to how to buy apartment complexes. Our focus is sharing strategies and tactics that can be implemented and measured. For more information, visit: http://www.Multifamilyinsight.com

By John Wilhoit Jr.

n multifamily property management, there is always more to do, but there are certain things that must be done. In the effort to maintain full occupancy, these five tips are in the “must be done” category. 1. Renewals! The straightest line to maintaining high occupancy in multifamily is focusing consistent attention on renewals. Ignoring this makes maintaining full occupancy near impossible. 2. Be Ready! Never show a unit to a potential tenant that is not ready to occupy. This includes “almost ready” and “gonna be ready next week” multifamily units. It’s either ready to occupy or… wait. 3. Know Thy Competitors! Know where you can compete and where you cannot. Wendy’s restaurant has tried many times to get in on McDonald’s breakfast revenue. They just cant do it. Know thy competitors and what concessions they are offering in the present tense. Leasing agents should know amenities of competitor properties and how/where your property can outperform. Example: older units almost always have greater square feet than newer product. Accentuate

the positive! 4. Social media is a mainstay! Integration of Internet based advertising/media is a must no matter how small the multifamily market. The renter market is younger people (still). Young people are glued/stuck/fastens to their smart phones…. smart phones with connectivity to available apartment homes. 5. Two-way communication! Leasing Agents are far from order takers- they are the front line representing your asset. A potential tenant coming to your Leasing Office is looking for a place to live and insight on the lifestyle represented. A big part of leasing, then, is to dialogue and convey to potential

tenants what they are buying. This is accomplished best by creating two-way communication. Leasing Agents should be asking open-ended questions that draw information from potential tenants to better understand their needs and wants. This allows Leasing Agents to provide information on features and benefits offered by the development that meet potential customers lifestyle desires. People may look for features, but they buy benefits. The only way to know what benefits they are looking for is to ask.

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RENTAL HOUSING JOURNAL ARIZONA • JANUARY 2015

RENTAL HOUSING JOURNAL ARIZONA

Multifamily Green Light U.S. Development Pace is Sustainable for Years to Come

orecasters have begun to warn of potential overbuilding in the multifamily sector, but concerns from pundits are premature. Multifamily development in the U.S. has yet to meet pent-up demand, and annualized effective rent growth was 4.1 percent in August 2014, the highest since October 2011. At the current rate of development, we anticipate production capacity and demand will reach equilibrium by mid-2015. Subsequently, the industry could enjoy up to six additional years of sustainable production, if developers and lenders carefully monitor demand and modify deliveries accordingly. It has been said that multifamily is in the middle innings of an extra inning game. Statistics on the U.S. supply of multifamily units clearly show the sector is not in danger of being overbuilt, although a few markets are the exceptions. Even areas such as Northern Virginia, which recently experienced oversupply conditions, are showing signs of improvement. Here are notable signs of a robust multifamily sector:

• The national multifamily occupancy rate rose to 95.2 percent in August 2014 after being at 95 percent since May, according to research firm Axiometrics. Occupancy rates are holding steady despite the new supply from developers. • There is fresh demand each year for 400,000 to 450,000 units, but developers are completing only 325,000 units a year. • 1 to 1.25 percent of the existing multifamily inventory in this country is demolished each year, a metric that when not taken into consideration, skews perception of demand. With considerable attention currently on urban development, the trend will continue in the near term. “In The Top 100 U.S. Markets, Demand for Apartments was More than Double that of the Number of Units Delivered.” Fundamentals remain strong on the demand side as the need for rental units continues to rise. In the top 100 U.S. markets, demand for apartments was more than double that of the number of units delivered, with 55,561 units completed

and 129,162 units absorbed, according to a second-quarter 2014 report from MPF Research. Job growth is expected to continue for the next five years, according to economists at Axiometrics, barring an unforeseen shock to the economy. Job growth will drive demand for multifamily projects, and as more job formation drifts to the suburbs, so will rental demand. In a somewhat surprising observation, the National Multifamily Housing Council reports that almost 50 percent of new renters are Baby Boomers, rivaling Millennials as the biggest driver of demand. Baby Boomers are becoming “renters by choice” who trade house and yard maintenance for convenient live/ work/play environments. For the time being, several factors are holding the supply/demand ratio in check. The number of Millennials entering the renter pool continues to increase − a circumstance that will not change in the near term. Millennials will constitute 24 million new households between 2015 and 2025, thus driving up demand for rentals and starter homes, according to “The State of the Nation’s Housing 2014,” a report by the Joint Center for Housing Studies

of Harvard University. Immigration is also driving additional household formation in ever-increasing numbers. Renter growth in 2013 remained well above the 400,000 average annual absorption rates of the last few decades, the study reports. In addition, stringent mortgage underwriting and growing student debt push homeownership further out for many young individuals and families. Also curtailing supply are barriers to entry, which exist in coastal markets as a result of the high costs of land and construction. Artificial barriers in other U.S. markets are a consequence of zoning restrictions and public opposition to higher density projects that are necessary to make some deals financially feasible. Finally, the lack of skilled labor is putting stress on construction capacity, driving up labor costs and lengthening construction timetables. Many former and would-be construction workers have been lured to the oil and gas industry by higher wages, leaving the development community without enough tradespeople. While commodity prices are increasing moderately, contractors are pushing up margins to recoup losses incurred ...continued on page 11

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RENTAL HOUSING JOURNAL ARIZONA

Metro Phoenix New Apartment Construction Great for Class B and C Properties

he Kasten Long Commercial Group specializes in multifamily brokerage and has been providing apartment market updates and identifying future trends for metro Phoenix in quarterly newsletters since 1998. Current and past issues plus detailed market data are available on their web site (www.KLCommercialGroup.com). New apartment construction continued at a rapid pace in metro Phoenix. At the end of the 3rd quarter of 2014, there were 33 apartment communities under construction with a total of 9,089 units. Most of these are in Scottsdale, Phoenix and Tempe. In addition, there were 61 projects (14,148 units) in the rezoning – permitting pipeline. That’s a combined total of 23,237 units that may enter our market over the next few years – with more to come. To date, there were 3,821 units completed in 2014 with a projection of 5,000 units by year-end and about 6,500 new units projected in 2015. To put this in perspective, over the past four years (2010 to 2013), the average number of units entering the market was 2,018/year. The previous 15 years (1995 to 2009) averaged 6,139/year. The lack of new con-

Negotiating the Sale

struction was obviously a driving force for the sharp decline in vacancy rates – currently at a seven-year low at 6.5%. Whether we see an increase in vacancy rates in the 4th qtr or early next year – the increased apartment supply will soon have an effect. At present, however, the new projects are leasing more quickly than projected and for higher rents. The overall quality of most of the new apartments is a significant stepup – and the rental rates reflect this quality. Up-scale builders like Alliance and Optima with underground parking, expanded common areas and many amenities have rates at $2.00/sf – $2.20/sf after adding on extra fees for water and common area. Builders such as Wood Brothers and Mark Taylor have surface parking, but their interiors are getting close to condo-quality. Their rates are in the $1.30/sf to $1.60/sf range – again, including add-on fees. While the amenities may pull some tenants from the nearby class “A” properties and have a negative rental effect, the class “B” and “C” properties may be able to actually increase their rental rates since they will be able to offer larger units and often with block solid (low noise) units at much less

Metro Phoenix Q3 2014 Apartment Units in the Pipeline by Percentage 0.2% 1.4% 1.9%

Chandler 16.6%

Scottsdale 22.3%

Gilbert 2.5%

Phoenix 18.9%

0.3% Goodyear 5.4%

Tempe 25.9% Mesa 6.2%

14,148 units in Pipeline

Scottsdale cost. Kasten Long Commercial Groupand Tempe, in the expandOne of the concerns for the pro- ing cities of Chandler and Gilbert jected population boom for Metro and a number of in-fill locations in Phoenix is that many of the new jobs Phoenix. What we see happening in will not be for high-dollar positions. many in-fill locations is that a new Again, this would provide a lesser apartment community will attract demand for the class “A” properties, upscale coffee shops, more retail, but may bode well for the older more restaurants, etc. – all adding properties with lesser rents – typical value to the area – and to the nearby “B’ and “C” properties. of the “B” and “C” communities. In summary, if you own a “B” or The location of the new apartments tends to be along the metro “C” property – you should look forLight Rail route, in dynamic areas of ...continued on page 9

...continued from front page

property to buy with the exchange proceeds. Double this with an out of state buyer making long distance trips to look at property and do inspections, and you have a very motivated stressed purchaser that is “under the time gun”. After receiving an offer or letter of intent on a property, a seller should question if the purchasing funds are coming from a IRC 1031 exchange. In addition, a verification of funds should be requested from the 1031 facilitator and the buyer should clarify where he or she is in the 45 day designation process. The closer that the buyer is to the end of his 45 day inspection period, the stronger the negotiating position of the seller. Other important buyer information is: 1. In what geographical areas, is the buyer, considering purchasing. The wider the buying area, the less potential negotiating power, for the seller.

2. Amount of similar local inventory. How many similar complexes are locally available for sale? Is it currently a buyer's or seller's market? Has the potential buyer offered on any other local properties? A good negotiator sizes up his opponent and negotiates according. When selling a property, find out if the buyer is utilizing an IRC 1031 tax deferred exchange. Ask lots of questions. Use the answers and common sense to formulate a strong negotiating position. This knowledge may net you thousands of additional dollars, at the closing table! Jade Bossert is a licensed Real Estate Broker with Tierra Antigua Realty in Tucson. She has sold investment properties for over 30 years and can be reached at 520-797-6900 or tucsonrelestate@mindspring.com.

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RENTAL HOUSING JOURNAL ARIZONA

Is Print Advertising Dead? The Evidence Says No! By Devan Gilbert, Staff Writer, Rental Housing Journal

umor has it in the marketing and advertising world that print advertisements are outdated and inefficient. The numbers, however, say otherwise. It’s time to squash this misinformation and get to the truth about the power of the print. The younger generation doesn’t read print anymore: False. Many like to claim that print advertising is incapable of reaching the younger generation, but research proves differently. While social media is an effective way to target the 18-30 year old demographic, it is not the only way. National Public Radio reported a study that found a quarter of 18-24 year olds had read a newspaper within the past 24 hours. The New York Times announced that 10 percent of its hard copy subscribers are between the ages of 18 and 24. According to Mediamark Research and Intelligence, magazine readership has increased by 4.3 percent in the past five years. The Association of Business Information and Media Companies reported that 96 percent

of business-to-business clients still read print publications. If businesses made the fateful decision to disregard print advertising all together, they would be disengaging from a massive list of potential clients. Multimedia is the only way to get readers to spend with my company. False. A December 2012 Valassis survey was conducted, focusing on the connection between print advertisements and the spending habits of the generations born in the 1980s and 1990s. Here is the break-down of the results. • Over half said they would spend less money if they didn’t look at print ads. • 91 percent said they used coupon cutouts from print advertisements to save money. • 51 percent admitted that print ads inspire their spending habits. • 30 percent said they refer to online websites seen in print ads to obtain more information

• 87 percent use print to choose a restaurant. Print ads make it easy to target certain demographics. Instead of throwing an advertising banner on Facebook or Twitter, you can send

magazines, flyers or catalogs to homes in certain areas. Nordstrom, a billion dollar company, still spends a pretty penny on print advertising. Strategically, different versions of catalogs are printed and are distributed according to how much a specific customer spends annually and which departments they shop in. Nordstrom is able to target where and who its catalogs should be mailed out to. Finding the appropriate audience for a company’s advertising is made easy with print resulting is less wasteful marketing spending and increased profits for a company.

Why should I use print ads? Large companies aren’t using them anymore. False. Nordstrom isn’t the only company not falling for the rumors. In 2011 Nike spent $113 million on advertising that did not involve the Internet. Google spent $1 million on non-internet advertising that year as well. We all know these companies have some of the most brilliant marketing teams in the world, which is exactly why they are still using print advertisements. Madison Hildebrand, a star of the Bravo show, “Million Dollar Listings,” has had massive success as a Realtor and is well-known by most television viewers and Internet users. However, it should not be assumed that every potential client uses the Internet or watches cable TV. Mr. Hildebran knew this and recently advertised himself in a four-page spread in Homes and Land magazine. If business thriving people and companies are still using print advertisements then why shouldn’t everyone else? What makes print ads “work”? Great question. As stated before, print is easy to target. People also tend to pay more attention to material they are subscribed to rather than a pop-up ad or an ad interrupting their music on Pandora. Websites tend to be skimmed quickly, advertising on TV or on the Internet is only there as long as it is paid to be there. A magazine tends to find a home on a coffee table or in a dentist’s office where it is picked up and sifted through by dozens of people over several months. The Internet these-days is full of scams and fake “news”. Print advertisements are more trustworthy to potential customers. The Internet has helped bring us a fast-paced world. Many people turn to the Internet to accomplish something quickly and efficiently, but that is not necessarily the best place for an advertisement. Can you recall the last advertisement that popped up on your computer screen? What about the company that was advertising itself? Most likely not, and you are not alone. These ads

don’t pique most people’s attention. It is not uncommon for somebody to unwind by reading a magazine or newspaper. In a relaxed environment is where information, in this case an advertisement, will be noticed. New advertising techniques are always better. Wrong again. “Out with the old, in with the new” shouldn’t apply to everything. People may argue that spreads with advertisements are flipped past, happens to the hundreds of emails consumers receive a day titled “Cyber Monday sale” “Going, going, gone” or “All orders over $50 take $5 off!” They go directly into the deleted items folder. Although the saying “print is dead” has been echoing through the advertising world, research shows differently. Penn State conducted a study, that concluded that print ads stick with customers more than online ads. Print is also an advertising technique that can stimulate multiple senses. Take sample perfume ads in magazines, or shopping catalogs, or sample textures in home improvement magazines and pamphlets. A potential customer is not going to be feeling, or smelling anything through the Internet. By stimulating senses, an advertisement becomes more interesting and memorable. Internet and multimedia advertising is important True. Although print advertising continues to prove itself in the marketing world, other forms of advertising are important as well. Many print ads include the company’s website to provide more information. Integrated marketing programs have been proven to be extremely successful if correctly executed and almost always involve print ads. The use of print advertising is increasing. True. The biggest myth of all is that print advertising is quickly slipping through the cracks. This couldn’t be more wrong. According to Media Radar, the medical and pharmaceutical, home furnishings, technology, and beverages categories have all published more print ads than the year before. Ralph Lauren, Chanel, Calvin Klein and Louis Viton amongst other luxury brands have dramatically increased their print ad spending since 2012.

RENTAL HOUSING JOURNAL ARIZONA • JANUARY 2015

RENTAL HOUSING JOURNAL ARIZONA

Ernest F. Oriente, The Coach {Article #224…since 1995}

ccording to the Society of Human Resource Management {SHRM} over 50 percent of the information presented on a resume by a job candidate may be false or misleading. These are alarming statistics, and as the executive of your property management company, it continues to be increasingly important to understand the mindset of the job candidates that are applying for positions within your company. This article will help you and your company strengthen your reference checking process and eliminate those who will not be a perfect fit, long before a position is ever offered. Some reference checking statistics: A recent SHRM survey at www. shrm.org was sent to 2,640 human resource members regarding reference checking. The survey concluded that job candidates frequently present misleading information about their length of stay with former organizations, their past/current salary levels and their college credentials. More specifically, 53 percent of companies involved in this survey discovered falsified infor-

mation about length of employment from job candidates and 51 percent discovered falsified information about past salaries. In addition, 61 percent of job candidates falsify their college credentials, a credential that can be easily researched during the reference checking process. Tip From The Coach: Based on the above survey information, conducting thorough reference checks must continue to be an important step in the selection and interview process of hiring SuperStars for your property management company. Developing a reference checking process: The first step is to determine how reference checks are going to be done in your property management company and to establish or strengthen your written policy for how reference checks fit into your interview process. With some of our property management clients, their human resource department handles this important step before a formal job offer is made. With other property management clients, all hiring executives handle their own reference checks, based on the specific level of position being offered or the

compensation range being present- reduce the chances of hiring low pered. As for references, three or more formers. Questions to ask when calling a business references should be supplied by a job candidate as early in reference: It has been our experience the interview process as possible. that all of our property management We highly recommend asking for clients want to create their own cusreferences early in the interview pro- tom reference checking form. Here cess because this will give your hir- are some sample questions to get ing executives additional time to you started with yours: How would contact each organization submitted you characterize his/her success by a job candidate. This also means with your company? How would that your hiring executives will not you characterize his/her energy be rushed to do reference checks in level? How was this person viewed the final hours before making a job by his/her peers? Describe the types offer. This makes for a more thor- of decisions this person made on a ough and complete reference check- daily basis? How did this person manage their time? Tell me about a ing process. Tip From The Coach: In addition disagreement or a challenging situato reference checks, many property tion and how this person handled it? management companies are now Specifically, how was this person asking permission to do background paid? Why did this person leave checks, credit checks and criminal your company? Based on what you shared today, would you hire this checks as part of their hiring process. VALLEY, METRO, ARIZONA Based on the SHRM survey statistics person back? Tip From The Coach: We know above and your own professional experience, have you recently that many companies are no longer reviewed your reference checking giving references on past employees process? This process will help to based on legal and liability concerns. link talented SuperStars to compati- Most of our property management clientsOct, now ask a job candidate to ble positions Feb, within Apr, your property Jun, Aug, Dec management company and will continued on page 11

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ward to a new apartment community being built in your area. Something else you might consider is to reposition your property – make it a bit more upscale – and thus offer a slightly lesser-cost option for the quality-driven tenant. If you are looking for an investment opportunity – look for an older property with good bones – with the idea of gutting and completely repositioning the property. We’re seeing this done in many areas across metro Phoenix.

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RENTAL HOUSING JOURNAL ARIZONA • JANUARY 2015

RENTAL HOUSING JOURNAL ARIZONA

Innovationrs Beware ...continued from page 2 invited the senior executives to watch. Jim’s prototype outperformed the other Wranglers and, as crowds gathered around it, the executives saw their enthusiasm. They immediately authorized production of what is now a best-selling icon, the Jeep Wrangler Rubicon. Fortunately for Chrysler and other companies, there are a few passionate innovators like Jim who won’t let go of their idea no matter what. They’ve developed a special set of skills (I call them Innovation Judo) that allow them to bypass those blocks. They are:

• • • • • • •

Discipline Leverage Speed Openings Circling Unbalancing Redirection The Jim Repp story illustrates the application of several of these principles. The discipline to plan for building a secret prototype; leverage in getting senior executives to support his idea; utilizing the opening at the Rubicon Trail; and then using the surprise (a tactic of unbalancing) of a Jeep that looked like all the other jeeps on the trail but outperformed

them. Since it takes so long to correct the dangers at the Complexity/ Wackiness intersection, identifying and supporting a few Innovation Judo Masters can go a long way in overcoming some of the most difficult barriers to innovation. Neal Thornberry, Ph.D., is the founder and CEO of IMSTRAT, LLC a consulting firm that specializes in helping private and public sector organizations develop innovation strategies. He serves as the faculty director for innovation initiatives at the Center for Executive Education at the Naval

Postgraduate School in Monterey, Calif. Thornberry, author of “Innovation Judo:Disarming Roadblocks & Blockheads on the Path to Creativity” (www.NealThornberry.com), holds a doctorate in organizational psychology and specializes in innovation, corporate entrepreneurship, leadership and organizational transformation. A respected thought leader in innovation, Thornberry is a highly sought-after international speaker and consultant.

Winterization ...continued from page 2 the roof as the snow melts instead of leaking into the tenant spaces. This is important because the weight of snow and ice can stress the roofs and cause them to cave in. Additionally, you also need to keep the air handlers clear of snow. If snow blocks the air flow it stresses the compressors and then you can’t generate heat either. Preparation Preparation is the name of the game. The more you inspect, plan and prepare for catastrophe the more likely it is that you and your properties will survive them with minimal damage. Make sure your documentation is well organized with prop-

erty maps, and the locations of water shut offs and roof drains are easily available for you and your staff to access. Also, make sure to have 24-hour maintenance staff, plumbers, electricians and emergency response contractors’ phone numbers in your cell phones to speed up your response. Finally, you will need easy access to your property insurance agents just in case you have a loss and need repair approvals and checks right away. Clifford A. Hockley is President of Bluestone & Hockley Real Estate Services, greater Portland’s full service real estate brokerage and property management company. Founded in 1972,

Bluestone & Hockley’s staff totals nearly 110 employees, including 20 licensed brokers. The company’s property management division serves commercial buildings, apartments, condominium associations and houses in the Portland / Vancouver metro area, while the brokerage division facilitates both leasing and sales of investment properties throughout Oregon and Washington. Cliff earned a degree in Political Science from Claremont McKenna College and holds an MBA from Willamette University. He is a Certified Property Manager and has achieved his Certified Commercial Investment Member designation (CCIM). Bluestone & Hockley Real Estate Services is an Accredited Management Organization

Green Light

(AMO) by the Institute of Real Estate Management (IREM). Cliff is a member of the Institute of Real Estate Management and was named Certified Property Manager of the year in 2001 and 2003. Cliff is a frequent contributor to industry newsletters. Bluestone & Hockley offers customized brokerage, property and asset management, as well as maintenance services to property owners and investors throughout the Portland/Vancouver metro area. The company’s full-service approach benefits busy property owners and investors, who know they can count on Bluestone & Hockley for high quality real estate services start to finish.

...continued from front page

during the recession, and the additional costs will price some projects outside the realm of feasibility. The same labor dynamic is slowing the building of homes, which, consequently, also adds to the number of people in need of rental units. Opportunity still abounds in the robust multifamily sector, but future projects will face greater scrutiny from debt and equity sources, particularly as interest rates begin to rise. The “easy” opportunities are largely done and developers must be creative in originating the next round of development opportuni-

ties. As long as developers exercise constraint, it appears we will have a number of years of positive investment environment for multifamily. By Mark Culwell Managing Director, Multifamily Development Transwestern Development Company MARK CULWELL Mark.Culwell@transwestern.com 214.534.1458

www. renta l h o u s i n g j o u rn a l .co m

RENTAL HOUSING JOURNAL ARIZONA • JANUARY 2015

RENTAL HOUSING JOURNAL ARIZONA

Ready for Growth

...continued from front page

according to the report’s metrics, itsfuture is promising. Arizona Wins Silver Shovel Award Area Development gave one of its 2014 Silver Shovel Awards to Arizona for its “achievements in attractinghigh-value investment projects that will create a significant number of new jobs in their communities.” Arizona was one of three to win the silver award in the category of states with populations between 5 million and 8 million. The other two were Indiana and Tennessee. Missouri won the category’s top honor called the Gold Shovel Award. “Bioscience is quite strong, generating $36 billion in annual revenue and employing more than 100,000 workers,” the magazine said about Arizona. It noted that the finance and insurance sector is expanding and that the “hottest sector” is IT. The publication ranked states

based on their top-10 job-creation and investment projects that started in 2013. Arizona’s top 10 projects totaled nearly 9,900 new jobs and represented a nearly $2.4-billion investment. All of those projects occurred in the Phoenix-Mesa-Glendale metropolitan statistical area (MSA). That means Tucson, as the state’s second largest MSA, contributed nothing to the state’s award. Indeed, when Area Development took a look at 379 MSAs to see what areas are in good positions to take advantage of the new economy, Tucson ranked a disturbing 313th. Phoenix-Mesa-Glendale came in at 115th and Flagstaff earned a rank of 172nd in the “Leading Locations for 2014” list. Tucson’s position was between Fresno, Calif., and Colorado Springs, Colo. The magazine used four categories to rank the MSAs.

• In “Prime Work Force,” which measures the quality of the labor pool, Tucson ranked 259th. • In “Economic Strength,” including employment and gross manufacturing product, Tucson ranked 305th. • In “Recession-Busting Cities,” which measures how well cities recovered from the recession, Tucson was 312th. • In “Year-Over-Year Growth Cities,” measuring short-term economic growth, Tucson came in 330th. “This is a disaster for Tucson,” says Michael Coretz, principal of Commercial Real Estate Group of Tucson. “Granted, this report ranks areas based on past numbers, but this proves that we have not recovered yet from the recession and fare much worse than many, many other cities.” Coretz believes there is posi-

tive movement, including • The University of Arizona’s establishment of Tech Launch Arizona that will more quickly bring to market innovation and invention from its faculty • better efforts to strengthen international trade with Mexico • steady growth in the bioscience industry. “However, we have a long way to go before Tucson can be a meaningful contributor to Arizona’s emerging success in bringing companies and their quality jobs to our state,” he adds. Commercial Real Estate Group of Tucson specializes in representing tenants and corporate users across the United States, Latin America, Europe and Asia as a member of ITRA. For more information call 520-299-3400.

Referance Checks ...continued from page 9 sign a reference authorization form giving permission to their previous employers for a full and candid reference while also waiving any legal liability. In addition, we strongly advise our clients to call each reference given by a job candidate and when the reference conversation is complete --- ask this person, “Is their someone else within your company who can give me an additional reference on this job candidate?” Speaking to a second person within the same company is the secret to getting accurate and detailed references. Want to hear more about this important topic or ask some additional questions about how to build a custom reference checking form or to see a sample reference authorization form? Send an E-mail to ernest@ powerhour.com and The Coach will E-mail you a free TeleForum invitation. Author’s note: Ernest F. Oriente, a business coach/trainer since 1995 [33,000 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

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Tierra Antigua Realty (520)797-6900 RENTAL HOUSING JOURNAL ARIZONA • JANUARY 2015

tucsonrealestate@mindspring.com 11

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RENTAL HOUSING JOURNAL ARIZONA • JANUARY 2015