Metro ( Portland ) RHJ May 2018 by Professional Publishing, Inc

May 2018

Rental Housing Journal Metro

2. Accommodating Disabled Tenants in Your Rental Property

7. Real Estate Exit Strategies

4. Are LED Light Bulbs the Best Option for Your Rental Property?

14. Application of Payments and 72 Hour Notices

9. How to Save Money and Water in Apartments 16. Dear Maintenance Men

5. RHAOregon President’s Message 6. Social Media Tenant Screening Risks and Fair Housing

18. Can Tenants Have Multiple Assistance Animals?

Portland/Vancouver

www.rentalhousingjournal.com • Professional Publishing, Inc

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

4 Outdoor Flooring Options for your Rentals

amaged or worn outdoor flooring, pavement and surfaces can be responsible for making your property look poorly kept. These surfaces can also endanger the safety of your tenants as cracks, holes and general wear make it easier to slip, trip and fall. Our expert contractors have provided a breakdown of common materials for outdoor flooring. We have included the pros and cons of each material to help you choose what works best considering your design preferences, pricing, weatherresistance and overall longevity. Number 1 - Natural stone is a beautiful outdoor flooring option Natural stone can present unique variegations in a variety of colors, which results in a beautiful, one-of-a-kind accent in your outdoor space. It can be customcut to be arranged accordingly to a preferred pattern and look, with irregular shapes being used for meandering mosaics and modular stones being used when a more regular and symmetrical appearance is desired. Pros • Extremely durable - natural stone is rather tough. It stands strong against the elements and wear and tear, usually requiring little to no maintenance. • Environmentally friendly and safe as a natural material, stone is not engineered utilizing chemicals or other substances that can be toxic to humans and the environment. • Affordable when local - a unique quality of natural stone is that local varieties ...continued on page 6 Professional Publishing Inc., PO Box 6244 Beaverton, OR 97007

Smaller Cities may be Pushed to Follow Portland Tenant Relocation Payments Ordinance, Landlord Attorney Warns

Portland landlord attorney has written to other city attorneys in Oregon warning them that they could soon see a push in their city for an ordinance similar to Portland’s requiring landlords to pay for tenant relocation. Portland attorney John DiLorenzo, who represents landlords in a lawsuit on appeal challenging the Portland tenant relocation ordinance, said he wrote the letter because “all kinds of city attorneys are interested in our case. “We have heard there are tenant advocacy groups approaching smaller cities in Oregon,” he said and he wanted the other city attorneys to have the background on the case and the filings. DiLorenzo letter to Oregon city ...continued on page 3

Potential for Higher Returns Lures New Buyers, Generating Competition Supply of For-Sale Listings Remains Tight, Boosting Prices

Marcus Millichap National Report – Manufactured Housing Research

ffordable housing need bolsters operations. Manufactured home communities are benefiting from rising single-family home prices and escalating apartment rents that are creating a shortage of affordable housing alternatives. This is especially prevalent in urban areas with strong employment gains, such as Salt Lake City or Denver. In these ...continued on page 10 PRSRT STD US Postage PAID Portland, OR Permit #5460

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Rental Housing Journal Metro

Accommodating Disabled Tenants in Your Rental Property

s a property manager it is fundamental to understand the laws pertaining to disability and accessibility for prospective disabled tenants. The maintenance checkup from Keepe this week involves 15 maintenance ideas to make your property more accessible to disabled tenants. Researching and studying actual accessibility law should be a priority to prepare and protect yourself. The Fair Housing Act and the Fair Housing Amendments Act make it unlawful to reject a prospective tenant because of their disability as you know. However it also prohibits asking a prospective disabled tenant about whether they are disabled and about the nature of their disability, visible or not. While such questions are unlawful, the law allows for clarifying whether a prospective tenant qualifies for demanding a rental unit designed for disabled tenants only, or for a unit designed to accommodate certain disabilities in particular. Accommodations are a core element to accessibility law. The law states that disabled tenants may request reasonable accommodations to be provided, added or allowed for them to use and access their living space and common areas within the property.

Disabled tenants request for accommodation should be reasonable Accommodating Disabled Tenants In Your Rental Property The nature of the accommodation requested should exhibit a reasonable relationship to the disability. Such reasonable requests include allowing a service animal to live on the property or a designated parking space. To handle requests properly, it is fundamental to have an open discussion with a tenant regarding their needs. Deciding what represents a “reasonable” request can be challenging considering that it can vary from case to case and property to property: the US Department

of Housing Development requires a “interactive process" for reaching a reasonable compromise between a tenant and property manager/landlord/ owner, generally justifying the rejection of demands for certain accommodations only when they represent an “undue” financial burden. Accessibility Through Property Modifications Requesting or making changes to a property fall into the category of “reasonable” requests that may or may not be granted. Before any modifications can be made, they must be approved by a property manager/landlord/owner in charge, who can ask the tenant to provide information regarding how proposed

changes are necessary and/or ideal for them. State laws can also apply to residential requirements, and should be considered when handling a request for building modifications. Why You Should Invest In Accessible Modifications Accommodating Disabled Tenants In Your Rental Property Generally, unless a property is considered to be federally assisted housing, disabled tenants are expected to arrange and pay for necessary modifications to the property. This being said, the following 15 tips have been provided to make residential units safe and accessible for prospective tenants who are disabled or who have particular needs pertaining to mobility and access. These changes can be significantly beneficial. It can make a rental property particularly appealing for tenants who value living in an accessible and safe space. Considering that disability law is more lax and challenging to apply uniformly for residential spaces, disabled tenants will likely also value their ability to find a welcoming space that they can trust to accommodate their needs, often ...continued on page 3

Rental Housing Journal May 2018

Rental Housing Journal Metro

Pushed to Follow Tenant Relocation ...continued from 1 attorneys on tenant relocation payments ordinance “You are no doubt aware of the efforts by the City of Portland to require landlords to pay “relocation payments” to tenants when their tenancies are terminated by use of “no-cause stated” notices, when landlords refuse to renew leases, or when landlords raise rents 10 percent or more over any one-year period. On March 7, 2018, the Portland City Council made this ordinance permanent and extended its application to landlords who own as few as one rental unit. “A copy of the ordinance is available at Ordinance 188849 . (“The Ordinance”). Last year, my clients initiated an action challenging the ordinance on several grounds. The Multnomah County Circuit Court dismissed those claims, but the judgment is currently on appeal. My clients have recently filed our opening briefs with the Court of Appeals. An amicus brief has already been filed on our behalf. The following is a summary of our more significant points: “The legislature has determined that rent control is a matter of statewide concern and proclaimed that no local government may enact any ordinance that either “controls the rent that may be charged for the rental of any dwelling unit,” ORS 91.225(2), or that is inconsistent with that prohibition, ORS 91.225(7). Notwithstanding the legislature’s unambiguously expressed intent to preempt local rent control legislation, the City enacted the Ordinance, which requires landlords to pay thousands of dollars to tenants upon the tenants’ demand when a landlord gives notice of a rent increase of 10 percent or more in a 12-month period—meaning the Ordinance penalizes rent increases that cumulatively total 10 percent or more in any rolling 12-month period. Tenants not required to use the money for relocation “The Ordinance calls the payments “relocation assistance,” but tenants are not required to use the money for that or any other designated purpose. Further, the requirement to make the payments is triggered solely by the size of the rent increase and is intended to limit those rent increases. By penalizing rent increases greater than a certain size, the Ordinance is designed to control the rent that may be charged. Accordingly, the Ordinance runs afoul of ORS 91.225(2) and ORS 91.225(7) which forbid the rent control aspects of the Ordinance. “In a separate provision, the Ordinance also imposes payment requirements when a landlord issues a “no-cause stated” termination; that is, the landlord

Accommodating Disabled Tenants ...continued from 2

exercises her state-granted right to terminate a periodic tenancy by giving notice without having to state a reason for the termination. See ORS 90.427. Under the Ordinance, a landlord cannot give notice and regain possession of the property at the end of the notice period, as the legislature has chosen to allow. “Instead, the Ordinance requires a landlord to give more notice than state law requires and also to pay thousands of dollars to the tenant before the landlord may regain possession. Given those requirements, the Ordinance is incompatible and with and contrary to ORS 90.427 and is preempted for that reason. “The Ordinance has yet a third provision that state law preempts. Where a landlord and tenant have a fixed-term lease, the Ordinance requires the landlord “to renew or replace an expiring fixed-term lease on substantially the same terms except for the amount of Rent or Associated Housing Costs” or pay relocation assistance to the tenant. That requirement destroys the very essence of a fixed-term lease, which by definition terminates without further notice or obligations. The Ordinance’s fixed-term provision is incompatible and cannot operate concurrently with state law authorizing fixed-term leases. “Finally, the Ordinance, in violation of the Oregon Constitution, impairs existing contracts because it applies retrospectively to contracts entered into before the Ordinance was adopted. “Before the Ordinance, landlords could raise rent or issue a no-cause stated termination without penalty. Tenants also had an obligation to vacate the premises upon expiration of a fixed-term lease. The Ordinance dramatically changes the landlords’ rights and tenants’ obligations by imposing significant penalties if landlords exercise their preexisting contractual rights, unconstitutionally impairing the parties’ contracts. “Needless to say, we feel we have a good chance of prevailing in the Court of Appeals. We anticipate that your City Council members might be approached by tenant advocacy groups urging they emulate Portland’s current regime. We therefore thought you would have an interest in following the progress of our appeal since the outcome will, no doubt, impact whatever proposed ordinance your city might consider. Below are links to our opening brief and to the amicus brief which has recently been filed.

becoming long-term tenants. Finally, addressing accessibility improvements to a property in a proactive manner makes it possible to avoid being unprepared when a prospective disabled tenant makes requests down the road. 15 Maintenance Tips For Making a Property Safe And Accessible For Disabled Tenants 1. Repair or remove carpet flooring that has become loose, broken tiling and/or any kind of uneven, damaged pavement. 2. Pave all walkways and driveways to render them regular and obstaclefree. 3. Enlarge all doorways on both interior and exteriors to at least 36 in. wide 4. Consider installing automatic systems allowing remote opening of doorways, garages and gates 5. Install ramps on all multileveled access points; our experts encourage having a qualified urban planning professional inspect the property and recommend adequate placement of ramps 6. Replace door knobs with accessible flat handles 7. Install non-slip flooring in bathrooms, kitchens, exterior walkways and any other surface that is likely to become slippery when wet 8. Install grab bars in the bathroom, ensuring that they are placed at the correct height and that can support the weight of an average adult 9. Consider installing particular accessible fixtures - such as toilets and showers - or begin by lowering toilets

and lavatories. 10. Accessible faucets are ideally switched on by motion sensors 11. Light switches should be lowered to be accessible for wheelchair users, or substituted for a motion-sensing lighting system 12. Mailboxes should be lowered or substituted for accessible models 13. If the unit is furnished, furniture arrangements should allow enough clearance for users of assistive devices to travel around comfortably 14. Consider implementing Smart technology home system; Smart tech automates several in-home, everyday tasks, which renders them accessible. Additionally, Smart tech is generally a worthy investment as it is a unique and practical asset for most tenants regardless of ability. 15. Upgrade to a side-by-side refrigerator: especially if your property is due for replacing outdated appliances - which is a beneficial investment considering that most newer appliance models feature energy-saving features - sideto-side refrigerators are ideal as they allow easy access to both refrigerating and freezing compartments Keepe is an on-demand maintenance solution for property managers and independent landlords. The company makes hundreds of independent contractors and handymen available for maintenance projects at rental properties. Keepe is available in the Greater Seattle area,

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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 info www.rentalhousingjournal.com Rental Housing Journal · May 2018

Rental Housing Journal Metro

Upcoming Events 5/11/2018

This is an easy disclosure form to keep your residents notified of planned utility outages. Specify which utility services and reason for planned interruption. You can designate the approximate starting and end times of the interruption. The form also tracks the method of how this form is communicated for your files.

Landlord Tenant Law (Bend) It's the Law: Four Notices, One Envelope: How a Multiple Termination Notice Strategy Can Save the Day

5/14/2018

Fair Housing for Maintenance

5/15/2018

SOLD OUT - NSPF® CPO® 2 day Certification Class

5/17/2018

Reasonable Accommodations

5/17/2018

Social Mixer (Eugene)

5/18/2018

Mold Awareness

5/18/2018

Marketing & Leasing (Salem)

6/6/2018

Landlord Study Hall: Fair Housing: Reasonable Accommodations

6/8/2018

It's the Law: Two States, One River: Understanding the Differences Between Oregon and Washington Laws

6/13/2018

HR Issues: Employee Engagement

6/13/2018

Landlord/Tenant Part II

6/20/2018

MWV Charity Putt-Putt Golf Tournament

UTILITY INTERRUPTION NOTICE DATE __________________________________________ PROPERTY NAME / NUMBER ___________________________________________________________________________________________________________________________________________________________________ RESIDENT NAME(S) ___________________________________________________________________________

___________________________________________________________________________

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

This is to notify you of a utility interruption that may affect this building and/or your unit during the following times (all of which are approximate): Starting

____________________________________

DATE

____________________________

TIME (am / pm)

and completed by

____________________________________

DATE

____________________________

TIME (am / pm)

5/11/2018

Form of the Month Utility Interruption Notice – M074 OR-WA

Utilities affected: Water

Hot water

Electric

Gas

Cable/Internet

Other

________________________________________________________________

Reason for interruption: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Actual notice of the utility interruption has been given to Resident as follows: Verbally to Resident at

____________________________

TIME (am / pm)

____________________________________

DATE

Left message on Resident’s answering machine at Notice posted on door of unit at

____________________________

TIME (am / pm)

Notice mailed to Resident by first class mail on

____________________________

TIME (am / pm)

____________________________________

DATE

____________________________________

DATE

____________________________________

DATE

(add 3 days for mailing only)

Notice given by other method allowed by written rental agreement at

____________________________

TIME (am / pm)

or .

____________________________________

DATE

Identify method:__________________________________________________________________________________________________________________________________________________________________________________ We appreciate your understanding and cooperation.

X OWNER/AGENT ____________________________________________________________________________________________________________________ ADDRESS

____________________________________________________________________________________________________________________

ON SITE

TELEPHONE

____________________________________________________________________________________________________________________

RESIDENT

MAIN OFFICE (IF REQUIRED)

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CHECK-IN/CHECK-OUT CONDITION

REPORT

TENANT(S): _____________________________ OR-RTG-24 Oregon_____________________________ ________ ADDRESS: _____________________________ ___________________UNIT: ______________ CITY: _____________________________ ______ STATE: ________ ZIP: _________________

PET AGREEMENT Rating Scale

= (E)Excellent (VG) Very Good

TENANT INFORMATION

(G)Good (F)Fair (P)Poor

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

DESCRIPTION OF PET(S) Windows

Stove/Racks

Blinds/Drapes

Out

BEDROOM 3

Ice Trays

Light Fixtures

Dishwasher

AGREEMENT

Counter Tops

Locks

TENANT(S): ________________ ________________ ADDRESS:

________________ ________________ Out CITY: ____ DATE:________ ________________ ________________ ________________ ________________

_________ STATE:

____ UNIT: _________ __________ ZIP: _________

48-HOUR NOTICE OF ENTRY

Pursuant to RCW 59.18.150, this is your WA-RTG-20 Washington 48 hour entering the dwelling notice that your

Blinds/Drapes

Rods

landlord or their agents unit and premises located at (Address) ________________ will be CHECK-IN/CHECK-OUT ________________ ________________ CONDITION REPORT ______________________________

Floor

Carpet/Vinyl/Wood 3) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ Disposal Vaccinations: Yes____ No____ License Number: ______________ Doors/Woodwork

Walls

Windows

Refrigerator 1) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ Vaccinations: Yes____ No____ Rods License Number: ______________ 2) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ Vaccinations: Yes____ No____ Floor License Number: ______________ Shelves/Drawer

Additional Security Deposit Required:$

WA-RTG-40 Washington

48-HOUR NOTICE OF ENTRY

Light Fixtures

TENANT(S): ________________ between the hours of (Date) and ________________ Doors/Woodwork ADDRESS: . ________________ (Time) ________________ ________________ ________________ (Time) CITY: __ Locks________________ The entry will occur ________________UNIT: ________________ for the following purpose: ______________ ___ STATE: ________________ ________ Rating CeilingsScale = (E)Excellent ________________ZIP: ________________ (VG) _ ________________ Very Good (G)Good ________________ ________________ ________________ (F)Fair (P)Poor Electric Outlets ______________ IN ________________ Out ________________ LIVING AREAS In Out ______________ KITCHEN In Out Walls

Cabinets Tenant(s) Tenant(s) certify that the above pet(s) are the only pet(s) on the premises. Ceilings understands that the additional pet(s) are not permitted unless the landlord gives ten Sink ant(s) written permission. Tenant(s) agree to keep the above-listed pets in the premises Electrical Outlets subject to the following terms and conditions: Floor

4. Management Database - Rentegration. com is an easy to503-933-6437 use, database driven softwww.Rentegration.com sales@rentegration.com ware. Most form fields are auto populated from the database. The mod-UNACCEPTABLE ules are allCOLOR in- USAGE tegrated and work together. For example, a customer can use the rentroll function to identify all delinquencies, apply fees, and create eviction forms with a few simple clicks of the mouse. Garbage Cans

Windows 1) The pet(s) shall be on a leash or otherwise under tenant’s control when it is outside the Antenna/Cable tenant’s dwelling TV unit. Blinds/Drapes 2) Tenant(s) shall promptly pick up all pet waste from the premises promptly. Fireplace 3) Tenant(s) are responsible for the conduct of their pet(s) at all times. 4) Tenant(s) are liable for all damages caused by their pet(s). Cleanliness 5) Tenant(s) shall pay the additional security deposit listed above and/or their rental agreement as a condition to keeping the pet(s) listed above. 6) Tenant(s) shall notBEDROOM allow their pets to cause any sort of disturbance or injury to the 1 BEDROOM 2 other tenants, guests, landlord or any other persons lawfully on the premises. Walls 7) Tenant(s) shall immediately report to landlord any type of damage Walls or injury caused by their pet. Windows 8) This agreement is incorporated into and shall become part of Windows the rental agreement exe Blinds/Drapes -cuted between the parties. Failure by tenant to comply with any part of this agreement Blinds/Drapes shall constitute a material breach of the rental agreement. Rods

_____________________________ Floor Landlord

Light Fixtures

Doors/Woodwork

BATH ROOM

Locks

Ceilings

Electrical Outlets

BATH ROOM

Towel Bars

Electricity

Electric Outlets

Sink & Vanity

BEDROOM 1

Hot Water

Smoke Detectors

Tub/Shower

Walls

Blinds/Drapes

may be reproduced without written

Toilet

BEDROOM 2

Walls

Windows

and mail.

Smoke Detectors

Blinds/Drapes

Cleanliness Heating

Ceilings

Post and Mail:

if served by post

Light Fixtures

Doors/Woodwork

Locks

Ceilings

Windows

Services

Floor day for compliance

Electric Outlets

Floor

Garbage Cans

Fireplace Plumbing

Blinds/Drapes

Personal Service:

Rods

Shelves/Drawer

Disposal

Dishwasher

Counter Tops

Cabinets

Sink

Phone

Windows

Refrigerator

Method Ice Traysof Service:

* Add one additional

Electric Outlets Ceilings

Light Outlets Electrical Fixtures

TV Antenna/Cable Essential

Doors/Woodwork

Walls

Stove/Racks

Towel Bars

Sink & Vanity

Toilet

Tub/Shower

______________________________ Floor Tenant ______________________________ Light Fixtures Tenant

BEDROOM 3

Walls

Landlord

Windows

Blinds/Drapes

Rods

Floor

Carpet/Vinyl/Wood

Light Fixtures

Fan (Exhaust) Doors/Woodwork

Floor Locks

Rods

permission.

Blinds/Drapes

Rods

Fan (Exhaust)

of this form may Floor be reproduced without Electric Outlets

Rods

Floor

written permission.

Light Fixtures

Floor

Light Fixtures

Doors/Woodwork

Locks

Essential Services

Plumbing

Locks

Ceilings

Heating

Ceilings

Electrical Outlets

Electricity

Electric Outlets

Smoke Detectors

Hot Water

Smoke Detectors

of this form may

be reproduced without

written permission.

DO NOT change the color

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Rental Housing Journal May 2018

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President: Ron Garcia • Vice President: Phil Owen President Elect: Mark Passannante • Past President: John Sage Secretary: Lynne Whitney • Treasurer: Sandra Landis • Office Manager: Cari Pierce

RHAOregon President’s Message

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

A New Normal

by Ron Garcia President, RHA Oregon

y son came home from college for the weekend and we got a quick chance to catch up. There have been a few things I have asked him to do lately, and I wanted to know if he had gotten to any of them. To get his attention, I asked him to PLEASE put down his iphone for a minute, so we could actually talk. This is something which is nearly impossible to do so I have learned to talk to him with an ever-present blue glow on his forehead while he remains perpetually immersed in cyberspace, typing something at hyperspeed with his thumbs. Anyway… I told him that I emailed him a copy of his tax return. He told me that he never checks email. I let him know his refund could be mailed to him. He let me know he never goes to his post office box. I reminded him that I called and left him a message to explain all this. He reminded me that he never listens to voicemail. So he has no email; no snail mail; no voice mail, yet he spends 24 hours a day

on his “smart phone?” What could he be doing without these normal apps? He looked at me as if to say “are you kidding??” Text, Instagram, Snapchat, Netflix, Twitter, Amazon, Facebook, YouTube, Sports updates, Photos. My first impulse is to consider him a misguided youth. He doesn’t seem to be concerned with what’s important in this world. Then in a flash, I got it. He is concerned – but this is his world now. Maybe, I mused, the truth could be that our world is changing. A new normal… Maybe I’m being left in the past? Next Gen is here. (Wow, I wonder, is that why AARP seems to start at so young now? I mean 50? C’mon! Who thinks of that as old age! I’m 64. But when the Beatles wrote that song “When I’m 64” they were talking about OLD people, not people like me. It’s so surreal, as if time just keeps marching on…) Anyway… I am watching as our industry is turning Next Gen too. And I am similarly disoriented by all that is happening within the rental housing business. There used to be some simple landlord

rules. Nowadays things aren’t so crystal clear. In fact, if you are managing a rental with the following list as a guideline beware! You may be walking in the past. Things like: • Charging market rent. • Screening the applicants thoroughly. • Only renting to those who qualify. • Allowing or not allowing pets, as desired. • Collecting a proper security deposit to insure against future issues. • Choosing to sign a lease or a month to month agreement. • Determining if the tenant should stay orleave at the renewal date. • Terminating a rental agreement if it is not working out anymore. • Raising the rent if desired. • Doing the maintenance and repairs that are necessary. • Electing not to do what is deemed unnecessary. • Requiring the tenant have insurance that cover their negligence. • Billing the tenants for damages that they cause. • Making sure they don’t keep repeating

the same problems over and over… It all seems normal, but there is a new normal emerging. To know if you are participating in today’s real-world rental market, here are a few test questions: What is wrong with anything on this list? If your answer is “nothing” it may mean you are not aware of Next Gen rental property management, and you are beginning your descent into an obsolete past. How do you feel about Tenants’ rights? If you have an attitude that is not positive, it may mean it’s time for you to re-boot your mainframe ideologies. Are you kidding me?? If you asked this, it’s time to get more involved with Rental Housing Alliance Oregon, and learn. Lastly, is there an app for any of this? Maybe - but it could require learning to type with two thumbs at 90 words a minute while listening to rap music and taking selfies. At least, that’s what my son is doing now. •

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Rental Housing Journal · May 2018

Rental Housing Journal Metro

Social Media Tenant Screening Risks and Fair Housing By Ellen Clark

ave you thought about using social media tenant screening as a way to checkout potential tenants on social media or checking on current residents on social media? The Grace Hill training tip of the week focuses on this issue and the Fair Housing Act. Social media can be a tempting tool to find more information about tenants and

prospective tenants, but the information you find can leave you vulnerable to discrimination claims. But what about looking up applicants or residents on social media? Can that be problematic from a fair housing perspective? Let’s take a look. First some background as the topic of social media and fair housing is back in the headlines. In March, fair housing organizations

filed a lawsuit against Facebook, accusing the company of allowing real estate companies and landlords to exclude women and families with children from seeing certain housing ads. The lawsuit, filed by the National Fair Housing Alliance in U.S. District Court in the Southern District of New York, alleges that the world’s largest social network still allows advertisers to discriminate against legally ...continued on page 13

Outdoor Flooring Options ...continued from 1 are generally more affordable. Purchasing a type of stone that is characteristic to your area gives you the option to source materials in a more eco-friendly and affordable way. • Versatile - natural stone can be used to pave a variety of outdoor spaces - from driveways and walkways to pool decks. While some materials are particularly sensitive to temperature and moisture, making it necessary to consider whether using them in a particular area of your property will make them more prone to damage, stone does not make this a concern. Cons • Longer installation time - installing stone pavements requires very precise planning and is typically a rather labor-intensive project, which means that completing the project will generally take longer. • Can be pricey - considering that, as mentioned above, installation is labor intensive and that certain varieties of stone will have to be sourced from places that are not located nearby, a natural stone pavement project can be more expensive. Number 2 – Wood is a common outdoor flooring Wood is one of the most common flooring materials utilized for decks and porches, and has been a favorite for generations. Pros • Visual appeal and versatility - the natural look of wood - with numerous colorations and designs made available by all the different varieties of wood that

exist - is preferred by those wanting to achieve a warmer or one-of-a-kind, custom look. • Local is more affordable - as for natural stone, turning to locally-sourced varieties of wood will make it more affordable to opt for wood. Cons • Vulnerability and durability - wood is one of the most sensitive materials, being vulnerable to scratches, discoloration from prolonged directed sunlight exposure, as well as rotting and warping following moisture exposure. Opting for wood will mean keeping in mind that you will need to plan for protecting your investment. • High maintenance - as a delicate material, regular preventative maintenance will become a necessity, especially with wood requiring to be regularly sealed. To avoid letting wood pavements to become damaged and worn, it is fundamental to be ready and expect to be investing in regular maintenance help frequently. Number 3 – Concrete outdoor flooring Concrete pavements are simple. Their simplicity can make them the ideal element to feature along with minimalist, modern décor. Or, make them a definite “no-no” for those wanting their outdoor flooring to be a more visible accent piece. Pros • Accessible - concrete slabs are inexpensive (generally costing a third of what natural stone would cost) and can be laid out by most contractors. • Durable - overall, concrete requires

little to no maintenance. Concrete pavers are most resistant and preferable to slabs. • Customizable - while this comes at an extra cost, modern advancements in manufacturing have made it possible to stamp concrete to resemble the textures of other types of pavements, such as brick and stone. Cons • Cracking and chipping - prolonged exposure, especially to cold or harsh weather, can result in concrete chipping and cracking on the long run. Those cracks can be difficult to repair in a way that does not make the space look “patched up.” Our experts point out that while this is common for concrete slabs, concrete pavers are less likely to exhibit this quality. • Slipping hazard - concrete can easily freeze when temperatures drop. Slipping becomes a serious concern during the winter months. • Simplicity - to some, the look of concrete is rather bleak. Indeed, the simplicity of concrete might not be ideal for those wanting pavements to contribute to the overall aesthetics of their exteriors by adding a unique touch of color or texture. Number 4 – Tile outdoor flooring Tile is a common pavement type. It allows you to achieve both uniform, subtle pavements but also incredibly intricate decorative designs and contrasts. Pros • Design potential - tile is highly-customizable and makes it possible to cre-

ate beautiful accents and designs for your outdoor areas. • Easy to install - unless one opts for a more elaborate design, installing basic tile is an easy project that contractors can complete quickly. Cons • Slipping - tiles freeze easily and become incredibly slippery when wet. To avoid dangerous falls, our experts highly encourage considering highly slip-resistant types only. • Cracking - freeze-thaw cycles take a serious toll on ceramic tiles, which can easily crack and chip following repeated exposure. Again, our experts find it best to only consider denser tiles that are formulated for the outdoors. • Grout maintenance - on top of concerns that have to do with maintaining the tiles alone, the grout joining them together adds an extra element to take care of. Grout can crack, stain and chip off over time, which is why consulting the manufacturer or a trusted contractor on what an ideal upkeep schedule would look like is necessary. Summary: As the weather starts to warm - and dry - up, there is no better time to tend to the needs of your property’s outdoor flooring. The weather should make it easy and usually fast to complete flooring projects, but it also should be a reminder signaling that now is the best time to check your property to assess whether any wear or damage has occurred over time. •

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Rental Housing Journal May 2018

Rental Housing Journal Metro

Real Estate Exit Strategies By Cliff Hockley, President Bluestone and Hockley Real Estate Services

eal estate investors are facing the interesting challenge of where to put their money once they have sold their real estate assets. As most of us have experienced when selling real estate outright, there are always the significant state and federal tax bills to be considered. Unfortunately, there is virtually nothing to trade into because investors are making money and are hesitant to part with a good thing. Many of these investors are baby boomers who are expected to live for another twenty or thirty years. Baby boomers are currently an average age of 55-70 years old, or birth years ranging from the 1940s to 1964. What is an investor to do if they want to exit their real estate investments? Options There are other several options available to an investor as they plan to exit their real estate investments. • They can pay taxes when they sell it • They can hold on to their property (not sell it) and leave to heirs • They can use a 1031 exchange to trade into another property • They can sell their property and trade into a Delaware Statutory Trust • They can trade their property into a

Tenant in Common (TIC) investment • They can donate to a Charitable Remainder Trust • They can sell and carry the paper (using a contract or a trust deed) also known as an installment sale Paying taxes The investor can convert their assets to cash and reinvest. Pros: 1. The investor does not have to manage those assets anymore or deal with the property problems, tenant issues, and ever-changing laws 2. They have cash to gift to their heirs or spend 3. They can gift the money to a charity Cons: 1. Capital gains taxes (federal and state), transfer taxes, depreciation recapture, and the 3.8% net investment gain tax add up. Holding the Property Retaining your investment: Most investors have had success with this over the last 10 years, as the Federal Reserve kept lowering interest rates and they could refinance at equal or lower rates. As we move forward, and inflation looms and interest rates increase, this strategy may not be as viable or profitable. Use a 1031 Exchange Selling your property and purchasing

another using a 1031 exchange will delay the capital gains and other taxes you might have to pay. Pros: The investor can go about this in many ways using: 1. Forward exchange 2. Reverse exchange 3. Construction exchange Cons: 1. They only have 45 days to identify a property and 180 days to close, and that may not be enough time in a supply constrained market. 2. With the current supply being so limited, they might buy a lower yielding property or a property that is not of a quality (or in as good a location) as the property you are selling. Trade into a DST The investor can place their money in a Delaware Statutory Trust also known as DST - similar to a tenant in common investments. Delaware Statutory Trusts or DSTs are an alternative for 1031 exchange investors seeking replacement properties offering the potential for monthly income and diversification without any on-going landlord duties. Pros: 1. They don’t have to worry about their sale creating a taxable event , since they can use a 1031 exchange to get into the DST.

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Cons: 1. 1031 DST properties are illiquid 2. 1031 DST investors invest in a pool with a sponsor and lose day to day control of their asset and money 3. Once the DST offering is closed, there can be no future contributions to the DST by either current or new investor. If there is a shortfall in cash or a need to deal with major capital improvements, such as a new roof or parking lot cash profits that should be going to your pocket, will be kept by the sponsor to bulk up reserves or to fund these capital improvements. 4. DSTs are hard to exit because the investor needs to find a new investor to take their position. There might be a discount from a buyer because they are a fractional investor and have no power to make any decisions. Trade into a TIC They can trade into a “tenant in common (TIC) partnership, where a sponsor will assemble a group of accredited investors to share in the ownership of a property or properties. Pros: 1. Shared risk 2.Ususally an experienced sponsor 3. The investor does not have to be involved in the day to day operations of the property ...continued on page 19

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Rental Housing Journal May 2018

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How to Save Money and Water in Apartments By John Triplett Rental Housing Journal

mm) meters. It is likely these rates will rise as the cost of providing water increases.” The Michigan State University study, called “Affordable Water In the U.S. – A Burgeoning Crisis,” says “If water rates continue rising at projected amounts, the number of U.S. households unable to afford water could triple in five years, to nearly 36 percent.” So Lamondin said it's actually a growing problem not just for apartment owners but “pretty much anyone paying their water bill right now because of our aging infrastructure and certain stresses on the water supply.” “I think part of the reason why we've actually seen a lot more interest in water conservation over the last few years is the fact that it's hitting people's pockets in a meaningful way,” he said.

ow to save money and water in apartments is the passion of entrepreneur Richard Lamondin Jr., who has founded a company to take on the challenge of both saving water and helping apartment owners, landlords and property managers make their apartment communities more green and eco-friendly. In an interview with Rental Housing Journal, one entrepreneur, who is in the middle of a large 10-property project in Dallas to help the Dallas-Fort Worth area with water conservation, talked about his passion and his company. The project is expected to save multifamily properties there an estimated 108 million gallons of water this year alone. The company is expecting to save two billion gallons of water over time. How leaking toilets are key to saving money and water in apartments “My brother and I grew up with a father who is a real estate developer, so we basically grew up on construction sites,” said Richard Lamondin Jr., CEO of Ecosystems. “But we are also environmentalists. We began researching the water situation here in the U.S. and found that 20 percent of all toilets in the U.S. right now are leaking as much as 200

The Ecosystems team in Houston where they did 1,300 bathrooms. Lamondin is back left top.

gallons of water a day. “I can go on with the numbers, but homes waste one trillion gallons of water every year. So while we're trying to find solutions on the grand scale, a lot of times what's being overlooked is the basic building block of water usage in apartment communities, which is the bathroom,” he said. Seattle and Atlanta two of highest

cost cities Atlanta, Georgia and Seattle, Washington have some of the highest water rates in the country at $325.52 and $309.72 per month for a family of four, respectively, according to a Michigan State University study. “These rates are based on 100 gallons (378.54 liters) of water per person per day including water, sewer and storm water for 5/8 inch (15.875

Apartment bathrooms are the initial focus “We audit a property’s water usage,” Lamondin said. The audit is based upon the building structure plus any potential local incentives and other contributing factors. Then they create a program based upon that property. “Most of the time what that includes is full replacements of all water-using fixtures in the bathrooms and kitchens. ...continued on page 12

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Potential for Higher Returns Lures New Buyers ...continued from 1

two metros, vacancy in manufactured home parks posted triple-digit drops to average below 2 percent. The lack of new communities and the redevelopment of older parks also contribute to a tightening vacancy rate as displaced tenants seek alternative placements for their homes. An aging population benefits manufactured home parks. During the next 10 years nearly 18 million additional people will reach age 65. Many of these seniors will move to resort or retirement manufactured home communities, many of which are in the Sunbelt. The number of people

age 65 and older will continue to swell through 2045 as the baby boomer generation ages. This bodes well for age-restricted communities. Operations tighten across the nation. During 2017, vacancy in all subregions reached a 10-year low, boosting rent growth and raising NOI. These factors combined with higher cap rates than many other real estate product types are intensifying competition for manufactured home communities and pushing prices up.

Investment Highlights • Buyers are flush with capital amid a scarce supply of available listings throughout most areas of the nation, which has resulted in more off-market transactions. Heightened demand is producing aggressive pricing that keeps cap rates steady despite the rise in interest rates. • In some areas of the country, for-sale listings are further reduced by resident groups in manufactured home communities exercising their right of first refusal and making offers to purchase the park. • Exchange buyers remain active. Many of these investors are trading out of other commercial real estate product types, such as apartments, and are unfamiliar with owning a manufactured home community. In many instances the potential for higher returns is luring them to consider park ownership and they are willing to pay a premium to own, helping to drive prices higher. • Communities on well and septic are still slower to trade. Some buyers are searching for a value-add opportunity in parks that have the potential to be hooked up to these city services.

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Rental Housing Journal May 2018

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Potential for Higher Returns Lures New Buyers

...continued from 10

West Region – Mountain Trends Vacancy: The vacancy rate contracted 110 basis points to 6.4 percent during 2017. The rate has fallen 490 basis points from the cyclical peak in 2011. The Denver market recorded the tightest vacancy among U.S. metros at 1.2 percent. Rents: The average monthly rent posted a 3.7 percent rise to $528, up 17percent during the last five years. Denver holds the highest average rent in the subregion at $660 per month, after a 5.4 percent gain in 2017.

percent to an average of $549 in 2017, the highest rent by subregion. Rent in coastal California properties can be double the average. West Sales Trends Cap Rates: Buyer demand for communities remains intense, though a lack of marketed properties reduced

trading activity last year. Cap rates for quality assets typically begin in the 4 percent range. Prices: The average price jumped 30 percent to $52,600 per unit in the West. Assets in the desired coastal communities can top $100,000 per unit.

Pacific Trends^ Vacancy: Rising home prices and strong job growth created a tight housing market in the Pacific, resulting in the lowest vacancy among subregions at3.2 percent in 2017. Rents: Monthly rent surged 4.2

The information contained in this report was obtained from sources deemed to bereliable. Every effort was made to obtain accurate and complete information; however,no representation, warranty or guarantee, express or implied may be made as to theaccuracy or reliability of the information contained herein. This is not intended to bea forecast of future events and this is not a guaranty regarding a future event. This isnot intended to provide specific investment advice and should not be considered asinvestment advice. Sources: Marcus & Millichap Research Services; Datacomp-JLT;CoStar Group, Inc.; Institute for Building Technology and Safety; U.S. Census Bureau. Manufactured Home Communities Group Michael L. Glass First Vice President National Director 216) 2642000 Prepared and edited byNancy Olmsted Senior Market Analyst

Research Services For information on national manufactured housing trends, contact: John Chang First Vice President, National Director Research Services Tel: (602) 707-9700

Rental Housing Journal · May 2018

•

Rental Housing Journal Metro

Save Money and Water ...continued from 9 So we'll change out toilets, shower heads, sinks, or even just the sink aerators ,” Lamondin said. They also inspect the apartment community looking for: • Any sinks, tubs, valves and supply lines that may have an existing leak • Any ground leaks throughout the property ”It’s very common to come across toilets that use three-and-a-half gallons per flush. Now those toilets were manufactured usually in the 70's and 80's and haven't been changed since.” And when the company is done, “We're really saving anywhere from about 30 percent to as much as 68 percent off of water bills,” Lamondin said. Installing new toilets without disrupting tenants “These days, you're getting toilets that are flushing 0.8 to one gallon per flush with more power than those big guzzling fixtures. It is basically a simple math problem. “If you take a three-and-a-half gallon per flush toilet and cut 75% off its water use, it's going to save you money. The same thing in the shower heads. A typical shower head uses two-and-a-half gallons per minute. We typically put in one-anda-half gallon per minute shower heads, and that saves 40 percent off their shower usage right there. “We try to make conservation unavoidable. We do not seek to disrupt any person’s daily routine, that's really embedded in our philosophy,” Lamondin said. “Sometimes we find some fun things when we lift up the toilets. And, that is

another added value of the program. “For instance, we may lift up the fixture and find there's a rotted floor under there. Or, there's some cracked item or a leaky valve that may in the future cause a catastrophic leak. So we go in and harden those properties against those leaks in a multi-floor building. “We're in and out usually within half an hour or 45 minutes, very quickly. We try to disrupt residents as little as possible. I would say that a lot of times the management, especially property managers on site, really appreciate the efforts we go through to handle that. We have their maintenance teams opening doors for us. We have a member of the staff with us at all times so residents see a friendly face. We really make an effort to make this a positive project,” Lamondin said. Big projects around the country to save money and water in apartments Lamondin said his company works with another company called BH Management Services, LLC which has expanded to a nation-wide project. “We're doing more than 14,000 bathrooms with them over the next year nationwide. In Arizona, we did 4,400 bathrooms in the fourth quarter of last year. We're still working on getting the savings numbers off of that, but they're going to be saving hundreds of millions of gallons of fresh water. I have no doubt about that,” he said. Denver project provided return on investment in nine months “Last year we did a project in Denver for one property.” Lamondin said. “It used to be called the Breakers and now

it's called Tava Waters,” and is managed by BH Management Services. “It was about 2,500 bathrooms in one shot. We did it in three months. Denver Water didn't think we could do it in five months. They gave our clients the largest rebate in Colorado history. it was about $376,000 on that project. Their return on investment (ROI) was about nine months. “This was the largest toilet rebate we’ve ever done,” Jeff Tejral, Denver Water conservation manager, said in the great toilet payback on the Denver Water site. “It was an impressive project, and they’re saving a lot of water by using some of the most efficient toilets available.” Denver Water estimates that Tava Waters will save around 33 million gallons of water each year by making the changes. Before the changes, Tava Waters residents were using about 51 gallons per person, per day; after the renovations, each person is using around 33 gallons per day. The practical side of working with a single vendor Mike Watkins, Director of Construction, West, for BH Management Services, said, “In the very beginning of an acquisition or refinance, we're working with an engineer on a green study report to identify the different items and areas where there could be efficiencies, electrical or water. A lot of our projects to date have been focused around water savings. “EcoSystems really stood out to me,” Watkins said. “I was involved in the Denver project where we had a short time frame of less than 90 days to do about 2,500 bathrooms. When I got involved with the program, and looked at how to roll this out nationally, we asked ‘Does it make sense to have multiple different vendors throughout the country doing it, or does it make sense to work with one vendor who has it down?’ “Based on their response and how they performed on the project in Denver, it was a no-brainer to work with them on the project nationwide That way, we have similar crews going on site and into tenant’s units, rather than having multiple different vendors. This has allowed EcoSystems to become more efficient working with our projects and our managers to continue to deliver a high level of customer service to our residents. ,” Watkins said. Freddie Mac Green Up Program for borrowers “BH Management has the Denver property but also 269 properties and just over 80,000 units under ownership and management,” said Kate Miller, Senior

Professional Real Estate Photography

Asset Manager for BH Management Services. “We started participating in the Freddie Mac Green Up program when it was initiated in early 2017. The benefit here is Freddie Mac recognized that in most multifamily apartment communities, the tenants paid their own utilities such as electric, gas, water, etc.. Previously, multi-family investors didn’t have a strong motivation to focus on green improvements. However, Miller said, “We are always cognizant of our footprint. We want to save resources, both utility-wise and financially, and we're always trying to do the right thing. We’ve taken full advantage of the Freddie Mac loans since they were introduced, which provide for funds to be rolled into the loan at favorable loan rates to implement green initiatives within the individual units. “It's a program that we're really excited about,” she said. Of their 269 properties “we've got 55 properties to date that are participating in the Green Up initiative. It's really something that we're proud of. It takes a lot of work. It takes a lot of logistics. But it's fun to see these projects wrap up. EcoSystems been very helpful to us in tracking, so going forward we'll be able to see the benefits of the investments being made in these properties,” Miller said. City rebates make a difference “Municipalities often offer rebates to encourage owners to participate in energy saving practices ,” Watkins said. “Denver had a phenomenal rebate. It basically paid for more than half of the project, which was fantastic.” “In Phoenix, we've taken advantage of smaller rebates; every market and county has their own standard for what is offered. But as far as all the cities, between Phoenix and Tempe, everything was fine. I can’t think of anything that stood out to me, where it didn't go smoothly,” Watkins said. Return on investment for apartment owners Apartment owners can finance much of the cost for the water saving initiatives. “Right now, there's a fantastic financing opportunity through Fannie Mae and Freddie Mac for any owners purchasing or refinancing,” Lamondin said. The programs go by different names, but “they all boil down to basically green loan programs.” “And for owners, that can save 25 percent on their utility costs. They're able ...continued on page 13

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Social Media Tennant Screening ...continued from 6 protected groups, including mothers, the disabled and Spanish-language speakers. Diane Houk, lead counsel for the alliance, told ProPublica this type of discrimination is especially difficult to uncover and combat. “The person who is being discriminated against has no way to know” it, because the technology “keeps the discrimination hidden in hopes that it will not be caught,” she said. Facebook disputes the housing groups’ allegations. “There is absolutely no place for discrimination on Facebook. We believe this lawsuit is without merit, and we will defend ourselves vigorously,” said Facebook spokesman Joe Osborne told ProPublica. A few weeks ago we talked about how social media communications are often considered advertisements, and discrimination in advertising is prohibited by the Fair Housing Act. It is illegal to create, publish or distribute housing ads that discriminate, limit or deny equal access to housing because of membership in any federally protected class. Using social media tenant screening It may be tempting to use social media to learn more about prospective residents during the screening process. However, on social media you are likely to find out information that defines someone as protected class, such as their religion, that they have children, or that they have a disability. This could make you more likely to deny someone housing based on those characteristics, which could make you more vulnerable to discrimination claims. If you think what you find on social media could influence, or even appear to influence, your decision about leasing to someone, then steer clear of investigating on social media. The best thing to do is follow your standard application and qualification procedures consistently for all prospects. If you connect with residents on social media, think carefully before acting on information you find. Using social media to check on current tenants Imagine you have a couple living in a one-bedroom apartment home. Your occupancy limits specify two people per bedroom. On social media, you learn that the couple is in the process of adopting twins. What should you do? In this case, it is best to not take any action.

Rental Housing

Even making a note of this in the residents’ file could be problematic if you face a fair housing claim. It could appear as though you used the couple’s familial status in making decisions, which could violate fair housing law. What if you come across something concerning about residents on social media, such an indication that they lied on their application or weren’t honest in an accommodation request? Consult with your supervisor and legal counsel before taking any action. If you act on information and are wrong about what you found, you may put yourself at risk for a fair housing complaint. Summary on social media tenant screening and fair housing In this age of social media, it is important to understand that you are responsible for acting in a non-discriminatory way, no matter what form of communication you are using. You must be just as mindful of fair housing laws when sharing information and interacting with customers online as you are when sharing information and interacting in print and in person. Ellen Clark is the Director of Assessment at Grace Hill. Her work has spanned the entire learner lifecycle, from elementary school through professional education. She spent over 10 years working with K12 Inc.’s network of online charter schools measuring learning, developing learning improvement plans using evidence-based strategies, and conducting learning studies. Later, at Kaplan Inc., she worked in the vocational education and job training divisions, improving online, blended and face-to-face training programs, and working directly with business leadership and trainers to improve learner outcomes and job performance. Ellen lives and works in Maryland, where she was born and raised. For nearly two decades, Grace Hill has been developing best-in-class online training courseware and administration solely for the Property Management Industry, designed to help people, teams and companies improve performance and reduce risk. •

Save Money and Water ...continued from 12 to receive significant reductions of up to 30 basis points on the loan in basis points, basis point discount, sa well as receive back much of the cost of the project that they implement through rebates.” Whose quote is this? “So, for example, that project in Denver was one of the early ones for that program, and they received, I don't know officially how much, but I think about 30 basis points off of their loan in addition to the water savings. We've seen a lot of growth and a lot of large owners taking advantage of this program lately,” Lamondin said. “I'd say about 18 months is our average ROI. We've had as quickly as three. When we do our due diligence, we ask the owner what their tolerance is in terms of an ROI. And if it goes above that - it's the least favorite part of my job - but we recommend not performing projects if something doesn't meet roughly about a 24- to 36-month ROI. “We really understand the importance from a business perspective in doing this work. But I would say right now anything built before 2000 has significant potential from a conservation standpoint. And there's about 20 million or so bathrooms in the U.S. that meet that criteria just in the multifamily industry,” he said.

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The Buyer was in a 1031 and maintenance checkup this week provided on ways to petprotecti out. hadThe a Buyer proof ng your investm be sure you are s huge rental property to was in a 1031 to sort it by Keepe focuses on ways to pet your ent and income In a similar situation, another clientamount of tax penalty at risk.huge well as be proof amount of and had a as protecting your investment sure you arekeeping your tenants In a similar situation, tax penalty your rental property to be sure you was recently bitten by the prepayment happy. another client and income at risk. Waysasto In a similar was recently bitten wellare as keeping your tenants pet protecting your investment and income penalty snake. She refinanced a property, by the prepayment as happy. was recently situation, another client with a prope proof your rental penalty bitten by the well as keeping your tenants happy.Ways to pet assuming that she was going to hold it for snake. 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Then, minimize property damage by investing buy another require addition months after her refinance, and work, investment opportunity surfacedsixthat out of the al six another propert y in durable, long-lasting solutions. While they may require designe makeovers opportunity surfaced months after her refinancblue - just d to thoroug additional needed her to come up with investment more costs and work, investm hly pet-proo thatent opportu e, another While they may require additional most secure needed property makeovers her to come up f are the cash. Her prepayment penalty cost way to protect nity surfaced for with designed to thoroughly needed more her costs and work, property makeovers increase the a propert y Her prepayment penalty that pet-proof to come that small project was $ 45,000 -cash. are the safety of and that’s up with cash. cost for secure way to protect pets. Her prepaym designed to thoroughly pet-proofmost that small project was more 1 - and are the a property Vinyl, $45,000 that is no ent longer $ 45,000that available to linoleum and increase the safety of penalty cost - that’s small project most secure way to protect a property tough, imperm pets. for tile and invest in another project. Using a $45,000 was $ 45,000 6 CAP that is no longer available $45,000to that eable and scratch floors are by Cliff Hockley 1 - Vinyl, linoleum increase the safety of pets. invest - that’s in another project. is no longer and tile Convert she lost $750,000 in upside – a significant by Cliff Hockley resistant. ing existing floors are Using invest a 6 CAP tough, impermeable available to flooring into in another she lost $750,000 in 1 - Vinyl, linoleum and tile floors and scratchthose are hard loss - and durable alternat are hard hard opportunity are by Cliff Hockley but she had aare upside – a significant to one avoid, resistant. better clients to avoid, have have had to avoid, of and my she lost $750,00 project. Using a 6 Converting my clientsmany been loss and ives existing flooring into have run-ins reduces the - butmyshe counsel CAP tough, impermeable and scratch resistant. significa clients 0 in upside had have many thatwith manycounseling needed the balance ing run-insntly a better have run-ins with prepayment of had one of likeliho the cash.with been clients penalties. loss - but had opportunity – a significa od of for a penalties. durable have that needed prepaym clients long that results she had a Converting existing flooring intothose be careful of prepayment been counseling alternatives for time theent a toThree clients balance a timeflooring one of damage significantly Three years long penaltie of s.the cash. Three better opportu nt fromfor years ago, prepaym that needed I hadpenaltie to be careful a clients (athat Buyer)years reduces the activity ago, When Idoes a ago, I had a had aent prepayment the likelihood of prepayment client long time those durable alternatives significantly the balance nity to be their (a Buyer) careful lurk everywh of prepayment of pets of flooring potentia that When penaltiesthatthat today’s that was damage was about was and about doesclient of the cash. l ‘indoor to close (a Buyer) about onmortgag a transaction a prepaymen penalty ere to close occur? results everywhere to close accidents’. lurk onina transaction When e environ penalties t reduces the likelihood of flooringthat that oflurk the activity in when everywhere on a transact when the penalty damage from today’sin does a prepay prepaymto pets and when environment. mortgage the Seller refused occur? the ment. Irefused Seller don’t The entclose. Seller refused ion • Some potential ‘indoor prepayment liketo Seller penaltie penalties I don’t like ment mortgage that results from the activity of their close. environment. I don’t s because accidents’. The (or•inabillike pets and today’s prepayment to close. The penalty occur? your Seller had Seller Some prepayment had not checked ...contin penalties not checked his prepayment not occur because checked limit ity they to pay ued had penalties (or on off y as an investor loan) hisa prepayment theyonflexibilit prepayment penalties because they typically on page their potential ‘indoor accidents’. in on his prepaym limit penalty, • Some inabilpenalty, flexibility prepayment penalty, ity to andinvestor at8theBuyer Professional yourlimit last and and minute pay and as (as found at off out an the at ent a Seller) loan) both last the following the ...continued minute penalties (or cases: typically occur your flexibility as an (as both last minute in real estate, investor ity to in on (as both out itfound Buyer PO page was going Inc.,Seller) 8 Publishing pay off a and it was in was inabilBox 6244 the following going found going to be but be $250,000. In itthe real to to be $250,000. they In estate, ...continued onProfessional but they the end, $250,00 cases: out and Seller) inBeaverto page 8 Buyer real estate, the followin loan) typically occur end, thethe they the Buyer assumed n, OR but Buyer Publishing Inc., Buyer assumed the the existing CMBS 97007 in g cases: assumed the 0. In the end, ...continued existing PO Box 6244 CMBS on page 11 existing CMBS PRSRT STD Professional Publishing Inc., Beaverton, OR 97007 ...continued on page PRSRT STD US Postage 11 PRSRT STD PO Box 6244 US Postage ...continued PAID US Postage Beaverton, OR 97007 on page 11 PAID Portland, OR PAID

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Millennials like apartments to focus on green initiatives So for example, for BH Management, “We did a projection that they're going to save about 400 million gallons of fresh water annually and just from the projects we're going to do for them within a calendar year,” Lamondin said. “Those are significant numbers that continue to build on each other. “I'm 30. A lot of times people in my generation do care that the place they live is doing their part to keep and stay green,” Lamondin said, and the key is to save money and water in apartments.

Owners saving 35 percent to 68 percent “It really all depends in terms of consumption, the amount of gallons saved, but we're pretty steady on that savings number,” Lamondin said. “A lot of times the way bills are structured and this is something that we teach our

2. 4 Reaso ns Rental Housing Journal Metro May Look a Rental Prope 2. 4 Reasons a rty Beat-Up Rental December 2017 May Look Beat-Up Property 4. Top Trend 7. 4 Ways 2. 4 Reasons a Rental Property 7.s 4 Ways to Be to December 2017 7. 4 Ways to Be Proactive in Rental in HOA & 13. Dear Proactive Property Be Proactive in May Look Beat-Up in Rental Maintenance Property COA Men 4. Top Trends in 5. Ask Property Prope Maintenan Mainte Rental 13. Maintenance Dearnance HOA & COA ce rties Maintenan Decemb ce Men PropertiesKen Schriv 10. Property er 13. Dear er 2017 15. The One About the 4 $2 ToolsBeat 4. Top Trends in HOA & COA Properties 10. 4 $2 5. Ask Ken Schriver 6. Want Maintenance Tools 10. 4 $2 Tools that Could that 15.that TheCould Save One About toyou $$$ Save thaton withCould Know an Ugly you $$$ Stick Men that on the Property 15. Next Mainte Save you Next Trainin Worki that Next Maintenance Maintenan 5. Ask Ken Schriver The One Beat with nance Call 6. Want to Know ng? – Askif Your an Ugly Stick $$$ on About the g is ce Call 12. Is the Call if Your Training Your Emplo 16. Retail with an Ugly 12. Is the Market Report Property Outdoor is Outdoor Is the yeesResearch Outdoor 6. Want to Know if Your Training isWorking?12. – Ask Faucet Faucet at Your Rental Beat Stick Your Fauce Research Market Property 16. Retail at Your Rental Employees Property 18. 16. Retail Property Winter-Proof? Winter-Proot at Your Winter-Pro 9 Insights Working? – Ask Your Employees RentaReport of?for Property Managers Research l 18. 9 Insights f?for Market Repor Heading into 2018 Property Managers 18. 9 Insigh Heading into 2018 t ts Heading for Property Manag into 2018 ers Journal Metro

partners - is a large determining factor in how much savings in dollars are achieved. “For example, you have things on your bill like a storm water charge that no one can affect. However, you also have consumption charges based on the number of gallons. That's where we really hone in. And a lot of times people don't understand how much of the bill they can actually affect. And so we do a lot of educating on understanding both opportunity and liability from a utility standpoint,” he said.

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Rental Housing Journal Metro

Application of Payments and 72 Hour Notices by Brad Kraus Attorney at Law Warren Allen LLP

see it at least once a week. Bewildered landlords painfully discovering recently enacted laws governing how and where to apply tenants’ payments. I’m talking about ORS 90.220(9), affectionately known as the “application of payments statute” in the ORLTA. Believe it or not, due to this statute, many of those landlords’ Non-Payment of Rent Notices may have been defective, without them even knowing about it. Prior to ORS 90.220(9), any payments received from tenants could be applied in manner described in the Rental Agreement. If the Rental Agreement was silent, the Landlord could simply “fill the bottom of the barrel first.” In amending ORS 90.220, the legislature forced Landlords to apply payments received by tenants in a predetermined order. Pursuant to ORS 90.220(9), any payments received from your tenants must now be applied as follows: “A. Outstanding rent from prior rental periods; B. Rent for the current rental period; C. Utility or service charges; D. Late rent payment charges; and

E. Fees or charges owed by the tenant under ORS 90.302 or other fees or charges related to damage claims or other claims against the tenant.” At first glance, the statute is pretty straightforward. However, when put into practice, the statute causes waiver problems galore, especially when tenants carry arrearages from one month to the next. A simple example will illustrate the waiver problem: Terry’s monthly rent is $1,000.00. If Terry pays only $500.00 in January, and the Landlord accepts it, a partial payment has been created. If Terry thereafter pays $1,000.00 in February, $500.00 of that would first go to January’s outstanding balance. The remainder could then either be applied to February’s rent (thereby creating another partial payment issue) or returned pursuant to ORS 90.414 (thereby preserving the Landlords Non-payment termination rights under ORS 90.394). Simple enough… right? Not so fast! Here’s where it could get complicated . . . Terry’s monthly rent is $1,000.00, but Terry also owes the Landlord utilities every month (and hasn’t paid them for over 10 months, causing a utility arrearage of $600.00). Terry also hasn’t paid his rent on time for the past 10 months, incurring a $100.00 late fee each month. Accordingly,

Terry’s ledger balance, including his January and February unpaid rent, is $3,600.00. Yikes! Let’s say that Terry tenders a payment of $1,500.00, which the Landlord accepts. The Landlord wrongly assumes that, due to Terry’s large balance, $2,100.00 (of the $3,600.00 balance) is still owed for rent. Accordingly, the Landlord serves a Non-Payment of Rent Notice, Terry fails to cure, and the Landlord files an FED. The parties then appear at the First Appearance, and a Tenants’ attorney appears on Terry’s behalf, demanding a dismissal (due to the waiver problem) and $750.00 in attorney’s fees. Unfortunately, the Tenant’s attorney’s position is legally sound, and the Landlord is in trouble . . . Why? Remember, due to the application of payments statute, the first $1,000.00 applied to January’s outstanding rent due. The remaining $500.00 then applied to February’s outstanding rent, regardless of how much money Terry owed. Maddening, right? So what can be done to prevent such a disastrous outcome? While every situation must be analyzed on its own merits, some best practices can be articulated. First, Landlords must know how the application of payments statute works in practice. This can be difficult when the Landlord’s

ledger software merely throws payments at the oldest (or total) balance. Second, Landlords should protect themselves (and their books) by serving valid For Cause notices. Third, if the Landlord desires to accept a partial payment, the parties should execute a partial payment agreement, in order to protect the Landlord. Finally, prior to service of any Non-Payment of Rent notice upon tenants who carry a substantial balance, Landlords should look at their ledger and determine whether or not, in the current month, a payment of larger than the outstanding previous months’ rent was made. If so, the application of payments statute may negate the Landlord’s ability to serve a Non-Payment of Rent Notice, and a For Cause notice may be the only remaining option. While it’s difficult to discuss and outline every possible way ORS 90.220(9) can complicate your life, knowing that the statute exists is half the battle. Once you acclimate yourself with the statute, and understand its practical effects, you can better protect yourself from potential waiver issues. •

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Rental Housing Journal Metro

Dear Maintenance Men By Jerry L'Ecuyer & Frank Alvarez Dear Maintenance Men: I own a small apartment complex that I manage myself. The property is starting to experience repetitive sewage backups. I’ve called the plumber several times and the problem is never resolved. The plumber is recommending the installation of a 4-inch main line clean out, running a camera down the line and few other things. It is

all starting to sound expensive and I don’t know what to do. Why can’t the plumber just do the job right the first time? Bryan Dear Bryan: Your plumber is giving you good advice. Using the camera will determine exactly what the problem is and will help you decide the best course of action to

solve your plumbing problem. We highly recommend adding an exterior mainline clean out. In the long run, a 4-inch clean out will save you money by making the plumber’s job easier to do. The plumber can run a larger snake without going on the roof or removing a toilet or disturbing the residents. The 4-inch clean-out is key to help keep your drains clear on a preventive maintenance basis. We would follow the advice of your

plumber and get bids on: 1. Running a camera down the line to determine the actual cause of your problem i.e. Roots, sewer line break, corroded pipe or cracks, etc. 2. Install a 4-inch main line clean out with street sweep and repair the sewer line as needed. 3. On a preventive maintenance basis, ...continued on page 17

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The statements and representations made in advertising and news articles contained in this publication are those of the advertiser and authors and as such do not necessarily reflect the views or opinions of Professional Publishing, Inc. The inclusion of advertising in this publications does not, in any way, comport an endorsement of or support for the products or services offered. To request a reprint or reprint rights contact Professional Publishing Inc. PO Box 6244 Beaverton, OR 97007. (503) 221-1260 - (800) 398-6751 © 2017 All rights reserved.

Rental Housing Journal May 2018

Rental Housing Journal Metro

Dear Maintenance...continued from 16 Hydro-jet annually to clean your main line. This work may not be cheap, but in the long run you will benefit from lower plumbing bills, late night emergency calls and happier residents. Dear Maintenance Men: How do I safely remove a large mirror from a bathroom wall without shredding myself or my helper in the process? Tom Dear Tom: Removing a large piece of glass or mirror can be spooky. Safety first, be sure you are wearing eye protection, gloves and a sleeve long sleeve shirt or jacket. Next, use duct tape diagonally in both directions on the face of the mirror. This will help keep the mirror whole if it cracks or breaks. If the mirror is glued to the wall; cover the glass with a blanket or tarp and tape it to the top edge of the mirror. Be sure to cover the entire mirror

top to bottom. You are now ready to remove the mirror and should it shatter, the blanket will contain the shards, protecting you and making the clean-up much easier. Dear Maintenance Men: What is the normal time frame for a one or two bedroom make ready? I have always heard the three-day rule to get an apartment ready for rent. My units seem to be on the three-week rule! How can I tighten up the process and turn my units faster? Martin Dear Martin: The “Three-Day Rule” is a nice goal to strive for and can be done. But, most units are not in rent ready condition when we get them back from our departing residents. Here’s a useful time table and work schedule for a one or two bedroom apartment requiring complete paint,

carpet, flooring, minor repairs, window coverings and cleaning. Day 1 & 2: Paint prep, trash out, minor repairs, removal of blinds, drapes, switch outlet plates etc. Day 3: Paint Day 4: Carpet/Flooring Day 5: Installation of window coverings, doorstops, switch/outlet plates, fixtures, accessories, toilet seat etc. Touch up paint if needed. Day 6: Cleaning – General cleaning including windows & final inspection. If you have done a per-inspection of the unit before the resident moves out. You can plan what needs to be done before the unit is vacant. Organize the maintenance techs and contractors ahead of time. Have all the repair and replacement parts ready to go. The key is to plan each day and try to stick to the plan.

WE NEED Maintenance Questions!!! If you would like to see your maintenance question in the “Dear Maintenance Men:” column, please send in your questions to: DearMaintenanceMen@gmail.com 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 Frank Alvarez is licensed contractor and 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 and Co-Chair of the Education Committee of the Apartment Association of Orange County as well as being Chairman of the Product Service Counsel. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance. com For more info please go to: www.BuffaloMaintenance.com Jerry L'Ecuyer is a licensed contractor & real estate broker. He is currently on the Board of Directors and Past President and past Chairman of the Education Committee of the Apartment Association of Orange County. Jerry has been involved with apartments as a professional since 1988.

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Rental Housing Journal Metro

Can Tenants Have Multiple Assistance Animals? By Ellen Clark

y now you’ve probably figured out that complying with assistance animal requests is confusing and difficult. One of the situations that many people find particularly confusing is when there are multiple animals involved and an apartment complex that may have a onepet rule. • Can residents have more than one assistance animal? • Can residents have pets and assistance animals? Can a resident have more than one assistance animal? The Fair Housing Act (FHA) and Section 504 of the Rehabilitation Act of 1973 (Section 504) do not limit the number of assistance animals one person can have. Consider these assistance animals scenarios: • A person with a visual disability and a seizure disorder may use a guide dog to get around and another animal to be alerted to oncoming seizures • A person might need two assistance animals for the same task, such as two dogs for stability when walking If a resident requests multiple animals,

you may request documentation to show that each animal provides disabilityrelated assistance or emotional support. Remember that you can only request documentation for the animals where the disability-related need is not obvious or known to you. What if I have a one-pet policy and a resident with a pet requests an assistance animal, too? If a person with a disability has a pet and makes a reasonable accommodation request to have an assistance animal too, you cannot deny the request just because of your one-pet policy. Remember, assistance animals are not pets. If the number of animals requested becomes unreasonable or you think it presents an undue hardship to your community, consult with your legal counsel to see if you can legally deny the request. Open communication with residents is best solution Remember, evaluating a reasonable accommodation request should be an individualized process with an ongoing dialog between you and the resident. Often people file discrimination claims because they don’t feel heard, don’t understand the process, or aren’t kept in

the loop. Don’t underestimate the importance of good communication as you navigate these complicated issues. Ellen Clark is the Director of Assessment at Grace Hill. Her work has spanned the entire learner lifecycle, from elementary school through professional education. She spent over 10 years working with K12 Inc.’s network of online charter schools measuring learning, developing learning improvement plans using evidence-based strategies, and conducting learning studies. Later, at Kaplan Inc., she worked in the vocational education and job training divisions, improving online, blended and face-to-face training programs, and working directly with business leadership and trainers to improve learner outcomes and job performance. Ellen lives and works in Maryland, where she was born and raised. For nearly two decades, Grace Hill has been developing best-in-class online training courseware and administration solely for the Property Management Industry, designed to help people, teams and companies improve performance and reduce risk.

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Capt. Robert Baldwin and 1st Lt. Gregory Caliwag, 88th Medical Center clinical nurses pet Bailey, a pet therapy dog from the Miami Valley Pet Therapy Association on July 21, 2017. Pet therapy dogs visit the medical center seven days a week to provide comfort to patients and staff members. (U.S. Air Force photo/Stacey Geiger) via creative commons.

Rental Housing Journal May 2018

Rental Housing Journal Metro

Exit Strategies ...continued from 7 4. There is usually an agreement when investors will exit the investment. 5. Regularly scheduled cash payments (return) and depreciation shelter for the investor 6. For an example of a lower risk TIC, logon to www.RockwellTIC.com They have two models: a. Invest cash and own a property with others that has no bank loan on it b. Properties to invest in using money out of a 1031 exchange Cons: 1. Lack of investor control 2. Illiquid 3. No ability to impact the management of the investment Donate to a Charitable Remainder Trust Charitable remainder trust: A charitable remainder trust (CRT) is an irrevocable trust that generates a potential income stream for the donor to the CRT, or other beneficiaries, with the remainder of the donated assets going to a favorite charity or charities. Pros: 1. First, after the investor has set up and donated to a charitable trust, they are allowed to take an income tax deduction and spread it over five years, for the value of the gift to charity. However, they do not get to deduct dollar for dollar the amount that they initially gave. Instead, the IRS calculates the total deduction as the amount they originally gave minus what they can expect to receive as a return through interest payments. For example, if they gave $200,000 but are expecting to get back $100,000 in interest over the course of their life, their total deduction would have to be $100,000. 2. Second, because the property given to the trust will go to the charity outright upon the investor’s death, the property will not be included in their estate for the purposes of determining their estate tax. 3. The charity will pay them, or someone they have named, a portion of the income that the trust funds accumulate. These payments will last for a set number of years, or for the remainder of their life, depending upon how the documents were drawn up. The trust will end at the time of their death and the donated property will go to the charity.

4. It’s a perfect place to place assets if there are no heirs. Cons: 1. Its irrevocable – in other words it cannot be reversed. Installment Sale (carrying the paper) Carrying the paper is most effective if a property is owned free and clear and not wrapped around an existing financial ( i.e. mortgage or trust deed) instrument - like a note and trust deed, or a mortgage - especially since most financial instruments prohibit the wrap. Pros: 1. The investor pays taxes only on the income received: Tax on the income received on the interest charged and capital gains taxes (on the reduction in principal of the investor note.) If the investor is retired and this is their major source of income, they might be in a lower income tax bracket for the investor income tax as compared to when they were working. 2. The investor’s tax on the principal will be the same but it is spread out over many years and by default puts the investor in a lover tax bracket if they are selling an expensive piece of property like a small office, retail or industrial building. 3. With a strong down payment (20 or 30%) investors have a solid income stream that they can control and thereby control your taxes as well. 4. The property typically will go up in value and so the risk reduces over time 5. If banks are willing to take the risk, why shouldn’t the investor? 6. Heirs can inherit the note. 7. In an emergency, the note can be sold on the secondary market with a discount if the buyer has been paying on time and the note is seasoned. Cons: 1. If your sale results in a loss, the investor can't use the installment method. If the loss is on an installment sale of business or investment property, they can deduct it only in the tax year of sale (unstated interest.) 2. They need a strong buyer 3. The investor needs to aggressively manage the terms of the installment sale to prevent a prepayment penalty when they are not ready to cash out 4. The investor has to keep an eye on

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the property to make sure the Buyer is taking good care of the investment - if the property needs to be repossessed for nonpayment on the note, then they will not have to repair the property 5. The investor is the bank and need to be comfortable with foreclosing on the note if the Buyer does not pay 6. They need an experienced real estate attorney and may need a collection escrow account. Summary Taxes play a large role for most investors (especially if they have successfully traded up more than one time) - their existing basis is then carried forward to the next property and will affect the residual return when they want to sell. There are many ways for an investor to exit from an existing property. If they don’t want to pay capital gains taxes, their options are: • They can use a 1031 exchange to trade into another property • They can sell their property and trade into a Delaware Statutory Trust • They can trade their property into a Tenant in Common (TIC) investment • They can donate to a Charitable Remainder Trust • They can sell and carry the paper (using a contract or a trust deed) also known as an installment sale But, most investors have limited choices: • They can use a 1031 exchange to trade up • They can refinance to take out cash and purchase other investments • They can leave their properties to their heirs

• They can use a charitable remainder trust to create an annuity • To carry the note, the property being sold needs to be free and clear of other encumbrances, most existing trust deeds and mortgages do not allow a wrap around the existing financing Every investor has a different set of circumstances that drive their decisionmaking process. It all depends on where an investor is at in their personal or business investment cycle. Are they holding on to the property? Reinvesting? Stepping up to larger or different property? Working through a partnership split? Diversifying or liquidating? Tired of owning the property? Investors must take the time to look at the various options, meet with real estate attorneys, CPAs, and real estate agents to listen to the many different ideas that are in the marketplace today to develop a successful strategy to exit their investments. Finally, I want to mention that when trading into another property via 1031 exchange, and trading up or into a different product class, an investor must make sure to do their research as they move into a product type they may not be familiar with. Not all NNN investments are great, not all mobile homes are home runs, nor are investments in other not as popular products, but a patient and thoughtful investor will see the best results. •

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