Rental Housing Journal Colorado
October 2014 - Vol. 6 Issue 11
2. The 3 Major Sins of Sales Management 3. Dear Maintenance Men
4. How to Manage Tenants Who Eat and Smoke Marijuana In Your Rentals 5. Compost Food: It’s Not Garbage Anymore!
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5 Strategies to Ensure Family Business Success Advisor Shares Tips for Avoiding Common Problems
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on-family businesses can learn a lot from family businesses, says Henry Hutcheson, a certified Family Business Advisor and founder of Family Business USA consultancy. “Family businesses outperformed non-family businesses during the boom years leading up to the 2008 recession, and during the 2001 and 2008 recession years,” he says, citing a recent Harvard Business Review study. Hutcheson, author of the new book, “Dirty Little Secrets of Family Business,” (http://dirtylittlesecretsoffamilybusiness.com), says family businesses were less likely to lay off workers during the lean times, and more likely to maintain their emphasis on socially responsible programs. But that’s just the businesses that survived. “Many closed their doors,” he notes. With 25 years of business management and family business consulting experience, Hutcheson says he’s seen the patterns that can lead to major problems. And they’re almost always preventable. “The factor that enables family businesses to rise to the top is trust: Family members can potentially trust one another far more than non-family members,” he says. “But trust can erode – when a family member can’t or won’t perform at the necessary level; when there’s a sense of entitlement; drug abuse; laziness. And that can have serious, business-killing consequences.
continued on page 8
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Demand Keeps Pace With Mile-High Supply Growth
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Marcus & Millichap – Apartment Research Report – Denver Metro Area – 4Q14
otal employment surges past the pre-recession high as new employers move into the metro and others expand their payrolls, spurring household formation and sustaining healthy absorption of apartments. Additionally, many households that bundled up during the economic downturn are now separating and contributing to the high demand for rentals, especially in the urban core. A dearth of condo construction and the high cost of single-family homes are adding to apartment demand. Developers have responded vigorously to the need for housing, pushing projects through the pipeline at a rapid pace. Despite the elevated rate of inventory growth, demand is keeping pace, maintaining tight conditions throughout the market. Vacancy is rising in the Central Denver submarket, though, many newly built properties are leasing up quickly. High demand for rentals is underpinning
some of the strongest rent growth in the country, with many areas recording double-digit gains. An expanding economy, rising rents and high occupancy are drawing a wealth of investors to Denver. In addition to the local and West
Coast buyers, new groups of investors from the Northeast and Midwest as well as private foreign investors are scouring the market for prospective purchases, particularly near the urban core. The diverse pool of ...continued on page 6
Industry Review: The Home Depot & ARPOLA Discount Program
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ur industry is changing, and technology is one of the drivers of this change. That is why I was interested to read the press release on the new partnership between ARPOLA and The Home Depot. The benefits of this partnership directly affect Rental Housing Journal readers. Specifically, The Home Depot now has a way to treat you – the rental property owner, property manager and service providers on rental property – differently based on how you do business. The program has three major
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components: • Savings specific to three primary times work is being done on rental property – maintenance and repair, rent turns and property improvement/ updating. It includes exclusive pricing discounts, special product offers, volume pricing, coupons and even a time and cost saving delivery option. • Information and education on the right solution to your problem the first time – knowing what
to buy and saving when you do. While this may be more important to less sophisticated owners and operators of rental property, the information may prove to help even the most advanced operator. • Advanced management tools to simplify and control your purchases. Will you save? There’s no doubt that you will. The everyday exclusive pricing discounts up to 5% are clearly posted right on ARPOLA’s ...continued on page 7
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The 3 Major Sins of Sales Management
t’s a simple fact of business: Without sales, no one else downstream can do their jobs, says veteran sales manager and business speaker Jack Daly. Because of how vital sales are to a company, CEOs frequently tend to misuse their best people, he says. “There are three sins that minimize the sales management role, which ultimately holds the company back from achieving its growth,” says Daly, author of “Hyper Sales Growth,” (www.jackdaly.net). “When they misallocate key players, small to medium-sized businesses tend to go into one of two directions. They either stay small to medium, or they go out of business. When you ask why, it most often comes down to a violation of one or more of these three sins of sales management. Having the right people in important spots is absolutely the secret to success.” To ensure continued growth, Daly says the people at the top must avoid the following: Sin No. 1 … is committed when the CEO or owner wears the hat of the sales manager. If you are doing that, you’re essentially relegating both the CEO job and the sales manager job to part-time status. In effect, you’re saying, “I’m going to grow
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my business part time.” If you want your business to grow, you must grow your sales force, and you need someone doing that full time. Sin No. 2 … is to make the best salesperson the sales manager. It can work, but seldom does. The usual scenario, however, is you lose your best salesperson and get a mediocre sales manager. The role and the responsibilities are entirely different. A salesperson’s role is to win new customers and nurture the ones you have, thereby differentiating you from your competitors. The sales manager’s job involves recruiting, training, coaching, building and developing. Being effective at one of those jobs is not an indicator that a person will be equally effective in the other. Salespeople are used to immediate gratification, involving a deal-to-deal routine. Sales managers, by contrast, must take their time to recruit, train and coach. A salesperson might easily become disenchanted with the pace of the new role and look for another sales job, perhaps with your competitor. Sin No. 3 … is probably the most grievous of all. The best salesperson is made a sales manager, but he or she is also required to continue booking business. It’s absolutely ruinous. The person’s focus will
remain fixed on the customer, as that is how their compensation is driven. Accordingly, the sales team will be underserved, missing the opportunity for leveraged growth. The key to growth is to put the right people in the right places, Daly says. “Since sales drive business, it’s essential to match skills and personality types to the jobs, and to ensure the people can focus on their roles,z” Daly says.
audiences to take action in the areas of sales planning and training, and customer loyalty. Daly draws upon more than 20 years of business experience, with several successful stints as the CEO of fast-growing companies. He has a Bachelor’s in Science degree in accounting, a Master of Business Administration degree, was a Captain in U.S. Army and is an accomplished author with audio and DVD programs.
Jack Daly, author of “Hyper Sales Growth,” (www.jackdaly.net), is an experienced and inspirational sales trainer and sales coaching expert who, as a sought-after speaker, motivates
www. re nt a l h o u s i n g j o u r n a l .co m
Rental Housing journal Colorado • November 2014
RENTAL HOUSING JOURNAL COLORADO
Dear Maintenance Men: By Jerry L'Ecuyer & Frank Alvarez
Dear Maintenance Men, I’m a bit concerned about the lights at my apartment building. I have various fixtures, sensors and timers, not one of which turns on the lights at the same time. Some don’t turn off or on at all. Any suggestions? Burt Dear Burt: There are two ways to effectively control exterior lighting: 1. A timer clock. 2. A photocell for detecting light and dark Both time clocks and photocells have been around forever. We prefer to activate landscape lighting with a photocell as it is virtually maintenance free. A photocell will ensure the property has light only when it is needed and turn off automatically with the approach of daylight. Be sure the photocell located where it can “see” ambient light and not near an artificial light source. A time clock needs constant attention in order to keep up with the
changing seasons and adjustments for longer or shorter nights. There is nothing more frustrating than seeing the property all lit up at 5pm and it only gets dark at 7pm or even worse; the lights turn on at 7pm and it has been dark since 5pm. Remember: the safety of your residents is at its greatest risk when it is dark and the lights are out. Dear Maintenance Men: I’m getting ready to have one of my rental units painted and the painter typically sprays the walls and ceiling as opposed to rolling on the paint. I’m a bit worried about my smoke and CO Detectors. I’m I being overly cautious? George Dear George: Overly cautious? No! We think you are right to worry. The paint and construction dust can contaminate the smoke/CO detectors and lessen their sensitivity. It is important to either cover the detectors in a protective plastic bag or remove them during the painting and construction work. While you are there, check the batteries and dates of installation. If you remove the detectors during
painting, don’t forget to reinstall them before the next resident moves in. Dear Maintenance Men: Garbage deposals are getting me down! I am forever getting calls to unblock them or replace rusted ones. They seem to be a source of constant problems. Are there any alternatives? John Dear John: The first issue may be education. When a new resident moves into a unit; explain how to use the garbage disposal, what should and should not be put through the unit. Show them what to do if the disposal jams and where and how to use the unjam key. (The un-jam key should be attached to the side of the disposer.) The same information should be distributed to all existing residents as well. To answer your question about an alternative to a garbage disposal: We recently met with a small Southern California company that makes an item to eliminate the garbage disposal unit altogether. The product is called SemperScreen and it looks just
like a standard sink drain strainer. The difference is in the strainer itself. The strainer is a fine stainless steel mesh permanently attached which will only allow water to drain and keep debris from going down the drain and into the pipes. In other words, the new drain strainer is used to replace the garbage disposal unit. Because it is permanently installed, the residents cannot remove it. The garbage disposer is removed the SemperScreen replaces it. This product can be found at: www.semperscreen.com . Please call: Buffalo Maintenance, Inc for maintenance work or consultation. JLE Property Management, Inc for management service or consultation Frankie Alvarez at 714 9568371 Jerry L’Ecuyer at 714 778-0480 CA contractor lic: #797645, EPA Real Estate lic. #: 01460075 Certified Renovation Company Websites: www.BuffaloMaintenance.com & www.ContactJLE.com www. Facebook.com/BuffaloMaintenance
Vi s it u s at www. rental h ous in g j o u r n a l.co m
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RENTAL HOUSING JOURNAL COLORADO
How to Manage Tenants Who Eat and Smoke Marijuana In Your Rentals
By Kimberly Smith
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s most of you know I live and work as a real estate broker in Colorado, and everyone asks about marijuana. Our first course of action, after recreational use was legalized, was to amend our leases to make sure the no-smoking-clause also included a no-smoking marijuana clause. The reality is, the general public thinks smoking marijuana is something different than traditional smoking, so you need to be very specific if you don’t want anyone smoking any substance- tobacco or otherwise- in your rental. Today I took my car into the dealership for a minor repair and they gave me the complimentary rental car and reminded me not to smoke in the car. Jokingly, I asked if they had changed their agreement to include no smoking marijuana and the associate pointed out that “yes” they had added that to the agreement and in
fact they have had customers arrive smelling like marijuana wanting the complimentary rental and they have declined to allow them to use their rentals. If you have rental properties in any state, especially a state with approved marijuana, just go and invest in an ozone machine to clean the air. I bought a Pro 3600-1 ozone generator [ www.ozone.ca ] 15 years ago and it still works like new. All you do is leave the ozone machine in the property overnight and the property will smell ready for the next occupant. The reality is the legalization of marijuana hasn’t been a huge problem. Yes, we do have those tenants, especially those from out of state, who use their time in Colorado to try out this novelty. We have had those tenants who ignore the no-smoking policy and we have had to remind them or asked them to switch rentals to a smoking property. While this may sound funny, the reality is it is very serious; our prob-
lem has been with the edibles. There was a news story about a teenager who jumped off a balcony after consuming a marijuana laced cookie. So it turns out one cookie contained six servings of marijuana! Really! I mean who eats just one bite of a cookie? One of our Colorado offices had a cleaner rushed to the hospital because of an overdose after consuming an edible left in a rental after the tenant’s departure. Tip: Alert all company staff never to consume any food left in a rental property; you just never know. In the meantime both the general economy and the real estate industry is doing great here in Colorado so we don’t have anything to complain about. Visit Lisa at www.corporatehousingbyowner.com Originally Published at www.personalrealestateinvestormag. com
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Rental Housing journal Colorado • November 2014
RENTAL HOUSING JOURNAL COLORADO
Compost Food: It’s Not Garbage Anymore!
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he City of Seattle recently passed an ordinance that prohibits food in the garbage starting January 1, 2015. While many Seattleites agree that composting is good, there are definite challenges when it comes down to tenant participation and cooperation. What Will Happen? The law starts January 1, 2015. On July 1, 2015 enforcement starts. Properties will be warned by tags and letters if too many recyclables or too much food waste is in the garbage. Properties will receive a $50 fine on the utility bill for each infraction after the second infraction. Why? • Cost: Each year Seattle spends over $13 million to send garbage by train to the landfill in eastern Oregon. More than a third of the waste is food scraps such as banana peels, chicken bones, and moldy bread. It costs notably less for this same food waste to go to a regional compost facility. • Resources and the Environment: Food waste can be turned into nutritious compost for use on landscapes and gardens. Methane gas from food waste in the landfill
is 22 times stronger than CO2 emissions from cars and trucks and contributes to climate change. Sending food waste to a compost facility instead of the landfill reduces pollution and conserves resources.
(For properties with 5+ units only) The free Friend of Recycling and Composting (FORC) training provides helpful tips, tools, and answers to questions on how to sort materials correctly in the containers. When you signing up a FORC with SPU and returning the pledge form your property will earn a one-time $100 credit on the utility bill. When the FORC attends the optional free training, your property qualifies for free food waste buckets for all units. Find out more at www.seattle.gov/util/ apartmentfoodwaste or leave a message at (206) 684-8717, press #2.
• Proud Recyclers and Composters: Seattle residents take pride in recycling, and composting food waste is already an established practice at most residences and many businesses. 400,000 tons of food waste have already been diverted from the landfill since 2005. Tenants call SPU wanting to compost and you can ensure they have access.
• Order and Distribute Free Flyers and Posters Available in many languages. Order or download at www.seattle. gov/util/recyclingeducation or leave a message requesting an order card at (206) 684-8717, press #2. Videos also online. Recommended flyers: “Where Does It Go?” and “Food and Yard Waste Tips”.
What’s the Benefit to You? There is not only the benefit of happier “green” tenants but also property managers report they have avoided or reduced expensive drain repairs when residents put food waste in the compost cart instead of down the sink. How Can You Prepare for Compliance? Seattle Public Utilities offers free resources:
• Request Technical Assistance or Presentations for Residents Leave a message at (206) 6848717, press #2. Phone assistance provided to all properties. On-site continued on page 8
• Attend a FORC Training in 2015
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Demand Keeps Pace ..continued from front page investors is creating intense competition for listings, driving up prices. Owners with high equity are being enticed off the sidelines by elevated prices and an aggressive bidding environment, increasing transaction velocity. The threat of overbuilding is motivating some seasoned property owners near downtown Denver to bring their holdings to market. As prices continue to rise in the urban core, local investors are seeking smaller multifamily assets farther out into the suburbs or even into tertiary markets in the Rocky Mountain region. Opportunistic buyers are searching in older areas outside of Central Denver for investments that can be easily renovated and have their rents and occupancy lifted. 2014 Annual Apartment Forecast Employment: This year employers are on track to boost staffing 3.1 percent with the creation of 40,000 jobs, which will push the unemployment rate into the mid-4 percent range. In 2013 38,400 workers were added to payrolls.
Construction: Developers are poised to increase rental stock nearly 4 percent this year with the addition of 9,400 apartments. In 2015, the pace of construction will ease as only 7,400 rentals are scheduled for completion. Last year 4,700 units were placed into service. Vacancy: This year, vacancy in the metro will tick down 10 basis points to 3.9 percent on net absorption of more than 9,000 units, 30 basis points below the pre-recession peak. In 2013, vacancy declined 30 basis points. Rents: Tight conditions will enable operators to boost average effective rents 9.2 percent in 2014 to $1,210 per month. Effective rents have surged 37.5 percent since the prior peak in 2008. Last year, rents climbed 8.0 percent. Published With Permission. www.marcusmillichap.com
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RENTAL HOUSING JOURNAL COLORADO
Home Depot & ARPOLA ..continued from front page website. The discount is based on product category. You will receive 5% on plumbing and hardware, 4% on appliances, electrical and lighting, and lesser amounts in other categories. The current Special Product Offer is 15% off on smoke detectors. This is significantly better than The Home Depot’s current retail promotion during Fire Prevention month. It
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Rental Housing journal Colorado • November 2014
is also important to you, as many local laws and building codes have been updated to require the new 10 year battery life. If you have a larger purchase of $200 or more, you receive a coupon for $20 off when you register for the program, potentially a 10% savings. How much you save depends on your needs and how well you use the different aspects of the program. Not every aspect of the program is ideal, as you may have to change the way you purchase to reap some of the benefits. This is true for receiving the exclusive price discounts in the program. When you join ARPOLA and register for the Home Depot Program you are given access to ARPOLA’s exclusive purchasing portal with The Home Depot. You buy directly through this portal online then pick up your purchase in the store, or have it delivered. While not completely intuitive, the portal works very well and has several tools to assist in making the buying process easy. It is expected to save you a lot of time, as well. For some of you, this way of purchasing will be easier and more time efficient. For others, the change could prove to be cumbersome. As a society, we are ordering more and more of what we buy on-line. In the future, this may prove to be the primary purchasing process for your rental properties,
too. It all seems headed that way. The informational and educational component is just getting started, so it is difficult to analyze the impact this will have for our readers. In speaking with Alan Langston, ARPOLA’s president, the information provided will be extensive over time. The objective is to take common product needs for rental property and provide information on that product from the perspective of a rental property owner or operator. The outcome will be an informed purchasing decision based on criteria important to you and the class of rental property needing the work. This concept is different and addresses the basic need of buying the right solution for the issue you have. Example: What size motor does the garbage disposal need for your property? An informed decision may significantly lower the initial cost of acquisition and long term cost. Also, there is an informative article in their blog on smoke detectors. A timely addition considering the special product offer pricing available through the program. What the catch? There is only one, and it isn’t much of a catch. You have to be a member of ARPOLA. With ARPOLA’s dues being only $35 a year, it isn’t much of an inhibitor. The dues for owners that manage their own properties, property man-
agers and services provider are all the same - $35. During the launch of their partnership with The Home Depot you receive a $10 welcome gift card and a $20 Off Purchase of $200 coupon making the net cost to join ARPOLA only $5 if you can use the coupon. ARPOLA has an aggressive vision to aggregate a large percentage of rental property owners, property managers, rental property owners associations and landlord associations of single family and small multi-family rentals across the country, says Langston. They believe providing information to their members to help them make informed decisions specific to their needs will increase members’ effectiveness and directly improve their profit. Negotiating special pricing for best of class services and products is a direct offshoot of that vision and saves their members directly in cost and indirectly in reducing risk and exposure. Time will tell on how well they deliver, but their latest partnership with The Home Depot confirms they are serious about executing on their vision. By Luke Miller, Contributing Editor, Rental Housing Journal
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5 Strategies ...continued from front page “If the business is professionalized, there will be a way to deal with those issues. But too often, safeguards are not in place.” Hutcheson offers five top success strategies for family businesses: Keep the lines of communication open. Schedule regular family meetings to discuss issues of concern and topics such as business transition, business performance, and responsibilities. Include all of the family members, no matter where in the hierarchy their jobs fall – exclusion creates animosity. Create a family manual that lays out the ground rules for how the meetings will take place to ensure everyone gets a chance to be heard and impediments to communication are left at the door. Assign clear roles and responsibilities. As a family member, it’s natural to feel that everything is “my” business. However, not everything is every family member’s responsibility. Job definitions prevent everyone from
jumping in to tackle the same problem, and help ensure the business runs smoothly. Keep good financial data. The downfall of many small businesses and family businesses is not having solid data. Have a single point of contact to manage the finances. If you’re small enough, you can rely on a family member. Otherwise, you’ll need to bring in a qualified accountant. You may cringe at the cost for this, but the difference between a good accountant and a bad one is the difference between knowing exactly where you are on the road and trying to drive with a mudcovered windshield. Avoid overpaying family members. Market-based compensation is fundamental and essential. Parents in family businesses tend to overpay the next generation, or pay everyone equally despite differing levels of responsibility. Both are bad practices. The longer unfair compensation practices continue, the messier it will be to clean up
when it blows up. Don’t hire relatives if they’re unqualified. Competence is key. Family businesses are a conundrum: The family aspect generates unqualified love, while the business side cares about profits. Thus, family members will be hired to provide them with a job, even though they’re not qualified. The remedy is to get them trained, move them to a role that matches their skills, or have them leave. “More than 70 percent of all businesses are family businesses – they account for a significant number of new jobs and a large portion of the GDP,” Hutcheson says. “But that’s not the only reason they’re so important. “They’re motivated by profits, but also by other important considerations: pride in the family name, building something for future generations, philanthropy. For those reasons, they contribute in tremendous ways to social stability. They make our communities better.”
Henry Hutcheson is president of Family Business USA and specializes in helping family and privately held businesses successfully manage transition, maintain harmony, and improve operations. His newest book is “Dirty Little Secrets of Family Business: How to Successfully Navigate Family Business Conflict and Transition,” (http://dirtylittlesecretsoffamilybusiness.com); he’s also quoted in “Kids, Wealth, and Consequences” and “Sink or Swim: How Lessons from the Titanic Can Save Your Family Business.” Hutcheson grew up working for his family’s business, Olan Mills Portrait Studios. He studied psychology and has an MBA from Columbia Business School, and is a popular speaker at professional, university and corporate-sponsored events.
Compost Food ...continued from page 5 technical assistance or educational presentations for residents available only to larger properties (75+ units) on a limited basis. • Sign Up for the Apartment/ Condo Conservation E-News (online only)
This quarterly newsletter updates you on rebates, trainings, changes in programs or laws, and other useful information pertinent to the multifamily community. Sign up at www. seattle.gov/util/aboutus/news/ newsletters/ Change is challenging, whether it’s resident or staff turnover, shift-
ing demographics, or simply one more new law. SPU wants to support you being successful with recycling and composting so please take advantage of the free resources available. Be sure to stop by our table at TRENDS – look for the City of Seattle banner at booths 515 -517!
Marcia Rutan is the Multi-family Recycling and Composting Program Manager for the City of Seattle. Contact her at marcia.rutan@seattle. gov or (206) 684-3976.
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Colorado Guide to Establishing No-Smoking Policies in Multiunit Housing
Peer-reviewed by housing providers, this guide provides information about: • Benefits and legalities of no-smoking policies • Implementation and compliance techniques • Available resources and materials • Dangers of secondhand smoke
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Rental Housing journal Colorado • November 2014