Rental Housing Journal Arizona October 2016

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Rental Housing Journal Arizona

October 2016 - Vol. 8 Issue 10

2. Phoenix Multifamily Market Report 3. ADA Compliance Tips In Fewer Than A Thousand Words 4. How to Prepare For a Winter Storm

5. Dear Maintenance Men – Roofs and Winterizing 6. Real Estate Investors Continue Flipping Frenzy 7. Multifamily Rent Growth Decline Continues

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5 Key Research Findings About Tenants And Rentals

Preparing Your Furnace For Winter

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he weather is getting colder and colder out there. It’s time to break out the warmer jackets and turn on the heat. But before you turn on your heater, winterizing your investment properties (especially the HVAC system) should be at the top of your to-do list. Your tenants will rely on the heater throughout the cold months of winter, so it’s important to prepare the system for the upcoming winter days. Here are some helpful tips on how to get it ready.

Tip #1: Clean and replace filters. Did you know that dirty and clogged filters can cause big problems? Furnace filters are incredibly important parts of the overall system and if they’re clogged By John Triplett Rental Housing Journal

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new survey designed to help property managers and owners gain insight into what tenants care about the most in their apartments shows insight on: • What will they pay more for? • What drives them crazy? • What makes them happy? • What makes them sign a lease or renew a lease?

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with dirt, pet hair or debris, the flow of warm air can be hindered, which means that the heating system will work harder to keep areas warm and comfortable. If this happens for extended periods of times, the system could break

Rent Checks To Have and to Hold, For Better Or Worse Is Challenge Facing Landlords

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andlord and tenant lease relationships are sometimes like marriages: most are good, but some turn out bad. Oftentimes a landlord has a situation where a tenant delivers a rent check, but it is not enough to cover all current charges. Does the landlord cash, return or hold it pending court action? If the landlord takes the check with the improper amount, issues a rent receipt and cashes the check, that amount is all the landlord may receive for that rental period. A.R.S. Sec 33-1371 precludes a landlord from pursuing the tenant for the remaining balance

• What makes them move on from a property?

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down. Make sure the furnace filters are checked on a routine basis to ensure they are clean and they are replaced on a regular basis as needed. continued on page 9

continued on page 9

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Rental Housing Journal Arizona

Phoenix Multifamily Market Report Phoenix Metro Area, Third Quarter 2016

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ob Growth Intensifies Apartment Demand and Construction in Tempe Hiring by large companies will generate further demand in local apartments, creating density in urban corridors. Continued optimism by Phoenix employers boosted job growth during the past four quarters, with increases expected throughout the year. White-collar jobs along with health professionals contributed to a large share of total employment, including nursing/direct care staff and back-office positions. In the Tempe area, the State Farm campus is up and running, while other portions of the site continue to be developed, which means more workers and demand for residences. Nearby, Home Depot’s 110,000-squarefoot service center opened last fall and continues to hire, with a goal of 100 new employees starting in August. Employees are attracted to apartments in high-traffic areas that are a short drive or walk to work. Developers are responding by ramping up apartment completions in the metro, with a target of 2,700 units in the Tempe, University and South Scottsdale areas alone. Vacancy in these locations varies, with the lowest rate in South Scottsdale. An influx of apartment completions near Arizona State University continue to be leased up over time. Despite temporary headwinds in certain submarkets, overall market demand continues to improve, pushing up the average effective rent in these areas above the $1,000 per month mark. Tightening vacancy and rising rents will improve NOIs, generating investor demand. The average price per unit increased by double digits this past yearlong period through June, pushing cap rates lower into the high-5 percent territory. The most trades occurred in neighborhoods off the Interstate 17, north to Thunderbird Road and south to 2

Thomas Road. Assets in neighborhoods slightly east of the I-17 generally consisted of smaller properties in the 10- to 50-unit range that traded at cap rates in the low-6 percent span, with higher yields to the west. Older properties in nearby neighborhoods such as Sunnyslope and Maryvale traded at cap rates in the 7 percent range. Buyers seeking stabilized and luxury assets targeted the Camelback/Biltmore submarket with returns starting at 4 percent and increasing to the high-5 percent area.

2016 Multifamily Forecast Employment: Employers will advance headcounts 2.9 percent in 2016 as 56,000 new workers are hired, which will include a significant amount of construction and professional and business services roles. This follows a 3.8 percent gain in 2015, when nearly 72,000 positions were created. Construction: Developers will increase apartment construction to 9,100 units put in place during 2016, the most completions in the metro since 2000. Builders will target areas in Tempe and surrounding neighborhoods in South Scottsdale. This follows the metrowide delivery of 6,100 units in the prior year. Vacancy: Vacancy will tick 10 basis points lower during 2016 to 4.5 percent as the large number of deliveries are leased up. This follows a 140-basis-point drop in the previous year. Rents: Demand for units near workplaces, universities and entertainment will boost average effective rent 6.5 percent this year to $937 per month with additional submarkets recording rent above $1,000 per month. In 2015, rent grew 6.7 percent. Published with permission by Marcus & Millichap

Rental Housing Journal Arizona ¡ October 2016

Rental Housing Journal Arizona

ADA Compliance Tips In Fewer Than A Thousand Words By Paul A. Henderson, Esq. | Law Offices of Scott M. Clark, P.C.

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ith the plethora of lawsuits being filed over alleged non-compliance with the Americans with Disabilities Act ("ADA") by a drive-by plaintiff, and our own Christopher Walker having his pithy correspondence to the attorney filing those lawsuits being included as an exhibit to the Attorney General's Office's efforts to intervene in those lawsuits, the ADA is a hot-button topic right now. Compliance with the ADA is no trivial matter, and thousands of pages can be devoted to describing the minute detail involved in construction, compliance, and litigation over the ADA. Despite the ADA being a weighty topic, there are some brief points to address that should avoid some of the most common pitfalls facing owners and operators of residential rental properties.

Parking Spaces The biggest issue right now is parking. Parking spaces aren't simply a matter of slapping up a sign flagging a specific space for disabled parking only. First, there are two different types of disabled parking spaces: "car"

accessible spaces and "van accessible" spaces. Car-accessible spaces, otherwise known as "standard" spaces, must have a width of no less than 8 feet. In Phoenix, however, spaces in multifamily communities' parking lots must be at least 8.5 feet wide for regular parking and 11 feet wide for disabled parking, so the ADA minimum is trumped here. Each car-accessible disabled space must abut an access aisle that is no fewer than five feet wide, and this aisle must both extend the same length as the parking space (which for all parking spaces in Phoenix is at least 18 feet deep) and lead to an accessible route to the rest of the area. Each space must also be flagged by a sign that indicates it is reserved/restricted for disabled parking only, and the base of this sign must be at least 60 inches above ground level. Van-accessible spaces have additional requirements. The ADA decrees that the van space abut an aisle that is 8 feet wide at the minimum, have additional signage that indicates the space is van-accessible, and must have vertical clearance of no less than 98 inches. Disabled parking spaces also have minimum quotas for your parking ar-

Rental Housing Journal Arizona ¡ October 2016

eas. There is a sliding scale for spaces. For each multiple of 25 up to the first 100, you must have one (e.g., 3 disabled in a total of 51 to 75), one for each additional multiple of 50 up to 200, and then one for each multiple of 100 up to 500. For 500 to 1000 total spaces, no fewer than 2.0% must be disabled spaces, and for more than 1000, the minimum number is 20 plus one for each hundred spaces past that first 1000. Keep in mind that as soon as you cross a threshold, you must have the full number of disabled spaces - so always round up. Van spaces further complicate this. For every eight disabled spaces, one must be van-accessible. If you have 9 disabled spaces, for example, then you must have 2 van-accessible and 7 car-accessible spaces. Parking spaces aren't the only area of ADA compliance that is important to owners and operators, but they're the topic that has received the most attention recently. Accessible bathrooms for your public areas must have stall clearance of 60 inches from the side walls and 56-59 inches of rear wall clearance. Grab bars on side walls must measure at least 42 inches long and be located at most 12 inches from the rear wall, and, if there is one on the rear wall, it must be at least 36 inches long and have at least 12 inches of reach on each side from the center-line of the toilet. These requirements are important whether you are constructing new parking areas or are replacing and re-striping current ones. However, when you are involved in any sort of re-striping (even something as simple as adjusting a small area), you cannot reduce the number of accessible spaces even if your plan for re-striping keeps you above the minimum. If you are forced to remove a disabled-only parking space, you must recreate it elsewhere. A 24-space lot currently with 2 disabled spaces must always have 2 disabled spaces, even though the ADA requires only a single space.

Other ADA Topics In your units, are accessible apartments constructed so that there is sufficient clearance inside the unit for wheelchairs, that cabinets and sinks are designed to permit passage around and use by a mobility-impaired individual, and that there are no unnecessary steps or level changes? Front doors on accessible units must be flush with the ground (i.e., no stairs) and not constructed on impermissible level grades. These may seem only like design issues, but if your community was not designed with them in mind, or some evolution of the community has caused you to fall out of compliance, you will need to come back into compliance as quickly as feasible. ADA Issues of the Future The next big issue will be website compliance with the ADA. This topic is too technical to discuss in this article, but key points that will be coming up will be text-to-speech functionality, magnification, and other visual-impairment accommodations. We'll be addressing this topic, and many others on ADA compliance, in the future. For now, keep one important thing in mind: if you have any questions, never hesitate to ask your attorneys for advice. The Law Offices of Scott M. Clark, P.C. stands ready to assist you on all legal matters you, as property managers and owners, may face.

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Rental Housing Journal Arizona

by Mary Girsch-Bock in Business

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How To Prepare For A Winter Storm

ith one winter storm already recorded in the books; there’s no doubt that it’s getting cold. Today in the desert southwest it’s a balmy 27 degrees. Even a sub-tropical paradise is no longer immune to the effects of a winter storm. In a typical season, winter storms can wreak havoc, causing billions of dollars in damages. While not every region in the U.S. will bear the brunt of a major winter storm, we’re all vulnerable to freezing temperatures, brutal, hurricane force winds, and freak blizzards. If your region typically sees a storm or two during the winter (think Midwest) you’re probably already doing most of the prep tips listed below. It’s much more difficult to prepare for a potentially catastrophic storm when you’re in a region in the U.S. not typically affected. Regardless of where your properties are located, the following advice can help you to be prepared – just in case that big storm makes a bid for your vicinity. Check and maintain an adequate supply of snow and ice removal tools. This includes salt or sand for melting ice, snow shovels, and possibly a snow blower to remove large amounts of snow. In case of a power or gas outage, you should be prepared with flashlights, bottled water, and blankets as well.

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Keep an extra stockpile of those supplies in case a tenant needs them. A warm blanket can go a long way toward making a miserable night a little bit better. Check your properties for loose or low-hanging tree branches. Gusty winds or ice build-up can cause loose branches to fall, presenting a hazard to both tenants and employees. Keep an eye out for loose roof tiles or faulty furnaces. While this should be a part of your annual winter inspection,

it’s imperative that these items continue to function property throughout the winter months. Heavy snow build up can quickly lead to damaging leaks in a unit, and you certainly don’t want a furnace to stop working during a winter storm. Make sure that tenants have removed any potential hazardous items from their patio or balcony. A chair can quickly become airborne in 40 mph winds, creating a potential hazard to those in the area.

Stay on top of the situation. With 24hour weather available via television and the Internet, it’s easily than ever to track storms and their potential to hit your properties. While nothing can prevent a winter storm from hitting your area, being prepared can go a long way toward lessening the impact of the storm, and returning to business as usual, sooner rather than later.

Rental Housing Journal Arizona · October 2016

Rental Housing Journal Arizona

DEAR MAINTENANCE MEN: Do's, Dont's, Droughts and Doors

By Jerry L’Ecuyer & Frank Alvarez

Dear Maintenance Men: When is the best time to do an annual roof inspection? Can you give me some pointers as what to look for when I inspect the roof?

Tom Dear Tom: The best time is before it rains! However, we find summer and fall to be most the prudent time to inspect and repair the roof. In other words, don’t wait to do roofing work after the first rains of winter. The roofing contractors will be very busy and costs may go up or you may have to wait in line for the work to get done. Inspect the roof during the summer and fall and get the roofing work done before it becomes an emergency. During the roof inspection, pay close attention to the flashing. Flashing is used to transition between the roofing material and the building or a change in roofing direction or angle. Flashing can also be found where pipes or a chimney come up through the roof. The flashing is sealed with roofing tar and water leaks can form when the sealing tar cracks or separates from the building or the flashing material. Look for curled up roof edges on composition roofs, low spots on flat roofs and

bird nests in tile roofs. Check all roof drains and cut away any trees branches that are touching or overhanging the roof. While you are inspecting the roof, check the gutters. Winter storms have a way of loosening gutters and filling them with gunk thereby causing them to lose their pitch and pool water. Pooling or overflowing gutters can deteriorate fascia boards and siding.

Dear Maintenance Men: I’m getting my work check off list started before winter comes. Do you have recommendations of what should be on the check list?

is stucco, wood, brick, vinyl or concrete panels etc. Water intrusion of the siding can find its way through the smallest cracks by capillary action or more directly from misaligned sprinklers or other water sources. A little known and often forgotten solution to leaky windows is the clogged weep holes along the bottom of the window frame and track. These weep holes clog with dust and debris and very easily can cause water to enter the building through the window frame or even through small cracks in the stucco or siding at the edges of the window frame.

Lisa Dear Maintenance Men:

Dear Lisa: After checking and repairing any roof damage, we recommend looking at the outside walls of the property. Stucco, wood siding or other vertical surfaces, is the building’s skin. Cracks, breaks and other damage to the siding invite “infection” to your building. This “infection” can take the form of wood rot, mold, siding delaminating or separation from the subsurface, material breakdown of the stucco will cause discoloration and crumbling. Common siding material found in most buildings

Quality Decking Systems For Balconies, Walkways and Roof Decks

It won’t be long before we need to change our clocks for winter. I’m a bit concerned about the lights at my apartment building. I have various fixtures, sensors and timers, not one of which turns on the lights at the same time. Some don’t turn off or on at all. Any suggestions?

Brian Dear Brian: There are two ways to effectively control exterior lighting: 1: A timer clock. 2: A photocell for detecting light and dark Both time clocks and photocells have been around forever. We prefer to activate landscape lighting with a photocell

as it is virtually maintenance free. A photocell will ensure the property has light only when it is needed and turn off automatically with the approach of daylight. Be sure the photocell located where it can “see” ambient light and not near an artificial light source. A time clock needs constant attention in order to keep up with the changing seasons and adjustments for longer or shorter nights. There is nothing more frustrating than seeing the property all lit up at 5pm and it only gets dark at 7pm or even worse; the lights turn on at 7pm and it has been dark since 5pm. Remember: the safety of your residents is at its greatest risk when it is dark and the lights are out. Bio: If you need maintenance work or consultation for your building or project, please feel free to contact us. We are available throughout Southern California. For an appointment please call Buffalo Maintenance, Inc. at 714 956-8371 Jerry L’Ecuyer is a licensed contractor & real estate broker. He is currently on the Board of Directors and Chairman of the Education Committee of the Apartment Association of Orange County. Jerry has been involved with apartments as a professional since 1988. Frank Alvarez is the Operations Director and co-owner of Buffalo Maintenance, Inc. He has been involved with apartment maintenance & construction for over 20 years. He is also a lecturer & educational instructor. Frank can be reached at (714) 956-8371 Frankie@ BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com

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Real Estate Investors Continue Flipping Frenzy

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lmost 40,000 individual real estate investors and institutions continued flipping homes at a record pace in the second quarter, according to a new report from ATTOM Data Solutions, the parent company of . The report shows 51,434 U.S. single-family home and condo sales were completed flips in the second quarter of 2016, up 14 percent from the previous quarter to the highest number of home flips in the past nine years. Many of the flips were done by "mom and pop" investors. For the report, a home flip is defined as a property that is sold in an armslength sale for the second time within a 12-month period based on publicly recorded sales deed data collected by ATTOM in more than 950 counties accounting for more than 80 percent of the U.S. population (see full methodology below). A total of 39,775 investors (including both individuals and institutions), many of them referred to as "mom and pop investors" completed at least one home flip in Q2 2016, the highest number of home flippers since Q2 2007 - a nine-year high, according to the report. "Home flipping is becoming more accessible for smaller operators thanks

• "First, home flippers are realizing a much bigger gross ROI in 2016, averaging 49 percent in the first two quarters compared to an average gross ROI of just 27 percent in 2006.” • “Second, while an increasing number of flippers are financing their purchases, more than two-thirds are still using cash to purchase compared to about one-third using cash to purchase back in 2006."

to an increasingly competitive lending environment with more loan options for real estate investors, who are also benefiting from the historically low mortgage interest rates," Daren Blomquist, senior vice president at ATTOM Data Solutions, said in a release. "That favorable lending environment for flippers has helped to fuel the recent flipping frenzy we've seen over the past five quarters.” Homes flipped in Q2 2016 accounted for 5.5 percent of all single family and condo sales during the quarter, down

from 6.7 percent of all sales in the first quarter but up from 5.4 percent of all sales in Q2 2015.

Flipping hits milestones "We're starting to see home flipping hit some milestones not seen since prior to the financial crisis, which is somewhat concerning, but there are a couple of important differences in the home flipping of 2016 compared to 2006 when home flipping peaked during the last housing boom," Blomquist said in the release.

Of the 51,434 homes flipped in the second quarter, 68.3 percent were purchased with cash by the flipper, down from 71.1 percent in the previous quarter and down from 69.6 percent in Q2 2015 to the lowest level since Q3 2008 - a nearly eight-year low. "The single family real estate sector is becoming more institutional, which means that more financing is available and more attractive," Varun V. Pathria, CEO at Asset Avenue, a company that provides investor rehab, bridge and rental loans, said in the release. "The entrepreneurs are also becoming savvier and as a result are looking to leverage their capital more. There continues to be a fringe group of people who enter and exit the sector based upon opporcontinued on page 11

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Rental Housing Journal Arizona

Multifamily Rent Growth Decline Continues Fundamentals Remain Strong For Rental Housing

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verage apartment rents dropped slightly for the first time since November of last year dropping to $1,219 compared to $1,220 in August, according to Yardi Matrix monthly survey of 123 markets. While there was a flattening in September, year over year rents grew 4.7% nationwide. “While rent growth keeps decreasing, multifamily fundamentals remain strong. Occupancy has remained unchanged since May and is staying near historic highs. The employment sector, while not as robust as it once was, has been creating jobs at a steady pace,” Yardi Matrix said in their monthly survey for September. The report said high demand will continue for multifamily housing “as Millennial household formation continues and Boomers seek to downsize and re-enter the rental market.” Despite the decrease, multifamily fundamentals remain strong. Occupancy has remained unchanged since May, employment is solid and demand for multifamily housing remains high. “Growth has significantly outpaced economic expansion and wage growth in the last three years, and the recent

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deceleration aligns with historical growth rates,” according to a report on BusinessWire.

Cities that led yearover-year growth • Sacramento • The Inland Empire in California • Seattle • Orlando • Portland • San Diego • Atlanta • Tampa • Dallas • Las Vegas The report said that the continued deceleration “is in line with expectations. While year-over-year growth has declined since last October, it remains strong at 4.7%. Yardi Matrix has forecast 2016 rent growth of 4.5%, as we approach a more normal and sustainable long-term growth level. Income gains of 2-3% are insufficient to continuously support nationwide rent growth in the 5-6% range.”

West Coast metros outpace the rest of the country Still some West Coast metros remain hot. Secondary cities that have not seen extremely high levels of new construction—such as Sacramento, Portland and Orlando—continue to outpace the rest of the nation, with year-over-year rent growth exceeding 7%. Multifamily building permits decline In another report, Axiometrics said in their construction report that while multifamily starts increased from a year ago, “the number of multifamily permits issued decreased, perhaps signaling a slowdown from the peak levels of apartment construction seen over the past two years. “ • The 370,000 multifamily permits issued in the 12 months ending in August represented a 8.4% decrease over July 2016 numbers and a 13.1% decrease from August 2015.

and equity sources underwriting investments in the multifamily sector. Email matrix@yardi.com, call 480663-1149 or visit www.yardimatrix.com to learn more. Resources: Denver apartment rent growth continues to slow h t t p : //w w w.9 n e w s . c o m /n e w s /d e n v e r s a p a r t m e n t- re n t- g ro w t h - c o n t i n u e s - t o slow/328879156 Apartment rents flatten in September h t t p : // w w w. b u s i n e s s w i r e . c o m / n e w s / h o m e /2 01610 0 4 0 0 5 4 8 4 /e n / Ya r d i - M a trix-Monthly-Real-Estate-Market-Report U.S. cities see apartment rates fall ht t p://w w w.wsj.com/ar ticl e s/u-s- citie ssee-apartment-rents-fall-for-first-time-inyears-1475614808 Multifamily permits slip h t t p : //w w w. a x i o m e t r i c s . c o m /a u gust-2016-construction-report-1

See the full report from YardiMatrix online here www.yardimatrix.com/ downloads/Reports/matrix-monthly/ Yardi-Matrix-Monthly-Sep-2016.pdf Yardi Matrix is a business development tool for brokers, sponsors, banks

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Rental Housing Journal Arizona

5 Key Research Findings ...continued from page 1

The rental survey was done by Buildium in the summer of 2016 and the company said it was created because, “As property managers or owners, naturally you want to highlight the best assets of a rental, benchmark rentals against the competition, and discover which convenience features will encourage great tenants to stick around. That’s why this report was created.� The study looked at regional differences, age and professional cohorts to look for trends.

“Overall, we came away impressed • Location. Location. Location. with the desire of tenants— particuRenters want (and will pay for) a larly apartment tenants—to use digigreat neighborhood. tal communications, not only to find a • Most commonly sought amenities place to rent, but also to keep in touch are washer/dryer in unit, highwith property managers,â€? the compaspeed internet and central air. ny said in the report. “Moreover, we • Tenants seek online convenience noticed a direct connection between a features like ePay, tenant portals, tenant’s relationship with their properand text alerts. ty manager or landlord, and how they felt about their rental.â€? • Loving a rental and loving a property manager go hand in hand. There were 5 basic findings: • 74% of tenants like or love their rental, but 54% are likely to move out next year. /ne !¨Ì£Ă?AÂ?ÂŁ [AÂŁ ¡Ă?¨óÂ?en Ì¡ Ă?¨ A äßÂŽĂśnAĂ? ˜AQ¨Ă? AÂŁe žAĂ?nĂ?Â?AÂ˜Ă“ ÂƒĂŚAĂ?AÂŁĂ?nn½ $ĂłnĂ?  ß ĂśnAĂ?Ă“ ¨| [¨ÂžQÂ?ÂŁne nþ¡nĂ?Â?nÂŁ[nz

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No. 1 - 74% of tenants like or love their rental, but 54% are likely to move out next year More than half of the renters surveyed reported that they like their residence (52%), while nearly another quarter (22%) said they love it. However, yet another quarter had a less positive feeling about their home, with 11% saying they don’t care, 12% saying they don’t like their rental, and 3% saying they actually hate where they live. Unsurprisingly, a tenant’s likelihood of moving over the next year is in direct approximation to these feelings. Those who loved their rental were least likely to report plans to move (only 17%). When those tenants did plan to move, it was usually for reasons such as job relocation or moving in with a boyfriend. Those who hated their rental, however, were most likely to report plans to move (58%). When tenants are looking for a new place, the most common place for them to look is to ask around with friends, family or colleagues. Next on their list is to hop online and look at listings: first on Craigslist, and then secondarily on Zillow, a Google search, or ApartmentList. No. 2 - Location. Location. Location. One clear trend that emerged from all of these questions was that location is key.

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Rental Housing Journal Arizona ¡ October 2016

Rental Housing Journal Arizona

Preparing Your Furnace ...continued from page 1

Rent Checks ...continued from page 1 unless there is a non-waiver partial payment agreement.

The other options are holding the check or returning it. Since the Arizona Residential Landlord and Tenant Act does not define what is “acceptance,” is holding the tenant’s check an acceptance? If the landlord elects to hold the rent check then, at the very least, the owner or manager should immediately send the tenant a letter informing him or her that the check is unacceptable and state the balance due – late charges, court costs, attorney fees, utility charges, etc. The courts are divided as to whether holding a check is acceptance, even if the landlord does not cash or deposit it. Most judges, however, will rule that a check is accepted if the landlord takes the document to a bank, converts it into a certified check made payable to the landlord then holds it in the tenant’s file. There is one Arizona appellate case that addresses the boarder issue of what constitutes acceptance of a check. Prevo vs. McGinnis, did not deal with a landlord-tenant dispute, but a foreclosure of a deed of trust: • A check is not payment of a debt unless, by express contract, is so received. Where a creditor takes a check from his debtor, the presumption is that he has not taken it in absolute payment; rather the burden is upon debtor to prove, by clean and cogent evidence, that such check has been taken in absolute payment.

bank check by a debtor for the amount of his indebtedness to the payee is not, in the absence of an express or implied agreement to that effect, a payment or discharge of the debt, the presumption being that the draft or check is accepted on condition that it shall be paid. When in doubt, return the check to the resident. If the landlord cannot personally deliver it, send it certified or registered mail. Do not tape the check to the resident’s door since it could be lost or stolen.

As an example, consider the following: Two tenants, Roe Mance and Val N. Tine, rent a unit at the Broken Hearts Apartments. The manager, Cue Pid, explains that any rent check must include all charges due on the day presented. Three months later, Roe Mance and Val N. Tine slip their rent check in the night drop box without any late charges. Cue Pid puts their check in his file but sends them a certified letter explaining their check will be held pending payment of all charges. The letter is not claimed. In court, the tenants argue their check was accepted by the landlord since he is holding it. Judge Jack O. Hearts decides the landlord did not accept the check because it was never presented to the bank for payment. Andrew M. Hull, Esq. Hull, Holliday & Holliday, PLC www.doctorevictor.com 602.230.0088

Tip #2: Clean the inside of the furnace. The inside of the furnace, often at the base of the heater, is where dust and other debris will start accumulating. You should consistently make sure this area is clean through routine maintenance of your heating system. Once it’s clean, it will function efficiently and will be less prone to breaking down in the future. Tip #3: Keep vents clear of obstruction. Obstructing furnace vents could cause your whole system to not work effectively and could cause it to break down so make sure vents are clear of furniture like couches or bookcases. While you’re looking at the vents, be sure to open them up and clean the insides so they are free of dust or other debris that may cause clogging or potential break down.

Tip #4: Get a professional tune-up. Hiring a professional heating and cooling company to complete an annual maintenance of the heating system is a great investment and one that should be done at the turn of the season. An annual maintenance will ensure the furnace is in proper working conditioning and the HVAC technician can identify potential problems that are unseen that could cause expensive repairs down the road. Rental properties require a little bit of attention to detail during the bitter cold of winter and taking the extra time to do that will keep your tenants comfortable and allows for the heating system to stay in good working order so you don’t have to plan for any unexpected repairs or premature replacement of the system. Written by Brooke Strickland, freelance writer for Specialty Heating & Cooling. Specialty Heating & Cooling is a full service heating and cooling company in Tigard, OR

With the exception of a few jurisdictions, the authorities are unanimous in supporting the rule that giving a draft or

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Rental Housing Journal Arizona

5 Key Research Findings ...continued from page 8 “When we asked renters what they most love about their homes, two of the top three answers were a great location and a nice, safe neighborhood,” the report says. In fact, quiet emerged as a motif throughout the survey, with tenants indicating they would pay more for it, or that they seek it out in a new place to live.

6 things tenants would pay more for The report says property managers and owners might consider six amenities the report found tenants say they do not have now but would pay more for: • Swimming pool • Fitness center • Designated pet areas • Onsite storage areas • Doorman or security access • Garden or community garden No. 3- Most sought amenities are washer/dryer in unit, internet and central air When it comes to the amenities inside of an apartment, renters leaned toward the all-inclusive the survey shows. The most desired choice was an inhome or in-unit washer/dryer unit, followed by included high-speed internet, central air, and included heat and hot water. These choices did have a bit more variety along generational lines, with the 70+ preferring included utilities as their top 3 (Internet, Cable TV and heat and hot water) while all three younger groups prioritized an in-unit washer/ dryer and high-speed Internet. Millennials wanted included heat and hot water, while those from 33 to 69 erred on the side of central air. “If it makes sense to bundle services in with your properties and raise the rent, consider doing so. This is some-

thing tenants will expect to pay extra for, and could be a draw for your listing,” the report suggests.

No. 4 - Tenants seek digital convenience features Another trend which emerged strongly in the report was the desire of tenants to conduct rental-related business online. The report says, “Across the board tenants reported a lower level of access to conveniences than they desire. Offering options such as online listings, electronic leases, electronic payments, and online maintenance requests/tracking—in addition to waiving move in or pet fees and offering flexible leasing options—will likely increase your number of rental applicants.” In particular, “We asked tenants about online portals (property management sites where they can connect, get information, file maintenance tickets and pay rent) and the option to pay rent electronically. In both cases, tenants showed a strong preference—regardless of age cohort—toward using portals and ePay.” More renters want to pay rent electronically. Where 37% of renters indicate they can currently pay online, 59% indicated they like or would like to pay rent via ePay methods. The report said this information on digital convenience is an opportunity for property managers and owners to gain a competitive advantage and differentiate their properties.

reduce repeat vacancies over time, and ensure you are holding on to the tenants you most value,” the report says. Feelings about property managers tended to be significantly more negative overall than feelings about landlords and this “may present a real business opportunity for property management,” the report said. The reason tenants may like landlords more, the study found, is that tenants of single-family homes may have been more likely to have found their rental through a word of mouth referral. Thus there was a potentially higher number of landlords with a personal relationship to their tenants.

Summary Buildium writes, “The 2016 American Renters Report gives us a lot of insight into what is going on in the minds of tenants in the U.S, but certainly one clear pattern emerged from these findings. Tenants—and in particular millennials—have growing expectations regarding the availability of online tenant services. This extends from initially finding a property to the leasing process and to ongoing payments, requests and communications.

“Overall, it seems to be worth the effort for property managers to build relationships with tenants, as that will potentially extend the vacancy cycle over time. Moreover, property managers and landlords should look carefully at what community and home amenities renters value most in order to prioritize property upgrades or to emphasize particularly appealing features in marketing vacant listings.” Find the full report here- www. buildium.com/wp-content/ uploads/2016/08/RentersSurvey-1.pdf Methodology: The 2016 American Renters Survey was conducted by Buildium from June 6-17, 2016. The survey responses were a random sample commissioned from Market Tools. The survey had an incidence rate of 97%, with a 95% level of confidence and a margin of error of +/- 3.3%. About Buildium: Buildium is a property management solution that helps real estate professionals win new business from property owners and community associations seeking services.

No. 5 - Loving a rental and loving a property manager go hand in hand “Our data shows there is a direct correlation between liking a property manager and plans to move house in the next year. Making the extra effort to connect with tenants may significantly

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Rental Housing Journal Arizona · October 2016

Rental Housing Journal Arizona

Flipping Frenzy ...continued from page 6 tunity and those people are hard to predict but generally look to take maximum leverage." Pathria noted that 79 percent of the rehab loans Asset Avenue has originated so far in 2016 have been purchase loans while the remaining 21 percent have been refinance- typically an investor who purchases with cash at a foreclosure auction or some other auction and subsequently finances the property.

Gross flipping profit increases to new all-time high Homes flipped in the second quarter of 2016 sold on average for $189,000, $62,000 more than the average purchase price of $127,000, according to ATTOM data. That $62,000 average gross profit was up from an average $59,250 gross flipping profit in the previous quarter and up from an average $57,900 gross flipping profit in Q2 2015 to the highest average gross flipping profit since Q1 2000, the earliest quarter tracked in the report. The average loan amount for rehab loans originated by AssetAvenue so far in 2016 was $193,786, according to CEO Pathria. The $62,000 average gross flipping profit represented an average 48.8 percent return on the original purchase price, down from a 49.3 percent average gross flipping ROI in the previous quarter but up from a 47.5 percent average gross flipping ROI in Q2 2015. Average days to flip at 10-year high Homes flipped in the second quarter 2016 took an average of 185 days to

• Los Angeles ($125,000) • New York ($124,160) • San Diego ($111,250) • Oxnard-Thousand Oaks-Ventura, California ($110,000) • Baltimore ($105,000) • Washington, D.C. ($104,500) • Seattle ($102,900).

flip, up from 180 days from the previous quarter and up from 182 days in Q2 2015 to the highest level since second quarter 2006 - a 10-year high. Among 100 metropolitan statistical areas with at least 90 home flips in the second quarter of 2016, those with the longest average time to flip were: • Ogden-Clearfield, Utah (229 days)

the second quarter of 2016, those with the highest flipping rate were: • Memphis (11.1 percent) • Visalia-Porterville, California (10.1 percent) • Tampa (10.0 percent)

"While the number of home flips is up moderately on an annual basis, this segment of the market is still a relatively small share of the overall market in the Seattle area," Matthew Gardner, chief economist at Windermere Real Estate in Seattle said in the release. "As we head into 2017, I believe Seattle may see a slowdown in flips due to our very limited supply of homes and the high prices buyers are willing to pay, regardless of the quality of the home. Moreover, while I expect inventory levels to increase in the coming year, I believe that will actually serve to slow overall price growth and take some of the steam out of the flipping market."

• Naples, Florida (222 days) • Punta Gorda, Florida (212 days) • Palm Bay-Melbourne-Titusville, Florida (206 days) • Pensacola, Florida (206 days).

Markets with highest home flipping rate Among 100 metropolitan statistical areas with at least 90 homes flipped in

• York-Hanover, Pennsylvania (9.7 percent) • Mobile, Alabama (9.6 percent). Other metro areas in the top 10 for the highest flipping rate in Q2 2016 were: • Fresno, California (9.5 percent) • Lakeland-Winter Haven, Florida (9.5 percent) • Deltona-Daytona Beach-Ormond Beach, Florida (9.4 percent) • Clarksville,Tennessee (9.3 percent) Along with Memphis and Tampa, major markets with a population of at least 1 million where the Q2 2016 flipping rate was above 7 percent were Miami, Orlando, Baltimore, New Orleans, Phoenix, Jacksonville, Florida, Nashville, and Las Vegas.

Markets with highest gross flipping profits Among the 100 metropolitan statistical areas with at least 90 home flips in Q2 2016, those with the highest gross ROI for homes flipped in Q2 2016 were: • Pittsburgh (133.3 percent) • Allentown, Pennsylvania (117.9 percent) • New Orleans (111.5 percent) • Cleveland (102.6 percent) • Philadelphia (98.9 percent). There were nine metro areas where the average gross flipping profit in Q2 2016 was more than $100,000: • San Jose, California ($161,000)

Other high-level takeaways • Thirty-five percent of all homes flipped in Q2 2016 were sold by the flipper for between $100,000 and $200,000, the biggest share of any price range, but the biggest yearover-year increase in terms of price range was homes flipped in the $200,000 to $300,000 range - up 10 percent from a year ago. • Homes flipped for more than $5 million yielded the highest average gross ROI (73 percent), followed by the $50,000 to $100,000 price range (58 percent) and the $100,000 to $200,000 price range (58 percent). • Homes that were flipped in Q2 2016 were purchased by the flipper at a 25.7 percent discount below full "after repair" market value on average and sold by the flipper for a 9.2 percent premium above market value on average. Report methodology ATTOM Data Solutions analyzed sales deed data and automated valuation data for this report. A single family home or condo flip was any transaction that occurred in the quarter where a previous sale on the same property had occurred within the last 12 months. Average gross profit was calculated by subtracting the average price for the first sale (purchase) from the average price of the second sale (flip). Average gross return on investment was calculated by dividing the average gross profit by the first sale (purchase) price.

• San Francisco ($146,000) Rental Housing Journal Arizona · October 2016

11

Rental Housing Journal Arizona

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Rental Housing Journal Arizona ¡ October 2016

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