Metro Rental Housing Journal April 2014 by Professional Publishing, Inc

Rental Housing Journal Metro

April 2014

2. MultifamilyNW – Touch Points: Intentional Customer Interactions 4. RHAO – Creating Member Value through Education 5. Exit Strategy Pt. II: Repositioning Your Real Estate Assets to Simplify Your Life 6. IREM – The Power of Volunteering 8. Ask the Energy Expert – Now is the Time to Convert to LED Lighting 9. Dear Maintenance Men:

10. Shoptalk 11. Ernest F. Oriente – Become a Daily Learner…Today! 13. Dryer Vents: Structure and Cleaning of 13. The Mortgage Market is about to Get Smaller 14. CCRA – Spring Cleanup has Arrived 19. Three MoreWays to Fill those Vacancies

WWW.RENTALHOUSINGJOURNAL.COM • PROFESSIONAL PUBLISHING, INC

PORTLAND/VANCOUVER

Published in association with: METRO Multifamily Housing Association; Rental Housing Association of Oregon; IREM & Clark County Rental Association

Do You New Rules for Raising Capital Appreciate for Real Estate Investments your Tenants? By Darrel Dickson ApartmentsForSale.com

By Marc Courtenay

s property managers, we’re all aware of the multitude of issues that frequently arise with unreliable tenants. Late rental payments, disturbing the peace, illegal activity, and a general disregard for the property are all problems that typically arise in the property management industry. Many times, we’re so focused on dealing with the problems prevalent in the property management industry that we overlook the tenants that always pay on time; the tenants that take good care of their property, the tenants that are considerate of their neighbors. How do we make sure that those tenants are happy? That they feel appreciated? That they know that we want them to remain tenants as long as possible? Chances are those good tenants are feeling unappreciated right now; which means that they will have no reason to stay at your property if a better opportunity opens elsewhere. It’s so important to remember that a rental agreement is between two separate parties, and just like any of us, our tenants like to know that they’re appreciated. continued on page 7 Professional Publishing Inc. PO Box 6244 Beaverton, OR 97007

rowd funding rules for real estate changed recently and with the available technology the landscape for raising funds for real estate investments in the future will be changed. The Jobs act created an entirely new exemption from registration of the securities act which will permit companies to publicly offer and sell up to a million dollars in securities over 12 months without needing to register. There are restrictions and individual investors annual income or net worth less than one hundred thousand dollars may invest no more than the greater of $2000 or 5% of his or her annual income or net worth. If his or her income or net worth is higher than $100,000 he or she may invest no more than 10% of annual income or net worth and never more than hundred thousand dollars. A new type of broker known as a funnel portal must be used to facilitate the sale. The funnel portal will be required to register with the SEC and other organizations and to confirm the investors satisfy the investment requirements. Companies that use the crowd funding process will have to file with the SEC. Certain information of the operating companies involved in raising funds will need to be provided to the SEC: such as the business plan description, company’s capital

Current Resident or

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structure, and intended use of the proceeds, audited financial statements will be required for offerings of more than $500,000. The Offering Company will need to file ongoing reports with the SEC based on rules yet to be determined by the SEC Crowd funding is an interesting new opportunity for syndicators to raise capital for real estate investments. Real estate operators will be able to raise capital online from groups of investors in an automated way Real estate investments typically have been illiquid. Investors have plenty of opportunities to invest in stocks and bonds but when it comes to actually access private real estate deals the process in the past has been

difficult for private investors to participate. Crowd funding will change all of that. Crowd funding eliminates the barriers that are typically associated with real estate investing such as having the time and expertise, and knowledge to invest can make investing in real estate a challenge. But pulling your money together through crowd funding you can access investment opportunities that otherwise would not be available to a busy professional to manage a property by themselves. You can have others with the knowledge and experience and the time to manage your real estate investments. In the near future, I foresee that you have continued on page 3

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Touch Points: Intentional Customer Interactions

By Pam McKenna Do you ever wonder what your customer really wants? Do you have a plan for finding out, or does it happen by accident or not at all? The more you engage with customers the clearer things become and the easier it is to determine what you should be doing. So, how often do you engage with the customer and are you intentional with your interactions? Setting up a touch point system will help you create a series of intentional interactions with your residents which will help you to better understand their expectations. This can be accomplished utilizing the outlook calendar and will involve the entire team. Start it off with a move in orientation led by the leasing team using the opportunity to educate your residents on what your community has to offer. Include where to

find the nearest trash and recycling areas, how to use all the appliances in the apartment and any other specific information that would start them out on a good note. The next touch point will be within 24 hours of move in. Use this as an opportunity for the maintenance team to get involved. Include a move in gift (ie; picture hangers, plunger, laundry detergent) delivered to the resident. Ask the resident if everything in the apartment is working properly. Be prepared to respond immediately and make repairs right there on the spot. One week later have the manager call the resident to welcome them to the community, ask how things are going in their new home and if there is anything they need to make their experience better. Confirm they are clear on the rent payment process and have all the information they need to get set up for auto payments. Provide them with information on all

the local businesses (ie: dry cleaning, pet services, restaurants, car wash). One month after move in send your resident a personalized hand written card or emailed video card from the entire team to let them know how much you appreciate them living at your community. At the 45 day mark invite them to a resident event that includes opportunities to network with other residents and start to build a sense of community. Hold these events once every three months to maintain comfort levels and to ensure consistency. Additionally, there are third party companies you can engage to send out customer surveys as an additional touch point. These can be sent right after the move in and after every maintenance request is completed. The survey allows you to listen to customer feedback but listen carefully and respond fast. If you respond to their comments they will continue to give you more feedback because they

know you are listening and that you care. The conventional resident experience typically includes focused attention during the sales process but once they are handed their keys they are on their own unless something goes wrong. Then forty five days before the lease ends we slap a note on their door with a rent increase. If you want to want to be in touch with what your residents really want, start by setting up intentional interactions. Don’t wait until it’s too late. With today’s busy schedules we need to plan ahead and be more purposeful to stay in touch. The results will provide an improved customer experience, a stronger sense of community and reduce resident turnover. In the end this shows your customer they are truly valued.

Multifamily NW

Events Calendar

Join us on Thursday, May 15th at the Portland Art Museum as we honor the “Best of the Best” in the Multifamily Industry with our prestigious ACE Awards!

April 1, 2014 8:00 AM - 12:00 PM Understanding Maintenance for Managers (Portland, OR)

April 16, 2014 7:30 AM - 9:00 AM Spring 2014 Apartment Report Breakfast (Portland, OR)

April 8, 2014 8:30 AM - 12:30 PM Tax Credit Housing Class Part I (Portland, OR)

April 17, 2014 10:00 AM - 12:00 PM Washington County Section 8 Voucher Forums (Hillsboro, OR)

9:00 AM - 11:00 AM 10 Common Fair Housing Mistakes to Avoid (Vancouver, WA)

April 18, 2014 9:00 AM - 3:00 PM NALP: Leasing Demonstration and Resolving Objections (Portland, OR)

April 9, 2014 8:30 AM - 12:30 PM Tax Credit Housing Class Part II (Portland, OR) 2:00 PM - 4:00 PM Section 8 Procedures Class (Portland, OR)

Individual tickets are $85 each or tables of 10 are available for $800. Contact Kristen Davies at kristen@multifamilynw.org or 800-632-3007 for more information.

April 10, 2014 7:00 AM - 4:00 PM EPA Lead-Based Paint Renovation Certification (Portland, OR) April 11, 2014 12:00 PM - 1:00 PM It's the Law Lunch Time Series: Domestic Violence - Making Sense In Challenging Situations (Portland, OR) April 14, 2014 8:00 AM - 12:00 PM Mold Awareness & (Portland, OR) April 15, 2014 8:00 AM - 5:00 PM CAMT: Electrical Repair and Maintenance (Portland, OR) April 15, 2014 9:00 AM - 5:00 PM CAM: Human Resource Management Part I & II (Portland, OR)

April 21, 2014 9:00 AM - 5:00 PM CAM: Marketing (Portland, OR) April 22, 2014 8:00 AM - 5:00 PM CAMT: Electrical Repair and Maintenance, Part II (Portland, OR) 9:00 AM - 1:00 PM CAM: Human Resource Management Part I & II (Portland, OR) April 23, 2014 1:00 PM - 3:00 PM Roofing Class (Portland, OR) 6:00 PM - 8:00 PM Washington County Section 8 Voucher Forum (Hillsboro, OR) April 25, 2014 9:00 AM - 1:00 PM New Hire Class (Portland, OR) April 29, 2014 9:00 AM - 2:00 PM CAM: Research, Analysis and Evaluation (Portland, OR)

Rental Housing Journal Metro • April 2014

RENTAL HOUSING JOURNAL METRO

New Rules ...continued from front page an opportunity to browse different investments from your computer looking at opportunities in different metropolitan markets throughout the country. Real estate is becoming more efficient with sites like Zillow and others providing incredible amounts of data to real estate investors. You are going to see more efficiency in the private real estate investment market. Because of the change in security laws more investors are going to have crowd funding opportunities and it is going to open up opportunities for not only accredited investors but also with the jobs act crowd funding rules will see retail investors participating in the future.

Safety Addendum – M106 OR-WA The Safety Addendum was created to enhance liability protection for the landlord. Each example is carefully worded to address concerns from actual occurrences and lawsuits filed. If you don’t already take advantage of this form, make sure to add it to the list of addendums you have every tenant sign at movein. National Window Safety Week

Before September 23, 2013 it was illegal for real estate investment operators to publicly advertise that the private company was seeking funding. The new rule change allowed operators throughout their fundraising efforts to market to persons on Facebook or twitter or other social media outlets. Different real estate investment websites will be developed to raise money on line in the near future. It will be fun to watch which companies become the leaders in this new frontier of raising capital for real estate investments.

is April 6th – 12th and the Safety Addendum includes critical language that reminds tenants that open windows present a potential risk of falling. While many of the statements can seem obvious, having this document in your tenant’s file goes a long way to exhibit your due diligence and protect your assets.

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RENTAL HOUSING JOURNAL METRO • Elizabeth Carpenter, President • Elaine Elsea, Treasurer • Cari Pierce, Office Manager • Teresa Carlson, Member Services • Suzanne Fullerton, Member Services Asst. • Pam Van Loon, Bookkeeper 10520 NE Weidler Portland, OR 97220 (503) 254-4723 • fax (503) 254-4821 info@rhagp.org • www.rhagp.org

Creating Member Value ON-SITE through Education VALLEY, METRO, ARIZONA APT. NEWS Salsbury Industries be a better or even a first time suc-

daughters Frances and Alexis. The first requirement to being in high school cheerleading is good grades. In my family, education is al’m a cheerleading Mom. In the ways first, cheerleading second. At RHA Oregon, education is prilast 5 years, I’ve hauled 2 teenMar,games May, oritySep, one. WeNov, create value by teachage girls Jan, to countless and Jul, cheerleading events all over the ing our members how to make their Northwest. I love supporting my rental businesses profitable, how to By Liz Carpenter Rental Housing Alliance Oregon President

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cessful landlord, why something as mundane as building codes are important, turnover technics, and our online tenant screening just to mention a few. When our members make better business decisions, more people are served and our entire industry does better. This month, take an extra moment with the calendar and look for classes that could help you better your business. Like a cheerleader, RHA Oregon is here to serve its members and encourage, make that root for, their victory. Another victory we are working towards is closing the gap between homelessness and the housing community. Rental Housing Alliance members are volunteering at JOIN; a Portland based non-profit. “This is a marriage made in heaven,” said Lynne Whitney, RHA board member. “Filling this need, being part of the community, serving people who need a hand into housing, is our motivation. It’s who we are. What is so impressive about JOIN is how thorough the organization is in helping people. We came to help serve 60 people, but left with such a warm impression and feeling of graciousness.” Lynne Whitney and Tony Kavanagh RHA Community Relations/ Donations Chairman got the ball

Liz Carpenter RHAOregon President

rolling and now we are inviting all RHA members to join in. Please call the office for more information. Did you know at the RHA Dinner meetings we highlight a RHA Affiliate Businesses? It’s a great way for the RHA community to support the businesses that support our industry. We’ve had a lot of changes at RHA and none of it would have happened without our committed volunteer Board of Directors and our staff. If you see one of them, please thank them for all the extra hours and extra heart they’ve given in the last few months. RHA Oregon is moving forward, growing, and focused on serving our members through education. We mentor; come along side, and coach. Creating member value, serving our community, and helping businesses grow- we’re your RHA. Sincerely, Liz Carpenter, Rental Housing Alliance Oregon President Since 1927, the Rental Housing Alliance Oregon has set the standard for community participation by landlords providing affordable and quality housing.

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RENTAL HOUSING JOURNAL METRO

Exit Strategy

Pt. II: Repositioning Your Real Estate Assets to Simplify Your Life Cliff Hockley, President Bluestone & Hockley Real Estate Services

s Baby Boomers age, they realize that things may need to change with how they handle their real estate investments. First of all, they may be tired of dealing with the details that are involved with the day to day operations of real estate investments; secondly, they start having to come to grips with their mortality and may not want their spouse or family to have to deal with those investments. Finally they may be concerned about the tax implications involved with selling their assets; inasmuch as the direct sale of a property could cost forty percent or more of the capital return. Making decisions regarding the future of existing real estate investments is much like selling a business. Typically, most real estate investors spend a lifetime [40 – 50] years building a retirement vehicle, poured blood, sweat and tears into their investments to build a legacy. They are now faced with decisions on how to maintain a sufficient cash flow during their lifetime and transitioning their assets either to their spouse, children, grandchildren or charitable organizations. There are many different directions baby boomers can choose to reposition their real estate investments to prepare for retirement and / or to reduce the time and energy needed to manage them. These include: 1. Selling their real estate investments 2. Family succession planning 3. Selling to partners 4. Contributing to a charitable organization 5. Repositioning your portfolio 6. Using a 1031 exchange to invest in an UPREIT (Umbrella Partnership Real Estate Investment Trust)

EXIT 7. Tenant in Common Investments 8. Hiring a property manager Sale of the real estate investments Typically when investors choose to sell their real estate holdings, they are faced with the following costs, taxes and possible prepayment penalties: 1. Federal Taxes Federal capital gains: 20% Federal Medicare tax: 3.8% 2. State capital gains (depends on state) 9.9% (Oregon) 13.3% ( California) RED FLAG: Depending on the number of 1031exchanges involved with their holdings, the state’s revenue departments (tax collectors) will come after the investor to recapture taxes one may have put off paying in the past closings. Should you die before the the state gets its share, the beneficiaries basis in the properties received from the decedents estate is valued at the properties Fair Market Value at date of death or 6 months later. (The estate has an option regarding the valuation date.)

Washington County is customarily divided equally between the seller and the purchaser. ** Go to this chart to decode the transfer taxes in California. http:// www. chicagotitletransfertax.c om/ 4. Local city and county business taxes Note: (in the City of Portland, Multnomah County, Oregon, the sale of a property could trigger a 2.2% city tax plus a 1.45% county tax, if one does not reinvest the funds via a 1031 exchange. 5. Federal depreciation recapture, which is 25% of the depreciation written down over the life of the ownership of the property. RED FLAG This could be a huge number depending on the number of

1031 exchanges one has closed to get to the final exit sale since with each 1031 the property basis is typically adjusted , though you can avoid those taxes at death. Upon death, property basis is “stepped up” to Fair Market Value at date of death or 6 months later. 6. Prepayment Penalties: Many properties have underlying financing issues the most important being the prepayment penalty. With Commercial Mortgage Backed Securities (CMBS) loans, an investor may have yield maintenance clauses and with other loans there may be percentage payoff between 1 and 5 percent of the outstanding loan balance, which might last over ten years. These penalties are a significant issue and need to be calculated into the costs of sale as one makes the critical decisions to sell and exit the real estate investment marketplace. These significant expense hits (Tax and prepayment penalties) frequently make real estate investors uneasy, so they tend to look at other ways to exit or reposition their real estate holdings. Family Succession Many investors dream of leaving ... continued on page 15

3. Real Estate Transfer Taxes** (state and county) See below for examples: **Washington State collects 1.28% and Clark County collects .5%, equaling a total of 1.78% of the sale of transfer of ownership of real property. **Washington County, Oregon: The current rate is $1.00 per $1,000.00 of consideration. The transfer tax in

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RENTAL HOUSING JOURNAL METRO President - Cammie Allie, CPM • President Elect - David Genrich, CPM • Treasurer - Stephanie MacPherson • Additional Officers - Julie Muir, CPM, Traci McCauley, CPM, Kathi Pearce, CPM, Tammy Mills, ARM, Kathi Pearce, CPM, Jeanna Rae Petty, CPM, Jennifer Gerritz, CPM, Chris Pasteur, ARM • CPM Admissions Contact - Traci McConley, CPM • ARM/ACoM Admissions Contact - Tammy Mills, ARM AMO Admissions Contact - Cliff Hockley, CPM • Education Contact - Kathi Pierce, CPM • Income/Expense Contact - Nutan Engels, CPM and Michelle Schiffer, CPM IREM Chapter #29 11575 SW Pacific Hwy Suite 210 Tigard, OR 97223 (503) 228-0002 (503) 406-2003 fax

The Power of Volunteering tested and that first burst of energy and strength is felt, volunteering becomes a quest (an obsession even), to feel even higher energy-bursts with each act of kindness. Soon, the volunteer realizes they’re receiving benefits. Benefits such as a sense of satisfaction, a renewed purpose and quite simply...feeling happier! In their book “The Healing Power of Doing Good”, authors Peggy Payne and Allan Luks provide medical documentation that volunteering strengthens the sense of identity, improves insomnia and strengthens the immune system. Further, improvements in self-esteem, communication skills, empathy—even transforming our own insecurities or phobias—can be an unintended but welcome consequence of our good deeds. And, there are different kinds of volunteering altogether. For instance, when we volunteer for IREM, it’s referred to as “skillsbased volunteering” which stems from our specialized knowledge

By: Julie L. Muir, CPM® Some say when there’s disconnect between fulfillment and satisfaction in ones’ life, that people will naturally drift to volunteering. Others say that when boredom sets in, the mind craves stimulus and varying perspectives, and that these are the true drivers behind volunteerism. Whatever the reason pushing us to join and “drink the Coolaid”, the effects and outcomes of that choice can be quite powerful. While the beneficiary of that service or work is definitely provided a “gift” in some manner or another, the giver is likewise “gifted” and sometimes even more profoundly. We don’t just wake up one day and say “I think I’m going to volunteer for something today”. No, the shift (to volunteer) happens more gradually…curiosity takes hold and then directs our intentions and actions. Once the waters have been

of real estate management. And when many ban together for the same cause, collectively, our abilities strengthen the infrastructure and governance of the association which in turn, bonds us even more closely while we enhance and meet IREM’s mission. And, while we oftentimes begin with the intent of helping others meet some unfulfilled need, even when we decide to take a back seat and let others take over, the effects of our experiences linger long after. Yes, the old cliché is accurate: “you get more out of volunteering than you put into it”. I should know because I’ve been volunteering since the mid-1990’s. And, I can’t even begin to quantify how much volunteering for IREM has enriched my life. It’s transformed this once shy, insecure and cautious person, into an author, instructor, mentor, public speaker and artist (to name a few). Powerful...to say the least! If you’re contemplating dipping that toe in the water but aren’t quite sure where or when to do so,

let your curiosity, boredom or insecurities give you a little nudge. Or, call a current volunteer in your circle and listen to their excitement as they describe the many rewards they’ve experienced in their volunteerism. Pretty soon, you’ll want to dive in head-first without any water-wings... because of the mere joy it can provide. Dual benefits. You don’t have to be an expert or have special skills...you just need enthusiasm, a good heart, the willingness to do the right thing and the ability to spend just a little bit of your time to better a worthy-cause. Enrich someone’s life and grab that POWER while enriching your own life exponentially. I’ll be waiting to say “I told you so!” Julie L. Muir, CPM® is a Senior Real Estate Manager with CBRE, Inc. and a Senior Vice President of IREM®

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RENTAL HOUSING JOURNAL METRO

Appreciate your Tenants ...continued from front page Here are just a few ways to show your tenants that they are appreciated: Be sure to take their concerns seriously. If your tenant calls to complain about loud music at midnight, or unauthorized vehicles in their parking spot, take prompt action and make sure that you advise them of both the action and the outcome; don’t make them complain more than once about the same issue. Fulfill the promises that you make. If you promise a tenant a new dishwasher or new carpeting, be sure to fulfill that promise. Don’t make them ask you about it. Just schedule a time

and do it. Respond promptly to any and all maintenance requests. If a tenant is responsible and takes good care of the property, they shouldn’t have to wait three months to have their stove repaired. Bend the rules – just a little. Should you wave a late fee – due to a mix-up with the post office for a reliable tenant that is never late with their rent? While opinions vary, remember that a good tenant is like a good customer, and it may be appropriate to bend the rules now and then. That’s not discrimination; that’s good business sense.

Give them a gift. A gift card to a local store at lease renewal time, or a card on their birthday will make a tenant feel appreciated, and build loyalty in the process. There are many ways to make a good tenant feel appreciated, with tenant stability and timely rent payments the ultimate payoff. What more could a property manager want?

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Ask JThe EnergyMExpert RENTAL HOUSING OURNAL ETRO

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2. Boosts curb appeal. LEDs make your property more attractive, drawing potential residents in the door. LEDs also increase the property value.

2. Recessed cans. LED recessed can lights use one-fourth the energy of incandescent or halogen lamps. Plus, “dim-to-warm” options shift warm like a sunset as they dim to create an inviting atmosphere.

By Mark Whitney, PGE lighting expert Q: My lighting supplier keeps mentioning LED lighting? Is this technology cost-effective for upgrading my common area lighting? A: You bet it is. Energy-efficient and long-lasting LED lighting is ideal for common areas where lights remain on for long periods. Thanks to improved technology and lower costs, LED lighting is rapidly taking over the retrofit market. Factor in all the benefits of LEDs, and you’ve got a lot of reasons to switch. Here’s one more: Sign up for an energy-efficiency consultation with PGE in April or May, you could win up to $1,000 toward a lighting upgrade. Sign up and watch our new LED video at PortlandGeneral.com/ LightSavings. Five reasons LED lighting makes sense† 1. Reduces maintenance costs and hassles. LED lamps last up to 25 times longer than halogens and

3. Increases tenant retention: Attractive lighting upgrades make your property more inviting, which can reduce turnover. 4. Improves safety: LEDs provide truer color and more even light in common areas, exterior walkways and parking lots. 5. Controls energy costs: Save up to 75 percent on lighting compared to current technology.

3. Exterior lighting. Compared to metal halide or high-pressure sodium lights, LEDs use 50 to 70 percent less energy and last up to four times longer. 4. Overhead fluorescents. In many cases, LEDs can offer better performance and appearance than fluorescent ceiling fixtures while

The best areas to switch and save† These are among the most effective places to upgrade to LED lighting. Many qualify for Energy Trust of Oregon cash incentives, which can significantly decrease the final cost of your upgrade.

using 25 to 50 percent less energy. Retrofit kits and new fixtures have very long lifetimes. Get a free consultation, plus a chance to win $1,000! Turn to the experts – the PGE Energy Experts. We offer a free, no-obligation energy-efficiency consultation that will help shine some light on where and how you might save. You’ll receive practical information on how to quickly cut lighting waste and control your bottom line. Request a consultation by May 31 and you’ll automatically be entered for a chance to win one of 10 lighting upgrades valued at up to $1,000 each. Request your consultation at PortlandGeneral.com/LightSavings or call 800-822-1077. If you’ve already had a consultation, you can still simply enter the sweepstakes. † Source: EnergySavers.gov If you have questions you’d like to have answered in future “Ask the Energy Expert” columns, please email Sarah.Pagliasotti@pgn.com.

1. Track lighting. Replace incandescent/halogen track lights with LED directional lamps. You’ll save

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RENTAL HOUSING JOURNAL METRO

Dear Maintenance Men: By Jerry L'Ecuyer & Frank Alvarez

Dear Maintenance Men: How can I add more storage to my utilitarian type bathrooms? The residents complain that they need to store their toilet paper in the hallway! Please list a few suggestions on what to do? Robert Dear Robert: It does seem bathrooms are sometimes designed as an afterthought. Sink, toilet, bath and that is it. A modern bathroom will take into consideration the need for storage, electrical devises, personal hygiene etc. The first item that comes to mind is installing a bath sink cabinet. An old style cabinet might only have a set of doors under the sink. We find this is not adequate and a cabinet should have drawers along with access to under the sink. The drawers can store hair dryers, and all manner of personal bath items. A unique system we like utilizes the space between the studs in the wall. Cabinet doors or mirrors can be used to cover storage in the walls. The wall storage is perfect for toilet paper, rolled up towels, tooth brushes, and most other small items. Install multiple towel racks on the back of the bathroom

door for additional towel storage. The space above the toilet can easily accommodate an overhead cabinet for larger items. Reversing the swing of the bathroom door from inward to outward will greatly increase the usable room and make the bathroom appear larger. Dear Maintenance Men: My building is clad in aluminum siding and it is looking very dull. The siding has its original finish and I was wondering if it can be painted? If so what is the procedure to insure a long lasting finish? Joann Dear Joann: Painting aluminum siding is not a problem. Good prep work will be time well spent for a long lasting finish. The biggest issue with old aluminum siding is the chalking of the surface. To check for chalking, rub the siding with your hand and if your hand picks up any color, that is chalking. Paint will not stick to the chalk. Check at any home improvement center for aluminum siding cleaner or use TSP Cleaner and scrub the siding using a soap bucket and a brush. Don’t forget to remove any mold or mildew as well. An alternative is to use a pressure washer to

clean the siding. The pressure washer is much faster, but be careful about water intrusion. Be sure to rinse the siding with clear water to remove any cleaning chemicals before painting. We recommend using a good quality oil based primer if the siding is bare aluminum. (Acrylic primers may react with bare aluminum over time.) After priming or if the siding has been previously painted, top coat with an acrylic paint and only primer

the bald spots. Use a satin finish for best results. Dear Maintenance Men: I hear the term “Aging in Place” and wondered as an apartment owner, what I could do to market to this growing segment of our population? What should I do to make my property more “Aging in Place” friendly? Sanford ... continued on page 12

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RENTAL HOUSING JOURNAL METRO

he value of setting up appointments from telephone inquiries has been clearly established. Yet, it seems that the number of callers being converted into visitors is not always producing a high percentage of rentals. A recent question submitted by a manager of a large apartment community may shed some light on this subject: Q: I know it’s important to set appointments from my phone contacts, but does it really matter who ends up giving a tour when the client arrives? I manage and lease out of a busy office and we all work together, but sometimes I wonder if we would

have a higher closing ratio if each of us helped our own clients. What do you think? I think there is a lot to be said for the environment of “teamwork” that you have created. Those managers who work side by side with their leasing staffs, will keep them motivated and excited about renting apartments. However, in working too closely as a team when it comes to leasing, some of the “personalized” service can be lost. If a prospective renter is helped by someone else when they arrive for an appointment, it can give them the impression that their initial contact wasn’t genuinely

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interested in helping them. Also, any “rapport” that was personally created by you, or another member of your staff over the phone, is lost if they have to “start from scratch” with someone else. - Not to mention the inconvenience to the client if they have to repeat their needs and preferences all over again to someone else. Many times it’s the personality, sales skills and knowledge of the employee on the phone that “sells” the client on making an appointment in the first place. Once a relationship is established in the initial phone contact, the prospective renter is expecting to meet with the same person when they arrive at the community. It can be a real let down to learn that the employee they connected with from the phone contact is unavailable. Worse yet, no one else in the office even knew they were coming in. For leasing consultants whose primary role is renting apartments, careful planning and scheduling can make it possible to keep most of the appointments they set. For managers and other office staff who end up answering the phone, but who are not available to keep appointments, it might be best to resist answering the phone on the days you are un-

available. This will give your leasing staff the ultimate opportunity to sell and close the deal. Remember: Working as a team means some players will spend time “on the bench” while other members of the team are out on the field. If you assemble your team before the day begins, then you can decide which employees are best equipped and available to lease apartments that day. With your strongest players on the front line and everyone “passing the ball” (clients) to them, you will score more rentals every time! If you have a question or concern that you would like to see addressed next month, please ASK THE SECRET SHOPPER by making contact via e-mail. Your questions, comments and suggestions are ALWAYS welcome! ASK THE SECRET SHOPPER Provided by: SHOPTALK SERVICE EVALUATIONS Phone: 425-424-8870 E-mail: joyce@shoptalkservice.com Web site: www.shoptalkservice.com Copyright Shoptalk Service Evaluations

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RENTAL HOUSING JOURNAL METRO

Become a Daily Learner…Today!

by Ernest F. Oriente, The Coach {Article #213…since 1995}

ur economy and your success in the property management industry is based on knowledge. Gone are the days when you could graduate from high school or college and never again pick up a textbook or attend another class. Ready or not, your lifetime of learning has already begun, no matter how reluctant or scared you might be. In addition, sophisticated technology, business acquisitions, new products and significant regional or national competitors will continue to require your full attention. Ready to become a daily learner? Let’s get started! Staying current with your profession: Begin your learning journey by subscribing and reading the industry publications, E-newsletters, blogs and LinkedIn groups that serve the property management industry, such as your local apartment association magazine, UNITS Magazine, The Journal of Property Management and Multi-Housing News…just to name a few. These are great waysfor keeping you in touch with local, state, regional and national trends. Next, consider investing the time and money to upgrade your professional certifications as this says to your peers and colleagues that you are serious about your property

management career. In addition, research the one day seminars delivered by Career Track {800-780-8476} or SkillPath {800-873-7545}, as their programs can advance your specific business skills in a short amount of time and with minimal investment. Lastly, search the Internet for industry websites such as MultifamilyBiz [ http://www.multifamilybiz.com ] that serve the property management industry and register for their E-mail newsletters, read their industry news or participate in one of their live and dynamic webcasts, to experience an engaging form of distance learning. Tip From The Coach: Start each year by reserving the property management seminars and trade show workshops you will be attending. Then, schedule your company meetings and training that is planned and budgeted. Now, look at your calendar and reserve the time and dates you are going to schedule for the professional and personal learning that will best serve you. More specifically, consider budgeting $50-$150 per month for your continued education. This small investment today will pay large dividends in the near and distant future…The Coach says so!

Using technology: Technology has created many new time saving, cost-efficient ways to enhance our professional and personal lives. But of course, you need to learn how to best maximize your technology tools to receive the highest return on your learning investment. Let’s start with the basics. Learn and master the software used by your property management company. Learn the shortcuts for creating professional looking correspondence, presentations or proposals. Understand the power techniques for using a spreadsheet or preparing your property budgets. Research social media websites and related software as powerful marketing engines. Tip From The Coach: Start with what you already know about technology tools and take it one step further. Not 10 or 100 steps further…just one step at a time. If you push yourself too far or too fast, you might be in a situation where you will not have the resources to succeed. Instead, take one step at a time, master your new skill, then take another step. For many, hiring a private business trainer or coach, can rapidly accelerate your learning curve around technology. For others, just reading two or three pages of

their software user manual each day, is enough to gain incremental knowledge with technology tools. Helping your team to learn: In addition to your daily learning, it will be equally important that your property management team continues to grow and learn at a comfortable pace. Property management companies around the world are finding a direct connection between learning and company performance. In fact, many companies are now measuring both performance goals and learning goals on an individual basis. These learning goals are focused on areas such as: resident satisfaction, increased asset performance, maximizing technology and team-building skills. Tip From The Coach: When helping your team with their learning skills, ask them to help you answer this question, “Learning __________ will help me __________ so that I can __________.” Asking this question is key, because the people that work for your property management company will be eager to learn if they have a hand in structuring their own industry and professional training. Remember, whenever you include your team in the planning of continued on page 12

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Maintenance Men ...continued from page 9 Dear Sanford: Baby Boomers are 25 percent of the population and the first of the Boomers turned 65 in 2011 and the last will turn 65 in 2029. We heard on the radio the other day that 85 is now the new 75 and so on down the line. That is a large healthy aging group! They are not going to go quietly into a nursing home which means as apartment owners & managers; we need to prepare for this group. Aging in place means bigger showers with wider doors, taller toilets, grab bars and bath sinks that will accommodate wheelchairs. This does not mean turning our units into institutions; there are many stylish accommodations to fit a number of needs. For example a grab bar capable of supporting 250 pounds does not need to look like it came out of a hospital. Grab bars come in a variety colors and designs. Many will double as towel bars and be virtually invisible to their primary purpose unless needed. A larger shower stall also will look opulent and practical at the same time. Replace old two handle faucets in the kitchen and bathroom for single handle or touch faucets. Consider installing anti-skid flooring in the bathroom and tub/shower area. A few other items might be contrasting color edging for the counter tops along with rounded edge and corners. Replace all door knobs with lever handles for ease of use. This is

Presents

Daily Leader ...continued from page 11

a small sample of the things you can do to stay competitive in a growing market while not making changes that younger generations would objectionable.

QUESTIONS? QUESTIONS? QUESTIONS? We need more Maintenance Questions!!! To see your maintenance question in the “Dear Maintenance Men:” column, please send submission to: Questions@ BuffaloMaintenance.com Please “Like” us on Facebook.com/BuffaloMaintenance 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 Websites: www.BuffaloMaintenance. com & www.ContactJLE.com www.Facebook.com/BuffaloMaintenance

their future, you raise their motivation to succeed and reduce turnover at the same time. In closing, today’s success comes from yesterday’s learning, while tomorrow’s success comes from what we learn today. Want to hear more about this important topic or ask some additional questions? Send an E-mail to ernest@powerhour.com and The Coach will E-mail you a free invitation to be on a PowerHour conference call.

Author’s note: Ernest F. Oriente, a business coach/trainer since 1995 [31,800 hours], serving property management industry professional since 1988--the author of SmartMatch Alliances™, the founder of PowerHour® [ www.powerhour.com ], the founder of PowerHour SEO [ www.powerhourseo. com ], the live weekly PowerHour Leadership Academy [ www.powerhourleadershipacademy.com/pm ] and Power Insurance & Risk Management Group [ www.pirmg.com ], has a passion for coaching his clients on executive leadership, hiring and motivating property management SuperStars, traditional and Internet SEO/SEM marketing, competitive sales strategies, and high leverage alliances for property management teams and their leaders. He provides private and group coaching for property management companies around North America, executive re-

cruiting, investment banking, national utility bill auditing, national real estate and apartment building insurance, SEO/SEM web strategies, national WiFi solutions [ www.powerhour.com/ propertymanagement/nationalwifi.html ], powerful tools for hiring property management SuperStars and building dynamic teams, employee policy manuals [ www.powerhour.com/propertymanagement/employeepolicymanuals.html ] and social media strategic solutions [ http://www.powerhour. com/propertymanagement/socialmedialeadership.html ]. Ernest worked for Motorola, Primedia and is certified in the Xerox sales methodologies. Recent interviews and articles have appeared more than 8000+ times in business and trade publications and in a wide variety of leading magazines and newspapers, including Smart Money, Inc., Business 2.0, The New York Times, Fast Company, The LA Times, Fortune, Business Week, Self Employed America and The Financial Times. Since 1995, Ernest has written 225+ articles for the property management industry and created 400+ property management forms, business and marketing checklists, sales letters and presentation tools. To subscribe to his free property management newsletter go to: www.powerhour.com. PowerHour® is based in Olympic-town… Park City, Utah, at 435-615-8486, by E-mail ernest@powerhour.com or visit their website: www.powerhour.com

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April 25th from 12:00 pm to 3:00 pm at Ernesto’s Italian Restaurant 8544 SW Apple Way Portland, OR 97225 As a landlord, are you confused about medical marijuana? What problems may you encounter and how can you reduce the risks? This workshop will cover all the questions you might have and the differences in federal and state laws on medical marijuana, including possible future changes. • 3 Real Estate Continuing Education Credit Hours available for this class! • $50.00 ORHA Member • $75.00 Non-Member • Contact Maren at: (503) 364-5468 or maren@oregonrentalhousing.com

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April 29th – How to Handle the Eviction Process From posting the 72-hour notice to hiring the sheriff to remove the tenants. Lunch and Live Landlord Helpline Q&A Session will be from 11:30-12:00pm. Presentation/training from 12:00pm-1:00pm. Most trainings will qualify for 1 hour of CE credit towards real estate and property management licenses. Cost is $14.30 and includes a delicious Italian lunch buffet with non-alcoholic drink. Must be a member to attend. Contact Maren at: (503) 364-5468 or maren@oregonrentalhousing.com

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Rental Housing Journal Metro • April 2014

RENTAL HOUSING JOURNAL METRO

Dryer Vents:

Structure and Cleaning of fire, it could cause severe damage to your property. Plus the more these vents clog, the more time is needed to dry the clothes in the dryers. This can waste a great deal of money on electricity and is why these vents should be cleaned out on a regular basis. Also, extremely clogged vents are harder to clean and may require extensive measures to gain access to the clog, which can be quite costly. Multiunit dryer vent cleanings done regularly prevents these issues. So protect your property, protect your tenants. Ensure your dryer vents are properly vented, inspected & cleaned for maximum safety and efficiency. You can always call a Chimney Professional to inspect the dryer venting and to clean the vents when needed.

By Portland Chimney & Masonry Inc.

he vents of dryers serve the same purpose as the chimney of a fireplace: a way for exhaust to be allowed to get out of the building. Usually these vents are vented through the roof or out the side of your buildings. Either way, there must be a clear passage for the exhaust to get out. Structural: Under no circumstances should these vents be allowed to vent anywhere inside the building, such as an attic or the like. This is simply allowing the exhaust and flammable lint to be vented into an enclosed, often unattended area. This is a fire waiting to happen. Cleaning: The lint that is built up in these vents is highly flammable and must be cleaned out on a regular basis, as should the chimneys for fireplaces. If this lint were to catch on

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The Mortgage Market is about to Get Smaller By by Marc Courtenay

s 2014 begins a bureau created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, The Consumer Financial Protection Bureau (CFPB), will set new rules concerning mortgages. Lenders will be required to verify and inspect borrowers’ financial records. The rules discourage lenders from allowing borrowers to carry total debt payments totaling more than 43 percent of the person’s annual income. That debt also includes existing debts like credit cards and student loans. Starting January 10th the CFPB will put into force a national standard for issuing mortgages that could help prevent the housing crash of 2008 and 2009. Earlier in 2013 CFPB director Richard Cordray called the new rules “the true essence of ‘responsible lending.” All kinds of consumer advocates and mortgage professionals are lauding the new CFPB requirements.

The new rules not only provide more responsibility for lenders, but it also protects them from lawsuits. “Lenders are going to be crossing their t’s and dotting their i’s like never before” said Bob Walters, the chief economist for Quicken Loans. On the downside, there will be a big number of people who should have been able to qualify for mortgages that won’t be able to and will be shut out of the home-buying market. If you add to that the fact that mortgage rates have risen in the past 6 month and are predicted to gradually move up to the mid 5 percent range by the end of 2014, you can see that the mortgage market will be shrinking. Others have commented that there’s a good chance that limits on the size of some popular mortgages will be lowered during 2014. CFPB director Corday noted that in the years leading up to the 2008 financial crisis, consumers could easily obtain mortgages that they could not afford to repay. In contrast, in subsecontinued on page 14

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RENTAL HOUSING JOURNAL METRO President • Lyn Ayers Vice President • Blain Cowley Secretary • Patty Silver Treasurer • Janine Ayers Membership Committee • Roger Silver Contact • Lyn Ayers • Phone (360) 693-0025 • info@ccrawa.org 5620 Gher Rd., Suite H Vancouver, WA 98662-6166 (360) 693-CCRA www. clarkcountyrentalassociation.org

Spring Cleanup has Arrived

inter is finally over—at least according to the calendar! We can surely be thankful for our mild winter especially when we hear and see what the rest of the country has experienced. Now that spring is here, it is time to consider the yards surrounding our properties and the exteriors of our buildings. Are the bushes out of control? Do tree branches hang over roofs? Are the beds overgrown? It is time to do a drive-by inspection and evaluate the status of your yards. Stop and consider curb-appeal from the street. Do the building and yard look inviting? While you are at

• Driveways • Parking Lots

it, recall the mild moist winter we have experienced. Moss and mildew have prospered and grown as well. Check out your driveways and sidewalks. Do they look black from moss? Are they slick? Remove the moss by pressure washing. By doing so, you increase the attraction of clean sidewalks, demonstrate that you are a landlord that cares, and eliminate any dangerous mossy surfaces. If tree roots are lifting sections, make sure to minimize the possibility that tenants and visitors might trip on the joints. While you are conducting these inspections, check the condition of

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your roofs and gutters. When was the last time you had the roofs and gutters cleaned? Now that spring rains have begun, make sure the downspouts drain easily. When was the last time your roof was inspected? Is the time approaching when it needs to be replaced? If it’s 3-tab, are the edges beginning to curl? When you clean the gutters, do they have a lot of sand in the bottoms? These are indicators it might be time to replace the roof before big problems show up inside the building. Washington State’s short legislative session will be finished by the time you read this. We (the Washington rental housing coalition) had successes and failures. None of the bills we supported made it through although a couple got farther than in previous years. We successfully opposed all but one bill which had to do with sealing juvenile records. This law will make it more challenging to protect our tenant communities if applicants had juvenile problems with the law. Our April dinner meeting will

depart from tradition. We are changing the date from Tuesday April 29 to Friday May 2nd. It will consist of two different topics. Blain Cowley will present a how-to repair workshop and WAA will review what happened in Olympia this year. Last month we mentioned our upcoming Landlord Training 101 that is scheduled for Saturday May 31st at Club Green Meadows. We are lining up topics of importance and knowledgeable speakers. We are targeting both new members and those that have been around a while. Mark the date on your calendar! Yes, the time for spring cleanup has arrived. Many of us have ignored the outsides of our units during the winter. Now it’s time to check them out and clean them up. We want our current tenants to feel proud to live there, and we want to be attractive to new tenants. After all, this impacts our finances and our rental community.

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Storm Damage ...continued from page 13 quent years banks tightened lending so much that few could qualify for a home loan. The new rules seek out a middle ground by protecting consumers from bad loans while giving banks the legal assurances they need to increase lending, he said in a press conference at the start of 2013. The new rules will limit offers like teaser rates that adjust upwards and large “balloon payments” that must be made at the end of the loan period. They include several exceptions aimed at ensuring a smooth phasein and protecting access to credit for underserved groups. For example, the strict cap on how much debt consumers may take on will not apply immediately. Loans that meet separate federal standards also would be permitted for the first seven years. Balloon payments would be allowed for certain small lenders that operate in rural or underserved communities, because other loans may not be available in those areas. The bureau also proposed amendments that would exempt from the rules some loans made by community banks, credit unions and nonprofit

lenders that work with low- and moderate-income consumers. You can learn more about the details that the CFPB’s website which is a great source of information on new laws that govern the use of credit and consumer rights. Property managers, here’s an idea for you. Why not send a link to this article to your owner-clients and your prospective client list as a “heads-up” for the year ahead. As I often like to remind us, being a font of information and the latest insights can separate you from your peers, leading to more referrals and a bigger book of business. On second thought, if you send this article to your owner-clients and your prospective client list, maybe it would be more prudent to copy and paste sections and leave off the last 3 paragraphs.

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Exit ...continued from page 5 their hard built real estate “nest egg” to their families. Unfortunately there are many challenges with this plan. Most important is that one will need to find a family member who is mature enough, has an interest and wants to learn about the family’s existing real estate investments. This typically proves very difficult to do. Real estate investors tend to forget that they made many mistakes building their portfolios. They expect the next generation to make the “right” decisions, just like they did. This is an unrealistic expectation. The next generation needs to be mentored and educated; patiently, over time. Decisions need to be discussed. An investor might request their successor(s) to take real estate and/ or finance classes to prepare them for their future decision making. They should be involved in the basics: Property inspections, financial reviews, attorney meetings, refinancing and purchasing decisions. Finally they should draft long and short term plans on paper to insure a record of their plans. Use this process as a road map for family leadership. Remember that over time one needs to relinquish control, if the transition is going to be successful. This does not mean relinquishing control of your income, just planning and decision making. Yes, mistakes will be made. Consider relinquishing control a small step at a time so that your successor(s) can learn in a controlled environment. At the same time, if there are numerous “stakeholders”, children, grandchildren, nieces and nephews, create a reporting relationship that is reasonable. Decide who is going to make the decisions. Create dispute resolution processes. Don’t let disagreements in the family ruin your investments. Have a plan B in place in case your next generation manager gets ill and can no longer serve in his or her role. Most important is that you, as the owner of the investments, understand the next generation’s needs. In every generation there is most likely one of the following:

build a Trust structure that addresses the needs of the next generation. Remember also that at some point in time (with the exception of those of you that have property in Alaska) that these real estate trusts that you build, will not last into perpetuity. Note: Whichever option you choose, have a designated person to manage your real estate in case you are hit by a car or suddenly become incapacitated.] Sale to partners This is the easiest one to accomplish, if you planned ahead. In other words you added a buy sell agreement into your other partnership agreements. Of course this is dependent on how your partnership was formed. If one has planned this in advance, you most likely crafted a partnership agreement or more likely formed an LLC. In that agreement you addressed the terms of your partnership. If PGE_SpectrumAd_BW_5.pdf on the other hand you had 1 8/30/2013 9:46:48 AM been operating on love and trust

alone, now is the time to draft those agreements and spell out everything, including how to value the real estate assets once you exit. You will want to sit down with your CPA and attorney to review the tax implications of this decision and plan out if it is possible to defer or avoid some of the income taxes on the sale of your shares of the property. Note: Minority partner discount (fractional interest): Sales or partnership interests are generally valued at Fair Market Value (FMV). The FMV of a third party arms-length transaction may include a discount for owning a non-controlling minority interest. That is a matter between the buyer and seller. The IRS has accepted up to 30% value discounts in the valuation of fractional interests. Transfers to trusts for estate planning purposes may also be valued at a lesser amount – minority discount. The issue here is reduction of the gift/estate tax upon demise of the property owner. Contribute to Charitable Organization You can always

donate all or part of your properties to a charity via a charitable remainder trust (CRT). The advantage to doing this is that the size of the tax deduction is based on the then current market value of the property, not its cost basis. If structured properly, the CRT can pay you an annuity (income for the balance of your life, or for a specified term, and then distributes what is left over to the charity.) As a tax exempt entity, the CRT can sell the real estate donated tax free and reinvest the proceeds in income producing assets (that are typically more liquid than real estate). You do have to pay income taxes on the distributions you receive, but each payment may include a combination of ordinary income, capital gain and tax free return of principal. The charity can also buy an annuity in your name from the proceeds of the sale of the real estate investment. Critical tax potholes you need to sidestep: 1. Substantiate the value with an appraisal as part of the donation procontinued on page 16

• A thrifty spender • A very conservative investor • A very risk oriented investor • A very sophisticated investor • Someone that does not get along with the others • Someone who needs cash to pay for the kids college • Someone who needs cash to retire or make their house payment • A child with a disability or a mental illness (a conservator needs to be appointed to protect their interest) • Someone that has no interest in real estate at all and is willing to opt out of all decision making • A son or daughter in law that have different ideas from the rest of the family. One needs to plan ahead with your estate and real estate attorney to Rental Housing Journal Metro • April 2014

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Exit ...continued from page 15 cess. Don’t just estimate a value; the IRS might disallow the donation. For properties over $500,000 you must attach an appraisal to your tax return. 2. If the charity sells the property within three years of the donation ( most do in the first year), and the property sells for less than the appraised value, the IRS will most likely challenge your deduction. 3. Donating properties that are free and clear is a cleaner process than donating one with a mortgage still in place. According to Attorney Peter Lennington of the Lennington Law firm PLLC, St Paul Minnesota, you might end up recognizing taxable income for some of the outstanding mortgage’s value. 4. Don’t prearrange the sale of the property before it is donated to the charity. If you do the IRS will disallow the donation and you will have to pay capital gains taxes. A simple summary on charitable real estate donations is available at: http://lennington.com/global_pictures/ Shouldyoudonaterealestatetocharity. pdf or go to the Oregon Community Foundation’s Website at http:// www.oregoncf.org/donors/ give. Giving real estate to a charity is not easy. Many charities are not geared to accepting real estate; they want cash or stocks etc. If they take real estate they have to figure out how to manage it and sell it, not al-

ways an easy task. Most charities prefer donations without a mortgage because of the complicated tax implications. It is not unusual to have a home donated to charity with a life estate attached also known as a “Gift of a Remainder Interest with a Life Estate”. This donation process takes time and has to be planned in advance. For more info see this link: http:// www.weikellaw.com/newsstory/ should-i-donate-my-housecharitypart- 4-donating-your-houseandreserving- life-estate. Repositioning your real estate portfolio One way to simplify your real estate portfolio is to reposition your assets. Assuming you have a multifamily portfolio, you might want to transition out of those assets and trade into quality triple net (NNN) investments, with longer term leases. There are tradeoffs in making this decision, primarily as the market changes you can typically adjust your rents with multifamily tenancies. Commercial long-term leases don’t have the same flexibility and the rents with national AAA tenant leased properties, which typically only increase 10% over a five year period with adjustments coming at the lease anniversary mark. On the other hand they are triple net leases and the tenants are picking up almost all of the costs in taking care of their buildings. Though it bears remembering

that critical to a successful investment in a NNN property are a great location and a financially strong tenant. This may mean that you trade a higher yield for a lower yield but the benefit is a long term tenant and an easy monthly check with no midnight calls for maintenance. Note: Single tenant investments exist with medical, retail, industrial and office tenancies. It pays to do some research before you decide on a tenant and an industry group. Use of 1031 exchange to an invest in an UPREIT (Umbrella Partnership Real Estate Investment Trust) Basically to take advantage of an UPREIT, you sell your property on the open market using a 1031 exchange and then using your 1031 proceeds you invest in a REIT. Then, by virtue of a 721 exchange, the assets are traded into shares of the REIT. It is possible to just trade your investment into a REIT, but that rarely happens because UPREITs want to be able to choose their own property focus. It looks like this: The first step is selling the relinquished property and structuring a 1031 Exchange. However, instead of searching for suitable replacement property, the investor identifies and acquires a fractional interest (tenantin-common interest) in real estate that the REIT has already designated. This completes the 1031 Exchange

portion of the transaction. The second step is to contribute the fractional interest into the operating partnership after a holding period of 12 to 24 months as part of a 721 Exchange (tax deferred contribution into a partnership). The investor receives an interest in the operating partnership (OP) in exchange for his or her contribution of the real estate and is now effectively part of the REIT. http://www.exeter1031.com/ article_upREIT_1031_721.aspx Benefits of an UPREIT The benefits of an UPREIT are numerous, most importantly they deliver a tax deferral strategy to the holder of the real estate. In trade for your property, you receive a return on your investment and someone else is managing it for you. The real estate investor just has to cash the quarterly check and does not have to pay capital gains on the sale of the real estate asset. To summarize an UPREIT: • Provides a viable tax deferral/ avoidance exit strategy to property owners facing significant capital gain tax liabilities on the sale of appreciated property with a low tax basis. • Allows diversification of real estate holdings (i.e., OP Unit Holders have an interest in a portfolio of properties instead of just one). Continued on page 17

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Exit ...continued from page 16 • Gives one potential to convert liquid‚ long-term assets (i.e.‚ real estate) into more saleable securities (i.e., OP Units → REIT Share → Cash). • Eliminates or reduces property management responsibilities or concerns. • Provides quarterly income distributions. • Provides potential to recognize unrealized gains as earnings. • Can provide professional management and expertise in capital markets. • Avoids risk of negative cash flow. • Establishes estate simplification. • Allows the owner to dispose of property in a way that maximizes its value. • Can improve cash position through potential leveraging of OP Units. More information through this link: http://www.broadstone.com/ realestate- services/upreit/ UPREITs can help you restructure your real estate assets and make it easier to give away or inherit after your death. If structured correctly, ownership in UPREITS might not result in a taxable event until the shares are sold; however when doing business with another company you must carefully

vet the strength of the company, its history and its future goals, as well as the experience of the officers running the REIT. Additionally, remember they are trying to make a buck as well. It is very important to understand all of the costs that are involved with investing with an UPREIT and the ups and downs of the stock market as well. Note: Fore more details regarding the definition of an UPREIT, see (http://www.exeter1031.com/ article_upREIT_1031_721.aspx) from the Exeter 1031 website TIC investments: Tenant in common investments were a common real estate investment vehicle before the market downturn in 2008. Then the short term mortgages that many of them were financed with needed to be refinanced and financial institutions were loath to refinance, because vacancy rates had increased and income had declined. Many investors lost significant assets due to the so called “TIC Meltdown”. All was not as advertised and the SEC decided that these were securities and needed to be sold by stock brokers with securities licenses vs real estate agents. On the other hand, out of this challenge a few companies in Utah, Rockwell and Realty Net Advisors, decided that they could mitigate in-

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vestment risk by taking investors 1031 returns and place then into NNN investments where no loan was needed. In other words 100 % of the purchase price for a single tenant investment came from 1031 proceeds that investors placed in the pool. They also focused on very small investments in the $1,000,000 range, possibly to avoid securities regulations. This means less risk for the investors, because the worst thing that could happen to the investors is the loss of the tenant, resulting in an empty building they have to retenant. They cannot lose the building to a financial institution since there is no loan in place. In addition, the TIC sponsors mitigate this risk, by only choosing high quality national tenants. They keep it simple. They collect the rent, charge a management fee, inspect the property and then send a check to the investor, {Note* There is no loan in this scenario so no mortgage to pay off, this helps with upside on the yield for the property.). Average returns are in the conservative but steady 5-7% range. This also means though that you don’t have help from Uncle Sam in this kind of transaction i.e. an interest expense write off. Additionally, in this kind of a transaction don’t get the benefit of leverage which could increase your returns. The downside is that you are in a type of a partnership and when you want to exit from this structure,

you have to live by the TIC agreement. Basically in this structure, much like the UPREIT structure, you have ceded control of the investment to a third party. If the third party mismanages your property/ies, you may lose all of the return from your investment. For more on the downside risk see this link: Note: don’t forget that when you complete a 1031 exchange you also have to replace the debt, if any, you have in place in the replacement property. For more details follow these links: http:// www.securitieslawyersblog.com/2013 /10/30/ tenants-common/ www.realtynetadvisors.com/ www.rockwelltic. com/ Hire a property/asset manager Many investors hate spending money to have their properties managed, but a good property manager is worth his/ her weight in gold. Life is simplified. You can travel, work and enjoy your family and not have to pay daily attention to your property, though you still need to be involved with your property. In preparing for retirement, you can have a property manager manage your assets for you and for the next generation as well. Annual or semiannual property inspections, reviewing financial reports and involvement in capital expense decisions are still on your required list of things to do. These are things that your spouse/ life companion can also do, should Continued on page 18

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Exit ...continued from page 18 you be unable to due to an illness or other incapacity. If you have significant assets, you might hire an experienced real estate professional in the form of an asset manager who makes all of your decisions for you, from acquisition to disposition, from long range planning, to holding property managers accountable. They typically are paid a fee for services. In some cases banks have trust departments that also can manage properties for you either with their own staff or through the use of property managers; they would perform this in an asset management role, much as they manage stocks and bonds for their clients. Conclusion So how do you best protect yourself when you are ready to retire from active real estate investing? Which one of the exit strategies do you use? 1. Selling your real estate investments 2. Family succession planning 3. Selling to partners 4. Contributing to a charitable organization 5. Repositioning your portfolio 6. Using a 1031 exchange to invest in an UPREIT (Umbrella Partnership Real Estate Investment Trust) 7. Tenant in Common Investments 8. Hiring a property manager

In the end your own personal situation and personal preferences will dictate or influence your decisions. I always fall back on the thoughts of George S. Clason and his book published in 1926, The Richest Man in Babylon.* Some of his key points were as follows: “Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling. Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep. Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.” Bottom line is that you need to carefully investigate all of your investment strategies. You should hire advisors you trust. Hire experienced CPA’s, Attorneys, and real estate advisors. Spend some of that hard earned money to protect the rest of the corpus. Seek out specialists in estate planning and real estate. I recommend that you do not have your employment attorney tell you what to do. The real estate attorney, who is an expert at evictions, is the wrong

person. You need to talk to someone that understands all of the exit strategies. Interview and meet many people. If your gut tells you that you are over your head, trust your gut. You will find the answer that is right for you; it just may take some time! Plan ahead! Don’t let the tail wag the dog, understand all of the tax implications (estate tax and real estate capital gains taxes) first before you make a final decision. *The Richest Man in Babylon - The Success Secrets of the Ancients, by George S. Clason. Publisher - Signet / First published in 1926 Clifford A. Hockley is President of Bluestone & Hockley Real Estate Services, greater Portland’s full service real estate brokerage and property management company. Founded in 1972, Bluestone & Hockley’s staff totals nearly 110 employees, including 20 licensed brokers. The company’s property management division serves commercial buildings, apartments, condominium associations and houses in the Portland/Vancouver metro area, while the brokerage division facilitates both leasing and sales of investment properties throughout Oregon and Washington. Cliff earned a degree in Political Science from Claremont McKenna

College and holds an MBA from Willamette University. He is a Certified Property Manager and has achieved his Certified Commercial Investment Member designation (CCIM). Bluestone & Hockley Real Estate Services is an Accredited Management Organization (AMO) by the Institute of Real Estate Management (IREM). Cliff is a member of the Institute of Real Estate Management and was named Certified Property Manager of the year in 2001 and 2003. Cliff is a frequent contributor to industry newsletters. Bluestone & Hockley offers customized brokerage, property and asset management, as well as maintenance services to property owners and investors throughout the Portland/Vancouver metro area. The company’s full-service approach benefits busy property owners and investors, who know they can count on Bluestone & Hockley for high quality real estate services start to finish.

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Three MoreWays to Fill those Vacancies By: by Marc Courtenay PropertyManager.com a Service of AppFolio

ere are three ideas from my upcoming article series titled “50 Ways to Fill Your Vacancies”. Like you, I’m fired up about the idea of having as many marketing tools as possible to manage properties effectively. As a property owner and/or manager, you may already have many successful ways to quickly fill your vacancies with well-qualified new residents. My hope is that I can add a long list of intuitive and counter-intuitive suggestions that have worked and will keep on working. So here are three more suggestions that can insure that the rental income stream keeps flowing to your clients and yourself. 1. Go to the restaurants you frequent the most. Ask the owner or manager to allow you to display a tastefully crafted “take one” box at the check-out counter or hostess table. Make sure it clearly displays the message that a gift certificate for that restaurant will be given to the individual who takes one of the special display cards and gives it to a prospect who becomes a resident.

A variation of this is to tell the restaurant owner, manager or hostess that if someone rents one of your units, you’ll buy a gift certificate from the restaurant and give it to a new patron who has never been to their restaurant. It will generate a fresh batch of regular customer for the restaurant and a repetitive source of referrals to you. You’ll be amazed how many restaurants will love the idea as they’re always looking for new ways to increase their clientel. 2. It may seem old-fashioned in this age of digital, mobile media, but creating a full-page, colorful, glossy hand-out that lists all of the benefits, accoutrements, and features of your available rental still works. Make sure you show some photos of how

nice the vacant unit looks, and when you take the photo “stage it” with a few perky pieces of furniture or wall furnishings. List any extra features like a new dishwasher or free Wi-Fi and provide information about the local area, bus routes, schools, laundry and conveniently popular shopping venue. You’ll be providing a valuable service that few property managers take the time to offer. Let your prospects take your hand-out and tell them to call you if they have any questions. Ask for their contact info so you can follow up. 3. Ask your current residents, clients and “happy campers” for a glowing testimonial of what it’s like to be a resident in one of your well-

maintained and thoughtfully managed buildings. Let your prospects know ahead of time how much current and past residents appreciated your services. Ask for as many testimonials as possible, and use them to attract more owner-clients as well as prospective renters to fill your vacancies. There you have three more ideas on how to fill your vacancies as fast as possible. Keep in mind that if you haven’t tried these ideas lately, you can’t objectively know why they work or how they work. These ideas derive from my property manager colleagues and my own experiences. Together we have many decades of management and marketing expertise and that’s why I literally have at least 50 of these tried and tested tools. They’re based on the principles that if you’re willing to do what few property managers are willing to do, you’ll have the kind of success that few will enjoy and experience. Also, your clients and residents don’t really care how much you know until they know how much you care. So get busy and show them!

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