Arizona Rental Housing Journal January 2014 by Professional Publishing, Inc

Rental Housing Journal Arizona

January 2014 - Vol. 6 Issue 1

PAGE 2 When a Tenant Can and Cannot Legally Break a Lease PAGE 3 AZREIA -Owning Rental Property is Challenging – There are Ways to Make it Easier! PAGE 4 How Resistant is Rental Property to Market Fluctuation? PAGE 5 Land Lady Katie - Top New Year’s Resolutions for Property Managers

PAGE 6 Dear Maintenance Men: PAGE 7 Property Management Mind Mapping…And Loving It! PAGE 8 Shoptalk Are You Alive After Five?? PAGE 9 Lessons from CT Fair Housing Case PAGE 15 The Top 10 Apartment Resident Complaints

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Metro Phoenix Apartment Market – A “Roller Coaster” Ride with Strong Upside

ver the past ten years, metro Phoenix has been on a huge “roller coaster” ride – especially for the class “B” and “C” properties. From 2003 to 2008, values climbed steadily with profits made with little improvement to the property necessary. Then in the fall of 2008, in concert with the US economic meltdown, metro Phoenix apartment values fell off the table. For the class “B” and “C” properties, values often plummeted by 70%, accentuated by Arizona’s SB 1070 – which resulted in many ‘undocumented’ tenants leaving the State further increasing vacancies and decreasing cash flow. Short sales and buying properties at Trustee Sales (by the “pound”) became common–place. Cash was “King” as there was no financing (beyond high-interest hard-money loans) available for these assets. New owners often offered huge incentives and discounted rents to lease-up the recently purchased distressed assets – further hurting owners that tried to weather the downturn thus creating more short sales and bank foreclosures. In the fall of 2010, metro Phoenix finally reached the bottom of the roller coaster ride for the “B’ and “C” properties. Class “A” and quality “B” properties were far less affected by the downturn. With banks paying almost no interest on held funds, the large investment funds looked to performing quality assets to provide Professional Publishing, Inc PO Box 30327 Portland, OR 97294-3327

their investment pool with some return. Financing for these assets reappeared quickly with rates often in the 3% range plus a LTV of 75% to 80%. As such, REITs and similar entities drove down cap rates to the mid 5%. Since the fall of 2010, market conditions and values have been steadily improving. Vacancy rates have decreased from a high of 14.2% to 7.4% (50+ units – stabilized). Financing for the “B” and “C” properties has now reappeared –

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initially with 5.5% interest rates and more recently with starter rates below 4% and 70% LTV. With the market stabilizing and the increased ability for financing, values have continued to climb off the bottom – but still far below the values in early 2008. Investors are now seeking real cap rates based on actual numbers – but with vacancy rates firming and rents increasing, values continue to climb.

Where do we go from here? One thing for certain – metro Phoenix is a dynamic apartment market driven by many factors – the most important being “population” which is driven by “job growth”. Unlike a city like Las Vegas, metro Phoenix is highly diversified with technology, manufacturing, health, and corporate centers. The 365-day major airport, the attractive business environment, the affordable home prices and available work force, plus Continued on page 3

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RENTAL HOUSING JOURNAL ARIZONA

When a Tenant Can and Cannot Legally Break a Lease

he Arizona Residential Landlord and Tenant Act (ARLTA) governs the rental relationship between a landlord and tenant, and in very limited situations, allows a tenant to prematurely terminate a fixed term lease. This article will examine rights and remedies in this situation. Once a landlord and tenant sign a lease for a definite period of time (i.e. one year) both parties must honor that term period. Only in month-tomonth leases can either party terminate the lease for no reason with a thirty (30) day Notice to Vacate. Some leases may provide for early termination due to job transfer or military duty, but the lease must specifically allow for this. The ARLTA has only the following ways for a tenant to end the lease prior to its expiration date. First, under A.R.S. § 33-1361, a tenant may terminate the lease for noncompliance by the landlord. This could include failure to make needed repairs, materially falsifying written information about the premises that

induces the tenant to rent, etc. In this situation, the tenant must deliver in person to the landlord or by certified mail a written notice specifying the alleged items of non-compliance and giving the landlord either ten (10) days to remedy, or in the case of health and safety issues, five (5) days. So long as the landlord adequately corrects the problems, the lease will not end. If the landlord does not fix the problem, then the tenant may terminate the lease and move and obtain the return of their security deposit. In these situations, just remember to investigate the alleged complaint and repair or remedy, if necessary. You may wish to photograph or video tape the alleged problem and take a witness or two along. A landlord does not need to remedy a problem caused by the tenant or their guest and normally does not need to upgrade the property or make aesthetic repairs. A tenant may also terminate a lease under A.R.S. § 33-1362, if the landlord cannot deliver possession

of the rental premises at the beginning of the lease. For example, a tenant has not moved on the date a new tenant was going to move in. The “new” tenant could then give the landlord at least five (5) days written notice that the new lease is terminated and the landlord would have to return all prepaid rent and deposits. A.R.S. § 33-1366 allows a tenant to cancel the lease if the rental property is substantially damaged or destroyed by fire or casualty (wind, storm, etc.). The tenant need only vacate and notify the landlord in writing within fourteen (14) days that the lease is over and then is refunded their deposits and rent paid through the date of vacating. If the landlord illegally excludes or locks the tenant out of the premises or willfully diminishes utility services, the tenant may, under A.R.S. § 33-1367, terminate the lease. It goes without saying a landlord should never change locks or shut off utilities without a court order. Finally, under A.R.S. § 33-1376(3), the tenant can terminate the lease in

those situations when a landlord abuses their right to access into the rental premises. The landlord does have the right to enter the rental unit with two (2) days written notice for any valid reason. However, if the landlord enters without appropriate notice or enters time after time, the tenant may be able to move if this conduct is considered excessive. Unfortunately, there may come a time when a tenant has an ulterior motive to move – they have purchased a house, found a cheaper rental, etc. The tenant may try to use one of the above sections of the ARLTA to get out of their lease. Always document your efforts as a landlord to investigate and correct the situation. Also, always consult your attorney regarding the specific facts of your situation, as the above is intended solely as a general overview. q Hull, Holliday, & Holliday, PLC

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many other factors, have already accounted for a significant annual increase in the Valley’s existing +4 million population. Arizona will likely reclaim its number one standing as the fastest growing state in population in the US. Metro Phoenix grew at 2.2% annually between 2000 and 2010. As the overall economy of the US improves, families will finally be able to sell their homes in the northern portions and move to the Sunbelt. For Arizona, this will create a demand for housing and thus create significant construction jobs. More jobs – more population – increased need for more apartments. With permitting and new apartment construction being minimal over the past four years combined with the projected boom in population, it’s not “rocket science” to see the need for more apartments. As of the end of the 3rd quarter of 2013 there were 25 projects under construction representing 4,733 units in metro Phoenix. In addition, there were 82 projects in various stages from initial rezoning to final permitting representing 19,840 units – with more on the way. A concern for the existing class “A” properties will be the increased supply and completion as the new projects come on-line especially if the population boom takes a year or two longer than expected.

While the class “A” apartments may come under pressure, there should be strong upside for “B” and “C” properties across the Valley. Few builders, if any, are building new apartments with rents typical for these properties. With essentially no increase in this inventory, as the population increases, a certain portion will seek the more-affordable rents offered by the “B” and “C” properties. With the increased demand we will see rents, cash flow and values continue to escalate. The “roller coaster” is a good description of the classic economic supply and demand real estate cycle. In early 2008, we were at the top of the cycle and, in the fall of 2010 at the bottom. Of significance is that the bottom was far below where we should have landed – thus providing a monstrous future upside. We are currently in the initial portion of the upside curve representing increased demand, new construction and increasing values. We expect that we will see a strong increase in apartment values, especially for the “B” and “C” properties, over the next three to five years. Jim Kasten, CCIM Owner, Designated Broker Kasten Long Commercial Group 2821 E Camelback Road, Phoenix, AZ 85016 602 677 0655, jim@ KLCommercialGroup.com

www.KLCommercialGroup.com The Kasten Long Commercial Group has specialized in apartment brokerage in metro Phoenix since 1998. Agents have brokerage more than 1,000 communities with gross sales in excess of 1 billion dollars. The company also provides weekly updates (by e-mail) on apartment sales and publishes an apartment market update on a quarterly basis – past issues are available on the company’s web site (www. KLCommercialGroup.com).

ARIZONA Publisher Will Johnson • will@propubinc.com Designer Steve Olsen • steve@propubinc.com Advertising Sales Will Johnson • will@propubinc.com Terry Hokenson • terry@propubinc.com

www.rentalhousingjournal.com The statements and representations made in advertising and news articles contained in this publication are those of the advertiser and authors and as such do not necessarily reflect the views or opinions of Professional Publishing, Inc. The inclusion of advertising in this publications does not, in any way, comport an endorsement of or support for the products or services offered. Metro Apartment Manager is produced monthly and is published by Professional Publishing Inc. PO Box 6244 Beaverton, OR 97007. (503) 221-1260 (800) 398-6751 © 2014 All rights reserved.

Rental Housing Journal Arizona • January 2014

ARIZONA REAL ESTATE INVESTORS ASSOCIATION RENTAL HOUSING JOURNAL ARIZONA

Owning Rental Property is Challenging There are Ways to Make it Easier! AZREIA, Arizona Real Estate Investors Association is pleased to partner with the Rental Housing Journal to bring you factual information about all aspects the rental market in Arizona. AZREIA has served the needs of rental property owners and real estate investors since 2002. Our 1750+ members proudly provide housing to tens of thousands Arizona residents. Our membership includes rental property owners, investors that rehab property for resale, providers of below market priced property, private money lenders, small developers and others that understand the benefits of investing in real estate. Investment choices of AZREIA members mirror the market. Most members invest in residential property with the next largest category being small multi-family followed by other types of commercial, land and financial offerings. AZREIA members are supported by many local businesses that provide products and services to fulfill the unique needs and requirements of rental property owners and real estate investors. Access to a large membership allows these local businesses to reduce their marketing and operational cost enabling their ability to offer reduced rates and pricing to AZREIA members. This translates into increased margins for our members. As a member of National REIA, AZREIA members enjoy access to exceptional benefits from national providers. At the top of this list is The Home Depot. The Home Depot rebates to AZREIA members 2% of their purchases on a semi-annual

basis. In 2013, this totaled nearly of economic factors on employment, ket, its trends and where the market $500,000! Other benefits include sig- population, bankruptcies, loans and is headed. You will make better decinificant discounts at Sherwin more. Periodic reports on multi-fam- sions. You will meet other investors. Williams, an investigative tenant ily, retail, office and industrial sup- You will learn. You will save. You screening product that is light years plement the residential information. will increase your margins. You will ahead of traditional tenant screen- Most importantly, we take a position reduce your liability. You will undering, insurance coverage options that on what we believe the data means stand creative investment techare specifically designed for rental for the future both short and long niques. I hope you will attend one of our property owner and investors, and term specifically for the real estate many others. Active members of investor. AZREIA members use the Chapter meetings to understand AZREIA receive many times their Market Update to assist them in buy- first-hand the value of AZREIA. dues back in savings from national ing and selling decisions, obtaining AZREIA Phoenix meets the second financing, proving value and acquir- Monday of every month. AZREIA and local providers. AZREIA is primarily and educa- ing investors. I will be using the Tucson meets on the Tuesday followtion and networking organization. Market Update to provide data for ing the second Monday and AZREIA With Chapters in Phoenix, Tucson future articles in the Rental Housing Prescott meets the first Tuesday. Complete information on AZREIA, and Prescott along with several sub- Journal. As a full-time association, AZREIA our meetings and upcoming educagroups there are ample opportunities each month for our members to represents the needs of local rental tion is available at www.AZREIA. be informed about the market, net- property owners and investors at the org. work with others and receive educa- state level and in some cases in q tion all of which is designed to make municipalities. Over the years, we our members more successful both have successfully helped prevent Smarter investing, in terms of profit and in reducing legislation that would harm our Alan Langston liability. AZREIA offers over 40 edu- industry. We have done so in a way cation classes designed for those get- that continues to inform our lawting started in real estate as well as makers of the valuable services and experienced investors. We under- benefits housing providers bring to stand the difficulties and the nuances the community. Without hesitation, I can adaof owning rental property and pride ourselves in helping our members mantly claim being an AZREIA member gives you a tremendous succeed. One of the best things about advantage. You are informed about AZREIA is pretty much a secret the market. You understand the marunless you are a member. Every month we prepare a comprehensive market analysis of the Greater Phoenix and Tucson markets. These Market Updates look across all aspects of the market comparing national and state level data and trends to local information. We look Since 1981 at sales, inventory, pricing and rental VALLEY, METRO, rates for both existingARIZONA and new APT. NEWS Valleywide Services homes. We analyze the local distressed markets including foreclosures, pre foreclosures/short sales and REOs. Included is trend analysis Residential and Commercial

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RENTAL HOUSING JOURNAL ARIZONA

How Resistant is Rental Property to Market Fluctuation?

ne of the hardest aspects to understanding the single family rental market is getting access to data. There is no centralized reporting or collection mechanism like there is for buying and selling property. We are fortunate to have a market service like the Arizona Regional Multiple Listing Service, Inc. (ARMLS) as a source of data. They are very serious about their business and continue to make decision like the acquisition of the Information Market to enhance their

offering. ARMLS is currently the only data source of any volume for rental property listings, closed rental contacts, days on market and rents. While we know the data on rentals is limited on ARMLS it is the best source and I feel it is valid to use for trend analysis. The information on rentals is available to the public at http://www.armls.com/statistics/ rent-check and I use it in the AZREIA Market Update available to our members.

Anyone that has drawn a breath over the last ten years knows how volatile the housing market has been. We have seen wild fluctuations in pricing and volume. We have lived through a market that defied the laws of supply and demand for extended periods only to ultimately succumb. One segment of our market seems to have been immune to certain aspects of the general real estate market throughout this period – the rental market. The chart below shows that this market continued to expand regardless of bubbles and crashes. As the general market hyper accelerated the rental market continued on a more predictable climb. As the general market crashed, rental contracts closures continued to rise. Yes, I know the volume of rental property has significantly increased throughout the distressed market cycle and this has impacted the numbers over the last three to four years. But, focus on the 2004 – 2006 period. When everyone regardless of financial capability bought a house – the rental market expanded. This speaks to a very healthy long term industry. With changes to home

ownership qualifications, the belief interest rates will be increasing and changes in lifestyle all point to a long term bullish rental market. The single family rental market is dominated by the small investor. Even with the recent market anomaly of institution investors invading the space during the distressed cycle, it is the small investor that owns the far majority of rental properties. Rental property remains one of the primary sources of wealth building for the small independent investor. While for decades the single family rental market in Arizona was less of a cash flow strategy and more of an appreciation consideration, the distressed market cycle provided an opportunity for investors to enjoy both. Rental property acquired throughout the distressed market cycle has enjoyed stable and in most cases increasing rents along with exceptional appreciation and ongoing tax benefits. The projections of increased population through both birth rates and more importantly migration remains very favorable for Arizona. The cumulative effect of years of not building new homes will become apparent in the not too disContinued on page 5

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One of the hardest aspects to understanding the single family rental market is getting access to data. There is no centralized reporting or collection mechanism like there is for buying and selling property. We are fortunate to have a market service like the Arizona Regional Multiple Listing Service, Inc. (ARMLS) as a source of data. They are very serious about their business and continue to make decision like the acquisition of the InformationMarket tENTAL o enhance their offering. OURNAL OUSING RIZONA

ARMLS is currently the only data source of any volume for rental property listings, closed rental contacts, days on market and rents. While we know the data on rentals is limited on ARMLS it is the best ...continued from page 4 source and I feel it is valid to use for trend analysis. The information on rentals is available to the public at http://www.armls.com/statistics/rent-‐check and I use it in the AZREIA Market Update available to our tant future providing yet another change quickly. I mention these members.

Market Fluctuation

Top New Year’s Resolutions for Property Managers

ere is a list of four resolutions that property managers should have on their list for 2014. None of them are difficult or require an immense amount of work, and all of them would bring rewards throughout the coming year. Start the New Year off organized. An organized landlord is a more profitable landlord. File your documents and paperwork logically and neatly in a file folder with brackets on each side of the folder. Two-hole punch the top of each document and file them in a way that works for you. Some landlords put all “premove in” documents on one side, and all other documents on the other. Being organized is simply a good business practice. Whether you manage one rental unit or a thousand, being organized and consistent will make you a better landlord and put more of the profit in your pocket. Aim for more work/life balance. Build down time into your schedule. When you plan your week, make it a point to schedule time with your family and friends, and activities that help you recharge. Drop activities that zap your time or energy. Take stock of activities that don't enhance your career or personal life, and minimize the time you spend on them. You may even be able to leave work earlier if you make a conscious effort to limit the time you spend on the web and social media sites, making personal calls, or checking your bank balance. Rethink your errands. Consider whether you can outsource any of your household chores or errands. Could you order your groceries online and have them delivered? Hire a kid down the street to mow your lawn? Order your stamps online so you don't have to go to the post office? Even if you're on a tight budget, you may discover that the time you'll save will make it worth it. Get moving. It's hard to make time for exercise when you have a busy schedule, but it may ultimately help you get more done by boosting your energy level and ability to concentrate. Try to exercise at least 30 minutes 2-3 times per week. Don't

Rental Housing Housing Journal Journal Metro ArizonaDecember • January2013 2014 Rental

market factor that will positively things as nothing is a certainty, but owning property in Arizona affect demand and rents. Anyone that rental has drawn a breath over the last ten years knows hrental ow volatile the housing market has continues to lived be tahrough viable waythat to defied Nothing in a straight line. been. We have seen moves wild fluctuations in pricing and volume. We have a market generate cash flow and appreciation. Supply, demand and pricing all the laws of supply and demand for extended periods only to ultimately succumb. Smarter investing, fluctuate and go through different One scycles. egment of oUnforeseen ur market seems tlaws o have been i mmune to certain aspects of the general real estate Alan Langston and market t hroughout t his p eriod – t he r ental m arket. T he c hart b elow shows that this market continued to government intervention in a market expand regardless of bhow ubbles aand crashes. would As the general market hyper accelerated the rental market can disrupt market continued on a mreact. ore predictable climb. As the can general market crashed, rental contracts closures normally Economic factors continued to rise.

assume that you need to make big changes to bring more balance to your life. Set realistic goals, like leaving the office earlier 1 night per week. Even during a hectic day, you can take 10 or 15 minutes to do something that will recharge your batteries. Increase Productivity. Move just one routine task online such as creating an online maintenance request form for your tenants. There is a host of property management software available to make every day management a little easier. Whether you manage one unit or 25, property management software can help you manage your rental properties more effectively and fill vacancies faster. With features like self-service customer portals, powerful accounting and advanced marketing, you’ll not only save time and increase productivity, but also reduce costs. Property management software helps you easily manage tenants, leases, contracts, documents, vendors and more. Go Green. One strategy a landlord can employ to stand apart is going green. Using environmentally responsible practices can save money, attract more prospective tenants and help the environment. A landlord's office should be as green as the rental units themselves. Using email and telephone to communicate with tenants saves paper and also speeds up the process. Energyefficient computers, fax machines and scanners all use less electricity. Print fewer checks and pay bills online or sign up for online bank statements. While you may have many other resolutions set for 2014, definitely consider these as they are simple to implement and will no doubt benefit your business moving into the New Year. q Katie Poole – Hussa is a Licensed Property Manager, Continuing Education Provider and Principal at Smart Property Management in Portland, OR. She can be reached with questions or comments at Katie@ SmartPM.com.

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RENTAL HOUSING JOURNAL ARIZONA

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Color Standards for National Tenant Network Logo

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Dear Maintenance Men: I’m about to start a rehab project in one (Less chance of a leak) of my units. Can you give me some tips 3: Cold weather burst on drywall repairs? The previous resiresistant. 4: PEX pipe is less dents were very hard on the walls and expensive than copper pipe left me with a number of holes. I want to Dear Mark: Cons: learn how to do the repairs. First let’s define what PEX tubing is. 1: Cannot be used outside or in Dear Maintenance Men: Ruben PEX is a cross-linked polyethylene sunlight. I am getting ready to tackle a sliding pipe. (It looks and feels like plastic 2: Not recycle friendly shower door replacement. The bottom Dear Ruben: pipe.) The PEX pipe is resistant to 3: Installation tools can be track looks welded to the tub. How do I Very small holes can sometimes be extreme temperatures, stress, expensive. repaired with a bit of drywall tape remove it without damaging the tub? pressure and chemicals attacks such and joint compound and feather Any tips on getting this job done will be as acids & alkalies. This makes PEX sanded smooth. However, it sounds appreciated! pipe suitable for both hot and cold Pros and cons of using copper pipe: George like your damage may be a bit more water systems and can be used in Pro: extensive. The first thing to do on a below freezing condition and is 1: Long lasting, easy to use and larger repair is to cut the damaged Dear George: suitable up to 200 degrees Fahrenheit. install drywall back to a stud. In other Remove the sliding doors by lifting The pipe is extremely flexible and 2: Resists corrosion words, cut a square hole large them off of the head rail track and easy to install. 3: Environmentally friendly, i.e.: enough to see half of the of the wall swinging them out. Remove the recyclable. studs on right and left of the hole. Fit screws holding the head rail to the Pros and cons of using PEX: a new piece of drywall inside the side rail. Using a rubber mallet tap Pros: 4: Safe for exterior use. • Logos are provided on the CD in all three forms: Cons: hole and attached the drywall patch the head rail loose from the side 1: Versatile and user friendly, can all black, reversed to white, or in PMS 280 Blue/PMS 7543 Gray spot or 4/color applications. 1: Expensive to buy. rails. The side rails are usually bolted to the exposed studs. be bent around corners & snaked Please see below for specific use examples. 2: Can burst in extreme cold The patch should be the same and caulked in place. Remove the through walls. thickness as the existing wallboard. screws (if they are corroded: use 2: Minimum of connections • weather. No other colors are acceptable for use for the logo. 3: More connections and elbows After completing the rough drywall Liquid Wrench or just drill them out) needed to complete a pipe run. • needed No alteringtoofcomplete the logo is allowed. you have a special circumstance that requires something a pipe Ifrun. and not pry the rails away from the wall. repairs, doing the finish carefully provided on the CD, please call NTN NaTioNaL HeadquarTerS 1.800.228.0989 for assistance. will be most important. Use Be gentle so as not to loosen any wallboard joint compound on all tiles. Next, remove any excess caulk • Logos should not be put over a busy background. seams, nails, screw holes and corners. from the bottom rail. Typically the Joint compound or drywall mud can bottom track is glued down to the be found at any hardware store and tub with “Adhesive Caulk”. It may BLACK WHITE (with 40% gray circle) comes in quart, gallon and five- be possible to gently tap the side of gallon buckets ready mixed. Using a the track with a rubber mallet and 4-inch taping knife, spread a thin break the hold of the dried out caulk. coat of joint compound on the repair Look for possible screws holding the joints filling the cracks and leaving a track to the tub. If the track is still layer of compound two inches on stuck gentle pry with a flat pry bar, CRIMINAL REPORTS? either side of the joints. Before the use a 3/8 plywood backer • With NTN, Instant compound dries, apply the drywall approximately 4”x 6” under the pry means instant – tape over each repair joint and apply bar so that you do not damage the 15 seconds a second layer of mud over the tape ...continued on page 11 with the four-inch taping knife.

Before making any decisions about using PEX piping, check with your local building department to ensure it is allowed in your area.

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Allow to dry. Using drywall sandpaper, even out any high spots and feather the edges. With a 10-inch drywall knife two coats of joint compound over the tape, letting the compound dry between coats. Sand any high spots between coats. After the final coat of mud, use sandpaper or a wet sanding sponge sand the joint until it is smooth. Texture to match the surrounding walls and the patch will disappear.

(More chance of a leak.)

Dear Maintenance Men:

By Jerry L'Ecuyer & Frank Alvarez

I keep hearing about PEX tubing as an alternative to copper tubing when it comes to re-piping my rental units. What is the difference between PEX and copper tubing and why use one over the other? What are the pros and cons? Mark

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Dear Maintenance Men:

Rental Housing Journal Arizona • January 2014 02

RENTAL HOUSING JOURNAL ARIZONA

Property Management Mind Mapping…And Loving It! by Ernest F. Oriente, The Coach {Article #213…since 1995}

he property management profession continues to be more complex and rapid planning seems to be a daily requirement. When faced with a large project, when pressured to reach tall goals or even when you are trying to fix a reoccurring problem… Mind Mapping is the perfect tool. In this article, you will learn the three steps for creating a clear and wellorganized front-end approach to resolving your most challenging problems or developing your most inspiring dreams! Mind Mapping will also allow you to discover new patterns, see untapped potential and link unforeseen ideas—an important concept we share in our book, Smart Match Alliances. Getting started: Begin by scheduling 15-30 minutes of uninterrupted time with no distractions such as ringing telephones, loud noises or knocks at your office door. Start with a blank sheet of paper and draw a large circle in the center of the page. Next, place the name of your project, goal, dream or problem in the center of this circle. Next, draw 10 or 15 lines around the circle, like the spokes of a bicycle wheel. Lastly, on each spoke,

list one idea or concept relating to the words inside the circle. Do not edit or judge the words you are placing on each spoke while you are brainstorming because you want to generate as many ideas as possible. Each spoke on your Mind Map will address: who, what, where, when, why and/or how. Tip From The Coach: If you are an auditory learner rather than a visual learner you may want to use a tape recorder to build your Mind Map, then transfer your words to paper as the second step. If you find your ideas are not flowing, then take a break to refresh your mind or share your progress with your manager, a peer or a close friend. Sometimes having another person’s perspective is just enough to get your creative juices flowing. Developing your action words: With your initial Mind Map now complete, take a second sheet of paper and list the first “spoke” topic in the center of a new large circle and draw another five or seven lines around this circle. These lines are now the action words for completing your project, fixing a problem or realizing your dreams. When building these action words, do not

make any quick assumptions but remain open to unusual ideas or solutions. Try to look at this project or task from a different level by asking yourself, “How will this impact my residents, my property owner, the properties I manage or my leasing team?” Tip From The Coach: Some of the best Mind Mapping is done when we look to other industries, other professions or other successful individuals and see how they have addressed a similar problem or opportunity. Many great ideas are just inches from where you are standing this very minute but you have to look closely and have your antenna up, to see and hear them. As a small step, try reading trade or business magazines unrelated to the property management industry and you will find that re-inventing the wheel is seldom necessary. Plus, exposure to new ideas in other industries will help you become a “Futurist” on your own behalf…a special trait! Taking words to action: Now comes the fun part! Take each of your Mind Maps and put them in outline form. Next to each action word, place an action step and

specify the exact date for completing each task or step. Also, if you are going to delegate portions of this project, include the name of each person who will be responsible for a specific step and be certain they receive a copy of your Mind Map so they can be clear on the purpose of your request. Lastly, take the action steps you are going to personally complete and place them directly in your appointment book. By scheduling time for each step on your Mind Map you are bringing this project/dream/goal/problem to life. Tip From The Coach: Once you have completed your first Mind Map, pause and reflect joyfully on what you have accomplished. This process is specifically designed to support your thinking process and will get easier and easier, with practice. Remember, Mind Mapping is meant to be fun and can be done in large groups, at your next big meeting or any time you need to visualize ideas quickly! Want to hear more about this important topic or ask some additional questions about Mind Mapping? Send an E-mail to ernest@ ...continued from page 10

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Rental Housing Journal Arizona • January 2014

RENTAL HOUSING JOURNAL ARIZONA

Are You Alive After Five??

very day at five o’clock, people pour out of the work place, get into their cars and head for home. However, often times they have to run errands or make other stops after they have already put in a full day. Some people even have to schedule appointments to look at apartments when they get off of work because their week-ends are packed and they can’t take a long lunch break. Most leasing consultants have put in a full day by five o’clock too, but many rental offices are open until 6:00 or later. Do the prospective renters who come through your door after 5:00 get the same level of enthusiasm and quality of service as though who visit your community before noon? See what happens when the Secret Shopper looks for a new home at the end of a work day, and just “drops in” without an appointment. The beautiful landscaping and colorful flags caught my eye and motivated me to stop in. It was about

5:40 when I entered the leasing office. I noticed the posted office hours sign indicating they are open until 6:00. The leasing consultant was alone and I could see that she was straightening up and had already turned out the lights in the connecting clubhouse. I told her that I had just gotten off work, and was driving by, and wanted to take a look at one of their apartments. The employee’s smile faded, as she sighed and practically groaned, “I just locked up the model and show apartment . . .” I apologized for stopping by so late, but explained that I was on my way home from work when I saw their sign. I told her there really wasn’t any other time that I could look for an apartment because I work during the day and am tied up on the weekends. She replied, “That’s okay. It’s not a problem,” but her body language communicated something entirely different. She asked what size apartment I needed and for when, but did not inquire about my

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specific needs or even ask for my name. We walked directly to the model, with little conversation. My efforts at “small talk” were met mostly with silence. The consultant entered the apartment ahead of me and turned on the lights. She said, “Go ahead and look around,” and then stood to one side. I walked from room to room, but did not open anything as I felt like I needed to hurry up. I thanked her for showing me the apartment and she thanked me for stopping by. When we returned to the office, she did not invite me back in. Instead, she reached inside the folder she was carrying and handed me a business card and an application. She dismissed me with, “Let me know what you decide.” The next evening I visited another community that attracted my attention from the curb. As I pulled into the designated parking space for future residents, I observed the leasing consultant locking up. When

I got out of my car and approached the office, she tried to avoid eye contact with me. It was 5:30 and the closing time was posted as 6:00 p.m. I asked if she worked there, and if the office was still open, even though I could see that everything was dark. The consultant unlocked the door and invited me inside. She apologized for closing early and said that it had been so slow that she had decided to lock up a little bit early and go home. The consultant tried to stifle a yawn and said, “Slow days always make me sleepy.” She asked what I needed, and then said she could show me a model apartment. However, I felt like I would be “putting her out” and offered to come back the next day. She smiled and looked relieved. The consultant handed me a brochure and a business card and said, “Give me a call in the morning. I’ll be here at nine with bells on.” (I wondered what time she took her “bells” off!) ...continued on page 11

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Rental Housing Journal Arizona • January 2014

RENTAL HOUSING JOURNAL ARIZONA

Lessons from CT Fair Housing Case

to live in a racially concentrated area of poverty. Her damages were awarded at $44,431.05

n May 2013, Connecticut complainants were awarded over $76K (before attorneys’ fees) by the courts in The U.S.A v. Hylton. This is a rental case but the ruling holds several important legal lessons for any housing provider. The complaint alleged that the Hyltons, a Black married couple, violated the Fair Housing Act1 (FHA) by refusing to allow a mixedrace couple, the Bilbos, to sublet their unit to a Black woman with children because they did not want "too many Blacks" at the property.

• As part her damages, the court awarded Ms. Wilson $20K for compensation for the lost opportunity to live in a neighborhood of lower crime, higher educational opportunities, and greater upward mobility. • Nearly half of the judgment, before attorneys’ fees, was for punitive damages. • An additional $37,422 in attorneys’ fees brings the total judgment against the defendants to over $113K.

The decision awarded the following damages: • $31,750 to Mr. And Mrs. Bilbo because their landlord made discriminatory statements to them about being a mixed-race couple, and about the race of their prospective subtenant refusing to allow them to sublet the home to an African American woman and her children because of race. • $10K of awarded distress.

this for

Details of the case can be found online. • A summary of the case is available on the HUD site: http://portal.hud.gov/ hudportal/HUD?src=/press/ press_releases_media_ advisories/2011/HUDNo.11198.

sum was emotional

• A summary of the ruling is posted on the DOJ’s site: http://www.justice.gov/usao/ ct/Press2013/20130812.html (DOJ).

• Because Ms. Wilson, the prospective subtenant, was denied the home she sought and was qualified for, she continued

• The court’s decision can be read at http://law.justia.com/cases/ federal/district-courts/ connecticut/ ctdce/3:2011cv01543/94677/23 The Hyltons were independent rental owners managing their own property. They initially rented to the Bilbos; however, the Bilbos found that their personal circumstances required them to move and to break the lease agreement. The Bilbos

agreed to find a suitable renter to sublease to. When they did the defendant asked if the person is white. When told she was Black, Hylton stated that he “did not want too many Blacks at the property” and that “the neighbors would not want to see too many Blacks there.” The defendant also told the Bilbos the only reason they were rented the house was because his wife is white and it was “a good mix.” continued on page 13

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Mind Mapping ...continued from page 2 powerhour.com and The Coach will E-mail back to you a free invitation to be a participant on a PowerHour conference call. q Author’s note: Ernest F. Oriente, a business coach since 1995 [31,120 hours], a property management industry professional since 1988--the author of SmartMatch Alliances-and the founder of PowerHour...[ www.powerhour.com and www. powerhourseo.com www. powerhourleadershipacademy.com and www.powerhoursalesacademy.

com and www.pirmg.com ], has a passion for coaching his clients on executive leadership, hiring and motivating property management SuperStars, traditional and Internet SEO/SEM marketing, competitive sales strategies, and high leverage alliances for property management teams and their leaders. He provides private and group coaching for property management companies around North America, executive recruiting, investment banking, national utility bill auditing [ www.powerhour.com/ propertymanagement/

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utilitybillaudit.html ] national real estate and apartment building insurance [ www.powerhour.com/ propertymanagement/insurance. html ], SEO/SEM web strategies, national WiFi solutions [ www. powerhour.com/propertymanagement/nationalwifi.html ], powerful tools for hiring property management SuperStars and building dynamic teams, employee policy manuals [ http://www.powerhour. com/propertymanagement/ employeepolicymanuals.html ] and social media strategic solutions [ http://www.powerhour.com/ propertymanagement/ socialmedialeadership.html ]. Ernest worked for Motorola, Primedia and is certified in the Xerox sales methodologies. Recent interviews and articles have appeared more

than 7000 times in business and trade publications and in a wide variety of leading magazines and newspapers, including Smart Money, Inc., Business 2.0, The New York Times, Fast Company, The LA Times, Fortune, Business Week, Self Employed America and The Financial Times. Since 1995, Ernest has written 200+ articles for the property management industry and created 350+ property management forms, business and marketing checklists, sales letters and presentation tools. To subscribe to his free property management newsletter go to: www.powerhour. com. PowerHour® is based in Olympic-town…Park City, Utah, at 435-615-8486, by E-mail ernest@ powerhour.com or visit their website: www.powerhour.com

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Alive After Five ...continued from page 8 On my third evening out, I stopped by another community that caught my eye. It was just past 5:30 when I entered the rental office. The leasing consultant greeted me with so much enthusiasm, that I was actually startled. She apologized and said, “I’m sorry. Did I startle you?” She extended her hand and introduced herself and asked for my name. She offered me a seat and asked how she could help me. I remarked that she sure seemed to have a lot of energy for the end of the day, and she said, “Not always, but I work at it.” She explained that sometimes the leasing staff staggers their start times so that the person who opens early, leaves earlier, and the person who comes on shift later locks up. The consultant said, “On the days I work alone, I take a couple laps around the property around 4:30 for a ‘pick me up’ and that seems to give me the extra energy I need to finish my day.” She was animated and enthusiastic as she spoke and seemed eager to help me. The consultant filled out a guest card for me, determined my needs and then gave me a thorough tour of the community amenities and a vacant apartment. At the end of the tour,

we returned to the leasing office where she made several attempts to close the sale. She presented me with a brochure, community newsletter and an application, and asked if she could follow up with me in a couple of days to see if I had reached a decision. When I left, it was 6:15 p.m. Are you still “alive after five,” with enthusiasm to burn? If not, what can you do about it? Can you adjust your lunch hour or your work schedule so you have more energy at the end of the day? What about your attitude? Can you adjust that? If your office is open for business after five, shouldn’t YOU be open for business too? If you cut corners after five and don’t give EVERY prospective renter a “full meal deal,” they are going to go away “hungry” and end up renting elsewhere! q SECRET SHOPPER Provided by: SHOPTALK SERVICE EVALUATIONS Phone: 425-424-8870 E-mail: joyce@shoptalkservice.com Web: www.shoptalkservice.com

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Fair Housing Case ...continued from page 9 There are several salient points in this case, none of them new but none-the-less noteworthy. MRS. MURPHY’S EXEMPTION First, the housing providers in this case were ‘mom and pop’ landlords representing themselves. Their blatant disregard for the law and others’ civil rights is clear from the case but the harm they caused – to the complainants and to their own pocketbook – may have been avoided with fair housing education and / or by hiring a professional manager who’s practice it was to know and abide by all federal, state, and local laws. As their defense, the defendants argued they were not subject to the Fair Housing Act given what is commonly referred to as the ‘Mrs. Murphy’s Exemption’ which states: Any single-family house sold or rented by an owner provided that such private individual does not own more than three such singlefamily homes at anyone time… if such house is sold or rented (A) without the use in any manner of the sales or rental facilities or the sales or rental services of any real estate broker, agent, or salesman, or of such facilities or services of any person in the business of selling or renting dwellings… and (B) without the

publication, posting or mailing, after notice of any advertisement or written notice in violation of [the FHA]. Put plainly, small, independent landlords can discriminate based on protected class only if they do not hire a professional (thereby enjoining someone else in the act of discrimination) and if they do not ‘advertise’ a discriminatory preference. Here, ‘advertising’ means, essentially, any outward expression ranging from verbal or written statements (ads whether printed or online, flyers, etc.). Interestingly, in this case the property in question was held by Hylton Real Estate Management, which only Mrs. Hylton had an ownership interest in. Because her husband, Mr. Hylton did not have an ownership interest in the company that owned the property only she, not he, qualified for this exemption. Mrs. Hylton argued that the Mr. acted as her husband and not as ‘someone in the business of renting dwellings’ in dealing with the Bilbos. However, Mr. Hylton himself stipulated that he was in the business of renting dwellings and detailed the tasks he performs in such capacity and, indeed, his behavior substantiated this. All of that aside, his outward expression, or

‘publication’ of a discriminatory intent trumped the Mrs. Murphy’s Exemption binding him to the full responsibilities of the FHA, even if he had had an ownership interest in the property. It should be clearly noted here that Oregon state law provides greater protection than federal and does not allow for the Mrs. Murphy’s Exemption. Essentially, all housing providers must comply with federal, state, and local fair housing laws in Oregon. VICARIOUS LIABILITY Secondly, this case reaffirms what preexisting case law has already established in terms of vicarious liability. As stated in the court’s decision, “Although Mr. Hylton is the individual who directly discriminated against Ms. Wilson and the Bilbos, both Mrs. Hylton and [the company] may be held vicariously liable for this discriminatory actions.” …‘It is clear under the FHA, owners of real estate may be held vicariously liable for discriminatory acts by their agents and employees.’ Glover v. Jones Therefore, if Mr. Hylton was acting as Mrs. Hylton’s agent, Mrs. Hylton, as sole owner of [the property] is also liable for his discriminatory

actions. See Cabrera v. Jakabovitz” DAMAGES FOR EMOTIONAL DISTRESS Here, the court said it best in its decision: “Third, as to the request for damages for emotional distress, ‘it is axiomatic that civil rights plaintiffs may recover compensatory damages for emotional distress.’ Ragin It is not necessary for a plaintiff to provide evidence of treatment by a healthcare professional or use of medication to be entitled to damages for emotional distress. See Parris v. Pappas… (distinguishing “significant” and “egregious” claims for emotional distress from “garden variety” claims…). In the context of Fair Housing Act violations, courts have ‘recognized the severe mental trauma associated with unlawful discrimination and have upheld large compensatory awards for the victims in such cases.’ Broome v. Biondi ‘The key factors in determining emotional distress damages are the complainant’s reaction to the discriminatory conduct and the egregiousness of the respondent’s behavior.’ HUD v. Walker When claims have been categorized as “garden variety” – meaning the claim for distress is devoid of evidence of medical ... continued on page 14

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Fair Housing Case ...continued from page 13 treatment or physical manifestation – the amount of damages authorized ranges from $5,000 to $125,000. Parris” PUNITIVE DAMAGES As stated above, the judge found in this case that the defendant acted with evil motive and showed no remorse justifying an award of punitive damages amounting to tens of thousands of dollars. LOST HOUSING OPPORTUNITY DAMAGES Finally, the issue of lost housing opportunity damages is also interesting. Here the court found that Ms. Wilson suffered based on key testimony from an expert in the field of “neighborhood effects.” The court concluded that there were “vast differences between the neighborhoods” in which she sought to leave and that which the subject property was located in amounting to “fewer ‘life chances’.” It’s clearly not only important to be familiar with the federal FHA, but to know applicable state, local, and case law, as well. Issues such as vicarious liability, and what kinds of damages may be awarded, as well as other legal precedents such as disparate impact, what constitutes illegally discriminatory advertising,

etc., should all be relevant to housing providers both at the company or organizational level and at the individual level. As this case illustrates, the owner was personally liable for her agent’s actions, even though she did not directly violate the law. This is true for ‘rank and file’ staff / employees / contractors as well, not just owners – that is, if a maintenance tech. or leasing agent violates the law, not only is the company and property owner liable, that individual may personally be sued as well. It is important to follow fair housing case law and to commit to a regular educational routine for yourself and all who work with you. Start today by signing up for our free, electronic, periodic newsletter (this you can do at the bottom of any page of our website, www.FHCO. org) and by following us on FaceBook or Twitter ( w w w. f a c e b o o k . c o m / FairHousingCouncilOregon and @ FairHousingOR, respectively). We also invite and encourage you to check out the range of courses we offer at www.FHCO.org/pdfs/ classlist.pdf. Our classes include, of course, Fair Housing Basics, as well as Fair Housing BINGO, Fair Housing Jeopardy The Game and Fair Housing and Advertising. In

addition, we have developed advanced classes for repeat trainees such as 50 Shades of Fair Housing and the RA/RM Intensive. This article brought to you by the Fair Housing Council; a nonprofit serving the state of Oregon and SW Washington. All rights reserved © 2013. Write jbecker@FHCO.org to reprint articles or inquire about ongoing content for your own publication. q

By Jo Becker, Education/Outreach Specialist, Fair Housing Council Serving Oregon and SW Washington To learn more… Learn more about fair housing and / or sign up for our free, periodic newsletter at www.FHCO.org. Qs about this article? ‘Interested in articles for your company or trade association? Contact Jo Becker at jbecker@FHCO.org or 800/424-3247 Ext. 150 Want to schedule an in-office fair housing training program or speaker for corporate or association functions? Visit www.FHCO.org/pdfs/classlist.pdf

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Rental Housing Journal Arizona • January 2014

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The Top 10 Apartment Resident Complaints When experiencing an uptick in vacancies, most property managers ask themselves what could be causing their resident to leave. Without asking former tenants directly (or waiting for a bad review) how can you discover the reason for their discontent? Thankfully, J Turner Research, a marketing research firm serving the multifamily industry has done just that. They surveyed 10,000 U.S. apartment residents regarding their satisfaction, and have published their results by ranking the top 10 apartment resident complaints:

1. Rental rates 2. Poor grounds / common area upkeep 3. Disorganized staff / lack of communication with staff 4. Quality of response to maintenance requests 5. Overall customer service of management staff 6. Quality of parking / parking availability 7. Concerns over security / safety / lighting 8. Lack of upgraded amenities 9. Pets not on leash / poor pet waste removal 10. General lack of preventative maintenance According to their findings, apartment residents across the nation have been more unhappy about rental rates than any other issue. In fact, residents mentioned the cost of rent more than twice as often as concerns about pet waste, which has been a big source of dissatisfaction in the past. Rent prices were nearly three times more likely to be cited by disgruntled tenants than noise, which surprisingly didn’t crack the

top ten. This could be proof of a softening in rent fundamentals, which have been experiencing somewhat of a rebound since the country began to recover from the recession. Aside from rental rates, residents are most often unsatisfied with on-site customer service from management professionals and members of the maintenance staff, which factored into three of the top five complaints. How You Can Use This Information While there are a number of complaints that would be worth addressing, it seems the best opportunity to improve resident satisfaction levels is by resolving any issues with the on site staff’s response to resident concerns. And, because the relations between residents and community staff have such an impact on the community’s reputation and online ratings, this should definitely be one of the key focus areas for multifamily properties moving forward. Another way property managers can improve customer satisfaction is by completing any deferred maintenance, upgrading appliances,

or updating amenities and commonareas. This is particularly important when a community’s curb appeal factors into online ratings and reviews. Analysts go on to suggest that “communities with the highest levels of customer satisfaction also benefit from the best online ratings and reviews.” Therefore, as property managers continue efforts to maintain a positive reputation, it remains crucial to measure customer satisfaction—and dissatisfaction, and asses how well efforts to improve these issues are actually working. Sara Thompson writes about property management in partnership with Zenith Properties NW, LLC in Vancouver, Washington. For more tips and advice, visit http://www. zenithpro.com/blog/. q

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Rental Housing Journal Arizona • January 2014