Arizona Rental Housing Journal JUne 17

Rental Housing Journal Arizona

June 2017 - Vol. 9 Issue 6

2. Why Rents are Rising Faster in The Suburbs 3. Is It Time to Upgrade Your Technology?

4. Top Regret for Home Buyers and Sellers is Not Prepping Soon Enough 5. Win, Win: Improving Cash Flow for Renters and Property Managers

6. Apartment Pet Amenities Draw Millennial Tenants 7. Do I Have To Pay For Tenant Housing While I Fumigate Apartments?

10. Dear Maintenance Men: 11. Ask Landlord Hank

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5 Ways Managers Can Perk Up Employees this Summer

Soft Landing Or Bumps Ahead for Multifamily Investment?

by Yardi Matrix

T H

by OfficeTeam

uman resources managers report workers may feel less productive in the summer and want more flexible schedules, while fewer companies offer flexible schedules, according to a new research.

In addition to wanting more flexible schedules in the summer, employees also want the ability to leave early on Fridays, a more relaxed dress code, and events such as company picnics.

However trends involving those employee desires have reversed since 2012, according to the survey from Office Team, a Robert Half company.

Now fewer companies are offering these benefits with a decline in flexibility of hours and leaving early on Fridays.

Also the most common employee behavior that managers see is employees not planning well for vacations.

"It's natural for employees to get distracted when the weather's nice and thoughts turn to plans outside the office,” Brandi Britton, a district president for OfficeTeam, said in a release. ...continued on page 9

he economic forecast for multifamily investment for the next year or two is that it is good enough to maintain occupancy, but rents may not be what people are hoping for, according to a new report from Yardi Matrix.

Jeff Adler, vice president and general manager of Yardi Matrix, said in a webinar that, “We are coming in for a soft landing – driven by supply. While demand is good, we are in for a busy 12 to 24 months,” he said.

“Things are getting absorbed, but not at rents people were hoping for,” Adler

said as multifamily supply will peak in 2017.

“In my view the macro economic conditions are good, not great, but they are pretty good,” Adler said. “And they are generating good job growth with 150,000 to 200,000 jobs per month.

This is good enough to maintain occupancy - and decent - but continued deceleration of rent growth is happening.

“You can clearly see we are coming in for what I hope will be a soft landing driven by supply – not by demand.

Demand is still solid. It’s mostly on the supply side. Demand is a big tailwind,

both short-term and long-term. It is still a fantastic demand story,” he said.

“However, shorter-term, supply is peaking. So we are in for a bumpy 12 to 24 months. Supply surges are focused in major urban hubs. Seeing that, it is coming at the top end which we are seeing through our pre-leasing data.

Things are still getting absorbed, but not quite at the rents people were hoping for.

“Higher cost of debt, higher cost of land are there, rents are not going higher to bail you out so all of that has made ...continued on page 8

3 Things Proactive Property Managers Want To Know About Roofs

by John Triplett

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ultifamily property managers have two interests at heart they don’t like their roofs to leak and they don’t want to spend any more money on them than they have to, according to a multifamily roofing expert “Regular maintenance and a good roofing contractor can help. If, for example, property managers have their roofs walked at least annually, and preferably semi-annually, the roofer can verify all roofing penetration areas are water-tight and sealed as needed,” Eric Skoog, owner of Sunvek Roofing in Phoenix, said in an interview with Rental Housing Journal. “Also, on pitched roofs, valleys need to be cleaned out so water or snow can move quickly off the roof, resulting in less chance of damage and water entry. “I think quite often, building owners mistake maintenance with roofing cost. Our experience is that if you maintain a roof – meaning having someone go up there periodically, do minor repairs, check

the roof to make sure everything is in good shape, you are much more likely to be able to extend the life of that roof than you are by ignoring it in order to save money until it leaks,” he said. Especially that is the case with flat roofs.

“Very typical on multifamily roofs, you will have mansards, eaves or porch covers on the exterior and a flat roof in the central area simply because it is

Text REALESTATE-ROI to 44222 to receive a digital copy of this year's Real Estate Opportunities in Investing (ROI) Finding Investing Success in Today's Housing Market

a less costly way to build initially, and you hide most of the roof,” Skoog said.

“You typically have larger, flat, expanses of roof to deal with. And those flat roofs are going to be some form of roll product – which is either self-adhered, heat-sealed, or some form of adhesive – or maybe spray polyurethane foam,” he said. His company installs self-adhered ...continued on page 5

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Rental Housing Journal Arizona

Why Rents are Rising Faster in The Suburbs

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ents are rising in the suburbs as many renters are looking outside of city centers for more affordable housing, causing rent payments to grow faster in the suburbs than urban areas As rents become more expensive, renters are starting to look for cheaper housing options outside downtown cores, according to a release from Zillow.

For the first time in four years, suburban rents are rising faster than urban rents • The monthly cost of a suburban rental in the U.S. is up 2.5 percent, while the cost of an urban rental is up 2.3 percent. This is the first time in four years that suburban rents are rising faster than urban rents.

• Suburban rents are outpacing urban rents in Nashville, San Francisco and Seattle, which are all hot housing markets. In Nashville, the cost of an urban rental is up 1.7 percent, but the cost of a suburban rental is up about 5 percent.

• In San Francisco, the price of an urban rental is falling, down 0.4 percent since this time last year, but suburban rental prices are up almost 3 percent year-over-year "Because walkable urban centers close to amenities are typically a big draw for renters, you'd expect rents to rise faster in the city than in the suburbs -- which is exactly what we've been seeing until very recently," Zillow Chief Economist Dr. Svenja Gudell said in the release. "But a handful of factors are helping turn the tables and beginning to push suburban rates up at a higher clip. These include: • Deteriorating rental affordability in expensive urban cores • New apartments, albeit high-end

ones, opening downtown compared to relatively few in outlying areas • Preferences among some renters toward the space offered by single-family homes in the suburbs.

“Rents themselves are still lower in the suburbs, but if demand keeps growing for suburban rentals and supply continues to lag, that will also start to change,” Gudell said. “ As more formerly urban renters move to the suburbs in coming years, we'll likely start seeing more apartment buildings and walkable amenities popping up in those communities."

Multifamily construction a factor in rising rents An increase in multifamily construction has slowed rent growth across the country, with rents rising at their slowest pace in five years. The suburbs often offer larger apartments and more single-family homes for rent with more space -- about 19 percent of all single-family homes in the U.S. are rentals, up from 13 percent in 2005. In the U.S., the median monthly cost of a suburban rental is up about 2.5 percent year-overyear, while the median cost of an urban rental is up 2.3 percent. At this time last year, the median urban rental price was up 5 percent year-over-year, while median suburban rental prices were up 3 percent. The trend is more pronounced in booming housing markets where rent affordability is worsening. Rental rates in the Nashville, San Francisco and Seattle metro areas are growing faster in the suburbs than in urban areas as rising costs force renters out of the city, increasing demand in the suburbs. Over the past decade, the share of income needed for the median rent payment in the San Francisco metro has increased from 34 percent to 44 percent. In the Seattle metro, the share has increased

from 26 percent to 32 percent. Expensive coastal cities are coming off about a decade of rapidly rising rents. Years of increases have pushed urban living out of reach for many renters, who may be choosing a longer commute in exchange for cheaper rental payments.

Rent affordability is a significant issue for renters across the country, and in many major metros, the share of income needed to pay rent well surpasses 30 percent. The price of an urban rental in Nashville is up 1.7 percent since this time last year, but the price of a rental in the suburbs is up almost 5 percent, with the median price of suburban rentals almost $500 less than an urban rental, despite many suburban rentals offering more space.

Rents growing in Seattle Rents in Seattle are growing strongly across the metro, but the median price of suburban rentals is growing faster than the price of urban rentals by about 2 percentage points. In San Francisco, urban rents are down 0.4 percent since this time last year, but rents in the suburbs are up 2.6 percent. The median rent price of a suburban rental is about $350 less than an urban rental in San Francisco.

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Rental Housing Journal Arizona

Is It Time to Upgrade Your Technology?

by Mary Girsch-Bock

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f your property management business is currently using the latest and greatest technology, congratulations! But for those of you still using technology from years ago, it’s time to start to take advantage of the benefits that today’s technology can bring to your business, and to your applicants and tenants. If you’re not sure where to start, here’s a quick list of items you may want to investigate in your quest to bring your property management business into 2017.

Online photos and virtual tours. Remember years ago when searching for a home, you were presented with a photo of the outside of the home. If you wanted to see more, you contacted an agent, who took you on a tour. Those days are long gone, but sadly, some property management companies continue to offer potential tenants a very brief glimpse of an available property, and nothing more. Savvy property management businesses know that viewing apartments and homes online is vital to their business. The more information you can offer applicants online, the higher likelihood that they will fill out an application, which brings us to my next suggestion…

Online rental applications. You have a great inventory of photos and virtual tours that potential tenants can access

at any time. A website visitor finds a property that he or she absolutely loves.

The next logical step would be to fill out an application – preferably an online application. One of the biggest advantages of offering online applications is the ability to channel the excitement that web visitors may experience when looking at your available properties. Do you really want them to have to stop and request an application, or worse, come into your office to complete the application? Chances are they will simply move on to another property that does offer that capability.

Online rent payment capability. Let’s face it , why wouldn’t you want a system in place that makes it easier for your tenants to pay their rent – and pay it on time. Today, checks have been widely replaced by online payment systems. Don’t force your tenants to write a check, and certainly, don’t force them to have to write a check and mail it! Make it easier on them, and on your property management business, and make online rental payment a reality in 2017.

Make your property management business technologically savvy in 2017 by investing in these tech benefits that will reduce paperwork and make your tenants happy.

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Rental Housing Journal Arizona · June 2017

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Rental Housing Journal Arizona

Top Regret for Home Buyers and Sellers is Not Prepping Soon Enough With the 2017 home shopping season approaching, Zillow reveals data-driven tips for buyers and sellers this spring

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he spring home-buying season is gearing up to be one of the most competitive in recent history, as the shortage of for-sale homes is keeping inventory tight and prices high. Buyers and sellers hoping to be successful this spring should start the process early, according to the 2016 Zillow Group Report on Consumer Housing Trends.

Of over 13,000 U.S. residents surveyed, the number one regret for both buyers and sellers was not starting their home search or prepping their home to sell soon enough.

U.S. home values across the nation are up 7.2 percent over the past year, and there are three percent fewer homes to choose from than a year ago, according to the January Zillow® Real Estate Market Reports.i "This spring, both buyers and sellers should be prepared for fast-moving sales, intense negotiations, and even bidding wars," said Jeremy Wacksman, Zillow Group chief marketing officer.

"Home shoppers and sellers are motivated to become more strategic and knowledgeable about what's happening in their neighborhood. Understanding whether you are in a buyer's or a seller's environment will help you manage your expectations and will give you insight into what you're going to need to bring to the table in order to close the deal."

The Zillow Group Report on Consumer Housing Trends reveal strategies for how to buy and sell in today's highly competitive market.

Buyers: • Keep your options open. More than half (52 percent) of buyers said they also considered renting, and more than one third (37 percent) of firsttime buyers seriously considered continuing to rent. Savvy shoppers will have a Plan B in place, hoping

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to buy if it works out, but willing to sign a lease for a home if they don't make a deal by the time they need to move.

• Be realistic with your budget. Once you set it, stick to it: first-time home buyers are more likely to exceed their budget than repeat buyers (39% vs 26%). Before you meet with a lender to determine how much mortgage you'll be approved for, take a good look at your individual finances and spending preferences to determine the monthly payment range that you feel you can comfortably afford. Use Zillow's mortgage calculator to help with you with the math.

• Get your financing squared away early. Plan to meet a few lenders four to six months ahead of when you're planning to buy to ensure you can make a competitive offer quickly when you find your dream home. The majority (82 percent) of buyers get pre-approved, with 77 percent getting pre-approval from a lender before finding a home on which they are interested in placing an offer.

• Find an agent with a winning track record. Take the time to find an agent who has expertise in fast negotiation, leveraging escalation clauses, and winning bidding wars.

Only 46 percent of buyers got the first home on which they made an offer, demonstrating that competition is now part of the process. Use search tools, like Zillow's Agent Finder, to choose an agent based on sales and listing activity, area of expertise and reputation.

• Communication is key. Make sure your preferred method – and frequency – of communication matches that of your agent. One

third (33 percent) of all buyers preferred phones call with their agent over emailing (21 percent) or texting (15 percent). Buyers can use the agent reviews on Zillow to learn more about prospective agents and their clients' experiences.

Sellers: • Start Early & Be Strategic. Sellers consider putting their home on the market for five months before they list it. But the top seller regret is that they wished they spent more time prepping for the sale. Many cities have a magic window in the spring when homes have a higher likelihood of selling quickly for more money.

• Work with an agent from the start.

The vast majority (90 percent) of sellers who sold quickly and for more than list price worked with an agent, and two out of three (58 percent) began working with an agent at the very beginning of their selling journey.

• Pay attention to your online curb appeal. The majority of buyers begin their search online. Sellers who sold their home for more than list price made imagery and home information available online: 48 percent had professional photos taken of the home, 30 percent shot video footage and 21 percent even shot drone footage. Zillow's video walk-throughs gives sellers an easy way to show home features that are hard to capture in photos.

and 20 percent more likely to renovate a kitchen than the average seller.

• Don't be afraid to try again. In many markets, nearly half of listing views occur in the first week the home is on the market. Twenty-six percent of those who sold above list price took their home off the market once to adjust the sales price, opting to start anew rather than letting the home languish on the market with minimal activity.

The full 200-page Zillow Group Report on Consumer Housing Trends, which is free and available to the public, can be accessed through the Zillow website 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

• Home improvements can be a worthwhile investment. Sellers who fetched above list price tackled home improvement before listing their home, being 50 percent more likely to take on a large project like modifying an existing home plan

Rental Housing Journal Arizona · June 2017

Rental Housing Journal Arizona

Win, Win: Improving Cash Flow for Renters and Property Managers Increasing acceptance of digital card payments is a giant leap forward for convenience and efficiency

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n this era of digital payment for everything from groceries and plane tickets to city taxes and medical bills, the industries who have been early adopters have created a competitive dynamic over those who have not. One of the latest industries to expand their acceptance to electronic payments is the apartment rental industry. According to a survey by the National Multifamily Housing Council, almost 80 percent of renters would prefer to pay rent with a credit or debit card online or by smartphone. The industry is responding to these digital changes and is reaping the benefits of digital transactions. Over the last few years, apartment managers have taken

heed to this statistic and are getting on board to implement a digital strategy.

Card acceptance by apartment managers can provide a significant increase in overall convenience and efficiency.

Payments that are processed digitally eliminate clerical work, freeing up staff and saving time and money. For tenants – especially millennials – who are used to paying their bills online, paying with a debit or credit card helps them pay rent on time and allows them to budget and plan better. According to the 2015 Census Bureau Survey, one in three renter-occupied households are millennials.

Responding to this emerging trend and opportunity, Visa and Entrata, a

property management software company, are making it easier for property managers to accept and process digital payments, subsequently changing how renters are choosing and preferring to pay rent. Entrata enables property management firms to accept Visa cards, which significantly reduces the number of steps it takes to process rent payments. The partnership set an industry precedent that helped broaden acceptance and implementation of electronic payments. Entrata data shows that properties using online payment technology can spend 65% less time processing rent and will decrease rent delinquencies by 50%. One property management firm, Trinity Property

Consultants, has had great success with the card payment program.

As a national organization managing a geographically diverse portfolio of over 23,000 units in 13 states, Trinity was looking to increase operational efficiency. Trinity had been accepting online payments since 2013 but they were interested in taking it to the next level by increasing adoption. Their goal in expanding acceptance to electronic payments was to establish a paperless office, with 100% of payments taken online.

Trinity estimates they have saved more than 51 employee hours a month

cheaper than having to come back and fix it,” he said. He gave an example of how it worked at an apartment complex he replaced the roofs on several years back. “The complex had roughly 450 units, so we had hundreds of tenants to deal with. The complex consisted of 20 buildings. We did one building, then moved to the next, and so on through the complex. The property management company was very good to work with. We sent notice in advance saying, ‘We will be on building A, starting this date, we expect it will take a week to 10 days.’ They would then send a notice to the tenants and post a notice on every door. Plus they sent digital communication, either text or email to every one of the tenants so everyone would know that we were coming. “They were also really good about including a telephone number to call so that if the tenants had any questions, they could call the property management office, or our office, and one of us would address the issue.

“Our crews went there, set up our tape lines, and did our work. First we had to replace underlayment on the tile roofs, then we did the repair work and coating to restore the flat roofs. It worked out as well as it did because the property management company was very willing to work with us to ensure their tenants were communicated with - as well as to ensure our work crews had the information they needed to do their work. “For example, they asked the tenants to please not park in these spaces where we need the space available to get our equipment in. And we, on our part, tried to make sure the tenants were notified at least a week or two in advance that we are going to be on their building – ‘here’s what you can expect, here are the hours we will be here, if you have any questions here is who you can contact.’ “It works really well when the property management company and the roofer can work together to coordinate the work,” he said.

Starting a roof repair can highlight other maintenance issues

“We have had tenants approach our roofing crews and ask, ‘Ok that’s great you are getting the roof fixed but when are you going to come back and fix the damage inside my unit from the leaks?’

“And our guys say we really don’t know the answer to that. But, our guys have been very good about telling the tenants we will pass the information on to the property management company because that is not typically something we do. And typically the property management company has somebody who does that type of repair,” Skoog said.

Property management has to be sure and check all locally applicable codes and requirements. “There generally is a state authority that licenses roofers.

And then you will get a city business license of course. Arizona is one of the more regulated contractor states because historically we have had a problem with fakes and frauds,” he said.

Top 3 questions property managers ask when they call a roofer 1.) Can we do a localized repair rather than replace the whole roof?

That is their first fear, that we are going to come back and say everything needs to be redone. And sometimes that is the case but usually we are able to do one plane or face of the roof, or in a flat roof just a section of it as far as repairs go.

Our gener ocalized repair rather than replace the whole roof?al experience with flat roofs is that if we can catch it early enough we can do roof restoration. If maintenance is deferred too long then we are looking at replacement. And there is a tremendous difference in cost.

2.) How much will it cost? Money is

...continued on page 6

Roofs ...continued from page 1 systems, TPO (thermoplastic polyolefin) and spray polyurethane foam.

“With foam roofs you do have the issue that they need to be periodically coated. It is much less expensive to maintain than replace. With a roll product you have the issue that seams can pop open, sealant can come loose, and you can have water entry. “If those roofs are periodically checked and maintained you can defer the need for major investments in restoring them. “Additionally, with any flat roof system you should be able to coat it at some point and extend the useful life, thereby saving significant sums of money rather than letting that system deteriorate to a point where you need to replace it. “It is much more cost effective to maintain, coat and restore a roof than to ignore, repair and replace a roof. And of course your tenants tend to be happier when they don’t have water leaking in their unit,” he said

Cost of an annual roof walk for preventive maintenance The cost of a roof walk check is going to vary depending on the size of the apartment complex. If you have a number of buildings, the unit investment is going to be lower. “But I think for a typical, 12-unit multifamily building, which might be either two or three stories, it would be reasonable, semi-annually, to have somebody walk the roof, check the penetrations, assess the need for repairs and/or replacement or restoration for $500 to $1,000,” he said. The larger the number of units, the more cost effective it could be. It could get down to as little as $50 per unit dependent on the type of roof system, he said.

Tenant communication is key in roof work “The ideal client for us is one who is proactive. They want to maintain their building. They want to keep their tenants happy. And they see the value of having a roof system that keeps water, snow and ice out because that is much

Rental Housing Journal Arizona · June 2017

Local codes and requirements for roofs Arizona is unique because building codes vary by community. One community might have a 2015 standard and another 2012 and a third might have 2010 and so on, so you do have some variation. “But we also have a registrar of contractors that regulates what we do and has minimum standards that we must meet. That helps to level the playing field,” he said. In some states each community may adopt its own building codes and standard requirements. So you do have variation in requirements.

...continued on page 11

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Rental Housing Journal Arizona

by John Triplett

Apartment Pet Amenities Draw Millennial Tenants

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uxury style pet amenities are a new feature that apartment developers and property management companies are putting in place to draw the increasing number of younger tenants who have pets and want to rent.

Apartment developers are creating new spaces both inside buildings and outside to build in more pet-friendly amenities and services for tenants.

In a recent interview, Kristen Gucwa, vice president of national lease-up operations at Richman Signature Properties, talked about some of the top pet amenities in their pet-friendly properties in Florida, Colorado and Texas.

“We have luxury rentals in several states and we do a lot of research when we go into these areas. What we are finding is that a pet is an incredibly important member of the family. So we do need to realize that and make them feel just as welcome as any other member of the family as they are moving in,” Gucwa said.

75 percent of millennials have pets “We work with BarkBox as one of our partners and they have some research that shows 75% of millennials currently have a pet – just a phenomenal number,” Gucwa said. ”And, most of our

She said most of their newer project properties now have the pet spas.

renters are millennials and GenXers, so when you are working with them, you look for new ways to pamper their furry friends and put together pet-friendly living spaces.

“Some of the things we do is put pet parks in our properties. You usually do not find great spaces for your pet to run around in downtown areas in apartment complexes.

“We have a project in downtown Tampa called Aurora that has a fantastic pet park so you actually have green space for your dog in a downtown location. Some of our locations have agility courses which are great because they get to run around and have fun.

“We also do social events where they can come out with their pet for our ‘Yappy Hours’ which are always incredibly popular. We will do our pet dress

up days where they bring them out for prizes. A lot of our events you can bring your pets to. It is more of a social, inviting aspect that we want to have at our properties,” she said.

Pet spas one of the newest apartment pet amenities

Photos copyright Richman Signature Properties "One of the newest amenities that we have are our pet spas. They have gotten more and more high-end, and more inclusive of some of the amenities you would find in an outside pet spa that you would pay for – but here it is right downstairs in you building,” Gucwa said.

“These are walk-up tubs, a place to dry – huge spaces that we are dedicating in our buildings to these areas which are incredibly important to our renters.

‘They are huge spaces that fit both large and small dogs, and they do get used quite frequently.”

Pet amenities and move-in gifts “We partnered with BarkBox, a popular pet toy and treat service, and our residents can choose it with their move-in gift. We have several different types of move-in gifts too such as the live healthier fitbit move-in gift, or an interior design option with an outside company called Laurel & Wolf. Or they can choose their move-in gift to go to their pet, such as BarkBox. “BarkBox is a little gift you get each month with different toys and treats delivered to your apartment that are customized to your pet. So each month for the first three months your pet gets that subscription we offer as a gift when you move in.

She said tenants have been very excited about these amenities.

“BarkBox has become one of the more popular move-in gifts.” And “our Yappy Hours” are one of the most well-attended events that we have each month.

So it’s a great way for our residents to socialize. It is a little bit easier and less intimidating when you can bring your pet with you.”

She said some of their properties are also involved in monthly pet photo contests. And, all of their properties also do pet DNA testing.

Richman Signature Properties has three properties in South Florida, four properties in the Tampa Bay area, opened the first one in Dallas last year across from White Rock Lake and the newest is in Denver in the LoHi area, she said, and more under construction.

“Our property in St. Petersburg, Florida has an agility park and a place to do the dog wash right there in the park. So they really range between the properties,” she said. ...continued on page 10

Win, Win: ...continued from page 5 with the increase in online payment adoption they have seen since the roll out of the Visa pilot program. By lowering the fee renters incur when using a debit card, Trinity has been able to substantially increase the number of residents paying rent electronically.

Trinity was also able to access the funds faster, than when paid by check, which has enabled better cash flow for their business. Over the year, the percentage of renters using cards to pay rose from two to 11%. Trinity reported that because of the program, they are able to focus on providing value-added services to their tenants instead of processing checks, which has led to increased customer and employee sat-

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isfaction.

“The staff loves it when residents pay rent online. The email notifications in Entrata’s technology has created instant transparency as to who has paid and who hasn’t,” said Trinity’s VP of Marketing and Training, Carla Alicea.

As a result of all of the positive outcomes, Trinity staff across the country are now specifically trained to encourage all residents to choose to make online payments through Entrata. As early adopters, Trinity Property Consultants has benefited greatly from the convenience and efficiency of accepting electronic rental payments.

Rental Housing Journal Arizona · June 2017

Rental Housing Journal Arizona

Do I Have To Pay For Tenant Housing While I Fumigate Apartments?

by Richard Montgomery

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n apartment building owner has to fumigate apartments due to termites and wants to know how to handle the issue as well as the tenants. Here are several things to consider say blogger Richard 'Monty' Montgomery.

Reader Question: I need termite fumigation. I own property in located in Florida, where termites are a big part of the pest population. I will be selling the five unit building soon, and four units are rented currently. Two of the four units have leases expiring in July. The property has to be tented to exterminate the little buggers. When they fumigate, the building must be empty.

• Do I have to pay for these four tenants who have pets to stay somewhere?

• Do I make the reservations for them or do they?

• How do I control the costs for it?

• Do I have to send them a letter in regards to this?

• How does it work?

lowance. A four-day fumigation duration, a hotel room, plus a daily meal allowance per occupant per day, provides you with a per-person per-day cost. Writing a letter in itself is likely not enough information to prepare a tenant for this event. Perhaps a letter that explains your plan and asking for a time to meet and discuss it, or meeting first and then a follow-up letter to confirm the agreement. How long will your structure be tented? Do they offer a guarantee? Will pets be af-

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fected on re-entry? Tenants will be interested in gathering this kind of information.

Ed Smith, of RE/MAX Coastal Properties in Destin, FL, stated, “The prices for fumigation can vary widely. I would suggest that the landlord call two trusted local real estate brokers for recommendations. Based on my experience, the bigger national firms are often the highest prices, yet not always the best. Three quotes from providers are sensible. Hugely important are the

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warranties. These will vary tremendously!”

Smith also noted that “going from four units to five units can ...continued on page 9

Monty’s Answer: The answer will assume that your leases do not contain any pest abatement language. Otherwise, your contract documents would provide much of the information you seek. Amending your leases to include a pest abatement clause may improve the property’s marketability. Be certain the lease contains language that conforms with all the state and local building and health laws.

Because each state’s laws are different, consulting an attorney practicing in your state is the practical solution to implement the additional lease clause.

According to the website Sciencing. com, the discovery of termites has occurred in every state except Alaska.

Termite damage is seldom discovered in the drier, higher latitude states while southern and southwestern states experience significant termite damage.

Because you have no pest clause in your lease, you have to create a plan to fumigate apartments based on timing, legal requirements, tenants’ circumstances, the cost to implement fumigation, and more.

Here things to consider if you have to fumigate apartments: • Coordinate the fumigation when the fewest tenants occupy the building. Vacant units may reduce your costs. As an example, July is right around the corner, are the tenants with their leases expiring, moving out? If they are moving out, and you have a current vacancy, you will only have to deal with two occupied units.

You re-rent after fumigating. You need to talk with your tenants to make a plan.

• Negotiate a daily room rate alRental Housing Journal Arizona · June 2017

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Rental Housing Journal Arizona

Soft Landing ...continued from page 1 new construction tighter. Things will get built but the pipeline is peaking,” Adler said.

There is still a housing shortage in mid-priced apartments, he said.

Is this still renter nation, does that hold true?

"Yes, but not in an accelerating way. I think the homeownership rate has stabilized around 63% so I think we still have great demographics because of the age of the group. But I do not think you are going to get more people renting as a percentage of the total.

“So it has stabilized and we said we thought it would stabilize. I think we are in renter nation compared to where we were 10 years ago. I don’t think the rate of homeownership is going to go to 50%. I think that 63% is about where it is going to be.

“I think we are still in good shape.

We don’t have quite as many tailwinds.

So that was a tailwind when we had the reduction in the homeownership rate.

Each reduction of one percent added about a million households into the renter pool. I don’t think we get this extra tailwind, but it is still pretty good,” Adler said.

Suburbanized urban areas near large cities for multifamily investment “Depending on your investment strategy and your cost of capital, you are going to have to go one to two tiers down from your comfort zone in order to make deals pencil,” Adler said.

“Wealth is created in this economy on the basis of ideas. And ideas in certain industries aggregate in certain locations where people can share ideas very quickly and knowledge is being generated in that particular industry.

And, where the value of place increases.

“If I am a real estate investor, I want to be in a rising tide where wealth is being created and where the value of place improves. That is a fundamental insight you can apply to a lot of different industries and lots of different locations,” Adler said.

Where does an investor go?

“I think it is commercial real estate.

I think high occupancy on stabilized properties is sliding. You can see in the data that the markets with high supply are impacted the most. Rents are decelerating. Wage pressures are finally catching up to rent growth,” Adler said.

“So while we have a tough 12 to 24 months ahead, I think we still come out the other side quite positive,” he said..

Rent growth and occupancy have crested "Central business district building is done for a few years," Adler said. “Leading edges of the millennials are moving out of the central business district to the suburbs, driven by the first kid or the second kid. “Central business districts have not solved their schools problem,” Adler said which is why this moving out is happening. Adler outlined the state of the real estate economy with the following:

The state of the real estate economy summary • U.S. Multifamily Supply is peaking in 2017; but the next 18 months will be a bit rough • Development is buffeted on all sides, demand/rents, costs, financing, labor availability • U.S. Multifamily rent growth peaked in early ‘16 and has been decelerating since-with Class impacted more • The Deceleration is broad, and most pronounced in area of accelerating supply and/or decelerating demand (Houston, San Francisco) • Remaining bright spots are small, niche markets that draft off of larger markets-(Reno, Sacramento, Colorado Springs,, Tacoma)—don’t expect it to last • U.S. Multifamily asset price growth has flattened—first time this cycle.

• Sharks are circling waiting for blood in the water of soon to be broken lease-up deals—don’t bet on too much of it.

“Where the units are going to come online is in these suburbanized urban areas,” he said.” That is where it is reoriented. I think the central business district building boom is done for several years. Everyone’s got what they want. It is great for society to have such wonderful, vibrant urban centers. But I think it’s going to take a pause for a few years. “Let’s acknowledge the fact that rent growth is decelerating. It is coming down. The ‘rent by necessity’ sector is performing better. But new supply has had an impact. “There is demand in the market, it is just a question of at what price point is it going to work. “The markets are all slowing down from where they were. Dallas went from 7% rent growth to 3% rent growth. Not bad, but not 7%. “I think it’s moving back to the long-term average. Until this supply pipeline gets absorbed. I think it’s a matter of absorbing the supply over the next 24 months, as long as the demand continues. I think it will be higher than the long-term average” for rent growth, “but it’s not 7%.” You see some of the same things in the Western markets. Salt Lake City being a variance.

“I would call out for example a couple of smaller markets that are doing quite well, but have a lot of volatility: • Reno • Sacramento • Colorado Springs • Tacoma “All of them have rent growth of over 7 or 8 percent, and they are all associated with a larger metropolitan area where there has been significant price discount trouble. Reno is a function of manufacturing coming into the market as a spill-over from the Bay Area – Tesla.

In summary now “The multifamily supply is peaking.

Multifamily rents have peaked and are decelerating. But it’s not bad. It is more a return to normalcy. There are people circling waiting for blood in the water for what they hope soon will be broken lease-up deals. I don’t see it. It’s a

8

possibility. I don’t see a lot falling out of bed, but some people are hoping,” Adler said.

The longer term view for multifamily investment “If I were an investor, I want to position myself where the tide is rising.

Why? Because even if I screw up on some underwriting or other variable, I am going to get bailed out. What I don’t want to do is put myself in a situation where everything has to go right, and I am swimming upstream,” Adler said.

“There is still multifamily supply that needs to be added in the future in big cities, such as Boston, New York, Los Angeles, San Francisco and Chicago.

Dallas also has a big supply coming on, but there is a demand there based on the jobs growth and industries across the metro. “There are areas where the growth is diminishing, and where the cost of housing has gotten ahead of the cost of labor, and so it is an affordability issue. We are seeing that in Denver and the San Francisco Bay area. “Look at the places where millennials and boomers are leaving. What do they have in common? They are all high tax states. So if someone tells you the high cost of living and taxes do not make a difference, the data says ‘Oh yes it does.’ And, you really have a set of winners and losers. The winners are the West and the Southeast capturing the out flow from the high tax, highly regulated states.

Same story on where people are moving to. Lower tax places fleeing higher tax places, Baby Boomers and millennials.

“In the gateway cities of Boston, New York, Los Angeles, San Francisco, Chicago and the District of Columbia, out flow of domestic people to other parts of the country is being covered by the in-migration or immigrants coming in those cities. So if you are counting on investing in those gateway cities, you are betting on the immigration coming in. It may be a good bet. It may be a bad bet. “We as a country actually need the immigration if you look at the working age population. We really need immigration to be appropriately legalized.

Immigration is not on the Hispanic side that is old news, it is actually from China and India,” Adler said. If you would like to learn more you can subscribe to Yardi Matrix or call 480-663-1149. You can also find out more about webinars here.

Yardi Matrix, formerly known as Pierce-Eislen, Inc.®, was founded in March, 2000, and acquired in July 2013

by Yardi Systems, Inc., a Santa Barbara, California software company focused on commercial real estate industry applications. The Yardi Matrix apartment information service is a high-performance system with the sole function of supporting the commercial apartment industry’s dominant participants. The company's services monitor the 50+ unit apartment universe from the property level to the submarket/market level in a form unique within the commercial apartment information industry.

Rental Housing Journal Arizona · June 2017

Rental Housing Journal Arizona

“But savvy companies maintain staff productivity and morale by embracing summer in the workplace. "Letting employees modify their schedules, leave early on Fridays or dress more casually when it's hot out are easy ways to keep them loyal and engaged," she said in the release.

Which if any benefits are offered at your company?

Additional managers survey findings

•

•

More than one-third of HR managers (34 percent) feel workers are less productive during the summer months. Another 34 percent said there's no change in on-the-job performance.

Not planning well for vacations (32 percent) and unexpected absences (22 percent) were identified as the most common negative employee behaviors at this time of year, ahead of dressing too casually (19 percent), sneaking in late or leaving early (15 percent), and being mentally checked out (12 percent).

5 Ways Managers Can Perk Up Employees This Summer

1. Perk up. Give employees more control over how they spend their time by offering flexible schedules and occasionally letting them leave early on Fridays.

Just make sure policies are clear so business can continue as usual.

1. Rally for rest. Remind workers to take time off, and set an example by doing so yourself. Bring in temporary professionals to fill in during absences.

1. Venture out. Holding meetings outdoors or while taking a walk is a great way to get fresh air while accomplishing business objectives.

1. Have some fun. Plan an ice cream break, picnic or group outing. Employees will appreciate being able to relax and bond with colleagues in a non-work setting.

1. Dress down. Allow staff who aren't customer- or client-facing to wear more casual attire, as long as it doesn't detract from work.

You might even consider instituting themed Fridays where Hawaiian shirts or sports apparel are encouraged.

The surveys of HR managers and workers were developed by OfficeTeam.

They were conducted by independent research firms and include responses from more than 300 HR managers at U.S. companies with 20 or more employees, and more than 380 U.S. workers 18 years of age or older and employed in office environments. OfficeTeam, a Robert Half company, is the nation's leading staffing service special-

izing in the temporary placement of highly skilled office and administrative support professionals. The company has 300 locations worldwide.

Fumigate ...continued from page 7

•

•

•

•

be a factor in some rule changes,” so be confident your advisor understands this difference and researches the law.

It may be possible is to sell the building with the termite infestation, and let the buyer deal with it. Offer the building at fair market value, less the cost of the fumigation, less an incentive to the purchaser for managing the work.

Tenants may also be the cause of termite infestations, so understanding the impact of state law, health codes and housing regulations is such cases. Furniture has been known to house termites, unreported water penetrations, and other sources of termites’ food source, cellulose, can initiate a new colony. Most often, a landlord’s lack of diligence, ignorance of preventive measures or poor maintenance are the cause.

Tenants with health related concerns in some states could resist fumigation with a letter from a physician stating the danger to their patient’s safety. There are a variety of chemicals used in different circumstances to fumigate apartments. Make your tenants aware of the product.

Termites can be discouraged with preventative measures such

as rain gutter extensions to move water away from the foundation, construction materials that termites do not eat, decorative stone landscaping and other measures.

Now you have some talking points to help you deal with termites both in your lease document and in your building.

Richard Montgomery gives no-nonsense real estate advice to readers’ most pressing questions through his website Dear Monty. He is a real estate industry veteran who has championed industry reform for over a quarter century.

He knows real estate investing, from up-close, get-your-hands-dirty rehab to armchair investing using your self-directed IRA as your funding vehicle. In his nearly half-century in the industry, Monty has bought and sold investment properties, founded a real estate brokerage company using a non-traditional consumer driven model, run his own successful brokerage and is former CEO of Corporate Relocation Services. He is a consultant to businesses and entrepreneurs and also shares his knowledge with inquisitive readers through syndicated newspaper columns. You can ask him your real estate questions at www.

DearMonty.com.

Rental Housing Journal Arizona · June 2017

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Rental Housing Journal Arizona

DEAR MAINTENANCE MEN: Faucets, Bathroom Storage & Good Maintenance

By Jerry L’Ecuyer & Frank Alvarez Dear Maintenance Men: When the bathroom faucet was new, turning off the hot or cold water knobs would cut the flow of water immediately. Two years later, upon turning them off, the faucet weeps a bit of water. Is this a sign the knob isn’t working? Can a clogged spout screen be fixed? With all these problems, do I need to buy an entire new fixture?

Paul Dear Paul: Most types of faucets are repairable with standard tools and a rebuild kit.

Note the brand and style of the faucet and find a corresponding repair kit at the local plumbing supply house or home improvement center. Repair kits often come with the specialized tool you may need to repair the faucet. The faucet screen can be cleaned and is housed in a removable assemble at the end of the spout. These can be spun off and the screens cleaned and replaced. Keep in mind the cost of repairs may rival the cost of replacement. If the cost of repair is more than fifty percent of the cost of replacement, we recommend the faucet be replaced with new modern fixture.

Dear Maintenance Men: How can I add more storage to my utilitarian type bathrooms? The residents complain that they need to store their toilet paper in the hallway! Please list a few suggestions on what to do?

Robert Dear Robert: It does seem bathrooms are sometimes designed as an afterthought. Sink, toilet, bath and that is it. A modern bathroom will take into consideration the need for storage, electrical devises, personal hygiene etc. The first item that comes to mind is installing a bath sink cabinet. An old style cabinet might only have a set of doors under the sink. We find this is not adequate and a cabinet should have drawers along with access to under the sink. The drawers can store hair dryers, and all manner of personal bath items. A unique system we like utilizes the space between the studs in the wall. Cabinet doors or mirrors can be used to cover storage in the walls.

The wall storage is perfect for toilet paper, rolled up towels, tooth brushes, and most other small items. Install multiple towel racks on the back of the bathroom

door for additional towel storage. The space above the toilet can easily accommodate an overhead cabinet for larger items. Reversing the swing of the bathroom door from inward to outward will greatly increase the usable room and make the bathroom appear larger.

Dear Maintenance Men: It is currently summer time and that is when we get the most vacancies. How do I keep my residents from moving?

Denise Dear Denise: Often residents relocate during the summer months due to a change in schools their kids attend. They want to be close or within walking distance.

The other more problematic reason is poor maintenance service.

According to the 2011 national resident study, "Getting Inside the Head of the Online Renter," the number one factor in a resident's decision to renew a lease is "Quality of Maintenance Services."

Additionally, the current SatisFacts Insite® Index for Work Orders indicates that 18% of all service requests are not

completed right the first time. And of those, only one-third of residents received notification that there would be a delay in completing the request.

What the above means is poor maintenance service can lead to higher vacancies. It does not matter if you have 10 units or 100 units; maintenance is a critical tool in the physical well-being of your property and the happiness of your residents. Think of it this way. A service call and parts may cost $250 to service a broken washing machine or water heater, resulting in a satisfied resident. However, a resident having to live with a broken washing machine or intermittent hot water may elect to move rather than dealing with the hassle of calling in repeated service requests.

That resident vacating will now cost the owner thousands of dollars in loss rent and rehab work to bring the unit back to rent ready condition. Good maintenance is a year round tool to keeping your investment healthy and your residents paying the rent month after month. ...continued on page 11

Pet Amenities...continued from page 6 Are competitors matching pet amenities?

Gucwa said they are starting to see some of their competitors starting to do some of the same things with luxury pet amenities.

“One of the things that sets our properties apart is probably the social element. We add to it with our partnerships like the one with BarkBox and the different events we do with them. Or, the Yappy Hours which we are doing which are more on a consistent basis.

It is really about the social connectivity

and becoming part of the local atmosphere in the community.

“So I think that sets us apart a little bit, but you are seeing a lot more of the local apartment communities becoming much more aware of the fact that they have to adapt to the folks who have pets. And that they are an incredibly important part of their lives.

“Some of the events we have coming up are partnering with groups, like the Humane Society, where we will do pet adoptions and we will waive your pet deposit. That way we can encourage people to adopt as well and give back,” she said.

Some of the move-in gifts offered: • Live Furrier: Residents receive a complimentary three-month subscription to popular pet toy and treat service Barkbox.

• Live Prettier: Residents receive complimentary interior design services from designers Laurel & Wolf.

• Live Easier: Residents receive a complimentary membership to Shipt.

• Live Healthier: Residents receive a complimentary Fitbit and fitness gear.

•

The Richman Group, a rental property development company and seventh largest owner and operator of residential apartments in the country, has 15 Richman Signature Properties in Florida, Texas and Colorado with more to come in Los Angeles and other locations. These projects range from 240 to 417 residences, depending on their location and market.

Some are in urban areas and others in suburban settings, with studios to three-bedrooms ranging from $1,200 to $2,800 per month. What they all have in common is accommodations for pets.

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Rental Housing Journal Arizona · June 2017

Rental Housing Journal Arizona

Ask Landlord Hank

Do tenants normally interview me as a property manager?

N

ormally, I'd answer this question with “no.”

The reason is that I usually have been instrumental in the rental process from the beginning Typically I have provided information about the unit and the development. I have shown the unit, helped with the application process for the owner and the Homeowners Association (if there is one).

Also I provide the necessary contact information for utilities, TV and WIFI, trash removal, etc.

I am also going to meet and welcome tenants on move-in day. I give them keys, fobs, remotes, etc and do an extensive walk through inspection of the property and contents. Any damage or problematic areas are photographed.

Do the walk-through as if I were the tenant I do the walk through as if I were the tenant. I really do record all the issues so that the tenant is not charged for damage they did not cause. I want to be fair to tenants. Also, it is best to orient the new tenants to the property.

I want tenants to know that if they have a problem or maintenance need, I want to hear about the issue as soon as possible so the issue can be repaired.

I make sure they have my cell phone number as well as my email address.

Problems that DEMAND an immediate call to me are:

A) Fire, after a call to 911.

B) Water leaks, but not drips into sinks or running toilets.

C) Perceived dangerous condition to people or property such as a downed tree, power line, animal, etc.

I also show tenants where water main cut off is to the unit, as well as fire extinguisher and smoke detectors. I have the tenants sign paperwork stating they have received information on the fire extinguisher and the smoke detectors are functioning. I let them know where mail delivery is, garbage pick-up days, routine for landscapers, pool maintenance, parking spots, etc.

At this point the tenants have also received community rules and regulations, if appropriate.

What should be the No. 1 question tenants ask a property manager?

Most tenants don't ask about safety.

They've already determined in their minds that the property is in a relatively safe location. But that would be my No. 1 question a tenant should ask.

Most properties are viewed during the day. And the night-time conditions could be markedly different. If a tenant does ask about safety, I can't really answer that question. So I refer tenants

Dear Maintenance Men ...continued from page 10 Questions, Questions, Questions!

We need more of them!!!

To be see your question in print, please send your them to: Frankie@ BuffaloMaintenance.com Thank 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 Frank Alvarez is licensed contractor and 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 as well as being Chairman of the Product Service Counsel. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com Jerry L'Ecuyer is a licensed contractor & real estate broker. He is currently on the Board of Directors and Past President and past Chairman of the Education Committee of the Apartment Association of Orange County. Jerry

Roofs ...continued from page 5 always an issue. Can it be a localized repair, and what will it cost?

3.) How quickly can you get it done?

If it is a leak they want us there immediately to at least stop the leak and then come back when it is not raining to do the repairs. “With the property managers that we deal with it really has been nice that for the most part they are proactive,” he said. “They are looking ahead for their budget for next year.

They want us to walk their roofs and give them our honest opinion about the condition of the roofs and what they can do to maintain them rather than having to replace them,” he said.

on new custom homes. As the residential market boomed, the company grew right along with it, hiring additional work crews as needed. Eric Skoog serves the company as President. He is a certified public accountant (CPA) and has a master’s degree in business administration (MBA). Eric previously worked in public accounting and corporate restructuring, and uses that background in guiding the company in day-to-day activities. Bill Skoog has worked in the roofing industry for almost 25 years, starting out as one of SUNVEK’s original employees. Bill serves the company as General Manager, overseeing work schedules and ensuring that materials are ordered.

SUNVEK is owned by two brothers, Eric and Bill Skoog. Started in 2001 as Skytop, Inc., it was originally focused Rental Housing Journal Arizona · June 2017

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Rental Housing Journal Arizona

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Rental Housing Journal Arizona ¡ June 2017