Metro Rental Housing Journal - June 2015 by Professional Publishing, Inc

Rental Housing Journal Metro

June 2015

3. 6 Keys to Maximize Leasing Results

8. Mind Your Business – Tia’s Tips for Better Rental Management

4. PAROA – 2015 Legislative Update for Property Managers and Investors

9. MFNW – Good Hiring Takes Time, Patience and Practice!

5. Behind the Leasing Desk with Heather Blume

15. Real Estate: What’s In It For Me?

6. RHA Oregon – Continue to Set the Standard

18. Retaining Quality Employees

16. Ask the Secret Shopper 23. Summer Maintenance Checklist

Gen C' Apartments 7. ORHA Legislative Update:

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

Apartment Rents Have Nowhere to Go but Up In 2015

Market Overview & Multifamily Housing Update 1Q15 PORTLAND, OREGON

By RED Capital Group Payroll Trends and Forecast The Portland payroll work force continued to expand at a significantly above average pace as establishments hired at a 31,800- job, 3.0% annual rate during the first quarter, up from 4Q’s 28,700-job, 2.7% performance. Accelerated growth was primarily attributable to faster hiring in electronic equipment and semiconductor manufacturing, health care and government, which collectively added 10,200 (3.3%) workers yearon-year, up from 4Q14’s 6.700-job, 2.2% gain. Constructive growth was observed in every industry sector with the exception of colleges and universities, where headcounts fell at 900-job, -6.9% y-o-y rate during 1Q15. The seasonally-adjusted series also recorded vigorous growth, showing an 8,700-job net pick up during the January-March period. Although the advance was moderately slower than 4Q14’s 9,000-job surge, it represented the sixth largest one quarter gain posted since 2000, and second largest of the current recovery. RCR specified a payroll forecasting equation using six lags of the dependent variable and lags of U.S. ...continued on page 12

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By Clifford A. Hockley, President Bluestone & Hockley Real Estate Services

s tall tower cranes have become a fixture in the Portland skyline, many are wondering how many units will be added to the Portland metro area in the next few years. According to the spring 2015 Barry Report (published by Patrick and Mark Barry Appraisers) somewhere between 12,000-16,000 units will be built between 2015 and 2016. Typical annual demand is between 3,000 and 4,000 units per year. That translates into a likely surplus of apartment units in 2016.

Given the increased supply, what is forcing rents up? Increased demand for rentals is driven by demographic changes, population growth, and job growth. The low rate of apartment vacancies, at the 3% mark across the Portland Metro marketplace, is evidence of this. Demographic changes. The millennials have exited college, moved out of their parents’ home and are populating central urban areas of major cities. They have created significant apartment demand in the metro Portland area. Note: Developers and investors need to use caution as they continue

to race ahead. Within five years, 50% of this cohort is looking to live in a suburban environment. (According to Trulia‘s chief economist Jed Kilko in a blog he posted on January 22, 2015. Population growth. Since 2010, an estimated 116,168 people have moved to the Portland metropolitan area. This reflects a 5.2% growth rate from 2010–2014, which is the 20th-fastest in the country among large cities in the United States, and fourth-fastest outside the Sun Belt. ...continued on page 17

More Consumers Positive on Housing, But Not Quite Ready to Leave the Sidelines

Survey Results Suggest Continued Modest Housing Growth in 2015

esults from Fannie Mae's April 2015 National Housing Survey™ show some improvement in housing sentiment, but likely not enough to trigger any breakout improvements in housing market activity this year. Among those surveyed, the share saying they would prefer to buy a home if they were to move increased to 63 percent in April, following a drop of six percentage points in February and March. In addition, average home

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price growth expectations continued their steady climb from late last year, with respondents now saying home prices will increase by 2.8 percent during the next 12 months. However, the share who believe this is a good time to buy a home decreased by four percentage points as consumer concerns regarding high home prices surged for a second consecutive month, matching renewed concerns regarding the state of the economy. These data points as a whole mirror

Fannie Mae's Home Purchase Sentiment Index (expected to be released this summer), which has remained largely flat since last fall, further suggesting that housing growth may remain subdued in 2015. "The spring and summer home buying season has gotten off to a stronger start, reflected in some of the improvement in consumer housing sentiment," said Doug Duncan, senior vice president and chief econ...continued on page 11

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6 Keys to Maximize Leasing Results By Tami Cox

n a competitive leasing market, it's important to stay on top of your game if you want to minimize vacancy rates. Regardless of whether you are new to leasing or have been doing it for years, try these proven strategies to gain better results from your leasing efforts on multi-family properties: 1. Know your market - When was the last time you not just pulled rental comps, but actually visited properties in the direct vicinity of the property to be leased? Do you know what the "other" guys units look like? What a prospective tenant is getting for their money? Are your rents in line with the current market for the same bedroom/bathroom configuration and square footage? How friendly is the leasing staff out there? Are your competitor's buildings well maintained or going downhill fast? How can you lease what you have if you never leave your desk when doing your "market research"? This may seem time intensive and tedious. But even a day or two spent on such activities will be worth it.

Rental Housing Journal Metro â&#x20AC;˘ June 2015

2. Be responsive to leads - I don't know about you, but one of the most irritating things as a person looking for a new place to call home is if you reach out to a place you're interested in, and they don't call you back! I consider this to be unprofessional, and surprisingly, there are a lot of these property managers and leasing agents out there. Maybe they don't care about leasing their units? Maybe they have so much money to throw around that how long their units sit vacant doesn't matter. Or, maybe they are just too overwhelmed with responsibilities to be effective. This is how you win and your competitor loses out. Be that contact person that cares about every inquiry. You never know who that lead may become to you in your circle of influence - your next tenant or an amazing networking contact! Even if nothing fizzles out from it, determine to be a professional who gives every lead equal respect and attention. 3. Arrive ahead of your prospect for showings - this is important. Units get hot and they get cold, depending on your geographic location and climate. No one wants to see an apartment and shiver or sweat as they do! A definite negative strike

against you from the onset. And have you gone around and turned all the lights on in the rooms? So people can actually see the layout and wall colors and so forth in the best possible way? If you stumble to find a light switch when showing a unit, that makes you look like you've never been there and a potential tenant doesn't get a warm fuzzy that you know what you're talking about when they ask questions about living there. They count on you to point out the features that they are just seeing for the first time. If you don't even know them, well - why would they lease from you? The more money you are asking them to cough up each month for that unit, the better you need to know it - inside and out! 4. Create the feeling of home - I can tell you, small details matter. Larger properties know this and that's why they pay stagers to come in and make a model feel like someone lives there - in a hotelish sort of way. Every prospect knows it's been "staged" when they walk in. But they don't care. It helps them visualize what the unit will look like with real live furniture in it. Now if you have a smaller property and full staging

isn't feasible or an option, at least do something to add the feeling and atmosphere of home. It's not expensive, and a trip out to your local department and/or building supply store will do the trick. Consider picking up a few low cost but eye catching pieces to be focal points that fit with the style of the room and your unit to be leased. Things such as a flowering potted plant, an attractive candle with a scent most people will like (that you can light just before the showing to freshen the smell of the unit), a seasonally attractive front door mat welcoming visitors, and so forth. I like to leave the flowers as a house warming gift to the new tenants, they love it! You can decide how simple or elaborate you want to get. But trust me, leasing success is in the small details your competitor doesn't think matter. You don't have to lease a 300 unit building to do such things. In fact, the smaller your building, the more important getting a new tenant in quickly becomes to your bottom line. 5. Display unit details and your contact information - I'm shocked at how often this is overlooked. If I'm going to buy a house, it's common continued on page 12

RENTAL HOUSING JOURNAL METRO President - Christian Bryant, Vice President - Michael Ross, Secretary - Jill Maricich, Treasurer - Maren Winters Portland Area Rental Owners Association www.PortlandAreaROA.com Membership questions - 503-364-5468 Email inquiries - Info@PortlandAreaROA.com

2015 Legislative Update for Property Managers and Investors

his year there are a number of bills being proposed within the Oregon House and Senate that will affect you or your clients if you are a Property Manager, Landlord, or Real Estate Investor. I have had the privilege of being the Legislative Director for both NWREIA and the SRHA as well as being president of the PAROA and Coldwell Banker Property Management here in Oregon and because of these positions I have to keep an eye on what legislation might affect our industry every year. In this article I will go over the ones that affect our

industry and my take on whether we should support or be against each bill. First is Senate Bill 390; this is the Landlord / Tenant coalition bill that I actually helped to negotiate. This bill will change a few items affecting landlord tenant law (ORS Ch. 90) in Oregon, but nothing too bad as far as Landlords are concerned. Personally I feel that we should always support this bill as landlords. The reason is that having the coalition in Oregon is quite unique and makes it so that landlords have a voice in all of these issues.

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Without the coalition the bills introduced by the tenant advocates would be worded heavily in their favor and we wouldn’t have much of an opportunity to negotiate the terms of the laws introduced. As with most years this bill shouldn’t have any trouble getting passed as most legislators see the value in a bill already being negotiating by both sides of the table and ultimately doing a lot of the hard work for them in advance. A brief overview of the items that will be changed if this goes through are: • Municipal fees and Utilities will be able to be passed through to tenants at their actual cost

• The allocation of payments will be specifically described in the law so that there is no longer any confusion of what tenant payments are supposed to be applied to • Landlords who knowingly rent unsafe or illegal dwelling units will now be assessed a fine • It will be ok to name landlords as “interested parties” on renter’s insurance policies. This

• HOA & COA move in fees can now be passed through to tenants • Unauthorized pet fees are being increased to $250 per occurrence after an initial warning. Keep in mind that these are a brief overview of the changes so I encourage you to research on your own or get in touch with an association like the Portland Area Rental Owners Association or the ORHA for a more detailed explanation of these changes along with how they affect the way you do business as a landlord. House Bill 2573 authorizes residential tenants to install electric vehicle charging stations on the ...continued on page 19

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Behind the Leasing Desk with Heather Blume Dear Heather, I have worked for the same property management company for several years and have worked my way into a good salary, benefits, and a Manager in Training role. With this role comes great responsibility, including taking on the challenge of supervising employees. The downside to this role is that I don't really have the autonomy to really fix some issues that drive me crazy within my office and for the most part, my hands are tied when it comes to disciplinary action issues because that is my manager's responsibility. You see, I have a coworker that has a variety of health issues and it is known within the office and management, so therefore, we have to accommodate. I have no problem with this for the most part. My issue is that she calls out a lot. When I say a lot, I mean it is to the point of being predictable. Even my maintenance staff make jokes about her calling out so much. For instance, I will get a text that tell me how she's not feeling well and how it's ruining her weekend. First off, this is rather annoying because I frankly don't care what she is doing on her days off. Secondly, this irritates me even more because in my eyes this is a set up for the inevitable call out for her return to work from her weekend break. Not only that but she won't hesitate to share with you that she suffers from several ailments at

the same time and all of the details of them ...I am not trying to belittle her health conditions but I honestly have never met anyone with more issues that prevents them from working in my life! I have brought these frustrations to my manager's attention many times. The response I get is very HR (which I understand) and it's typically something like "you have to accommodate by giving breaks during the day or allowing her to go home early or come in late". Seriously?! Can't I just get a Leasing Agent that shows up and isn't a Web MD nightmare? Although her call outs have been less frequent than before, it's still predictable and if she does show up, she is so loopy from her medications it makes it difficult to work with her. My manager has told me to send her home if she comes to work loopy but frankly, I need her in the office and can't afford to be alone in the office any more than I already am. How do I balance my feelings of frustration and disbelief in her legit "sick days" and still be in compliance with the law and not on the wrong side of an lawsuit? Some days I believe she is ill and other days I think she just didn't want to get up out of bed and come to work. She has even mentioned that she knows my manager can't fire her because she could sue based on her medical issues. I know we all have a right to call out sick but I just feel like

it's predictable and abusing that very policy that is meant for those that do have medical issues that truly inhibit them from working normal shifts or performing daily tasks. How do I overcome these feelings of not believing her, not feeling confident in her attendance, not feeling confident that her ailments are severe enough to prevent her from working or performing her duties, and yet knowing that I have to accommodate her call outs and deal with it? Please Help! Sick and Tired of those who are ALWAYS Sick and Tired Dear Sick and Tired of those who are ALWAYS Sick and Tired, Wow! This is a really horrible situation and I can imagine that you

must be thoroughly frustrated, even more than your letter sounds. It's always difficult to work in an environment where you feel there is someone who is shirking their responsibilities, and working in a property management office with that sort of a person is extra hard because our days move so fast that once you get behind, you never feel like you can catch up. First, while I very much sympathize with your situation, I have to concur with the "very HR" response that you've gotten so far. Employers MUST make accommodations to sick employees under federal law, but more than that, this particular employee has already placed a notso-veiled threat against them. ...continued on page 10

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RENTAL HOUSING JOURNAL METRO President: John Sage • President Elect: Ron Garcia • Past President: Elizabeth Carpenter Secretary: Lynne Whitney • Treasurer: Elaine Elsea • Office Manager: Cari Pierce 10520 NE Weidler Portland, OR 97220 (503) 254-4723 • fax (503) 254-4821 info@rhaoregon.org • www.rhaoregon.org.

President’s Message: Continue to Set the Standard

ecently, I have been thinking about what a great country and community we live in. There are so many opportunities to volunteer and get involved in helping individuals and our community as a whole. We are able to share our talents with others, and also to grow through the shared experiences. Recently, I was watching my daughter’s eyes as she talked about her involvement with the Youth Advisory Committee in our city, Peer Court, and the next play that the drama department is going to be producing at her school. The excitement that danced in her eyes reminded me of the joys of being involved in something larger than one’s self. Don’t we all remember the joy of the first time that we volunteered our time to help bring something into being? The increased feeling of selfworth and respect for those you

were working with is immeasurable. It is with this in mind that I write to you today. We are gearing up at RHAOregon for the upcoming summer months. First Contract Furnishings Mart is holding their annual dinner for RHAOregon members on June 16th at their Beaverton location. This is always a fun and joyful event. RHAOregon’s 2nd Annual Starry Night event on July 15th is an opportunity for our members to help raise funds for JOIN, to get a family off the streets and into housing. You can volunteer to help the committee organize the event, donate silent and oral auction items or raffle prizes and attend this event. Last year we raised over $2,500 to help get one family into housing and this year’s goal is to raise even more. As always in August there is the RHAOregon picnic at Oaks Park. This year the

date is August 12th , so mark your calendars. There will be games for members young and old, our buffet dinner served by the board of directors, vendors tables for you to gather information from our affiliate members, and of course the rides at Oaks Park to enjoy. Then of course there are the committees that serve the organization on a monthly basis that you can get involved in. These committees help to grow our organization (Membership Committee), educate our members by scheduling training and instructors (Education Committee), provide opportunities for our vendor partners to grow along with us (Marketing Committee). We at RHAOregon invite you to attend the aforementioned events. We also invite you to volunteer for one of the aforementioned committees. You truly will

John Sage RHAOregon President

enjoy the time spent helping and getting to know the other landlords that serve on the board and volunteer for your organization. Our ancestors that built the great communities that we live in understood the value of volunteering and how it helped to strengthen the bonds of the community, increased skill development, socialization, selfworth and respect. So I encourage you to volunteer your skills, time and knowledge to help RHAOregon to continue to set the standard for community participation for landlords proving affordable and quality housing. Sincerely, John Sage President RHA Oregon Stegmann Insurance Agency Inc.

Gen C' Apartments By Dave Sorter Millennials – that ubiquitous 18to 34-year-old age group that makes up most of the United States’ apartment renters – mightAblon_pic be willing to pay a little more in rent to gain the lifestyle experience they desire. So says Michael Ablon, Principal at PegasusAblon, a commercial real estate development, investment and management firm that works in apartments, office, retail and land. Ablon recently appeared in a recent AxioPod podcast. His comments are excerpted here. “I really think millennial, to us, is just a vanguard, for the front unit, for a bigger constituency that’s coming along,” Ablon said. “Instead of a Gen X or Gen Y, I think what the generation we’re really talking about is Gen C or Generation Connected. And it transcends the conventional age-based demographics to a group that's really looking for lifestyle. Now you're getting to an experience economy and you're getting into experiential people.” He defined experience by using a cup of espresso at a European café as an example. “It's like when I was living and studying in Europe and you walked up to the café,” he said. “Inside the café to get an espresso at the counter and it’s equivalent of $1. And when you sat down at a table inside, it was equivalent of a $2. But when you sat 6

on that great seat out on the side walk, it was $3 -- the same espresso. You're really paying for the experience more than the product. The experience was the product. “So when we're building multifamily and we say we're building to the experience economy, what we're really doing is trying to say ‘the product is the experience.’ The product is more than shag carpet. It’s how you feel, how it actually integrates into your life, and that is how we look at the experience economy, the experience constituent and our Gen C.” Ablon provided two scenarios and asked which people would prefer: “You say, ‘Hey, guys, I've got some great shag carpet. I've got 1inch blinds. And I've got pickled cabinetry.’ And then you go, ‘Over here, you got a flat-screen TV built in, with built in Wi-Fi and surround sound speakers. And when you walk you through the unit, why don't you airplay onto them and crank it up.’ Who are they going to pick? Are you kidding me? But it really resonates… these people understand who I am, how I live, what I value. So it's really trying to figure out what's the value structure of the constituent.” In other words, instead of the conventional method of earmarking a certain percentage of income toward rent, Ablon’s “Generation Connected” may see their apartment

as part of their entertainment, so the dollars spent on rent also replace some of the entertainment budget. “There's always a cost sensitivity, but you kind of get back to the value,” Ablon said. “It's like when you go on a cruise. Do you care which room you have? Or do you look at what's on the cruise ship?” Being ecologically friendly also is a part of young adults’ social fabric – something ingrained. “They can't imagine not doing it,” Ablon said. “So there’s another trend line in there, an overriding notion, that resources are finite. There’s an ecological value structure just like there is the experience as part of the experience structure. And so I think you are going to see more density building up and you're going to see more density next to mass transit. And I think you're going to see less washeterias. I'm going to tell my kids about a washeteria and they're going to look at me and say, ‘What was that?’

together. And I think student debt now is over a trillion dollars, which matches the highest of any subset of debt other than the American homestead.” But young adults are going to want to stay mobile, Ablon said. “I think the biggest trend line you're going to see is that people are going to stay mobile longer. They are going to probably stay single longer. They're going to move in groups longer. They are going to wait to have kids longer. They're going to try to both have experience economy and deal with this debt piece and get beyond the debt. So I think the big trend line is you're going to see people staying as renters – by choice – longer. They’ve transcended the moment where they have to live in multifamily. They can be in singlefamily, but they want to be in multifamily by choice. And they want that lifestyle.” www.propertymanager.com

Ablon sees the “experience as value” paradigm continuing for the next several years, though financial concerns will play a big role. “I think that the biggest piece of that for the next ten years is, how does one balance the lifestyle component with a financial capacity?” he said. “Again, we know that a lot of this Generation Connected is going to be coming out of school in the next 10 years or have gotten out of school in the last five, and you put it Rental Housing Journal Metro • June 2015

RENTAL HOUSING JOURNAL METRO

ORHA Legislative Update:

n April 9, 2015, I testified at the Oregon Legislature on House Bill 3076, which would require annual well water testing by landlords and require us to report the data to the Oregon Health Authority, which would analyze ground water contaminant data and provide education in problem areas. The ORHA opposes this bill because it places an unreasonable financial burden on landlords to analyze their groundwater, and also because the bill was not routed through the Landlord-Tenant Coalition for consideration as part of the coalition’s landlord-tenant omnibus

bill. Landlord and tenant advocates have mutually agreed to we would oppose any landlord tenant bills that have not gone through the Landlord Tenant Coalition. Here is an excerpt of my testimony: Historically, since the early 1980’s, bills relating to landlord-tenant matters have been negotiated by the Coalition, which is comprised of tenant advocates, landlord advocates, both representing all areas of the state, legal aid and other attorneys, housing authority representatives and other interested parties. In every single legislative session except one since the beginning of this group, the stakeholders have sat down together to vet issues from

both sides and explore all the variables and impacts associated with any affected parties to ensure that there are no unintended or unforeseen consequences. There are so many variables at work in any proposed legislation that even the best intentioned legislators cannot always measure the full impact on such a large and diverse group of stakeholders. The Landlord-Tenant Coalition is a perfect example of bipartisanship and cooperation and, as such, the laws affecting landlords and tenants are truly some of the most fair and balanced in the nation. We should continue to honor this model. In this bill, the cost of doing business for landlords will increase,

prised at how far being "friendly" can get you! Who wants to deal with cranky management? The tone you set with your attitude and demeanor at the onset of the leasing relationship can make the difference in whether or not a prospect leases with you or your competitor. You've heard the old adage, "People do business with people they like", right? That still holds true. A friendly, personable leasing professional will get better results than one who's not. Even if you've had a bad day, shake it off before you show up at that appointment. It's you on stage first, then the unit you're leasing. In that order.

your game and stand out from the competition. Your operating account will thank you (and hopefully, so will the building owner)!

6 Keys ...continued from page 3 for realtors to display information on the kitchen counter or somewhere obvious to visitors regarding the home they are looking at. Because they know it's competitive out there, and they want to sell that house and build a network of contacts. Why wouldn't you put the same effort in if you were leasing? A prospective tenant may look at several properties the same day, and how will they keep them all straight if they have nothing physical to take with them as a reminder of that unit and have a way to follow up with you if they want to lease it? Creating a flyer for each unit you have to lease is a smart move. And having business cards along with it helps as well. Don't forget to make a simple sign in sheet for visitors - include spaces for name, number of adults, desired move in date, any pets, email, and telephone numbers for contact. This gives you a record of who saw the unit and a handy reference to follow up. Even if they don't lease this particular unit, you may have others that you can lease to them as they become available. 6. Be a friendly face - Again, this may not sound like the leasing strategy of the century, but you'd be sur-

These six simple techniques will help you lease your units more quickly. Provided your rent rates are priced right for your market, and you have value to offer a prospect. There are more, and cumulatively, they all add up. But you can maximize your leasing results with a little more effort and attention to detail. You may not become the star leasing agent or property manager of the year, but when preserving and growing an asset - cash flow is king. Without leased units, you have no cash flow. Decide today to step up

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ground). She helps business owners, VALLEY, METRO, ARIZONA investors, and entrepreneurs nationwide to become more profitable, put systems in place to run their businesses more efficiently, and reach their goals. For more information and to request her services, visit her website at www. sizzlinghotbusiness.com. Bio: Aug, Oct, Dec Feb, Apr, Jun, Tami Cox is a Business Consultant and multiple business owner with over 15 years of experience in the commercial real estate market (finance back-

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which will equate to higher rent prices for tenants. Generally, bills which increase costs across the board are not always popular with either affected party. I urge you to vote against the passage of this bill at this time and recommend to the sponsor to place this bill into the able hands of the Landlord-Tenant Coalition for further discussion. The Landlord Tenant Coalition’s own bill, Senate Bill 390, is still under consideration by the Oregon Legislature, but we don’t anticipate any opposition to its passage. Stay tuned to future legislative updates for more information on bills currently under consideration.

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RENTAL HOUSING JOURNAL METRO

Mind Your Business – Tia’s Tips for Better Rental Management By Tia Politi, Rental Owner, ROA Board Member, Lead Property Manager for Acorn Property Management

esting, Testing, 1-2-3! Ever been tested by the Fair Housing Council of Oregon (FHCO)? If you abide by best practices and an awareness of protected classes under Fair Housing law, you may never know; violate Fair Housing law with a tester and you will most definitely know. Hopefully, your violation is minor and you will be warned for the future, but violators can be financially penalized, and the fines start at $16,000. Protected classes include, Federal: race, color, national origin, religion, gender, familial status (families with children), and disability; State of Oregon: marital status, source of income (now including housing subsidies like Section 8), sexual orientation, and gender identity; City of Eugene: type of occupation, ethnicity and domestic partnership. Active duty military and victims of domestic violence have additional protections under landlord-tenant law. Fair Housing claims against landlords often begin with the advertise-

ment of their rental property. Place a discriminatory ad or say the wrong thing to a potential applicant, and a complaint may be filed against you. If a complaint is filed, the Fair Housing Council of Oregon will often conduct multiple tests on you to determine whether or not the complaint is legitimate. Random testers are operating across the state right now, focusing mainly on landlords who are violating the new Housing Choice Act of 2013. That bill outlawed discrimination against housing subsidies, most frequently in regards to Section 8, but including other agency subsidies such as those administered through the Department of Human Services, Lane County Mental Health, and ShelterCare, among others. Most current violators are placing ads that say, “No Section 8.” For now, the Fair Housing Council’s mission is education, but that won’t last forever. Also, in case you haven’t heard, our local Section 8 program has now changed its parameters for leasing to allow month-to-month rental contracts. That means no more excluding Section 8 applicants by offering only month-to-month tenancies. In regards to the advertising or

leasing of rental property, there are a few definitions which you should be aware of: disparate impact, chilling effect and steering. Disparate impact describes policies or procedures which have a discriminatory effect on members of a protected class. You may unknowingly violate the law by having screening criteria that adversely impacts members of protected classes, even if you apply those criteria in an un-discriminatory fashion. Develop criteria that make allowances for members of protected classes. Chilling effect describes language, written or spoken which is off-putting to members of protected classes or causes them to fear discriminatory treatment. Beware the chilling effect of word choice. An ad that expresses a preference for tenants who are “mature and quiet” for example, could discourage families with children from applying. Steering describes policies, ads or language that encourages applicants in a protected class to go toward one rental unit or away from another. “You would like this apartment better because there are more children on this end of the complex,” or “You might not like it here because there are no other Hispanic families

nearby.” A good rule of thumb when you are advertising a rental property: Describe the property, not the people. If your property has features that would appeal to a certain demographic, just describe that benefit in your ad; the tenant who desires what you have to offer will find it. It is okay to advertise pet friendly, close to campus, wheelchair accessible, universal design, convenient location, low-maintenance landscaping, huge fenced yard, close to schools. These are all related to features of the property, not the type of person you think should live there. You may advertise public amenities such as schools, parks, shopping, proximity to bus lines or freeways, cultural attractions, trails, recreational activities, etc. You may not advertise private schools, membership-only groups such as country clubs, or any other private club, group or attraction. Most landlords these days do a good job with their ads, but stumble when it comes to service or aid animals. You may have a “No Pets” policy, but because service or aid animals are not pets, you may not ...continued on page 14

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Rental Housing Journal Metro • June 2015

RENTAL HOUSING JOURNAL METRO 16083 SW Upper Boones Ferry Road, Suite 105, Tigard, OR 97224 503-213-1281, 503-213-1288 Fax www.multifamilynw.org

Good Hiring Takes Time, Patience and Practice!

I doubt that any business professional would argue that an essential component to success is hiring the right people for the job. And, as any company leader or manager would likely tell you, this could be one of the most difficult and challenging aspects of operating any business – regardless of type, size or location. Why is it that so many businesses still have challenges in this arena? After all, we now function in a world filled with technology and software programs designed to make our everyday business tasks more efficient, accurate, and faster. We have thousands of mobile apps at our fingertips (literally) to do so many things: track our diet/exercise, watch our homes (and even kids) while we are on vacation, guide us to destinations within foreign countries, and even find us a mate (temporarily or for life-your choice!). We even have the ability to create a car, or a gun (scary), with a 3-D printer! Why should we not just be able to print the perfect employee…right? If only it were that easy. Good hiring decisions can increase

productivity, boost morale and culture, and truly enhance the bottomline. Mistakes can create just the opposite effect and be extremely costly in terms of both money and time. High employee turnover impacts the culture of an organization with demoralization. Although the space constraints of this article prohibit exploring the volumes of information one could write about this topic, I will limit this to some hiring practices that I have come across and learned from others that make the process less daunting and, with consistent execution, can produce favorable outcomes. Create a good job description: Preparation is key. Know and understand the role you are seeking to fill. Writing a clear and concise position description is essential to attracting qualified candidates – and avoids wasting your time with someone with skills that simply do not match the job requirements. Interviewing: Brian Tracy and Mark Thompson (authors -Now, Build a Great Business: 7 Ways to Maximize Your Profits in Any Market) describe a process of interviewing called the “law of three”:

Educational Opportunities

Multifamily NW offers an astounding amount of education and professional development courses at all levels! These educational opportunities are provided throughout the year and include classes of all types and on a variety of topics. Multifamily NW as an affiliate of the National Apartment Association (NAA) and we offer certified designation courses including Certified Apartment Manager (CAM), Certified Apartment Supplier (CAS), National Apartment Leasing Professional (NALP) and Certified Apartment Manager Technician (CAMT). We offer a robust class catalog serving areas: Portland, Vancouver, Salem, Eugene, Bend and other locations throughout the state.

Always interview at least three candidates. Even if you feel the first one is the best and right fit, discipline yourself to meet a least two more candidates. The more people interviewed the greater the selection choices- bringing a higher likelihood of making the best decision. Interview your top candidates in three different locations. People often demonstrate different personality traits in different settings. The presentation in a formal office setting may be very different from how a person behaves in a less formal coffee shop or restaurant. When the guard comes down, more accurate personality traits may come forth. This is especially helpful if the job

Scott Arena President, Multifamily Northwest

requires a person to work in multiple settings or locations with different people. How do they function in different settings? Three interviewers. If possible, have at least three different people in the organization meet with the candidate. This not only provides multiple input from different perspectives, it also promotes a team “buyin” which leads to vested interest and support in helping the person succeed. References: Checking references with people who can speak to the abilities and performance of a candidate is crucial. Although most references provided are typically weight...continued on page 18

Multifamily NW

Upcoming Educational Opportunities 6/3/2015 Finding Good (Killer!) Apartment Deals Bernard Gehret

6/17/2015 Accelerate Your Career 6/18/2015 Habitability Disputes (Bend)

6/4/2015 NALP Bringing in New Residents: Be Prepared

6/18/2015 New Hire "An Introduction to the Industry"

6/5/2015 CAM Financial Management 6/10/2015 Project Management

6/23/2015 CAMT Appliance Maintenance and Repair Parts 1 & 2

6/10/2015 MWV Law and Rule Required Course (Salem)

6/24/2015 Unit Inspections and Turnover Techniques

6/12/2015 It's the Law Lunchtime Series: Rental Agreements: Fine Tuning Your Rental Package

6/25/2015 EPA Lead-Based Paint Renovation Certification 8-Hour 7/7/2015 NSPF® Certified Pool Operator (CPO®) 2-Day Certification

6/15/2015 CAMT Heating Systems Maintenance & Repair 6/15/2015 Fair Housing Reasonable Accommodation and Modification 6/16/2015 MWV Charity Putt-Putt Golf Tournament 6/16/2015 Fair Housing 150 (Corvallis)

7/7/2015 Mold Awareness and Remediation 7/8/2015 CAM Legal Responsibilities 7/10/2015 It's the Law Lunch Series "Section 8 and Renter's Insurance: Understanding the Latest Laws"

Form of the Month We are pleased to announce our partnership with Grace Hill, enabling us to offer you 24/7 online training with their incredible classes! Grace Hill offers highquality, interactive property management training that is available anytime and anyplace you have high-speed access to the internet. To ensure you get continuing education credits and ease in registering for classes, visit our website at www.multifamilynw.org, under “Professional Development.” Here you can access a variety of classes available at your convenience through our partner Grace Hill. Multifamily NW is a Certified Continuing Education Provider with the Oregon Real Estate Agency. You can count on Multifamily NW’s Academy of Higher Learning to provide the most relevant and engaging courses to choose from in order to accrue the required 30 hours of class work for license renewal every two years. Multifamily NW Office, 16083 SW Upper Boones Ferry Road, Suite 105, Tigard, OR 97224 800-632-3007 • 503-213-1281 • Fax 503-213-1288 Rental Housing Journal Metro • June 2015

The Maintenance Doorhanger is a handy dual purpose form to use in your rentals. On one side it serves as a notice to anyone who might enter the rental that maintenance work is being performed in the house. On the reverse side it serves as a disclosure to the residents that maintenance personnel was inside whether for scheduled maintenance or an emergency. It has space to further clarify who entered and what action was taken. Additionally, if maintenance did not enter the house, the door hanger also offers common reasons to communicate the attempt to enter was made.

c A.M. c P.M.

UNIT #

MAINTENANCE DEPARTMENT IS WORKING IN YOUR UNIT NOW

DATE

TIME

c SOMEONE HAS BEEN IN YOUR UNIT REASON: c MAINTENANCE______________________________________ ___________________________________________________________________

c EMERGENCY_________________________________________ ___________________________________________________________________

WHO ENTERED___________________________________________________________ ____________________________________________________________________________________

ACTION TAKEN____________________________________________________________ ____________________________________________________________________________________

____________________________________________________________________________________

FUTURE ACTION REQUIRED_______________________________________ ____________________________________________________________________________________

____________________________________________________________________________________

c WE COULD NOT ENTER BECAUSE: c ENTRY REFUSED c UNRESTRAINED PET(S) c RESIDENT REQUESTED TO BE PRESENT BUT DID NOT ANSWER THE DOOR c OTHER__________________________________________________________

RENTAL HOUSING JOURNAL METRO

Leasing Desk ...continued from page 5 Whenever you have an employee who KNOWS and has the audacity to say that they know they can sue their employer upon termination, it's a very sticky situation. On one hand, if any other employee pulled this behavior, you'd do the write ups and terminate them. On the other hand, it's going to cost you much more in the legal and public relations arena to get rid of this person than to let them half ass their job. From a company view point, you're picking up the slack, so they aren't out anything and they don't have to deal with the problem. Second, you have to make sure that even through your dissatisfaction with this employee that you are not making the work environment hostile so she will leave. She can sue the company for that as well, and a lot of those kinds of suits are being won currently, plus with the health issues she has, she'll have the sympathy on her side. Problems all around on that front. Third, if she comes in "loopy" on her meds, you really should send her home. I know this puts additional stress on you, but remember that some states are verbal contract states and what she says in her inebriated state, you and your company can be held legally liable for. On top of which, any contract that she signs with a resident might not be valid if she, as a company representative, is

statement, that might be what she's really looking for, and when you do not provide her with the grounds to sue, she'll move on and look for another rube to play this game with. How you, as a manager in training, handle a situation like this can be a defining moment for your career. You can take the path of secretly hating your coworker (and believe me, MANY of us take that path, as it's the easiest), or you can try to ignore as much of the situation as you can and realize that you can only do what you can do in any given day, or your can try to reach the employee on a personal level. The last is the hardest to do, but also the most long term rewarding of the options presented. To open communication you have to re-foundation some modicum of trust between the two of you. I would start by giving her massive positive reinforcement on days when she doesn't call out sick or come in loopy. Extending yourself as a mentor and trying to have a different relationship with this employee might encourage her to come to work more often and to call out less. As for managing your feelings on the issue, my best advice to you is to step back and take some deep perspective on the issue. I want you to ask yourself if it's really worth you caring if you believe her or not? If it's worth carrying anger and spite

in an altered state. Plus, in such a state, she could write a contract for either the wrong amount of rent or the wrong lease term, and once the resident has signed it with her, you're bound to that contract. Send her home when she's a threat to your NOI. So let's talk about some solutions. One of the things that you mentioned is that you can't afford to be alone in the office anymore than you already are. This may just be the background of a staffer talking, but one of the quickest ways to call attention from the corporate office to the escalated degree of the problem is to call your local staffing agent when she calls out, or when you have to send her home sick. The corporate office might not notice the stress that it puts you under to not have her there, but they WILL notice the stress that staffing costs put on your budget. This is a risky solution, however, so it might be worth it to just contact your office about ASKING for staffing. It will have a similar effect, and won't potentially get you in as much trouble as just calling a staffing agent without approval will. Now here's the good news People who are frequently absent or who do not seem to connect with their workplace rarely stay there long term, so she may be on her way out. Also, if she's made the lawsuit

over something you cannot prove and something that in the long run will not make a difference? My mother once told me that you only have so many pieces in your matched set of emotional luggage, and you have to choose what's worth packing in them. You can't carry everything, so make sure that she's worth putting in there. Good Luck to you! Heather Heather is the Imagination In Charge of Behind the Leasing Desk Training & Consulting Services out of Seattle, WA. An accomplished national speaker, trainer, consultant, career coach, and author of both books as well as countless industry related articles, Heather holds her CAS designation, is NAA Advanced Instructor trained, and has been a member of the NAA Faculty since 2009, serving as a WMFHA, CAM, and NALP instructor since 2009. You can check out more of her musings, podcasts, and class offerings at www.behindtheleasingdesk.com

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RENTAL HOUSING JOURNAL METRO

Positive on Housing ...continued from page 1 omist at Fannie Mae. "The share of consumers who intend to own rather than rent their next home rebounded after a two-month slide. Meanwhile, home price growth expectations strengthened to the strongest pace since last October. Nevertheless, consumers continue to express concerns about the recent weakening economic conditions and high home prices. These combine to depress the share of consumers believing it is a good time to buy a home. When we consider both the continued caution of consumers and the positive start to the year, we believe that these results support our expectation that 2015 will be a year of modest growth in housing activity." Survey Highlights Homeownership and Renting

• The average 12-month home

price change expectation rose to 2.8 percent.

• The share of respondents who

say home prices will go up in the next 12 months fell to 46 percent.

Are you looking for a new carrer?

The share who say home prices will go down fell to 7 percent.

• The share of respondents who say mortgage rates will go up in the next 12 months stayed constant at 52 percent.

• Those who say it is a good time

to buy a house fell to 63 percent, while those who say it is a good time to sell remained at 46 percent – tying last month's survey high.

• The average 12-month rental

price change expectation rose to 4.1 percent.

• The share of respondents who

say the economy is on the right track decreased by 1 percentage point to 42 percent, while those who say the economy is on the wrong track rose by 1 percentage point to 49 percent.

• The percentage of respondents

who expect their personal financial situation to get worse over the next 12 months fell to 10 percent – matching the survey low.

significantly higher than it was 12 months ago rose 2 percentage points to 24 percent.

• A new survey low, 29 percent of

respondents say their household expenses are significantly higher than they were 12 months ago. A survey high, 60 percent say their expenses are the same.. SOURCE Fannie Mae

• The share of respondents who say their household income is

• The percentage of respondents

who expect home rental prices to go up rose to 54 percent.

• Those who think it would be easy to get a home mortgage increased by 2 percentage points to 52 percent, while those who think it would be difficult remained at 46 percent.

• The share who say they would

buy if they were going to move rose 3 percentage points to 63 percent, while the share who would rent fell to 32 percent.

• The Economy and Household Finances

Sales Management Administration Accounting Finance

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Rental Housing Journal Metro • June 2015

RENTAL HOUSING JOURNAL METRO

Market Overview ...continued from page 1 payroll growth and S&P500 returns to achieve a 97.9% adjusted-R2. This model produces a forecast of steadily moderating payroll job growth, influenced by comparable declines in U.S. hiring and weaker, although positive equity returns. To be specific, the model forecasts a 2.7% y-o-y advance in 4Q15, followed by comparable 4th quarter metrics of 2.0%, 1.4% and 1.2% in 2016, 2017 and 2018, respectively. In each case the Portland result is about 50% faster than the U.S. mean;. 1Q15 Absorption and OccuPayroll Job Summary Total Payrolls 1,085.7m Annual Change 31.8m (3.0%) 2015 Forecast 31.4m (2.9%) 2016 Forecast 24.8m (2.2%) 2017 Forecast 18.4m (1.6%) 2018 Forecast 14.1m (1.2%) Unemployment (NSA) 5.3% (Mar.) pancy Rate Trends Tenant demand was moderately stronger during the winter quarter as renters occupied a net of 371 vacant units, according to Reis, up from 305 during the previous quarter. On the other hand, absorption was down materially from the comparable periods of 2013 and 2014 when Portland households net leased an average of 723 units. Net

supply totaled only 378 units during 1Q15, however, and average occupancy held steady at 96.7%, immaterially lower than the 96.9% 20-year high recorded during the third quarter 2013. Axiometrics surveys of larger, stabilized same-store properties recorded a 96.1% average occupancy rate, up 30 basis points sequentially and 30 bps y-o-y. Axio data indicate that class-C properties maintained the highest level of occupancy, adding 40 bps sequentially to 97.4%. Class-B occupancy also increased 40 sequentially (to 96.2%), while class-A properties continued to battle the impact of new supply, holding steady at 94.5%. Absorption of new units appeared to slow down during the winter quarter, falling to about 9 units per property/month from 16 during 4Q14. RCR’s occupied stock growth model achieves a 93.8% ARS using payroll and home price growth and lags of rent and inventory as independent variables. Inventory growth has the largest coefficient, and that’s a good thing as supply pressure promises to be intense. Demand will nearly keep pace, however; allowing occupancy to recover to about 96.0% following a supply-driven 150 bps decline to the 95.2% area projected by the end of 2016.

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Occupancy Rate Summary Occupancy Rate 96.7% (Reis) RED 50 Rank 17th Annual Chg. -0.1% (Reis) RCR YE15 95.4% Forecast RCR YE16 95.2% Forecast RCR YE17 95.6% Forecast RCR YE18 95.9% Forecast 1Q15 Effective Rent Trends High occupancy notwithstanding, rent trends decelerated during the winter quarter. Average effective rent increased 3.9% year-onyear, down sharply from 4Q14’s 4.5% performance and the smallest advance recorded in nearly four years. Rent trend weakness was largely confined to the Northwest Portland submarket. This submarket, which encompasses Downtown, the Pearl District and contiguous areas of intensive new property development, saw rents actually decline -0.1% sequentially, thereby trimming the y-o-y metric to only 2.1%, equal lowest with Beaverton. These data suggest that supply already is exerting downward pressure on rents. Axiometrics data paint a more optimistic picture. According to this series, Portland same store rents increased at a 7.7% y-o-y rate, up from 7.5% in the prior period. This was largely a class-B and class-C phenomenon as gains recorded in these segments reached 8.5% and 7.7%, respectively. By contrast, classA rents advanced only 4.9%, largely due to slower growth in suburban areas. The RCR Portland rent model employs payroll and occupied stock growth and a lag of inventory growth as independent variables to reach a 93.8% ARS. The model interprets recent deceleration in the Reis series

as a predictor of further slowing in the future. The model forecasts rent progress to decline to 3.1% in 4Q15 and to less than 2% by YE16 before recovering moderately in the out years. 1Q15 Property Markets and Effective Rent Summary Mean Rent $933 (Reis) Annual Change 3.9% RED 50 Rent 19th Change Rank RCR YE15 3.1% Forecast RCR YE16 1.9% Forecast RCR YE17 2.1% Forecast RCR YE18 2.3% Forecast Total Returns Buyers remained active in the Portland market, consummating 12 transactions valued at $5 million or greater during the winter quarter for gross proceeds of $256.7 million. These metrics compare to 13 transactions valued at a total of $373.2mm during the prior quarter. The decrease in proceeds was attributable to the older average age of the properties in the mix. A preponderance of assets traded during 1Q15 were lower cost 70s- and 80svintage suburban garden projects. Moreover, no higher priced urban mid-rise or high-rise assets were exchanged. Cap rates gravitated to the 5% to 6.75% range. Newer vintage garden properties generated going-in yields at the low end of this range, while class B– and C assets traded in the 5.75% - 6.75% area. The most recent benchmark trade for class-A properties took place in December when a 4-story, 2008-construction Beaverton complex was priced to an approximate 4.5% initial yield. ...continued on page 13

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Rental Housing Journal Metro • June 2015

MARKET OVERVIEW | 1Q15 | PORTLAND, OREGON

1Q14

1Q15

Beaverton

$869

$888

East Gresham

$755

$788

$796

$822

$1,222

$1,248

$883

$970

MARKET OVERVIEW | 1Q15 | PORTLAND, OREGON Milwaukie / Oregon

RNortheast ENTAL HOUSING JOURNAL METRO $959 $988

SUBMARKET TRENDS (REIS)

RED 46 AVERAGE RED RED46 46AVERAGE AVERAGE PORTLAND (REIS/RCR) PORTLAND (REIS/RCR) RED 46 AVERAGE PORTLAND (REIS/RCR) PORTLAND (REIS/RCR)

Northeast

Vancouver Metro 2014 2015f 2014 2015f

YoY YoY Rent Trend YoYRent RentTrend Trend YoY Rent Trend

YoY YoY Growth Growth Trend Trend YoY Growth Trend

4% 25% 4%

YoY Growth Trend

50 bps 1Q14

0.6% 2.1% 1.2% 4.3% 5.4% 3.2% 6.2% 3.0% 3.1% 2.1% 3.8%

$970 3.2% $899

-20 bps 2.8% -70 bps 0.8% 150 bps 1.9% 90 bps 3.9% 40 bps 5.3% -10 bps

9.8% 2.7% 3.3% 10 bps 4.3%Portland 5-yr Compound 3.9% Annual Rent Gro

$933

3.9%

3.2%

1.00% 9.6%

45 35 30 25 20 15 10 5

2018f 2019f 1Q20F 2018f 2019f 1Q20F 2018f 2019f 1Q20F Portland 5-yr2019f Compound Annual Rent Growth Distribution 2018f 1Q20F 1.00%

5.3% 5.3% 5.3% 5.3%

6.1% 6.1% 6.1% 6.1%

6.0%

5.3% 5.3% 5.3% 5.3%

Director of Research djhogan@redcapitalgroup.com Portland 5-yr Compound Annual Rent Growth Distribution +1.614.857.1416 oﬃce 1.00% 3.50% +1.800.837.5100 toll free Portland 9.6% 82.3% 8.1% 45

5.8% 5.8% 15 5.8% 5.8% 10 0

Minimum -1.67% Maximum 6.69% Mean 2.21% Std Dev 0.930% Values 10000

4.9% 4.9% 5.0% 4.6% 4.9% 5.0% 4.9% 5.0% 4.6% 4.6% 5.0% 4.6%

Daniel J. Hogan

8.1%

Source: eFannie.com, RCR Calculations

6.0%

82.3%

Source: eFannie.com, RCR Calculations PORTLAND PORTLAND PORTLAND 6.0% 6.0% PORTLAND 5.8% 6.0% 6.0% 6.0% 6.0%

5.8% 5.8% 5.8%

9.6%

Portland Cap Cap Rate Rate Trends Trends Portland Portland Cap Rate Trends Source:Portland eFannie.com, RCR Calculations Calculations Cap Rate Trends Source: eFannie.com, RCR

3.50%

Portland Minimum -1.67% Maximum 6.69% Mean 2.21% Std Dev 0.930% Values 10000

25 20 15

2017f 2017f 2017f 2017f

2016f 2016f 2016f 2016f

2015f 2015f 2015f 2015f

2014 2014 2014 2014

2013 2013 2013 2013

7.0% 7.0% 7.0% 7.0% PA CI F I C R EGI ON 6.5% PA 6.5% PACI CIFFI ICC RREGI EGION ON 6.5% PA CI F I C R EGI ON 6.5% 5.8% 5.8% 5.8% 6.0% 5.5% 5.8% 6.0% 6.0% 5.5% 5.5% 5.8% 5.8% 5.3% 6.0% 5.5% 5.8% 5.8% 5.3% 5.3% 5.5% 5.5% 5.3% 5.5% 5.5% 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% 4.0% 4.0% 4.0% 1Q12 2Q12 3Q12 4Q12 4.0% 1Q12 1Q12 2Q12 2Q12 3Q12 3Q12 4Q12 4Q12 1Q12 2Q12 3Q12 4Q12

10 5

FOR MORE INFORMATION ABOUT RED’S RESEARCH CAPABILITIES CONTACT: 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15

Element 170 (Beaverton) Commons at Redwood Creek (Beaverton) Commons at Redwood Creek (Beaverton) Commons at Redwood Creek (Beaverton)

-1%

1Q13 1Q13 2Q13 2Q13 3Q13 3Q13 4Q13 4Q13 1Q14 1Q14 2Q14 2Q14 3Q14 3Q14 4Q14 4Q14 1Q15 1Q15 2Q15 2Q15 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15

FOR MORE INFORMATION ABOUT RED’S RESEARCH CAPABIL

Daniel J. Hogan

For more information about red’s

/ LR (1980) (2014) B-B+ / GLR B- / GLR (1980) B- / GLR (1980)

U.S. FHFA HPI U.S. FHFA HPI PORTLAND S&P C-S HPI PORTLAND PORTLANDS&P FHFAC-S HPIHPI PORTLAND FHFA HPI

2015f 2015f 2015f

$39.0 $48.8 $48.8 $48.8

$159,836 $120,074 $120,074 $120,074

5.0% 5.2% 5.2% 5.2%

1-614-857-1416 office 1-800-837-5100 toll free

RED Capital Capital Research Research || May 2015 RED May 2015 RED Capital8% Research | May 2015

5% 5% 4% 4% 2.3% 2.3% 3% 2.0% 2.3% 2.3% 3% 2.0% 2% 2% 1.9% 1.9% 1% MARKET OVERVIEW | 1Q15 | PORTLAND, OREGON 1% Group, 2017f 2018fRED Capital 2019f 1Q20f LLC  RED Mortgage Capital, LLC  RED Capital Markets, LLC (Member FINRA/SIPC)  RED Capital Partners, L 2017f 2018f 2019f 1Q20f

THE FACE OF LENDING

2016f 2016f

10 West Broad Street, Columbus, Ohio 43215

15.1% 15.1%

3.9%

24-Feb-2015 25-Mar-2015 25-Mar-2015 25-Mar-2015

8% RED Capital Research | May 2015 RED 46 AVERAGE 7% RED 46 AVERAGE PORTLAND AXIOMETRICS SAME-STORE 7% PORTLAND AXIOMETRICS SAME-STORE 6% PORTLAND (REIS/RCR) 6% PORTLAND (REIS/RCR)

Portland Home Price Trends Portland Home Price Trends

14.9% 14.9%

3.1% 2016f 2016f 2016f

THE FACE OF LENDING

 redcapitalgroup.com  +1.800.837.510

RED Capital Group, LLC © 2015 REDRED Mortgage Capital, Capital Group, LLC LLC  RED Capital Markets, LLC (Member FINRA/S 25% 25% 20% 8% 20% RED 46 AVERAGE 12.4% 7% 15% 12.4% 10.0% PORTLAND AXIOMETRICS SAME-STORE 15% 10.0% 6% PORTLAND (REIS/RCR) 5.8% 10% 5.8% 10% 5% 5% 7.6% 5%4% 7.6% 0% 2.3% 2.3%0% 3% 2.0% -5% 2% -5% 1.9% 2017f 2018f 2019f 1Q20f 2017f 2018f 2019f 1Q20f 1% 2017f 2018f 2019f 1Q20f

Portland Payroll Employment Trends Payroll Employment Trends Portland Portland Home Trends Source: BLS, BEA Data,Price RCR Forecasts

Source: BLS, BEA Data, RCR Forecasts Source: S&P Case-Shiller and FHFA Home Price Indices and RCR Forecasts

U.S. FHFA HPI PORTLAND S&P C-S HPI PORTLAND FHFA HPI

4% 25% 4% 3% 20% 3% 1.4% 15% 2% 1.4% 2% 5.8% 10% 1% 1% 5% 0% 0% 0%

10 West Broad Street, Columbus, Ohio 43215

 redcapitalgroup.c

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-1% -5% -1% 1Q20f 1Q20f 1Q20f

Portland Payroll Employment Trends Source: BLS, BEA Data, RCR Forecasts

YoY Growth Trend

The information contained in this report was prepared for general information purposes only and is not intended asVacancy legal, tax, accounting or financial advice, or 4% recom4% Rent for Physicalas information contained in this reportEffective was prepared general information purposes only and is not intended legal, tax, accounting or financial advice, or recomThe mendations any specific transactions. Information has been gathered from third party sources and has not been Submarket to buy or sell currencies or securities or to engage in 3.0% mendations 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 2.7% independently verified or accepted by RED Capital Group. RED makes no representations or warranties as to the accuracy or completeness of the information, assump1Q14 1Q15 Change 1Q14 1Q15 Change 3% 3% verified or accepted by RED Capital Group. RED makes no representations or warranties as to the accuracy or completeness of the information, assumpindependently tions, analyses or conclusions presented in the report. RED cannot be held responsible for 2.1% any errors 2.0% or misrepresentations contained in3.3% the report or in the information Beaverton 2.8% contained bps tions, analyses or conclusions presented in the$869 report. RED cannot be$888 held responsible for any errors or misrepresentations in the report or in the50 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 1.4% 2%toto 2%Gresham 1.2% gathered from third party sources. Under no $755 circumstances should$788 any information contained herein be used or considered as an offer0.6% or a solicitation -20 of an bps offer 1.4% East participate in any particular transaction or strategy. Any reliance upon this information is4.3% solely and exclusively 0.8% at your own risk. Please consult your own counsel, acparticipate 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 are3.2% subject to change without notice due to market conditions and other factors. Milwaukie Oregon $796 1.9% -70factors. bps 1% 1%or countant other advisor regarding your specific situation. Any views$822 expressed herein are subject to change without notice due to market1.2% conditions and other

Metro

$959

$988

3.0%

3.9%

5.4%

$1,222

$1,248

2.1%

5.3%

6.2%

150 bps 0% 90 bps

9.8%

2.7% 2018 3.9%

3.1% 2019f 3.8%

-1% 40 bps 1Q20f -10 bps

3.3%

10 bps

US GDP GROWTH

2013

$883 2014 $862

$970

US JOB GROWTH

PORTLAND JOB GROWTH

RED Capital Research | May 2015 2015 2016 4.3% 2017 $899 RED Capital Research | May 2015

$898

$933

3.9%

3.2%

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

Portland 5-yr Compound Annual Rent Growth Distribution

Rental Housing Journal Metro • June 2015 45 40 35

1.00% 9.6%

3.50% 82.3%

8.1%

RED Capital Research | May 2015

Portland

Minimum -1.67% Maximum 6.69% Mean 2.21% Std Dev 0.930%

20 15

FOR MORE INFORMATION ABOUT RED’S RES

Director of Research THE FACE OF LE research capabilities contact: djhogan@redcapitalgroup.com Property Class/Type Class/Type Approx. Date of of Total Price Price // Price // Estimated Property Approx. Date Total Price Estimated DanielCap J. Hogan Property Class/Type Approx. Date of Total Price / Price Estimated RED Capital Group, LLC  RED Mortgage Capital, LLC  RED Capital Mark Property Name (Submarket) (Constr.) Transaction (in millions) per unit// Rate +1.614.857.1416 Property Class/Type Approx. Date of Total Priceoﬃce / Price Estimated Property (Constr.) Transaction (in per Cap Rate PropertyName Name(Submarket) (Submarket) (Constr.) Transaction (inmillions) millions) perunit unit Cap Rate of Research Property Name(Northeast (Submarket)Portland) (Constr.) Transaction (in$42.3 millions)toll free per unitDirectorCap Rate The Belmont (Northeast Portland) A // MR MR (2008) 15-Dec-2014 $42.3 $343,902 4.5% +1.800.837.5100 1 0 W est Broad Street, Columbus, Ohio 43215  r The Belmont A (2008) 15-Dec-2014 $343,902 4.5% The Belmont (Northeast Portland) A / MR (2008) 15-Dec-2014 $42.3 $343,902 4.5% Daniel J. Hogan djhogan@redcapitalgroup.com Jory Trail at the the Grove (Wilsonville) (Wilsonville) B+A///GLR GLR (2012) 25-Jan-2015 $59.0 $182,099 5.0% The Trail Belmont (Northeast Portland) MR (2008) 15-Dec-2014 $42.3 $343,902 4.5% Jory at Grove B+ (2012) 25-Jan-2015 $59.0 $182,099 5.0% Jory Trail at the Grove (Wilsonville) B+ / GLR (2012) 25-Jan-2015 $59.0 $182,099 5.0% © 2015 RED Capital Gro MARKET OVERVIEW | 1Q15 | PORTLAND, OREGON Sunnyside Park Apts. (Milwaukie/Oregon) BGLR (1986) 8-Feb-2015 $14.1 $83,304 7.5% Jory Trail at theApts. Grove (Wilsonville)| 1Q15 | PORTLAND, B+// /GLR GLR(1986) (2012) 25-Jan-2015 $59.0 $182,099 5.0% +1.614.857.1416 oﬃce Sunnyside Park (Milwaukie/Oregon) B8-Feb-2015 $14.1 $83,304 7.5% Director of Research MARKET OVERVIEW OREGON Sunnyside Park Apts. (Milwaukie/Oregon) B- / GLR (1986) 8-Feb-2015 $14.1 $83,304 7.5% Element 170Park (Beaverton) B+ LR (2014) (2014) 24-Feb-2015 $39.0 $159,836 5.0% Sunnyside Apts. (Milwaukie/Oregon) B- // GLR (1986) 8-Feb-2015 $14.1 $83,304 7.5% Element 170 (Beaverton) B+ LR 24-Feb-2015 $39.0 $159,836 5.0% +1.800.837.5100 toll free Element 170 (Beaverton) B+ / LR (2014) 24-Feb-2015 $39.0 $159,836 5.0% djhogan@redcapitalgroup.com Commons at Redwood Creek (Beaverton) B- / GLR (1980) 25-Mar-2015 $48.8 $120,074 5.2%

SUBMARKET TRENDS (REIS)

Tigard -1% / Oswego 2012 Vancouver

-1%

Source: S&P Case-Shiller and FHFA Home Rent Price Indices Portland Effective Trendsand RCR Forecasts Source: S&P Case-Shiller and FHFA Home Price Indices and RCR Forecasts Sources: Reis, Inc., Axiometrics and RCR Forecast

Northeast 0% Northwest

3.50

82.3%

Units Units (T12 (T12 Months) Months) Units Units (T12 (T12 Months) Months)

Average Average Cap Cap Rate Rate Average Average Cap Cap Rate Rate

3.3%

Change

0.8% $888 1.9% $788 3.9% $822 5.3% $988 2.7% $1,248 3.9%

$899 4. Change Physical $933 Vacancy 3.

1Q15

ABSORPTIONS ABSORPTIONS ABSORPTIONS COMPLETIONS COMPLETIONS ABSORPTIONS COMPLETIONS COMPLETIONS

3.0% 2.7% 3.0% 2.7% 3% 20% 3% 15.1% 2.0% 12.4% 2.0% 15% 2% 10.0% 1.2% 1.4% 2% 1.2% 1.4% 14.9% 10% 1% 1% 5% 7.6% 0% 0% 0% US GDP GROWTH US JOB GROWTH PORTLAND JOB GROWTH US GDP GROWTH US JOB GROWTH PORTLAND JOB GROWTH -1% -5% -1% 2012 2013 2014 2015 2016 2017 2018 2019f MARKET OVERVIEW | PORTLAND, 2012 | 1Q15 2013 2014OREGON 2015f 2016f 2017f 2018f 2012 2013 2014 2015 2016 2017 2018 2019f YoY YoY Growth Trend YoYGrowth GrowthTrend Trend

1Q15

94.5%

NOTABLE TRANSACTIONS NOTABLE NOTABLE TRANSACTIONS TRANSACTIONS

2015f 2015f

2014 2014 2014

2.8%

$898

Source: History, Forecasts Source: Reis History, RCR Forecasts PortlandReis Absorption andRCR Supply Trends Source: Reis History, RCR Forecasts Source: Reis History, RCR Forecasts

4,500 4,500 4,500 4,000 4,500 4,000 4,000 3,500 4,000 3,500 3,500 3,000 3,500 3,000 3,000 2,500 3,000 2,500 2,500 2,000 2,500 2,000 2,000 1,500 2,000 1,500 1,500 1,000 1,500 1,000 1,000 500 1,000 500 500 0 500 00 0 2012 2012 2012 2012

3.1% 3.1%

2013 2013 2013

2.1%

1Q14

Portland Absorption and Supply Trends

3.9% 3.9%

25% 25% 20% 8% 20% 7% 15% 15% 6% 10% 10% 5% 5% 4%5% 0% 3%0% -5% 2% -5% 2012 1% 2012 2012

$888

$862

1Q14

94.0% 94.0% Tigard / Oswego $883 94.0% $933 1Q20f 2016f 2017f$8982018f 2018f 2019f 1Q20f 94.0% 3.9% 2016f 2017f 2019f 2015f 2016f 2017f 2018f 2019f 1Q20f Vancouver 2015f 2016f 2017f 2018f 2019f 1Q20f $862 Metro $898 Portland Absorption Absorption and and Supply Supply Trends Trends Portland

2014 2014

Sources: Reis, Inc., Axiometrics and RCR Forecast

2014 2014

95.4% 95.4% 95.4% 95.4%

Tigard / Oswego

Portland Effective Rent Trends Portland Effective Rent Trends Sources: Reis, Inc., Axiometrics and RCR Forecast

2013 2013

$869

Vancouver Change Effective Rent Metro

$755 $788 4.3% 97.0% 97.0% 97.0% Beaverton $869 97.0% 3.2% $796 $822 96.5% 95.9% 95.9% 96.5% 95.9% 95.6% 95.9% 95.9% 95.9% 96.5% 95.6% East Gresham $755 96.5% 95.6% 95.9% 95.9% 96.0% $959 $988 95.6% 96.0% 95.2% 96.0% 3.0% 95.2% 95.2% 96.0% Milwaukie / Oregon $796 95.5% 95.2% 95.5% $1,222 $1,248 95.5% 2.1% 95.5% Northeast 95.0% $959 95.0% 95.0% 9.8% $883 $970 95.0% 94.5% 94.5% Northwest $1,222 94.5% 4.3% $862 $899

96.7% 96.7% 96.7% Oregon

Northwest

2013 2013 2013 2013

1Q15

Portland Occupancy Occupancy Rate Trends Trends Submarket Portland Portland OccupancyRate Rate Trends

Milwaukie /

2012 2012 2012

1Q14 Source: Reis Occupancy History, RCR RCR Forecasts Source: Reis History, Portland Rate Forecasts Trends Source: Reis History, RCR Forecasts Source: 96.7%Reis History, RCR Forecasts

East Gresham

97.0% 97.0% 97.0% 97.0% 96.5% 96.5% 96.5% 96.5% 96.0% 96.0% 96.0% 96.0% 95.5% 95.5% 95.5% 95.5% 95.0% 95.0% 95.0% 95.0% 94.5% 94.5% 94.5% 94.5% 94.0% 94.0% 94.0% 94.0% 2012

Physical Vacancy

Average Average Occupancy Occupancy Average Average Occupancy Occupancy

Beaverton

Trade & Return Summary $5mm+ Sales 12 Approx. $256.7mm Proceeds Avg. Cap Rate 4.6% (FNM) Avg. Price/Unit $130,044 Expected Total 5.7% Return RED 46 ETR 35th Rank Risk-adjusted 3.83 Index RED 46 RAI 33rd Rank

2012 2012

Effective Rent

Submarket

RCR elected to reduce the generic cap rate for Portland class-B+ assets by 15 bps to 5.35% to reflect the strong interest among investors for Pacific Northwest properties. Using this level, a terminal cap rate assumption of 6.0% and model derived occupancy and rent forecasts, we estimate that Portland investors may expect to achieve a 5.7% unlevered five-year total return. This ranks only 35th among the RED 46, constrained by our forecast for sluggish rent growth after 2015. Volatility is about average, giving rise to a similar risk-adjusted index, ranked group #33.

8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1%

SUBMARKET TRENDSTigard (REIS) / Oswego

MARKET OVERVIEW || 1Q15 | PORTLAND, OREGON MARKET MARKETOVERVIEW OVERVIEW |1Q15 1Q15||PORTLAND, PORTLAND,OREGON OREGON MARKET from OVERVIEW ...continued page| 1Q15 12 | PORTLAND, OREGON

-1%

Market Overview

Northwest

RENTAL HOUSING JOURNAL METRO

Mind Your Business ...continued from page 8 exclude an otherwise qualified applicant based on their disability-related need for an animal. You may require documentation, but when a potential applicant responds to your ad, you will get in trouble if you don’t know the difference between a pet and a service animal. In a recent local case, a landlord was found to be in violation of Fair Housing law when a complaint was filed by a prospective applicant who called on a “no pet” property, but told the landlord he had a service animal. The landlord said, “We don’t take pets.” The landlord was tested multiple times. He failed those tests, and FHCO levied a substantial fine. Enforcing unreasonable occupancy standards is another stumbling block for the uneducated landlord. Check out the following ad I recently found on Craigslist: “Seeking clean, responsible, mature individual for respectful living situation. We have a mother-in-law type of room in that it is located in a separate building and offers complete privacy with separate entrance etc… If you are looking for a quiet place to study or just like peace and quiet this might work for you. Single occupant only, no overnight guests. MUST BE GAINFULLY EMPLOYED.” In addition to occupancy standards, this ad violates the source of income provision within Fair Housing law by requiring employment, and blatantly attempts to exclude children. Why would this unit be unsuitable for a single parent

with a young child, a couple living on disability payments, students receiving financial aid, or a retiree? Banning overnight guests is a topic for another article… Occupancy standards are created by Housing and Urban Development (HUD), the housing agency of the federal government (www.hud.gov/ offices/fheo/library/occupancystds.pdf). In the past, landlords used unreasonable standards related to occupancy that served to create a disparate impact on families with children, and families from cultures where intergenerational living is commonplace. To combat this widespread problem, HUD developed guidelines that are broadly interpreted as: two per bedroom, plus one, not counting children under the age of two – but this is just a guideline. If your property is quite large, occupancy can exceed this standard. If it is quite small, or the property systems will not handle a larger number of occupants, it is okay to have standards that vary from the HUD standard or that serve to limit occupancy, but you’d better be able to defend it if challenged. Also, you may not charge more rent per tenant or a larger deposit for larger occupancies. (There are some carve-outs in occupancy standards for fraternities, sororities, substance abuse or postprison support homes, and professional care facilities, among others. The city of Eugene currently has a

code which prohibits more than five unrelated adults from sharing a home zoned for single-family occupancy. To my knowledge, there is no case law in regards to the potential contradiction of this city code to federal Fair Housing law.) Landlord prejudices seem to come to the fore most often when fielding calls from prospective applicants. Time after time, Fair Housing testers get different responses from landlords based on foreign accents or the questions they ask about the unit. Avoid problems by saying the same thing to each person who calls. If a caller inquires as to the specifics of their situation, and it is related to their membership in a protected class, just repeat, “I do not discriminate based on any protected class. Would you like to schedule a showing?” If you are showing a unit and a potential applicant asks about the specifics of their situation and it is related to their membership in a protected class, just repeat, “I do not discriminate based on any protected class. Would you like an application?” Don’t pre-screen an applicant or ask questions about their employment, children, religion, marital status, relationship status, citizenship status, disability, etc. The pertinent questions will be answered by the information provided on an application. You may inquire as to the number of applications they want you to bring for the number of adults (over the age of 18, or emancipated minors)

who are applying to rent. The bottom line for landlords is to check your prejudices at the door to your rental unit. Stay aware of Fair Housing law and law changes, and remember, this is a business transaction, if the applicants meet your criteria, don’t concern yourself with things that really don’t matter. Whether applicants are gay or straight, married or unmarried, get their income from a job or a housing subsidy, are undergoing gender reassignment, work in a field you find distasteful, have children out of wedlock, have immigrated from another country, belong to an unfamiliar culture, have lots of children or none at all, go to a church you think of as a cult, or have no religious affiliation, is none of your business, they are customers plain and simple. You should care about their ability to pay the rent, maintain the peaceful enjoyment of the neighbors, and take good care of your property, period. This column offers general suggestions only and is no substitute for professional legal assistance. Please consult an attorney for advice related to your specific situation.

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RENTAL HOUSING JOURNAL METRO

Real Estate: What’s In It For Me?

any people are interested in real estate, but don’t really know much about it. They know that it seems that a lot of people have made a lot of money in real estate (or achieved other goals using it), and they wonder if maybe there could be something in it for them, too. National REIA wants to help you understand a little more about the real estate business and real estate investing. We’ve developed this report so you can get an overview of multiple investing strategies and determine whether any of these areas of real estate business or investing sound interesting to you. All of the strategies in real estate we cover in this report are actually used by REIA members. When you join us at a monthly meeting you can talk to us and learn even more. Here are some areas of real estate discussed in this report:

a real estate agent or broker, an appraiser, or a home inspector, and buying/selling on creative terms. Although these are beyond the scope of this report, we at REIA would be happy to discuss these with you as well.

Real Estate Business vs. Real Estate Investment

• Landlording

Is real estate a business, an investment, or both? The correct answer is “Yes.” The “business” of real estate is generally referring to an ongoing, hands-on strategy. This is usually done using techniques like wholesaling, retailing, and flipping (buying/rehabbing/selling) property. It can be a great way to

• Wholesaling • Rehabbing/Retailing (Flipping) • Discounted mortgages and notes • Private money and hard money lending There are many more things you can do in real estate, including being

make a living, but if you stop working at your real estate business, the income will stop too. When we talk about “investing” in real estate, we typically mean buying and holding real estate longterm, which generally means you are acting as a landlord, or landlording. When investing in real estate, we talk about tax advantages, return on investment (ROI), and appreciation. Many people operate a real estate business and invest in buy-and-hold properties at the same time, but it is helpful to keep the two concepts separate in your mind. In any case, you can participate in real estate fullor part-time.

• Supplemental current income At this point we’ll begin an overview of different types of real estate businesses and investing. National REIA has experts who are involved in these various areas of real estate, and they would really like to speak with you at a monthly meeting.

Goals: What are your goals? You need to think about this and come up with your own answer before you actually proceed to involve yourself in real estate as a business or investment. Below are some common goals that you may want to achieve through real estate:

Landlording Description:

• Higher income • Tax benefits • Self-employment • Personal fulfillment • Passive income

• Landlording is the purchase of and holding of real estate over a period of time. It is often referred to as “buy & hold” or as the “get rich slow” technique.

• Increased wealth

...continued on page 20

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5 REASONS TO USE RENTEGRATION

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CHECK-IN/CHECK-OUT CONDIT

ION REPORT

TENANT(S): ____________________ ______________________________ 48-HOUR NOTICE ________________ ADDRESS: ____________________ OF ENTRY __________ OR-RTG-24 Orego__________ n ________UNIT: ______________ CITY: ______________________________ _____ STATE: ________TENA : _____________ ZIP: NT(S) __________ __________________ ______ ADDR Rating

Scale = (E)Excellent (VG) Very Good PET AGREEMENT

WA-RTG-40 Washing

ESS: ____________ __________________ __________________ ____ DATE:_____ (G)Good (F)Fair CITY: (P)Poor ___ __________________ __________________ ____ UNIT: ______ __________________ ___ In _____ STATE: ______ Out In Out ____ ZIP: ______ ___

IN Out TENANT INFORMATION LIVING AREAS TENANT(S): ____________________________________________________ DATE:________ KITCHEN ADDRESS: ____________________________________________________ UNIT: _________ Walls Walls CITY: _________________________________________ STATE: __________ ZIP: _________

48-HOUR NOTICE OF ENTRY

BEDROOM 3

Walls

Pursuant to RCW 59.18.150, this is your 48 hour notice that g the dwelling unit your landlord or their and premises located agents will be at (Address) __________________ Rods 1) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ ____________ WA-RTG-20 Washin Ice Trays ____________ gton ______ Rods Vaccinations: Yes____ No____ License Number: ______________ ____________ on Floor CHECK-IN/C Shelves/Drawer betwee n the hours 2) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ Floor HEC (Date)K-OUT CONDITI of and Vaccinations: Yes____ No____ Carpet/Vinyl/Wo License Number: ______________ od . ON Disposal REP ORT (Time) Light Fixtures (Time) 3) Type _______________ Breed _______________ ________ Light Fixtures Size ______ Age __ Weight ___ Color ____ Name DishwasherTENANT(S): __________ The entry will occur Vaccinations: Yes____ No____ License Number: ______________ Doors/Woodwo __________ rk _____ for the following purpos ADDRESS: _____ _______________ ____________ Doors/Woodwork ______ __________ _____e:__________ Counter Tops ______ Additional Security Deposit Required:$ __________ ____________ Locks ________________ ______ ______ CITY: __________ ____________ ___________ _____________UN ______ Locks _______________ ____________ __________________ Cabinets ____________IT: __________ __________ ______ AGREEMENT ____ ______ Ceilings STATE: _____ ______ ______ Rating ___ ZIP: _______________ __________________ Scale = (E)Excellent Ceilings Tenant(s) certify that the above pet(s) are the only pet(s) on the premises. Tenant(s) Sink (VG) Very Good __ Electric Outlets (G)Good (F)Fai understands that the additional pet(s) are not permitted unless the landlord gives ten Electrical r (P)Poor Outlets IN Out pets in theLIVING premises ant(s) written permission. Tenant(s) agree to keep the above-listedFloor In Landlord AREAS Out Garbage subject to the following terms and Cans conditions: KITCHEN In Windows Out Walls Phone BEDRO Windows

DESCRIPTION OF PET(S)Blinds/Drapes

Stove/Racks

Refrigerator

TV Antenna/Cable

1) The pet(s) shall be on a leash or otherwise under tenant’s control when it is outside the Blinds/Drapes Windows tenant’s dwelling Fireplace unit. Blinds/Drapes 2) Tenant(s) shall promptly pick up all pet waste from the premises promptly. Cleanliness 3) Tenant(s) are responsible for the conduct of their pet(s) at all times. Rods 4) Tenant(s) are liable for all damages caused by their pet(s). Floor 5) Tenant(s) shall pay the additional security deposit listed above and/or their rental BEDROOM agreement as a condition to keeping the pet(s) listed above. 1 Carpet/Vinyl/Woo BEDROOM 2 d 6) Tenant(s) shall not allow their pets to cause any sort of disturbance or injury to the Walls Light Fixtures Walls other tenants, guests, landlord or any other persons lawfully on the premises. Windows report to landlord any type of damage or injury 7) Tenant(s) shall immediately caused by Windows Doors/Woodwork their pet. Blinds/Drapes Locks 8) This agreement is incorporated into and shall become part of Blinds/Drapes the rental agreement exe -cuted between the parties. Failure by tenant to comply with any part ofCeilings this agreement Rods shall constitute a material breach of the rental agreement. Rods Floor

_____________________________ Light Fixtures Landlord

Floor

Electrical Outlets

______________________________ Garbage Cans Light Fixtures Tenant TV Antenna/Cable ______________________________ Doors/Woodwork Tenant Fireplace

Windows enterin

__________________ Blinds/Drapes

MethodStove/Ra of Servic ckse: Refrigerator

Personal Service:

additional day for

Ice Trays

Toilet

Shelves/Drawer

Locks

Cleanliness

Electric Outlets

BEDROOM 1

Walls

Windows

BlueIndustry PMS 280/Gray PMS Partner 7543 Exclusive of:

PMS 280/PMS 7543 over color

Walls Windows Post

and Mail:

Blinds/Drapes

compliance if served

Tub/Shower Disposal Fan (Exhaust) Dishwas

her

Floor

from the database. The modules are all integrated and work together. For example, a customer can use the rent-roll function to identify all delinquencies, apply fees, and create eviction forms with a few simple clicks of the mouse.

OM 3

Walls

BATH ROOM Towel Bars

* Add one Sink & Vanity

Counter Tops

Electric Outlets Cabinets Sink Light Fixtures Floor Windows Essential Services

Rods

by post and mail.

Floor Light Fixtures Doors/Woodwork Locks Ceilings Electric Outlets Smoke Detector

sales@rentegration.com Doors/Woodwork

Locks

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sk the Secret Shopper

ach apartment community has certain features and benefits, which are the selling points of that particular community. It could be its location, friendly staff, spacious floor plans, beautiful landscaping or affordable price; just to name a few. Yet even with the most fabulous features, there will be times when the apartments you have available won’t seem to meet the needs of your prospective renters. The following question from a leasing consultant addresses this issue: Q: We have several vacant apartments right now and I know I’m supposed to try and rent all of them, but how can I rent to someone when it doesn’t seem like the apartment will really meet their needs? A: Things are not always what they “seem.” Many times you may have the tendency to make an assumption about what you think someone needs based upon your limited perspective, frame of reference or belief system. For example, you might have 2 bedrooms available right now that are all located on upper floors. If a family with small children comes in, you might automatically assume that they are not going to be interested because you think they won’t want to deal with the stairs. On the other hand, you

could have all first floor openings and your prospective renter could be a single woman. You might think women living alone only want upper level apartments because you believe they feel safer off the ground. Therefore, when you have a single woman seeking a new home, you may not try to sell her on a first floor location because you don’t think it will meet her needs. Until you truly get to know your prospective renters and determine what is most important to them, you really don’t know what they need. You are merely making “assumptions.” It could be that the husband of the family mentioned above travels a lot. The wife may prefer an upper level apartment as she is frequently home alone with their small children, and would feel safer living upstairs. The single woman might have a lot of equipment that she has to bring home from work each day, and does not want to deal with constantly lugging it up and down the stairs. It’s important to remember that every person who walks through your door is as unique and special as each one of your available apartments. The term “one size fits all” may work when you are buying a stretchy article of clothing.

However, when it comes to helping people find a new home, no apartment will fit the same two people in the same way. For those times when you have prospective renters with needs you just cannot meet, send them to a sister community and/or offer to pay them a referral fee for anyone they refer who rents. Since things are not always what they seem, you never know when a prospective renter who does not end up leasing could be a source of referrals for months, or even years to come. If you are interested in leasing training or have a question or concern that you would like to see

addressed, please reach out to me via e-mail. Otherwise, please contact Jancyn for your employee evaluation needs: www.jancyn.com ASK THE SECRET SHOPPER Provided by: Joyce (Kirby) Bica Former owner of Shoptalk Service Evaluations Consultant to Jancyn Evaluation Shops E-mail: shptalk2@gmail.com Copyright © Joyce (Kirby) Bica

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Nowhare to Go but Up ...continued from page 1 Job Growth. Portland has gained jobs more rapidly than Seattle, San Francisco and most other major U.S. metro areas in the past year. Portland's employment base expanded 3.1% from June 2013-June 2014, the area's fastest annual growth rate in nine years. According to state workforce economist Christian Kaylor, the past year marked only the second stretch since the mid-1990s that job growth exceeded 3% in Portland. Cost of construction. In 2010, the cost of building a two bedroom one bath apartment unit with a washer/ dryer hookup was approximately $90,000–$95,000 per unit. Today that cost ranges from $125,000-$165,000 for wood frame apartment buildings up to five floors. The cost of construction is significantly greater for buildings over five floors due to the higher cost associated in building with concrete and metal. A recent appraisal completed by Barry and Associates for the construction of a “high end” five story elevator-served building priced out at $230,000 per unit all in (system development charges, soft and hard costs and developer profit.) A number of factors account for the increased costs of construction: Increased land prices. Land prices that were down to $10,000 a unit during the recession are now averaging closer to $20,000 a unit for multifamily units, with some deals coming in at $30,000 – 40,000 a unit (which was once prerecession pricing for townhouse unit land.) Code changes. There have been many code changes in the last six years. In 2012 the Oregon Structural

Rental Housing Journal Metro • June 2015

Specialty Code was revised using the framework of the international building code. This had many implications. First of all, new multifamily properties are now required to install fire suppression sprinklers. Additionally, there are more complete requirements for handicapped accessibility, seismic resistance, and stricter codes regarding air flow into buildings. These new requirements have increased building costs significantly. Lack of enough labor. The 20142015 construction boom has created increased demand for construction labor creating a lack of contractors and laborers available to complete projects. This labor shortage has increased the cost and supply of labor. Commercial increases have averaged 4.4% over the last two years. According to Brian Frank, President of Keyway Construction, a construction company that specializes in the construction of midrise wood frame apartment communities, the cost for labor across all trades has increased about 5% due to a shortage of experienced tradespeople. Increased material costs. The cost of construction materials have been increasing as well. More importantly, there are more materials needed to complete the construction of apartments and homes in order to comply with code changes. Brian Frank of Keyway Construction pointed out that the cost of materials has risen about 5% this year. The combination of labor and materials brings the total increase in apartment construction costs in the last 8–12 months to 10%. Increased permit costs.

Every year there are typically some increases in permit fees to offset the operation of the permit center staff who manage the permitting and inspection requests. Patrick Barry of Barry and Associates noted recently that system development and permit costs were approaching $20,000 per unit in the Portland Metro area, with a recent smaller project actually costing $25,000 a unit. Increased systems development charges. System development charges increase annually. The Portland Parks and Recreation Department, led by Commissioner Amada Fritz, recently proposed residential increases in parks-related fees for units over 1,700 square feet in the city center and over 700 square feet outside of the city. The proposed increases follow a sliding scale based on unit size which may increase fees up to 52% for outer city units more than 2,200 square feet. Commercial increases in this proposal are budgeted to increase 113%-281%. Increases in operating expenses. Water and sewer bills, property taxes (with bond measure increases) and regular maintenance are making properties more expensive to manage and are also forcing investors to increase property rents. Appraisers have recently noted that outside of new apartments, in which taxes are the biggest expense, utilities are leading the way. Typical utility costs are $70-$100 per unit per month.

New apartments are being taxed at around $1,500-$2,500 per unit. The bottom line. Rent increases will continue to go up in the next 24 months as a response to continued robust demand and job growth. Additionally, the cost of construction is forcing developers to increase their asking rates in order to meet all of the economic needs for their projects. There are two kinds of rent to consider: Rents for newly constructed properties will continue to be strong, ranging from $2.50-$2.75 per foot, even reaching as high as $3.00 per foot for very small units, but significant concessions will be needed to fill these properties. Also, as more of these new properties lack parking we will see some shift of tenants to properties that have a parking component. Well located, well maintained older product rents are in the $1.50 per foot range, while further outside the metro area rents are ranging closer to $1.00 per foot. “Value add” properties, which have been substantially upgraded, are nearing the $1.75-2.00 per foot mark. We expect to see rents for existing properties continue to increase from between 4%-7% each year over the next two years, as existing multifamily housing adjusts to the increasing demand in the marketplace. In summary, rents have nowhere to go but up in 2015.

RENTAL HOUSING JOURNAL METRO

Retaining Quality Employees By Mary Girsch-Bock

s property managers, your primary focus is to locate and keep quality residents. Long-term residents can mean a stable rental income, less marketing dollars spent, and a stable rental community, which is attractive to all residents. One area that many managers may not realize the value of is a stable work force. Finding and retaining quality employees can pay just as many dividends for a property management company as finding and retaining quality tenants. So how can you ensure that you are finding and, more importantly, keeping top quality employees on your team: Hire the right employee for YOUR property management business. If

you run a high-energy office, it’s likely that the laid-back, methodical applicant will not be a good fit in the long-term. Likewise, if your office is more relaxed, introducing a highenergy individual to the fold may create more problems than it solves. While a solid skill set can be invaluable, it’s not always a good idea to hire on experience alone. Provide adequate training. I remember one of my first jobs in property management where I was given a desk, and some papers and left on my own to figure out the generally accepted policies and principles of the office. Don’t set your employees up for failure; provide them with the training they need to be successful. Utilize all of their skills. What if your best leasing agent is also a topnotch copywriter? Why not use their

skills to write ads, update web copy or write an article for the community newsletter? Employees often have more than one skill set, and most enjoy the opportunity to use them at any opportunity. Provide professional development opportunities. Most of us enjoy the opportunity to learn something new. Providing your employees with the opportunity to attend classes, seminars, and workshops has no downside. Take a look at benefits. While most property management businesses offer standard employee benefits such as paid time off and health insurance, what about some office perks such as free food and beverages in the office or flex-time? Reward them accordingly. While all of the above perks can certainly contribute to a happy workforce,

don’t overlook the importance of compensation. While adequate training, professional development opportunities, and a flexible work schedule are all important, the level of compensation you offer your employees can make a tremendous difference in how long your employees stay. Be sure and do your research and pay them what they’re worth, and reward their successes accordingly. While we can never be sure exactly how long a new employee will ultimately stay with an organization, providing a good mix of the suggestions above will certainly go a long way in keeping your staff both happy and productive for the long term. www.propertymanager.com

Good Hiring ...continued from page 9 ed to favorable feedback, careful questions can allow you to read between the lines. A good start is asking how the reference and the candidate are acquainted. How long did/have they worked together? A long-term relationship reveals more about a person than a short-term job stint.

Ask about the person’s daily responsibilities. Watch out for evasive or vague answers. Pay close attention to what is NOT being said as well as what is being verbally described. If a reference struggles describing the candidate’s responsibilities - beware - they may not have worked together to the degree the

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candidate states. Asking what the candidate might need to enhance their career or professional development is another telling question. This reveals what challenges they may have had in the past and how well they might fit the new job. Wrap-up questions should include: Why did the candidate leave? Could they have stayed if they desired to do so? Why are they seeking change? A final question that is very revealing: “If you were hiring at your company, would you hire this candidate, and if so, for what type of position?” I also recommend careful consideration of the “three Cs”. Bill Hybels (author of Courageous Leadership) describes three important characteristics that can help evaluate a person’s fit in any team or organization. Character, Chemistry and Competence. To the degree that these traits can be evaluated is key in determining overall compatibility and provides an indicator for future success. Character: Look for evidence of honesty, teach-ability, reliability, humility, and a healthy work ethic. This is an important trait because a breakdown in character can breed distrust and alienate co-workers. Character is a foundation of workplace morale. It should be strong in presence to breed success. Competence: Seek the highest level of competence possible. This can also be described as “never fear hiring someone smarter than you”. Surrounding yourself with gifted, skilled, bright, capable people will enhance your team will and inevitably contribute to the company mission and goals. Seek people with proven track records of success. They are likely highly valued by the people they work with. Go after this proven competence.

Chemistry: How does the person “bounce” or interact with others? Is the demeanor overall happy, positive, upbeat? A personality that attracts and promotes positive energy is more likely to engage and foster teamwork and connection versus someone who is not. Chemistry should not necessarily override character and competence but it must be a contributor. Is the person likable? If two job candidates have equal character and competence, strong consideration should be afforded the candidate whose personality and temper blends best with the team. These are just a few practices that can help with the hiring process. When I began my career in management as a much younger person and was faced with the task of hiring a team for a large multifamily property, it was far from simple. I never had a college course that taught the subject. There was no “training manual” for hiring the perfect person. It required careful planning, communication, and evaluation. I was fortunate to have good mentors and experienced co-workers. Even with those supporting factors, it was not always successful. And today, the process is still not 100% guaranteed. Remember, hiring practices require just that….. PRACTICE. It is a refined art that takes time and experience to hone, but with preparation and patience, success will follow more times than not. Be smart and careful in selection and do not rush the process. No doubt that one day soon an app for producing the perfect candidate will arrive. With the rate of technical evolution, we may need to get ready for those “3-D printed” employees sooner than we think! Better start updating that virtual Employee Handbook. Happy hiring!

Rental Housing Journal Metro • June 2015

RENTAL HOUSING JOURNAL METRO

Legislative Update ...continued from page 4 premises. The stations would be the personal property of the tenant and can be removed when they move out. Personally I think that allowing tenants to do things like this is a good business practice of landlords, but I don’t think that we should be required to allow for it. This should be left up to the landlord and should ultimately be something that the landlord can approve or deny as installing these stations involves a lot more than just putting a post in the ground. Typically this will involve digging a trench from the tenant’s breaker box to the area that the charging station is located in order to run the electrical wiring. This would include tearing up a driveway or parking lot and then patching the area when it is complete which leaves a bit of an eye sore that most landlords would not want. I would suggest that we come out against this law and that we leave this up to the landlords. The landlords that would allow such a thing like myself would happily rent to tenants with electric vehicles and quite honestly would even build apartment units with charging stations already installed on the property; and those that don’t want to deal with it can simply avoid doing so. House Bill 2689 clarifies that carpet cleaning may be deducted from tenants’ security deposit, but is not considered default or damage caused by the tenant. Really this bill is just redundant as we already have this legislation written into ORS Ch. 90. I think that given it is redundant and that it is circumventing the landlord / tenant coalition we should be opposed to this bill. House Bill 3305 prohibits utility or service providers from billing a landlord / owner for an unpaid balance on an amount owed by a tenant. Currently there are utility providers that will pass the buck to the owner if they can’t collect from the tenants. This obviously is not a fair practice given the owner is not the one that used the utility and is not the one that opened up the account in the first place. We should adamantly support this bill to stop this very unfair practice. House Bill 3494/2824 prohibits landlords from requiring tenants to have their pets declawed or devocalized. This really should be up to landlords to determine and should

not be something they are forced into. Really this shouldn’t be a landlord issue, if the powers that be want to stop this practice because they feel it is cruel then they shouldn’t single out landlords. They need to be pushing for an outright ban on these practices to make it so that veterinarians aren’t allowed to do them. Within my company we either accept pets or we don’t accept them and we wouldn’t ever put these requirements on one of our tenants. With that said, it should be our choice and if tenants don’t want to abide by these types of restrictions then they can rent from the other landlords that don’t have these restrictions. So we should be against this bill. House Bill 3076 requires landlords with rental properties on well water to have their water tested on a yearly basis. In general we are against this as it adds an additional cost to landlords. Obviously if there is any problem with the water or there are any underground pipes replaced then a good landlord should go ahead and test the water, but there doesn’t seem to be any reason to have it tested on a yearly basis. House Bill 3107 allows landlords to charge a security deposit for service or companion animals if the tenant does not produce documentation that a physician has recommended the use of such animal. It would be nice to have this go through as there is a lot of abuse by tenants surrounding this issue in Oregon, so we should support it. With that said I will be surprised if it passes as it may be in violation of some federal laws. Senate Bill 539 requires BOLI to study issues surrounding use of service animals in Oregon and to report findings to the legislative assembly. This could be good or bad for landlords depending on how well you follow the laws. I would suggest supporting this as anything we can do to bring the amount of abuse being done by tenants in Oregon would be a good thing. Ultimately the amount of abuse going on by tenants that don’t have any legitimate need for a service or companion animal will end up hurting those tenants that do legitimately need these animals. Senate Bill 592 / House Bill 2564 repeals the laws that prohibit local

governments from imposing conditions on approved permits that establish sales prices for residential developments or limit purchases to a certain class of purchasers. We are against this as it opens up the door for there to eventually be allowance for local governments to establish rent control and telling landlords what the maximum amount of rent is that they can charge. House Bill 3185 this will align Oregon Statute with Federal guidelines concerning seller financing. Currently Oregon law doesn’t allow a LLC to carry the financing where federal law does. We support this because given the recent financial crisis this will open up more options for financing to home buyers and thus lessen the impact that the banking system has on the industry. House Bill 3488 this will limit the ability to apply private transfer fees. Essentially these are fees that a builder, HOA/COA, or other entities put on the title of a property where they get paid a fee every time the property sales in the future. We are in support of this because any fees that limit the ability to buy or sale a property hurts our industry as a whole. Senate Bill 507/House Bill 2564 would require builders to have a certain percentage of their homes available to low-income individuals. Currently local governments are able to give incentives to builders

that build low income housing so there is no need to require it in our mind. We should be opposed to these bills. House Bills 2073, 2136, 2151, 2153, and 2171 are last but definitely not least on my list. All of these are trying to reduce or even eliminate the mortgage interest tax deduction in the state of Oregon. We are strongly against this as this will obviously decrease the number of people that can buy a home and will remove a major incentive for people to purchase a home. These have been a general overview of these bills and as they go through committees and the normal process this year they may change quite a bit. Please do keep your eye on these and reach out to your House or Senate representative to express your opinions on these bills. Since these are not things that will be coming to a public vote the only tool that we have is our voice. Use your voice and make sure that your legislators know where you stand on these issues. Christian Bryant PAROA & Coldwell Banker Property Management President www.CBPropertyManagement.com

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Rental Housing Journal Metro • June 2015

RENTAL HOUSING JOURNAL METRO

What's In It For Me? ...continued from page 15 Pros: • Tax advantages – This is a huge advantage to buying and holding real estate. The government has setup the game in such a way that owning real estate long-term as an investment can save you significantly on your taxes. • Appreciation – Unlike almost everything else that you purchase in life, real estate historically goes up in value, not down. Since real estate tends to go up in value, it can be a great hedge against the increased erosion of your net worth due to inflation. Cash flow – Hopefully you have purchased the property “right,” (with the right terms and the right financing) so that almost every month you have a positive cash flow. Over time, if you own enough properties, this can fully support you and your family. Generally speaking, there isn’t much money left over in the early years of owning a property, but the finances improve as your tenants effectively pay off the mortgage for you. • Leveraging Other People’s Money (OPM) – When you purchase a property using a sensible amount of leverage (borrowing OPM), you are minimizing the amount of money you are investing and getting a higher return on the cash you have invested without excessive risk. You are also using OPM by using tenants’ rent to pay off your loan over time. • Wealth building – Due to tax advantages and that real estate typically appreciates, buying and holding property long-term typically will help you increase your net wealth. It is sometimes referred to as the “get rich slow” technique.

Cons: • Tenants – If you talk in depth to experienced landlords, they will probably agree that a majority of their tenants have been good. However, it only takes a few bad experiences to dishearten one on being a landlord. Many people avoid putting on the landlording hat due to challenges such as trying to collect rent on time and property upkeep. • Liability – Landlording increases your chances of being involved in a lawsuit. Most people think the landlord is “rich,” and thus the landlord becomes a target for lawsuits. You can take steps to minimize this risk. • Time intensive – Being a landlord takes time. You can minimize this if you are able to hire a manager. Some way or another the property must be maintained, managed, kept occupied and the bills paid. • Expenses – It takes money to maintain real estate. You must have the financial ability to replace 20

the roof when it needs replacing, fix damage from a pipe breaking, and weather some of the ups and downs of owning property longterm.

aren’t holding the property and renting it out, you do not get any of the tax advantages of buying and holding rental property. Furthermore, the money you make wholesaling is considered “earned income” and will be taxed by the IRS as such.

Skills needed: • People skills – A landlord deals with a wide variety of people, so you will need to relate to and negotiate with your tenants, repair people, contractors, insurance representatives, bank officials, politicians, etc. • Fix-it skills – Knowing how to repair and maintain your property is invaluable. Whether you decide to do the work yourself or hire someone else do it, you should know as much as possible about how to install drywall, fix a toilet, install a faucet, repaint a property, and so on. • Financial skills – You will need to keep accurate records of the income/expenses associated with each property. This includes knowledge of tax-related issues. It is important to have a good CPA on your success team who will help you in these matters. • Planning/saving skills – This is a specific financial skill but an important one. If you are someone who spends every dollar as soon as it hits your hand, then you will have problems being a landlord. You must keep a “rainy day” fund for when the roof needs fixing. And you must have the skills to plan the maintenance and improvement of your property.

Time needed: • The time needed to be a landlord varies widely depending on factors such as the number of units owned, the kind of property owned (single family vs. multi), and whether you plan to make repairs yourself. Relative to some other areas of real estate, landlording can be fairly timeintensive. Often it will be in spurts. A property may require no time for months, and then need your undivided attention for several weeks in order for you to repair and re-rent it.

Cash needed: • Typically landlording requires seed money. How much will depend on your method. Cash required for buying property can be minimized if you are successful in using some creative purchasing techniques. • Once you own or have “controlled” the property, you may need money to fix it up prior to renting it out. • You will need money to keep the property maintained and to pay taxes, insurance, and the mortgage. If you purchased the property “right,” the rents from your tenants should cover all these costs and leave you some money left over for your efforts.

Skills needed: • Negotiation – You will need to negotiate with sellers when you are putting the property under contract. Likewise, you will need to negotiate with your buyers.

Wholesaling Description: • As a wholesaler, your job is to find a motivated seller who has a pressing need to sell his or her property. You negotiate with the seller and enter into a purchase agreement. Then you find a buyer who will pay a little more than you have contracted for, and you keep the “spread.” There are various valid techniques for doing this, including “buy-don’t fix-sell, buy make minimal or only urgent changes and sell, etc.” The other techniques are beyond the scope of this report.

• People skills – These are an important part of your negotiation skills. • Analytical skills – You need to be able to determine what the property will be worth after it is fixed up, accurately estimate repair costs, and determine your maximum allowable offer (MAO).

Pros: • Minimal money needed – Wholesaling requires very little money, unless you choose to pay for advertising in the hopes of getting motivated sellers to call you. • Income – This varies, but there is no limit to the number of properties you can wholesale. • No ownership responsibility – Using some techniques, you never actually purchase the real estate, but transfer your purchase rights to the end buyer. • Minimal liability – Your liability is minimal assuming you have a properly written purchase agreement. ** Remember that as a wholesaler you are focused on the CONTRACT, not the real estate itself when you are selling the property. As you have not taken possession you cannot sell the property.

Cons: • Wholesaling is highly regulated in most states – You must know the law in your state and act accordingly. • Time intensive – Since you are a “deal finder,” when you stop working to find deals, you stop making money! • Business not investing – This is a way to make money. You are in the business of being a wholesaler; you are not “investing” in real estate. • No tax advantages – Since you

Buy/Fix-up/Sell (flipping) Description: • You are buying a property that is in moderate to bad physical condition, fixing it up, and then selling it—just like on those cable TV shows (except you make or lose your own money, and it’s not “reality”—it’s real!).

Pros: • Income – This can be a very lucrative way to make a living. How much you make per house will vary, and every person will have a minimum amount that he or she expects to make before purchasing. • Hands-on – If you are a hands-on type person, this may be for you. • Not hands-on – You can also just supervise and write checks to contractors, if you wish. This generally results in a lower profit but allows you to leverage the expertise and experience of others. • Creativity – If you like to be creative and solve problems, then this will be up your alley as you determine how to transform a mess into a beautiful finished product. Just remember to focus that creativity toward the tastes of a typical buyer in the masses.

Cons: • Hidden costs – Like most repair ...continued on page 21 Rental Housing Journal Metro • June 2015

RENTAL HOUSING JOURNAL METRO

What's In It For Me? ...continued from page 20 projects, fixer-uppers often seem to take twice as long and cost twice as much as you expected. When you tear into something, you often find some other unexpected “surprises.” As a result, you may spend much more than expected doing repairs, and your bottom line suffers accordingly. • Contractors – It can be very frustrating dealing with some contractors. They may be juggling different jobs and it can be challenging to keep your rehab project on budget and on schedule. • Cash-intensive – This is one of the most cash-intensive areas of real estate. It takes money to purchase the home, do the repairs, pay the utilities, and pay the insurance/ taxes/mortgage for however long until you can finally sell the home.

work is done properly, you will be okay. It’s when something isn’t done correctly, and someone subsequently gets hurt, that you may be liable. So make sure you are dealing with reputable contractors.

Skills needed: • Construction knowledge – You don’t need to know how to do everything yourself, but you need to know how things should be done, how much it should cost, and how long it should take. This knowledge enables you to talk and work with the contractors you hire. • Project management – One of the common pitfalls of rehabbing is when a two-month project takes six months. Suddenly the $20,000 profit is gone and you’re just hoping to break even.

• Infrequent paydays – If you are used to getting paid every week or on a regular basis, you may be in for a shock. You will be doing nothing but spending money for weeks and weeks until you finally sell the home and get one (hopefully) big payday.

• Analytical skills – You must be able to determine the current value, after-repair value, and repair costs relating to the property in order to be successful in this business.

• Liability – There is a certain amount of liability relating to fixing anything. As long as the

• Many cities require that at least some of the repairs, such as plumbing and electrical repairs,

Other:

be done by a licensed contractor only. • Time-intensive – It depends. You can be a part-time rehabber or a full-time rehabber. Typically this is fairly time-intensive unless you hire a general contractor and turn the project over to him; then you simply spend your time (and more money) managing them. If you get the wrong guy, you’ll feel like you are paying him so you can babysit him.

and the like. Most people learn about how to do these things by taking special courses. You can also find out some more about some of them by attending your local REIA meeting.

• Cash-intensive – As noted above, this is one of the most cashintensive areas of real estate. It takes money to purchase the home, do the repairs, pay the utilities, and pay insurance/ taxes/mortgage. • Tools – Don’t forget that if you’re going to do some of the work yourself, you’ll need money for tools, equipment and maintenance. • Creative buying and selling – You can use all kinds of techniques to buy and sell houses. We would need a whole new report to deal with all of these techniques. The “short version” on creative transactions includes subjects such as financing, short sales, partnering, buying on lease option or land contract, seller financing,

Discounted Notes and Mortgages Description: • This real estate-related business is often referred to as “buying paper.” Someone who specializes in discounted mortgages purchases an income stream, such ...continued on page 22

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Rental Housing Journal Metro • June 2015

RENTAL HOUSING JOURNAL METRO

What's In It For Me? ...continued from page 21 as monthly payments on a promissory note (secured by a mortgage) for less than it is “worth.” Folks who cannot or will not learn to use a financial calculator (or certain types of financial software) need to run from this one. This is a real estaterelated business/investment that requires a lot of “savvy” and is best left to those at the advanced level.

Pros • No landlording – You are concerned with your Return on Investment (ROI) and how secure your investment is (determined by Loan-to-Value, appraisals, inspections, evaluation of the borrower, etc.). • Moderate time involvement – Most of your time is spent at the beginning of the investment doing the due diligence and analysis necessary to determine if this is a transaction in which you want to be involved. • Secure – If you do your homework correctly, this should be a very secure way of obtaining an excellent return on your money. It is secure because the income stream should be secured by appropriately evaluated real estate. • Minimal hassles – You are

primarily in the business of analyzing notes to be purchased and in managing your portfolio of already purchased notes, including making sure that payments are being received as agreed.

enough to purchase a home, fix it up, and repay the loan. Folks involved in this type of lending business are normally very experienced members of the advanced group who have made some money in real estate and are diversifying by becoming lenders.

discounting notes. Moreover, you need to evaluate the person who originally borrowed the money and whose name is on the note.

Cons: • Cash-intensive? – This may or may not be a cash-intensive business. It is cash-intensive if you are using your own money, because you can buy only as many loans as you have money to purchase. There are ways to do this without your own money, but that is for an advanced class, not this report. • Bankruptcy and foreclosure – One downside of discounted mortgages occurs when the borrower doesn’t pay and/or declares bankruptcy. You may be forced to foreclose on the property and take it back. Ouch.

Skills needed: • Analytical skills – Much of the analysis or “due diligence” required for deciding whether to buy a note resembles that of purchasing a property. You need to determine what the property that is securing the note is worth. Additionally, you need to learn the ins/outs of the “time value of money” and the process of

Pros:

Private Money or Hard Money Lender Description: • A private money lender or hard money lender is an individual who lends money to real estate investors. Instead of borrowing money from a bank and having to jump through the hoops that they require, it often is much easier and faster to use private money lender. The most common customer of the hard money lender in real estate is probably the rehabber who borrows money just long

• Higher ROI – If you have money to lend and are willing to do some of the “due diligence” needed when lending someone money, this may be a good niche for you. It is not uncommon to earn higher interest rates than the bank gets when lending money to investors. • No landlording – You are concerned with your Return on Investment (ROI) and how secure your investment is (determined by Loan-to-Value, your own appraisal and inspection, etc.). • Moderate time investment – Your time is primarily spent at the beginning of the investment doing the due diligence and analysis necessary to determine if this is a transaction in which you want to be involved. • Secure – If you do your homework correctly, this should be a very secure way of obtaining an ...continued on page 23

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What's In It For Me? ...continued from page 22 excellent return on your money. The income stream should be secured by real estate that you feel comfortable owning for the amount you lend the borrower. If the borrower doesn’t pay, you’ll probably foreclose, take the house, and be the new owner. • Minimal hassles – You are primarily in the business of analyzing the loan, managing your portfolio of loans, and making sure that payments are being received as agreed.

Cons: • Cash-intensive – You can only loan out money you have available. • Bankruptcy and foreclosure – As with discounted mortgages, the downside of lending people money is what happens if the borrower doesn’t pay and/or declares bankruptcy. This is typically a long and expensive process.

Skills needed: • Analytical skills – Much of the analysis or “due diligence” required for deciding whether to buy a note resembles that of purchasing a property. You need to determine what the property that is securing the loan is worth, in both its current state and its after-repair state.

Conclusion As you can see, there are many areas of real estate in which you can get involved. Some areas are better for beginners; others are best left for those who have lots of experience. In any case, there is much room in this field for you to involve yourself on a full- or part-time basis. If you are interested in learning more about the real estate business or investing in real estate, we would like to invite you to attend the Real Estate Investors Association in your area. Local REIA groups offer education, networking, and more at their monthly meetings. Our members have varied levels of experience so you can feel comfortable and get the support you need; many members have decades of experience, and many of our other members are just exploring whether real estate is something they want to do. Find a local group at www. nationalreia.com.

Summer Maintenance Checklist In summer, complete the following projects to keep the rental property landscape lush and the home cool for your tenants. Outdoor Tasks: • Walk around the property’s exterior and open or uncover foundation vents. • Uncover central air conditioner and install window air conditioners. • Pressure wash siding and fences. • Pressure wash sidewalks and patios. Repair and seal cracks in walkways, driveways, patios, etc. • Touch up peeling or damaged paint. • Check exterior caulking and apply caulk as needed. • Wash exterior windows. • Remove lint from dryer exhaust vent with a long, flexible brush. • Clean the swimming pool or spa. Fix cracked tiles and any safety or structural concerns. Ensure any fence around the pool is secure and the gate has a working latch or lock. • Turn on the sprinkler system and check for leaks. • Open or remove storm windows.

Katie Poole–Hussa is a Licensed Property Manager in the State of Oregon, Continuing Education Provider, Chair of the Education Committee for the RHA Oregon, and Principal at Smart Property Management in Portland, OR. She can be reached with questions or comments at katiepoolehussa@hotmail.com.

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