Rental Housing Journal Arizona
April 2017 - Vol. 9 Issue 4
2. Phoenix Area Apartment Market Update 4. 4Q16 Market Overview & Multifamily Housing Update
6. Essential Cleaning Tips and Techniques for the Spring 7. Are You Ready to Rent to Millennials?
5. MODE Hires Industry Veteran as Senior Real Estate Manager
9. Dear Maintenance Men 11. Ask Landlord Hank
WWW.RENTALHOUSINGJOURNAL.COM • PROFESSIONAL PUBLISHING, INC Monthly Circulation To More Than 7,000 Apartment Owners, Property Managers, On-Site & Maintenance Personnel
How To Improve Your Tenant Selection and Screening By Landlord Hank
I
was very proudly showing my very first rental property, which had been extensively renovated, to a nicely groomed and mannered young woman. She arrived for her tour, on time, in a newer vehicle, praising the property and saying she'd love to rent it. I fancied myself as astute and a good judge of character so I thought I'd skip the tenant screening step. I had her fill out an application and pay the fee. I told applicant I would let her know later in the day. As I thought more about not screening this tenant I decided to reconsider. I did screen her and found out she was in the process of eviction and hadn't paid rent in three months! So do not learn the hard way. Here are some questions and answers to help. Question: The landlord/investor has the property ready to rent-everything has been repaired and works properly, the unit is clean and looks great, inside and out. You have shown the property to a tenant prospect that seems to fit your criteria and can move in quickly. So what is the next step? Answer: This step is CRITICAL and if this step is not handled properly, the landlord will know first-hand why the landlord role is not for everyone. Tenant screening begins with your personal assessment of the prospective continued on page 10
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Homes in Short Supply as Home Shopping Season Kicks Off
here are 3 percent fewer homes on the market than a year ago, with the median home value hitting its highest point since June 2007, according to Zillow's February Real Estate Market Reports • U.S. home values rose 6.9 percent over the past year to a Zillow Home Value Index (ZHVI) of $195,700 in February. • Rents rose 1.2 percent over the past year to a Zillow Rent Index (ZRI) of $1,406 per month. • Inventory shortages will be a big concern for buyers going into home shopping season -- there are about 3 percent fewer homes for sale this year than last. • Minneapolis, Cincinnati and Detroit reported the greatest drop in homes for sale over the past year. • Mortgage rates on Zillow ended February at 3.89 percent, down from 4.01 percent at the start of the month. continued on page 3
Creating a Buzz to Attract Renters to Your Properties By Mary Girsch
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n the Chicago Tribune, the real estate section has a weekly feature that profiles an apartment community in their readership area, taking great care to describe the apartment in rich, picturesque detail. It’s one of my favorite parts of the newspaper; allowing me to experience a property that I may not typically visit. While this may not be feasible for most apartment communities, there are ways to create a similar buzz about your own communities. These can range bolstering your social media profile to teaming up with area businesses that are willing to send applicants your way.
While the strategies may vary, all can work to drive more quality applicants to your properties. • · Ramp up your social media strategy. This can be anything from creating a Facebook profile if you
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don’t already have one, to posting more in-depth information such as photos and videos of your apartment community that can be easily viewed and shared. Virtual tours of your community may also be useful. And don’t underestimate the value of Twitter, which can quickly get information out about your community and drive people back to your website for more information. Encourage your residents to share their positive experiences on social media as well. • Create a professional website that is loaded with tools that will appeal to those looking for a new continued on page 11
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Rental Housing Journal Arizona
Phoenix Area Apartment Market Update Pete TeKampe • Vice President Investments • Marcus & Millichap
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he Phoenix area apartment market is experiencing among its best operational times in history. This article explores various aspects of the local rental market including rent trends, vacancies, concessions, new construction and the unit mix composition of the most recently constructed apartment communities. These elements are important considerations for owners, appraisers, investors, managers, and lenders when evaluating any rental community for investment, valuation or lending purposes.
RENT The Phoenix area in fourth quarter 2016 recorded the highest-ever weighted average asking rent. The period marked the 18th consecutive quarter that YOY quarterly average rents increased. Average rent in fourth quarter 2016 stood at $920 which was the same as the average rent recorded in third quarter 2016. The last time quarterly rents remained the same for two consecutive periods occurred in 2012, when rents remained the same in the third and fourth quarters of that year. As of fourth quarter 2016, there were ten submarkets with average asking rents above $1,000. The submarket which had the highest rents in fourth quarter 2016 is South Scotts-
dale, with rents of $1,240, up from the average of $1,180 observed one year earlier. The lowest rent in fourth quarter 2016 was in West Central Phoenix, with rents of $621, up from the $587 average observed one year earlier. West Central Phoenix rents are expected to increase this year due to the area’s low vacancy rate.
VACANCY Phoenix area vacancies remained relatively low, 7.3 percent, as of fourth quarter 2016. Northwest/Southwest County saw the highest vacancy for the period, 20.2%, as it continued to absorb new apartments added to the area. Northwest Mesa recorded the Phoenix
area’s lowest vacancy during fourth quarter 2016 at 4.9 percent. Phoenix area vacancies remained unchanged from levels observed one year earlier despite the metro area adding new multi housing stock to the existing inventory. The Phoenix area added thirty-one projects comprising 5,397 units in 2016. The unit mix with average square footage of each unit type and the weighted average asking rental rate of all units constructed in 2016 are depicted in following table*:
BD/BA # of Units Avg SF Avg Rent 0,1 222 618 $1,093 1,1 2,576 738 $1,189 1,1.5 116 838 $1,480 1,2 4 1,201 $2,180 2,1 50 828 $1,668 2,1.5 38 1,106 $1,358 2,2 2,171 1,095 $1,494 2,2.5 108 1,320 $2,249 3,2 537 1,314 $1,567 3,2.5 36 1,635 $1,625 3,3 17 1,503 $3,057 4,2 58 1,512 $1,469 5,2 4 1,782 N/A *There were no rental rates available for the 5x2 units as of 4Q16.
As of fourth quarter 2016, there were forty-eight projects comprising 11,871 units scheduled for- or under construction. Sixty-eight percent of these units are concentrated in five submarkets. The following graph depicts the distribution of these units among the five submarkets:
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Estate Opportunities in Investing (ROI) Finding Investing Success in Today's Housing Market
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Twenty-five percent of the immediate development pipeline is in North Tempe which had the Phoenix area’s second highest rents during fourth quarter 2016. North Tempe added nineteen projects comprising 4,213 units since 2010. Area concessions remain relatively low.
CONCESSIONS: The Phoenix area as of fourth quarter 2016 recorded the lowest-ever percentage of communities offering any type of concession. Thirty-four percent of all buildings Valley-wide offered some form of concession with the highest concession ratio existing in the Chandler submarket. Fifty-one percent of Chandler submarket communities offered some form of concession during fourth quarter 2016. The lowest concession ratio in fourth quarter 2016 occurred in the North Paradise Valley submarket. Ten percent of area commu-
nities offered concessions during fourth quarter 2016. The years of 2016 and 2017 could be referred to as the halcyon days of apartments in Phoenix, Arizona. Concessions are at record lows, vacancies are near record lows; rents, values and new construction are at record high levels. Be sure to check out future issues of the Rental Housing Journal to be informed of future trends which will affect the local apartment market. Pete TeKampe ptekampe@marcusmillichap. com 602.687.6767 Direct *Sources: RealData Inc./Phoenix, Maricopa County, City of Phoenix, Peter E. TeKampe, P.C.
Rental Housing Journal Arizona · April 2017
Rental Housing Journal Arizona
Homes in Short Supply ...continued from page 1 Home values across the country are up 7 percent since last February, with 3 percent fewer homes to choose from than a year ago, making for another competitive home shopping season. The median U.S. home value is $195,700, according to the February Zillow® Real Estate Market Reportsi, the highest value since June 2007. Tampa, Fla., Seattle, Dallas and Orlando, Fla. reported the highest yearover-year home value appreciation among the 35 largest metros across the country, all growing in the double-digits. In Tampa, home values rose almost 12 percent to a median home value of $182,100. Home values in both Seattle and Dallas are up 11 percent since last February. High buyer demand coupled with fewer homes for sale is driving home values higher in many of these markets -- there are 5 percent fewer homes to choose from than a year ago Metropolitan Area
in Tampa and 11 percent fewer in Orlando. Across the country there are 3 percent fewer homes on the market than a year ago and many places with rapidly rising home values have inventory shortages in the double-digits. In Seattle, for example, home values are up 11 percent but the selection of homes down 10.5 percent. Millennials will have a big impact on this year's home shopping season as they start aging into homeownership, especially in booming job markets that are attractive to young homebuyers. "Low inventory, strong demand and tough competition will be the defining characteristics of this year's home shopping season," said Zillow Chief Economist Dr. Svenja Gudell. "Even though interest rates are rising, buyers are eager to start their home search. If you're a prospective buyer about to enter the Zillow Home Value Index (ZHVI)
market, keep in mind that it's rare to get the first home you make an offer on, and homes in particularly hot markets frequently sell for over asking price. Buyers should give themselves enough time to get their finances in order and find a real estate agent they know and trust before jumping into the market." National median rent across the nation is up 1.2 percent since last February, to a median payment of $1,406 per month. Seattle, Portland and Sacramento, Calif. reported the highest yearover-year rent appreciation among the 35 largest U.S. housing markets. Rents in Seattle are up 7 percent to a Zillow Rent Indexii (ZRI) of $2,100. Rents in both Portland and Sacramento are up 5 percent. Minneapolis, Cincinnati and Detroit reported the greatest drop in inventory since last February. In Minneapolis, there are 18 percent fewer homes on the
Yearover-Year ZHVI Change
Zillow Rent Index (ZRI)
market than a year ago, and 15 percent fewer in Cincinnati. In February, mortgage ratesiii on Zillow ended at 3.89 percent, down from a high of 4.01 percent at the start of the month. The month low was 3.86 percentiv. Zillow's real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site and reflect the most recent changes in the market. Purchase mortgage requests on Zillow are up 7 percent compared to this time last year, indicating that borrowers are moving forward with plans to buy a home amidst rising interest rates. On the other hand, the refinance market is more rate-sensitive, and refinance requests on Zillow are down 69 percent compared to this time last year.
Yearover-Year ZRI Change
Year-over-Year Inventory Change
United States
$195,700
6.9%
$1,406
1.2%
-2.6%
New York/Northern New Jersey
$407,600
7.0%
$2,391
-0.7%
-7.0%
Los Angeles-Long Beach-Anaheim, CA
$599,400
6.4%
$2,642
4.8%
-1.8%
Chicago, IL
$207,500
6.4%
$1,619
-1.5%
-7.5%
Dallas-Fort Worth, TX
$203,400
11.1%
$1,565
3.4%
4.1%
Philadelphia, PA
$215,400
4.6%
$1,568
0.4%
-7.3%
Houston, TX
$175,200
4.5%
$1,547
-2.2%
3.1%
Washington, DC
$382,400
3.9%
$2,114
-0.1%
-8.5%
Miami-Fort Lauderdale, FL
$248,600
8.9%
$1,854
0.2%
16.2%
Atlanta, GA
$175,200
7.6%
$1,335
3.7%
2.8%
Boston, MA
$416,100
6.4%
$2,342
4.0%
-11.8%
San Francisco, CA
$839,600
4.5%
$3,354
0.1%
6.4%
Detroit, MI
$137,500
10.0%
$1,175
2.3%
-14.4%
Riverside, CA
$321,400
6.7%
$1,754
2.9%
-10.5%
Phoenix, AZ
$231,700
6.3%
$1,309
3.3%
6.2%
Seattle, WA
$420,200
11.2%
$2,100
7.2%
-10.5%
Minneapolis-St Paul, MN
$239,700
7.1%
$1,566
3.8%
-18.0%
San Diego, CA
$529,200
5.4%
$2,452
4.3%
-4.4%
St. Louis, MO
$149,900
7.1%
$1,132
0.3%
-8.0%
Tampa, FL
$182,100
11.6%
$1,347
2.9%
-5.4%
Baltimore, MD
$259,000
4.2%
$1,720
-0.2%
-12.1%
Denver, CO
$359,100
9.3%
$1,998
1.4%
12.1%
Pittsburgh, PA
$135,600
5.3%
$1,068
-3.8%
-4.0%
Portland, OR
$358,700
9.2%
$1,804
5.4%
10.1%
Charlotte, NC
$169,500
7.0%
$1,248
1.5%
-7.5%
Sacramento, CA
$357,700
7.7%
$1,709
5.2%
-4.4%
San Antonio, TX
$158,100
6.0%
$1,323
1.6%
16.4%
Orlando, FL
$201,900
10.4%
$1,396
3.4%
-10.6%
Cincinnati, OH
$150,500
6.4%
$1,254
2.2%
-14.9%
Cleveland, OH
$132,100
4.9%
$1,141
1.2%
-2.1%
Kansas City, MO
$154,600
5.5%
$1,251
2.2%
-10.4%
Las Vegas, NV
$217,800
10.1%
$1,247
2.0%
23.3%
Columbus, OH
$161,000
4.5%
$1,293
1.3%
-13.0%
Indianapolis, IN
$137,100
5.3%
$1,184
-0.2%
-10.3%
San Jose, CA
$979,400
3.9%
$3,449
-0.7%
-0.9%
Austin, TX
$264,800
7.0%
$1,694
0.0%
24.0%
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle. Zillow and Zestimate are registered trademarks of Zillow, Inc. i The Zillow Real Estate Market Reports are a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Real Estate Research. For more information, visit www.zillow.com/research/. The data in Zillow's Real Estate Market Reports
are aggregated from public sources by a number of data providers for 928 metropolitan and micropolitan areas dating back to 1996. Mortgage and home loan data are typically recorded in each county and publicly available through a county recorder's office. All current monthly data at the national, state, metro, city, ZIP code and neighborhood level can be accessed at www.zillow.com/local-info/ and www.zillow.com/ research/data. ii The Zillow Rent Index (ZRI) is the median Rent Zestimate® (estimated monthly rental price) for a given geographic area on a given day, and includes the value of all singlefamily residences, condominiums, cooperatives and apartments in Zillow's database, regardless of whether they are currently listed for rent. It is expressed in dollars. iii Rates for a 30-year fixed mortgage. iv Month high occurred on February 21, while the month low occurred on February 3rd. SOURCE Zillow Related Links http://www.zillow.com
Rental Housing Journal Arizona · April 2017
3
Rental Housing Journal Arizona
4Q16 Market Overview & Multifamily Housing Update Red Capital Group • April 2017 PAYROLL JOB SUMMARY Average Payrolls 2,021.5m Annual Change 4Q16 51.0m (2.6%) RCR 2017 Forecast 49.6m (2.5%) RCR 2018 Forecast 40.9m (2.0%) RCR 2019 Forecast 19.8m (1.0%) RCR 2020 Forecast 7.0m (0.3%) RCR 2021 Forecast 8.7m (0.4%) Unemployment 4.5% (1/17) (NSA)
4Q16 PAYROLL TRENDS AND FORECAST Phoenix job growth decelerated materially during the fourth quarter, slowing from 3Q16’s robust 64,100-job, 3.4% year-on-year rate, to a 51,000 (2.6%) job pace. Weaker growth in goods producing sectors was partly responsible, particularly construction, where job gains slowed from 3Q’s rapid 7,400job, 7.4% annual rate to 3,800 (3.7%) in 4Q, and further to a 2.8% rate during January and February. Slower business service hiring also contributed as the rate of sector headcount growth declined from as fast as 5.4% in 1Q16, and
3.6% in 4Q16, to only 2.8% during the first two months of 2017. Conversely, sectors driven by Phoenix’s robust net in-migration and population growth flourished. Retail trade and financial, healthcare and leisure service concerns added workers at a 33,300, 3.9% annual rate in January and February, up from 30,600, 3.6% in 3Q16. Seasonally-adjusted data magnified the extent of this soft patch. This series indicates that PHX created only 2,500 jobs in 4Q16, the smallest one-quarter add in five years. January and February also were relatively weak as only 5,100 net jobs were created. The outlook for metro job
creation still is bright in the intermediate term but cloudier over the longer run. RED Research specified a 97.5% adjusted-R2 (S.E.=0.5%) total payroll growth model using only the rate of change of U.S. payroll growth, Phoenix home price appreciation and Baa-rated bond rates as independent variables. Home prices are the key. We project strong appreciation through mid-2018, with positive implications for job creation. But we expect home prices to be vulnerable afterward, leading to much slower, potentially negative job creation in the forecast out-years.
OCCUPANCY RATE SUMMARY Occupancy Rate 95.5% (Reis) RED 51 Rank 31st Annual Chg. (Reis) +0.1% RCR YE17 Forecast 94.7% RCR YE18 Forecast 94.8% RCR YE19 Forecast 94.7% RCR YE20 Forecast 93.8% RCR YE21 Forecast 93.5%
4Q16 ABSORPTION AND OCCUPANCY RATE TRENDS Metro absorption was surprisingly weak in the fall. Reis report that a net of 200 tenants vacated Phoenix units during 4Q16, the first negative absorption post in eight years. At the same time, developers delivered 688 new units, a modest amount by recent standards but enough to send metro occupancy down -30 basis points sequentially to 95.5%. The B&C segment was the soft spot, perhaps a reaction to sharp rent increases in 2015 and 2016. Tenants vacated 501 lower tier units, re-
sulting in a -30bps sequential decrease in occupancy to 96.7%, the first class decline recorded since 2009. Axiometrics surveys of 662 same-store, stabilized properties recorded materially lower occupancy. These professionallymanaged complexes were 93.9% occupied in 4Q16, down –70bps year-onyear. Class-B led on 94.1%, followed by classes-A (93.9%) and –C (93.3%). Mid– and high-rise buildings were 92.4% full, up from 90.8% in 3Q16. Only Goodyear (95.4%) and West Mesa (95.0%) submarket posted occupancy above 95%; while Northeast Phoenix, Glendale
South and Sunnyslope failed to crack 93%. North and South Central Phoenix submarkets averaged 94.2%. Supply is likely to exceed demand in 2017, as 5,800 units are projected to be delivered by Reis. RCR estimate occupancy will tumble 50-80bps by year-end. But supply is likely to taper off afterward and demand should be strong enough to push occupancy back up above 95% in 2018 and 2019. Slower economics and reinvigorated supply trends may result in a retreat below 94% in 2020-2021.
EFFECTIVE RENT SUMMARY Mean Rent (Reis) $860 Annual Change 5.8% RED 51 Rent 9th Change Rank RCR YE17 Forecast 3.5% RCR YE18 Forecast 3.6% RCR YE19 Forecast 3.4% RCR YE20 Forecast 2.8% RCR YE21 Forecast 2.3%
4Q16 EFFECTIVE RENT TRENDS In light of the material decrease in apartment demand in 4Q16, it is little wonder that rent growth decelerated as well. After 10 consecutive sequential quarter advances of 1% or greater average Phoenix rent trends slowed to $4 (0.5%) in 4Q, down from 3Q’s $12 (1.4%) gain. The slowdown cut across classes as class-A and –B&C growth declined to 0.4% and 0.5%, respectively, in each instance the smallest increases in several years. Expressed on an annual basis, rents increased 5.8%,
ranking 9th among the RED 51. Axiometrics same-store survey results were consistent. Surveyed rents were flat sequentially but still strong (6.3%) when expressed annually. Class-A year-onyear trends (3.8%) were weakest but the upper tier posted the strongest sequential quarter metric. Class-C (7.1%) recorded the fastest advance but was the sole segment to see a sequential quarter decrease. So. Glendale and Sunnyslope again were among the submarket leaders, each posting 9%+ advances. Higher rent areas did not fare as well: No. Scottsdale and Paradise Valley trends were
slowest. Weak 4Q16 rent trends notwithstanding, RCR’s PHX rent model remains optimistic. We found that job (+), supply (-) and home price (-) growth and occupancy (+) are statistically significant predictors of rent. The robust 96.8% (S.E.=0.6%) equation projects 3% or faster annual rent growth through mid-2020. Compound annual rent growth over the 5-year forecast interval is projected to be 3.1%, ranking 26th among the RED 48 peer group.
TRADE & RETURN SUMMARY $5mm+ / 80-unit+ 40 Sales Approximate $1,285.1mm Proceeds Average Cap Rate 4.8% (FNM) Average Price / Unit $118,761 Expected Total Return 6.5% RED 48 ETR Rank 40th Risk-adjusted Index 4.17 RED 48 RAI Rank 19zth
4Q16 PROPERTY MARKETS AND TOTAL RETURNS Investors acquired Phoenix assets at a brisk pace, closing on more than $1 billion of properties for the third consecutive quarter. Volume totaled $1,285.1 million, up 18% from the prior quarter but down –2% year-on-year. Forty properties exchanged hands during 4Q16, comparing unfavorably to 43 and 46 properties transacted in the prior and year earlier periods, respectively. Trade was seasonally slower over the winter. Incomplete data for 1Q17 show 30 closings for $671
million. Proceeds declined 48% sequentially but were 5% greater than the year earlier quarter. Private investors dominated trade accounting for about 60% of purchases over the last six months. Institutional and private equity buyers accounted for 35% of sales, down about 4% from the first nine months of 2016. Cap rates were mostly in the 5’s. Recent construction trophies traded at about 5%, value-adds from 5.5% to 6%. Commodity class-Cs were priced to yield in the mid-6s. RCR elected to increase the generic purchase cap rate 15 basis points to 5.4% as demand for B/B+ properties
seems to have cooled off. With a 6.1% terminal cap rate and model derived occupancy and rent point estimates we calculate that an investor would expect to achieve a 6.5% unlevered annual rate of return on a 5- year hold. This metric ranks 40th among the RED 48 peer group. Low model standard error makes Phoenix cash flows more predictable, elevating the risk adjusted-index to RED 48 19th highest.
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continued on page 8
Rental Housing Journal Arizona · April 2017
Rental Housing Journal Arizona
MODE Hires Industry Veteran as Senior Real Estate Manager
Scottsdale-based CRE management firm expands team and starts new training MODE Commercial Property Management, a Scottsdale-based boutique commercial property management company, recently hired commercial property management veteran Gary Coley as its senior real estate manager. Coley joins MODE with more than 30 years of commercial real estate asset and property management experience in office, retail, industrial and data center assets in several markets in the US. He has been responsible for overseeing many large capital projects in several regions and has directed assets through the entire real estate cycle of acquisition, development, lease up, stabilization and disposition, while always focusing on building tenant relationships. Prior to working with MODE, Coley was the senior real estate manager for Digital Realty Trust, as well as the vice president and designated broker for CAPSTAR Commercial Real Estate in Arizona. “We are honored to welcome Gary to our team and excited to expand with
him in 2017,” said Patty Hartley, president and designated broker of MODE. “With Gary’s background, he can really become state associations including earning professional certifications; CCIM, RPA and FMA from the CCIM Institute and BOMA (Building Owners and Managers Association). Previously being a BOMA instructor, MODE plans to hold in-house monthly commercial property management classes for MODE team members including building engineers as well as interns.
For more information about MODE Commercial Property Management, please visit www.modecommercial.com or call 480.294.6000. About MODE Commercial Property Management MODE Real Estate Management Services is a market leader in commercial property management services in Greater Phoenix and Tucson metropolitan areas. With more than 20 years of experience, the MODE management
team fully understands the importance and value of its clients’ commercial real estate investments. As a result, MODE is better able to balance client goals and objectives with the needs and expectations of their tenants. MODE has a unique, professional approach to the management of office, retail and medical properties. For more information about MODE Commercial Property Management, please visit www. modecommercial.com .
Advertise in Rental Housing Journal Arizona Circulated to over 10,000 apartment owners, on-site and maintenance personnel monthly
Call 503-221-1260
for more information
Rental Housing Journal Arizona · April 2017
5
Rental Housing Journal Arizona
Essential Cleaning Tips and Techniques for the Spring By Lance Allen, Merchant-Cleaning, The Home Depot
W
hether it is touching up the exterior paint or switching out the air filters, the Spring season is the perfect opportunity to conduct a thorough sweep of each home to impress potential renters and keep your current residents satisfied for the rest of the year. The following cleaning essentials and latest products will help your maintenance teams clean more efficiently ahead of the busy turnover season.
Allergen Prevention Approximately 50 million Americans suffer from outdoor allergies, according to the Asthma and Allergy Foundation of America. As spring pollen counts increase across the country, one of the most important steps to help prevent symptoms is replacing air filters. Filters should be replaced every one to three months to minimize dust and pollen buildup. As temperatures and humidity grow warmer with the season, moist surface areas such as the bathroom and kitch-
en are more prone for mold buildup. In particular, caulked areas around the tub or sink are common spots for dirt and mildew. Inspect these areas for signs of water damage during apartment turnover to prevent mold growth. In addition to obvious signs like buckling floors and chipping paint, water detection devices can identify high moisture levels and unseen leaks before they get out of hand.
heavy-duty like ZEP Citrus Degreaser to help remove any grime and dirt. When choosing cleaning chemicals, look for large sizes of concentrated product rather than single bottles. For example, a gallon-sized version of concentrated glass cleaner will deliver the equivalent of 128 bottles. Not only will this save hundreds of dollars, but maintenance teams will also make less frequent trips to the store.
Restore the Outdoors As winter winds down, walk the property and see if there is any leftover damage from harsh weather. Common problem areas include roofs, irrigation systems and landscaping. For large cleanup jobs, equip teams with trash bags that are not only large, but also reusable. Demobags are 42-gallon, tear-resistant bags made of a tarplike material that can handle up to 110 pounds of debris and trash. Maintenance teams can reuse them up to 5 times, making cleanup much quicker. Also, look for opportunities to touch up and increase curb appeal. Make sure all grills and patio furniture are in tip-top shop shape, and look into multi-purpose cleaners that are
Essential Tools for the Job During this busy season of heavy turnover, having the right tools can enable maintenance teams to operate efficiently. While cleaning supplies may not seem like a market rife with innovation, products like the Rubbermaid Maximizer Looped-End Mop feature new technology to help teams move faster. The mop provides 30 percent more coverage and weighs 25 percent less than standard mops. Or, consider the Quickie Jobsite Push Broom for heavy duty jobs like construction debris, sidewalks and garages. The water-resistant fiberglass handle will help your teams finish projects quickly and comfortably. Today, eco-friendly products are a
good alternative to get the job done without any chemical smell or effects. The Home Depot has a wide variety of products, including non-toxic options like Simple Green and Tub O’ Towels, which are non-abrasive and have formulas that are environmentally safe. A clean property will help your residents take full advantage of the property as the weather warms up. No matter how big or small a task may be; you want to ensure your residents have a clean environment. By Lance Allen, Merchant-Cleaning, The Home Depot Lance joined The Home Depot in 2014 in product development and is currently the national Cleaning Merchant. With ample experience and background working with tools, hardware and paint, Lance has the knowledge to help the consumer and PRO meet all their product needs.
Advertise in Rental Housing Journal Arizona Circulated to over 10,000 apartment owners, on-site and maintenance personnel monthly
Call 503-221-1260 for more information w w w . rentalhousingjournal.com
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Rental Housing Journal Arizona ¡ April 2017
Rental Housing Journal Arizona
Are You Ready to Rent to Millennials? By Mary Girsch-Bock
ers, electric car charging stations, bike racks and bike storage. Being pet-friendly doesn’t hurt either.
T
here are 75 million of them; people born between 1980 and 2000. That’s roughly 25% of the U.S. population. Millennials, like all of us are looking for a great place that is safe, convenient, and affordable. But millennials have their own set of desires, and even requirements when looking for a new apartment home. And they have their own way of locating those apartments. • The question is: are you ready to market and lease to this largest segment of the population? Here are a few tips for reaching and renting to millennials: • Make sure your rental ads are where millennials can find them. This includes the ability to access ads, including photos and floor plans from the Internet or on a mobile phone. • Make sure you’re proactive on any public ratings issues that may appear. Millennials, more than any other group rely on the opinion
• If your properties are convenient to public transportation, be sure to mention that in your ads. Millennials are much more likely to use public transportation than their older counterpart and will see this as a definite plus.
of others. If there are issues, make sure you respond to them promptly, and note that response where it can be viewed by potential renters. • Ramp up your social media presence. Don’t underestimate the value that millennials place on a solid social media presence, such as an active Facebook page, Twitter account, and Instagram account. • Speaking of Facebook, be sure to
Rental Housing Journal Arizona · April 2017
create a Facebook page for your properties if you don’t already have one; and more importantly, keep posts fresh and timely. Facebook remains a popular forum for millennials, where they can easily access additional information and even download an application. • Make sure you list amenities such as free Wi-Fi, Leed-certified appliances, in-unit washers and dry-
• Fitness centers and coffee shops also top the list of amenities that millennials want. While space can be an issue for fitness centers, as an option, you can offer a discount to area gyms if desired. And millennials aren’t the only ones that would like an onsite coffee shop. Offering coffee and quick snacks would appeal to just about any demographic. While marketing to millennials can seem tricky, in the end, millennials, like generations before them, simply want a place that they can call their own. www.propertymanager.com
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Rental Housing Journal Arizona
4Q16 Market Overview ...continued from page 4
Property Name (Submarket) Altitude Sixteen 75 (Sunnyslope / Pointe Corridor Center) Scottsdale Horizon (North Scottsdale / Raintree) Solano Terrace (Central Phoenix North / I-17 @ Camelback) Urban Trails @ District (South Mesa / Alma Meadows) Regency Park Apartments (Northeast Phoenix / Alhambra) Mandarina (Central Phoenix South / Warner Hghts. / Papago)
Property Class/Type (Constr.) A- / RC MR (2015) B+ / GLR (1986) C / GLR (1985) B- / GLR (1974) B- / GLR (1971) B+ / (2002)
SUBMARKET TRENDS (REIS) Submarket
Reis Inventory Percent Change
Effective Rent 4Q15
4Q16
Central Phoenix North Central Phoenix South Chandler / Gilbert Deer Valley East Mesa Glendale South Goodyear /Avondale Maryvale North Scottsdale North Tempe Northeast Phoenix Paradise Valley Peoria / Surprise South Mesa South Scottsdale South Tempe Sunnyslope West Mesa Metro
1.2% -0.6% 5.3% 0.0% 1.4% 0.0% 10.2% 0.0% 4.1% 5.3% 2.3% 0.0% 2.7% 0.0% 8.9% 3.1% 1.9% 0.0% 2.1%
$653 $757 $971 $740 $790 $647 $884 $601 $1,093 $906 $783 $752 $825 $690 $936 $928 $690 $646 $813
$684 $769 $1,021 $759 $885 $742 $926 $707 $1,161 $948 $832 $764 $861 $776 $977 $952 $764 $704 $860
For more information about red’s research capabilities contact: Daniel j. Hogan Director of research Djhogan@redcapitalgroup.Com 1.614.857.1416 Office 1.800.837.5100 Toll free
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Approx. Date of Transaction 30-Oct-2016 21-Dec-2016 30-Dec-2016 10-Jan-2017 17-Jan-2017 16-Mar-2017
Total Price (in millions) $60.0 $51.0 $19.0 $13.1 $9.2 $25.0
Price / Per Unit $266,667 $154,545 $65,972 $83,971 $87,981 $138,889
Estimated Cap Rate 4.7% 5.1% 6.4% 5.5% 6.0% 5.2%
Change
Physical Vacancy 4Q15 4Q16
Basis Point Change
4.8% 1.5% 5.1% 2.6% 12.0% 14.7% 4.7% 17.6% 6.1% 4.6% 6.3% 1.5% 4.4% 12.5% 4.3% 2.5% 10.8% 8.8% 5.8%
5.1% 7.3% 6.8% 3.2% 1.3% 5.1% 1.2% 3.8% 6.8% 7.1% 5.0% 4.1% 2.1% 3.8% 11.7% 3.9% 2.1% 2.9% 4.6%
-10 bps -160 bps -210 bps -20 bps 160 bps -60 bps 100 bps -50 bps 0 bps -110 bps 140 bps -110 bps 110 bps -70 bps -540 bps 90 bps 70 bps 30 bps -10 bps
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
5.0% 5.7% 4.7% 3.0% 2.9% 4.5% 2.2% 3.3% 6.8% 6.0% 6.4% 3.0% 3.2% 3.1% 6.3% 4.8% 2.8% 3.2% 4.5%
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.
Rental Housing Journal Arizona ¡ April 2017
Rental Housing Journal Arizona
DEAR MAINTENANCE MEN: Painter's Caulk, Redwood and Cigarette Smoke
By Jerry L’Ecuyer & Frank Alvarez Dear Maintenance Men: I have just finished rehabbing a rental unit. I replaced counter tops, cabinets, baseboards and so on. Even though the unit is freshly painted with new carpets, the unit still looks unfinished. The base boards don’t always follow the wall contours exactly and the cabinets also have small gaps where they meet the wall. What can I do to make my work look professional? Julia Dear Julia: We are going to let you in on a “professional” secret and it is called painter’s caulk! Painter’s caulk typically comes in a tube and is applied with a caulking gun. Run a small bead of caulk along the baseboard and with your finger push the caulk between the wall and the gap you are trying to fill. Using a damp sponge or rag, wipe up any excess caulk. Painter’s caulk can be used to hide a multitude of installation sins. Almost anywhere two dissimilar materials meet; painter’s caulk can help hide the transition. Painter’s caulk is not limited to just baseboard, use it to make cabinets and door trim look custom installed. Fill nail holes without making a big flat spot on your wall. If you have ever tried to mate two pieces of trim or coving at a 45 degree angle and your cuts are not quite square, use painter’s caulk and no one will know. All gaps will magically disappear. Dear Maintenance Men: My building has redwood fencing and patio decks. Both the fencing and decks are in good condition, however the “red” in the wood has faded with exposure to the weather. The wood looks grey now. How can I bring back the redwood look back without buying new wood? Josh
have flat ceilings, wash them too. If you have “acoustical” or “pop-corn” type ceiling, that’s a problem. By its nature, acoustical ceiling material cannot be cleaned. Encapsulating the acoustical ceiling with spray paint may solve the problem. You will need a primer coat and a minimum of two coats of paint. If the smell is still present, give it another coat of paint and let the unit air as much as possible. Don’t forget to wash the windows and window frames. You will be amazed at how clean the aluminum or vinyl windows will look after a good cleaning.
Dear Josh: A Redwood deck or fence may be young and fit, but they do tend to grey prematurely. Luckily, the solution is not too hard. There is a chemical called oxalic acid which will help give the wood its youth and vitality back again. Most hardware stores will stock a product called cedar and redwood cleaner/ brightener. It may be under the brand name of “Olympic Cedar and Redwood Deck Brightener” Be sure your deck or fence is clean before treatment by using a TSP and water solution. (TSP is a heavy duty powder cleaning solution available at any hardware store or supermarket.) After cleaning, be sure to read the deck brightener product’s instructions before use. For safety and wear gloves and goggles. Mix the product’s solution with water into a pump up sprayer. Wet the deck or fence with the solution and using a nylon brush or broom, scrub the wood evenly, working harder on stained areas. Let the solution stand for about thirty minutes and rinse off with a strong stream of water. Let dry and the wood should look brighter. It might not look brand new, but it will look much better.
Dear Maintenance Men: My current vacancy was long occupied by a heavy smoker. Every surface is sticky with brown nicotine and the smell of smoke is overwhelming. How do I get rid of the smell and keep it from coming back? George Dear George: Cigarette smell is very hard to remove even after painting and cleaning the carpets. Chances are if the resident was long term, the carpets, drapes or blinds will need to be replaced. Remove the carpets, pad and tack strips. The tack strips are wood and can absorb and release the smell of smoke, urine etc. Thoroughly clean the floors with soapy water mixed with bleach. After cleaning the floors, it is not a bad idea to paint or use a primer to coat the flooring. One of the best ways to remove the nicotine residue from the walls is using old-fashioned elbow grease! Again, wash the walls with soapy water using a brush or rag. Adding TSP (a powdered cleaning solution available at most hardware stores) or using a degrease agent will help in the cleaning. If you
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 Past 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 and Co-Chair of the Education Committee of the Apartment Association of Orange County and Chair of the Education Committee at Southern Cities Apartment Association. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com
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Rental Housing Journal Arizona · April 2017
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Improve Your Tenant Screening ...continued from page 1 tenant and prospect’s family. • Are prospects clean and well groomed? • Are kids bouncing off the walls, etc? • Is the car they drove up in falling apart and filthy? Or nice? • Would you want to live next to these people? The application is the key that unlocks the real truth to how this prospect conducts life and relationships. Submitted with the application are driver’s license copy or photo ID so you know the people you are checking out are the people that are applying for your apartment, and not a brother or a friend of the real applicant using someone else's information, social security number, etc. You also want verification of income. Preferably you want the last two years tax returns, or bank statements for last three months and pay stubs from work. The application will request the following: • Biographical information, name, current and previous addresses • Contact information – not just the tenant but others such as relatives and emergency contacts • Social security number • Date of birth • Work history • Signed authorization for you to run credit and background checks
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Your application fee should pay for this screening process. There are screening companies that will handle this process and send you a summary. Or, you can set up with a company to run credit and background checks and you as landlord can check work and residential history by calling references. All adults must be screened and on the lease.
At this point, I ask if they would be willing to answer some questions concerning the applicant. Sometimes I must send the prospective tenant’s signed application which contains authorization for release of information. The questions I want answered are: • Rent amount paid to this landlord
Calling the previous landlord So if you decide that you, as the landlord, will verify residential/employment history, here is what you do next: Your first phone call should be to the current landlord. If it starts with someone answering the phone “Hello,” then questions immediately arise in your mind as to who is answering this phone as it does not sound like a professional landlord. Is it really a landlord or owner of a rental property and this is their only rental? Or, is this the applicant’s best friend or relative? When this has happened to me, I tell them my name and say the applicant is using them as a reference and how does this person know that applicant? I don't tell them applicant is looking to rent from me, etc. Sometimes I hear that the applicant is this "landlord’s" (again, is it really a landlord?) relative or friend and they are staying with them or other times the person answering the phone says that applicant used to, or still does, rent from them. What to ask when you get on the phone with previous landlord
• Notice of termination of lease given (usually 30-60 days)
• Term of occupancy • Payment history
• Any damage to property • Any unauthorized guests or pets • Eligibility for renting to this person again • Anything else this landlord thinks I should know? Now what do you do as a landlord? You have the information you want but can you trust that information? In this situation, I've immediately called the tenant and asked for clarification of this rental situation and asked: • Is this landlord a family member or friend? • Please send me a copy of your lease to this property now. Can the prospect come up with a lease? Then I move on to next residential history to see if this one be verified or not? If not, then I don't feel comfortable renting to this applicant and they are rejected and we move on. You must feel comfortable with the new tenants. You must be satisfied that they make enough money to pay the rent AND have enough left to live on. Also that their history shows they will take care of your property, pay rent and not disturb others. Their credit history demonstrates that they pay their responsibilities, and that they aren't a violent criminal. This is the most important step in the entire process of renting your property. Do this like it is important because the tenant relationship governs, for the most part, your landlording experience for the next year.
If you rent to a reasonable, responsible tenant and you are a good landlord, this experience should be very rewarding. How long should screening process take? Usually about 24- to 48 hours depending upon responsiveness of tenants references. Keep up communication with prospective tenants Let tenants know your progress so they know you are working on getting them clearance and what or who is the hold up. Perhaps the prospective tenant provided an incorrect or old email address or phone number, etc. Don't learn the hard way! Find a tenant you are comfortable with after you have reviewed their background and credit history, or keep looking. Never settle for someone you don’t feel good about just to get the rent coming in. If you settle, the first months’ rent may be all you receive! One final thought, do not let a prospective tenants rush to move in change the vetting protocol. If tenants can’t wait for normal procedures to transpire, that is normally a bad sign (like sheriff is at the door with eviction crew, etc). About the author: “I started in real estate as a child watching my father take care of our family rentals- maintenance, tenant relations, etc , in small town Ohio. As I grew, I was occasionally Dad’s assistant. In the mid-90s I decided to get into the rental business on my own, as a sideline. In 2001, I retired from my profession and only managed my own investments, for the next 10 years. Six years ago, my sister, working as a rental agent/property manager in Sarasota, Florida convinced me to try the Florida lifestyle. I gave it a try and never looked back. A few years ago we started our own real estate brokerage. We focus on property management and leasing. I continue to manage my real estate portfolio here in Florida and Atlanta. “ Visit Hank’s website here.
Rental Housing Journal Arizona · April 2017
Rental Housing Journal Arizona
Ask Landlord Hank
5 Questions Landlord Hank Asks enants When They Call
V
eteran landlord and property manager Hank Rossi takes on questions each week from landlords and property managers around the country. His goal is to help educate fellow landlords and property managers on issues he has seen in his 30 years in the business. This week the question from a property manager is about what questions you ask when the tenant first calls?
Question: You have received your first inquiry regarding your rental property, via phone or email. What do you ask someone inquiring for information about your property and why, when they first contact you? Hank’s Answer: Even though you may have put an ad on the internet loaded with details and photos, someone may have seen a sign for your property or heard about the unit through a friend or current resident. No. 1 So my first question is, "How do you know about our property"? If the prospective tenant says they saw an ad, then most of their questions will have been answered in the ad. If they haven't seen an ad I do a brief description of the unit and development. No. 2 My second question then is, "When you do need to begin a lease?” If someone wants to rent a currently available unit NOW, then you may have
a candidate. If prospective tenant’s current lease isn't up for six months, then your immediately available unit will be long gone. If you have multiple units, perhaps another down the road could work for this prospect.
No. 3 My third questions is, “Do you have any other questions? Answer any specific questions related to the property so prospective tenant can determine if they would like to move forward to a tour. No. 4 This is really a series of questions related to determining if you as a landlord could want this prospect as a tenant. For instance, if your community doesn't accept pets you could ask, “Do you have pets?” If you do accept pets, you'll need that information as well, as prospective tenant could have a pack of pit bulls. Next I want to know how many individuals will be in the unit. We don't want two families sharing a unit, etc. By now, you will have built up some rapport with prospective tenant and you could ask, "Is there anything else you would like to tell me? Maybe you'll find out that the prospective tenant had an unreasonable landlord. Or maybe they will say, "We just lost our house!" Or, maybe the prospective tenant has a legitimate complaint about their current property. There could be issues around poor maintenance history, poor management, unpleasant living conditions
such as noisy neighbors, barking dogs, a messy complex, parking problems, etc.
No. 5 If you would consider this prospective tenant then next ask, "When would you like to tour the property?" The sooner the better so you can begin the process of vetting tenant and renew the income stream from this unit. A few final thoughts: You as a landlord spent time and money to develop this lead. So treat this prospective tenant with respect, kindness and honesty just like you'd want someone to treat you. This prospective tenant could spend much of their life in your rental as a great tenant, but you never know. Next, if you have a chance to see tenant’s car, take a look. Often one's car care will reflect the living situation. If they open the car door and trash falls out or the muffler is held up with a coat hanger, you'll have a feeling about this prospective tenant. Hopefully they drive up in a well-kept auto. Also, notice and evaluate the prospects themselves. Do they reek of smoke and are seeking to rent a "no smoking" unit, etc? Lastly, never take a tenant because either you or they are desperate. If a tenant doesn't make the grade and have the required funds your guidelines require, then reject them, properly. Either take a good tenant or no tenant. Send your landlord and property management questions to Dear Landlord Hank and he will answer them in this blog on the site.
About the author Hank Rossi: “I started in real estate as a child watching my father take care of our family rentals- maintenance, tenant relations, etc , in small town Ohio. As I grew, I was occasionally Dad's assistant. In the mid-90s I decided to get into the rental business on my own, as a sideline. In 2001, I retired from my profession and only managed my own investments, for the next 10 years. Six years ago, my sister, working as a rental agent/property manager in Sarasota, Florida convinced me to try the Florida lifestyle. I gave it a try and never looked back. A few years ago we started our own real estate brokerage focusing on property management and leasing and I continue to manage my real estate portfolio here in Florida and Atlanta. “ Visit Hank’s website here.
Crreating a Buzz ...continued from page 1 rental home. This includes easy navigational tools, online photos and property tours and access to an online application option as well. If you already have a quality website, make sure that it is updated constantly, with fresh photos and new information. • Get to know your neighbors. Teaming up with area businesses can serve to drive a large number of applicants to your properties. Consider giving any referred applicant an incentive, such as a 5% rent discount, reduced security deposit or other incentive such as a gift card.
• Take full advantage of free sites that will allow you to post rental information about your communities. Like your social media strategy, you’ll want to include photos and virtual tours of your properties that will entice readers to search out your property for more information. While attracting quality tenants can often seem difficult, employing these strategies can provide you with a pool of applicants that will have your community leased up in no time.
• Encourage your current tenants to refer friends, family, and colleagues, and reward them with a gift card once a referral signs a lease.
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Rental Housing Journal Arizona · April 2017
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Rental Housing Journal Arizona
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Rental Housing Journal Arizona ¡ April 2017