Rental Housing Journal Metro November 2016

Rental Housing Journal Metro

November 2016

3. Long-term Hold Investing 5. A Warm Slice of Cherry Pie 6. What Creates Housing Affordability 7. What Do Current Economics Trends Mean for Property Management?

9. Are You Leaving Money on the Table?

11. Dear Maintenance Men – Plumbing, Pest Preventing Primer and Paint 12. Most Home Buyers Keep Their Options Open, Consider Renting Instead

www.rentalhousingjournal.com • Professional Publishing, Inc

14. Ten-X's Latest U.S. Retail Market Outlook Shows Sector's Top 5 'Buy' and 'Sell' Markets 15. All-Cash Investment Home Prices Shot Up 33 Percent in September 17. While U.S. Economy Grows, Housing Confidence Remains Flat

Portland/Vancouver

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

Biggest Mistake New Investors Make in Due Diligence

By Charles Dobens, www.multifamilyinsight.net

W

hat is the biggest mistake new investor make in multifamily due diligence? Due diligence is where many new investors start to go astray. They find a deal, make offers, get an offer accepted, put it under contract and then start the due diligence process.

During the due diligence process their entire focus is centered around the real estate. They interview and negotiate rates with property inspectors. They set up a date and time that they will go through each and every unit looking for the most egregious example of poor management so that they can go back to the seller and negotiate a repair allowance.

The owner of a bad property will see this coming a mile away and be prepared for it. They will inflate their purchase price to make you pay the repair allowance WITH YOUR OWN MONEY. They will play hardball with you and structure the terms of the repair allowance such that the dollars come out of the deal in an in-kind transfer and not in cash. You, at the end of the day, end up with a property that has a list of needed repairs and no cash to fix it.

But that is not where your focus needs to be. Here’s where the new investor goes astray. After the property inspector has completed his task and submits his beautiful 100-page report that you pay for, you will review it and look at the last page that gives a dollar amount as to the needed repairs. You then go back to the broker and open the negotiations all over again and I

Top Tips for Real Estate Investing Trends and Data Surrounding the U.S. Real Estate Market and What it Takes to Become a Successful Owner and Investor

By Michael Monteiro, CEO and Co-Founder, Buildium

M

aybe it was passing by the For Sale sign in your favorite vacation town, flipping through the new listings in your Sunday paper or receiving a property passed down through the family—there are countless ways and reasons that real estate investors enter the market. But once that purchase goes through and all the papers are signed, what are you supposed to do next? I know from experience it can be daunting to figure out what your first step should be, how to get a rental ready for the market and how to then expand the business. continued on page 4

Four Questions to Consider When Deciding to Buy or Rent Tools

By Tony English, Senior Tool Rental Merchant, The Home Depot

M

aintenance expenses are one of the largest controllable elements for a property manager’s operating budget, and you have to factor in both labor and equipment. One of the most important considerations for managing equipment costs is deciding whether to buy or rent necessary tools.

In addition to the upfront vs. rental costs of the products, there are a lot of factors to consider when deciding to rent or buy. Equipment may be required on a seasonal or ongoing basis and used for small- or large-scale projects. Ask the following questions to help determine what’s best for you and your maintenance staff.

continued on page 8 Professional Publishing Inc., PO Box 6244 Beaverton, OR 97007

continued on page 13 PRSRT STD US Postage PAID Portland, OR Permit #5460

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Rental Housing Journal Metro ¡ November 2016

Rental Housing Journal Metro

Long-term Hold Investing For Owner/Managers

T

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 always 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 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.

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 cen-

Investment Real Estate Multi-Family I Commercial I Plexes

HOW THE DEAL GETS DONE. JASON WAXBERG Principal Broker

CHUCK BRAZER Broker

BEN FiCKER Broker

ter? 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 fixed 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 fix the interest rate for 3-10 years, and then it is variable or renegotiable, on commercial loans. Sometimes you can find a fixed 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 in-

volves 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.

Make your job a little easier 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: The City of Portland Multifamily Waste Reduction Program can help.

Get free materials and support to make your job easier. Keep your garbage and recycling program working for you and your residents.

Multifamily Resource Line: 503-823-7224 Email: multifamily@portlandoregon.gov

www.portlandoregon.gov/bps/multifamily

Call 503.327.8237 www.equitypacificrealestate.com

Rental Housing Journal Metro · November 2016

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Rental Housing Journal Metro

Top Tips for Real Estate Investing ...continued from page 1 In 2002, when my business partner and I first started our property management business in Rhode Island, we had a lot of questions on how to successfully manage a property. We were faced with what seemed like a never-ending list of day-to-day, tedious tasks such as credit checks, lease renewals, rent collection, etc., while simultaneously trying to grow the business with new properties. But fourteen years later, and through some growing pains, we’ve seen the potential for real estate investment and the success it can bring.

Are you looking to expand your own portfolio in a thoughtful and lowrisk way?

While it will be trial and error to get a successful real estate investment or multiple investments off the ground, here are a few of the tips and indicators that helped my business partner and I along the way: Location Matters It may seem obvious, but location is a key factor when it comes to real estate investment. While it likely won’t make sense to invest in a property across the country because of travel constraints, a real estate investor or property owner/ manager should definitely put thought into what location will offer the most potential for rentals or flipping a home. This research can be done by looking at both industry trends along with other contributing factors. For example, Buildium’s annual Rental Ranking Report looks at a combination of U.S. real estate, rental housing and jobs reports, along with property appreciation forecasts, and a comparison of quarter-over-quarter and

year-over-year data to discover how rental markets are changing.

For 2016, some factors to consider for location from the report include: • Top Performing Metros: The top five performing metros for the past year include: San Francisco, Seattle, San Jose, Calif., Louisville and San Diego.

• Top Performing Region: The Western U.S. is currently the best region for rental property investment, thanks largely to the impressive rent increases and property value appreciation found there.

• Vacancy Rate: Worcester, Mass. had the lowest vacancy rate with 3.05 percent, and Birmingham came in the bottom spot with a 17.67 percent vacancy rate.

• Rent Variance: The percent change in median rent was best in Buffalo, New York at 16 percent and worst in Hartford at -6 percent.

Looking at industry data along with other important statistics can help a real estate investor truly understand the market and serve as a valuable resource to guide property purchasing decisions.

Think Like a Renter Becoming a successful real estate investor goes beyond just finding a good piece of land or a property at a good price. In the end, the success of a property always depends on its marketability, whether it’s for new buyers or renters. Does your property have the amenities that people are looking for? Is this a safe or quiet neighborhood in the city? Is the right property management company handling the property?

Buildium’s annual American Renters Survey looked at these questions as it aimed to shed light on what tenants care most about in their apartment or home

rental and provide insights to help property managers and landlords attract and retain the very best tenants. Some of the findings include: • Overall, an in-unit washer/dryer, high-speed internet and central air are the three most commonly sought after amenities among the age groups surveyed.

• Feelings about property managers tended to be significantly more negative overall than feelings about landlords. Of those tenants who don't like their property manager, 58 percent say they are extremely or very likely to move in the next year.

• Among all the factors that renters consider when renting an apartment, 72 percent of the surveyed renters prioritized location. Indeed, when renters continued on page 13

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Rental Housing Journal Metro · November 2016

President: John Sage Vice President: Phil Owen President Elect: Ron Garcia Secretary: Lynne Whitney Treasurer: Elaine Elsea

Past President: Elizabeth Carpenter Office Manager: Cari Pierce

President’s Message A Warm Slice of Cherry Pie

John Sage, RHA Oregon President

A

s I was starting the RHA Oregon’s dinner meeting last night, I stood at the front of the room and surveyed the audience. As always, I looked out upon many familiar faces and some new ones. Other members of the board of directors, members, and some new guests that were there to find out what being a property owner is all about. There were some you could guess were there because their property was for their future retirement, some who were already in the midst of their retirement, a few others who were accidental landlords due to circumstances beyond their control, and our valued vendor partners. What I didn’t see was the Snidely Whiplash characters that some would have you believe represent all property owners. For those of you who might not get that reference go to YouTube and watch an episode or 2 from the Rocky and Bullwinkle show. I have talked about this many times- the caring people that I have met through my association with RHA Oregon. The times that I have had to counsel members that are concerned about the housing issues and how to help those in need. Yet it seems that our industry, and yes it is an industry, continues to be attacked and vilified. As these thoughts are rolling around in my head and I again survey the audience, I notice that there is an air of excitement and expectancy about

the place. It took me a while to identify why at such a time, so close to the election, with so much anxiety in the media, these people were conversing so intently, listening to others talk about their experiences as property owners, how to navigate issues that they may have been dealing with or repairs that they are making to their property, etc. Then it hit me, they are talking with someone else who has some understanding of what they go through every day. Someone who knows the struggles and may have been through the same thing at some point.

People want only a few things in their life: to be heard and hopefully understood. To feel that their life mattered, that there is value to their having existed. I was reminded of this several days ago. I was talking with a friend and wasn’t really listening as closely as I should have been.

Instead of it being a friendly conversation with a little back and forward, it all of a sudden turned into a contest to see who could take control of the conversation.

We both tried to talk a little louder. Then a little faster. Then a little more forcefully.

Each change just made it worse, and only escalated the problem. Then I remembered to stop and listen. As I took more time to hear what he was saying and how the problem he was having made him feel, the anxiety started to drain from the con-

versation. We both started to think about what was being said instead of having to control the conversation. Once this happened we were able to quickly move into a discussion of how to solve the issue, a resolution was found, problem solved. After our conversation I remembered an old saying “You have 2 ears and one mouth.

Use them proportionally.”

Solutions are not found by shouting into the wind. Only when you take the time to listen and try to understand the position of the other party will you then be able to find a solution. I remember when I was around 5 or 6, my mother and I would sometimes bake together. I was never really a big fan of cherry pie, but I was a fan of the time that I got to spend with my mom one on one. You see I have 4 sisters and we were all born about a year apart. 5 kids in 5 years!! So one on one time with either of my parents was pretty rare. Anyway, mom would have me help her with baking while everyone else watched TV. Then, finally, the pies would go into the oven and then usually it was bedtime. I always made mom promise that once they were done she would come wake me, so that we could share a warm piece of pie together fresh from the oven. While we were eating, we would talk about many different things.

She would share her knowledge and wis-

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

dom. Sometimes I would understand and other times it would take a while for the meaning to sink in. Mainly, I remember her telling me to see a problem from both sides, to put myself in the shoes of the other person. Try to see things from their standpoint, understand what they are thinking or feeling. Once you can do that, then you may not agree, but you will have done your diligence in trying to find a solution. This is the kind of thing that I see and hear from many of the members of RHA Oregon. Hopefully, both sides of an argument can and will come together to seek a solution that is long term and reasonable; something that will benefit more than just a select few without long range ill effects. Maybe it’s time that those leading the argument stopped seeing who can talk the loudest, fastest, and most forcefully. Maybe, it’s time that someone started to see who can really listen and put themselves in the others’ situation. Maybe, we all need to sit down in a cozy, warm kitchen with a piece of freshly baked pie and talk about solutions that make sense.

Sincerely, John Sage President RHA Oregon Stegmann Insurance Agency Inc.

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What Creates Housing Affordability Dave Bachman President of Cascade Management

T

here is a lot of current industry conversation and speculation about what creates affordability in a growing housing market. In the Northwest, there’s currently heavy demand for housing, both single family and multifamily. Absorption is quick, and new construction often necessitates higher rent price points. Lending requirements, increasing construction costs and development risk will not change the dynamic of price point for newly constructed units anytime soon. It’s the sign of an economy that has regained momentum and has been thriving on that momentum through the current housing cycle. The pinch point is when there aren’t enough homes available for everyone, especially those on a tight budget. In order to pay for necessities like health care, transportation, and food, most economists say that no more than thirty percent of a family’s income should be spent on housing. That can be a low amount for many, including families, young people living on their own for the first time, seniors, and people with disabilities. Ultimately, thirty percent of a low income family’s wages can’t eat the costs of a new building.

The obvious answer to this issue would be simply to build affordable housing at a wide range of price points, and a lot of it. Unfortunately, it’s not that easy but is certainly is factor in the equation. The timeline to create new rent restricted rent housing units can be many years. Obtaining funding from public partners is also competitive with limited funding available. Creativity is required to put newer, affordable units online. It will take partnership with local governments, an expedited process and a broader view of what quality affordable housing can look like. Housing options can look different without having to be of lesser quality. Where we need long term affordability, we should not cut corners. Durable, quality materials and building smart for energy efficiency lower the long term cost of operations substantially. What should be part of the forward conversation to creating more affordable units includes streamlining the permitting process, evaluation of unit size standards, greater tax incentives, freeing up publicly owned land that sits idle in urban centers and larger scaled developments that create development cost efficiencies.

That’s not to say that new construction outside of structured and restricted affordable housing is not part of the solution. One thing that causes the price of

an apartment home to drop gradually is filtering, which happens naturally in the market. After enough new units come online and become available, people with growing or higher incomes will move from their slightly older, more outdated apartment home. The older housing, less in demand, becomes more affordable in order to compete. With local populations increasing and a tight rental market, a significant amount of new units are required before we see strong evidence of these market forces. In the Portland Metro Area, 3,000 units have been put online in the last six months and there are currently an estimated 10,300 units under construction with additional 25,600 units in the pipeline. That has finally started to move the needle to balance market conditions and affordability.

The filtering phenomenon has been studied for years, and the only way that it is stimulated is by new development.

New development can be inclusive of new construction and re-development of existing housing. If there isn’t enough fresh housing the filtering process slows. We need to encourage development in all capacities. In the meantime, cities would do well to boost density and logical urban planning. One of the key factors to affordability is location. Properties further from the urban core typically offer cheaper rents, but low income households can eas-

ily eat up their budget on commuting or accessing everyday needed services. Having units located close in to the city center or in neighborhoods where there are jobs and services available is important, especially for seniors, veterans, people with disabilities, and families who need access to childcare and good schools.

We need our leaders in local government who will advocate responsible development and educate the public on the benefits of increasing our housing supply – at all levels of affordability. We need to point out the positive and direct ties between increasing the housing supply and a strong economy that benefits entire communities. We need to be careful not to create restrictive public policies that will not incentivize developers who are eager to increase our housing supply. Other desirable housing markets have learned these lessons the hard way which restricted new development and ultimately eliminated a balanced marketplace. Market forces need to be fully unleashed in order to meet the needs of all multifamily consumers moving forward.

Form of the Month - Safety Addendum – M106 OR-WA SAFETY ADDENDUM DATE __________________________________________ PROPERTY NAME / NUMBER ___________________________________________________________________________________________________________________________________________________________________ RESIDENT NAME(S) ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

and all others.

UNIT NUMBER ___________________________________ STREET ADDRESS ___________________________________________________________________________________________________________________________________________________________________________ CITY ___________________________________________________________________________________________________________________________________________________ STATE ___________________________________ ZIP _____________________________________________________________

WARNING!! The Owner and its Agents cannot be responsible for watching and supervising children’s activities. Various state and federal laws prohibit the Owner/Agent from imposing rules and regulations which discriminate against children. THEREFORE, PARENTS AND THOSE PERSONS HAVING CARE, CUSTODY OR CONTROL OF CHILDREN ARE RESPONSIBLE FOR THE SUPERVISION, SAFETY AND WELL-BEING OF THOSE CHILDREN. Following are some areas of the property that may pose special dangers to children who may not be aware of the risks. This list is not meant to cover all possible dangers that may be present.

WINDOWS =

=

=

=

=

=

=

=

Open windows present a potential risk of falling.

Window screens are intended solely to keep bugs out. They are not intended to support a person’s weight or prevent a person from falling from an open window.

=

=

Parents must keep their children from sitting or playing on window sills, and, for child safety, should keep windows shut and locked when children are left unattended.

=

=

Keep furniture and other objects on which a child can climb away from windows. =

=

=

=

Do not block windows in any way that would prevent exit in the event of a fire.

=

X

Stoves, ovens and fireplaces can cause burns and start fires if not properly used and attended.

=

=

=

SAMPLE

= = =

=

Trash or items in the dumpster can fall, causing injury or death.

=

Trash in or around the dumpster may contain dangerous items such as broken glass, chemicals or sharp objects.

Trash compactors include machinery that can cause serious injury or death if improperly used.

=

Improper use of exercise equipment can cause serious damage to the equipment.

X

No one should climb on or over railings.

Do not place furniture or other objects on which a child can climb near railings.

Keep all stairways clear of debris or obstructions.

=

Report any damaged or loose railings to Owner/Agent immediately.

=

Improper use of play equipment can cause injury or death.

Any damaged or improperly working play equipment should be reported to Owner/Agent immediately.

SAMPLE

_____________________________________________________________________________________

RESIDENT

SAMPLE

X

SAMPLE

_____________________________________________________________________________________

DATE

RESIDENT

SAMPLE SAMPLE ON SITE

Small children can crawl through railings.

Throwing objects off balconies, decks and walkways can cause injury or death to persons below.

PLAY AREAS

Improper use of exercise equipment can lead to serious injury or death.

SAMPLE

Any location where water pools more than one inch deep poses the risk of drowning.

Danger can be present with bathtubs, sinks, buckets, fountains, streams and ponds.

BALCONIES, DECKS & SECOND STORY WALKWAYS

Dumpsters can move or fall, causing injury or death.

_____________________________

RESIDENT

SAMPLE

=

Playing in or around vehicles is dangerous.

DATE

_____________________________________________________________________________________

SAMPLE

=

It is hard to see any persons moving around vehicles.

Riding bicycles, tricycles, skate boards, etc. in the parking areas increases the risk to children because they may not be able to control their movements and are not easily seen.

State laws limit the use of pools, spas and saunas by children under 14 unless supervised by an adult. All residents must follow such laws.

WATER

Moving vehicles can cause serious injury or death.

_____________________________

RESIDENT

SAMPLE

=

EXERCISE EQUIPMENT

Hot water can cause burns if not properly used and attended.

_____________________________________________________________________________________

X

SWIMMING POOLS, SPAS & SAUNAS

DUMPSTERS & TRASH COMPACTORS

USE OF APPLIANCES =

Never allow anything, except approved plugs, to be placed in electrical sockets.

PARKING LOTS

There is a risk of serious injury or death if a person leans against a screen.

Window stops and other devices that restrict a window from opening are not provided by Owner/Agent because of the dangers associated with fire and the requirement that occupants can escape.

If Resident desires to use such devices, they must be approved by Owner/Agent before being installed. Resident accepts full responsibility for the safe use of such devices.

Children can turn on stove burners and ovens. Never place anything on stove burners or in the oven except when actually cooking.

RESIDENT

X

SAMPLE

_____________________________________________________________________________________

OWNER/AGENT

Form M126 OR-WA Copyright © 2014 Multifamily NW®. NOT TO BE REPRODUCED WITHOUT WRITTEN PERMISSION. Revised 12/5/2014.

The Safety Addendum was created to enhance liability protection for the landlord. Each example is carefully worded to address concerns from actual occurrences and lawsuits filed. If you don’t already take advantage of this form, make sure to add it to the list of addendums you have every tenant sign at movein. It includes critical language that reminds tenants that open windows present a potential risk of falling.

While many of the statements can seem obvious, having this document in your tenant’s file goes a long way to exhibit your due diligence and protect your assets.

SAMPLE

_____________________________

DATE

SAMPLE

_____________________________

DATE

SAMPLE

_____________________________

DATE

MAIN OFFICE (IF REQUIRED)

Upcoming Calendar 11/7/2016 Oregon Landlord Tenant Law Part I 11/8/2016 HR Brown Bags: Leaves Jungle (FMLA/WC/ADA) 11/8/2016 CAMT: Plumbing Part I & II 11/10/2016 Maintenance Boot Camp for Spanish Speakers 11/11/2016 It's the Law - Time to Part Ways: Terminating the Tenancy 11/14/2016 Client Trust Accounts 11/15/2016 Reverse Trade Show 11/15/2016 Fair Housing 150 11/16/2016 Prism Educational Conference (Eugene) 11/18/2016 Washington Landlord Tenant Law 11/21/2016 Oregon Landlord Tenant Law Part II 11/21/2016 EPA Lead-Based Paint: Renovation, Repair - Refreshener 12/2/2016 General Fair Housing 6

Rental Housing Journal Metro · November 2016

Rental Housing Journal Metro

What Do Current Economic Trends Mean for Property Management?

By Marc Courtenay, www.propertymanager.com

T

here are times where we throw caution to the wind and go “all in.”

There are other times to pause and carefully ponder the realities of what may be “coming around the bend.” Perhaps, after nearly 8 years of low interest rates and endless economic stimulants, we are now in the “carefully ponder” stage of economic realities. Now is a good time for property managers to be cautious. Notice I didn’t say “scared” and I never propose “indolence” (an excellent word to know about).

With patience and keen observations come immediate results. It’s the power of doing almost nothing.

Recently we learned that the U.S. economy added only 151,000 jobs during August, giving the reluctant Fed justification to delay an interest rate hike until December. That’s the most likely scenario. This familiar posture for the Fed was exacerbated by the Chinese economic scare, plunging oil prices and spooked equity markets in early 2016. Then Brexit hit leading into the summer meetings and now the uncertainty of the upcoming U.S. elections.

“Lower-for-longer,” interest rates now look like “lower forever” unless the Federal Open Market Committee (FOMC) surprises and proceeds with normalizing monetary policy. This appears unlikely. Low interest rates benefit borrowers, including single-family rental investors. At today’s rates, investors will be able to leverage investment assets at historically low rates.

Meanwhile auto sales are turning south.

After rising for 66 straight months, retail car sales have now fallen four out of the last six months. My sources say that this trend is likely to continue.

This and other factors suggest the making of a new economic trend and not just for the auto sector. The entire economy is beginning to show unmistakable signs of slowing.

When people are overwhelmed with financial uncertainty they buy fewer cars and take fewer vacations. They’re going to eat out less and cut back on noncritical spending and purchases.

In other words, the big drop-off in car sales could mean U.S. consumers are already cutting back. That’s probably why U.S. manufacturing is weakening as we begin the 4th quarter.

Last month, the Institute of Supply Management (ISM) reported that its Purchasing Managers’ Index fell from 52.6 in July to 49.6 in August. This index measures the strength of the U.S. manufacturing sector. When the index dips below 50, it signals recession. More importantly, the services and manufacturing sectors are now weakening at the same time. It’s significant that both indices would weaken so much at the same time.

The manufacturing index dropped to 49.4% from 52.6% in August and the ISM services metric slipped to 51.4% from

55.5%. The combined reading was also the weakest in six years. Look out below!

Here’s my takeaway: Now’s a good time to upgrade and streamline your property management business. Have the best most efficient technology and software available to navigate your operations.

Develop a “wait and see” strategy that takes into consideration the perspectives and preferences of your clients. Take the time to know what they are and invite their feedback now, not later.

Doing “almost nothing” incorporates prudence, calm and careful analysis. It doesn’t invite procrastination and should empower you to prioritize your work for the months and year ahead.

FAIR HOUSING FAIR

FAIR HOUSING FAIR NEIGHBOR

NEIGHBOR

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Call 503-221-1260 for more information www.rentalhousingjournal.com Rental Housing Journal Metro · November 2016

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Rental Housing Journal Metro

Biggest Mistake New Investors Make ...continued from page 1 can assure you, they are lying in wait for you to return.

But the problem with this over-dependence upon the inspection report is that, no matter what the inspector finds, it can be fixed with one thing – Money. Just name your price and the roof is fixed. Get three bids and the foundation is fixed.

The brokers focus, along with yours and everyone else is on the real estate. This is exactly where you should not be focused.

What business are you in? Real estate or multi-family? You are in the multi-family business. What generates revenue in the multi-family business? The factory or the product? The product, or in our case, the leases, is what generates revenue. How much time and money have you spent up to this point in the due diligence process analyzing the value of the leases?

See, when you show up with your inspector and walk the property with your clipboard and flashlight, the real deal is not going to be found in the units. The real deal is going to be found in the filing cabinets in the manager’s office. That is where you should be spending the majority of your time. Now don’t get me wrong, you will still need to do a complete and thorough physical inspection. But that should be secondary to your “product” analysis.

Why is this so important? Because you need to understand the types of things that can destroy your business overnight.

Hurricanes, tornadoes, floods? Nope, you can buy insurance to protect you for those events and in some cases, you might end up better off. Leaky roofs, broken pipes, appliances that don’t work? Nope, those happen all the time and it just takes money to fix.

What can destroy a property fast that a property inspector never finds?

So what can destroy your business overnight and that can’t be fixed with money?

The answer, just so we can keep it in the business realm, is bad customers. More specifically, felons, drug dealers and those convicted of violent crimes. Nothing can clear out a nice apartment complex faster than the news that a sex offender has just moved in. Not only will you lose existing customers, your property will quickly get the reputation as being the place where felons can go and live. That is the kiss of death for any property.

Let’s discuss the repair allowance.

What do successful people do? Successful people do those things that the rest of the world won’t do. In this case, the seller is expecting you to come back with a list of items that shows all the things wrong

with the property. He is seeing you coming a mile away because he played the same game when he bought the property. In addition, his broker is preparing him for it and they have already have a strategic response.

But you are not like all the other investors. You look at this business as a business. You look at the strength of the customers as the strength of the asset and you will negotiate accordingly. When you complete the inspection and set up a meeting with the broker to review, you will have two sets of reports. The first one will be the property inspection report.

That will have a dollar figure at the bottom. The broker will nod his head, let you know that he will present this to the seller and then ask the waiter for the check.

This is where you distinguish yourself from every other investor. “Not so fast, Mr. Broker, there is one more thing,” you say in your best Colombo imitation. This is when you bring out your analysis of the leases. This is where you show the broker that fifty percent of the files were lacking criminal background checks. This is where you show the broker that there is no income analysis done on any of the residents and therefore the sales pitch that the rents are below market and can be increased is meaningless because there is no way to tell if the current crop of residents could even afford an increase in the rent.

The broker will do one thing; stare at you with the blankest look you have ever seen and wonder what comeback he could possibly muster. He has done absolutely no analysis in this department so he will not have any facts on the table to respond back to you. You will be in complete control of the deal.

Let’s say just the opposite is true. After your analysis, you cannot find anything wrong with the resident files. They are completely up to date and accurate. If that is the case, start getting serious about buying that property. It might be as good as you think. I do spot reviews on my properties to make sure that the files are up to date. I review credit and criminal background checks all the time and make sure that everything is in order. That’s the type of business you want to buy.

Mr. Dobens is an attorney and multifamily owner. We thank him for his guest post and insights on due diligence. He can be reached at www.dobenslaw.com

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*Renter preference acquired from a 2014 Market Strategies International discrete choice modeling study.

An 80% preference for gas was reported among Portland tenants 1paying $1,200+ in monthly rent. For more details visit nwnatural.com/multifamily.

10695_NWN_MultiFamily-Rental_Housing_Journal-Builder_SNAP.indd **Limited incentives available and distributed on a first come, first served basis. *Renter preference acquired from a 2014 Market Strategies International discrete choice modeling study.

An 80% preference for gas was reported among Portland tenants paying $1,200+ in monthly rent. For more details visit nwnatural.com/multifamily. **Limited incentives available and distributed on a first come, first served basis. *Renter preference acquired from a 2014 Market Strategies International discrete choice modeling study.

10695_NWN_MultiFamily-Rental_Housing_Journal-Builder_SNAP.indd 1 An 80% preference for gas was reported among Portland tenants paying $1,200+ in monthly rent. For more details visit nwnatural.com/multifamily. **Limited incentives available and distributed on a first come, first served basis.

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Rental Housing Journal Metro · November 2016

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Rental Housing Journal Metro

Are You Leaving Money on the Table?

By Cliff Hockley CCIM, President, Bluestone & Hockley Real Estate Services

M

ost real estate investors tend to operate their properties with a simple rule in mind: If money appears in their checking account by the end of the month, their property is healthy.

As long as they see the same amount every month they’re happy.

However this rule inevitably leaves money on the table. Sophisticated investors know that they need to plan for their properties to be successfully operated.

They need to buy the right property and 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 respect 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 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 continued on page 19

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Rental Housing Journal Metro · November 2016

Rental Housing Journal Metro

DEAR MAINTENANCE MEN: Plumbing, Pest Preventing Primer and Paint

By Jerry L’Ecuyer & Frank Alvarez

Dear maintenance men, I own a 16 unit apartment building built in the late 1960s. The property is in good shape and we try to address maintenance issue as soon as they develop. However, the drains lines are starting to get the best of us. For the past three years I have been experiencing clog after clog and now my main line appears to be blocked once again.

Other than the obvious (the pipes are old) what can be contributing to my problem?

Charles Dear Charles: You are not alone. Plumbing issues and rooter service is the largest line item expense as compared to other trades at any apartment building regardless of age.

With plumbing and drains, it is best to be proactive rather than reactive. The difference in approach can save you thousands of dollars a year. In order to begin a proactive approach we will recommend the following: 1: Make an appointment with your local plumbing contractor or current service provider and tell them you are interested in having them join you on a thorough inspection of your plumbing, drains and fixtures. A professional plumber may see things you will miss.

2: On the date of inspection have your smart phone or camera with you to doc-

Dear Maintenance Men: Three years ago, I had termite repairs done to the back side of my building. Turns out the wood was never painted or protected and now the wood is badly damaged.

Would prime and paint have prevented this damage?

George

ument any items or areas of concern.

A flashlight and clipboard with notepad will be essential.

3: During the inspection take extra care to look for improper drain connections, leaks, possible or future leaks, corrosion, staining and fixtures that can appear be near or at their life expectancy. Also keep an eye out for water damage, dry rot, fungus etc.

4: Check the garbage disposal unit under the kitchen sink and if you find 1/3rd HP disposal unit, consider replacing it with a half horse motor disposer. The underpowered 1/3rd unit is a large contributor to your kitchen drain line clogs. It is important to also instruct the resident in the proper use of the garbage disposal

Rental Housing Journal Metro ¡ November 2016

unit such as using plenty of water while using the disposer and not stuffing too much scrap food all at once.

5: Take special note of large trees above the route of the main drain line. The roots may be invading the pipe and causing many of the backups you are experiencing. Have the plumber use a camera snake to inspect the pipe.

6: If your property does not have proper mainline drain cleanouts; plan on having them installed. We recommend having the pipes hydro jetted at least once a year to clear grease from the lines.

Dear George: It is unfortunate that your contractor did not complete his job by sealing or painting the new wood. This would have saved you the effort and expense of repairing the wood all over again. We cannot tell you how many buildings we see that had termite or dry rot repairs completed years ago, and they are still not weatherized or painted! It is not the cost of the lumber that is expensive, but the labor that you want to avoid by having to perform the same work twice.

When replacing wood at your building you should insure that the proper type of wood is used for an exterior job and that the wood is sealed with primer and paint.

To do the job properly, the wood should be primed before it is installed followed by a second prime and paint.

When using a contractor for this type of work, be sure to read the contract carefully. Make note and question the contractor continued on page 19

11

Rental Housing Journal Metro

Most Home Buyers Keep Their Options Open, Consider Renting Instead

I

n today's competitive housing market, most of those who moved recently considered both buying and renting while looking for a new place to live, according to the Zillow Group Report on Consumer Housing Trends.

It takes more than 10 weeks to find a new home to rent – and more than 12 weeks for those with low incomes or those searching in tight rental markets, according to an analysis of the Zillow Group Report and U.S. Census datai. For home buyers, the search is longer – 17 weeks.

The Zillow Group Report, available for free in its entirety, surveyed more than 13,000 renters, homeowners, buyers and sellers about their home search, aspirations, and preferences.

More than half -- 54 percent -- of buyers do not get the first home on which they make an offer. First-time home buyers make up 47 percent of all buyers, so it's feasible for many potential buyers to keep their options open and return to renting if they aren't successful purchasing a home.

"The line between renting and buying is blurry, and that's a sign of the times," said Zillow Chief Marketing Officer Jeremy Wacksman. "It's difficult and time-consuming to find a home to move to, especially in competitive housing markets.

With first-time buyers competing for a limited number of homes on the market, savvy shoppers have a Plan B, hoping to

12

buy if it works out, but willing to sign a lease for a home if they don't make a deal by the time they need to move."

Among those who bought a home in the last 12 months, 66 percent of Millennials considered renting as well. Just over half (54 percent) of Generation X buyers considered renting, and 32 percent of Baby Boomer buyers.

Younger renters are also more flexible when looking for a home to rent – 63 percent of Millennials and 59 percent of Generation X renters considered buying while looking for a rental. Among renters over 50, most did not consider buying at all.

Renters make up a larger group of the U.S. population than at any time in the last 50 years. Last week, the U.S. Census Bureau reported the homeownership rate rose very slightly to 63.5 percent in the third quarter of 2016 – barely edging up from a 51-year low.

For many renters, buying is not a financial option. The median income of home buyers is $87,500 a year, while renters make, on average, $37,500. Low-income renters looking for a new home in a tight rental market can expect to spend an average of 12.1 weeks looking for a home, according to Zillow's analysis of survey responses and rental markets.

PRNewswire

teractive™ and Retsly®. The company is headquartered in Seattle.

Zillow Group Zillow Group (NASDAQ: Z and ZG) houses a portfolio of the largest real estate and home-related brands on the Web and mobile. The company's brands focus on all stages of the home lifecycle: renting, buying, selling, financing and home improvement. Zillow Group is committed to empowering consumers with unparalleled data, inspiration and knowledge around homes, and connecting them with the right local professionals to help. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow®, Trulia®, StreetEasy®, HotPads® and Naked Apartments®. In addition, Zillow Group works with tens of thousands of real estate agents, lenders and rental professionals, helping maximize business opportunities and connect to millions of consumers. The company operates a number of business brands for real estate, rental and mortgage professionals, including Mortech®, dotloop®, Bridge In-

Zillow, Mortech, StreetEasy, Retsly and HotPads are registered trademarks of Zillow, Inc. Trulia is a registered trademark of Trulia, LLC. dotloop is a registered trademark of DotLoop, LLC. Naked Apartments® is a registered trademark of Naked Apartments, Inc. Bridge Interactive is a trademark of Bridge Interactive Group, LLC. Zillow looked at individual responses from renters surveyed as part of the Zillow Group Report on Consumer Housing Trends about how much time they spent searching for their current rental unit. This data was combined with data on metro-level rental vacancy rates from the U.S. Census Bureau's 2015 American Community Survey to explore how the search for a rental unit varies across income groups and across different types of housing markets. i

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Rental Housing Journal Metro · November 2016

Rental Housing Journal Metro

Four Questions to Consider ...continued from page 1

Top Tips for Real Estate Investing ...continued from page 4

How frequently will we use it?

Generally speaking, this is one of the easier questions to answer. Renting is a viable solution when equipment is used a few times a year, while buying is much more economical when it’s an item of regular use. There may even be times when choosing to do both is the best option.

For projects that require duplicates of the same tool, consider buying one and renting the extra items to complete the project more quickly. This will allow you to scale up and only worry about maintaining one tool or piece of equipment.

were asked what they love most about their homes, two of the top three answers were a great location and a nice, safe neighborhood.

It’s necessary for real estate investors to consider these factors if they want their investment to eventually be profitable through either selling or renting. Researching what tenants are looking for in that area, or what amenities are included in recent rentals or home purchases can really help convince that buyer or renter to make the move.

What kind of maintenance is required?

Depending on the complexity of the tools, maintaining them may cost significant time and money, especially if your staff is not familiar with the ongoing upkeep. Purchasing equipment may require the assistance of an experienced professional and may hold up projects if tools are not in working order. Renting gives access to tools that are professionally and regularly maintained by experts. Your staff will then be able to spend more time and effort completing the project.

Do we have space for storage?

Don’t underestimate the amount of space a large piece of equipment will take up in your storage area. If a new piece of equipment requires an additional shed or room, factor in the cost. You don’t want items sitting out as eye sores for residents.

Renting takes this factor out of the equation and simplifies the process, allowing you to return all units to the tool rental center after being used.

How do we transport the item?

Lastly, take into account transportation costs if the piece of equipment is particularly large and factor in whether you will need to transfer it to different parts of the property. Avoid taking a toll on your current vehicles and consider renting a large truck or special oversized trailer to transport the equipment. It may be an additional cost, but it will make for smooth and safe transportation from the tool rental center to your property and back.

By Tony English, Senior Merchant, Tool Rental Tony has worked in the capital equipment manufacturing and equipment rental industries for nearly 20 years, with extensive experienced gained at Ingersoll-Rand, Sunbelt Rentals, and The Home Depot.

Going Digital is a Must It goes without saying that technology exists in every facet of our lives, and this goes for the real estate industry as well.

Adopting and implementing relevant technologies can only help an investor’s business, and there are a few ways to do this.

Right from the start, technology should be used when marketing properties.

Buildium’s aforementioned American Renters Survey found that when renters are searching for new housing, they first look at Craigslist, Zillow, a Google search and finally ApartmentList—clearly showing that just listing properties in the local paper is not a top search method.

The report also found that a large percentage of potential renters are looking

for digital options such as online listings, electronic leases, electronic payments and online maintenance requests/ tracking. Especially for those renters in multi-tenant dwellings, where 37 percent of renters indicate they can currently pay online and 59 percent indicated they like or would like to pay rent via ePay methods. Additionally, while only 27 percent of residents say they currently use a tenant portal (property management sites where they can connect, get information, file maintenance tickets and pay rent), 45 percent report either having and loving it, or wanting one.

When it comes to real estate investing, the success of a business goes beyond just purchasing a brand new condo around the corner. Investors should make sure to look into the key trends listed above and relevant research in their area in order to set themselves up for success. While in the end it always depends on the effort put in, these tips can assist as some fail-proof guidelines to help along the way.

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Rental Housing Journal Metro

Ten-X's Latest U.S. Retail Market Outlook Shows Sector's Top 5 'Buy' and 'Sell' Markets Ten-X Research reveals retail sector struggling to gain momentum as consumers turn increasingly toward online shopping

T

en-X, the nation's leading online real estate marketplace, today released its latest U.S. Retail Market Outlook, including the top five 'Buy' and 'Sell' markets for retail real estate assets. The long-term forecast reveals the sector is still recovering, slowed by the rise of e-commerce and major shifts in consumer behavior.

The long-term forecast reveals Austin, Miami, Fort Lauderdale, West Palm Beach and San Francisco as markets in which investors should consider buying retail assets. These markets, concentrated largely in the Southeast and West, are being fueled by robust local economies,

where a steady influx of new residents are able to find jobs and fuel overall growth.

Milwaukee, Detroit, St. Louis, Memphis and Philadelphia are the top markets where Ten-X Research estimates that market conditions might cause retail investors to consider selling their properties. These cities reflect several lagging economic and demographic indicators in the Midwest and Northeast, where stagnating wages and lackluster growth outside of the major urban cores have made for a weakened retail climate.

The Ten-X Research report notes that 13 percent of all retail sales are now conducted through e-commerce – a share

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"As more consumers opt to do their shopping online, the retail market is battling major headwinds as it crawls toward a comeback after the downturn," said Ten-X Chief Economist Peter Muoio.

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Rental Housing Journal Metro · November 2016

Rental Housing Journal Metro

All-Cash Investment Home Prices Shot Up 33 Percent in September The housing sector saw its 55th month of growth since the beginning of 2012. doubt the Fed's forthcoming monetary policy will greatly benefit them. Investors are frustrated by sitting on cash, and each passing meeting with inaction from the

Fed casts further doubt about how much fixed-income investments will improve over the short term. Therefore, the attractiveness of SFRs is getting amplified."

Below is a complete breakdown of national home prices trends in September:

H

omeUnion, a leading real estate firm that provides all the services investors need to buy, sell and manage real estate online, has released September 2016 data showing that median sales prices for investment housing and owner-occupied housing continue to accelerate. According to the monthly HomeUnion Home Sales Report, median prices increased 17 percent year-over-year to $269,300, the 55th month of year-overyear growth in the residential real estate sector since 2012. All-cash buyers pushed prices up nearly 33 percent in September to $211,400. In addition, average cap rates for both financed and non-leveraged sin-

gle-family rentals (SFRs) dropped 90 basis points to 5.2 percent.

Median prices for rental properties in markets hit the hardest by the recession completely bottomed out in 2012, and little inventory remains in the sub-$150,000 range across several metros nationwide.

"With a paucity of lower-priced inventory, SFR investors have started to target higher-priced assets," explains Steve Hovland, director of research for HomeUnion. "The elevated price of all-cash sales is indicative of investors' uneasiness with lower-risk, dividend-yielding assets. More buyers are willing to lock in returns over the next five to seven years because they

September National Home Price Trends Data Year-Over-Year Total Median Sales Price $269,300 17.0% Owner-Occupied Sales Price $286,900 15.8% Investment Median Sales Price $238,800 17.1% Average Investment Cap Rate 5.2% -90 Basis Points Investment Median Cash Price $211,400 32.8% Average Cash Cap Rate 5.5% -160 Basis Points Investment Median Leveraged Price $261,900 12.0% Average Cap Rate 5.1% -70 Basis Points PRNewswire

Source: HomeUnion Research Services Disclaimer: Median sales prices are non-seasonally adjusted and based on transactions of single-family homes above $30,000.

For more information, download the HomeUnion Home Sales Report.

About HomeUnion HomeUnion is an online real estate investment management firm. Based in Irvine, Calif., it provides all the services needed for individuals to invest remotely in single-family rental (SFR)

properties. The company uses a combination of research and data-driven proprietary analytics to incorporate over 110 million homes and 200,000 neighborhoods into their database, and then delivers its solutions to an on-the-ground infrastructure that currently serves 18 locations. HomeUnion's role spans the lifecycle of the investment transaction: identifying sound investments, handling all aspects of acquisition, maximizing income, protecting asset value, and selling the asset when the time comes.

SOURCE HomeUnion http://www.homeunion.com

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Rental Housing Journal Metro

Ten-X's Latest U.S. Retail Market ...continued from page 14 2Q'16 – 2020 U.S. Retail Projections 2016 Q2 Effective Rents (psf)

2020 Forecast Effective Rents (psf)

Change in Effective Rents (%)

2016 Q2 Vacancies (%)

2020 Forecast Vacancies (%)

Change in Vacancies (bps)

Austin, TX

20.52

24.54

19.6%

5.4

5.7

30 bps

Miami, FL

23.21

26.98

16.2%

6.1

5.0

-90 bps

Fort Lauderdale, FL

17.67

20.74

17.4%

9.3

7.5

-180 bps

West Palm Beach, FL

20.30

22.90

12.8%

8.6

8.8

20 bps

San Francisco, CA

32.84

36.68

11.7%

3.1

3.1

0 bps

Top 5 Sell Markets

2016 Q2 Effective Rents (psf)

2020 Forecast Effective Rents (psf)

Change in Effective Rents (%)

2016 Q2 Vacancies (%)

2020 Forecast Vacancies (%)

Change in Vacancies (bps)

Milwaukee, WI

13.74

13.93

1.4&

11.7

12.8

110 bps

Detroit, MI

15.35

15.29

-0.4%

11.7

11.6

-10 bps

St. Louis, MI

12.44

12.82

3.1%

11.9

12.6

70 bps

Memphis, TN

12.28

12.61

2.8%

11.3

11.6

30 bps

Philadelphia, PA

18.30

18.75

2.5%

10.1

10.5

40 bps

U.S.

17.72

19.41

9.5%

9.9

9.9

0 bps

Top 5 Buy Markets

The Retail Sector's Top Five 'Buy' Markets: Austin Austin's economic fortunes continue to soar, making it an ideal spot for retail investment. Local employment has grown between 3 and 5 percent over the last five years and shows no signs of slowing, while population growth has more than tripled the national rate for more than a decade. Coupled with a thin supply pipeline, strong demand for retail in the area is poised to drive vacancies below 5 percent by 2018, and rents are expected to rise by more than 4 percent over the same period.

Miami Burgeoning leisure and hospitality industries have been powering Miami's swift recovery from the recession, helping to push overall employment to an alltime peak. While unemployment is still hovering slightly above the national rate, it has dropped drastically from its pre-recession peak. The city's retail sector has been thriving, with rents climbing more than 4 percent over the last year. Vacancies are expected to dip as low as 4 percent by 2018, and a dearth of supply additions on the horizon puts buyers in position to capitalize on the strong market.

Fort Lauderdale Retail conditions are also inviting in Miami's neighboring city to the north, Fort Lauderdale. Though vacancies and rents have been mostly stable over the last year, a steady stream of supply is expected to dry up in the near future, pushing the market sharply in the right direction.

The city's recovery from the recession has been robust, and unemployment is currently just above 4 percent – well below the national average. Ten-X Research data indicates strong population growth and job projections are likely to set investors up for annual NOI growth of about 4.2 percent through 2020.

West Palm Beach The third South Florida city to make the 'Buy' list, West Palm Beach is benefitting from escalating population growth and steadily increasing employment numbers, each of which outpaces national averages.

Retail demand is strong enough to withstand healthy additions to supply, and Ten-X Research forecasts that it will pull vacancies below 7 percent by 2018. Rents should continue an accelerating growth pattern over the same period, and steadily improving fundamentals show NOI will continue to grow at close to 4 percent. continued on page 18

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Rental Housing Journal Metro · November 2016

Rental Housing Journal Metro

While U.S. Economy Grows, Housing Confidence Remains Flat Millennials Worry More Than Others About Home Buying, According to ValueInsured's Quarterly Index

D

espite positive economic indicators like record wage growth and falling unemployment, housing confidence remained flat from June through September, according to the new ValueInsured Housing Confidence Index.

Housing confidence rose a mere 0.2 points from June through September to 68.9 on the hundred-point scale. That figure is up 1.9 points since March. A number of factors are likely to blame for the subdued confidence measure, according to Joe Melendez, CEO of ValueInsured.

"Home prices rose over the summer, putting them out of reach for many renters who also saw their rents rising," said Melendez. "Another factor suppressing housing confidence is the unsettling presidential contest and uncertain future it entails. Combine those factors with the hangover of the 2008 housing crisis, and many prospective buyers really need a confidence boost."

The ValueInsured Housing Confidence Index is the aggregate mean of seven multidimensional confidence measures collected through the Modern Homebuyer Survey, which is conducted once per quarter. As such, the Index reflects the attitudes of American homeowners and non-homeowners toward the housing market and benefits of buying a home.

A significant factor in the flat confidence index is the continued uncertainty and anxiety of millennials. Although three-in-four (76 percent) millennial non-homeowners (i.e., would-be firsttime buyers) want to buy a home, less than two-in-five (38 percent) are confident they can afford a down payment.

Millennials also outpace Americans in general in a number of other home buying concerns measured by the survey: http://photos.prnewswire.com/prnfull/20161012/427962-INFO Overall, millennials are skeptical and bracing for volatility. They are more likely to expect a price bubble and correction in the next two years than Americans overall (60 percent of millennials vs. 47 percent of Americans). Prospective first-time homebuyers in particular are nervous about market instability – only a quarter of these millennial non-homeowners are confident that the 2008 housing crisis will not happen again in their lifetimes.

On the bright side, 70 percent of millennials said the American Dream is alive and well. They do, however, describe it differently than past generations. They want to own a home but not be tied down by it. More than four-in-five (83 percent) millennials say their new definition of the American Dream is "owning a home on my own terms while staying mobile, agile and financially secure." In fact, more than four-in-five (81 percent) millennials plan to live in their current home for less than five years.

Reassurance and down payment protection appear to be crucial in converting millennial homebuyers. ValueInsured provides assurance and supports the new American Dream by protecting homebuyers from loss of their down payment in the event of falling home values or the need to quickly sell at a loss. +Plus by ValueInsured, the only down payment protection product available to homebuyers today, is now available with mortgages through participating financial institutions.

For additional findings from the ValueInsured Modern Homebuyer Survey visit valueinsured.com/trends.

PRNewswire Survey Methodology The ValueInsured Modern Homebuyer Survey was conducted online by Equation Research on behalf of ValueInsured in September 2016 among a nationally representative sample of 1,013 American adults ages 18 and older.

About ValueInsured PVI Agency, LLC dba ValueInsured, is the only provider of down payment protection for modern homebuyers, giving them greater control, confidence and flexibility in a volatile real estate market – all for the cost of a lunch per month. ValueInsured's +PlusSM down payment protection is easy, affordable and backed by one of the world's largest re-insurance companies, with over $8 billion in capital. Based in Dallas, ValueInsured is led by a team of professionals experienced in every part of the home buying process. http://www.valueinsured.com/ The information contained herein does not constitute a solicitation nor an offer of insurance in any jurisdiction in which it would be unauthorized or unlawful to do so, including, but not limited to the State of New York.

Rental Housing Journal Metro ¡ November 2016

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Rental Housing Journal Metro

Ten-X's Latest U.S. Retail Market ...continued from page 16 search projects vacancy rates will remain above 10 percent through 2018 before increasing more drastically. Effective rent growth faces a similarly bleak outlook, with projections averaging 1.3 percent over the next two years before declining during 2019 and 2020.

San Francisco The surging tech sector in and around San Francisco continues to make the city a solid bet for investors. Employment has taken off since the recession, with job growth averaging better than 4 percent per year and unemployment hovering just above 3 percent. Coupled with an empty supply pipeline, the continued boom projects to lower vacancies to 1.9 percent by 2018 – a historical low. While overreliance on a single sector can make a metro market particularly volatile, data suggests rents are poised to climb in the coming years, pushing NOI up roughly 3.2 percent each year.

The Retail Sector's Top Five 'Sell' Markets: Milwaukee Despite an unemployment rate below the U.S. average, Milwaukee is hampered by a struggling economy, including tepid employment growth and near-stagnant population levels. Ten-X Research predicts that the city will continue seeing lukewarm demand for retail space, and

18

with 650,000 square feet of product hitting the market, vacancy rates will stay above the mid-11 percent range in the next two years. The influx of supply will limit rent growth to less than 1 percent per year through 2018, and annual NOI gains are expected to average a meager 0.4 percent through 2020.

Detroit Detroit's population is growing for the first time in a decade, but the city's total employment remains more than 10 percent lower than its prior cyclical peak, in part due to the muted comeback of the city's manufacturing sector. Even with limited supply coming to market, the report indicates that middling retail demand will nudge vacancy rates into the high-10 percent range by 2018, before the market enters a projected downturn. Ten-X Research predicts that rent growth will average just 1.2 percent over the next two years before declining in a cyclical downturn, while NOI growth is expected to average 0.5 percent per year through 2020.

St. Louis St. Louis' metro population growth has lagged behind that of the U.S. for several decades, measuring 0.2 percent in 2015.

While the city has surpassed its previous peak in terms of total employment, St. Louis job growth is expected to be 1 percent per year through 2018. The city's retail market will see modest supply additions in the coming years, but the report notes that weak demand will likely keep vacancy rates at or above the mid-11 percent range over the next few years. Ten-X Research predicts effective rents will grow by 1.3 percent per year through 2018 before falling, while NOIs will grow by 0.8 percent annually through 2020.

Memphis Buoyed by a transportation/utilities sector which set a new peak level for employment in 2016, Memphis' total employment numbers are 1.4 percent below their prior highs. The city's retail supply pipeline is limited, but Memphis' population grew 0.1 percent in 2015 -- a metro that has lagged behind the country in this measure for nine straight years. Ten-X Re-

Philadelphia Philadelphia's economy is accelerating, with payrolls 2.5 percent higher than their prior peak, but the city's population growth slowed in 2015 and its unemployment rate remains higher than the U.S. average. Even with a modest supply pipeline, the city's limited demand for retail space is expected to keep vacancy rates hovering over 10 percent in the coming years. Ten-X Research projects effective rents climbing just 1.6 percent per year through 2018 and annual NOI growth of 1 percent through 2020.

About Ten-X Ten-X is the nation's leading online real estate transaction marketplace and the parent to Ten-X Homes, Ten-X Commercial and Auction.com. To date, the company has sold 244,000+ residential and commercial properties totaling more than $41 billion. Leveraging desktop and mobile technology, Ten-X allows people to safely and easily complete real estate transactions entirely online. Ten-X is headquartered in Irvine and Silicon Valley, Calif., and has offices in key markets nationwide. Investors in the company include Google Capital and Stone Point Capital. For more information, visit Ten-X.com.

SOURCE Ten-X http://Ten-X.com

Rental Housing Journal Metro ¡ November 2016

Rental Housing Journal Metro

Dear Maintenance Man ...continued from page 11

Are You Leaving Money ...continued from page 9

if you see the terms: “Paint by others” or “Priming and Paint not included”. You can either ask the contractor to include these items or contract with a painting company to complete the job.

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

Dear Apartment Owners: We are getting close to the holidays, which means guests, cooking and an emergency call to you from one of your residents on Thanksgiving Day about a clogged sink or non-working oven with an apartment full of guests waiting for dinner. This scenario can ruin both yours and your residents’ holiday. The answer is: Preventive Maintenance. Before the holiday season begins, check each stove and oven for proper operation, many residents only turn on their ovens at this time of year, and the problem may be as simple as a pilot light being out. Also, check the oven’s temperature calibration with an oven thermometer. Because of heavier than normal use of the plumbing, it may be a good idea to snake out your main plumbing lines. Also, sending a note to each tenant on the proper use of the garbage disposal will be useful. Note what they should and should not put down the disposal unit. A few items to include on this “Do Not” list are: banana peels, potato skins, coffee grounds and any stringy food. Also make sure they turn on the water before using the disposer and put down small amounts of food at a time.

Do not use the disposer as a trash can and then turn it on when full, it will clog.

Halloween and other holidays also means more people than usual walking on your property. Is your property safe? What are some of the liabilities to worry about? Check trip and fall hazards. Sprinkler heads sticking up above

the grass or landscape near sidewalks.

Use pop-up heads to solve this problem.

Look for sidewalks that have been pushed up by tree roots. This can be solved with a concrete grinder or replacement of the section and removal of the tree root. Cut any low hanging tree branches and look for branches that may break in heavy winter wind or rain. Check your decking for cracks or damage and inspect the exterior stairways for wear and tear. Inspect all your garage door springs, winter wind and rain may make them heavy causing the door to close or fall unexpectedly. As a precaution, always replace both garage springs at the same time and throw away any used springs. Never install used garage springs. Check all property lighting and timers. Remember: Preventive Maintenance is cheaper than Emergency Maintenance!

Bio: If you need maintenance work or consultation for your building or project, please feel free to contact us. We are available throughout Southern California. For an appointment please call Buffalo Maintenance, Inc. at 714 956-8371 Jerry L'Ecuyer is a licensed contractor & real estate broker. He is currently on the Board of Directors and Chairman of the Education Committee of the Apartment Association of Orange County. Jerry has been involved with apartments as a professional since 1988.

Frank Alvarez is the Operations Director and co-owner of Buffalo Maintenance, Inc. He has been involved with apartment maintenance & construction for over 20 years. He is also a lecturer & educational instructor. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com

Rental Housing Journal Metro · November 2016

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.

Advertise in Rental Housing Journal Metro Circulated to over 6,000 apartment owners, on-site and maintenance personnel monthly.

Call 503-221-1260 for more information www.rentalhousingjournal.com

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Rental Housing Journal Metro

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Rental Housing Journal Metro ¡ November 2016