Rental Housing Journal On-Site October 2015

Rental Housing Journal On-Site

October 2015

3. Property Managers Help Residents Save Money and Energy 5. Winter Is Coming 6. 2015 Changes to the Oregon Landlord Tenant Act (SB 390) 7. Amid Rapid Gentrification, Inclusionary Housing Can Reduce Segregation

8. Ask The Secret Shopper

14. What To Do When You Need A Lawyer

9. Low-Value Homes Leading the Climb Out of Negative Equity

15. More SFRs And The Call For Seasoned Property Managers

10. 500 Resumes Just Arrived

18. Market Update

12. Self Directed Retirement Account Investing

26. Giving A Tenant “The Boot”

13. Washington Apartment Outlook

31. Rebuilding Together

30. The Latest FAU

www.rentalhousingjournal.com • Professional Publishing, Inc 17,000 Papers Mailed Monthly To Puget Sound Apartment Owners, Property Managers & Maintenance Personnel Published in association with Washington Association, IREM & Washington Multifamily Housing Association

Prepare Rental Properties For The Winter Season

DEAR

MAINTENANCE MEN:

2. Seal gaps. Thoroughly examine roofs, siding, doors and window frames for damage and drafts. Repair damages immediately and seal around doors and windows with caulking, weather stripping, or a door sweep to help keep warm air in and cold air out. As a best practice, ensure exterior seals are strong where building materials meet, like where siding stops and brick begins. Encourage tenants to notify of any drafts or noticeable gaps in their units to prevent soaring utility bills.

By Jerry L’Ecuyer & Frank Alvarez

Dear Maintenance Men: Being part of the Baby Boom generation and staying active means I should know a bit more about “Aging in Place”. Can you explain this term and how it might affect my apartment community?

Bob & Joann Dear Bob and Joann: Baby Boomers are 25 percent of the population and the first of the Boomers turned 65 in 2011 and the last will turn 65 in 2029. We heard on the radio the other day that 85 is now the new 75 and so on down the line. That is a large healthy aging group! They are not going to go quietly into a nursing home which means as apartment owners & managers; we need to prepare for this group.

Aging in place means bigger showers with wider doors, taller toilets, grab bars and bath sinks that will accommodate wheelchairs. This does not mean turning our units into institutions; there are many stylish accommodations to fit a number of needs. For example a grab bar capable of supporting 250 pounds does not need to look like it came out of a hospital. Grab bars come in a variety

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By Scott Matthews, Director, Strategic Accounts, The Home Depot

F

all is a great time to prepare properties for the colder months ahead, which may help prevent or offset costly repairs and high utility bills caused by harsh winter weather. Before winter hits, take steps to ensure that the property is ready for the elements with this must-have checklist.

A

1. Stock up. Property managers – especially those handling procurement – should prepare for colder months by purchasing winter products, such as salt and ice melt, in bulk before the season changes. Buying in bulk not only saves time and money but also gives property managers peace of mind as they look ahead to potential extreme weather.

3. Protect pipes. Install heat cables and pipe insulation to prevent freezing pipes as temperatures drop – especially for pipes exposed to outside air or on exterior walls. Remind tenants to let faucets drip overnight during extreme cold to keep pipes from bursting and causing water damage. Repairing burst pipes can cost more than $600 – depending on where the pipe is lo...continued on page 20

5 Lessons For Winter Property Survival

s Darwin concluded, “It’s the survival of the fittest.” If we hope to preserve our property over the long term, there are simple truth’s we must accept and actions we must take in order to ensure the viability and value of the physical assets under our stewardship. The simple truth is that as soon as a property is built, it begins the process of dying. It’s a harsh truth, but we have all seen it. With that said, there are some properties that seem to escape the inevitability of decay, waste, and death.

So, how do they do it? Are they special in some way? What are those operators doing to extend the life of those properties, or, at least, lessen the effects of time in order to retain value? These operators

Advertise in Rental Housing Journal On-Site Circulated to over 20,000 apartment owners, on-site and maintenance personnel monthly.

Call 503-221-1260 for more information

understand the following 5 lessons and keep them at the top of their preventative maintenance approach. ...continued on page 27

Rental Housing Journal On-Site

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Rental Housing Journal On-Site 路 October 2015

Rental Housing Journal On-Site

Property Managers Help Residents Save Money and Energy Use Energy Efficiency and Money-Saving Ideas to Create Client Conversations

by Marc Courtenay

W

hile vacancy rates are low many property managers are focusing attention on effective ways to retain good residents and pro-actively please their clients. Saving money is one of the most popular ways.

The cost of energy to heat and cool buildings is rising once again. With seasonal variations and the extreme temperature changes many are facing, now’s an auspicious time to consider an energy-efficiency campaign. There are still many subsidized programs sponsored by utilities, manufacturers and the government that reward the use of the latest, energy-saving windows, doors, insulation, furnaces and appliances.

Some encourage water savings in drought stricken areas like California, which according to the San Francisco Chronicle is experiencing the most severe drought in over 1,200 years.

Low volume toilets, shower heads and drought tolerant landscaping are some of the suggestions being implemented.

One way to begin is to visit the U.S. Environmental Protection Agency’s WaterSense website. WaterSense, a partnership program, “…seeks to protect the future of our nation’s water supply by offering people a simple way to use less water with water-efficient products, new homes, and services.”

The EPA also has its popular EnergyStar program to help find countless ways to save both energy and money.

The U.S. Department of Energy collaborates on the website and programs. Now in its 23rd year, EnergyStar is “…a voluntary program to identify and promote energy-efficient products and buildings in order to reduce energy consumption, improve energy security, and reduce pollution through voluntary labeling of or other forms of communication about products and buildings that meet the highest energy efficiency standards.”

The list of certified EnergyStar products is remarkable. It includes water heaters, lighting and fans, heating and air-conditioning systems, building products and even offers a list of office equipment and electronics that save energy and money.

Many utility companies, municipalities and state governments offer rebate programs to reward energy efficiency.

My local utility offers rebates on EnergyStar appliances, ducted heat pumps, windows and storage tank water heaters.

Your owner-clients will always be impressed when you contact them with ideas to retain residents and save money. Some are probably thinking, “What’s my property manager doing to keep my business?”

That thought alone may motivate you to call or write your clients with energy-saving tips and proactive suggestions to make their rental units more attractive and less costly. Begin by calling your local utility companies and finding out what incentive programs and rebates are available in your area. Tell clients about the EnergyStar program and how it can save them money.

Be a reliable source of innovative ways to deal with the challenges of climate change. Initiate a dialogue with your clients to see if they have any questions or if they’d like to learn more. The good news is that money is available to offset the costs of energy-saving upgrades for rental homes and apartments. Let them know about the opportunities and keep them informed. You’ll strengthen relationships; build more credibility, while contributing to the solutions to today’s energy challenges that impact us all.

Published Courtesy of PropertyManager.com

35

Rental Housing Journal On-Site · October 2015

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Rental Housing Journal On-Site

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Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

Winter is Coming Have a plan!

I

t’s budget season for property manager and everyone is scrambling to get them done accurately and on time, while managing everything else that goes on daily on our properties. But, we can’t forget cold weather and freezing conditions are coming. Although, we have had a hot long summer into fall, we need to be prepared for cold weather. Prepare for the worst and hope for the best!

Here are some best practices for to help ease the process and headache.

Prepare the residents.

• Staff should be prepared with all emergency situations and how to navigate all emergencies. Winter can bring fires, floods, freezing pipes, and freezing branches that can fall on buildings.

All staff should know how to handle all of these situations. Be prepared with phone numbers for after hours emergencies for restoration companies, electricians, tree removal and landscaping companies, and help organizations like The Salvation Army. It’s also important to make sure that your whole team has contact information for all team members, in case of emergency.

• Prepare staff and residents for emergencies. Make sure everyone knows what to do in case of emergencies during business hours and after. Office Hours and emergency contact information, including emergency and utility information, should go out to all residents and posted on the office door as well as voice mail.

• Publish and distribute an information booklet of emergency plans and reminders. For example: in the event of a power outage, remind resident not to use stoves or space heaters that do not automatically shut off if tipped over.

Avoid candles and make certain that residents have working flashlights and batteries. Another important plan to include is fire evacuation. Make cer-

tain to walk your property and note potential areas of concern – IE sidewalks, parking lots or stairway that might freeze over, etc. Include those in your plan.

Everyone hopes that none of these emergencies will occur, but they do happen. The best way to overcome, minimize damage and keep residents as happy as we can will come from BEING PREPARED!

By Dana Brown

Dana Brown has worked in all facets of the property management and rental housing industry for over 30 years. She is a national speaker and trainer who consults with both property management companies and industry service providers. You may reach Dana at: danabrown3321@gmail.com

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Rental Housing Journal On-Site

2015 Changes to the Oregon Landlord Tenant Act (SB 390)

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

O

nce again, tenants and landlords have come together with the legislature to update the Oregon Landlord Tenant Act. On June 15, 2015, Oregon Governor Kate Brown signed SB 390 into law. The law itself takes effect the 1st of January 2016. While most of the changes to the act are basic clarifications, significant issues are addressed as well. I have reviewed the changes in the act and summarized them here for your convenience. Please read carefully.

1. Clarification regarding mailing of notices To avoid confusion, ORS 90.160 has been updated insofar that notices expire at 11:59 p.m. on the last day of the notice period rather than at 12 midnight.

2. Timing for notices of restitution ORS 105.159 (with a specific focus on ORS 105.151 regarding notices of restitution) has been updated insofar that notices of restitution expire at 11:59 p.m. on the last day of the notice period rather than at 12 midnight. This change also clarifies that the mail time for notices of restitution starts at 12:01 a.m., the day after a notice has been placed in the mail, and ends at 11:59 a.m. four days later. However, if the end date falls on a Saturday, Sunday or other legal holiday,

6

then the notice period shall end at 11:59 p.m. on the day preceding the next judicial day.

2. Noncompliant pet fees ORS 90.302 has been amended to include authorization to charge noncompliance fees to tenants for failure to clean up the waste of a service/companion animal from a part of the premises other than the dwelling unit. (The point of this change was to encourage owners of those animals to pick up animal waste at a property just like any other tenant would be responsible for.)

In addition, there was a change to the section of the act that addresses the penalties for keeping an unauthorized pet capable of causing damage to persons or property as described in ORS 90.405.

Initial noncompliance fees are limited to $50 (see ORS 90.302(3)(a)(A). However, a fee for a second or any subsequent noncompliance relating to an unauthorized pet can increase to a maximum of $250. Those unauthorized pet fees may not be imposed until 48 hours after the warning notice has been delivered to the tenant.

3. Assessments imposed by a homeowner / condominium association ORS 90.302 has been modified to address homeowner / condominium association fees. This section clarified that assessments can be passed on to tenants

if they are imposed for moving into or moving out of a unit or property located within the association.

To levy these fees the landlord must establish the fees in a written rental agreement at the beginning of the lease term and the landlord must give a copy of the assessment distributed by the association to the tenant before or at the time the landlord charges the tenant.

If a landlord charges a tenant a fee in violation of this section the tenant may receive from the landlord a penalty that recovers twice the actual damages to the tenant or $300, whichever is greater.

4. Regarding a tenant’s failure to pay for damages, utility fees and / or charges and deposits.

Amendments to ORS 90.412 (the “waiver” statute) clarifies a tenant’s failure to pay money to a landlord for damages to the property, structures at the property, utility fees and / or charges and deposits. The following section is new: The violation concerns the tenant’s failure to pay money owed to the landlord for damage to the premises, damage to any other structure located upon the grounds, ...continued on page 24

Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

I

Amid Rapid Gentrification, Inclusionary Housing Can Reduce Segregation

nclusionary housing, a policy by which developers provide for the construction of affordable housing, can be used effectively to reduce economic segregation at a time of rapid gentrification in neighborhoods across the United States, according to a report published today by the Lincoln Institute of Land Policy. And it can be deployed while avoiding the negative economic impacts and legal concerns often cited by critics, according to the report.

“In hot-market cities, skyrocketing housing prices push middle class and low income residents far away from well-paying jobs, reliable transportation, good schools and safe neighborhoods,” said Lincoln Institute President George W. “Mac” McCarthy. “Inclusionary housing alone will not solve our housing crisis, but it is one of the few bulwarks we have against the effects of gentrification—and, only if we preserve the units that we work so hard to create.”

The report, Inclusionary Housing: Creating and Maintaining Equitable Communities, charts a path forward for local policymakers who are grappling with the effects of gentrification, but who are wary of overburdening developers, impeding new housing construction, or inviting legal challenges. Through a review of literature and numerous case studies, author Rick Jacobus offers solutions for overcoming the major political, technical, legal and practical barriers to the adoption of inclusionary housing.

“More than 500 communities have used inclusionary housing policies to help maintain the vibrancy and diversity of neighborhoods in transition, and we’ve learned much along the way,” Jacobus said. “Research shows that if programs are thoughtfully designed and implemented, they can be a valuable tool at a time when affordable housing is desperately needed.”

Inclusionary housing is a strategy that taps economic gains from rising real estate values to create affordable housing. Many inclusionary policies require a certain percentage of residential units in new developments to be affordable to lower-income residents, while others rely on developer fees, or provide for the construction of off-site affordable housing.

Chief among the concerns citied by critics is the potential for inclusionary housing to impede new construction by making development less profitable.

However, many cities have avoided such impacts by allowing flexibility in how developers comply and offering incentives, such as the ability to build at greater densities, according to the report.

Some of the key findings and recommendations in the report include: • Contrary to popular perception, rapid construction of market rate housing actually fuels the need for more affordable housing by changing the character of neighborhoods.

• The most successful policymakers have built public support and worked closely with private developers in the crafting of inclusionary housing policies.

• Offering flexibility and incentives to developers can prevent negative economic impacts, but these tools need to be used judiciously.

• Inclusionary housing has been challenged in court, but programs can be designed to minimize legal risks.

• Follow-up, in the form of enforcement and stewardship, is critical. Some communities have created thousands of affordable homes, only to see them disappear after subsequent sales.

About the Author

Rick Jacobus is the principal of Street Level Advisors (StreetLevelAdvisors.com) where his work focuses on crafting strategies that ensure that everyone benefits from growth. He is the founder and currently serves as a consultant to Cornerstone Partnership (AffordableOwnership. org), a nonprofit initiative that supports local inclusionary housing programs.

The Lincoln Institute of Land Policy is the leading resource for key issues concerning the use, regulation, and taxation of land. Providing high quality education and research, the Lincoln Institute strives to improve public dialogue and decisions about land policy.

SOURCE Lincoln Institute of Land Policy

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Rental Housing Journal On-Site · October 2015

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Rental Housing Journal On-Site

SK THE SECRET SHOPPER

T

here is an old saying when it comes to selling/renting real estate that the three most important factors are: location, location, location. Yet, what if you are working at an apartment community that does not have these three things going for it? Maybe your community is “off the beaten path” and no one can find you, or your building is located in a neighborhood that is not considered desirable because it needs a facelift. Perhaps you are near certain types of businesses that may discourage people who are driving by from driving in. The issue of “location,” is obviously a concern based on the following question: Q: I work at an older building that is tucked away in a secluded spot. It once had a great reputation, but over several years, the local neighborhood has taken on a “run down” appearance and many of the area businesses are not caring for their properties the way they once did.

It’s getting harder and harder to attract new renters, not to mention trying to hang onto existing residents who are now concerned with security and safety issues. If I could pick up and move this building I would do it! Do you have any suggestions?

A: I want to commend you for your loyalty to your building and residents.

It’s obvious that you care a great deal about the people and the place where you work, as well as your local community.

Challenges with “location” are especial-

8

ly difficult as they sometimes fall into the realm of things that we consider to be “beyond our control.” We feel powerless and frustrated. On the other hand, difficult challenges present unique and exciting opportunities to become creative and also get other people involved in the problem-solving process. Thomas Edison said, “Opportunity is missed by most people because it is dressed in overalls and looks like work!”

Well... solving challenges related to “location” is work; it’s HARD work! It requires spending time analyzing ALL of the problems, not just the ones that are blamed on location. Let’s face it: Over a period of time, it becomes easier and easier to make “excuses” and “blame” what is perceived as a “bad location” on EVERY problem that arises. (i.e. “No one can find us because we are in a bad location!” How colorful and well placed are your signs? How skilled are you at giving specific, detailed directions; even if it means using a local pub as a landmark? “No one will use our laundry facility because it is perceived as being ‘unsafe’ because we are in a bad neighborhood.” - Is your laundry room bright, cheerful and welcoming? Is the interior, as well as the exterior building and surrounding area, well lit? Can residents be introduced to each other and encouraged to use the “buddy system?”)

With regards to your neighborhood situation, perhaps your community could become a member of your local

Chamber of Commerce and network with other area businesses who care about the condition of your section of the city. Maybe your staff and residents could get involved civically and attend local town meetings to make your voices heard about what’s happening in your neighborhood. What about forming a block watch at your community?

The problems you face won’t go away overnight. They took years to develop and will take time to correct. MUCH patience will be required to bring about any lasting change. Of course many people prefer to stay with problems they understand rather than look for solutions they’re uncomfortable with. (It’s easier to complain than change!) However, if you always do what you’ve always done, you’ll always get what you’ve always got.

You may not be able to change the location of your building, but you CAN change the direction of your thinking.

- After all, it’s a lot easier to “pick up and move” people, rather than buildings!

If you have a question or concern that you would like to see addressed next month or if you would like to inquire about a shopping program and leasing training, please ASK THE SECRET SHOPPER by making contact via e-mail or fax. Your questions, comments and suggestions are ALWAYS welcome!

If you are interested in leasing training or have a question or concern that you would like to see addressed, please reach out to me via e-mail. Otherwise, please contact Jancyn for your employee evaluation needs: www.jancyn.com ASK THE SECRET SHOPPER

Provided by: Joyce (Kirby) Bica Former owner of Shoptalk Service Evaluations Consultant to Jancyn Evaluation Shops E-mail: shptalk2@gmail.com Copyright © Joyce (Kirby) Bica

Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

H

Low-Value Homes Leading the Climb Out of Negative Equity

ome values in the bottom third of the market helped pull more homeowners out of negative equity in the second quarter of 2015, and condos were more likely than houses to be underwater.

• The U.S. rate of negative equity among mortgaged homeowners continued to drop in the second quarter of 2015, to 14.4 percent-- the first time the rate has been below 15 percent since the real estate bubble burst.

• The improvement was spurred by value growth in the least valuable third of the housing stock, which are far more likely to be underwater than other homes.

• Condos are more likely to be underwater than single-family homes. Nearly 20 percent of all condos with a mortgage are upside down.

SEATTLE - The U.S. negative equity rate dropped below 15 percent in the second quarter of 2015, according to the Zillow® Negative Equity Reporti, but nearly 20 percent of condo-owners remain underwater.

Condo-owners were in far worse shape than single-family homeowners in Chicago, Orlando and Las Vegas. And in only three markets – Detroit, Memphis, and Pittsburgh – single-family homeowners were more likely to be underwater than condo-owners.

A high rate of homeowners who owe more on their mortgages than their homes are worth is a lingering effect of the real estate crisis. At its worst, more than 15 million homeowners were upside down on their homes. Foreclosures, short sales and rapidly rising home values freed nearly half of those homeowners, leaving 7.4 million homeowners upside down at the end of Q2 2015.

The continued decline of the overall negative equity rate was fueled in the first half of the year by strong appreciation for the least valuable third of homes.

The least valuable homes are much more likely to be underwater than more valuable homesii.

In the Atlanta market, for example, nearly 43 percent of the least valuable homes are in negative equity, while only 9.4 percent of high-end homes are underwater. Annual home value appreciation

among the least valuable homes in Atlanta had slowed for 12 straight months through June 2015. However, low-end homes have been appreciating annually more than more valuable homes. Since June 2014, annual appreciation in the bottom tier outpaced home value appreciation among all Atlanta homes, likely helping drive negative equity down there from 29 percent to 21 percent year-overyear.

Similar trends played out in Sacramento, Riverside, and Phoenix, all places that have struggled with high rates of negative equity.

“If the overall negative equity rate is going to continue to fall, it will need to keep being driven down by improving health at the bottom end of the market,” said Zillow Chief Economist Dr. Svenja Gudell. “The least valuable homes really bore the brunt of negative equity during

the recession, and that’s where most negative equity remains concentrated today.

As more first-time buyers enter the market seeking these less expensive homes, home value growth at the bottom end could continue to outpace growth overall, which will be good news for millions of underwater homeowners in these homes.”

Among the 35 largest housing markets, Las Vegas, Chicago and Atlanta continued to have the highest rates of homeowners in negative equity. Condo-owners had the highest rates of negative equity in Las Vegas (36.7 percent), Chicago (32.6 percent), and Orlando (29.9 percent), while single-family homeowners had the highest rates in Las Vegas (23.8 percent), Atlanta (20.4 percent) and Chicago (19.2 percent). ...continued on page 25

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Rental Housing Journal On-Site

500 Resumes Just Arrived Which One Is The Property Management SuperStar?

Conducting a telephone interview Select the best candidates from the resumes you have been sent and schedule a ten minute telephone interview with each person.

by Ernest F. Oriente

F

inding a new SuperStar for your property management company is never any easy task, especially in our current economic climate. In addition, a recent article published by the Society of Human Resource Management {SHRM} says, “over 50 percent of the information presented on a resume by a job candidate may be false or misleading”. In this article we will share some important tips and techniques for reading resumes, the most important first step for finding property management SuperStars.

Sorting the resumes: Resumes arrive by mail, E-mail or fax. Start by sorting these resumes into three stacks. Your “A” stack will include resumes from potential SuperStars who attach a customized cover letter. This cover letter will address you personally and will often include specific references to the advertisement you placed. Your “B” stack will include resumes from possible SuperStars who will only attach a generic cover letter. Your “C” stack will include those who just send a resume and represent the least likely group to contain a SuperStar.

Setting up your system: Purchase an 8 ½ x 11 “flat desk file” with A-Z tabs. A flat desk file looks like an accordion file, except it lays flat on your desk and can be easily carried with you. Use your A-Z desk file to store the resumes of potential SuperStars, sorted by last name. When a person returns your initial telephone call or arrives for their first interview,

During each call, ask the following questions • Are you currently employed?

• Why are you leaving your current employer?

• What is the ideal position you are looking for? Why should you be the person selected for this position?

• What are you currently earning? you will now have their resume right at your fingertips.

Tips for reading a resume Here are some key questions to consider when reading a resume: • What city/state does this person live in?

How long will their commute to work be? If this person does not live locally, how long will it take for them to acclimate professionally and personally?

• How many companies has this person worked for in the past five years? Are the companies related? Any time gaps?

• What skills and experience can this person bring to your property management team?

• Does this resume include specific and measurable achievements?

• Does this resume include any information regarding ongoing training and/or certifications?

• Does this resume include any information about professional and/or industry affiliations?

• Does this resume have any spelling or grammatical errors? Does the resume match their LinkedIn profile?

Tip From The Coach In addition to the questions above, ask yourself the following questions while reviewing each resume: Does this person have experience working with consumers? Does this person have a sales/service background? Does this person have experience developing relationships?

Take written notes during each phone call and listen carefully to this person’s telephone voice, their attitude, and how close their ideal position matches the position you have advertised. Financially, your advertised position should be within 15-20 percent of this person’s current income. Lastly, give each person homework or research to complete, prior to their first interview with your property management company.

Want to hear more about this important topic or ask some additional questions about how to read a resume? Would you like to see a sample of a world-class resume? Send an E-mail to ernest@powerhour.com and The Coach will E-mail you a free PowerHour invitation.

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For insight into the screening industry, rental market, and your and your options, calloptions, or visit: visit: (800) 628-6414

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Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

Dear Maintenance Men ...continued from page 1 colors and designs. Many will double as towel bars and be virtually invisible to their primary purpose unless needed. A larger shower stall also will look opulent and practical at the same time.

Replace old two handle faucets in the kitchen and bathroom for single handle or touch faucets. Consider installing anti-skid flooring in the bathroom and tub/ shower area. A few other items might be contrasting color edging for the counter tops along with rounded edge and corners. Replace all door knobs with lever handles for ease of use. This is a small sample of the things you can do to stay competitive in a growing market while not making changes that younger generations would find objectionable.

Dear Maintenance Men: I am starting my planning for a major kitchen cabinet remodeling project in my rental units. However, I am having a difficult time making material and design decisions. What recommendations can you give?

Allen.

Dear Allen, When doing a kitchen or bath material selection, cohesive and functional design is important. Kitchen and bath rehabs are some of the most expensive work you can do in an apartment unit and proper planning is a must. In order to appeal to a larger segment of the population, try to keep the interior color scheme to neutral earth tones. Cabinetry quality varies greatly. Don’t let the cabinet fronts fool you. Manufactures designed their cabinets to look good at first glance. Keep

in mind, being in a rental environment, the cabinets also need to hold up to abuse. Look at the actual construction of the cabinet box or frame. There is no need to use custom cabinets to fit your existing layout. The use of prefabricated modular cabinetry can greatly reduce the time and cost to have a finished kitchen or bathroom. Using real wood cabinet fronts with 3/8” plywood sides is essential for durability. The drawer fronts and sides should be connected with a dovetail or other positive lock construction.

Drawers that are held together by nails will not hold up to tenant abuse, nor will particle board constructed cabinets.

On a side note; if you are gutting the kitchen or bathroom, use this time to relocate and add more electrical outlets and under cabinet lighting.

Dear Maintenance Men: I have a conundrum! My roof is in good shape, however I have a mystery leak or to be more precise I have a moving mystery leak. In other words, when it rains, the roof does not always leak in the same place. This is driving me crazy.

Sam Dear Sam: A good roofing troubleshooter is worth their weight in gold. Here at Dear Maintenance Men, we love a good mystery!

First things first; have your building inspected by a reputable roofing company or roofing inspector. The inspection will eliminate non-issues and help point you in the right direction and may even solve the leak mystery.

The amount and intensity of rain will contribute too many roof leak mysteries. Often a light rain will cause a leak in an area that would not leak in a heavy or prolonged rainstorm. The reason is material swell. A light rain is not “wet” enough to swell surrounding wood or roofing material and cut off the leak.

Mind you, this is still a leak that needs fi xing. The deep penetration of water in a heavy or wind driven rainstorm will cause a leak by sheer volume that would not have leaked in a light rainstorm.

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Rental Housing Journal On-Site

Self Directed Retirement Account Investing

by Jeffery S. Watson, Esq.

D

uring a recent speaking engagement in front of a large REIA in a Midwestern state, I asked the audience how many of them had set up a self-directed retirement account. Approximately 85% of the room raised their hands. After the presentation, I discussed that fact with a friend of mine who has been doing self-directed investing since the late 1970s. He made the comment that when that question was asked just ten years ago, only five to ten hands would be raised in a room of over a hundred people. Clearly the awareness of self-directed investing is growing.

With that in mind, I would like to share with you over the course of two articles what I consider to be the top ten recommendations for self-directed retirement account investors.

1. If you do not understand the deal, do not do it!

This is one of the fundamental rules in all types of investing, whether inside or outside a retirement account. Understanding the deal means more than just being able to say you understand it. It means being able to explain it in a way that makes the complex sounds simple.

You should be able to explain the deal in three sentences to an 8-year-old child.

When a person is able to explain something complex in a way that even an

8-year-old child can understand, then you know they truly understand what they are doing. I have seen too many investors who made investments with a self-directed retirement account and later regretted it because the person with whom they invested or to whom they lent money was far more sophisticated than they were, and they felt like they had been taken advantage of. Ask me how I know!

Allow me to give you an example of a simple explanation. I am going to loan $50,000 from my retirement account to

Fred. Fred is going to use that money and other money to buy a house, fi x it up, and resell it. My loan to Fred will be secured by a mortgage against the house he is buying and fi xing. There, in three simple sentences you can explain a deal that many people could take paragraphs to cover.

2. Always fund your accounts every year.

Many real estate investors are struggling with ongoing monthly cash-flow needs, and they forget to discipline

themselves to set up an automatic or systematic program for funding their retirement accounts, whether they are Roth IRAs, 401(k)s, HSAs or CESAs. Pick the two or three accounts that really matter to you and determine what your monthly budget needs have to be in order to be able to put approximately $6,000 per year into those accounts. At a minimum, you should be funding ap-

...continued on page 21

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711 Powell Ave. SW, Suite 101 Renton, WA 98057 (425) 656-9077 • (425) 656-9087 (fax) admin@wmfha.org

O

Executive Director - Jim Wiard • President - Kris Buker - Vice President - Brett Stevens Treasurer - Becky Sanders • Vice President of Suppliers Council - Rob Pendleton • Immediate Past President - Gail Duke

Washington Apartment Outlook

ver 500 industry attendees at the annual Washington Apartment Outlook economic forecast luncheon held at the Seattle Sheraton were treated to some outstanding and informative speakers, giving their projections and perspectives for 2016.

The afternoon session started with a warm welcome from King County Council-member Jane Hague.

Afterward, WMFHA was very proud to bestow their Legislator of the Year Award to State Senator Andy Hill. In his capacity as chairman of the Senate Ways and Means Committee, Senator Hill negotiated the 2015-17 operating budget and rejected proposals to create new taxes, most notably a statewide capital gains income tax.

“I am honored to accept this award and thank the Washington Multi-Family Housing Association for its participation in the legislative process,” said Senator Hill.

WMFHA Government Affairs Director Joe Puckett brought attendees up to speed on both statewide and local government affairs and legislative issues, including the upcoming Seattle City Council races. These issues also included possible legislation regarding tenant screening, rent control, tax on rental income and background checks.

This is a historic time in Seattle, as there will be at least four new City Council members after this November’s election.

Despite the current Seattle City Council’s resolution asking the State Legislature to modify or repeal the current state law exempting local jurisdictions from enacting rent control, WMFHA believes rent control is not in the best interest of the citizens of Seattle, and more focus should be made to solutions that can have the biggest positive impact on affordable housing.

Industry expert Dylan Simon from Colliers International gave an excellent pre-

sentation on apartment development and sales activity. According to Dylan, 2015 is a breakout year for apartment sales. He anticipates 2015 will set a record for apartment sales volume, expecting to reach $4B in sales.

45% of the sales will be to institutional buyers, who favor Seattle for its economic diversity and strong job growth potential.

Compared to previous years, sales to foreign entities is well below past averages.

More than half of sales are from San Francisco area buyers.

Market demand and falling home ownership are fueling strong investor demand in our market. “Cheap money” is a draw, with cap rate spreads over the 10-year Treasuries rate exceeding 200 basis points in King County.

Projected job growth in King County exceeded 55,000 jobs in 2014 and is expected to exceed 64,000 jobs in 2015.

Wage growth remains stagnant nationally, at less than 2% annually, but exceeds 4.5% in the local tech sector.

Seattle is the 21st largest city nationally but has the 4th largest apartment development pipeline. Condominium development remains nearly non-existent.

Quoting Yogi Berra, Dylan said “It’s tough to make predictions, especially about the future”, although he notes that 2016 will continue to be a hot sales market, with interest rates and cap rates relatively unchanged.

Economist Matthew Gardner of Windermere Services Company gave an exceptional presentation on the current economic conditions nationally and locally as well as his forecast for the coming years.

U.S. payroll jobs have more than recovered from the Great Recession. Employment in our state continues to expand rapidly, although job growth locally is expected to taper in the next couple years.

Amanda Beaudoin, StoneHorse at Wandermere Douglass Properties Cami DeWinter, Riverfalls Tower Apartments Black Realty Management Kandi Smith, Union Park Apartments Black Realty Management Katie Galbraith, Affinity at Southridge FPI Management Kristi Hamberg, Aspen Village Madrona Ridge Residential Morgan Snider, Crosspointe Douglass Properties Samantha Hughes, Lincoln Village Apartments Prodigy Property Management Sandy Jingling, Parkview Aparment Greystar Staci Grogan, Fairwood FPI Management

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Alan Christianson, Madrona Ridge Residential Doug Harris, Montgomery Court FPI Management Emil Harrah, Washington Square 1 Prodigy Property Management Pavel (Paul) Lipatkin, College Terrace Greystar Pio Pescione, Heron Creek FPI Management

Filiberto Mendoza, Copper Ridge / Affinity at Southridge - FPI Management George Gladback, Whimsical Pig Greystar James Kegley, Englewood Gardens Apartments Greystar John Derting, The Ridge at Midway Greystar Larry Turner, The Vintage Apartments Weidner Apartment Homes Salvador Talavera, Maple Ridge Greystar Tom Clark, Prairie Hills Apartment Greystar

GDP growth this year has been a pleasant surprise and Matthew forecasts 2.8% growth in 2016.

Unemployment rates in Seattle are at an exceptional 3.7%, outperforming the U.S. by a considerable margin. Construction employment continues to rise. Matthew predicts more than 31,000 jobs will be created in King County in 2016, driving additional demand for housing.

Inflation is still a non-factor and will continue that way for quite some time, although rates are expected to increase in December. “Rental rate growth will slow in select sub-markets”, said Matthew, due to all the new construction. “Institutional demand will not slow anytime soon” predicted Matthew.

Mike Scott from Dupre+Scott gave an entertaining market trends update, offering his fall rental market survey numbers to the audience. Market vacancy rates are below 4% and even lower in some submarkets. Vacancy rates by unit are highest at the higher rent levels.

The area average rent growth is highest in Seattle, due to the influx of newer apartment properties that rent for higher rent than existing properties. Taking this new stock out of the numbers, rent growth in Seattle is actually below other markets.

Despite high development activity in recent years, there are still over 13,000 units projected to be developed in each of the next three years, with 65% of those units being built in the city of Seattle.

Mike cautioned that although rent levels have recently increased at a higher pace than typical, rents have rebounded from dramatic declines a few years back.

In addition, operating expenses continue to climb at a 4% pace, higher than NOI growth. This is not sustainable, he noted.

State and King County in-migration numbers continue at staggering paces. Al-

David Doremus, Crosspointe Apartments Greystar Drew Smith, Forest Creek FPI Management Jeff Hill, Sunset Hill Black Realty Management, Inc. Paul McGinn, The Lusitano Douglass Properties Pierre Madrigal, Meadow Park Apartments Greystar Wayne Harris, Knightsbridge Community Douglass Properties

though more than 55,000 jobs have been added each of the last two years in the Puget Sound region, the forecast for the next three years is expected to be closer to 30,000 jobs gained annually.

Due to the influx of new construction, Mike expects the market vacancy rate to increase to a peak of 7% in 2018 before dropping again, and expects rent growth to decline and even go negative by 2018.

With increasing expenses for property taxes and utilities, and slowing rent growth, Mike predicts NOI to continue to decline in the next three years, before increasing again in 2019.

There is no doubt that the Puget Sound region and Seattle market have experienced phenomenal growth and positive dynamics. However, each speaker cautioned about the cyclical nature of the real estate market, with ups and downs, peaks and valleys, exuberance and corrections. They were less optimistic about the future trend.

Any artificial constrictions imposed by political means will have a profound negative effect on the industry and residents living in rental housing. Market conditions are showing signs of a correction soon.

When pressed about politics vs. housing solutions, Matthew stated emphatically, “Rent Control is a very, very, very bad idea!” for the economy in Seattle.

WMFHA would like to thank all of our outstanding speakers, industry supplier partners who helped support the Washington Apartment Outlook conference, and our members for supporting the association and each other.

For more information or for assistance, please feel free to call us at the Washington Multi-Family Housing Association at 425656-9077 or go to www.wmfha.org for more about how to join the association.

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Rental Housing Journal On-Site · October 2015

13

Rental Housing Journal On-Site

What To Do When You Need A Lawyer

T

Navigating The Best Route To Legal Advice

hese days, a sharp pain in the knee or a persistent cough sends many people not to the doctor’s office, but to the Internet, looking for a potential diagnosis and cure.

Something similar happens with people in need of legal advice, says Jasen McDaniel, executive director of the Jeffers, Danielson, Sonn & Aylward law firm (www.jdsalaw.com), which has been in existence in Wenatchee, Wash., for nearly seven decades.

“It’s much easier to type in some search terms and hope you get some usable legal information, cheap or free, without having to visit an attorney,” McDaniel says.

But, just as with health issues, that’s not the wisest move, he says. Google is no replacement for a legal education and years of practical experience, and information via a website may “provide a false sense of security,” he says.

“There’s a reason it takes three years of post graduate law school and passing the Bar exam to become a licensed attorney,” McDaniel says. “Even legal issues that seem simple on the surface can become much more complex as you delve into the details and the existing case law.

“Because of that, you want a customized, rather than mass-produced, approach.”

For example, Jeffers, Danielson, Sonn & Aylward employs about 20 attorneys and is growing to an expected 27 by the end of 2017. JDSA Law is always on the

• Small and medium-size firms. These firms can provide some of that personalized attention that comes with a solo practitioner, combined with the sophistication of the much larger firms.

The attorneys often enjoy a collegiality that is sometimes lost at larger firms.

And, generally, their hourly rates will be lower than those of the mega-firms.

“One reason to go with a firm of 20 to 30 attorneys that has been around for decades is you get a high-quality attorney and support staff for an extraordinary value,” McDaniel says. lookout to recruit highly skilled applicants to join them. The firm’s attorneys focus on 18 areas of law, such as agriculture, construction, employment and labor, estate planning, healthcare, real estate and tax law, McDaniel says.

“I think one of the most important factors when hiring an attorney is the relationship,” McDaniel says. “You definitely don’t get that through virtual-legal advice, where you aren’t physically in the savme place, and probably don’t get it at some law firms where the attorneys are overloaded with clients.”

Those in need of legal assistance have a few options when they shop around for an attorney. Here are pros and cons of each: • Solo practitioner. Most towns of any size have at least a few attorneys who practice on their own. They often gen-

eralize, offering legal advice in a number of areas, though in some cases they may focus on a particular area of law.

“A solo practitioner can be a less costly option,” McDaniel says. “But you forgo the intellectual horsepower and collegial environment you get at firms that have a team of associates who share knowledge and experience with each other, ultimately benefiting the clients.”

• Large firms and mega-firms. These firms can sometimes employ 100 attorneys or more who focus on numerous areas of law, and usually can handle more sophisticated legal issues than can the average solo practitioner.

They may have offices in multiple cities and even multiple states. A downside is their services tend to be pricey, McDaniel says, in some cases costing $800 to $900 an hour, or more.

“Ultimately, it all comes down to finding the attorney that best suits your needs,” McDaniel says. “From that personal relationship, to a focus on a particular area of law, to your budget, what’s important is a fit that is right for you and your situation.”

About Jasen McDaniel

Jasen McDaniel is executive director of the Jeffers, Danielson, Sonn & Aylward law firm in Wenatchee, Wash. (www.jdsalaw.com) The firm has been in existence since 1946 and focuses on a number of areas of law, including agriculture, construction, employment and labor, estate planning, healthcare, real estate and tax law, among several others.

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Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

More SFRs and the Call for Seasoned Property Managers

by Marc Courtenay

G

ood news is worth celebrating, and there’s good news for the property management business: A huge increase in residential rental real estate will soon need your services.

As I’ve reported numerous times during the past two years, more and more homes are being purchased for conversion to single-family rentals (SFR). Since the crash of 2008-2009 the number of SFRs soared. In the past six years the big players in the SFR market were multi-billion dollar companies like Blackstone Group (symbol BX). If you were an individual trying to compete you’re chances were slim to none.

Many small investors, myself included, who wanted to buy foreclosed properties and rent them out in hopes of generating more income, were stymied. Before we could make an offer the house was sold.

The housing crash had created a plethora of foreclosed properties for the big players. It’s been estimated that institutions spent over $20 billion the past seven years buying over 100,000 properties.

Now the appetite for quality SFR properties is expanding to the crowd-funding arena. I recently caught up with Scott Picken, co-founder and CEO of Wealth Migrate. This innovative firm is “…the leading global real estate investment marketplace, giving investors direct access to exclusive real estate investment

opportunities in premier markets around the world.” Picken explained that the company makes it possible for millions around the globe to have access to quality real estate opportunities. Pooling the crowds’ funds with their “best qualified partners,” Wealth Migrate endeavors to

live up to its name, allowing investment capital to “migrate” towards good deals.

An example of a “qualified partner” is the company’s President Dolf de Roos, best known for his New York Times best seller Real Estate Riches, and renowned for his real estate investing prowess. Dr.

de Roos is currently working on his next project, “…balancing all the lessons of traditional real estate investing with the power of crowd-funding to enable inves...continued on page 19

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Rental Housing Journal On-Site

Market Update

What is Going On Here?

by Chris Kuehl, PhD.

A

t the time of this writing investors are running around as if their hair was on fire. It suddenly came to the attention of the markets that China has been slowing and that the price of oil had fallen. The timing of the collapse has been a little perplexing but it is something that many had anticipated for some time. The real question is what happens from here?

There are parts of the economy that matter more to the folks involved in real estate investing than to others. It is interesting to note the turmoil in the oil markets but housing data and trends matter more. The other factors that usually attract attention include the overall state of employment as well as the potential for interest rate changes.

Starting with the last sector first, there has been an impact on the Fed’s thinking since the markets started their swoon.

Up to that point the expectation had been that the Fed was going to hike rates in September. Granted, analysts have been predicting that rate hike for almost two years now but this forecast looked pretty secure. Now the expectations have changed. The talk is not of a December

rate hike and maybe not one until 2016.

This change in opinion is predicated on the assumption the fed is not interested in throwing gasoline on a fire and the assertion that acting now would drive the dollar even higher than it already is.

The Fed is well aware that the world’s

impact is more serious as the greenback has already been gaining and this has already hurt the US export community.

Driving the interest rates up – even by a small amount – will trigger a further gain in the dollar and that is not helpful. The Chinese devaluation of the yuan

markets are in turmoil and there is no desire to make matter even less stable.

Even though the markets have been pricing in these interest rate hikes for two years now there will be a reaction to changing rates after six years. The dollar

drove dollar value already and it is very likely that more of this devaluation will take place as the Chinese try to get their economy back on track The second area of note to the real estate investor – at least as far as the greater

economy is concerned – is the status of the job market. Nothing correlates more closely to home ownership than job numbers and nothing motivates people to move than changing jobs. The data of late has been improving but there are lots of nuances as far as job assessment is concerned. There are even issues as far as how to accurately measure it. The Bureau of Labor Statistics is the keeper of the data and they release the official job numbers based on the Household Survey conducted monthly by the BLS. The number we all hear is the U-3 version of that data and right now it says that unemployment is at 5.3% and that is pretty good. The U-6 version however is almost twice that number at 10.6%.

The U-6 version counts the “discouraged worker” that is seeking work but not formally through the system. It also looks at the number of involuntarily unemployed individuals. The fact is that many more people are jobless than most people realize.

Then there is the fact that workers are not nearly as mobile as they once were.

The US was always seen as a place where

...continued on page 23

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Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

More SFRs and ...continued from page 15 tors to create global wealth together.”

Picken knows what a boon this is for outstanding property managers. In fact, great property managers will directly benefit from the company’s robust growth plans. Picken told me, “We’re constantly looking for seasoned property managers with a niche [like SFR] and a proven success formula. We look for well-connected visionaries in the field of property management.”

Investors in the SFR space know that investing in quality properties is just the beginning. The most challenging step is attracting quality renters and successfully maintaining the homes.

While organizations like Blackstone and Wealth Migrate concentrate on finding great deals, they can’t successfully keep the residences profitable without a proven process of finding qualified residents. As Picken told me, “we’re looking for property managers with scale, who know how to take good care of our properties and can grow with us.” He kept emphasizing competence, thinking big, and experience.

The SFR market in the U.S. will only grow hotter. Institutional investors already own about 200,000 single-family homes. SFR properties now make up

13% of U.S. housing supply which is a 9% increase from just ten years ago according to Moody’s Analytics. Now with crowd-funding platforms like Wealth Migrate, a gigantic new influx of investment capital is looking for SFR properties to buy, rent out and produce income streams.

“We estimate that 25 million Chinese now own properties outside of China.

They want to get their money into stable, English-speaking countries like the U.S.,” Picken concluded in our interview.

“A ‘Great Wall of Capital,’ upwards of $5.6 trillion wants to move out of China” he opined. This phenomenal buying power especially wants real estate where there are shortages and many tenants.

As the big players like Blackstone begin to sell-off or spin-off their SFR holdings in the months to come, a whole new economic class of owner-investors will emerge. They’re going to need great managers. Are you preparing for this “Great Wall of Capital” to knock on your doors and say, “We heard you’re the best property management company in your area. Would you like to grow your business with us?”

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Rental Housing Journal On-Site

Prepare Rental Properties...continued from page 1 8. Defend against moisture. Keep outdoor fabrics and surfaces safe from the winter elements with a moisture blocking spray or sealant. Use the product to protect walkways, wood and other outdoor surfaces before the harsh weather arrives.

cated and the extent of the damage, so take the necessary steps to avoid the additional out-of-pocket cost.

4. Check the water heater. Ensure units on the property are in good condition with thorough inspections. Drain and flush the hot water heater to get rid of sediment build-up. If it’s time for an upgrade, choose a model that’s compliant with the latest efficiency requirements enacted in April of this year.

9. Create a severe weather kit. Prepare for the worst by assembling a severe weather kit before the season hits, including generators, batteries, flashlights and a First Aid Kit. Also include snacks, water and other essential supplies.

5. Install programmable thermostats.

Wi-fi enabled thermostats offer customizable convenience by enabling users to control temperatures from their smart phone. Some models even sense when a unit is occupied, delivering comfortable temperatures when it is in use and saving energy and money when no one is home.

Property managers can also program smart thermostats to send reminders for filter changes or extreme temperature alerts.

6. Clear gutters. Remove debris from gutters to ensure proper drainage around the property. The fall and spring seasons are the best times to clean gutters, and property managers should take this one at least two times per year. Improper drainage can damage landscaping and the property’s foundation and cause snow and ice to build up in the winter months.

7. Protect the landscaping. The steps to winterize your landscape largely depend on your location. In milder climates, like the West Coast or Deep South, you can protect your outdoor

10. Help residents prepare. Encourage tenants to report maintenance issues immediately and share tips to help them get ready for the winter season.

Let them know that they play a huge role in keeping the unit intact during the colder months.

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plants by applying mulch or protective fencing and verifying that the freeze sensor on the irrigation system is working properly. In colder climates, drain water from the irrigation system so pipes and sprinklers don’t burst underground. There are three common

techniques to winterize irrigation systems – manual, automatic and compressed air blow-out methods – so property managers should review the options to determine which can best protect their landscape.

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Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

Self Directed Retirement...continued from page 12 proximately $6,000 into your IRA, your spouse’s IRA, and your HSA. If you do not fund your accounts, you will have very little to work with for investing purposes. The discipline of consistently funding your accounts creates the “seed” you will plant and subsequently reap in future, profitable harvests. If you never create the seed, you’ll never be able to plant it.

3. Know the things in which you cannot invest.

The list of things in which you cannot invest with a self-directed retirement account is very simple: collectibles, shares of sub-S corporations, and life insurance contracts. Once you understand what you cannot invest in, it means everything else is possible. The same theory also applies to the next rule.

4. Know the prohibited transaction rules, or hire someone who does.

We all think we understand the rules; but when we are in a hurry and get into a deal with a lot of moving parts, we often don’t take the time to analyze the transaction in light of all the prohibited transaction rules, particularly rules regarding not providing a service to your account, as well as direct and indirect benefit rules. Many retirement account

investors are unable to distinguish between what they believe is a service and/ or managing their investment, let alone explain whether they are using their retirement account in a way that either directly or indirectly benefits them now or in the near future.

It is prudent to do at least an annual review of the rules regarding prohibited transactions and disqualified persons so you can keep current as to what you can do with your self-directed retirement account investments. There are many good resources from custodians, administrators and trustees, lawyers, and even some reasonably-priced books on the internet. These will give you a basic understanding of most of the rules for prohibited transactions and investments, and disqualified persons. If you are a fact junkie like I am, or if you suffer from chronic insomnia, you may want to take the time to carefully read 26 U.S.C. 4975, as well as the Plan Asset Rules promulgated by the Department of Labor.

willing to do short-term deals (such as hard money lending) in order to achieve those rates of return. While 3 points and 15% might sound impressive for a 6-month period of time, that deal pales in comparison to an investment that may last for four years consistently earning a 12% rate of return. Since the goal is to amass a good-sized retirement account, you need to work toward that goal. My suggestion is that you do it by focusing on longer-term deals. Consistency is important, because slow and steady wins the race.

Another benefit of doing longer-term deals is that it is much easier to do the necessary due diligence and underwriting for one longer-term deal than for a series of shorter-term deals. There are fewer demands on your time and fewer opportunities to make mistakes.

The remaining five recommendations for self-directed retirement account holders will be available in next month’s publication.

5. Remember that it is a retirement account, and you need to treat it as such by doing longer-term, cash-flow-producing deals.

Many times an investor gets trapped in what I call “yield disease.” They are looking for a high rate of return and are

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Rental Housing Journal On-Site · October 2015

B&W Rental Housing Journal On-Site

Market Update ...continued from page 16 people could pick up and relocate to find the job they want but that is less true today than in the past. The three most important inhibitions are that today the majority of households are dual earning and for somebody to take a new job the spouse will need to take one as well and that gets harder to arrange. The second problem is that many people have to sell their current home to move and in some markets that is hard to do. Finally there is the issue of split families where moving creates custody issues.

Finally there is the most closely watched set of indicators – those that

deal with housing. This year has been decent and verging on good. The demand for new homes is up and that has boosted starts. There has been more growth in the multi-family sphere than in the single family sector. The mood of the construction sector has been improving and there is a sense that millennials are finally starting to get engaged in the housing sector as they start to hit their 30s and late 20s. The price of homes has remained pretty stable but some hotter markets are seeing price hikes. Mortgage rates have remained generally low but most assume that they will jump up a bit when the Fed finally starts to act.

Rental Housing Journal On-Site · October 2015

What does the future hold? That is always a challenge – after all, the science of economics is explaining tomorrow why the predictions made yesterday didn’t come true today. Assuming that the markets settle down by the time the leaves start to turn the economy of the rest of the year should be an extension of what we have seen thus far. The housing market will keep improving in most cities – at least in the areas where there has been decent economic progress.

Those communities that are tied to the energy sector are going to keep suffering and things are likely to get worse before

improving. This will affect the Dakotas as well as Texas and other states that have been connected to that boom. The growth will be in places that host health care related industries as well as those that are connected to the aerospace community. The “popular” regions are now growing again – Florida, California, Colorado but the rust belt states keep shrinking.

The long and the short of it is that the US economy can expect to finish the year with growth close to the average of the last twenty five years – somewhere in the 2.0% to the 2.5% range.

23

Rental Housing Journal On-Site

2015 Changes to the Oregon ...continued from page 6 utility charges, fees or deposits and, following the violation but prior to the acceptance of rent for three rental periods or performance as described in subsection (2) of this section, the landlord gives a written warning notice to the tenant regarding the violation that: • Describes specifically the basis of the claim and the amount of money owed that constitutes the violation; States that the tenant is required to correct the violation by paying the money owed; and • States that continued nonpayment of the money owed that constitutes a violation may result in a termination of the tenancy pursuant to ORS 90.392 This statute is also amended to read that “ for violations concerning the tenant’s failure to pay money owed to a landlord, the landlord’s written warning remains effective for 12 months from the date of the tenant’s failure to pay the money owed.”

5. Regarding renter’s liability insurance and landlord requirements thereof.

Changes to ORS 90.222 are important given that as of January 1, 2016 landlords must provide a reasonable written summary of the exceptions to the insurance requirements to tenants. This typically addresses low income tenants or tenants using vouchers or living in subsidized housing, and basically exempts Section 8 tenants for carrying rental liability insurance. Should a landlord desire to amend a month-to-month rental agreement, so as to require rental liability insurance, the landlord must not only give

S

R R

a tenant a 30 day notice, but must also deliver the same written summary of exceptions to a tenant/tenants.

A landlord may require that the tenant provide documentation that the tenant has named the landlord as an interested party on the tenant’s renter’s liability insurance policy authorizing the insurer to notify the landlord of: a. Cancellation or non-renewal of rental insurance policies b. Reductions of policy coverage c. Removal of the landlord or other interested party (like a property management company or an attorney) If a landlord” knowingly” does not follow the modified rules, tenants may recover actual damages or $250, whichever is greater.

6. ORS 90.325 tenant responsibilities 1. New codes require that new apartments be constructed with fire sprinklers installed. To that end tenants may not remove, obstruct, or tamper with a sprinkler head used for fire suppression.

2. Other new rules regarding tenant responsibilities define what damages tenants are NOT responsible for: a. Acts of God b. Conduct by a perpetrator relating to domestic violence, sexual assault or stalking c. Damage resulting from conduct by a perpetrator relating to domestic violence, sexual assault or stalking.

A Landlord may require a tenant to provide verification that the tenant or

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a member of the tenant’s household is a victim of domestic violence, sexual assault or stalking as provided in ORS 90.453.

7. Utility and public service charges ORS 90.315 now allows landlords to bill tenants for utilities and public service charges (charged to the landlord by the public service.

A ‘public service’ is defined as municipal services and the provision of public resources related to the dwelling unit, including street maintenance, transportation improvements, public transit, public safety and parks and open space.

“Public service charge” means a charge imposed on a landlord by a utility or service provider by a utility or service provider on behalf of a local government or directly by a local government. However, “public service charge” does not include real property taxes, income taxes, business license fees or dwelling inspection fees.

Provided your rental agreement requires a tenant pay a utility or service charge, landlords can bill for it but landlords must bill for the utility within 30 days after receipt of the utility provider’s bill. If the landlord includes the bill in the monthly statement of the rent due, the landlord must separately and distinctly state the amount of the rents and the amount of the utility and / or service charge.

To be able to bill back utilities to the tenant the landlord must provide to the tenant in the rental agreement or in a separate bill to the tenant an explanation of: a. The manner in which the utili-

ty provider assesses the utility bill or service charge. b. The manner in which the service charge is allocated if the provider’s bill is allocated among multiple tenants, (for example: RUBs (Ratio Utility Bill back), sub meter, by number of residents in a unit, or by number of units).

Landlords must include a copy of the utility bill for the tenant to review or state in the rental agreement and / or tenant bill back that the tenant can inspect the bill at the landlord’s office (during reasonable office hours) and that the tenant can have copies of the bills at a reasonable cost. Utility bills and service charges can be transmitted to tenants via first class mail, posted on the door, or via email, if the rental agreement so provides (ORS 90.155).

Service charge pass through A landlord must provide 60 days written notice to a tenant before the landlord may amend an existing rental agreement to require a tenant to pay a new service charge adopted by a utility service provider (such as a billing service or a local government) that was not in existence at the time the rental agreement was entered into and that was adopted by a utility or service provider or a local government within the previous six months.

A landlord may not hold a tenant liable for a public service charge billed to a previous tenant. ...continued on page 30

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Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

Low-Value Homes ...continued from page 9 % Change in Number of Q2 2015 Negative Equity Homes in Negative Equity Rate From Q2 2014 to Q2 2015 14.4% -19.3% 12.0% -17.1% 7.8% -25.3% 22.0% -17.8% 6.2% -38.7% 16.9% -9.2% 6.4% -25.1% 16.4% -13.7% 16.3% -25.8% 20.9% -28.6% 7.9% -24.4% 5.4% -37.8% 18.3% -24.0% 15.8% -20.6% 18.2% -17.5% 11.9% -34.2% 13.2% -21.7% 8.6% -26.3% 18.8% -17.9% 17.6% -25.3% 17.8% -13.4% 6.0% -29.9% 10.2% -8.8% 7.5% -40.9% 13.0% -23.8% 11.0% -19.0% 17.8% -25.8% 15.4% -18.7% 18.3% -16.3% 17.9% -14.9% 25.0% -16.4% 3.4% -31.8% 14.2% -25.5% 12.1% -34.5% 15.0% -17.1% 6.9% -22.4%

Metro Area United States New York-Northern New Jersey Los Angeles, CA Chicago, IL Dallas-Fort Worth, TX Philadelphia, PA Houston, TX Washington, DC Miami-Fort Lauderdale, FL Atlanta, GA Boston, MA San Francisco, CA Detroit, MI Riverside, CA Phoenix, AZ Seattle, WA Minneapolis-St Paul, MN San Diego, CA St. Louis, MO Tampa, FL Baltimore, MD Denver, CO Pittsburgh, PA Portland, OR Sacramento, CA San Antonio, TX Orlando, FL Cincinnati, OH Cleveland, OH Kansas City, MO Las Vegas, NV San Jose, CA Columbus, OH Charlotte, NC Indianapolis, IN Austin, TX

Q2 Negative Equity Rate for Q2 2015 Negative Equity Condos Rate for Bottom-Tier Homes 19.3% 24.0% 12.6% 23.4% 10.1% 12.2% 32.6% 11.2% 23.4% 32.4% 14.0% 20.2% 28.5% 23.0% 29.9% 27.8% 42.7% 12.9% 13.6% 7.1% 10.9% 17.3% 20.5% 24.2% 26.1% 27.0% 20.1% 19.5% 22.1% 22.9% 12.7% 12.7% 24.7% 37.6% 23.9% 34.1% 24.9% 30.5% 9.9% 8.5% 9.6% 20.6% 15.5% 10.6% 25.4% 20.1% 16.7% 29.9% 31.2% 23.3% 29.3% 22.5% 38.4% 23.8% 36.7% 38.3% 5.1% 6.2% 24.6% 30.7% 21.3% 20.0% 21.0% 11.0% Source Zillow

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Rental Housing Journal On-Site · October 2015

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Giving A Tenant “The Boot”

he time has come that you want to part ways with your tenants.

How do you do it and what things should you be careful of? How much notice do you give them? Can you do things in a way that will avoid upsetting your tenant and causing them to damage your property before moving? Can you walk up to the door of the unit to have a conversation with them?

First thing is the amount of notice you give them. This depends on the reason for terminating the relationship. If you are just doing a no-cause notice to vacate then you can give them a 30-day notice, if they have paid rent for less than 12 months. 60-days if they have lived there for more than 12 months. If this is a non-payment of rent situation then you are able to give them a 72-hour non-payment of rent notice on the 8th day of the month (assuming your rent is due on the 1st). This gives the tenant 72 hours to vacate or pay their rent. If your tenant threatens your safety or breaks the law while on the property then you may be able to give a 24-hour notice of eviction.

Be careful with this one though and make sure that you are able to prove the violation. For most other lease violations you can give them a 14/30 notice. This is a notice that gives the tenant 14 days to cure the lease violation in a manner that is agreeable to the landlord or 30 days to move out.

If the tenants have not become hostile yet then I would suggest that when you give one of these notices you either call the tenant beforehand or do it in person and try to have a conversation with the

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tenant at the same time. Keep in mind that the main goal is to get the tenant to move out. When you post a notice of eviction for a cause you can accomplish a lot by having a conversation with the tenant. Keep in mind that it is perfectly legal for you to do a “knock and talk”.

That is you are allowed, without prior notice, to walk up the normal pathway to the front door to knock on it and try to talk with the tenants. Obviously be careful to stay on the natural path to the front door, don’t look inside any windows, and don’t walk around the property if you haven’t given notice. When you talk to the tenant let them know that you have no choice but to post this notice. Although if they are able to get moved out prior to the notice expiring or even prior to the initial hearing if you have to file an eviction, that you will drop the eviction.

90% of our evictions end on a positive note in this way. Ultimately we get what we want in that the tenant moves out without causing any additional trouble and sooner than if they fight it and we have a trial. They get the added benefit of

not ending up with an eviction on their record which could cause them to be denied at the next place they try to rent or pay much higher security deposits.

The reason that you want to have this conversation while still posting the necessary notice is that you want to reserve your right to evict them as soon as possible if they don’t follow through on their side of the agreement. The majority of landlords have heard the “promises” and sob stories. If you still post the notice, but let them know that an eviction won’t end up on their record if they can follow through, then the ball is in their court and if they fail to follow through you haven’t lost any time and can still evict them as soon as possible.

The eviction process is much like getting a traffic ticket in that there is an initial hearing to see if you and the tenants can come to an agreement; and then there is a trial if no agreement can be made. The best thing that you can do is reach an agreement at the initial hearing. The reason is that the judge will make that stipulated agreement part of

his judgment. In entering this agreement with you and the court the tenants are waiving their right to a trial. So if they fail to follow through on their end you are able to file some paperwork at the courthouse and get your FED judgment.

If you are evicting a tenant and part of the agreement is that if they follow through you will actually allow them to continue living at the residence then you can add to that agreement that they pay their rent on time. Most judges will allow you to require this for up to 6 months.

This is a very good thing to add to that agreement as it makes it so that you can skip the hearing and trial and just evict them on grounds of violating their stipulated agreement if they fail to pay their rent on time.

The last bit of advice I can give is to never make it personal.

Keep in mind that even if they live in a property you own that this is just business. Don’t get sucked into arguments with the tenant and stick to the facts at all times. Always remember that your end goal is not to punish the tenant, but to get possession of your property back as quickly as possible with as little damage as possible. So be prepared to offer the tenant something (like dropping the eviction case) if it means they will move out sooner than later and without a fight.

Good luck with your next eviction!

Christian Bryant

President Portland Area Rental Owners Association Coldwell Banker Property Management www.CBPropertyManagement.com

Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

5 Lessons for ...continued from page 1

Lesson One: Gutters and drains are key.

When gutters, downspouts, and ground drains are neglected, they begin killing your buildings. These components are at the top of the most wanted list when it comes to the destruction of your physical property. When they are clean and clear of debris, they will redirect and remove thousands of gallons of rainwater per year. To find the estimated amount of rainfall at your property use the following equation: (total sq’ of roof surface X 0.6 X annual rainfall).

Here is a common property example from one of the properties in my portfolio in Portland, OR. It’s a 100 unit property with 10 buildings. Each building has a roof surface of approx. 2000 sq’. Using the annual rainfall for Portland (37.2”/ yr), we can estimate that over 446, 000 gallons of water per year is landing on nearly all surfaces of my property, but

mostly on the roofing. Without clean and functioning gutters, downspouts and ground drains all of that water is pouring into your building envelope somewhere. Whether it’s damaging the roof sheeting, deteriorating the fascia, pouring down the siding, splashing over the side and causing splash back on the underside of the siding, or simply creating standing water throughout the property, it will cause you problems. The obvious solution is to give your rain drain system the attention it deserves. I recommend 3 cleaning and line jettings per year. Starting in March, I want to get all the residual debris out from the previous winter.

Then in August/September I want to get them all clear for the upcoming Fall and Winter leaf drop, then I will do one final clean and jet in December/January to get rid of all the leaves and debris that was just dropped over the past 90 days.

Rental Housing Journal On-Site · October 2015

Lesson Two: Sealant matters.

The sealant (caulk) that is protecting your windows and siding material joints is like the sentry guarding the castle gate.

At first he is strong, flexible, dependable, and nearly unbeatable. However, he gets weaker over time, and, depending on his location, is constantly under attack and beaten down. Eventually, he fails and must be replaced. The truth of the matter is that even the best sealants on the market have a manufacturer’s recommended useful life of around 3-5 years. This

flashed with metal. This increased focus on the sealant will not only prolong the life of the material components, it will eliminate interior envelope damages.

Since all surfaces and potential points of intrusion are being reinforced on a regular basis, the life span of the envelope materials, and ultimately the value and future capital needs to retain the value of the property is preserved.

means that if your property was built before 2013 and hasn’t had the sealant removed and replaced then your property is under siege, and there is nothing protecting the critical access points that could become an open gate for water, mold, dry rot, and building failure.

Within the industry there is a push given the construction defect litigation environment that is prevalent to implement sealant replacement schedules every 4-5 years with a focus on the horizontal surfaces, especially those that are not

Lesson Three: Irrigation is key to NOI. We all know water is very expensive.

What we sometimes forget is, one of the largest water drains on our sites are our irrigation systems. These systems were designed, initially, to get things growing fast at the time of development. Green grass, healthy trees, and bushes that can be trimmed and shaped make the prop...continued on page 28

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Rental Housing Journal On-Site

5 Lessons for ...continued from page 27 erty look good and help with the initial lease up and aggressive marketing that it takes to get the property performing well financially. But, over time, grass takes root, trees and bushes become mature and native plants and trees stabilize, leaving much of our irrigation systems unnecessary. Take this opportunity to do an in depth irrigation audit and determine areas that no longer need to be watered. Some areas may need different approaches, such as drip systems rather than the more common sprinkler heads which use far more water. If possible, remove entire zones in areas that have little or no grass, heavily shaded areas, or areas that appear to be heavily saturated. Taking advantage of these savings

will not only save you money but eliminates the need for future maintenance and possible damage and repairs as well.

Lesson Four: Don’t forget about crawl spaces.

Although often forgotten, neglected crawl spaces can be can serious problems. They may be too cold and wet under the units, or too warm and wet above the units. Take the opportunity to get a visual on these areas. Here is where to focus; lower crawlspaces should be clean and dry. Check the vapor barrier to be sure there are no tears in the barrier, no standing water or stains of previous water stains from the previous winter. Also, be sure to inspect all plumbing pipes that

are within 5 feet of the outer foundation wall to be sure they are insulated.

As for the upper crawl space, take a few minutes in each building to look for potential problems that add to excessive moisture issues and ultimately mold.

Check fan exhaust venting to be sure it is positively connected to the exterior of the building, be sure that intake baffling is in place (you should see some outside light coming in where the bird block and intake vents are located), so that clean air can come into the crawl space and help push the moist, stagnant air out the top of the system. Last, be sure insulation is in place all the way out to the edge of the roof. As long as the baffles are in place this will ensure proper insulation for the units below.

Lesson Five: Emergencies are going to happen.

Be proactive by implementing and practicing emergency plans with your team. If there is an after-hours call, does every member of your team know what to do? Setting up emergency response protocols, such as pre-approved vendors for restoration, plumbing, carpet extraction, and leak locators to deal with the problems, and hotels restaurants, or even the Red Cross to deal with the residents. Have a centralized location at the site that has a list of all these vendors,

utility shut off locate maps, valve keys, fire panel directions, and emergency protocols for fire, flood, and blood, but also natural disasters, terrorist threats, gang violence, and even domestic violence. When emergencies occur everything is chaotic, be sure your responding site staff are trained, prepared, and are level headed so they can assume the leadership role your residents expect and deserve.

Zach Howell, CAMT, UPCS, LEED GA Director, Apartment Maintenance Institute Zach carries a Psychology degree from Oregon State University. He is a nationally Certified Apartment Maintenance Technician, LEED GA, and Certified UPCS inspector carrying more than a decade of experience within the multifamily housing, development, and construction industries. Zach is a valued advocate for the Apartment Maintenance trade, serving as Subject Matter Expert for the National Apartment Association, Training Director for The Apartment Maintenance Institute, Community Education Faculty Member at Portland Community College, and 2014 Apartment Community Excellence “Oregonian Civic Award” Recipient.

He can be contacted via email Zach@aminstitute.net

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Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

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Rental Housing Journal On-Site · October 2015

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Rental Housing Journal On-Site

2015 Changes to the Oregon ...continued from page 24 8. Application order for tenant payments According to ORS 90.220(9)(a), as of January 1, 2016 funds received from tenants must be applied in the following order: a. Outstanding rents from previous periods b. Rent from the current period c. Utility or service charges d. Late rent payment charges e. Fees or charges owed by tenants under ORS 90.302 or other fees and charges related to tenant caused damages and other claims This section does not apply to rental agreements subject to ORS 90.505 – 90.840 relating to manufactured dwellings or floating homes but does affect all rental agreements for fi xed term tenancies entered into or renewed after the effective date of this 2015 Act (January 1, 2016).

9. Definition change regarding emergency exits Section ORS 90.100 creates new language requiring a landlord to provide an emergency or secondary means of exiting a bedroom (in addition to the main door to the room,) and allows a tenant to terminate such a tenancy on 72 hours’ notice unless the landlord cures the noncompliance, compensates for damages and pays a penalty for their failure to cure.

This change is aimed at landlords who rent out illegal units containing bedrooms without legal or approved egress, which can be catastrophic in the case of a fire or other emergency. This law is focused on landlords who build extra rental rooms without a permit, with a specific focus on basements, attics and rooms that have no windows that can be used for emergency egress.

If the landlord does not cure the noncompliance within a 72 hour period the tenancy terminates without any tenant penalties, and the tenant can recover twice the tenant’s actual damages or twice the periodic rent, whichever is greater. Within four days after termination, the landlord must return all the security deposits and any prepaid rent owing to the tenant.

Summary In summary, as these new laws take effect, landlords must be vigilant in cases regarding the mailing period of notices, pet waste in public spaces / noncompliant pets, homeowner / condominium association assessment fees, tenants’ failure to pay fees, exceptions to insurance requirements, tenants’ responsibility for damages, utility and public service charges, the order tenants’ payments are applied, and provisions for emergency exits as they adapt their policies, procedures and documentation to the new provisions.

The Latest FAU Buy vs. Rent Index Indicates The U.S. Housing Market Trending More Favorable To Buying Than Renting The latest national housing market index produced by Florida Atlantic University and Florida International University faculty indicates the country as a whole is moving deeper into buy territory, as owning a home is expected to produce greater wealth, on average, than renting.

According to the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, as of the end of the second quarter of 2015, the housing market in the United States as a whole is trending closer to buying being the superior option.

“The U.S. as a whole is still in clear buy territory,” said Ken Johnson, Ph.D., a real estate economist who is one of the index’s authors and an associate dean of graduate programs and professor in FAU’s College of Business. “The cities of Cincinnati, Chicago, Cleveland and New York City are deep into buy territory.”

Two cities that have been edging into rent territory - Miami and Portland have “pulled back from the edge,” Johnson said. “It’s coming back toward a tossup between buying and renting. That’s a good sign for home pricing in Miami and Portland as it suggests prices are going to level off in these metro areas.”

Dallas and Denver dipped slightly deeper into rent territory, making renting the preferred method for wealth accumulation, on average. Houston, however, has plunged alarmingly into historic levels of rent territory.

“Houston is particularly worrisome coming in with a score of .633,” Johnson said. “Rapid property appreciation combine with shaky economic prospects to put Houston on the watch list for a nearterm dip in housing pricing.”

Dallas and Houston “have faced relatively flat income growth and rising index scores that strongly favor renting,” said Johnson.

Honolulu, Pittsburgh, San Francisco and Seattle remain toss-up cities, implying that they are at or near the indifference point between ownership and renting. Here the spread between monthly rent payments and ownership payments appears to be at a point where neither ownership nor renting is statistically favored.

SOURCE Florida Atlantic University

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Rental Housing Journal On-Site · October 2015

Rental Housing Journal On-Site

Rebuilding Together Washington Multi-Family Housing Association partners with Rebuilding Together Seattle for a volunteer Impact Day. September 29, 2015

R

enton, WA – The Washington Multi-Family Housing Association (WMFHA) organized their first annual volunteer Impact Day, partnering with Rebuilding Together Seattle. Rebuilding Together Seattle brings volunteers and communities together to help low income homeowners live in warmth, safety and independence.

In an effort to continue to give back to local communities and provide a way for the association’s members to be a part of a charity volunteer day, WMFHA chose houses owned by an Army veteran and a Navy veteran. “This volunteer day was extremely rewarding and heartwarming for our member participants. To be able to help these homeowners out with needed repairs was a joy for all who attended”, stated Jim Wiard, WMFHA’s Executive Director.

WMFHA’s member companies donated materials, equipment and labor to make extensive repairs and replacements in the homes. New appliances installed included a refrigerator, stove, dishwasher, washer/dryer and a new hot water heater. All vinyl flooring and carpet was replaced in one home. Kitchen cabinets and countertops were all replaced, along with bath and kitchen sinks. Window blinds were replaced. Volunteers performed gutter cleaning and landscaping as well. In a separate home, a complete roof was installed.

WMFHA would like to thank these members for their participation in this gratifying event: HD Supply, Roto Rooter, 1 UP Floors, Mono Rooftop Solutions, NPI Multifamily Renovation Solutions, TopLine Counters, American Floors & Blinds, Moen Faucet, Reinhart Electric Service, ABODA, Apartment Advantage Staffing, SUHRCO, CTL Management and Greystar Management.

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representing over 160,000 apartment homes, and over 190 service suppliers working together to promote and enrich the multi-family housing industry in Washington state. For more information please visit www.wmfha.org Jim Wiard, WMFHA Executive Director (425) 656-9077 jim@wmfha.org

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Rental Housing Journal On-Site · October 2015