Rental Housing Journal Metro November 2015 by Professional Publishing, Inc

Rental Housing Journal Metro

November 2015

3. Americans Think Homeownership is a Sound Investment

6. Ask the Secret Shopper

4. 9 Tips For Getting Started in Real Estate Investing

9. Selecting a Contractor

13. Find Your Life Path and Navigate it Carefully

10. Transitioning from T12 to T8, T5 or LED Lighting for Commercial Buildings

17. Portland City Council Acts to Stall Evictions and Rent Increases

5. Our Voice Can Be a Call to Make Changes

www.rentalhousingjournal.com • Professional Publishing, Inc

15. Is It Really Rent Control?

Portland/Vancouver

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

Five Real Estate Investing Fundamentals By – Jeff Watson, The Jeffery S. Watson Law Firm LTD, General Counsel National REIA

ne of my favorite movie moments is when Ernest Borgnine, portraying the legendary football coach Vince Lombardi, stood in front of the world champion Green Bay Packers at the beginning of training camp and held aloft an oblong object proclaiming, “Gentlemen, this is a football.” What Vince Lombardi taught the Green Bay Packers then applies to real estate investing today.

Master The Basics Practice them over and over again. Consistently do the fundamental things that make you a successful real estate investor. Repeat Your Successes And Keep Repeating Them The vast majority of “investors” today suffer from what I call “squirrel or shiny-object syndrome.” They have a little success in one area, but then they are suddenly distracted by something else and go to another area, and then another, and then another. The bottom line is they lose their focus and intensity, and they don’t continue to practice the same thing over and over again. Let me remind you, slow and steady wins the race! Establish Your Parameters In addition to becoming good at the basics, I urge real estate investors to establish their investment parameters.

Long-term Hold Investing For Owner/Managers

he rental property investing strategy for a hold time of 15+ years is significantly different, than a short term real estate investment strategy. This is even more critical for owners who plan to do their own property management. Owning and managing a property for 1520 years is similar to raising a child, from birth through high school. Price is always important when buying any property. If you are planning to own a property for decades, do not consider purchasing a potential “problem child”, because it is cheap. Bad purchases are often made when investors feel they must purchase quickly. Adapt the motto that “I can always spend my money” and keep shopping to you find the “right” deal. Investors need to seriously consider the location, quality of construction, target tenants and financing for a long term hold rental property:

Location Properties should be located within 30 minutes of where you reside. Anything longer than an hour round trip drive will become cumbersome over time. It is al-

priced at a lower capitalization rate, than rental properties in less desirable areas. Over time, the quality of tenant, ease of leasing, and appreciation potential will compensate for the initial lower return. Buying in a neighborhood, that you feel may decline, is a big mistake. You can change many things about a property, but you cannot change its location.

...continued on page 8

Are You Leaving Money on the Table? By Cliff Hockley CCIM President, Bluestone & Hockley Real Estate Services

ost real estate investors tend to operate their properties with a • What kind of investments or deals do simple rule in mind: If money you want to do? Are you going to do appears in their checking account by the loans? Are you going to use options? end of the month, their property is healthy. Are you going to buy rentals or tax liens? As long as they see the same amount every Are you going to invest in commercial month they’re happy. properties? Pick two or three (no more However this rule inevitably leaves than that) of these things and get very money on the table. Sophisticated invesgood at doing them. Do them over and tors know that they need to plan for their properties to be successfully operated. ...continued on page 8 They need to buy the right property and Professional Publishing Inc., PO Box 6244 Beaverton, OR 97007

ways a wise idea to geographically diversify your rental portfolio. Therefore, owning properties in different neighborhoods. Within 30 minutes of your home, is preferable to owning all your properties, in one neighborhood. Target property purchases in desirable residential neighborhoods with a low percentage of rental properties. Initially, the annual cash and cash return will probably be less, than what could be bought in less desirable locations. Rental properties in more desirable locations usually are

PRSRT STD US Postage PAID Portland, OR Permit #5460

operate it with a vision in mind. That vision should include an annual focus on rent increases and tenant relations.

Rent Increases Residential: Multifamily or single family investors have the opportunity to increase rental income at least once a year through the annual budgeting process.

This process starts with an annual inspection, followed by a local area renewal rate review (rental comparison survey). Keeping your property well maintained is the key to managing long term rental increases. Tenants will not be as hesitant to pay more if you treat them with re...continued on page 12

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Rental Housing Journal Metro

Rental Housing Journal Metro 路 November 2015

Rental Housing Journal Metro

Americans Think Homeownership is a Sound Investment

vast majority of Americans believe that buying a home is a solid financial decision, and most believe they could sell their home for at least its initial purchase price, according to a new survey from the National Association of Realtors®. The 2015 National Housing Pulse Survey also found that a preponderance of Americans think that now is a good time to buy a home. The survey, which measures consumers’ attitudes and concerns about housing issues in the nation’s 50 largest metro-

politan statistical areas, found that more than eight in 10 Americans believe that purchasing a home is a good financial decision, and 68 percent believe that now is a good time to buy a home. Seventy-one percent believe they could sell their house for what they paid for it, a jump of 16 percentage points from 2013. When asked for reasons about why homeownership matters to them, respondents’ answers did not change significantly from past years. Building equity, wanting a stable and safe environment,

and having the freedom to choose their neighborhood remain the top three reasons to own a home. “Homeownership is part of the American Dream, and this survey proves that dream is alive and thriving in our communities,” said NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark. “Realtors® believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream in a safe, responsible

Did You Know? The City of Portland recently passed a 90 90-day notice 90-day period for End of Tenancy notices AND for notices of rent increase that’ that’s more than 5%. This change goes into effect on November 13th. The Multifamily NW forms collection is prepared for this sudden law change and has made necessary legal edits to several forms and created the new Portland End of Tenancy Notice, #M049.

way, which is why NAR advocates homeownership issues and educating potential buyers about achieving their property investment goals.” The number of renters who are now thinking about purchasing a home has increased since the last survey in 2013, up from 36 percent to 39 percent. Sixty-one percent of renters stated that owning a home is a priority for their future. According to the survey, 80 percent of respondents believe that pre-purchase counseling programs and classes are very or somewhat important. Forty-five percent of homeowners who said they did not take a counseling program, reported they would have taken part in one had it been easily available to them. Attitudes about the housing market have improved in recent years. Forty-nine percent of respondents indicated that they feel activity in the housing market has increased in the past year, compared to 44 percent in 2013 and 12 percent in 2011. Eight-nine percent expect home sales in their area to either increase or remain the same. Concern about foreclosures has also declined, with only 15 percent of respondents indicating that foreclosure is a major concern. In addition to improved attitudes about the housing market, survey participants also showed an improved outlook regarding the economy. Only 36 percent think that job layoffs and unemployment are a ...continued on page 7

Changes were also made to the Notice of Rent Increase #M011, the Renewal Offer #M065, the Resident Resident’s 30 Resident’s 30-day Notice to Vacate #M014 and the standard 30-day End of Tenancy Notice #M019. Additionally, the Rental Agreement forms, both standard #M001 and the Single-Family #M201 are Single-Family Single updated for the Portland law changes. However, these forms will update again in January 2016 with legal changes from this year year’s legislative year’s session.

Visit MultifamilyNW.org to get the forms you need. 16083 SW Upper Boones Ferry Road Suite 105 Tigard, OR 97224 503-213-1281 Fax 503-213-1288 info@multifamilynw.org Rental Housing Journal Metro · November 2015

Rental Housing Journal Metro

9 Tips for Getting Started in Real Estate Investing By JC Underwood, Crown Properties

reat This As A Business One of the biggest mistakes I see new investors make is to treat real estate investing as a hobby instead of a profession. If you’re counting on real estate investing to provide income now and retirement income later you must treat it like a business. Real estate investing is now your profession. Treat it like one. By that I mean you have to advertise, devote time to it, show up for appointments on time, act professionally, do your paperwork properly and treat your clients professionally. Most real estate investing isn’t passive. Unless you are a private lender most investing takes real work. Even a landlord using a property manager has work at the outset and should continue to remain active in oversight. This is not a get-rich-quick scheme. It takes time to build client lists, credibility, partnerships and associations. A well-grounded business is built over time unlike “overnight sensations.” It will take you 3 to 5 years to become a real success in this field.

Learn About The Business and Stay Informed “If you think education is expensive, try ignorance.” Derek Bok

You can lose more money with a mistake than you can learning how to avoid one. Even if you have been at this business for years, you need to keep up with current trends and laws. You never get to the point where you know it all or even know “enough”. Some investors honestly believe that there is nothing else that they really need to know to be successful, then a law changes, the market turns, or a new strategy begins to be used. They either miss changes coming in their community that will majorly effect their profits, put themselves in a position of huge liability, or miss out on time and money saving

tips because they just didn’t take time to stay informed. In the real estate business, like everywhere else, knowledge is power and for investors it’s profit too.

There Are Many Profitable Strategies In Real Estate Most new investors get into real estate investing after hearing about one specific strategy. They have a friend or family member that has participated in real estate, they saw a TV show or infomercial or they went to their first REIA meeting and heard a charismatic speaker that made

them want to pursue a specific investing strategy. They begin to invest using that strategy because they are drawn to the certainty and proven success of the individual that is in front of them. After the new investor has any success with one strategy they often develop the idea that other strategies are less profitable, more difficult to execute, and generally inferior to the one they are using. Suddenly they develop a certainty that their particular strategy is the supreme strategy so there is no earthly reason to even consider anything else. Following a one particular strategy as a beginning investor can be extremely valuable for the overwhelmed new investor since it allows him to really, really learn how a particular technique works. The downside of being so narrowly focused is that it limits the new investor’s opportunities. If you believe that your investing strategy is the only strategy worth pursing, to the exclusion of all others, you will have a narrow viewpoint of what a “good” deal is, and pass up a lot of opportunities to profit with another strategy. Don’t get so stuck in a mindset that you can’t even see good deals if they are out of your comfort zone. That being

...continued on page 7

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Rental Housing Journal Metro · November 2015

President: John Sage • President Elect: Ron Garcia | Past President: Elizabeth Carpenter Secretary: Lynne Whitney | Treasurer: Elaine Elsea | Oﬃce Manager: Cari Pierce

John Sage, RHA Oregon President

Our Voice Can Be a Call to Make Changes

have been privileged in my time as president of RHA Oregon to work with some very dedicated and caring property owners. They not only take great care of their units, but of their tenants. They make difficult decisions on how to operate their businesses and how to deal with difficult choices when it comes to their tenants. Some would have you think that they view their tenants as ATM’s. That their only focus is to see how much they can squeeze out of them in the name of profit for themselves. If you believe this, then you haven’t really gotten to know these people. The RHA Oregon office receives calls every day from property owners wanting to know if they are doing the right thing when it comes to evicting a tenant or raising the rent or any other myriad of complicated choices that have to be made when you own rentals. I have experienced what it is like to make a difficult choice when it comes to how to handle a tenant. In the past I have worked with a property owner who was being sued because of a choice that he had made to advise a prospective tenant on which unit to pick. He was concerned about their small children possibly falling out of a second story window. So he advised the tenant to take the first floor unit. Was this the right thing to do? From a humane perspective, I would have to say “Yes”. I would have a hard time looking at this as something that he did out of anything other than concern

for a child. However, we all know that this is called steering according to fair housing law and thus he was sued for doing so. I didn’t bring up this point to have a discussion about Fair Housing. We at RHA Oregon support and train on Fair Housing. The reason that I bring this up is to show the caliber of the property owners that I work with all the time. They care about their communities and the people that are in them. They serve on the boards of non-profits and as you know they donate time, money and of themselves to organizations like RHA Oregon, JOIN, and numerous others. Our late Vice President Robin Lashbaugh was always reminding us to gather coats and socks and other articles of clothing for the homeless. He would then gather them up and deliver them to a shelter. Property owners are not the “Bad Guys”, greedy and only looking out for themselves as some would have you believe. I, myself, am tired of being

portrayed in the media as such when we all know better. Property owners (landlords) are hoping to find the same thing that we all want. Good neighbors that care about the area and home that they live in, have a good sense of community and want to see that everyone benefits and prospers. Pretty simple really!! On October 14, 2015 the City of Portland city council voted unanimously to amend City Ordinance 187380; this new regulations requires landlords increasing rent by more than 5% in a 12-month period or choosing to terminate tenancies for no cause must give a 90-day notice to tenants. This new regulation goes into effect November 13, 2015. Will the changes that were recently approved by the Portland City Council be a solution or even a step in the right direction for creating more affordable housing? What will be the long term effects of their short term changes? Why wasn’t something be-

10520 NE Weidler, Portland, OR 97220 (503) 254-4723 • Fax (503) 254-4821 info@rhaoregon.com • www.rhaoregon.org

ing done about the shortage of affordable housing long before it became a “crisis”? These are the questions that I have heard asked and have myself been asking for some time now. Vice President of RHA Oregon Phil Owen and lobbyist Cindy Robert, asked the same things of the Portland City Council when they went to the council meeting to testify on behalf of property owners. I really appreciate them taking the time to go to the council meeting and listen to the boo’s and scorn from the tenant advocates that were there. Thank you Phil and Cindy!!! We need to keep asking these questions and watching what is going on with housVALLEY, METRO, ARIZONA ing in Portland. RHA Oregon is watching what is happening in the rental industry and listening to the conversations at City Halls and the State legislature. As an organization our voice can be a call to make changes that are in the interest of all concerned. So I urge you to get involved, pay attention to the choices being made by our local and state government that affect our industry. Watch the emails, alerts and newsletters for information and calls to action from RHA Oregon.

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SK THE SECRET SHOPPER

vailable for a limited time! Only one of its kind! Offer expires at midnight! These and similar phrases are used to make people “spring boldly into action.” They conjure up images of people rushing into department stores and retail outlets to take advantage of incredible offers on quality merchandise, especially during the holiday season. The advertisers and merchandisers are trying to create a sense of urgency in the minds of their customers; which will motivate them to take immediate action. They are in the “sales” business and want the customer to immediately purchase a product and part with some of their money! You may not have to meet monthly or quarterly sales “quotas,” but undoubtedly you have specific occupancy standards which must be met and maintained. Therefore, you need to rent a certain number of apartments each day, week or month to achieve the goals set for your community. It’s no secret that in the Pacific Northwest, many prospective renters decide to hibernate for the winter and dig in their heels until after the holidays. The phone isn’t ringing off the hook like it was in July, and the few people who are moving, may or may not make it to your community before they decide to rent somewhere else first. A vacant apartment today, could be “ringing in the New Year” with you on January 1st. The Secret Shopper phoned three communities, looking for immediate

availability. Each leasing person seemed interested in helping me, but only one motivated me to visit. My first call was answered promptly by a friendly voice. I stated that I was new to the area and needed to find a place right away. The consultant asked where I was moving from and what was bringing me to the area. She then asked for my name and began to inquire about the specific needs and requirements I had. It was a pleasant exchange that went on for several minutes. Once the consultant learned what was important to me, she began to talk about various openings. She said that I had called at a good time because there were a couple of great apartments to choose from. The consultant invited me to visit and told me the office hours. She said, “If I’m not here, anyone in the office can help you.” She gave me directions and closed with, “I hope to see you soon.” The next call I made was answered with a great deal of enthusiasm. The consultant asked for my name right away, and I could hear the smile in her voice as she spoke and offered her assistance. I explained that I was new to the area and needed to find a place to live right away. The consultant asked questions to determine my needs and find out what was important to me. She told me there were only two apartments available, and briefly described the positive attributes of each one. She asked when I would like to come by, and we discussed the driving distance and the fact that it was raining. The consultant said,

“It’s been kind of slow today because of the weather. If you want to wait and come by tomorrow, I’m sure the apartments will still be available.” I said, “I think I’ll do that.” The consultant said, “Great! I’ll see you tomorrow!” My final call was met with an energetic greeting and an immediate offer of help. When the consultant learned that I needed an apartment immediately, she said, “Well, you better get right over here because I only have one left!” I laughed and asked if she could tell me a little bit about it first. The consultant described the apartment interior, as well as the view. She explained that the “view apartments” don’t open up very often, and said this one was especially nice because of its southwestern exposure. The consultant said she had a model to show, and she could take me by the location of the apartment for rent. She told me they were still getting it ready, but that I could move into it by the week-end. Th e consultant asked if I had time to come over right now. She said she had another appointment in an hour and if I waited, the upcoming apartment would probably be gone. I agreed to come over within the next twenty minutes. The consultant then gave directions carefully, since I had stated I was new to the area, and said, “Call me if you get lost.” Before we hung up, she asked for my number to be able to check back with me if I didn’t make it by. The consultant thanked me for calling and ended with, “I look forward to meeting

you. I’ll see you when you get here.” What are you doing to create URGENCY when the telephone rings at your community? How do you convince the caller that what you have to offer is worth their time and consideration? Your community may be just one of a dozen competing for their attention. Why should they visit YOUR place, and why should they DO IT NOW? Is there something about your apartments or community that stands out from all the rest? Could it be a unique floor plan or desirable location? What about the easy access to area conveniences or your sensational staff ? Whatever it is, use it to create urgency to get your callers to visit TODAY! Tomorrow is TOO LATE! By then, they will have already rented from the leasing consultant who invited them to visit YESTERDAY! 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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Rental Housing Journal Metro · November 2015

Rental Housing Journal Metro

9 Tips for Real Estate Investing ...continued from page 4 said. You can’t try to participate in a dozen strategies at once…see number 4.

Surround Yourself With Like-Minded People Real estate investing can be “creative” and a bit non-traditional, which means that this profession won’t appear on the Forbes top 100 professions. Because those participating in real estate often do so by working for a corporation or as a realtor, investing as an independent isn’t a main stream career choice. Thus, most people you speak with will tell you it won’t work. Some of your friends might even ask if you bought a course from a late-night television “guru.” They may even laugh and call you “gullible.” Attorneys and other professionals may denounce it because it sounds unusual. Keep in mind that these people are either threatened by their own lack of success or are looking to protect their own butts. The first thing you should do is join a local real estate association connected to National REIA. These associations will help you keep your thoughts in the right place and prove to you that investing with a plan really does work. You will be connected to investors that have had great successes, those that can share what they learned from their not so successful deals, and to those who are just starting in the business just like you.

Have A Plan All businesses need a game plan. You can’t just wander aimlessly hoping to find a deal. You also can’t rent an office, decorate it and then sit behind your desk waiting for the phone to ring. It just doesn’t happen that way. You need to decide upon a strategy, learn what you need to do, set your goals and make it happen! Have a plan. Pass out 50 business card

Be Persistent Anyone who’s ever been in sales will tell you that being persistent is the key to success. Just because a person says “No” to an offer the first time doesn’t mean that’s the final answer. Waiting a couple

a week (or whatever goal you decide is appropriate for the amount of business you want to generate). Talk to 50 people by phone. Make 10 offers a week, spend $100 a month on advertising – whatever your goal is, make it happen every single week – day in and day out – work the market. Eventually you will start to see results.

of weeks and checking back to see if the ...continued on page 11

Americans Think Homeownership ...continued from page 3

big problem, a substantial drop from 45 percent in 2013. Perceived obstacles to homeownership have remained mostly unchanged compared to recent years; 78 percent of respondents point to college debt and student loans as the main obstacle to making a home purchase affordable. Seventy-six percent of participants said they have a full-time job but still did not make enough money to purchase a home. Seventy-four percent believe they do not have enough money for a down payment and closing costs. As the market has improved, concern about the cost of housing has increased. Two-thirds of survey participants said that home prices are more expensive than they were a year ago. There is additional concern over the lack of available housing; 41 percent said the lack of affordable homes is either a very big or fairly big problem in their area, an increase of 9 percent points from 2013. For adult millennials under the age of 35, the burden of student debt is their chief concern, with 86 percent of respondents naming college debt as an obstacle to homeownership. Over half reported that their housing costs are a financial

strain on their budget, 65 percent are concerned about high rental prices, and 60 percent are concerned about high home prices. However, millennials tend to have a more upbeat and positive view about the future of the nation than older Americans, with 42 percent of millennials saying that the country is headed in the right direction compared to only 20 percent among those aged 50 and older. The 2015 National Housing Pulse Survey is conducted by American Strategies and Myers Research & Strategic Services for NAR’s Housing Opportunity Program. The telephone survey polled 1,000 adults nationwide in the 50 most populous metropolitan statistical areas. An additional 250 interviews were conducted with millennial adults (born after 1981) from the same geography. The study has a margin of error of plus or minus 3.1 percentage points. The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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Long-Term Hold Investing ...continued from page 1 Quality of Construction Properties that are built in quality materials and workmanship tolerate the abuse of tenants, time and the elements much better, than marginally constructed properties. Tile, metal or shingle roofs last longer and require less maintenance than flat roofs. Copper plumbing is preferred to galvanized plumbing. Tenants damage themselves, rather than interior walls, when they punch a plaster wall. Solid wood cabinets will last decades longer than press-board or veneer cabinets. Even if you intend to remodel a property, choose one that has good “bones”. Target Tenant When you preview properties, form a realistic mental picture of who would be a potential tenant(s) for that property. Is it located near a college or a senior center? Is there a major employer or a hospital nearby? Does the rental have a private outdoor patio? Covered or enclosed parking for a newer car? With the number and size of bedrooms, how many people could realistically live in the space long term? What does the property lack, that the potential tenant might desire? Now that you have formulated a mental picture of your tenant(s), think how it would be interacting with that tenant(s), or a succession or variation of that tenant(s), for the next 18 years. If the mental picture you are formulating is not pleasant, keep shopping for the right property. Financing Investor loans are fi xed rate amortized loans, up to 30 years, for 1-4 family

properties. When you purchase 5 unit or

larger properties, it is considered a commercial loan. Institutional lenders fi x the interest rate for 3-10 years, and then it is variable or renegotiable, on commercial loans. Sometimes you can find a fi xed 15 year fully amortized commercial loan. If you are going to hold a property long term with a commercial loan, develop a game plan for dealing with interest rate adjustments or renegotiation, before purchasing. Formulating a long term rental property real estate investment strategy involves more than analyzing the numbers on paper. Location will be a huge factor in future appreciation and convenience of management. Quality of construction will determine long term maintenance and capital expenditures. If you self manage your properties, the tenants you choose and your relationship with those tenants, will contribute or detract from your quality of life, for decades. Securing stable long term financing, while interest rates are historically low, will insure strong cash flows until the properties are paid off. Incorporate the importance of location, quality of construction, target tenants and financing strategy into your long term invest portfolio strategy. Jade Bossert is a licensed Real Estate Broker in Tucson, Arizona that specializes in multifamily property sales. She has been successfully selling real estate in Arizona for over 35 years. She can be contacted at 520-797-6900 or tucsonrealestate@ mindspring.com.

5 Real Estate Investing Fundamentals...continued from page 1 over again. • Determine what you are looking for in each of your potential investments.

These are just some of the parameters you need to establish for yourself. There is no one book, manual or class where you can learn all this information. No, it requires your spending some time working on what you think is best for you. That means you may have to do one of those activities in which investors should engage on a regular basis but often don’t – think and plan. As you think and plan, you will be able to clearly define your investment parameters in a way that you can clearly communicate with others who may want to do business with you.

Do Your Essential Due Diligence Another key component of real estate investing involves your due diligence process. There are two very crucial questions to be asked at the beginning: • Who is involved? • How much capital per investment are you willing to put at risk? • How much time will you put into this investment? • What is the length of time you want your capital to be out working? • What is the projected rate of return you are seeking? • What is the minimum rate of return you want from your cash and/or time in each of your investments? When I say “rate of return,” I’m not just talking about an interest rate. • Do you want your investments to result in your receiving monthly income payments, either interest only or something else, so each investment is generating a monthly cash flow to you?

• How are they involved? Allow me to explain why these questions are so important. It doesn’t matter how papered-up or how careful your lawyer is when drafting the agreements. If the person on the other side is a person of weak or poor character whom you know has a tendency not to honor their word, it will not be a good deal. You want to be in a situation where someone you know who has very high character and is a capable investor is involved in the transaction. You still need to know HOW they are involved. Are they going to be involved in a way that will make sure the deal goes well, or are they just on the periphery and their ...continued on page 19

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Rental Housing Journal Metro · November 2015

Selecting a Contractor

Rental Housing Journal Metro

Tia Politi, is the Lead Property Manager for Acorn Property Management, ROA Board Member, and the co-owner of five rental properties.

s renovation season approaches, you may be planning projects for your rental properties. How can you know you’re hiring an honest, competent person who is capable of performing an effective repair or upgrade at a reasonable price in a timely manner? Many people hire contractors without fully screening them and pay the price in poor quality work, high prices, and projects that go on far beyond the promised end date. One of the best ways to locate a good contractor is a referral from someone you know and trust. Ask around, and read the endorsements in the ROA bulletin. Of course, you can always ask prospective contractors for referrals from past clients. Even though they will only give you the good ones, you can gain useful information if you ask the right questions. Did the contractor begin the job when promised, or were there excuses? Was their bid accurate, or did costs get added on and if so, were they reasonable? Did they clean up after themselves daily and when the job was complete? Was the job completed to their satisfaction? Did they finish on time? When you seek bids from contractors, the more detailed the bid, the better. This is the preliminary outline of your contract for services and will become very important if there ends up being a dispute about the job. Bids should include everything you can think of, including specifics about exactly what materials will be used, down to the thickness and

brand of plywood, to the size of nails, screws, etc. Remember the Chinese sheetrock used in many construction projects a while back? Turns out it was toxic. These details are very important, and if they aren’t spelled out can result in problems for you with no recourse against them, so get it all in writing. Also, who will actually be doing the work? Who will be supervising? Who will be obtaining permits and paying the costs of those? Timelines are one of the biggest sources of conflict between contractors and their customers. To be a successful contractor requires juggling multiple clients and multiple jobs. You are just one client and while they are trying to keep you happy, they are also working to keep their other clients happy. You will likely maintain a good relationship with your contractor if you accept some flexibility in the timeline, but hold them to their commitment. The squeaky wheel does get the grease. A more positive way to hold contractors accountable (and keep you from having to nag them) is by adding time incentives or penalties. That’s what government agencies do and it can help keep a project on track. For instance, the contractor may get a bonus of X number of dollars for finishing on time, but the bill is reduced by X number of dollars for each day the project runs over the contracted end date. Another useful tool in this regard is to divide their payments into thirds. One third at the beginning of

the job so that they can purchase materials and get going; another third at some specified mid-point of completion; and the final third only when every single part of the entire job is complete. When my daughter accidentally set her bedroom on fire, that’s the deal I struck with the restoration company and it came in very handy when they delayed completion, but still wanted to get paid in full. I received a bill that had late fees on it and I very politely called the contractor to inquire (and then his supervisor, when he failed to return my three phone calls). I reiterated the agreement and made it clear once again, that they would not get any part of the final payment until every last part of the job was done and they had failed to finish the trim work on the siding. Gosh darn, they finished up right away! Always keep that final payment on hold, or you will lose your leverage. A word of caution: While you as an owner are allowed to be an unlicensed individual while performing most repairs on your properties, this is not the case with hired help, nor is it the case when dealing with hazardous materials such as asbestos or lead-based paint. And ignorance of the law is no excuse! Make sure that if you are dealing with hazardous materials that your contractor has the proper certifications, such as lead-based paint certification if they are disturbing more than two square feet of paint on a property built before 1978, or are hiring a qualified company to dis-

pose of asbestos. Because in the end it’s not only the contractor can be held liable, but you as well. Fines can run into the tens of thousands of dollars. Think hiring a contractor with the proper certifications is expensive? Not hiring one can cost even more. Please refer to the Environmental Protection Agency website for more complete information about hazardous materials in renovations. www.epa.gov The Construction Contractors Board is the agency that oversees licensed contractors. On their website, you can find information on all licensed contractors in the state of Oregon, including whether or not they are licensed (Go figure, but some folks actually lie about this.); the kind of license they hold; how long they have operated under a specific license; and whether there have ever been complaints lodged against them and/ or any punitive damage awards against their company or their bond. Take a few moments and save yourself a lot of time, trouble, and money.

https://ccbed.ccb.state.or.us/ccb_ frames/consumer_info/ccb_index. htm This column offers general suggestions only and is no substitute for professional legal advice. Please consult an attorney for advice related to your specific situation.

*Complete selection of user friendly property management forms, available pre-printed or online *Effective legislative advocacy and monitoring *Networking opportunities with other local landlords, managers and other industry leaders *Educational programs and seminars on property management, landlord/tenant laws, fair housing, evictions and more

Membership Inquiries – 503-364-5468 Info@PortlandAreaROA.com www.PortlandAreaROA.com Rental Housing Journal Metro · November 2015

Rental Housing Journal Metro

Transitioning from T12 to T8, T5 or LED Lighting for Commercial Buildings By Cliff Hockley, President Bluestone & Hockley Real Estate Services

of-life at 60% of its light output, which equates to roughly 14,400 hours.

lectric lighting is responsible for over one quarter of the energy used in commercial buildings in the USA. One reason why it continues to be a major contributor to operating costs is because many commercial buildings are still equipped with T12 light bulbs. As of July 14, 2012, the U.S. no longer manufactures or imports most T12 lamps. These include most standard four foot T12 lamps, eight foot T12 lamps, and two foot T12 U lamps used in commercial buildings. The EPA recommends retrofitting all T12 fi xtures in an effort to reduce the use of mercury and fossil-based fuel, and to support this effort, utility districts have created incentive programs to encourage property owners to upgrade their lighting. T12 light bulbs can be easily retrofitted to T8 light bulbs which are smaller, use less energy, and have less mercury in them than T12 bulbs. The other alternative, not as easily retrofitted, are LED bulbs that have no mercury in them at all.

Definition of lamp types Fluorescent lights are tube shaped lamps with a chemical phosphor coating on the inside of the tube. The have small pins on each end that fit into the ballasts located in light fi xtures. T12 lamps have a diameter of 1 ½ inches (or 12/8th of an inch.) T8 lamps are fluorescent lights one inch (or 8/8ths) in diameter. T5 lamps are 5/8th in diameter. LED lights use light emitting diodes to produce light very efficiently. An electrical current passes through semiconductor material, which illuminates the tiny light sources we call LEDs. LEDs do not contain mercury.

ADVERTISE IN

Rental Housing Journal Metro

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LED replacement bulbs on the other hand, calculate the end of life at 70% which is approximately 50,000 hours. In order to keep up with LED, you will have to replace the T8 bulbs 3.5 times. LED Replacement No Mercury

Bulbs

Have

One of the most important differences lies in the fact that there is no Mercury or Glass Content with LED lighting.

Eﬃciency The smaller the lamps the more energy efficient they are. T8 bulbs use about 35% less electricity to produce the same amount of light as a T12. T5 bulbs use about 45% less energy than T12s. For some applications, one T5 bulb can replace two T12 bulbs, providing even greater energy savings (a process called “de-lamping.”) The process, however, can be more complex than plugging in a new bulb. Older bulbs, like T12s, used magnetic ballasts while newer, more efficient T8s and T5s use electronic ballasts. T8s can be retrofitted into T12 fi xtures. In some cases, changing to T5s requires replacing or rewiring the whole light fi xture, adding significant cost and complexity in the interest of improved efficiency. LED lighting The typical T12 four-lamp fi xture uses 172 watts of power between the lamps and ballast. LED equivalents typically use only 50 watts, 71% less energy per fi xture. Not only are they brighter per watt, they also last longer than even the preferred florescent bulbs. T8 and T5

bulbs can last up to 4 years maximum, which sounds good until you learn that LED bulbs can last up to 10 years in a new fi xture. With replacement lights, there is almost no price differential between LEDs and T5s. With the energy savings being so great the no-brainer is to go with LEDs. In a 2013 article, Michigan-based Hovey Lighting, an energy efficient commercial lighting provider, argued the advantages of retrofitting with direct replacement LEDs (where you don’t need to replace the ballast) over T8s. Here are some of their reasons: “LED Replacement Bulbs are 30% More Efficient So not only do you get more light from a LED replacement bulb, they use less wattage. LED replacement bulbs only use 22 watts vs 28-32 watts with T8 making the LED 30% more efficient. LED Still Give Off Light At End-of-Life A fluorescent bulb at the end of its life is very simple to spot, because it is DEAD, nothing left. A T8 bulb is considered end-

In the State of Washington alone, over 10 Million lamps are disposed of in landfills each year. Those 10 Million lamps hold roughly 400 lbs of toxic Mercury waste that gets deposited each year. Washington State estimates that only 2 out of 10 bulbs are effectively recycled. LED Does Not Give Oﬀ UV LED replacement bulbs do not emit any light in the non-visible light spectrum (UV). UV/IR light causes colors to fade in fabrics, signage, while also being the leading cause for eye strain and eye fatigue. Fluorescent T8 bulbs emit UV/IR light. LED Makes More Eﬃcient

Air

Conditioning

LED fixtures contribute little to none in regards to heat gain in a room or air conditioned space. The LED generates less heat. Less heat means that the Air Conditioning system does not have to work as hard. This is vitally important if you are doing a new build or upgrade as you may be able to utilize smaller A/C systems to heat the same area. LED Provides 70% More Light ...conintued on page 11

Order Your Free Recycling Resources Now! Making sure resident garbage and recycling is properly disposed of can be a big challenge. When it’s not, you’re left with a mess that costs time and money to fix. The good news: our free tools and resources help ensure your residents know how to handle recycling and garbage the right way. We can help you prevent mistakes before they happen at your multifamily property.

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Rental Housing Journal Metro · November 2015

Rental Housing Journal Metro

Transitioning from T12 to T8 The beam angle of the LED replacement bulb is 110 degrees. This means that all of the light generated by the LED bulb is focused in the 110 degree area. The T8 bulb on the other has a beam angle of 360 degrees. That means the majority of the light generated by the T8 bulb is going out the sides and top of the bulb, which does not benefit the intended target.” This may lead you to consider retrofitting your commercial building to save energy. But is the initial investment worth it? In our oﬃce building the owner sends a technician to replace burnt out light bulbs monthly. At the very least, the longevity of LEDs would save this labor cost.

Retrofitting The decision to retrofit a building can be a difficult and potentially expensive one, but many resources are available to help. In the Portland, Oregon / Vancouver, Washington metro area companies like Pacific Lamp Wholesale, Phoenix Electric and Pacific Energy Concepts lead the way in energy retrofits. They conduct a lighting retrofit analysis, draft an implementation plan and introduce owners to the applicable cash incentive programs offered by the Energy Trust of Oregon (or the local electricity supplier / utility district). These programs change all of the time and need to be reviewed at the time that you are ready to make a retrofit decision. There are currently no federal or state tax credits available for commercial building retrofits.

...continued from page 10

Recycling old lamps As previously mentioned, all fluorescent lights contain mercury, and the ballasts for old long-tube lights contain PCBs, so when you do decide to discard your old fluorescents, remember to recycle rather than tossing them in the trash. For large retrofits, the company you contract with will most likely dispose of the old lamps, but for smaller jobs, many local governments and commercial retailers offer no cost recycling drop-offs. Among the larger retailers, Home Depot, IKEA, and Orchards Supply Hardware offer fluorescent recycling. Another option is your city’s hazardous waste facility. It makes total sense to retrofit buildings and even portions of buildings when you are leasing to a new tenant so you can include it in a tenant improvement plan. Retrofitting the lighting in commercial buildings is a logical step since it saves you money on your electrical bill while improving the lighting. You use less electricity and it makes your building more attractive to lease and easer to work within. So consider retrofitting your lighting as you make decisions to update your commercial building, especially when you are moving in new tenants. Tie the cost to your tenant improvement package.

9 Tips For Real Estate Investing

...continued from page 7

situation has changed can make all the difference, or changing the terms of the offer slightly to accommodate the seller can jump start negotiations. Have a good follow-up system for tracking contacts, leads and conversations you’ve had with both buyers and sellers. You’ll get to the point where you’re so busy you can’t possibly remember all the conversations you’ve had with everyone – it’s important to be able to pull up that information so you know where you are in the negotiation process. Anyone who has ever been in sales will tell you that few deals are ever made on the first try. Use a system that allows you to schedule follow ups and keep a running history of calls and conversations. One of the National REIA benefits is a huge discount on Realeflow, but you could also use ACT by Sage, an Outlook or Gmail plug-in or one of hundreds of apps for your phone or iPad. It doesn’t matter what soft ware you use as long as you actually use it.

of the real estate laws that will affect your business but you need an advisor who does.

Have a Team On Your Side Don’t wait until you have a big deal pending and need to ask questions before assembling a team you can turn to. You need to go out and cultivate relationships with reliable professionals you can depend on. Here’s who you need on your team: • Attorney – preferably someone who’s familiar with the needs of a real estate professional. Make sure they understand the specific real estate strategy that you are using and that they’ve had some experience in that specific strategy. You don’t need to know all

• Insurance Agent – you need one that also understands your strategy and investors in general. Make sure

the insurance products they sell are right for investors. We have needs that are far different than your average home owner.

• CPA or Accountant – find one that’s a real estate investor – they’ll know the ins and outs of the business and when to be aggressive. You can lose $1,000s in deductions and tax breaks without a professional that knows the most up to date tax law as it applies specifically for investors. • Contractor – you need a reliable pro...conintued on page 16

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Rental Housing Journal Metro

Are You Leaving Money ...continued from page 1 spect and keep the property looking well maintained. A clean property with great looking landscaping, a current paint job without any mold or a refinished roof will net you more rent. Yes, it will cost more to maintain, but in my opinion the payback will be in the form of higher rent, longer tenancies and lower turnover costs. Don’t forget, tenants want to be appreciated just like you do. If you have a property manager you work with, have them help you draft an annual budget and forecast the annual increases. Think into the future; plan your rent increases and capital expenses two to three years ahead so you can better control your long term destiny.

Commercial: Owners of office, retail or industrial buildings need to think through the same process. They need to develop a plan that lasts through the initial lease term and includes details regarding the tenant’s options to renew, (since commercial tenants tends to stay for 3-10 years, even more planning is involved in controlling the costs and the rental increases). Annually, property owners need to review the comparative position of their property. They need to be realistic regarding the value of their real estate. Just as with residential investments, they must consider the condition and location of their investment. Commercial landlords need to have a long term plan in place that keeps rent increasing on an annual basis

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12 Units $515,000 $515,000 ‐‐ 12 Units

If you make a concession regarding a starting rent to get a tenant in, plan to step it up to market value within three years. Aim for a minimum of 21/2 % to 3% in annual increases based off the pre-negotiated step increase or percentages that increase on the basis of a business’ success (typically used by retail businesses). I am not a huge fan of CPI (consumer price index) increases because the government has too much control of those numbers. Don’t permit expense caps unless you can stay ahead of the expenses, regardless of the caps. Landlords and their property managers should not automatically cave into very low or zero rent increases at lease renewal time, even if the tenant threatens to move out. Run realistic scenarios regarding the cost of re-tenanting. Include vacancy rates, leasing commissions and tenant improvements in these calculated scenarios. Consider also, the moving costs an existing tenant will face. Understand their business and business goals, their staffing and their success at your location. Most importantly while they are renting from you, fix repairs that are required by your lease, and fix them quickly. Show your tenants you appreciate them by treating them how you would want to be treated, otherwise they will blame you and possibly hold back rental payments, do the repairs themselves or, worse yet, move out. We once had a client who took two months to repair the air conditioning units on a newly leased space. It was wintertime and it was raining; the tenant

was livid and hired an attorney to preserve their rights under their lease. The landlord wanted absolutely the lowest price for the repairs and getting the lowest price took over 30 days of negotiating with vendors. The tenant almost moved out because it took so long, and alternative cooling systems needed to be provided. The experience drove them to become a hostile tenant. These bad feelings could have been prevented and we could have agreed on rent increases and lease renewals with this tenant if the landlord would have allowed the property manager to be more proactive. Note: Typically property managers have vendors they work with that are reasonably priced who respond quickly, but they may not be the absolute – lowest, period.

Conclusion Inevitably, attention to detail, future planning, a current understanding of the marketplace, and a fair and realistic approach to taking care of your properties will yield higher returns for real estate investors. A key component to profitability is a focus on current and future rental incomes. Sticking to the basics with an annual planning process and taking care of your tenants will increase your annual yield and keep reliable tenants in your properties.

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Rental Housing Journal Metro · November 2015

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Find Your Life Path and Navigate it Carefully

believe most people eventually arrive at a place in life where they realize that the path they’ve taken to get to their current career destination has been dotted with numerous learning opportunities. Although perhaps not fully appreciated at the time – these shaped and created the individuals they are today. In this month’s writing I rewind my own career and note a few valuable pieces of advice I have picked up along the way.

Be humble. When I graduated college I felt ready to take on…or was it “take over”...the world. It was going to be so simple to obtain gainful employment in any field of my choosing. After all I had this sacred piece of paper called a college degree. I was bulletproof, young, vibrant, and good-looking! Who would turn all that down? Well…quite a few people as it turns out. This is the season when I learned the rewards of tenacity, self-selling, and perseverance and learned how to take “no” for an answer…but the most valuable lesson was never, never, never give up! Watch your step. Understand that politics are everywhere and learning how to navigate those of the office and workplace is vital to both

become an Executive Officer and eventually you will “be” just that. Reversing the order simply does not work.

Be on time. Establish yourself as punctual and you define your image as someone who is dependable, hard working and respectful of others. This also shows self-respect and an appreciation for being organized and in-control.

smooth survival and attaining success. Navigating office politics is a learned art and takes time. Learning different personalities and how they react in different situations is essential for harmony and growth in any office setting. For effective leadership… it is essential.

outfit and carried a briefcase to the leasing office. Dressed for success, I could place myself in the mindset of achieving and “see” the next promotion in my head. It was and is powerful. What we visualize in our head subconsciously guides our actions.

Clothes make the man/woman. Dress for the next level up. When I began my career in property management back in the early 90s I started as a site manage at age 25. I was leaving the financial services field where my daily uniform was a suit and tie. This carried over to my new industry as every day I wore my same Wall Street commando

“Do” then “be”….not “be” then “do”. It is important not to get ahead of yourself. It may look quite impressive to have that corner office given to you… but remember there are steps to getting there. No shortcuts exist…and if they are taken, the stay is usually short-lived. Achieving success takes time, hard work and tenacity. “Do” the work necessary to

Stay healthy - eat right and exercise. I have always said that when you feel good you maintain a sense of having a physical edge. And when there is a physical edge, there is a mental edge. Nourishing your body and nourishing your mind with healthy choices is essential to success. Do things that make you feel good about yourself and the universe will bring good things into your life. Smile more, frown less. Develop consistency and maintain balance. Anything done to excess is potentially harmful. Seek moderation and balance in your work and home life. Obsessing about the job or personal issues can be harmful to both mental and physical health. Seek harmony through relaxation techniques. Take that vacation you need. Turn off the phone and un-plug ...continued on page 18

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Rental Housing Journal Metro · November 2015

Rental Housing Journal Metro

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Rental Housing Journal Metro · November 2015

Rental Housing Journal Metro

Is It Really Rent Control? New tenant protection ordinance passed by the Portland City Council in October of 2015

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

requirement does not apply to Rental Agreements for week-to-week tenancies or to Tenants that occupy the same Dwelling Unit as the Landlord.

n October 14, 2015 the city commissioners of the City of Portland unanimously voted to modify the laws that govern landlord / tenant relations in the City of Portland. Their stated objective was to help tenants manage the low city vacancy rates. These low vacancy rates are especially difficult for low income and disabled tenants to manage, because in order to move they need to save for moving costs, deposits and rent. Most low income tenants live from paycheck to paycheck (or public assistance check) and find it difficult to save enough money to move. To help those tenants, the city commissioners passed the following additional renter protections. • 1. They extended no cause lease terminations from 30 and/or 60 days as established in the Oregon Landlord Tenant Law to 90 days. • 2. They limited rent and/or utility increases to five (5%) percent within a 12 month period if the tenant is given less than a 90 day notice of the increase. • 3. They put teeth into the enforcement section of this ordinance, penalizing a non-compliant landlord with an amount of up to three months’ rent as well as actual damages, reasonable attorney fees and costs.

The bottom line is that the city commissioners bought tenants more time to be able to get together the funds they need to move. They also preserved the rights of landlords to pass through rent increases, albeit with a longer lead time. The major downside for landlords with this new language is that if you have a problem tenant you need out right away, you will have to use a for cause notice. I have attached the language as passed by the City of Portland and codified as section 30.01.085.

30.01.085 Portland Renter Additional Protections.

Rental Housing Journal Metro · November 2015

• A. In addition to the protections set forth in the Residential Landlord and Tenant Act, the following additional protections apply to Tenants that have a Rental Agreement for Premises covered by the Act. For purposes of this chapter, capitalized terms have the meaning set forth in the Residential Landlord and Tenant Act. • B. A Landlord may terminate a Rental Agreement without a cause specified in the Act only by delivering a written notice of termination to the Tenant of (a) not less than 90 days before the termination date designated in that notice as calculated under the Act; or (b) the time period designated in the Rental Agreement, whichever is longer. This

• C. A Landlord may not increase a Tenant’s Rent or Associated Housing Costs by 5 percent or more over a 12 month period unless the Landlord gives notice in writing to each affected Tenant: (a) at least 90 days prior to the effective date of the rent increase; or (b) the time period designated in the Rental Agreement, whichever is longer. Such notice must specify the amount of the increase, the amount of the new Rent or Associated Housing Costs and the date, as calculated under the Act, when the increase becomes effective. • D. A Landlord that fails to comply with any of the requirements set forth in this section 30.01.085 shall be liable to the Tenant for an amount up to three months’ Rent as well as actual damages, reasonable attorney fees and costs (collectively, “Damages”). Any Tenant claiming to be aggrieved by a Landlord’s noncompliance with the foregoing has a cause of action in any court of competent jurisdiction for Damages and such other remedies as may be appropriate.

Rental Housing Journal Metro

9 Tips for Real Estate Investing ...continued from page 7 fessional that shows up on time, completes the job within budget and knows how to make suggestions that will save you money. Free estimates don’t hurt either.

• Mortgage broker, private money lender, hard money lender or other money professional – find one that’s experienced with investors, knowledgeable and creative. You can never have too many people who are willing to fund your deals. • Mentor – someone who’s been there and done that. • Title or Escrow Company – find one that caters to investors. Make sure they understand double closings, land contracts, etc. Your local REIA group has local and national providers to use to build your team. These professionals work daily with investors and understand their special needs and requirements. It is a

beautiful day when you realize that you can find people to add to your team that can do all of the things in your business that you hate.

Don’t Waste Time With Unmotivated Sellers This is possibly the most common mistake new investors make. Some beginning investors waste time talking to sellers who are only marginally motivated. Even worse, they drive by the house and look for comps without even talking to the seller first. There’s a difference between being persistent with a seller or buyer who hasn’t yet made up their mind about what they want to do and dealing with a seller who really has no intention of selling anytime in the near future. Don’t waste your time if the seller falls into the latter group. Never Forget That Real Estate Is Really About People In the end real estate isn’t about the

land, the house, or even the money. On a practical note and an altruistic note, it really is all about the people. Many people go through their first years of real estate investing making all their offers based on the properties. This is a huge mistake. These investors worry about making really low offers because they are concerned that it will make them a “bad” person to “take advantage” of a seller, especially one in a tough situation. What they don’t understand is that many people will happily forgo profits if other benefits are more important to them. Some people need speed, some need ease of exit, some need someone else to blame. I’ve heard more than one investor tell a story about a seller who happily sold below market because their son, sister, nephew – pick a relation – wouldn’t pay rent or move and they honestly just wanted to sell the house and let you deal with the situation! There is a scale of client motivations, the Hustead Scale, that concisely describes the level of motivation a seller has. The most motivated sellers will pay to get out of a house. Something in their life makes being out of that property so important that they will pay you to take the property. Many investors make offer after offer, receiving rejection after rejection,

never bothering to ask the seller what they want, assuming they already know. Making offers on the properties because you think you understand the value is far less effective and far less profitable than making an offer that provides the seller an option they didn’t know existed, a solution to their problem. The moral of the story here is that if you listen, and I mean REALLY listen, and try to solve the seller’s problem you will always make more money than if you try to just apply your cookie cutter approach. Zig Ziglar used to say “You will get all you want in life, if you help enough other people get what they want.” He’s right. This business, at its core, is about people. We provide housing, we provide solutions, and sometimes most importantly, we provide options they didn’t know were available. There you have it. Follow these nine simple steps and before you know it, you’ll be an outstanding real estate investor.

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Rental Housing Journal Metro · November 2015

Rental Housing Journal Metro

Portland City Council Acts to Stall Evictions and Rent Increases

n October 14, 2015, the Portland City Council approved law changes to increase the amount of notice given to tenants for a no cause termination notice and on rent increases of 5% or more within the city of Portland. State law requires a landlord give 30 days notice when issuing a without stated cause termination notice for a tenancy less than one year, and 60 days notice to terminate a tenancy that is over one year. The new law requires a 90 day notice to terminate a tenancy for without stated cause in either situation. State law requires a landlord to give 30 days notice to increase rent in month-tomonth tenancies. The new Portland ordinance requires 90 days notice to increase rent, including associated housing costs, by 5% or more in any 12 month period. In addition, the city council discussed a proposed $25,000 tax on demolition. All changes only affect property within the city limits. Obviously, this will have some effect on how landlords and developers do business in the city of Portland. Sam Johnson, owner of Landlord Solutions Inc, a Portland based evictions service provider, has received numerous calls from concerned landlords wanting to know how this will effect them, and what they need to do to when the laws go into effect on November 13, 2015. Sam recently sat down with Portland landlord - tenant attorney Mark Passannante to discuss the matter. The fol-

MP The ordinance prohibits increases of rent and associated housing costs in any one year. So a 4% increase is not affected, but another increase of 1% or more for 12 months would require 90 days written notice.

lowing questions are based on concerns from real landlords:

Sam Johnson A landlord in the city of Portland gave a no cause notice per the State laws before the rule changes went into effect and the termination date falls after the November 13, 2015 law changes. How does this affect the notice? Mark Passannante The text of the ordinance appears to operate on the notice itself so likely would not affect a termination notice given prior to the effective date. While the ordinance text is consistent with the above analysis, there is always some uncertainty in how a new ordinance will be applied by the court, which I could not fully analyze in a brief answer to the above question. SJ Lets say that a landlord sent a 30 day rent increase notice of above 5% before the new law went into effect, but the

first day of the higher rent comes after November 13, 2015. What is your understanding? MP My understanding is that the intent of the ordinance from persons at the meeting was that it would affect notices issued after November 13, 2015. However, the text of the ordinance appears to operate on the increase. While the comments of the city council can be used by the courts in resolving some ambiguity in the ordinance, given the text I read, it seems more likely that a court would apply the ordinance to notices served before the effective date, but that take effect after the effective date. SJ A landlord wants to raise the rent 4% and only give 30 days notice to stay below the threshold of the new law. Is there a limit to how many times rent can be raised by 4% or less in one year?

SJ A tenant moves out that was paying $1200/month and the landlord wants to raise rents to $1700/month for the next tenancy. Are there any restrictions on that activity for new tenancies? MP The ordinance does not apply to the original rent and associated housing costs provided in a new tenancy. SJ Specifically, do these laws address the problem of inventory and lack of housing that we are seeing in the market? MP Not in my opinion. Sam Johnson is Principal as Landlord Solutions, Inc, Oregon & SW Washington’s leading evictions service provider. Sam can be reached at Sam@Landlord-Solutions.com Mark Passannante is attorney licensed in Oregon and Washington that been practicing for 21 years with significant trial experience in residential landlord tenant matters in both Oregon and Washington. Mark can be reached at (503) 294-0910

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Find Your Path ...continued from page 13 Stay true to your moral compass. Be true to yourself and you can be true to others. Be false and the opposite will follow. Do not give in to gossip. Follow the golden rule and never compromise your integrity or your word. Do it right the first time. My dad, a weekend carpenter, is fond of saying “measure twice and cut once”. Striving to produce top quality work reflects a pride in your performance. Preparing in advance reduces stress and lends to better output and production. Strive to “put your signature” on all you do. Choose your friends wisely. It has been said that a person’s character is reflected in the character of the friends he or she keeps. Surround yourself with people that keep you feeling and acting positive and you will thrive in good times and weather the low-times. Fly with high altitude people and you will attain new heights yourself. And lastly, protect your reputation. The only thing more difficult than establishing a good reputation is recovering from a bad one. Making careful and wise decisions regarding your business practices, your personal choices, and your private life will go far in establishing how you are perceived by associates, family, friends and within the local business community.

Form of the Month End of Tenancy Notice M049 In response to Portland’s new 90-day notice period for standard end of tenancy notices applicable to month-to-month tenancies or for the non-renewal of lease, Multifamily NW has created a new form specific and exclusive for use within the city of Portland. SAMPLE

PORTLAND, OREGON

END OF TENANCY NOTICE

MONTH-TO-MONTH OR NON-RENEWAL OF LEASE SE DATE __________________________________________ PROPERTY NAME / NUMBER ____________________________________________________ RESIDENT NAME(S) ___________________________________________________________________________ ___________________________________________________________________________

_____

__________________________________________________

___________________________________________________________________

_____

____________________________________________________________ __ ___ __

UNIT NUMBER ___________________________________ STREET ADDRESS ______________________________________________________ ___ __ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ __ CITY __________________________________________________________________________________________________________________________________________________ __ __ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ __ ___ ___ ___ ___ ___ __

and all others.

_____

THIS NOTICE SHOULD ONLY BE USED WHEN THE UNIT IS LOCATED OCAT A ED WITHIN AT W THE CITY CIT

____________________________________________________

_______________________________________________________

______________________________

_________________________________________________________________

_________

ZIP _____________________________________________________________

Pursuant to Oregon landlord / tenant law and nd City of Portland P tland ordinances, ordin THIS IS YOUR 90-DAY NOTICE OF THE OWNER/ AGENT’S INTENT TO TERMINATE YOUR TENANCY. Y. Y c This notice has been served d personally and nd is effective at a least ast 91 9 days later at midnight (end of day) on ____________________________________. DATE

c If written rental agreement allows, greem ws, this notice has been be served by posting on the main entrance door of the dwelling unit and mailed first class mail. It I is effective ective at least le st 91 days later at midnight (end of day) on ____________________________________. DATE

c This notice has been en served serv d by first class clas mail only and the effective date is extended by four our days including the date mailed. at least 94 days later at midnight (end of day) on ____________________________________. iled. It is effective eff l DATE

SAMPLE

OPTIONAL: AL: Owner/Agent Owner/Agen may, but bu is not required to, include an explanation of the reason(s) forr the termination. If an explanation is included, in this notice is still given without gi hout stated stat cause, Resident does not have a right to cure the reason(s) n(s) for the termination and Owner/Agent Owner/Agen need not prove the reason(s)) for the termination in a court action. termin

SAMPLE Reason(s) for termination: ation: _______________________________________________________________________________________________________________________________________________________________________________________________________ ___ __ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ __ ___ __ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ __ ___ __ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ __ _______________________________________________________________________________________________________________________________________________________________________________________________________ __ __ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ __ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ __

SAMPLE LAST MONTH ACCOUNTING - ESTIMATED For the period of

SAMPLE

________________________

DATE

thru

SAMPLE

________________________

DATE

Estimated rent

SAMPLE $______________________________

SAMPLE Other _______________________________________

SAMPLE $______________________________

SAMPLE Other _______________________________________

SAMPLE $_________________________

SAMPLE Other _______________________________________

SAMPLE $_____________________

Total

SAMPLE $_________________________

Due date

SAMPLE

________________________________ ___ __ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ __

If Resident, wi will suffer work or to al Thes mag e r

a ustification, fails to vacate on the date set forth above, Owner/Agent s because of in inability to gain access for maintenance or turn-over ents en to move in and a Resident will be responsible for such damages. but are not limited to: (i) the value of any rent accruing from the of the Rental until Owner/Agent knows or should know R al Agreement Agre uished pos s of the unit; (ii) loss of rent due to delays in possession resid a new resident; (iii) any amounts due a new resident because of ent’s ability bilit to provide possession; (iv) the costs of Owner/Agent’s th delayed delivery of possession; and (v) costs imposed by with the ndors ndo rescheduling their work.

any emplo racto

SAMPLE

X OWNER/AGENT ____________________________________________________________________________________________________________________ ADDRESS A DR

SAMPLE

____________________________________________________________________________________________________________________

SAMPLE

____________________________________________________________________________________________________________________

TELEPHONE

ON SITE

RESIDENT

SAMPLE

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Multifamily NW Upcoming Events Calendar 11/9/2015 Customer Complications 11/11/2015 NALP: Effectively Meeting the Needs of Current Residents 11/11/2015 SOLD OUT - Washington Landlord Tenant Law 11/12/2015 Reverse Trade Show 11/12/2015 November Board of Directors Meeting 11/13/2015 It’s the Law Lunchtime Series: Am I the Referee? Domestic Violence Obligations and Inter-Tenant Disputes 11/13/2015 SOLD OUT - Client Trust Accounting 11/16/2015 Advanced Tax Credit Workshop 11/16/2015 Oregon Landlord Tenant Law - Part II 11/17/2015 HD Supply class: Electrical & Plumbing Topic 11/18/2015 November Luncheon: Disaster/ Emergency Preparation 11/25/2015 Maintenance Tips, Tricks & Pitfalls 12/2/2015 Fair Housing Basics with a Historical Perspective 12/3/2015 NALP: The Market Survey Presentation 12/11/2015 It's the Law Lunchtime Series: Cutting Edge Topics: A 2015 Retrospective

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5 Real Estate Investing Fundamentals...continued from page 8 name is just being “borrowed” for marketing or window-dressing purposes? Once those key questions have been answered and you understand who is involved and how, and you have done some basic due diligence on them, then you are able to determine if you want to proceed with further due diligence on the deal or investment. Even though you may have a long, successful track record of doing multiple deals with individuals, it never hurts to check up on them again to see if things have been going well in other aspects of their lives. Allow me to share a brief story to illustrate this point. A client of mine indicated that he had made a series of large-dollar, hard-money loans to a rehabber who always got the properties finished in great condition, and they sold for top dollar. After doing several of these deals, he began to feel very comfortable with this borrower. Unbeknownst to him, this borrower was having marital problems. Once those problems grew to the point where domestic relations court and lawyers be-

came involved, this individual’s rehabbing business fell apart, and one of my client’s loans was put in a great deal of jeopardy. Fortunately, things worked out and full payment was made, but it was late and destroyed my client’s belief that this rehabber could be counted on to perform and pay on time. Make sure you develop the type of relationship with the individual with whom you are doing business that allows you to look them in the eye and ask them how they are doing and what else is going on in their life so you can pick up on what issues may be on the horizon that could affect the way you are doing business with them.

Organize Your Deal Paperwork There is one last fundamental principle that investors need to understand that I want to share with you. You need to organize your paperwork. You need to have all your baseline transactional documents saved in Word format so you can easily do your own word processing and create nearly-completed drafts of your documents to be reviewed by the

appropriate outside professionals and other parties to the transaction (yes, get a professional review each time). By always working from a baseline document, you have a template in place so you aren’t reinventing the wheel every time. You are also able to maintain a greater degree of privacy and security over what you’ve done with other deals. I often see individuals who grab the last document they used (last lease, last trust agreement, last operating agreement, etc.), and they begin making edits to that one for the next deal, not realizing that there may be holdovers, both digitally and facially, in tvhat document. Has that ever happened to me? Embarrassingly, yes. I have taken steps, however, to prevent it from happening again in the future. That’s why I’m sharing this concept with you. Whatever the type of document, whether promissory note, mortgage,

deed of trust, option agreement, due diligence checklist, or borrower questionnaire and loan application, have them saved in a baseline format that you can quickly modify it for the particular deal on which you are working. This will allow you to be much more organized as you prepare these documents on your own to be sent to your lawyer or other licensed professional for review and then used in the transaction. Remember, it’s all about getting good at the basics. Make sure you master the basics of real estate investing, establish your parameters, do thorough due diligence regarding those with whom you are working, and work from the same, consistent set of documents so you can continue to repeat your successes.

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Rental Housing Journal Metro · November 2015