Rental Housing Journal Metro
July 2014
2. Multifamily NW – “I just do maintenance”
12. Dear Maintenance Men 14. Shoptalk
4. President’s Message: A Landlord's Summer
15. Knowing the Limits on Collection Practices for Property Managers
6. Thoughts on Being a Successful Landlord
16. The Coach - Can Your Rental Center Walls…Sell?
9. How Entrepreneurs Can Increase Profit with a Hands-Off Approach 10. Responding to Maintenance Emergencies
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
Market Overview Portland Oregon Multifamily Housing Update 1Q14 RED CAPITAL GROUP®
Understanding Oregon Medical Marijuana Dispensary Tenants By Cliff Hockley and Special Contributors Jacob Zahniser and Chris Walters building owner asked to lease to a marijuana dispensary is faced with a host of complex legal considerations unique to marijuana dispensary tenants. This arises from the inconsistent state of play between federal, state, and local regulators: • Marijuana remains a controlled substance under federal law. • Oregon law permits dispensaries, subject to licensing and other requirements. • Oregon cities have the right to prohibit dispensaries within their jurisdiction. This article summarizes the key considerations a building owner must keep in mind when thinking about leasing to a dispensary. The Legal Morass Federal Law The sale of medicinal marijuana is illegal under federal law and marijuana remains a federally controlled substance. As long as marijuana remains a federally controlled substance, there will always be a risk that federal law enforcement will shut down a dispensary and potentially seize the premises. The U.S. Department of Justice, however, has stated that federal prosecution will occur only when the sale of medicinal marijuana touches on one of the following: 1. The distribution of marijuana to minors 2. Revenue from the sale of marijuana goes to support criminal
A Payroll Job Summary Total Payrolls 1.043.8m Annual Change 28.0m (2.8%) 2014 Forecast 22.8m 2015 Forecast 18.1m 2016 Forecast 17.9m 2017 Forecast 12.4m Unemployment 6.1% (May) 1Q14 Payroll Trends and Forecast Notwithstanding the sharp drop in 1Q14 GDP, Rose City job creation trends were buoyant, as employers added workers to payrolls at a 28,000- job, 2.8% year-on-year rate; the fastest growth observed since 3Q06. Every sector save transportation made a positive contribution, led by construction, retail trade and business and leisure services, which collectively expanded at a 19,900job, 5.0% year-on-year pace. Seasonally-adjusted data also painted a bright picture. This series reveals that Portland establishments created a net of 12,100 new positions during the three-month period ended in April, the largest such job gain recorded in ten years. RCR analysis finds that Portland job growth is closely correlated to U.S. payroll and metro personal income growth rates and lagged S&P 500 investment returns. A 96.0% continued on page 7 Professional Publishing Inc. PO Box 6244 Beaverton, OR 97007
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organizations, gangs, and cartels 3. The diversion of marijuana from states where it is legal in some form under state law to other states where it is illegal 4. State-authorized marijuana activities being used as a cover for trafficking other illegal drugs or engaging in other illegal activities 5. The use of firearms or violence in the cultivation and distribution of marijuana 6. The exacerbation of other adverse public health consequences associated with marijuana use such as driving under the influence 7. Growing marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands 8. Marijuana possession or use on federal property Civil Forfeiture If federal law enforcement steps in to shut down the dispensary, it may also seek to take the premise through civil forfeiture laws. Under federal and state civil forfeiture law, the government has the authority to seize property used to commit a crime, even if the owner of the prop-
erty is not charged with, or convicted of, a crime. As long as the property itself is linked to the criminal activity, it may be seized. Typically, the government first seizes the property and then builds its case as to whether the property should be forfeit. This can take months or years before the forfeiture is final, during which time the building owner is deprived of any revenue from the property. Consequently, while the threat of federal law enforcement is mitigated when a dispensary is operated in compliance with state law, the risk associated with federal law enforcement remains very real (and very high), especially considering that federal enforcement policy may change with a new administration. State Law A building owner would be wise to include terms in the lease that mandate the tenant to provide the owner with documentation of compliance with all state requirements. For example, the premises cannot be within 1000 feet of a school or another dispensary, it must be equipped with an alarm system and video monitoring, and the dispensary tencontinued on page 10
Advertise in Rental Housing Journal Metro Circulated to over 6,000 Apartment owners, On-site, and Maintenance personnel monthly.
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RENTAL HOUSING JOURNAL METRO Pam McKenna Multifamily NW President
By Pam McKenna “I just do maintenance.” How many times have heard this statement out at a property? The phrase seems to imply that this role is insignificant or less important than others. Through our resident surveys, I’ve seen consistent feedback on personnel demonstrating the importance the maintenance team plays. Through reviewing financial reports I’ve seen operations literally turn around as a result of an organized, diligent, hardworking maintenance team member. Clearly this is a pivotal role in property management. So what have you done to invest in this critical piece of your operations? Through strategic training, development and oversight, you will experience a higher level of performance and improved operations. The best place to start is with your onsite manager. If your manager and your maintenance team do not speak the same language it can often cause
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“I Just Do Maintenance” frustration and create unnecessary work for the team. Get your manager signed up for a maintenance class in order to understand the basics of the maintenance function. One of the best experiences I have had in my career was spending the day working alongside the maintenance team. It allowed me to understand the demands of the day for the maintenance crew and highlighted ways that the office team could improve on communication. Let’s just say I had a lot more respect for what they do after walking a day in their shoes. The more knowledge the management team has of this critical function the more effective their management will be over the maintenance role. Budget knowledge is the number one weakness. We don’t want to give our maintenance managers the budget, but when they are over budget they are the first to get reprimanded for spending too much. If you prepare your team with budget knowledge they will understand the goals for the year ahead and can find
ways to not only meet budget but often come up with creative ways to reduce expenses resulting in savings. Time management for the maintenance team includes efficiency in ordering. On-line ordering will cut down on hours spent thumbing through a catalog. Create a saved favorites list that only requires you to enter the quantity of items and with a few clicks the order is submitted. Planning ahead will make it easier to cut down on driving to the local hardware store for those last minute items needed to wrap up a turn. It is more effective to order supplies once a week through organized scheduling rather than putting in an order every other day. Communication between the maintenance team and the management team is critical. It begins with holding regular team meetings to ensure the team is on the same page. Was a move-in bumped up to an earlier date? Did someone cancel their notice and they are not moving out? Did a resident complain about
a work order not getting handled correctly? Team meetings can be an excellent way to coordinate and efficiently work through changes and challenges. How often do the manager and maintenance walk the property together? This should be done weekly so that both sets of eyes are on the community and expectations are reviewed and discussed during that walk. The team should set goals for each week, month and year and track them in order to appreciate their progress. Establish standards regarding the use of radios to ensure all communications are professional and appropriate. Train the management team on how to better communicate when preparing a maintenance request. There are questions that when asked can clarify the specifics of the request. An example might be clarifying a specific room and wall an outlet is not working instead of just saying “outlet in bedroom not working.” Resident satisfaction is often tied Continued on page 5
Multifamily NW
Events Calendar July 8, 2014 9:00 AM - 11:00 AM SOLD OUT Fair Housing for Maintenance (Portland, OR) July 10, 2014 1:00 AM - 1:00 AM PDX Charity Golf Tournament (Portland, OR) July 11, 2014 12:00 PM - 1:00 PM It's the Law Lunch Time Series: Dealing With Non-Tenants Unauthorized Occupants, Trespassers & Ejectments (Portland, OR) July 15, 2014 7:00 AM - 4:00 PM SOLD OUT EPA LeadBased Paint Renovation Certification (Portland, OR) July 16, 2014 9:00 AM - 11:00 AM NALP: Rental Policies and Procedures (Portland, OR) July 22, 2014 9:00 AM - 1:00 PM New Hire Training (Portland, OR) July 24, 2014 8:00 AM - 5:00 PM CAMT: Appliance Repair Part I (Portland, OR)
Golf spots are available for $100 each and sponsorships start at $125! Sign up today by visiting multifamilynw.org, calling 800-632-3007 or emailing Kristen Davies at kristen@multifamilynw.org.
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July 31, 2014 8:00 AM - 5:00 PM CAMT: Appliance Repair Part II (Portland, OR)
August 5, 2014 1:00 PM - 5:00 PM OR Landlord/Tenant Law Part 1 (Portland, OR) August 6, 2014 9:00 AM - 12:00 PM NALP: Leasing and the Internet (Portland, OR) August 7, 2014 1:00 PM - 4:00 PM Washington State Forms & Notices (Vancouver, WA) August 8, 2014 8:00 AM - 12:00 PM Mold Awareness & Remediation (Portland, OR) August 8, 2014 12:00 PM - 1:00 PM It's the Law Lunch Time Series: Crazy But True: Stories From a Full Moon (Portland, OR) August 12, 2014 1:00 PM - 4:00 PM Washington State Landlord/Tenant Law (Vancouver, WA) August 15, 2014 9:00 AM - 1:00 PM New Hire Training (Portland, OR) August 19, 2014 1:00 PM - 5:00 PM OR Landlord/Tenant Law Part 2 (Portland, OR)
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RENTAL HOUSING JOURNAL METRO
Market Overview ...continued from front page adjusted-R2 model specified with these variables forecasts moderating job creation trends, gradually reverting toward the metro’s 1.6% annual long-term mean. Portland is likely to achieve faster than average growth through 2016, but gains are likely to recede in 2017, in keeping with broader U.S. trends. Occupancy Rate Summary Occupancy Rate (Reis) 97.0% RED 50 Rank 10th Annual Chg. (Reis) +0.4% RCR YE14 Forecast 96.8% RCR YE15 Forecast 96.8% RCR YE16 Forecast 97.4% RCR YE17 Forecast 96.9% 1Q14 Absorption and Occupancy Rate Trends Strong tenant demand remained the order of the day as Portland households occupied a net of 689 vacant units during 1Q14, according to Reis. Absorption was moderately weaker than in the prior (870) and year-earlier (709) quarters, but the shortfall was largely attributable to lower supply. Developers delivered only 395 units during 1Q14, down from 1,088 (4Q13) and 502 (1Q13). Consequently, occupancy increased 20 basis points sequentially and 40
bps year-over-year to 97.0%. Axiometrics surveys of stabilized property found an average occupancy rate of 95.7%, unchanged sequentially but up 50 bps y-o-y. Class-C assets enjoyed the highest average occupancy (96.3%), followed by class-B (96.3%) and class-A (95.0%). Units in not-stabilized properties were absorbed at a useful rate of about 21 units per month. RCR find that absorption is closely correlated with job growth. In line with our jobs forecast, Portland is likely to enjoy above normal demand through 2016, followed by a gradual drift to the long-term mean, yielding slightly lower occupancy by 2017. Effective Rent Summary Mean Rent (Reis) $894 Annual Change 4.3% RED 50 Rank 11th RCR YE14 Forecast 3.7% RCR YE15 Forecast 3.1% RCR YE16 Forecast 2.5% RCR YE17 Forecast 1.9%
ter basis, average rents advanced $10 (1.1%), up from the prior quarter’s 0.8% gain. Axiometrics surveys of larger, same-store properties found considerably stronger rent growth. Effective rents among this group increased 7.6% y-o-y, representing the fourth consecutive annual metric in the series exceeding 6%. Class-B properties achieved the strongest rent gains, rising 8.8% over-the-year. Class-C assets trailed (4.8%), while class-A properties notched a 5.8% average advance. Rent increases were steepest in the metro’s two largest submarket inventories: Beaverton (8.3%) and Tigard (9.4%). By contrast, slower growth was recorded in Northwest Portland (5.7%) due to competitive pressure. RCR find that changes to metro personal income, job and supply growth and S&P 500 returns account for 91.4% of changes in rent growth. Using this model, we estimate that Portland rents will rise at an above average (3% - 4%) rate through 3Q16 before slowing to the 1.9% - 2.3% range.
1Q14 Effective Rent Trends The Portland market posted a tenth consecutive quarter of 4% or faster effective rent growth in 1Q14, rising at 4.3% annual rate, up from 4.0% in 4Q13. On a sequential quar-
Trade & Return Summary $5mm+ Sales 7 Approx. Proceeds $197mm Avg. Cap Rate (FNM) 6.7% Avg. Price/Unit $141,964 Expected Total Return 6.5% RED 46 ETR Rank 34th Risk-adjusted Index 2.53 RED 46 RAI Rank 41s 1Q14 Property Markets and Total Returns Investors drank long and deep of Portland properties during 4Q13, closing on 18 properties valued at $5 million or more for a total of $414mm. Sales velocity was understandably slower over the winter quarter, falling to seven transactions for aggregate proceeds of $183mm. The average unit price was sharply higher, however, rising to $141,964 from 4Q13’s $113,343 metric. Acquisition of a class-A Boise mid-rise by a Wall Street fund for $281,915/unit (fifth highest price ever in this market) was largely responsible for this result. Cap rates for institutional trophies fell in the mid- 4% range, but standard class-B suburban assets were mostly in the high-5% to mid6% range. Continued on page 7
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RENTAL HOUSING JOURNAL METRO President Elizabeth Carpenter • President Elect John Sage • Past President Phil Owen • Vice President Robin Lashbaugh • Secretary Lynne Whitney • Treasurer Elaine Elsea • Office Manager Cari Pierce 10520 NE Weidler Portland, OR 97220 (503) 254-4723 • fax (503) 254-4821 info@rhagp.org • www.rhaoregon.org.
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President’s Message: A Landlord's Summer
Liz Carpenter RHAOregon President
read somewhere the perfect sum- pected losses and tax losses, and all screening, and answers to all the mer day is when the sun is shin- of a sudden you’d wish that lawn questions around the section 8 law ing, the breeze is blowing, the mower were broken--this stuff can taking effect continue at the RHA. Just call our office or check our new birds are singing, and the lawn be overwhelming. The RHA is here to help you navi- website. We are here to serve. mower is broken! Well that may be Can’t wait to see everyone in a true for a lot of people, but not for us gate the pitfalls of our industry and landlords. Summer is the short time help you make smart business deci- few weeks Under a Starry Night. July 16, 2014 at 6pm, complimenwindow we have to make repairs, sions for your properties. We have an replacements, upgrades, and the rest experienced team, experienced board tary beer and wine. $19.00 per guest of those things wet winter days don’t of directors, and wonderful partner to cover the cost of food. companies who are here to help. allow. Sincerely, This month we have something It’s important to remember a few things about all this work. Foremost, very special going on at the RHA. Liz Carpenter keep good books. All those receipts Please save the date and come to our Rental Housing Alliance Oregon and bills are really important around first annual “Under a Starry Night” tax season. Understand how to use social. Taking place of our monthly President depreciation as a business tool. Some dinner meeting, we are starting a Since 1927, the Rental Housing landlords use a strategy known as July tradition of hosting all our memAlliance Oregon has set the standard cost segregation, components of a bers at the RHA offices. Fine food, for community participation by landproperty and its improvements are wonderful friends, and a way for lords providing affordable and quality depreciated separately, often with you to help our favorite non-profit VALLEY, METRO, ARIZONA APT. NEWS housing. different, shorter timelines. Furniture JOIN, who help people transition and appliances, for instance, are from the street to a home. We will also be dedicating our depreciated over five years. Did you know property improvements are new community room after longtime also included in the cost basis? They RHA board member Jon Moon. It are depreciated over time, though will be a fine and special evening the cost of most repairs is deductible and we really hope the entire RHA Feb, Apr, Jun, Aug, Oct, Dec in the year when it is incurred. Add community will attend. Of course our classes, tenant the use of your home office, unex-
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Rental Housing Journal Metro • July 2014
RENTAL HOUSING JOURNAL METRO
I Just Do...continued from page 2 to the relationship with maintenance. This team is interacting with the residents on a more consistent basis making customer service and fair housing training a critical piece for improved resident satisfaction. The maintenance team should know how to sell the value of the community when interacting with the residents and do their part to market the service they provide. Make sure they are completing follow up calls to verify the residents are satisfied after every work order. What about leaving behind a thank you note and a treat? This can add that additional marketing and customer service “wow” factor to your maintenance team. Setting up a team with the proper personal protection equipment, current MSDS sheets, and regular training on safety practices can reduce liability at the property. Routine site inspections are encouraged to stay out in front of any areas that may become liabilities and are being overlooked.
Set standards for the team on appearance and hygiene. Personally, I am more comfortable allowing a maintenance person into my home that is in a clean uniform with a proper name badge. Smoking should only be allowed in designated areas and steps should be taken to remove the smoke smell that lingers on an employee. How else can you improve efficiency with the maintenance team? Be clear on when it is a good time to include two workers to complete a task. Train the team to plan ahead to bring all the right tools and supplies to a job to avoid those needless trips back and forth to the maintenance shop. Managers should be aware of what a reasonable amount of time is required to complete typical tasks so they can help monitor efficiency. The maintenance team needs to know when it is appropriate to call in a vendor because an issue is larger than what they can handle. PGE_SpectrumAd_BW_5.pdf 1 8/30/2013 9:46:48 Keeping the shop organized willAM
help improve efficiency as well. A shop should have minimal inventory with a system that is organized making it easy to quickly locate the parts needed. Dispose of old random parts that will never be utilized. Create smart work spaces that allow for easier repairs, such as a large table to cut screens. Get rid of old couches and TVs and create appropriate lunch stations for the team to take breaks. Compile a standard specs list for your community making it easier to order supplies and creates a more consistent apartment turn for residents. It is easier to find the parts you need when the specs are the same throughout the property. Create a record documenting the property systems, dates replacements occurred, annual inspection dates and routine maintenance calendars. Plan the year ahead by creating a capital planning board in the shop. Map out the plan for the year ahead and what items are budgeted or planned for in each month.
Set the tone that a great attitude goes a long way. Coming to the property with a “can do, get it done” outlook will make a huge difference in performance. Ask for their commitment to excellence and to bring 100%. Invest in your maintenance team through training. Maintain consistent oversight – “inspect what you expect”. Follow up with recognition, rewards and appreciation. Validate how valuable they are to the operations of your communities and definitely don’t accept the statement “I just do maintenance.” p
Advertise in Rental Housing Journal METRO Circulated to over 20,000 Apartment owners, On-site, and maintenance personnel monthly. Call 503-221-1260 for more info.
Rental Housing Journal Metro • July 2014
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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
H
ave you noticed that when you take time off from work, life goes on? I have recently done just that and now that I am back in the saddle, I realize the challenges we were facing before are still present. In fact, new challenges have developed in the interim. Here are a few examples. A few landlords continue to create problems for the industry. Others live on the opposite extreme of being involved in community activities in addition to taking care of their rentals and their tenants. Most of us operate in between. When you encounter landlords and managers in the second category, acknowledge their contributions and thank them for going beyond and doing more. Alternatively, when you encounter the problem landlords offer to assist them. Many just don’t know any better through their ignorance; others just don’t care; and the minority tries to milk the situation for the highest return at the lowest cost. Many things happen in our lives that are outside our control but they
Thoughts on Being a Successful Landlord
impact us and our tenants and often require a response from us. Gang violence is a growing problem. Apartment fires continue to damage our properties and devastate those tenants that are impacted. Young children fall out of windows. Tenants lose jobs. Governments pass laws restricting our industry. These are just a few of those crises that may occur. Do we have contingency plans? Are we willing to remain flexible to these external influences? If we do not stop to consider these possibilities, we may end up being forced to react rather than being proactive. Contingency planning is only one facet of being a good landlord. Another is appreciating your tenants and that they have lives too. When tenants are taking care of their “homes”, let them know you appreciate them. You don’t have to be friends—just respectful. Be firm: when the rent is late the first time, send them a 3-day notice immediately. Let them know that paying on time is important and
expected. Do not try to be nice and give them a few days to pay (unless there is a good reason.) Realize that just being nice may actually be mean. If a tenant is several weeks late, he/ she still has to pay the rent PLUS late fees besides the following month’s rent is due even sooner. If you give them until the next month to pay, realize they NOW have two months’ rent due—if they can’t pay one month’s rent, how do you expect him/her to come up with 2 months of rent? There is another facet of landlording that is becoming more important as a result of the Great Recession, and that is there are more families on the edge of homelessness. As humans we have an ethical obligation to be aware of their plight and when it makes sense do something about it. Often as we become more successful, we look at those less fortunate and classify them as lazy or not living smart or living off the public dole. As with most generalizations, this belief is just plain wrong: there are many exceptions. Many who are living on
the edge are in that position due to circumstances beyond their control. Don’t automatically disqualify them if they don’t meet your criteria. Stop and look beyond their current situation. Whenever you do this remember two important rules: don’t make exceptions to your criteria without documented reason and keep in mind your rentals are a business, not a social service agency. If this style of landlording does not work for you, find some other way to help families in these straits. There are many freedoms in being a good landlord. This is one of the reasons I like being a landlord. My wife and I can run our business how we wish, remembering always the rules and regulations for landlords. It is easy to feel like we are making a difference for good. Look for ways you as a landlord can make a difference for good as well. p
LANDLORD-FRIENDLY RENTAL FORMS Attorney Drawn Forms for all Your Rental Needs! Now 4 Convenient Ways to Get Forms 1. Visit www.rhaoregon.org, go to the “tools” page for hard copy forms mailed to you 2. Visit www.rhaoregon.org, go to the tools page for individual fillable forms that you can download in PDF directly to your computer. 3. Call 503-254-4723 and order forms over the phone with one of our friendly representatives. 4. Come visit us at 10520 NE Weidler St. Portland, OR 97220 for fast and frienly service.
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Rental Housing Journal Metro • July 2014
RENTAL HOUSING JOURNAL METRO
Market Overview...continued from page 3 Reflecting higher cap rates for mid-range properties, RCR elected to increase the generic cap rate 25 bps to 5.75%. Using this level, a 6.5% exit cap rate and model derived occupancy and rent forecasts, we arrived at a 6.5% expected, 5-year unlevered total return, ranking 34th
among the RED 46 markets. Risk modeling indicates that investments yield 2.53% of return for each 1% of measured risk, ranking 41st best among the group.
For more information about RED’s research capabilities contact:
James P. Hensley, Senior Managing Director Head of Mortgage Origination jphensley@redcapitalgroup.com 770.753.6472
Daniel J. Hogan, Director of Research djhogan@redcapitalgroup.com 614.857.1416 The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice, or recommendations to buy or sell currencies or securities or to engage in any specific transactions. Information has been gathered from third party sources and has not been independently verified or accepted by RED CAPITAL GROUP. RED makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. RED cannot be held responsible for any errors or misrepreRental Housing Journal Metro • July 2014
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sentations contained in the report or in the information gathered from third party sources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.
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Dispensary ...continued from front page ant must pass a criminal background check. In order to know if the dispensary tenant is in compliance, the building owner should be familiar with the state’s regulations governing dispensaries. Regular property inspections will show tenants that they cannot deviate from their obligations to the law and the lease agreement. Local Law Under Oregon law, any Oregon city may pass a moratorium on dispensaries until May 2015. At least 70 cities across Oregon have passed moratoria or other regulations effectively prohibiting dispensaries altogether. These cities include Hillsboro, Beaverton, Tigard, Tualatin, Milwaukie, Gladstone, Oregon City, and Wood Village. Thus, the building owner should know whether the local code even allows a dispensary at the premises. The Practical Considerations Once through the legal morass, the building owner must address the host of other considerations unique to dispensaries such as (a) tenant mix, (b) image issues, (c) insurance considerations, (d) compliance with other leases, and (e) compliance with financing restrictions. For example, in a multi-tenant building the other tenants may not appreciate having a marijuana dispensary as a co-tenant. Besides the perceived image problem, marijuana
gives off distinctive odors that other tenants sharing a common HVAC system may not appreciate inhaling. Relatedly, having a dispensary as a tenant could lead to a decrease in lease renewals from other tenants in the building. Other tenants may perceive any loss of business as caused by the dispensary (whether true or not). To mitigate this, and other cotenant risks, stand-alone facilities may be the best option for dispensary tenants. Finally, dispensaries are relatively new and their operators may be inexperienced in operating a dispensary. This inexperience increases the likelihood that the dispensary will fail and the tenant will default on the lease. Conclusion A building owner asked to lease to a marijuana dispensary is faced with a host of complex legal and practical hurdles unique to marijuana dispensary tenants. While not insurmountable, the building owner should take great care, and consult with experienced legal counsel, when considering whether or not to enter into a lease with a marijuana dispensary. p
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Rental Housing Journal Metro • July 2014
RENTAL HOUSING JOURNAL METRO
How Entrepreneurs Can Increase Profit with a Hands-Off Approach Mechanical Rule of Distance’ Lets You See Big Picture & Test Ideas, Says Business Development Strategist
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t’s a common occurrence among the most talented people in the corporate world – highly skilled and qualified workers make the leap from valued employee to uncertain business owner. Unfortunately, rather than becoming a master of their own business, many of these entrepreneurs work twice as much as they did in their safe corporate job, unwittingly committing themselves to becoming the lowest rung on the ladder, says Zenovia Andrews, founder and CEO of The MaxOut Group, a company devoted to empowering and teaching entrepreneurs development strategies to increase profits. “People believe that starting a new business is supposed to mean they’ll have to work much longer hours, and that’s why most new businesses fail early,” says Andrews, author of the new book “All Systems Go – A Solid Blueprint to Build Business and Maximize Cash Flow,” (www.zenoviaandrews.com). “Entrepreneurs need to be the brains and oversight of the opera-
tion. It’s not wise to work for your own business. Sixteen-hour days get entrepreneurs lost in the minutiae. The lose perspective and burn out.” Business owners need distance for perspective, and the best way to create that is by knowing how to delegate duties to employees, she says. “Owners need to be the strategic visionary who hires, trains and develops the best talent available, and then delegates work,” says Andrews, who discusses the five keys of delegation.
they do well, and give them responsibilities and authority. They’ll be happier and so will you. • Focus on your own strengths, then plug the holes. Few of us are great at everything! If bookkeeping’s not your thing, hire an accountant.
If you don’t have marketing experience, find someone with proven skills. Trying to perform jobs that you don’t do well will require twice as much effort with less-than-satisfactory results. continued on page 11
• Understand that your team is made up of human beings. No one can work nonstop, so get your timing right. Know what each employee can handle, and never overwork them. Most people perform at their best when they are consistently busy but not rushed or pressured. • Focus on the strengths of your team. Delegation is not a dumpand-run tactic. Know your employees and how they fit into your business puzzle. Allow them to do what
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Responding to Maintenance Emergencies
By Mary Girsch-Bock
Y
ears ago, while living in Las Vegas, a summer thunderstorm wreaked havoc on my apartment. Lightning eventually struck the roof of my loft, creating a fairly significant hole in the roof. Since it was late, I placed a bucket under the hole to catch the still-falling rain and called the management office to report the damage. I left four messages that evening; none were returned. The roof was eventually fixed; five days later.
10
Each day I prayed that the summer monsoon rains would stay away until the roof was fixed. I was lucky about the weather. Not so much about my choice of apartment communities. What really angered me was the lack of concern about a serious problem that a tenant had. I didn’t expect them to come out that evening in the middle of a storm to fix the roof. I did expect them to call me back and let me know that it would be taken care of. That lack of concern was what I put on my 30 day notice, when I chose not to renew my lease.
Are you available for your residents 24-7? That doesn’t mean following up on minor issues that can be easily addressed in the light of day. It does mean that when your tenant has a legitimate concern, are you easily reachable, even if just for some reassurance? If you’re a little confused on what constitutes a legitimate emergency, here are some issues that property managers should respond to as quickly as possible. And remember, if you’re not sure, err on the side of the emergency being important and pick up the phone and call.
Major leaks, including both storm related damages, or issues such as a toilet or sink overflowing from an upstairs units. Lack of heat. This is an issue that needs to be addressed immediately, particularly in colder climates. Any structural issues. This can include anything from collapsing balconies, stairways, carports, or ceilings. Any gas smells. While hopefully tenants have been instructed to call the local gas company in the event of a gas smell, this is an issue that managers need to address promptly. Lack of running water. Again, this is an issue that constitutes an emergency, and property managers should respond accordingly. While property managers should never be expected to respond to every issue that arises after hours, it’s important for tenants to know that should an emergency arise outside normal business hours, their property manager is only a phone call away. PropertyManager.com a Service of AppFolio p
Rental Housing Journal Metro • July 2014
RENTAL HOUSING JOURNAL METRO
Hands-Off ...continued from page 9 • Be the resource king or queen. Your employees are only as good as the resources they have. Make sure that they are equipped to always do the best work for you on a daily basis. Running out of stock, not having new software and not shelling out for that desperately need printer is NOT good delegation. • Become the fire, ice and motivation behind your team. When they need guidance, give it to them; when they need appreciation, offer it to them. Inspire, motivate and lead by supporting your delegated decisions and following up on them often. “Business owners need to be the big thinkers: to identify patterns both good and bad; to become an idea machine and testing fanatic; to fill out details from outlined strat-
egy; to be aware of market trends; to always have one eye on the competition; and to develop an instinct for the people with whom you like to work,” Andrews says. About Zenovia Andrews Zenovia Andrews, www.zenoviaandrews.com, is a business development strategist with extensive experience in corporate training, performance management, leadership development and sales consulting with international clients, including Pfizer, Inc. and Novartis Pharmaceuticals. A sought-after speaker and radio/TV personality, she is the author of “All Systems Go” and “MAXOut: I Want It All.” p
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RENTAL HOUSING JOURNAL METRO
Dear Maintenance Men: By Jerry L'Ecuyer & Frank Alvarez
Dear Maintenance Men: Mildew is driving me crazy. We have a property with interior bathrooms and they are constantly developing mildew on the walls and ceiling. We have cleaned, painted and cleaned out the duct work for the vent fan and the problem does not go away. How can I solve this problem?
William Dear William: A number of things may be at work here. Unit overcrowding is generally the main reason for moisture & mildew build-up in an apartment unit. Because of the overcrowding, the residents, take more showers and baths, throughout the day and evening. Often to hide the excess people
in the unit, the resident will keep all the window covers closed and the widows shut, effectively keeping the moisture from escaping. Add a windowless bathroom into the mix and the problem is compounded. Mechanically, we suggest you inspect the vent fans in the bathrooms. Make sure they are not clogged with lint or dust. If the fan is operating properly, check the CFM or Cubic Feet per minute of air movement. The minimum number should be 50 CFM. If the bathroom is getting more than the average amount of use, you may want to replace the existing fan with one that has a higher CFM rating. We recommend using at least a 120-CFM fan. Equally important, many bathrooms have two wall switches; one for the light and the other for the fan. If this is the case, we recommend combining the two switches into one. That way when the resident switches on the light the fan will come on automatically. We find most residents will not turn on the fan if it has its own switch. Lastly of course, is to get the resident to open a few windows and let some fresh air in.
Dear Maintenance Men: Over the years, the sidewalks around our building have accumulated a fair amount of chewing gum residue. We are looking for a good method to remove the gum and the gum deposit. Once clean, is there any surface treatment to prevent gum from sticking? Ryan Dear Ryan: There are a number of ways to remove gum from a brick or concrete sidewalks. Spray the gum with an aerosol freezing agent or place dry ice on the gum for a few minutes. The gum will become very brittle and should be easier to pry off the surface with a putty knife or scraper. It may take a few tries to remove all the gum. If there is any gum remaining, spray WD-40 or vinegar and let it soak to dissolve the remaining gum. Use a scraper or stiff brush to remove the rest of the gum. After all the gum is removed, use a power sprayer to deep clean and remove any gum residue. If you still have discoloration on the concrete, use muriatic acid & water mixture to bleach the concrete. To keep the ... continued on page 19
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lowing question:
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Q: I work at an older building that is tucked away in a secluded spot. It once had a great reputation, but over several years, the local neighborhood has taken on a “run down” appearance and many of the area businesses are not caring for their properties the way they once did. It’s getting harder and harder to attract new renters, not to mention trying to hang onto existing residents who are now concerned with security and safety issues. If I could pick up and move this building I would do it! Do you have any suggestions?
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A: I want to commend you for your loyalty to your building and residents. It’s obvious that you care a great deal about the people and the place where you work, as well as your local community. Challenges with “location” are especially difficult as they sometimes fall into the realm of things that we consider to be “beyond our control.” We feel powerless and frustrated. On the other hand, difficult challenges present unique and exciting opportunities to become creative and also get other people involved in the problem-solving process. Thomas Edison said, “Opportunity is missed by most people because it is dressed in overalls and looks like work!” Well. . . solving challenges related to “location” is work; it’s HARD work! It requires spending time analyzing ALL of the problems, not just the ones that are blamed on location. Let’s face it: Over a period of time, it becomes easier and easier to make “excuses” and “blame” what is perceived as a “bad location” on EVERY problem that arises. (i.e. “No one can
find us because we are in a bad location!” - How colorful and well placed are your signs? How skilled are you at giving specific, detailed directions; even if it means using a local pub as a landmark? “No one will use our laundry facility because it is perceived as being ‘unsafe’ because we are in a bad neighborhood.” - Is your laundry room bright, cheerful and welcoming? Is the interior, as well as the exterior building and surrounding area, well lit? Can residents be introduced to each other and encouraged to use the “buddy system?”) With regards to your neighborhood situation, perhaps your community could become a member of your local Chamber of Commerce and network with other area businesses who care about the condition of your section of the city. Maybe your staff and residents could get involved civically and attend local town meetings to make your voices heard about what’s happening in your neighborhood. What about forming a block watch at your community? Continued on page 18
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Knowing the Limits on Collection Practices for Property Managers eliminate abusive debt collection practices by debt collectors, to insure ne of the challenges in the that those debt collectors who refrain management of rental prop- from using abusive debt collection erties involves collecting practices are not competitively disfrom residents behind on rent pay- advantaged, and to promote consisment. Knowing the laws which gov- tent State action to protect consumern the methods used for collection is ers against debt collection abuses. The completeareas text ofsince the Fair Debt a vital first step. Portland Metro and Vancouver Serving 1990 We can debate how far we’d push Collection Practices Act (FDCPA) is the envelope to make sure the rent found here. It’s challenging to read is collected, but the key to avoiding but it does cover in detail the intenlegal trouble is awareness and com- tions and protocols of the FDCPA. Then there are state and local regpliance with federal, state and local ulations to know about. The good regulations. A good place to begin is the fed- news is that each state and many eral government’s “Fair Debt Collec- municipalities have updated online tion Practices Act” which is enforced explanations of these laws. Most are by The Federal Trade Commission common sense but the details are (FTC). You can go directly to their where managers and their staffs can get entangled. web page on this topic for details. This topic was recently discussed Two relevant declarations that motivated Congress to enact this leg- at the PropertyManagers.com discussion page on LinkedIn. The quesislation speaks volumes: There is abundant evidence of the tion of what constitutes being “too use of abusive, deceptive, and unfair aggressive” was raised in regards debt collection practices by many to Community Management Assodebt collectors. Abusive debt collec- ciations (CMA). The feedback turned tion practices contribute to the num- in the direction of how it applies to ber of personal bankruptcies, to mar- property managers. One property manager responded ital instability, to the loss of jobs, and by writing, “Aggressive to me would to invasions of individual privacy. It is the purpose of this title to entail going door to door instead of
By Marc Courtenay
O
the normal practical methods of getting tenants to pay on time. Are there other ways to promote timely payments?” That’s the main question, and responding to it another manager wrote, “Depending on the property, door knocking, notices, phone calls and e-mail generally work. “Using the threat of an eviction after say the 10th or 15th (after proper 3
or 5 day notices have been delivered) has proven most effective for myself as they do not want that on their record, the associated court costs due to dismiss the eviction or the ruined rental history. Being consistent on this and requiring signed arrangements are usually an effective strategy”, he concluded. This topic reminds us of how imcontinued on page 17
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Can Your Rental Center Walls…Sell? by Ernest F. Oriente, The Coach
I
f first impressions are formed by a new resident within 10-12 seconds of meeting those on your leasing teams, what impressions do the walls in your office make? Can your walls sell? Can your walls motivate and inspire you and your leasing teams? You bet they can! This article will show you three easy steps to make sure your walls are selling—365 days a year. Inspiring your residents: First, recognize that every time a resident comes into the leasing office of the properties you manage, your leasing teams have a golden opportunity to sell and re-sell the wonderful lifestyle your apartment communities provide. Next, have your leasing teams determine how much wall space is available in their leasing offices and ask them to draft a plan for the types of information they want each resident to see. Here are some strategic items your leasing teams can place on their walls: pictures of their residents having fun at a recent property activity, letters of appreciation from current residents, a mission statement from your company, your service guarantee or promise, a cur-
rent resident newsletter, a reminder about resident referrals, dates for an upcoming resident party or event, sample floorplans, special awards or training certifications, your Facebook page, and a photo of your leasing and maintenance team. Lastly, have your leasing teams professionally frame each of the items they will be displaying on the walls of their leasing offices, as the quality of the framing will make a subconscious quality impression on your residents and future residents. Tip From The Coach: Now that your leasing offices are ready to sell to your current residents, can your leasing teams use this sales tool for future residents as well? You bet! At the start of each property tour, have your leasing teams begin by showing each future resident the fun items displayed on their walls…especially the pictures of current residents having great fun. When the walls in your leasing offices sell, your leasing experts will have higher closing ratios and more team success! Motivating your team: Once your leasing teams have finished setting up the selling walls in their leas-
ing offices, it’s time to prepare the walls that will motivate them. Ask your leasing teams to locate a wall or two in their leasing offices that is not usually seen by either current residents or future residents. Next, discuss with your leasing teams the key numbers, corporate information or trends they would like to see on a regular basis. Here are some ideas that might be helpful to display: weekly/monthly leasing goals, budget performance on a monthly and year-to-date basis, maintenance requests, a follow-up system for tracking hot prospective residents, bonus programs, a calendar to plan future resident events or activities, a place to share or post new ideas, company awards and collection reports. Lastly, ask your leasing teams to find a creative way to display this wonderful information so they will have a pride of ownership attached to this special area. Tip From The Coach: Many of our property management clients ask their resident managers to hold a weekly meeting in the area where this information on their walls can be easily referenced. Consistently refer-
encing this information on a weekly basis will show your leasing teams that the information displayed is critical to the success and profitability of their apartment community. Encouraging yourself: As the executive or owner of your property management company, your walls must also sell. Certainly, many of the ideas mentioned above, would be valuable to have on your walls. Some specialized measurements to place on your walls might include: occupancy trends, employee turnover, ROI performance, quarterly graphs recapping this quarter…compared to the same quarter last year, team rankings and industry statistics that will impact your properties. Tip From The Coach: Remember, whatever you place on the walls in your executive office will send a strong message to your company about the key areas of your business. So choose each item carefully, as every person who comes into your office will survey your walls and ask you questions about what they see or read. In addition, you might consider giving new employees a tour Continued on page 18
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RENTAL HOUSING JOURNAL METRO
Collections Practices...continued from page 15 portant it is to screen applicants thoroughly. Once you’ve found qualified residents consider having a questionand-answer discussion concerning timely payments. Many property managers have a one-page “collections agreement” that clearly spells out what will happen if the resident is late on paying rent. The manager has them sign it and gives them a copy. Make sure you know your rights
as a property manager, and make sure if you use a “collections agreement” the wording is legally sound and in harmony with the laws. There are also collection agencies and “debt collection specialists”. One that I corresponded with wrote, “Collection agencies must have licenses in most states. In my company, everybody (including myself) must take courses and get designations from the ACA and other
trade organizations. Nobody in my organization talks to a debtor without taking the course, passing the exams, and getting the designations.” If you have suggestions and experience on the subject of effective and legal collection practices please leave them in the comments section. It’s a need-to-know topic for all property managers.
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Shoptalk ...continued from page 14 The problems you face won’t go away overnight. They took years to develop and will take time to correct. MUCH patience will be required to bring about any lasting change. Of course many people prefer to stay with problems they understand rather than look for solutions they’re uncomfortable with. (It’s easier to complain than change!) However, if you always do what you’ve always done, you’ll always get what you’ve always got. You may not be able to change the location of your building, but you CAN change the direction of your thinking. - After all, it’s a lot easier to “pick up and
The Coach ...continued from page 16
move” people, rather than buildings! 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: www.shoptalkservice.com
Pl e as e V is it us a t w w w . R ent alHous ingJ ou rn a l .c o m
of your office walls on their first day with your property management company. This will allow them an opportunity to see and read firsthand, exactly what is most important to you and those on your executive teams Want to hear more about this important topic or ask some additional questions about how to create walls that sell? Send an E-mail to ernest@ powerhour.com and The Coach will E-mail you a free PowerHour invitation. Author’s note: Ernest F. Oriente, a business coach/trainer since 1995 [32,170 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 recruiting, 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 p
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Dear Maintenance ...continued from page 12 gum from sticking to the concrete or brick sidewalks in the first place; use a waterproofing sealer on the sidewalk to reduce the likelihood of the gum sticking to the surface. Dear Maintenance Men: I keep hearing about PEX tubing as an alternative to copper tubing when it comes to re-piping my rental units. What is the difference between PEX and copper tubing and why use one over the other? What are the pros and cons? Aldridge Dear Aldridge: First let’s define what PEX tubing is. PEX is a cross-linked polyethylene pipe. (It looks and feels like plastic pipe.) The PEX pipe is resistant to extreme temperatures, stress, pressure and chemicals attacks such as acids & alkalies. This makes PEX pipe suitable for both hot and cold water systems and can be used in below freezing condition and is suitable up to 200 degrees Fahrenheit. The pipe is extremely flexible and easy to install. Pros and cons of using PEX: Pros: 1: Versatile and user friendly, can be bent around corners & snaked through walls. 2: Minimum of connections needed to complete a pipe run. (Less
chance of a leak) 3: Cold weather burst resistant. 4: PEX pipe is less expensive than copper pipe Cons: 1: Cannot be used outside or in sunlight. 2: Not recycle friendly 3: Installation tools can be expensive. 4: Not handyman friendly Pros and cons of using copper pipe: Pro: 1: Long lasting, easy to use and install 2: Resists corrosion 3: Environmentally friendly, i.e.: recyclable. 4: Safe for exterior use. Cons: 1: Expensive to buy. 2: Can burst in extreme cold weather if not properly winterized. 3: More connections and elbows needed to complete a pipe run. Before making any decisions about using PEX piping, check with your local building department to ensure it is allowed in your area. However, if it were our building, we would use copper pipe. Copper is straight forward to install, no special tools are needed and any competent handyperson can fix a leak with simple tools and a torch.
Please send us your 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
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APPLIANCES • mATTRESSES • HDTVs Servicing the Property Management Industry for over 30 Years
Phone 503-542-5120 Fax 503-281-5644
Mon - Fri 8:00AM to 5:00PM
Rental Housing Journal Metro • July 2014
Tony Kavanagh
Pat Jennings
40 years experience
33 years experience
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RENTAL HOUSING JOURNAL METRO
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Rental Housing Journal Metro • July 2014