Rental Housing Journal Colorado March 2017 by Professional Publishing, Inc

Rental Housing Journal Colorado

March 2017 - Vol. 9 Issue 3

3. Consumer Confidence in Housing Hits All-Time High

5. Dear Maintenance Men - Sidewalks, Fencing and Toilets

4. Survey on Home Buying, Millennials and Boomers

7. The World is Searching for Reliable Property Managers

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Millennials Buying in the Suburbs

6 Keys to Writing A Lease The Right Way

By John Triplett, Rental Housing Journal

he webinar was by Buildium. com and run by Darcy Jacobsen, Director of Content, and Sam Driver, Product Director, and an experienced property manager at the company. During the webinar, they polled the group of property managers on a number of questions, and the first one was:

s the millennial generation ages into adulthood, they are choosing the suburbs over urban neighborhoods, skipping the traditional starter home and staying in the same city when they move. Almost half of millennial homeowners live in the suburbs, and the majority stay in the same city when they buy a home, revealing their home-buying preferences now that they are the largest generational group in the housing market. According to the 2016 Zillow® Group Report on Consumer Housing Trendsi, millennials made up 42 percent of home buyers last year, more than any other generation, with most of them buying for the first time. Millennials, those ages 18-34, associate homeownership with the American Dreamii and believe that buying a home is a good financial investment, even more so than Generation X and baby boomersiii. But until recently, they were delaying homeownership, and it was difficult

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How many different leases do you use in your business? “The most common is one lease, especially when the units are often similar. And, especially with smaller operators, one lease works.” Driver said. “However we are finding it is not uncommon to shift to a two- or three-lease template model, especially if there are significant differences in the properties. If you are an owneroperator, you tend to have one. If you are managing for different owners, who continued on page 2

U.S. Home Flipping Increases 3 Percent In 2016 To A 10-Year High

Average Gross Flipping Profits and ROI at New Record Highs

TTOM Data Solutions, curator of the nation's largest fused property database, today released its 2016 Year-End U.S. Home Flipping Report, which shows that 193,009 single family homes and condos were flipped — sold in an arms-length transfer for the second time within a 12-month period — in 2016, up 3.1 percent from 2015 to the highest level since 2006, when 276,067 single family homes and condos were flipped. Home flips in 2016 accounted for 5.7 percent of all single family home and condos sales during the year, up from 5.5 percent in 2015 to a three-year high

but still well below the peak in 2005, when 338,207 single family homes and condos were flipped representing 8.2 percent of all sales. The report also shows that 126,256 entities — including both individuals and institutions — flipped homes in 2016, up less than 1 percent from 2015 to the highest number since 2007, when 143,266 entities flipped properties. Meanwhile, the share of flipped homes that were purchased by the flipper with financing increased to an eight-year high of 31.5 percent in 2016 while the median age of homes flipped increased to 37 years — a new high going back to

2000 — and the median square footage of homes flipped decreased to 1422 — a new record low going back to 2000. "Home flipping was hot in 2016, fueled by low inventory of homes in sellable or rentable condition along with a flood of capital — both foreign and domestic — searching for the returns and stability available with U.S. real estate," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "The combination of more home flips and a greater share of financing for flip purchases resulted in a 18 percent jump in the estimated dollar volume of continued on page 6

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6 Keys to Writing a Lease ...continued from page 1 have different kinds of units, then you tend to see more” types of different leases, he said.

The poll showed that: • 62% use a one-lease template • 30% use multiple lease templates • 5% use a custom lease by the owner • 2% custom lease by the tenant Do you know the difference between a lease and rental agreement? A rental agreement is for short term tenants (often 30 days). It is usually automatically renewed at the end of the period unless either the renter or landlord ends it with written notice. These are month-to-month rentals, and the landlord can change the terms with notice. A lease is a contract that grants a renter the right to occupy a rental unit for a specific period of time (often 6 months, or a year) as long as the tenant complies with the terms. The landlord cannot raise the rent or change those terms unless the tenant agrees.

Will you deal with short-term rentals? Qualities of a good lease “One of the things that has been hot in the industry lately is really how to handle a very short-term tenant,” Driver said. “This is the sort of Airbnb problem that has been out there for a long time or the vacation rental. That is something worth thinking about when you are drafting an exemption, an exclusion or a whole new lease that describes the behavior for any short-term leasee.” “These laws are changing quickly and it is well worth your time keeping abreast of the changes,” he said. What about the issue of multiple tenants who may or may not be related? “Another one is this number of tenants problem that is worth addressing directly. When you see the opportunity, especially in a student housing situation, to be able to charge for multiple tenants there are some things to consider,” Driver said. “What we have found the courts will support is the number of bedrooms times two persons, plus one extra person as adults that meet that test. And so it is not unreasonable for your lease to actually contain language that describes that so you know that is very defensible.” Rent plus what other fees and utilities? Driver said from a tenant perspective, they want to know, “How much am I going to pay you each month and what is that covering?” “We will see on the utility side this becomes a little tricky, especially for housing that was originally a condo and then bills you would not normally see in a rental – water and sewer – that are starting to show up as extra utilities. We do not have a lot of good case law that breaks that down, so we end up treating them all like normal utilities. So the more detail you give the better. The thing that we find that gets people into trouble with utilities and fees in general is not being clear enough about what they exactly mean. “ “A good example of what is avoid is something like, ‘I am going to charge you an extra $50 a month for a certain amount of electricity, then you have to pay overage fees after that.’ That creates a huge logistical nightmare for you and your team to manage. So we definitely want to shy away from that,” Driver said. Penalties, violations and fines “We are seeing what used to be in homeowner association or community areas, start to creep more into rental areas. You need to condition people’s expectations and the way you do that is with the lease. So if you spell out all the penalties and fines you put yourself in a great situation so you can see this as a source of revenue and as a source of 2

control over the quality of the residents you get in your units,” Driver said.

Pet policies, smoking policies “This is an area that has seen a radical shift over the past couple of years. It had been most common for people to get pet deposits if they took pets at all. A pet deposit basically means ‘I am retaining some money in escrow and I will return if it is unused.’ Bummer if you are in California because that is heavily restricted on what you can charge” and the deposit you can get, Driver said. There is some worry there that a pet deposit and a security deposit can overlap. “So there are a bunch of things that are happening, some of which are now being described as “pet fees” which are monthly recurring fees that have no expectation of being repaid. But increasingly pet rent. And there are very few jurisdictions in the U.S. that actually address this. But it effectively becomes another class of rent that can be charged. This is great because it is basically well understood as rent and you are going to see nice recurring revenue that you may or may not share with your owners. It takes care of the pet habitation but does not compromise your security deposit later. So keep an eye out for some of those things in your jurisdiction and talk to your fellow property managers and your attorney friends. Because this pet rent thing is coming on strong. We are seeing it rise up everywhere,” Driver said. Maintenance fees and court fees property managers may collect Leases may have a clause that allows managers to collect maintenance fees. Depending on who the management company uses for repairs and property maintenance, they may charge a markup for cost of services and keep the difference from the owner as management income. Court fees are another area to collect if a property manager has to bring an action against a tenant to collect late fees or an eviction. “Describe these fees in detail in your leases so you have a reasonable expectation of being able to collect them. Hopefully this should mirror what is shown in your management agreements with your owners,” Driver said. They did another poll of property managers on: Where did you get your lease? “I ended up drafting my own, with lawyers,” Driver said. “I did that because I wanted to have a clear idea how lease clauses worked because I was new to it. And so I really just wanted to go through it line by line and clause by clause to make sure that it was doing what I wanted,” Driver said. “What I can report is that is relatively uncommon,” he said. “There are so many sources of leases out there that people basically see this as a commodity and say, ‘Yeah I can find one online or my buddy’s got one.’ “ What people said in the poll about where they got their lease: • 34% from MLS or real estate association • 29% drafted my own with lawyer • 17% online search or service • 15% from colleagues or partners • 5% from a government agency The MLS is the most common in the industry. But Driver recommends drafting your own with a lawyer. “There is so much opportunity in your lease to improve your business and potentially your day-to-day operations,” Driver said. “One of the things we often hear is the terms of a lease, and variation between leases, is that it can make a fair amount of work for the office during rent collection and violation, and potentially even down the road to eviction if there is a lack of consistency in the lease,” Driver said.

The 7 basics of the lease agreement • Identity of the property manager • Address of the property • Description of the property, storage, parking, etc • Additional facilities included gym, pool, etc • Names of all tenants • Limits on occupancy tenants and minor children • Put in a note that the lease contract represents entire agreement- eliminates verbal deals How to handle future rent increases Next when it comes to lease terms there are many standards, such as which day you collect each month and other items. But one item to think about is future rent increases. “One of the things that is often a real challenge is the ability to develop a relationship with the tenants around future rent increases. You want to be friendly enough with your tenants and have them like you, but not enough so you feel badly raising the rent,” Driver said. “Many of us have been in the situation where the resident has a story, and we feel sympathetic, and makes us question whether we can raise those rents. Think about using this lease as a guideline to help with that. We are not friends. We are in business together. Setting up that expectation and that attitude can be very helpful for your team and the backstop is always the lease,” Driver said. Occupancy and guest limitations While you do not want the lease to go on and on, “It is important to deal with occupancy and guest limitations. There is now a generally accepted occupancy limit as mentioned above was the two times each bedroom, plus one adult. This is the precedent from most jurisdictions,” Driver said. “If you don’t specify this, you are starting behind the eight ball,” Driver said. “You are not going to be in a position to enforce much if you have not set a standard to which they have agreed to and signed on the dotted line. So the best thing you can do is specify all the things for which you do have some worry and occupancy and guest limitations are definitely going to be one of them. You want to be able to say ‘those are the agreements in our community’ and ‘no can do’ otherwise,” Driver said. “Where it gets a little tougher is around behavior control,” Driver said. He advises to be consistent with all tenants and enforce with all tenants the same rules. Otherwise you could open yourself up to a Fair Housing Act charge “if you let one tenant slide, and then enforce it on another in another situation,” he said. “Define the rules that you (as a property manager) feel comfortable with that are going to protect you and your business, particularly from fair housing violations, but also from extra expense. And then, just consistently apply them,” Driver said. Should the lease be between the tenant and the owner, or the tenant and the property manager? “It depends on the nature of the relationship between the owner and the residents,” Driver said. “So the short answer is preferably, unless we are an owner-operator, it should be with the property manager. And the reason to do that is that you, as a part of your service to the property owner, is to provide a buffer and isolation, particularly for an investor client. So there are some activist owners who want to get involved in your business, but I think most of us do this because we don’t want to work for somebody else. And so the default answer is the lease should be with the property manager” who is:

• Generally more aware of what is changing in the law than the owner • More aware of what is happening in the neighborhoods • More aware of the competition for good tenants “It is far more likely that you as the property manager are going to get the outcome you want if you sign and manage the leases with the tenants,” he said. But some states may require the lease be in the owner’s name, so you need to check state laws he said.

Sloppy payers as a revenue source “Late fee policies, while kind of an unfriendly concept, are actually a great source of revenue for a lot of property managers. Some share them with owners but many actually keep them as sort of a cost of doing business and it is a good revenue source for their property management business,” Driver said. “You are looking for what we call sloppy payers. These guys are a good thing as long as you do not have too many of them. These are the folks who always pay in month, but frequently don’t pay on time. So you reliably collect a late fee. It can be a pain in the neck to wait to collect that and make sure you have enough to pay your bills. But if you have enough of a float and enough of a cash flow, then we see some property managers plan for 20 percent to 30 percent sloppy payers across their portfolio. And that is all money in their pocket. “They are often not sharing these with the owners basically saying, ‘This is the fee I charge because I have to track them down and collect money.’ And so by building a stable business where you can tolerate the lateness, this ends up becoming relatively low-risk income. And, you can start designing your resident portfolio for it. It does require consistent enforcement of the late-fee policy,” Driver said. 6 qualities of a great lease • Accessible, such as electronic leases • Consistent – legal protection • Transparency – ability for tenants to pay in multiple methods • Profitable – fees and fines • Security – check in with your lawyer • Ethical – fair housing and security deposits About Buildium.com

Buildium.com and All Property Management are the chosen solution of more than 12,000 property managers and HOAs. Keep up with lease information and all the changes in the laws with our weekly email newsletter. Sign up here.

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Rental Housing Journal Colorado · March 2017

Rental Housing Journal Colorado

Consumer Confidence in Housing Hits All-Time High

News Provided by Fannie Mae

he Fannie Mae Home Purchase Sentiment Index® (HPSI) increased by 5.6 percentage points in February to 88.3, a new alltime high. Five of the six components that comprise the HPSI were up, and three hit record highs. The net share of Americans who reported that now is a good time to buy rose 11 percentage points, while the net share who believe that now is a good time to sell rose 7 percentage points. Consumers also demonstrated greater confidence about not losing their jobs, with the net share rising 9 percentage points. On net, the share of respondents reporting that their household income is significantly higher than it was 12 months ago increased 4 percentage points. Additionally, more Americans expect home prices to go up, with the net share rising 3 percentage points. The net share of those who think mortgage rates will go down over the next 12 months remained unchanged for the third consecutive month. "The latest post-election surge in optimism puts the HPSI at its highest level since its starting point in 2011. Millennials showed especially strong increases in job confidence and income gains, a necessary precursor for increased housing demand from first-time homebuyers," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Preliminary research results from our team find that millennials are accelerating the rate at which they move out of their parents' homes and form new households. However, continued slow supply growth implies continued strong price appreciation and affordability constraints facing millennials and firsttime buyers in many markets."

Home Purchase Sentiment Index – Component Highlights Fannie Mae's 2017 Home Purchase Sentiment Index (HPSI) increased in February by 5.6 percentage points to 88.3. The HPSI is also up 5.6 percentage points compared with the same time last year. The net share of Americans who say it is a good time to buy a house rose 11 percentage points to 40%, rebounding strongly from last month's survey low. The net percentage of those who say it is a good time to sell increased by 7 percentage points to 22%, reaching a new survey high. The net share of Americans who say that home prices will go up increased by 3 percentage points in February to 45%. The net share of those who say mortgage rates will go down over the next twelve months remained constant for the third consecutive month at -55%. The net share of Americans who say they are not concerned about losing their job rose 9 percentage points to a new survey high of 78%. The net share of Americans who say their household income is significantly higher than it was 12 months ago rose 4

percentage points to 19% in February, continuing the increase from January and reaching a new survey high.

About Fannie Mae's Home Purchase Sentiment Index The Home Purchase Sentiment Index (HPSI) distills information about consumers' home purchase sentiment from Fannie Mae's National Housing Survey® (NHS) into a single number. The HPSI reflects consumers' current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers' evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier. About Fannie Mae's National Housing Survey The most detailed consumer attitudinal survey of its kind, Fannie Mae's National Housing Survey (NHS) polled 1,000 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). As cell phones have become common and many households no longer have landline phones, the NHS contacts 60 percent of respondents via their cell phones (as of October 2014). For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares

Rental Housing Journal Colorado · March 2017

monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future. The February 2017 National Housing Survey was conducted between February 1, 2017 and February 21, 2017. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.

Detailed Hpsi & Nhs Findings For detailed findings from the February 2017 Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the

site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results. To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here. Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae. com and follow us on twitter.com/ fanniemae. SOURCE Fannie Mae

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Survey on Home Buying, Millennials and Boomers

n improving economy, multiple years of strong job growth and the notable increase in home values in most markets fueled a greater share of home buying from Generation X households over the past year, according to a new survey on home buying from the National Association of Realtors. The National Association of Realtors 2017 Home Buyer and Seller Generational Trends study, which evaluates the generational differences of recent home buyers and sellers, found:

Highlights of the survey on home buying: • One consistent finding for the last four years has been that buyers 36 years and younger (Millennials/ Gen Yers) is the largest share of home buyers at 34 percent. • 46 percent of buyers 36 years and younger that had debt reported having student loan debt with a median loan balance of $25,000. • While only 27 percent of buyers 37 to 51 have student loan debt, they have the highest median balance of debt at $30,000. • Buyers 52 to 61 are more likely to buy a multi-generational home. • Buyers 62 to 70 typically move the

longest distance at a median of 25 miles and are least likely to make compromises on their home purchase. • All generations of buyers continue to consult a real estate agent or broker to help them buy and sell their home. Much of the spotlight in recent years has focused on the several challenges millennials are enduring on their journey to homeownership. According to Lawrence Yun, NAR chief economist, lost in this discussion are the numerous Generation X households who bought their first home, started a family and entered the middle part of their careers only to be rattled by job losses, falling home values and overall economic

uncertainty during and after the Great Recession, according to the release. This year's survey reveals that debt and little or no equity in their home slowed many Gen X households from buying sooner. Recent Gen X buyers delayed buying longer than millennials because of debt, were the most likely generation to have previously sold a distressed property and were the generation most likely to want to sell earlier but couldn't because their home was worth less than their mortgage. Furthermore, Gen X buyers indicated they had the most student loan debt ($30,000). "Gen X sellers' median tenure in their previous home was 10 years, which puts many of them selling a property

they bought right around the time home values were on the precipice of declining," Yun said in the release. "Fortunately, the much stronger job market and 41 percent cumulative rise in home prices since 2011 have helped a growing number build enough equity to finally sell and trade up to a larger home. More Gen X sellers are expected this year and are definitely needed to ease the inventory shortages in much of the country." The uptick in purchases from Gen X buyers this year (28 percent) was the highest since 2014 and up from 26 percent in 2016. Millennials were the largest group of recent buyers for the fourth consecutive year (34 percent), but their overall share was down slightly from a year ago (35 percent). Baby boomers were 30 percent of buyers, and the Silent Generation made up 8 percent. Survey of home buying generational breakdowns: • Younger millennials (ages 26 and under) • Older millennials (ages 27-36) • Generation X (ages 37-51) • Younger boomers (ages 52-61) continued on page 8

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Rental Housing Journal Colorado · March 2017

Rental Housing Journal Colorado

DEAR MAINTENANCE MEN: Sidewalks, Fencing and Toilets

By Jerry L’Ecuyer & Frank Alvarez

Dear Maintenance Men: What is the difference between Cement and Concrete. I hear people use both terms to describe a sidewalk or building. I understand there is a difference, but don’t know which one means what! George Dear George: Great question! Many people including those in the building industry mix the two terms up. Cement is a binding agent used to hold other materials together. You may have heard the term “Portland Cement”. Portland cement is not a brand name, but the generic term for the type of cement used in almost all concrete today. Portland cement is a mixture of ground sintered limestone or calcium, silicon, aluminum and iron all ground into a very fine powder. Concrete is a mixture of aggregate, gravel, sand and Cement. Mixed together with water and you have Concrete, a stone like material. Another way remember which is which: Cement has a soft “C” sound like soft powder and Concrete has a hard “C” sound like a hard sidewalk. Cement and the resulting concrete has been around for a long time. The process goes all the way back too Ancient Macedonia and was used extensively by Roman Empire to build

the aqueducts, the Pantheon and many other Roman structures.

Dear Maintenance Men: I am replacing a number of rotted pressure-treated 4x4 fence posts on my property. Why do some posts rot and other do not. I cannot see any rhyme or reason for one post to be good the other bad. How can I avoid this trouble in the future?

Kent

Dear Kent: The issue of the rotting posts lies in the Tree Growth Rings and their location. The rotting posts may have centered growth rings. If you look at the 4x4 post end, the growth rings will be either centered or not centered. A centered growth ring is common in post made from a peeler core. The tight centered growth rings of the peeler core will not accept pressure treatment as well as a post with off-centered growth rings. Chances are the fence you are repairing may have a mixture of peeler core posts and off-center growth ring posts. A Peeler core is the by-product of plywood manufacturing. A log is turned on a lathe to produce plywood veneer and the center that remains is called a peeler-core. When buying pressure treated post, look for off-center growth rings.

Dear Maintenance Men: I am trying to do my part to conserve water and have found my toilets are the biggest offenders. The toilet constantly fills every five or ten minutes. I have replaced the fill & flapper valves but the problems persist. I’m at my wits end about this! What can I do besides replacing the toilets?

Benjamin

Dear Benjamin: Leaks at the Flush Valve are possibly caused by a damaged flush valve seat which may have a hole or the rim is pitted or cracked. The seat is the large drain hole at the bottom of the tank. A temporary repair may be to sand the seat with a steel wool pad or wet/dry sandpaper. This will remove the calcium build-up. If the seat is damaged, replacing the seat will be the next option. “Fluidmaster, Inc” makes a Flusher Fixer Kit that can be cemented directly on top of your old worn flush valve seat. This is a quick fix that may not work on all toilets. If the seat kit does not work, you will need to replace the valve seat. This can be accomplished by removing the tank from the base of the toilet: Turn off the water to the fill valve, disconnect the water line and remove any water from the tank. Unscrew the two or three brass bolts under the tank and carefully lift

the tank off. Once the tank is removed, turn it upside down. Remove the rubber “Spud” washer from the tank. Spin the large nut from the threads and then push the valve seat through the tank. Reverse the procedure when installing the new valve seat. Always install a new “Spud” washer and new brass bolts and washers. Be sure your toilet tank is installed level, as this will aid in its operation. The new flush valve will give the rubber flapper a smooth seat for a positive seal. Bio: If you need maintenance work or consultation for your building or project, please feel free to contact us. We are available throughout Southern California. For an appointment please call Buffalo Maintenance, Inc. at 714 956-8371 Jerry L'Ecuyer is a licensed contractor & real estate broker. He is currently on the Board of Directors and Chairman of the Education Committee of the Apartment Association of Orange County. Jerry has been involved with apartments as a professional since 1988. Frank Alvarez is the Operations Director and co-owner of Buffalo Maintenance, Inc. He has been involved with apartment maintenance & construction for over 20 years. He is also a lecturer & educational instructor. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com

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Milennials Buying in the Suburbs ...continued from page 1

U.S Home Flipping Increases ...continued from page 1

to know where they would actually purchase homes when they started buying. The median age of a first-time home buyer is 33 years old, compared to 29 a generation agoiv.

financing for home flip purchases, up to $12.2 billion for the flips completed in 2016 — a nine-year high." "Investors in search of flipping returns are increasingly willing to move to secondary and tertiary housing markets and neighborhoods with older, smaller properties that are available at a deeper discount," Blomquist continued. "Given that many of these markets are more affordable, we are also seeing a higher share of the flipped homes sold to FHA buyers, with that share reaching a four-year high of 19.6 percent in 2016."

Here are some key findings on millennial home-buying trends: • Almost 50 percent of millennial homeowners live in the suburbs, while 33 percent live in an urban neighborhood and just 20 percent live in a rural area. • Of the millennial buyers who moved in the past year, 64 percent stayed in the same city and just 7 percent moved to a different state. • When millennials become homeowners, they skip the traditional starter home by choosing larger properties with higher prices: They pay a median price of $217,000 for a home that is about 1,800 square feet, similar in size to what older generations buy. • Millennial home buyers share many preferences with their grandparents' generation, both choosing homes with shared community amenities and considering townhouses at higher rates than other generations. "Millennials have delayed home buying more than earlier generations, but don't underestimate their impact on the housing market now that they're buying," said Jeremy Wacksman, Zillow Group chief marketing officer. "As members of this huge generation start moving into the next stage of life, expect the homeownership rate to tick up and suburbs to change to suit their urban tastes. We're constantly learning about this young group of home buyers -- we're finding that they are more similar to older generations than many thought. Their views on community and homeownership are pretty traditional, and they don't all fit the urban stereotype you might have in your head." Millennials make up almost 30 percent of the population in San Diego

and Austin, Texas. Los Angeles, San Antonio and Columbus, Ohio also have large millennial populations, over 25 percent v. Zillow Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle. Zillow is a registered trademark of Zillow, Inc. The first annual Zillow Group Report is the largest-ever survey of U.S. home buyers, sellers, owners and renters, and asked more than 13,000 U.S. residents aged 18 to 75 about their homes – how they search for them, pay for them, maintain and improve them, and what frustrations and aspirations color their decisions.

According to the Q2 2016 Zillow Housing Confidence Index (ZHCI), almost 70 percent of millennials associate homeownership with the American Dream. ii

According to the Q2 2016 Zillow Housing Confidence Index (ZHCI), 65.5% of millennials believe buying a home is a the best longterm investment a person can make compared to 62.8% of Generation X and 64.1% of baby boomers.

iii

Home flipping profits reach new record high in 2016 Homes flipped in 2016 sold for a median price of $189,900, a gross flipping profit of $62,624 above the median purchase price of $127,276 and representing a gross flipping return on investment (ROI) of 49.2 percent. Both the gross flipping dollar amount and ROI were the highest going back to 2000. Among 117 metropolitan statistical areas with at least 250 home flips in 2016, there were 11 with an average gross flipping profit of $100,000 or more in 2016. "Our strong wage growth is still supporting rising home prices, which when combined with the historically low number of homes for sale in Seattle, gives home flippers substantial returns on their investments," said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. "I believe flipping serves as a negative for any housing market because it further erodes housing

affordability, but if there's a demand for it in the market, it's a trend we will continue to see."

39 zip codes where at least one in five home sales was a flip in 2016 In the Los Angeles metro area, which accounted for six of the 39 zip codes with a home flipping rate of at least 20 percent in 2016, the best opportunity for flipping is in lower-priced neighborhoods with properties that need significant repairs, according to Brett Chotkevys, co-founder of Helpful Home Solution, which flips properties in Los Angeles and other parts of Southern California. "We do pretty much a full gut on the houses we buy. Most of those we buy are pretty nasty … they're falling down, there are druggies living there," said Chotkevys, noting that a typical rehab for his Los Angeles flips will run $40,000 to $50,000, and it's not "inconceivable" for him to spend six figures on a Los Angeles fix-and-flip. "We like south central (Los Angeles) a little bit more. The barrier to entry is lower. We can pick up properties in the 200s. … There are normal people not making gobs of money that can afford to buy these houses." Media Contact: jennifer.vonpohlmann@attomdata.com Data Licensing and Custom Report datasales@attomdata.com SOURCE ATTOM Data Solutions http://www.attomdata.com

iv From 2010-2013, the median age of the firsttime home buyer was 33 years old. From 19751979, the median age was 29 years old. Read more on Zillow research here. v

According to 2015 data from the Census Bureau.

SOURCE Zillow Related Links Publisher Will Johnson – will@propubinc.com

https://www.zillow.com

Designer/Editor Kristin Flores – kristin@propubinc.com

Advertising Sales Will Johnson – will@propubinc.com Terry Hokenson – terry@propubinc.com Larry Surratt – larry@propubinc.com

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Rental Housing Journal Colorado · March 2017

Rental Housing Journal Colorado

The World is Searching for Reliable Property Managers

By Marc Courtenay, www.propertymanager.com

irtually every month I meet or hear of a rental income property owner who wants to expand their portfolio. They’re searching throughout the 50 states for deals that make sense to them. Of course finding a lucrative “cap rate” is a challenge in today’s world. With interest rates still at historical lows, the returnon-investment (ROI) is also very low. The “cap rate”, aka capitalization rate, is the rate of return on a real estate investment property based on the income that the property is expected to generate. Are you aware of the cap rates nationwide? Knowing what they are, especially in your state and the surrounding states in your region gives you a competitive advantage. On your web page or social media page you’d be able to offer your insights. Those insights based on up-to-date information and exceptional awareness will attract prospective clients who are looking for reliable, competent property managers to do business with. Are you one? In other words, are you more informed and more savvy then other property managers? For example, do you know what ROI is all about? Are you conversant on these important terms of business effectiveness?

The ROI is, generally speaking, a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of similar investments. It’s a very important moving target. To measure the amount of return an investor will receive relative to the cost of that investment, minus management and other overhead expenses, will give prospective clients a “realistic” ROI. It’s also a valuable talking point that can help you communicate professionally with existing clients as well. Candidly, if you’re an honest, reliable property manager, there are hundreds, even thousand of “other managers’

Rental Housing Journal Colorado · March 2017

clients” who need you and are most likely looking for someone like you this very moment! How are these distressed and discouraged residential single or multi-family rental property owners going to find you? How can prospective clients know you exist and know your core competencies? If they’re not fortunate enough to be referred to you, then they need a media that will help them to discover you. An ad, an email, a banner, a great website that clearly and professionally says, “If you own rental property and you want dependable, outstanding service we’re here for you!” is imperative.

Before you begin your ad campaign or employ whatever medium is most affordable for you, be absolutely certain you can live up to the hype. Can you “under promise and over deliver”? Most landlords and residential rental property owners have an easier time finding a mortgage, a refinance, or more potential rentals to buy than finding a property manager who keeps their word. If you’re a reliable, diligent, wellinformed and very competent as a property manager, then you may be that sought-after exception. Again I ask, “Have you found an effective way to tell the world about you?” Make sure you ask your existing clients if they’ll give testimonials, referrals and recommendations. Have some of them on your impressive website. You do have an impressive website? Your reputation is your most important asset when it comes to the property management business. Insure that yours is the very best possible, and then spread the word! The world is looking for you now.

Rental Housing Journal Colorado

Survery on Homebuying ...continued from page 4 • Older boomers (ages 62-70) • The Silent Generation (ages 71-91)

Influence of rising cost of rent on home buying This year's survey also brought to light how the soaring cost of rent in many areas is likely influencing the decision of middle-aged parents to buy a home with their young adult children in mind. Younger boomers were the most likely to purchase a multi-generational home (20 percent; 16 percent in 2016), and the top reason for doing so was that children over 18 years old either moved back home or never left (30 percent; 27 percent in 2016). "The job market is very healthy for young adults with a college education, but repaying student debt and dealing with ever-increasing rents on an entry-level salary are forcing many to either shack-up with several roommates or move back home," said Yun. "This growing trend of delayed household formation is one of the main contributors to the nation's low homeownership rate." A new survey on home buying by generations from the National Association of Realtors Student debt is not just a millennial problem Debt, particularly from student loans, appears to be a portion of the household budget of buyers in every generation. While millennials were the most likely to have student debt (46 percent), their typical balance ($25,000) was lower than Gen X buyers ($30,000). A combined 16 percent of younger and older boomer buyers also had student debt, with a median balance of over $10,000 for each group. Among the share of buyers who said saving for a down payment was the most difficult task, millennials were most likely to cite student loans as the debt that delayed saving (55 percent), followed by Gen X (29 percent) and younger boomers (9 percent). "Repaying student debt also appears to be slowing some current homeowners who went to graduate school and now can no longer afford to sell and trade up because of their loans," added Yun. "Nearly a third of homeowners in a NAR survey released last year said student debt is preventing them from selling a home to buy a new one." More millennials moving to the suburbs…with their kids Similar to previous years, roughly two-thirds of millennial buyers are married. One aspect of their household that has changed is the number of children in them. In this year's survey, 49 percent of millennial buyers had at least one child, which is up from 45 percent last year and 43 percent two years ago. With more kids in tow, the need for more space at an affordable price is increasingly pushing millennial buyers outside the city. Only 15 percent of millennial buyers bought in an urban area, which is down from 17 percent last year and 21 percent two years ago. "Millennial buyers, at 85 percent, were the most likely generation to view their home purchase as a good financial investment," added Yun. "These strong feelings bode well for even greater demand in the future as more millennials settle down and begin 8

raising families. A significant boost in new and existing inventory will go a long way to ensuring the opportunity is there for more of them to reach the market." Millennial buyers and sellers overwhelmingly go online and use a real estate agent Survey on home buying by generation Regardless of age, buyers and sellers continue to see real estate agents as an integral part of a real estate transaction. In this year's survey, nearly 90 percent of respondents said they worked with a real estate agent to buy or sell a home. This kept for-sale-by-owner transactions down at their lowest share ever (8 percent). Not surprisingly, online and digital technology usage during the home search has increased in recent years. Although millennials and Gen X buyers were the most likely to go online during their search, they were also the most likely to buy their home using a

real estate agent (92 percent and 88 percent, respectively). On the seller side, millennials were the most likely to use an agent (90 percent), followed closely by Gen X and younger boomer sellers (each at 89 percent). "Online and mobile technology is increasingly giving consumers a glut of real estate data at their disposal," NAR President William E. Brown, a Realtor from Alamo, California, said in the release. "However, at the end of the day, buyers and sellers of all ages – but especially younger and often DIY-minded consumers – seek and value a Realtors 'ability to dissect this information and use their expertise and market insights to coach buyers and sellers through the complexities of a real estate transaction." NAR mailed a 132-question survey in July 2016 using a random sample weighted to be representative of sales on a geographic basis to 93,171 recent homebuyers. Respondents had the

option to fill out the survey via hard copy or online; the online survey was available in English and Spanish. A total of 5,465 responses were received from primary residence buyers. After accounting for undeliverable questionnaires, the survey had an adjusted response rate of 5.9 percent. The sample at the 95 percent confidence level has a confidence interval of plusor-minus 1.32 percent. The recent homebuyers had to have purchased a home between July of 2015 and June of 2016. All information is characteristic of the 12-month period ending in June 2016 with the exception of income data, which are for 2015. About NAR: The National Association of Realtors, "The Voice for Real Estate," is America's largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

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Rental Housing Journal Colorado · March 2017