Rental Housing Journal Arizona October 2015

Rental Housing Journal Arizona

October 2015 - Vol. 7 Issue 9

2. 2Q15 Market Update

5. Dear Maintenance Men

3. Winter is Coming. Have A Plan!

9. Amid Rapid Gentrification, Inclusionary Housing Can Reduce Segregation

4. Security Deposit Litigation

11.What To Do When You Need A Lawyer

WWW.RENTALHOUSINGJOURNAL.COM • PROFESSIONAL PUBLISHING, INC Monthly Circulation To More Than 10,000 Apartment Owners, Property Managers, On-Site & Maintenance Personnel

Prepare Rental Properties For The Winter Season

2Q15 Market Overview Multifamily Housing Update

By Scott Matthews, Director, Strategic Accounts, The Home Depot

F Payroll Job Summary Total Payrolls 1,888.2m Annual Change 49.7m (2.8%) 2015 Forecast 51.7m (2.8%) 2016 Forecast 51.3m (2.7%) 2017 Forecast 51.5m (2.6%) 2018 Forecast 47.9m (2.4%) Unemployment 5.7% (July)

Payroll Trends And Forecast The year-on-year pace of payroll employment growth decelerated, slowing from a 56,800-job, 3.1% rate in 1Q15 to 49,700 (2.7%) jobs in the second quarter. Likewise, seasonally-adjusted data indicate that net job creation during the period plunged from 9,100 jobs during the first quarter to 300 in the second, the weakest gain since 3Q10. Slower expansion in regional services appear to be the cause as sequential quarter growth was weaker in retail trade and health care, leisure and personal services.

By contrast, the tempo of job creation appears to have gained speed during the summer. Year-on-year comparisons in July showed a gain of 60,900 jobs over 2014, and payroll employment totals expressed on a seasonally adjusted basis advanced 10,900 jobs in July and August.

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contiued on page 2

all is a great time to prepare properties for the colder months ahead, which may help prevent or offset costly repairs and high utility bills caused by harsh winter weather. Before winter hits, take steps to ensure that the property is ready for the elements with this must-have checklist.

1. Stock up. Property managers – especially those handling procurement – should prepare for colder months by purchasing winter products, such as salt and ice melt, in bulk before the season changes. Buying in bulk not only saves time and money but also gives property managers peace of mind as they look ahead to potential extreme weather.

2. Seal gaps. Thoroughly examine roofs, siding, doors and window frames for damage and drafts. Repair damages immediately and seal around doors and windows with caulking, weather stripping, or a door sweep to help keep warm air in and cold air out.

As a best practice, ensure exterior seals are strong where building materials meet, like where siding stops and brick begins. Encourage tenants to notify of any drafts or noticeable gaps in their units to prevent soaring utility bills.

3. Protect pipes. Install heat cables and pipe insulation to prevent freezing pipes as temperatures drop – especially for pipes exposed to outside air or on exterior walls. Remind tenants to let faucets drip overnight during extreme cold to keep pipes from bursting and causing water damage.

Repairing burst pipes can cost more than $600 – depending on where the pipe is located and the extent of the damage, so take the necessary steps to avoid the additional outof-pocket cost.

4. Check the water heater. Ensure units on the property are in good condition with thorough inspections. Drain and flush the hot water heater to get rid of sediment build-

up. If it’s time for an upgrade, choose a model that’s compliant with the latest efficiency requirements enacted in April of this year.

5. Install programmable thermostats.

Wi-fi enabled thermostats offer customizable convenience by enabling users to control temperatures from their smart phone. Some models even sense when a unit is occupied, delivering comfortable temperatures when it is in use and saving energy and money when no one is home.

Property managers can also program smart thermostats to send reminders for filter changes or extreme temperature alerts. contiued on page 3

5 Lessons For Winter Property Survival

A

s Darwin concluded, “It’s the survival of the fittest.” If we hope to preserve our property over the long term, there are simple truth’s we must accept and actions we must take in order to ensure the viability and value of the physical assets under our stewardship. The simple truth is that as soon as a property is built, it begins the process of dying. It’s a harsh truth, but we have all seen it. With that said, there are some properties that seem to escape the inevitability of decay, waste, and death. So, how do they do it? Are they

special in some way? What are those operators doing to extend the life of those properties, or, at least, lessen the effects of time in order to retain value? These operators understand the following 5 lessons and keep them at the top of their preventative maintenance approach.

Lesson One: Gutters and drains are key.

When gutters, downspouts, and ground drains are neglected, they begin killing your buildings. These compocontinued on page 6

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Rental Housing Journal Arizona

2Q15 Market Overview

...continued from page 1

The Phoenix job market is among the more volatile in the country and is, therefore, a challenge to model. Red Research settled on a equation that employs two lags of the dependent variable, U.S. GDP and payroll and metro income and home price growth as independent variables; achieving a 97.2% adjusted-R2 (S.E.=0.5%). The model projects gradually moderating growth throughout the forecast, consistent with the national average. Annual job gains are likely to remain above 50,000 jobs through 2017, slowing to the mid40,000 range in the out-years.

Occupancy Rate Summary Occupancy Rate (Reis) 95.7% RED 50 Rank 28th Annual Chg. (Reis) +0.6% RCR YE15 Forecast 94.9% RCR YE16 Forecast 94.4% RCR YE17 Forecast 94.4% RCR YE18 Forecast 93.9%

Absorption And Occupancy Rate Trends Space absorption trends moderated during the second quarter as a net of 1,212 tenants leased vacant units, according to Reis, down from 2,120 during the seasonallystronger first quarter but up from 902 in the comparable quarter of 2014. Supply remained subdued as developers delivered only 868 units, allowing occupancy to rise 20 basis points sequentially to 95.7%, a Reis series high mark.

Axiometrics surveys of 605 larger stabilized assets recorded market occu-

2

pancy of 94.6%, up 90 bps y-o-y. In this population, classes-B and—C notched the highest average occupancy, each on 94.8%. Class-A properties lagged at 93.6%, largely due to strong competition from new properties coming on line. Indeed, this services identified 41 new or rehabbed assets still in lease-up during the second quarter. Absorption of new units appeared to slow to a crawl, sending rents lower after aggressive increases. RCR’s demand model employs payroll, GDP and supply growth and a lag of vacancy as independent variables to achieve a 94.8% ARS (S.E.=0.4%).

The equation projects robust demand for more than 5,000 units in 2015 and 2016. But supply is likely to consistently over-balance demand, causing a –210 bps drop in occupancy by 2020.

Effective Rent Summary Mean Rent (Reis) Annual Change RED 50 Rent Change Rank RCR YE15 Forecast RCR YE16 Forecast RCR YE17 Forecast RCR YE18 Forecast

$781 3.9% 22nd 2.9% 1.3% 2.1% 2.6%

Effective Rent Trends Reis surveys indicate that average Phoenix effective rents increased $7 (0.9%) sequentially to $781 during 2Q15, marking the 10th consecutive quarter of 0.8% or faster sequential quarter growth. As a result, year-on-year rent growth held steady at 3.9%, nearly two times as fast as the sixteen-year quarterly average (1.5%). Much of the im-

1503073_10wx75h_CMYK_MEEP_AZ_Rent_Hous_Journal_ad_r4_042015_outlined.indd 1

petus came from the class-A segment, where asking rents surged 4.4% y-o-y while class-B&C gained just 2.1%.

Axiometrics surveys of 605 stabilized, same-store professionally- managed properties uncovered average y-o-y rent growth of 7.4%, representing the fifth consecutive quarter of 5% increases or faster. Growth was comparable across classes, each notching gains from 7.2% (class-B) to 7.8% (class-C). The fastest growth was observed in Northeast Phoenix (9.9%) and South Mesa (9.7%), while South Scottsdale (2.6%) and Paradise Valley (3.9%) trailed the pack.

The RCR rent model uses payroll, supply, income and home price growth as independent variables to achieve a 97.3% ARS (S.E.=0.5%), with payroll (+) and supply (-) having the greatest significance. This model yields a forecast of sluggish growth due to supply pressures in 2015-17, followed by faster advances as the inventory wave subsides.

Trade & Return Summary $5mm+ / 80-unit+ Sales 30 Approx. Proceeds $612.1mm Avg. Cap Rate (FNM) 5.0% Avg. Price/Unit $95, 328 Expected Total Return 4.9% RED 46 ETR Rank 46tj Risk-adjusted Index 4.41 RED 46 RAI Rank 29th

Property Markets And Total Returns Investors continued to accumulate Valley properties liberally as sales velocity of properties priced at $5 million

more accelerated to 30 trades from 28 and 27 in the last and penultimate quarters, respectively. Sales proceeds totaled $612.1mm, down moderately from $685mm and $630mm in the comparable quarters. The decline was attributable to a decrease in traded units as the average property size declined from 279 in 4Q14 to 214, while the average price per unit increased from $91,031 to $95,3328. The average age of traded assets was 28 years, up from 24.

Regional owner/managers predominated among investors, accounting for about one-half of all trades. Other buyers included REITs, private equity firms and investment funds. Cap rates were mostly sub-6%. Class-A/B+ assets traded from the mid-4s to low-5s; classB/B- from 5% to 6% and class-C in the 6.25%-6.5% range.

The prices of Phoenix properties were at odds with our downbeat rent forecast.

Using a 5.5% assumed going-in yield, a 6.4% terminal cap rate and model derived occupancy and rent point estimates, the integrated model produces a 4.9% unlevered 5-year expected total return, last among the RED 46. Investors appear to be betting that supply will not have the impact on rents anticipated by the model. As for risk-adjusted returns, Phoenix ranks #29.

By Daniel J Hogan Director of Research djhogan@redcapitalgroup.com 614-857-1416 Office 1-800-837-5100 Toll Free

continued on page 7

Rental Housing Journal Arizona · October 2015

4/20/15 3:33 PM

Rental Housing Journal Arizona

Winter is Coming

Prepare Rental Properties ...continued from page 1 6. Clear gutters. Remove debris from gutters to ensure proper drainage around the property. The fall and spring seasons are the best times to clean gutters, and property managers should take this one at least two times per year. Improper drainage can damage landscaping and the property’s foundation and cause snow and ice to build up in the winter months.

7. Protect the landscaping. The steps to winterize your landscape largely depend on your location. In milder climates, like the West Coast or Deep South, you can protect your outdoor plants by applying mulch or protective fencing and verifying that the freeze sensor on the irrigation system is working properly. In colder climates, drain water from the irrigation system so pipes and sprinklers don’t burst underground. There are three common techniques to winterize irrigation systems – manual, automatic and compressed air blowout methods – so property managers should review the options to determine which can best protect their landscape.

8. Defend against moisture. Keep outdoor fabrics and surfaces safe from the winter elements with a moisture blocking spray or sealant. Use the product to protect walkways, wood and other outdoor surfaces before the harsh weather arrives.

9. Create a severe weather kit. Prepare for the worst by assembling a severe weather kit before the season hits, including generators, batteries, flashlights and a First Aid Kit. Also include snacks, water and other essential supplies.

10. Help residents prepare. Encourage tenants to report maintenance issues immediately and share tips to help them get ready for the winter season.

Let them know that they play a huge role in keeping the unit intact during the colder months.

By Scott Matthews, Director, Strategic Accounts, The Home Depot Scott is responsible for managing national accounts and e-commerce while overseeing business-to-business relationships. During his 25 years at The Home Depot, he has served in a variety of roles and capacities, including Regional Pro Sales Manager, District Manager and Store Manager.

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Rental Housing Journal Arizona · October 2015

I

Have a plan!

t’s budget season for property manager and everyone is scrambling to get them done accurately and on time, while managing everything else that goes on daily on our properties.

But, we can’t forget cold weather and freezing conditions are coming. Although, we have had a hot long summer into fall, we need to be prepared for cold weather. Prepare for the worst and hope for the best!

Here are some best practices for to help ease the process and headache.

Prepare the residents.

• Staff should be prepared with all emergency situations and how to navigate all emergencies. Winter can bring fires, floods, freezing pipes, and freezing branches that can fall on buildings. All staff should know how to handle all of these situations. Be prepared with phone numbers for after hours emergencies for restoration companies, electricians, tree removal and landscaping companies, and help organizations like The Salvation Army. It’s also important to make sure that your whole team has contact information for all team members, in case of emergency.

• Prepare staff and residents for emergencies. Make sure everyone knows what to do in case of emer-

gencies during business hours and after. Office Hours and emergency contact information, including emergency and utility information, should go out to all residents and posted on the office door as well as voice mail.

• Publish and distribute an information booklet of emergency plans and reminders. For example: in the event of a power outage, remind resident not to use stoves or space heaters that do not automatically shut off if tipped over. Avoid candles and make certain that residents have working flashlights and batteries. Another important plan to include is fire evacuation.

Make certain to walk your property and note potential areas of concern – IE sidewalks, parking lots or stairway that might freeze over, etc. Include those in your plan.

Everyone hopes that none of these emergencies will occur, but they do happen. The best way to overcome, minimize damage and keep residents as happy as we can will come from BEING PREPARED!

By Dana Brown Dana Brown has worked in all facets of the property management and rental housing industry for over 30 years. She is a national speaker and trainer who consults with both property management companies and industry service providers. You may reach Dana at: danabrown3321@gmail.com

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Rental Housing Journal Arizona

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Security Deposit Litigation

ext to evictions, suits over security deposits are the highest volume of litigation between landlords and tenants. Everyone in property management should be aware of the basic requirements concerning deposits.

The landlord can require a new tenant to pay a security deposit. These are subject to the following under A.R.S. § 33-1321: • A) The deposit cannot exceed one and one-half month’s rent.

• B) All deposits are refundable unless designated “non-refundable” in writing by the landlord.

The purpose of these must also be stated in writing by the landlord.

• C) There must be a walk-through form completed at the beginning and the end of the tenancy showing the unit’s condition. Normally the tenant has the right to be notified of the move-out inspection and to be there. This forms the basis for determining damage to the rental premises.

• D) Deposits do not accrue interest.

• E) The Deposit must be refunded at the end of the tenancy after netting out any rent and utility charges due, and the cost of repairing any tenant caused damage provided the landlord gives the tenant an itemized statement

within fourteen (14) working days after the lease is terminated, the tenant returns possession to the landlord, and the tenant makes a demand. A landlord failing to do so within fourteen days after the tenant vacates and makes written demand may become liable for three times the amount wrongfully withheld.

• F) The holder of the landlord’s interest in the premises at the time of the termination of the tenancy (the owner) is bound by this statute.

This section of the Act is probably the single most litigated area in landlord/ tenant relations next to nonpayment of rent actions. It is also potentially the

most dangerous for the landlord. With the enactment of the Arizona Small Claims Court, more and more tenants are suing landlords for the return of part of their deposit.

Security deposits should be required from every tenant, but must not exceed an amount equal to one and one-half month’s rent. Security does not have to be money but could be anything of value acceptable to the landlord (i.e., a stereo, title to a vehicle, etc.). Keep in mind the definition of security under A.R.S. § 33-1310(14) which excludes cleaning or redecorating charges.

A landlord can never forfeit a refundable deposit but must always itemize where the deposit was applied (rent, damages). Once the tenancy has ter-

minated, whether through expiration of the lease or the eviction process, a landlord needs to itemize how the security deposit will be applied and the 14-day period does not begin to run until three conditions are met. Those three conditions are termination of the tenancy (the lease expires or the premises are re-let), return of possession (the keys are turned in), and demand for the deposit is made. However some courts require the disposition within fourteen business days from getting possession back (regardless of the other two requirements being met).

It is unclear whether a tenant must make a demand in writing and either deliver it in person or send it by certified or registered mail as required by A.R.S. § 33-1313(B). However, some judges will take the position that a verbal request is sufficient and tend to believe that, human being what it is, the tenant would have requested their security at move-out. This can create problems for the landlord as in the case where the tenants, upon moving, request their deposit from a manager who is shortly thereafter terminated or finds another job. As a safety precaution it is always advisable for the landlord to inspect the vacated premises as quickly as possible and send written itemization by regular first-class mail to the last known address of the tenant, within the 14-day time period, even if it is the address just continued on page 10

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Rental Housing Journal Arizona · October 2015

Rental Housing Journal Arizona

Dear Maintenance Men

By Jerry L’Ecuyer & Frank Alvarez

Dear Maintenance Men: Being part of the Baby Boom generation and staying active means I should know a bit more about “Aging in Place”. Can you explain this term and how it might affect my apartment community?

Bob & Joann

Dear Bob and Joann: Baby Boomers are 25 percent of the population and the first of the Boomers turned 65 in 2011 and the last will turn 65 in 2029. We heard on the radio the other day that 85 is now the new 75 and so on down the line. That is a large healthy aging group! They are not going to go quietly into a nursing home which means as apartment owners & managers; we need to prepare for this group.

Aging in place means bigger showers with wider doors, taller toilets, grab bars and bath sinks that will accommodate wheelchairs. This does not mean turning our units into institutions; there are many stylish accommodations to fit a number of needs. For example a grab bar capable of supporting 250 pounds does not need to look like it came out of a hospital. Grab bars come in a variety colors and designs. Many will double as towel bars and be virtually invisible to their primary purpose unless needed. A larger shower stall also will look opulent and practical at the same time. Replace old two handle faucets in the kitchen and bathroom for

single handle or touch faucets. Consider installing anti-skid flooring in the bathroom and tub/shower area. A few other items might be contrasting color edging for the counter tops along with rounded edge and corners. Replace all door knobs with lever handles for ease of use. This is a small sample of the things you can do to stay competitive in a growing market while not making changes that younger generations would find objectionable.

Dear Maintenance Men:

I am starting my planning for a major kitchen cabinet remodeling project in my rental units. However, I am having a difficult time making material and design decisions. What recommendations can you give?

Dear Allen,

Allen.

When doing a kitchen or bath material selection, cohesive and functional design is important. Kitchen and bath rehabs are some of the most expensive work you can do in an apartment unit and proper planning is a must. In order to appeal to a larger segment of the population, try to keep the interior color scheme to neutral earth tones. Cabinetry quality varies greatly. Don’t let the cabinet fronts fool you. Manufactures designed their cabinets to look good at first glance. Keep in mind, being in a rental environment, the cabinets also need to hold up to abuse. Look at the actual construction of the cabinet box or frame. There is no need to use cus-

tom cabinets to fit your existing layout.

The use of prefabricated modular cabinetry can greatly reduce the time and cost to have a finished kitchen or bathroom. Using real wood cabinet fronts with 3/8” plywood sides is essential for durability. The drawer fronts and sides should be connected with a dovetail or other positive lock construction. Drawers that are held together by nails will not hold up to tenant abuse, nor will particle board constructed cabinets.

On a side note; if you are gutting the kitchen or bathroom, use this time to relocate and add more electrical outlets and under cabinet lighting.

Dear Maintenance Men: I have a conundrum! My roof is in good shape, however I have a mystery leak or to be more precise I have a moving mystery leak. In other words, when it rains, the roof does not always leak in the same place. This is driving me crazy.

Sam Dear Sam: A good roofing troubleshooter is worth their weight in gold. Here at Dear Maintenance Men, we love a good mystery!

First things first; have your building inspected by a reputable roofing company or roofing inspector. The inspection will eliminate non-issues and help point you in the right direction and may even solve the leak mystery.

The amount and intensity of rain will contribute too many roof leak mysteries. Often a light rain will cause a leak

in an area that would not leak in a heavy or prolonged rainstorm. The reason is material swell. A light rain is not “wet” enough to swell surrounding wood or roofing material and cut off the leak.

Mind you, this is still a leak that needs fi xing. The deep penetration of water in a heavy or wind driven rainstorm will cause a leak by sheer volume that would not have leaked in a light rainstorm.

Roof flashings are a common source of leaks that drip far from the source of the water intrusion. A roof flashing can be found were the roof material meets a transition area such as a chimney, a wall, a pipe or other structure. Shifted or lifted composite shingles or roof tiles will cause water to come into contact with the felt paper under the roofing material and a break in the felt or roofing paper will cause a leak. Debris on the roof, valley, top caps, gutters etc can form water dams and cause leaks.

Watch overhanging trees as well as they can damage the roof and cause leaks.

Bio: Please call: Buffalo Maintenance, Inc for maintenance work or consultation.

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

How much does the job pay?

Publisher Will Johnson – will@propubinc.com Designer/Editor Kristin Flores – kristin@propubinc.com

Advertising Sales Will Johnson – will@propubinc.com Terry Hokenson – terry@propubinc.com Larry Surratt – larry@propubinc.com

Rental Housing Journal Arizona is a monthly publication published by Professional Publishing Inc., publishers of Real Estate Opportunities in Investing & Real Estate Investor Quarterly

www.rentalhousingjournal.com The statements and representations made in advertising and news articles contained in this publication are those of the advertiser and authors and as such do not necessarily reflect the views or opinions of Professional Publishing, Inc. The inclusion of advertising in this publications does not, in any way, comport an endorsement of or support for the products or services offered. To request a reprint or reprint rights contact Professional Publishing Inc. PO Box 6244 Beaverton, OR 97007. (503) 221-1260 - (800) 398-6751 © 2015 All rights reserved.

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Rental Housing Journal Arizona

5 Winter Lessons ...continued from page 1 then I will do one final clean and jet in December/January to get rid of all the leaves and debris that was just dropped over the past 90 days.

nents are at the top of the most wanted list when it comes to the destruction of your physical property. When they are clean and clear of debris, they will redirect and remove thousands of gallons of rainwater per year. To find the estimated amount of rainfall at your property use the following equation: (total sq’ of roof surface X 0.6 X annual rainfall).

Here is a common property example from one of the properties in my portfolio in Portland, OR. It’s a 100 unit property with 10 buildings. Each building has a roof surface of approx.

2000 sq’. Using the annual rainfall for Portland (37.2”/yr), we can estimate that over 446, 000 gallons of water per year is landing on nearly all surfaces of my property, but mostly on the roofing.

Without clean and functioning gutters, downspouts and ground drains all of that water is pouring into your building envelope somewhere. Whether it’s damaging the roof sheeting, deteriorating the fascia, pouring down the siding, splashing over the side and causing splash back on the underside of the siding, or simply creating standing water throughout the property, it will cause you problems. The obvious solution is to give your rain drain system the attention it deserves. I recommend 3 cleaning and line jettings per year. Starting in March, I want to get all the residual debris out from the previous winter. Then in August/September I want to get them all clear for the upcoming Fall and Winter leaf drop,

Lesson Two: Sealant matters.

The sealant (caulk) that is protecting your windows and siding material joints is like the sentry guarding the castle gate. At first he is strong, flexible, dependable, and nearly unbeatable.

However, he gets weaker over time, and, depending on his location, is constantly under attack and beaten down. Eventually, he fails and must be replaced.

The truth of the matter is that even the best sealants on the market have a manufacturer’s recommended useful life of around 3-5 years. This means that if your property was built before 2013 and hasn’t had the sealant removed and replaced then your property is under siege, and there is nothing protecting the critical access points that could become an open gate for water, mold, dry rot, and building failure. Within the industry there is a push given the construction defect litigation environment that is prevalent to implement sealant replacement schedules every 4-5 years with a focus on the horizontal surfaces, especially those that are not flashed with metal. This increased focus on the sealant will not only prolong the life of the material components, it will eliminate interior envelope damages. Since all surfaces and potential points of intrusion are being reinforced on a regular basis, the life span of the envelope materials, and ultimately the value and future capital needs to retain the value

Com pet Pric itive ing

of the property is preserved.

Lesson Three: Irrigation is key to NOI. We all know water is very expensive.

What we sometimes forget is, one of the largest water drains on our sites are our irrigation systems. These systems were designed, initially, to get things growing fast at the time of development.

Green grass, healthy trees, and bushes that can be trimmed and shaped make the property look good and help with the initial lease up and aggressive marketing that it takes to get the property performing well financially. But, over time, grass takes root, trees and bushes become mature and native plants and trees stabilize, leaving much of our irrigation systems unnecessary. Take this opportunity to do an in depth irrigation audit and determine areas that no longer need to be watered. Some areas may need different approaches, such as drip systems rather than the more common sprinkler heads which use far more water. If possible, remove entire zones in areas that have little or no grass, heavily shaded areas, or areas that appear to be heavily saturated. Taking advantage of these savings will not only save you money but eliminates the need for future maintenance and possible damage and repairs as well.

Lesson Four: Don’t forget about crawl spaces.

Although often forgotten, neglected crawl spaces can be can serious probcontinued on page 10

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Rental Housing Journal Arizona · October 2015

Rental Housing Journal Arizona

2Q15 Market Overview

...continued from page 2

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 currencies or securities or to engage in any specific transactions. Information has been gathered from third party sources and has not been independently verified or accepted by RED Capital Group.

RED makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. RED cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third party sources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.

continued on page 8

myitzchaki@MSYLaw.com

Visit our website at www.rentalhousingjournal.com Rental Housing Journal Arizona 路 October 2015

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Rental Housing Journal Arizona

2Q15 Market Overview

...continued from page 7

Submarket Trends (REIS)

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Rental Housing Journal Arizona · October 2015 CCI140272_MDU_Print_Ad_7.5x10 1

3/17/15 10:14 AM

JOB NO. CCI140272

DATE 3.17.15

INITIALS

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Rental Housing Journal Arizona

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Amid Rapid Gentrification, Inclusionary Housing Can Reduce Segregation

nclusionary housing, a policy by which developers provide for the construction of affordable housing, can be used effectively to reduce economic segregation at a time of rapid gentrification in neighborhoods across the United States, according to a report published today by the Lincoln Institute of Land Policy. And it can be deployed while avoiding the negative economic impacts and legal concerns often cited by critics, according to the report.

“In hot-market cities, skyrocketing housing prices push middle class and low income residents far away from well-paying jobs, reliable transportation, good schools and safe neighborhoods,” said Lincoln Institute President George W. “Mac” McCarthy. “Inclusionary housing alone will not solve our housing crisis, but it is one of the few bulwarks we have against the effects of gentrification—and, only if we preserve the units that we work so hard to create.”

The report, Inclusionary Housing: Creating and Maintaining Equitable Communities, charts a path forward for local policymakers who are grappling with the effects of gentrification, but who are wary of overburdening developers, impeding new housing construction, or inviting legal challenges. Through a review of literature and numerous case studies, author Rick Jacobus offers solutions for overcoming the major political, technical, legal and practical barriers to the adoption of inclusionary housing.

“More than 500 communities have used inclusionary housing policies to help maintain the vibrancy and diversity of neighborhoods in transition, and we’ve learned much along the way,” Jacobus said. “Research shows that if programs are thoughtfully designed and implemented, they can be a valuable tool at a time when affordable housing is desperately needed.”

Inclusionary housing is a strategy that taps economic gains from rising real estate values to create affordable housing. Many inclusionary policies require a certain percentage of residential

units in new developments to be affordable to lower-income residents, while others rely on developer fees, or provide for the construction of off-site affordable housing.

Chief among the concerns citied by critics is the potential for inclusionary housing to impede new construction by making development less profitable. However, many cities have avoided such impacts by allowing flexibility in how developers comply and offering incentives, such as the ability to build at greater densities, according to the report.

Some of the key findings and recommendations in the report include: • Contrary to popular perception, rapid construction of market rate housing actually fuels the need for more affordable housing by changing the character of neighborhoods.

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• The most successful policymakSalsbury Industries

ers have built public support and worked closely with private developers in the crafting of inclusionary housing policies.

Feb, Apr, Jun, Aug, Oct, Dec

economic impacts, but these tools need to be used judiciously.

• Inclusionary housing has been challenged in court, but programs can be designed to minimize legal risks.

• Follow-up, in the form of enforcement and stewardship, is critical.

Some communities have created thousands of affordable homes, only to see them disappear after subsequent sales.

About the Author Rick Jacobus is the principal of Street Level Advisors (StreetLevelAdvisors.com) where his work focuses on crafting strategies that ensure that everyone benefits from growth. He is the founder and currently serves as a consultant to Cornerstone Partnership (AffordableOwnership.org), a nonprofit initiative that supports local inclusionary housing programs.

The Lincoln Institute of Land Policy is the leading resource for key issues concerning the use, regulation, and taxation of land. Providing high quality education and research, the Lincoln Institute strives to improve public dialogue and decisions about land policy.

SOURCE Lincoln Institute of Land Policy

• Offering flexibility and incentives to developers can prevent negative

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October p September Rental Housing Journal Arizona · October 2015

The Industry Leader in Quality

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Rental Housing Journal Arizona

Security Deposit Litigation ...continued from page 4

5 Winter Lessons ...continued from page 6

vacated. Include receipts and mail an extra copy certified mail.

Procedurally, the landlord should always attempt a walk-through of the premises with the tenant so as to eliminate or lessen the areas of dispute. It is advisable to take a witness along and photograph areas that exceed “normal wear and tear”. Next, the landlord should apply prepaid rent and any refundable security deposit to rent owned and damages. Also. If a landlord uses vendors to make repairs, they should, at the very least, give the landlord written estimates so that these may be included with the notice sent to the tenant.

If money is due the tenant, it should be returned with the itemization, or if the money is due to the landlord then that should be demanded from the former tenant.

Failure to send the itemization within fourteen days after proper demand may make the landlord liable to the tenant in an amount equal to the portion of the deposit wrongfully retained plus twice that amount. The key words are “may” and wrongfully”. The Court has discretion to award the tenant triple damages under this section. The burden is on the tenant to prove the deposit was wrongfully withheld. Remember that if the landlord retains $50.00 of a $300.00 deposit, the tenant can only sue for the $50.00 and double that amount or $150.00 total. HOWEVER, be aware that some court decisions have awarded tenants all their security deposit plus the double damages where the landlord failed to account within the fourteen days even if part of the deposit was properly used.

lems. They may be too cold and wet under the units, or too warm and wet above the units. Take the opportunity to get a visual on these areas. Here is where to focus; lower crawlspaces should be clean and dry. Check the vapor barrier to be sure there are no tears in the barrier, no standing water or stains of previous water stains from the previous winter. Also, be sure to inspect all plumbing pipes that are within 5 feet of the outer foundation wall to be sure they are insulated.

As for the upper crawl space, take a few minutes in each building to look for potential problems that add to excessive moisture issues and ultimately mold.

Check fan exhaust venting to be sure it is positively connected to the exterior of the building, be sure that intake baffling is in place (you should see some outside light coming in where the bird block and intake vents are located), so that clean air can come into the crawl space and help push the moist, stagnant air out the top of the system. Last, be sure insulation is in place all the way out to the edge of the roof. As long as the baffles are in place this will ensure proper insulation for the units below.

If either landlord or tenant still has a claim for any other damages they may have suffered, they can be raised at the same time as a deposit claim is made.

If the property has been sold since the time the tenant first began occupying the property, the new owner would be responsible to comply with the itemization, even if the new landlord failed to have the tenant’s security deposits transferred as part of the sale.

Finally, if the suit is brought by a tenant to recover a security deposit, determine who the tenant has named as the defendant. The tenant can only sue the landlord and as was pointed out in A.R.S. § 33-1310(6) and (8), a manager or management company is not an owner/landlord unless there was a failure to disclose the owner to the tenant.

In other words, the tenant must sue the actual titled owner of the property, not the managing agent. Failure to do so should result in a dismissal by the trial court of the tenant’s claim.

Andrew M. Hull Hull, Holliday & Holliday, PLC

Lesson Five: Emergencies are going to happen.

Be proactive by implementing and practicing emergency plans with your team. If there is an after-hours call, does every member of your team know what to do? Setting up emergency response protocols, such as pre-approved

vendors for restoration, plumbing, carpet extraction, and leak locators to deal with the problems, and hotels restaurants, or even the Red Cross to deal with the residents. Have a centralized location at the site that has a list of all these vendors, utility shut off locate maps, valve keys, fire panel directions, and emergency protocols for fire, flood, and blood, but also natural disasters, terrorist threats, gang violence, and even domestic violence. When emergencies occur everything is chaotic, be sure your responding site staff are trained, prepared, and are level headed so they can assume the leadership role your residents expect and deserve.

Zach Howell, CAMT, UPCS, LEED GA Director, Apartment Maintenance Institute Zach carries a Psychology degree from Oregon State University. He is a nationally Certified Apartment Maintenance Technician, LEED GA, and Certified UPCS inspector carrying more than a decade of experience within the multifamily housing, development, and construction industries. Zach is a valued advocate for the Apartment Maintenance trade, serving as Subject Matter Expert for the National Apartment Association, Training Director for The Apartment Maintenance Institute, Community Education Faculty Member at Portland Community College, and 2014 Apartment Community Excellence “Oregonian Civic Award” Recipient.

He can be contacted via email: Zach@aminstitute.net

www.doctorevictor.com 602.230.0088

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Rental Housing Journal Arizona · October 2015

Rental Housing Journal Arizona

What To Do When You Need A Lawyer

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Navigating The Best Route To Legal Advice

hese days, a sharp pain in the knee or a persistent cough sends many people not to the doctor’s office, but to the Internet, looking for a potential diagnosis and cure.

Something similar happens with people in need of legal advice, says Jasen McDaniel, executive director of the Jeffers, Danielson, Sonn & Aylward law firm (www.jdsalaw.com), which has been in existence in Wenatchee, Wash., for nearly seven decades.

“It’s much easier to type in some search terms and hope you get some usable legal information, cheap or free, without having to visit an attorney,” McDaniel says.

But, just as with health issues, that’s not the wisest move, he says. Google is no replacement for a legal education and years of practical experience, and information via a website may “provide a false sense of security,” he says.

“There’s a reason it takes three years of post graduate law school and passing the Bar exam to become a licensed attorney,” McDaniel says. “Even legal issues that seem simple on the surface can become much more complex as you delve into the details and the existing case law.

“Because of that, you want a customized, rather than mass-produced, approach.”

For example, Jeffers, Danielson, Sonn & Aylward employs about 20 attorneys

be pricey, McDaniel says, in some cases costing $800 to $900 an hour, or more.

and is growing to an expected 27 by the end of 2017. JDSA Law is always on the lookout to recruit highly skilled applicants to join them. The firm’s attorneys focus on 18 areas of law, such as agriculture, construction, employment and labor, estate planning, healthcare, real estate and tax law, McDaniel says.

“I think one of the most important factors when hiring an attorney is the relationship,” McDaniel says. “You definitely don’t get that through virtual-legal advice, where you aren’t physically in the same place, and probably don’t get it at some law firms where the attorneys are overloaded with clients.”

Those in need of legal assistance have a few options when they shop around for an attorney. Here are pros and cons of each: • Solo practitioner. Most towns of any size have at least a few attorneys who practice on their own.

They often generalize, offering legal advice in a number of areas, though in some cases they may focus on a particular area of law.

“A solo practitioner can be a less costly option,” McDaniel says.

“But you forgo the intellectual horsepower and collegial environment you get at firms that have a team of associates who share knowledge and experience with each other, ultimately benefiting the clients.”

• Large firms and mega-firms.

These firms can sometimes employ 100 attorneys or more who focus on numerous areas of law, and usually can handle more sophisticated legal issues than can the average solo practitioner. They may have offices in multiple cities and even multiple states. A downside is their services tend to

• Small and medium-size firms.

These firms can provide some of that personalized attention that comes with a solo practitioner, combined with the sophistication of the much larger firms. The attorneys often enjoy a collegiality that is sometimes lost at larger firms. And, generally, their hourly rates will be lower than those of the mega-firms. “One reason to go with a firm of 20 to 30 attorneys that has been around for decades is you get a high-quality attorney and support staff for an extraordinary value,” McDaniel says.

“Ultimately, it all comes down to finding the attorney that best suits your needs,” McDaniel says. “From that personal relationship, to a focus on a particular area of law, to your budget, what’s important is a fit that is right for you and your situation.”

About Jasen McDaniel Jasen McDaniel is executive director of the Jeffers, Danielson, Sonn & Aylward law firm in Wenatchee, Wash. (www.jdsalaw.com) The firm has been in existence since 1946 and focuses on a number of areas of law, including agriculture, construction, employment and labor, estate planning, healthcare, real estate and tax law, among several others.

Conserve water. Save money.

Tempe now offers multifamily rebates for landscape conversions.

Manage your water consumption and your bottom line with Tempe’s new landscape conversion and grass turf strip conversion rebates.

Landscape conversion and retrofit rebate

Grass turf strip conversion rebate

Convert an existing landscape into a desert-friendly xeriscape by replacing grass and trees with desert-friendly, low-water-use plants. Retrofit an existing landscape by switching to a more efficient irrigation head or adding a new flow controller.

Replace turf strips, those grassy areas that are often found between the sidewalk and the street, with desert landscaping.

Rebate - $.25 per square foot, maximum of $3,000

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Benefits • Conserves water • Reduces water bill costs • Simplifies landscape maintenance

Rebate - $1.00 per linear foot, maximum of $500

Get rebate forms and more information at www.tempe.gov/conservation or call 480‐350‐2668.

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Rental Housing Journal Arizona

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Rental Housing Journal Arizona 路 October 2015