Rental Housing Journal Colorado July 2016 by Professional Publishing, Inc

Rental Housing Journal Colorado

July 2016 - Vol. 8 Issue 7

3. Single Best Way for Property Managers to Get Promoted

5. Tips for Taking Better Photos When Marketing Your Property

4. Dear Maintenance Men – Mold, Flush Valve Seats and Preventative Maintenance for Heaters and Air Conditioners

7. Death In A Unit

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1Q16 Market Overview Multifamily Housing Update

You May Want to Rethink That Lease Renewal if You are Planning to Sell Your Small Plex

property values to increase significantly over the past several months prompting many owners to sell and exchange into larger multifamily properties or different asset classes. If you are considering a disposition, here are a couple things you need to be aware of:

Denver, CO Payroll Job Summary Total Payrolls Annual Change RCR 2016 Forecast RCR 2017 Forecast RCR 2018 Forecast RCR 2019 Forecast RCR 2020 Forecast Unemployment (NSA)

1,402.5m 38.9m (2.9%) 36.6m (2.6%) 25.7m (1.8%) 22.8m (1.6%) 24.4m (1.6%) 25.6m (1.7%) 3.3% (Apr.)

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1Q16 Payroll Trends and Forecast The Denver job market hot streak continued in the first quarter as DEN recorded among the fastest rates of job growth in the country. Expressed on a year-on-year basis metro headcounts increased at a 38,900-job, 2.9% pace, up from the prior quarter’s 37,900-job performance. Strength was observed across the board but business and leisure services exhibited the greatest momentum. The former sector added employees at a robust 9,100-job, 3.7% rate, while the latter added 9,100 positions over the past 12 months, the fastest annual gain since at least 1990. Seasonally-adjusted data also were constructive, showing a net 16,800-job January to March advance, equaling the existing one-quarter record job add. April’s 7,100 net gain was stronger still, exceeded in only one month since 1990. continued on page 2

f you haven’t raised your rents already, I’m sure the rent increase notices are in the mail. I’m also sure that some of you have tenants that you can’t wait for their leases to end so you

can move their rents up to market levels. However, before you sign any new lease agreements you need to make sure you are not planning on selling first. Rising rents have caused small plex (2-4 units)

1. Locking your tenant into a lease is also locking the value of your property into place. If you sign a one year lease at less than market rents you are asking a potential buyer to take on your existing tenants for a guaranteed period of time. It is not appealing to investors to buy an underperforming property at proforma values. The better plan of action is to leave them on monthcontinued on page 7

Boulder Rent Growth Losing Momentum

emand for U.S. rental apartments surged during the second quarter of 2016, gaining momentum after a sluggish performance in the first three months of the year, according to a new report from the RealPage.com MFP Research Division. The occupied apartment count across the nation’s 100 largest metros increased by 127,402 units in the second quarter, according to the report. This is one of the biggest quarterly demand totals posted throughout recent years, topping 2015’s second quarter demand volume by 23 percent. Furthermore, apartment demand from April to June well surpassed completions totaling 67,550 units, according to MFP Research. “Any concerns that the market couldn’t handle this year’s increase in apartment deliveries appear unfound-

ed for the moment,” Greg Willett, chief economist of RealPage, said in a press release. “As we’ve hit prime leasing season, the greater product availability—brought by sizable new supply—is revealing bigger product demand capacity. Initial lease-up for most new additions is registering at a very healthy pace, and we’re managing to squeeze a few more residents into an existing stock that’s been essentially full for quite a while.”

Apartment Occupancy Returns to Peak Level U.S. apartment occupancy inched up to 96.2 percent in the second quarter, regaining the bit of ground lost in late 2015 and early 2016. Current occupancy matches this economic cycle’s previous peak rate seen in continued on page 8

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Rental Housing Journal Colorado

1Q16 Market Overview

...continued from page 1

May was an anomaly as Denver suffered its third post-recession sequential month setback (-1,100 jobs). Weak May data notwithstanding, the RED Research DEN payroll model foresees further above average job creation trends in the metro area. The model uses the rate of change of US job and GDP(t-3) growth and metro personal income growth as independent variables to specify a strong 98.5% adjusted-R2 (S.E.=0.3%) equation. The model projects strong job growth in 2016 (2.6%), followed by moderate deceleration to the mid– to –high 1% range for the duration of the forecast interval. Growth is projected to average 1.5% annually, ranked 10th among the RED 46.

cupancy was highest for the fifteenth consecutive quarter, followed by classes -B (94.1%) and -A (93.4%). Class-C suffered a -190 bps y-oy decrease, however, largest among classes. Every submarket posted a y-o-y decrease save Lakewood North and South. Denver Central posted the low metric at 92.7%. RCR found that stock (+) and home price growth(t-3) (-) were the most statistically significant independent predictive variables for Denver demand. The resulting 94.1% ARS (S.E.=0.3%) model projects robust demand averaging 5,300 units annually through 2020. But supply is projected to exceed absorption by about 2,000 units per year, sending occupancy tumbling to the low 93% range by 2019.

Occupancy Rate Summary Occupancy Rate (Reis) 95.1% RED 50 Rank 29th Annual Chg. (Reis) -0.5% RCR YE16 Forecast 94.5% RCR YE17 Forecast 93.9% RCR YE18 Forecast 94.0% RCR YE19 Forecast 93.2% RCR YE20 Forecast 93.2%

Effective Rent Summary Mean Rent (Reis) Annual Change RED 50 Rent Change Rank RCR YE16 Forecast RCR YE17 Forecast RCR YE18 Forecast RCR YE19 Forecast RCR YE20 Forecast

1Q16 Absorption and Occupancy Rate Trends First quarter space demand decelerated to the slowest rate recorded since recessionary 2009. Tenants absorbed only 351 vacant units, down from 1,712 and 1,379 units in the previous and prior-year quarters, respectively (Reis). By contrast, developers were active, placing 1,273 units in service, down moderately from 2015’s 1,900-unit quarterly average. Consequently, occupancy fell -50 basis points sequentially and yearon-year to 95.1%, representing the lowest metric recorded by Reis since 3Q11. Axiometrics surveys of 470 stabilized same-store properties uncovered average occupancy of 94.2%, down -140 bps year-on-year. Class-C (94.8%) oc-

$1,065 6.3% 6th 5.5% 4.9% 4.6% 4.0% 4.8%

1Q16 Effective Rent Trends Denver rent growth slowed from its recent torrid pace, rising only $4 (0.4%) sequentially to $1,065, down from $13 (1.2%) and $15 (1.5%) gains in the prior and year earlier quarters, respectively, according to Reis. Likewise, the year -on-year comparison fell below 7% for this first time since 1Q14. Still, rents advanced at a healthy 6.3% y-o-y rate, ranking 6th fastest among the RED 50 metro peer group. Axiometrics same-store, stabilized property surveys exhibited similar characteristics. Rents slipped –0.7% sequentially, underperforming 1Q15’s 1.4% gain. Expressed on a y-o-y basis rent growth declined to 5.2% from 7.5% during 4Q15, and 12.6% in the year-ear-

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lier period. Class-A was most effected as growth decelerated to 2.2% y-o-y, slowest since 2009. Class-C recorded fastest growth (7.8%), while class-B increased 4.9%. Among submarkets, Westminster (8.4%) and Englewood (7.4%) soared but Downtown (0.3%) continued to struggle, rising only 0.3%. RCR’s Denver rent model uses sequential occupancy change (+), and payroll (+) and home price growth (+) as independent variables to achieve a 98.1% ARS (S.E.=0.5%). The point estimate forecast is exceptionally favorable, irrespective of expected occupancy declines. Rents are projected to grow at a 4.7% annual compound rate through 1Q21, ranking first among the RED 46 markets. Trade & Return Summary $5mm+ / 80-unit+ Sales 31 Approximate Proceeds $1,165mm Average Cap Rate (FNM) 5.2% Average Price / Unit $169,645 Expected Total Return 8.5% RED 46 ETR Rank 1st Risk-adjusted Index 6.39 RED 46 RAI Rank 9th

1Q16 Property Markets and Total Returns Trade continued at a blistering pace as a total of 31 large property sales were recorded during the seasonally soft first quarter, nearly replicating the record 33 trades observed in each of the prior two fourth quarter periods. Sales proceeds totaled $1.16 billion, down –24% sequentially but 14% higher than the

comparable quarter of 2015. The average price of sold units was $169,645, -4% relative to 4Q15, yet the 4th consecutive quarter in which the unit price average topped $160,000. Second quarter performance promises to be equally robust as 15 sales valued at $816mm were settled through mid-June. While investors exhibited a healthy appetite for older “value-add” properties in 1Q16, buyers focused on recent construction trophies in spring. Cap rates for new assets ranged from 4.5% to 4.7%. Value-adds fell in the mid-5% range with older class-C assets reaching as high as 6.1%. For purposes of estimating expected total returns RCR elected to trim the purchase cap rate proxy 10 basis points to 4.9%, At this level, using model derived rent and occupancy point estimates and a 5.6% terminal cap we estimate that an investor would expect to achieve a 8.5% 5-year, unlevered total return, ranking #1 among the R46 peer group. Model standard error is low, generating attractive risk adjusted returns as well: Denver ranks 9th on this basis.

By Daniel J Hogan

Director of Research djhogan@redcapitalgroup.com 614-857-1416 Office 1-800-837-5100 Toll Free

Publisher Will Johnson – will@propubinc.com Designer/Editor Kristin Flores – kristin@propubinc.com

continued on page 6

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Rental Housing Journal Colorado · July 2016

Rental Housing Journal Colorado

Single Best Way for Property Managers to get Promoted

What is the Single Biggest Secret to Being Promoted From Property Manager to Regional Manager, Vice President or CEO?

s EVP at MultiFamily Traffic, I have worked with thousands of property managers, regional managers, marketing managers, CEO’s etc. I have seen them come and I have seen them go. Recently my friends at Rental Housing Journal asked me what the number one trend is in our industry is. My answer is this, management companies are desperate for rock-star talent and when they find it they will promote that person as high as they possibly can. So, what is the secret to being promoted in our industry? The answer may surprise you, it’s not hard work and it’s not who you know. It’s all about how well you can manage the asset and how profitable you can make it. If you can outperform the other managers in terms of leases and lowering occupancy rates and show leadership your abilities are scalable, get ready for an amazing career, you are now in line to be CEO. So let’s breakdown what it means to get leases, increase revenue and scale. Let me start by telling you what it is not.

You will not be promoted if you bring in leases by: • Giving away the farm: Out of this world promotions that bring in unprofitable leases may improve your occupancy rates short term but it’s a sure fire way to get yourself locked into the role of assistant property manager for life. Giving stuff away tells your leadership that you care and can think outside the box but you are also telling them that you better be monitored by someone with experience or you will bankrupt the company. Not a good label to have associated with you. • One-one-selling: So you are the best at closing prospective renters? Awesome. You can show a unit, explain the benefits of living at the property and close the deal. These are all good skills to have. But, if this is what you become famous for, you have now made yourself a leasing agent for life. At best, you can hope for a “new title” and the added responsibilities of a “trainer” with little or no extra pay. Sales rock-star, get used to now doing your job and teaching the slackers how to do theirs with all hope for promotion quickly fading. Why would they take you away from the leasing office when talking to prospects is where you add value? • Being a shopaholic: You know the type, you may be the type, its ok. The first step is admitting you are a shopaholic. You have banners, you have balloons, you bake cookies and whenever a ILS rep comes into the office you buy whatever they are selling. If you want to be

promoted, you need to show leadership you have the ability to make tough decisions. Saying “yes” to everything is not making decisions its going on a shopping spree with the company’s money.

You will be promoted if you bring in leases by: • Getting the community in front of qualified renters looking to sign a lease without having to use promotion after promotion. The best way to do this is to make sure your property is on the first few pages in Google for as many of the top searched terms that renters in the area are typing in. Additionally, by using Google AdWords campaigns. The bottom line here is, if you are the first property a prospect finds, you don’t need promotions to try and change their minds about other properties they have visited. There are enough renters that sign a lease at the first property they visit for you to get to 100% occupancy without having to use promotions. You just need to be FIRST.

cisions. Imagine this conversation with the VP of Operations, “my strategy to improving the properties numbers was twofold. First, I wanted to increase occupancy, but second I wanted to reduce waste and overspending. Both numbers have an equal effect on the bottom line. I found success by boosting the properties visibility with the best renters and reducing unneeded or redundant expenses. For example, I used Google AdWords, a compressive $499 a month SEO plan and our top performing ILS. I systematically cut out all other unnecessary tenant acquisition expenses”. You just earned yourself a promotion! Matt Easton is EVP of MultiFamily Traffic, the only apartment SEO and AdWords management company that measures themselves by how many leases you sign.

Millions of online apartment searches are performed each day, resulting in new leases being signed. Is your website being found by renters? The fact is the first 20 results on search engines like Google receive about 97% of all clickthrough traffic. MultiFamily Traffic’s job is to make your property website one of these top results. By leveraging years of expertise in both apartment marketing and apartment portfolio ownership they will help your property GET FOUND online and your VACANT UNITS LEASED. MultiFamily Traffic is headquartered in Denver, Colorado. They have been in operation since 2003 and have helped thousands communities see great success in driving low cost leases to their properties. Most clients are so pleased with our service that they end up eliminating most other forms of lease-up services including expensive ILS subscriptions, saving the property thousands per month in apartment advertising fees. Matt can be reached directly at 303-803-7372

• Show leadership you are a leader, not a seller. Imagine meeting with the CEO, and you tell him or her that you are terrific at talking to renters, are you going to be promoted? No. Now imagine that same conversation but instead, you say; “I researched my community and discovered that we were over spending and underperforming because we were constantly playing catch-up due to the fact that prospects were not finding the property when they looked first. We were battling to win the war of “lookie-loos” who required the best deal to sign a lease. How I fixed this problem is, 1. I evaluated our online presence, 2. I isolated the issue and fixed it by 3. ranking the property for the top searched keywords organically as well as running a Google AdWords campaign simultaneously. This placed the property first in front of prospects allowing me to close all of the potential renters that signed a lease on the first visit, leaving our competing properties to waste resources fighting over the tire kickers.” If you are able to say this, welcome to the big leagues, you are on the path to CEO. • Show leadership you can make tough decisions rather than spend your way out of problems. If you get to 100% occupancy but you have shown leadership a laundry list of expenses needed to get there, you are not ready to lead. Real leaders make calculated de-

Rental Housing Journal Colorado · July 2016

Rental Housing Journal Colorado

DEAR MAINTENANCE MEN: Mold, Flush Valve Seats, Heating and Air Conditioning Preventative Maintenance

By Jerry L’Ecuyer & Frank Alvarez shoot your HVAC (a/c)units whether they are window, wall or central. Most A/C units fail or work improperly due to nonexistent or improper maintenance and not age. Cleaning is your A/C is the most inexpensive and critical maintenance procedure you can perform.

Dear Maintenance Men: I have noticed the base molding in the living room and leading into the kitchen is starting to come off the wall. The corners are splitting and it is starting to look very rough. What do you think is causing this? I don’t see any water anywhere. Randy Dear Randy: We would bet you do have a water problem somewhere. Chances are it will be traced to the refrigerator. There might be two issues you can look at. First check that the drain line for the defrost cycle is not clogged and two if the refrigerator has an icemaker, that the line is not leaking. Chances are the icemaker line has a hole or the drain line is leaking and the walls are sucking up the water. That is why you don’t see any standing water. Look under the fridge or pull out the fridge and look at the water line. It should be a small quarter inch nylon or polyethylene line; often they are white or translucent in color. If the water line goes though the cabinets to the kitchen sink; follow the line and look for rough spots or kinks in the line. Because these small water lines often leak for a long time before they are discovered, your walls may very well be saturated. The swelling baseboards are an indication they are full of moisture. The repair for this leak goes far beyond repairing the pinhole leak in the icemaker line. You will have to remove the drywall in order to allow the walls to dry properly. Chances are you will also have a major mold issue inside the walls. You should seek professional help for an evaluation of the potential mold issues involved. Please note when replacing icemaker or filter

Here is our 4-point check list: 1. Turn on the A/C and listen for unusual noises. lines, only use tubing specified for that use. Ask for icemaker tubing, it will be marked icemaker compatible.

Dear Maintenance Men: I have a toilet that runs every ten or twenty minutes. I have replaced the fill valve, the flapper valve and I have even scrubbed under the rim! In other words, all the items I can think of that are replaceable in the tank are new. What else should I be looking at? Sam Dear Sam: You replaced all the easy ones!! When all else fails on a toilet leak down issue; it is time to put on your rubber gloves and get an adjustable wrench. Chances are the problem lies with the Flush Valve Seat. The rubber flapper valve seals against the flush valve seat (the big hole at the bottom of the tank.) to either keep the water in the tank or let the water out of the tank. The seat may have a burr, crack or calcium deposits that allow a small amount of water to seep past the rubber flush valve. Sanding the seat to remove the burr or calcium deposit is a short-term solution, but rarely solves the problem for long.

A permanent solution is to replace the flush valve. Start by turning off the water supply, completely empty the tank and remove the water line. Remove the two or three bolts holding the tank to the toilet bowl. Turn the tank upside down and remove the large nylon or brass nut that holds the flush valve to the tank. Install the new flush valve. Be sure the tank bottom is clean and no debris gets between the new valve’s rubber gasket and the tank. Tighten the large nut on the outside of the tank and you are ready to reassemble the tank and bowl and put the toilet back into action. When reassembling the tank to the bowl, install new rubber washers and bolts.

Dear Maintenance Men: Can I get some pointers with preventive maintenance when it comes to heating and air conditioning? Mike Dear Mike: Heating and air condition or HVAC should be inspected at least twice a year or at the change of the major seasons such as summer and winter. Prior to summer or winter seasons, it is essential to properly inspect and trouble-

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2. Inspect/clean or replace filters. Filters should be cleaned or replaced at the beginning of each major season, such as before summer and before winter. 3. Clean & repair damaged or bent fins. (They can constrict proper air flow and decrease the cooling capacity of the A/C unit. 4. Clean out all dust and debris inside of the A/C pan or coils. On a central HVAC unit: cleaning or replacing the main and return filters, may be the limit on a DIY cleaning. A qualified technician should do any other work on a central heating and air unit. Bio: Please call: Buffalo Maintenance, Inc for maintenance work or consultation. JLE Property Management, Inc for management service or consultation Frankie Alvarez at 714 956-8371 Jerry L’Ecuyer at 714 778-0480 CA contractor lic: #797645, EPA Real Estate lic. #: 01460075 Certified Renovation Company www.BuffaloMaintenance.com www.ContactJLE.com www.Facebook.com/BuffaloMaintenance

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Rental Housing Journal Colorado · July 2016

Rental Housing Journal Colorado

Tips for Taking Better Photos When Marketing Your Property

By Katrina Langer and Jeffrey O’Connor

ccording to Buildium’s State of the Property Management Industry Report, over two thirds of property owners feel unequipped to effectively market residential properties. When it comes to marketing a property, this can include a variety of tactics, whether it’s listing properties on websites or working with clients and brokers for referrals. While property managers and landlords might have different approaches to how they market their rentals, it goes without saying that the ability to show off a residential property through photos is the foundation of vacancy marketing. That being said, there are a few important things to keep in mind when taking photos for your property listings. While it would be nice to hire a photographer, it’s not always within the budget of a property manager, landlord or owner. Luckily, smartphone providers such as Apple, Motorola, Nokia and Samsung have improved their cameras’ specs in recent years, and newer phones have great cameras. For example, the 2007 iPhone was only 2 megapixels, while the iPhone 6s comes standard with a 12 megapixel camera—a go-to for professional photographers. But, again, you don’t have to be a professional to effectively market your real estate. This article will dive into tips and best practices for using a smartphone to take property photos.

Get the Right Equipment While most phones are equipped with almost professional-grade camera technology, some of the top-rated phones when it comes to design, function and camera specs include: Apple iPhone 6s, HTC One M9, Samsung Galaxy S7, Google Nexus 6P and Motorola Moto X Pure Edition. Additionally, property owners and managers can download new camera apps to achieve great results, including Cocologics ProCamera (iOS), Open Camera (Android) and Lumia Camera (Windows). Another great piece of inexpensive equipment to look into is an aftermarket wide angle lens for your smartphone (about $100). Wide angle shots are essential for great property photos, as it widens the field of view, making rooms look bigger. Additionally, a tripod or shutter release will help to stabilize the camera to help avoid shaky and/ or crooked shots. Another great way to straighten your shot is to compare the vertical lines within the room (such as a doorway, window or corner) with the grid settings in your camera app.

Set up the Perfect Shot Truly great shots are usually taken in the middle of the day, when the sunlight is softer than it is at sunrise or sunset, when it streams directly through the windows, creating shadows and bright spots. Midday light is evenly distributed throughout the room, creating a warm, welcoming atmosphere. To get the most out of this light, turn off the flash, open the curtains, and keep the blinds pulled down. When setting up your shot, hold the camera about three or four feet from the floor, and try to shoot from the corners to get as much of the room in the frame as possible. Don’t forget to take exterior shots, too. It’s best to start these in the early afternoon, when the sun is high overhead. And, be sure to take at least one shot from each angle to provide context for the property within the neighborhood. Editing and Uploading Making simple edits to property photos doesn’t require a professional editor. There are free apps for both iPhone and Android users, such as Snapseed and Adobe Lightroom, that offer the ability to adjust verticals, exposure, white balance and sharpness. With these tools, the editing process should only take around 30 to 60 seconds per photo Once the photos are ready to go, make sure to save your work so they can be easily accessed for marketing materials. Websites such as Google Drive and Dropbox can make this a seamless process, and you can share images easily with links you can send to colleagues and prospective buyers. While professional photographers are a nice-to-have, it’s not always a realistic luxury for property managers or landlords when they’re looking to quickly turn over a property. With these tips and tools that can be used at little to no cost, the images needed for marketing properties can be easily taken, edited and shared as needed. By Katrina Langer and Jeffrey O’Connor Katrina Langer is a content marketer at Buildium with more than five years of experience in writing and SEO, and has worked with a number of Fortune 500 companies to improve their website experience. Jeffrey O’Connor is a Stoneham, MA based commercial photographer specializing in high end residential real estate, product, and food photography. His portfolio includes work for small and large clients across New England and Canada, and as far away as Seattle, WA, and Sydney, Australia. He lives and works out of his home office and studio with his wife, Erin, and their dog, Laika.

Rental Housing Journal Colorado · July 2016

Rental Housing Journal Colorado

1Q16 Market Overview

...continued from page 2

The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice, or recommendations to buy or sell currencies or securities or to engage in any specific transactions. Information has been gathered from third party sources and has not been independently verified or accepted by RED Capital Group. RED makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. RED cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third party sources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.

Rental Housing Journal Colorado Âˇ July 2016

Rental Housing Journal Colorado

Death in a Unit

By Cliff Hockley, President, Bluestone & Hockley Real Estate Services

t is not uncommon to have a resident pass away at a property, whether in their apartment, on the grounds or even in a hot tub or pool. Sometimes, the on-site manager can anticipate this in advance, if a tenant is elderly or ill for example. Good on-site managers make sure to check in on such tenants and will notice if the tenant has not been seen or heard of recently. Other deaths are sudden or even violent and require training to handle properly. If you believe that one of your tenants might be in trouble or may have died you can call the police to do a wellness check. A tenant may be incapacitated inside a unit and unable to call for help. If the police find a body they will call in the coroner, investigate the cause of death, and notify the next of kin. If you discover a body, you can check for signs of life but do not disturb anything in the unit or vicinity. If a person is non-responsive, call 911. If you are an onsite manager also call your supervisor and your supervisor should notify the property owner. The police will request any information on the deceased that the building management might have, so their file should be readily accessible. Check for emergency contact information as the police will use this to identify the next of kin. Managers should ask the police to let them know once the next of kin have been notified and also request a copy of the police report for the tenant files.

Leasing a property after a death Once the body has been removed the management may not be given access to the unit until the coroner and the police have completed their investigations.

Rethink That Lease Renewal to-month tenancy and continue to increase rents anyway. 2. You are turning away owner occupy buyers. The majority of offers that we are seeing on small plex properties are from owner occupy buyers using FHA and VA loans to buy. If you have your units tied up in leases, they may not be able to move into the property for several months or a full year causing these buyers to look elsewhere. These buyers are usually willing to pay more than the typical investment buyer and If you are looking to achieve retail values, these buyers may well be your best audience. For new tenants, consider a month-tomonth agreement so that if you do encounter an ‘owner occupy’ buyer they will be able to evict the tenants within a reasonable amount of time and move in to the property. There are a few items you should consider if you are trying to make your property more appealing to these owner occupy buyers aside from passing on unwanted leases: 1. Think about your small plex the same way you would if you were selling your private residence. I am not suggesting that you stage the property or have open houses.

The authorities will advise when it is O.K. to re-enter the apartment. When you have been granted access to the unit you must work quickly to prevent any permanent damage. If there are any pets the emergency contact needs to know that they require care. If no one is available to take care of the pets animal control should be called. The unit should be cleaned as soon as possible. Any items that are contaminated with bodily fluids will need professional cleaning or removal, (carpeting, flooring, chairs, mattresses, walls, sheetrock). Jeff Darr, owner of Crime Scene Service in Monroe, NC noted in a recent article that, “A decomposed body is one of the worst health hazards, time and temperature influence decomposition, and the fatty tissue in a human body is like kerosene in that it won’t evaporate like gasoline will. It’s a greasy substance and it absorbs into the carpet and the floor. If someone dies in bed, the fluids can seep through the mattress, the box spring, the carpet, the floor—and sometimes you even have to pull up the sub-floor; the hepatitis B or C virus can live outside the body for seven days.” His and other death cleaning companies have chemicals that kill that hepatitis, MRSA, and staph. Check on the property or tenant’s insurance policies if the coverage includes this service. Any cleaning efforts may be hampered by the presence of the tenant’s personal affects, and the process of relinquishing this property must follow specific instructions established by law. It is a good idea to check with an attorney to be sure that you follow the process correctly.

Public notice Abandoned property rules require the posting of an abandonment notice. In Oregon, the abandonment rights and responsibilities apply to an heir or devisee; any personal representative named in a will or appointed by a court; and any person designated in writing by the tenant to be contacted by the landlord in the event of the tenant’s death. The abandonment notice must be mailed to ALL of the following three parties: the deceased resident, at the rental address; any heir, devisee, personal representative or designated person known by the landlord, and the “Estate Administrator of the Department of State Lands” You must allow the heir, devisee, personal representative and estate administrator the opportunity to remove the personal property if they contact you within 8 days of mailing the notice and provide reasonable evidence that they are in fact the heir, devisee, or personal representative or estate administrator. With the help of the police, establish a list of individuals authorized to enter the unit. Request the ID of anyone who arrives to remove the personal items to verify their identity. If they need a few extra days, that’s fine, but establish a date in which the unit will be back to re-rent. If the next of kin want to continue to control the unit, rent will need to be paid. Also, if the tenant left unpaid rent, notify the estate of this and when the next rent payment will be due. If property is unclaimed it should be auctioned and the proceeds sent to Department of State Lands Unclaimed Property. If a balance is less than $5,000

that amount can be counted toward tax losses. If the balance owed is over $5,000 you may wish to pursue the estate. Some circumstances require a public response. In the case of a violent death, consult the police on the proper procedure to inform residents. Make the response timely to calm fears, within 48 hours. You may also want to organize a neighborhood watch or ask the police to drive through more often for the weeks after the incident. In higher crime areas, it may be a good investment to hire a security company to increase the visible security on the property. In cases where a long term and/or much loved tenant has passed you may want to express your condolences to the surviving family by sending a sympathy card and allow fellow tenants to pay their respects by staging a community get-together honoring the life of the tenant.

Summary A death in a unit is typically an unplanned event, often a traumatic one in cases of a suicide or a murder. This creates an environment of uncertainty for the on-site manager, the neighboring tenants and the property owner. Communication is important; so is humanity. Though the unit may remain vacant longer than anyone would like, showing compassion to family members who may not have anticipated the travel or storage of the deceased’s property, not to mention the loss of their loved one, is more important that a timely turn.

...continued from page 1 However does it have curb appeal and does it look livable? Things that may not scare away a seasoned multi-family investor have the ability to stop an owner occupier in their tracks before they ever even write an offer. You might need to hire a landscaper, or spend a few dollars on paint to make sure you give the right first impression. 2. Does your property have deferred maintenance that needs to be addressed? Items such as peeling paint, damaged exterior, missing smoke alarms or co2 detectors may prevent a FHA or VA loan from funding until they are fixed. Make sure you are asking your broker what you need to do to get the property in condition to qualify for a government backed loan.

there is usually a rent increase that comes with new ownership. It is a great time to be a small plex property owner. If your plan is to hold your properties, rents are on the up and cash flows are looking better. If you are planning on selling your property take advantage of these prime market conditions. It is not every day that residential buyers cross over into the multifamily market.

By Chris Salaz Chris Salaz is Small Plex Broker at SMI Commercial Real Estate, LLC . Please contact Chris if you would be interested in receiving SMI’s free bi-annual newsletter which includes the most comprehensive rent and vacancy survey in the mid-valley, the SMI Apartment Update. 503.390.6060 Chris@smicre.com

3. Don’t let your broker put up For Sale signs in the yard or show your units without an accepted offer. The last thing you want to do is parade a large number of looky loos through the property disturbing your tenant’s peaceful enjoyment of their home. Plus, what do most tenants do when the find out the property they rent is for sale? They immediately start looking for a new place to live! Tenants know

Rental Housing Journal Colorado · July 2016

Rental Housing Journal Colorado

Boulder Rent Growth Losing Momentum ...continued from page 1 the third quarter of last year. The only time occupancy has been tighter was at the height of the tech boom in 2000 and early 2001. “Occupancy remains stronger than the norm during past periods of substantial construction,” Willett said in the release. “The fact that few young adults are opting for home purchases right now is helping the occupancy performance. Economic growth is bringing new renters in through the front door. At the same time, the number of existing residents exiting out the back for other housing options is limited.”

Rent Growth Remains Robust Typical rents for new residents climbed another 1.8 percent during the second quarter, taking the price increase seen over the past 12 months to 4.6 percent. Monthly rents for new resident leases now average at $1,282. Influenced by the increased volume of new supply that apartment owners and operators have in the initial leasing stage, average annual rent growth has slowed modestly from this economic cycle’s peak growth of 5.6 percent, seen in the third quarter of 2015. However, today’s annual rent growth pace is still very substantial compared to the long-term historical norm that runs just under 3 percent. “Annual rent growth in the range of 4 to 5 percent is an unprecedented result six years into a growth cycle,” Willett said in the release. Annual rent change has been positive for 24 consecutive quarters, with the average price increase during that period registering at 3.8 percent. For comparison, the mid-2000s growth cycle lasted for 19 quarters, and annual rent growth averaged 2.8 percent in that span. Among individual large metros, Sacramento is now the country’s rent growth leader for the first time ever. Pricing for new-resident leases in Sacramento climbed 9.7 percent during the past year. The following list shows current top performing metros for annual rent growth. Leaders in Annual Rent Growth for New Residents Year Ending in the Second Quarter 2016 Rank Metro Rent Growth Sacramento, CA Portland, OR Seattle-Tacoma, WA Phoenix, AZ Nashville, TN Oakland, CA Fort Worth, TX

9.7% 8.8% 8.2% 7.6% 7.2% 7.2% 6.8%

Los Angeles, CA Riverside-San Bernardino, CA Fort Lauderdale, FL Las Vegas, NV San Diego, CA West Palm Beach, FL Atlanta, GA

6.7% 6.7% 6.6% 6.4% 6.3% 6.2% 6.0%

Select Metros Losing Steam While annual rent growth remains near this cycle’s peak levels in most metros, pricing power is cooling meaningfully in a handful of spots.

After San Francisco, Oakland and San Jose metros, experienced huge rent growth for several years, the size of price increases is coming back to levels that appear more realistically sustainable now that the region’s building activity has climbed to record volumes. Similarly, a substantial amount of new product additions have slowed Denver-Boulder’s annual rent growth pace, after record price increases occurred earlier in this economic cycle. Importantly, the Bay Area metros and Denver-Boulder are posting strong apartment demand. Increased deliveries haven’t resulted in vacancy issues. Thus, while rent growth has slowed from the very robust levels achieved recently, price increases are still strong relative to the long-term norm. In contrast, Houston’s current pricing is weak, not just a slowdown from previous results. Rent growth is close to disappearing due to slowing economic growth occurring alongside aggressive apartment construction. In fact, actual price cuts have emerged in several of the neighborhoods adding the most supply.

Markets Losing Rent Growth Momentum Second Quarter 2016 Vs Second Quarter 2015 Annual Rent Growth Metro Q2 2016 Growth Q2 2015 Growth Momentum Change San Jose, CA San Francisco, CA

3.6% 4.7%

10.0% 9.9%

-640 basis points -520 basis points

Oakland, CA Denver-Boulder, CO Houston, TX

7.2% 5.6% 1.1%

11.8% 10.2% 5.0%

-460 basis points -460 basis points -390 basis points

Peak Deliveries Lie Just Ahead A recent slowdown in the number of multifamily housing units authorized by building permits suggests that the apartment construction volume should soon cool slightly. For now, however, ongoing building remains in line with the very high levels posted over the past year or two. Properties totaling 534,743 units are under construction in the nation’s 100 largest metros. “With so much additional product finishing very quickly, the apartment leasing environment could become more competitive in the short-term,” according to Willett. “A large block of new supply is scheduled to finish, just as demand registers its routine seasonal slowdown in the winter months. However, barring a pronounced stumble in economic growth, there’s nothing suggesting future stock is going to cause big-picture problems.” For further information on MPF Research, visit https://www.realpage.com/mpf-research/

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503-933-6437 Rental Housing Journal Colorado · July 2016