Rental Housing Journal On-Site October 2016

Rental Housing Journal On-Site

October 2016

3. 8 Ways to Profit by Properly Managing Your Commercial Leases

6. Dear Maintenance Men – Roofs and Winterizing

9. Washington Apartment Outlook Forecast

4. Better Investment - Rent or Fix & Flip?

7. Fix and Flip or Rent

5. The Elements of Fire, Ice and Water

8. Increase Apartment Construction Catches Up With Demand and Political Pressures Stifle Rents...

14. 3 Things Possum Has Done to Local Apartment Search

11. Time to Winterize Your Property

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

Hot Market Causing Seattle Multifamily Construction Pipeline Bulge Market Report Seattle-Tacoma Metro Area, Third Quarter 2016

Seattle - The latest Apartment Insights survey shows a surge in units in the construction pipeline. The hot market has inspired developers to fill the pipeline with over 72,000 units according to Tom Cain of Apartment Insights. The data are from his Seattle firm’s 3rd quarter statistics and trends on 50+ unit properties in the King/Snohomish market

Vacancy: 3.99% The vacancy rate for our nonrandom survey of conventional, stabilized 50+ unit properties in the King/Snohomish market is 3.99%. This is up from 3.86% last quarter. It was 4.07% a year ago.

King and Snohomish counties have had the same vacancy rate at 4%. The continued on page 17

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Preparing Your Furnace For Winter

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he weather is getting colder and colder out there. It’s time to break out the warmer jackets and turn on the heat. But before you turn on your heater, winterizing your investment properties (especially the HVAC system) should be at the top of your to-do list. Your tenants will rely on the heater throughout the cold months of winter, so it’s important to prepare the system for the upcoming winter days. Here are some helpful tips on how to get it ready.

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urging Economy Lifting Rents to New Highs in Seattle-Tacoma Developers struggle to keep pace with apartment demand as housing affordability becomes a mounting concern. More than 200,000 jobs created in the metro during the last four years are producing a tremendous demand for housing. Even though developers have ramped up the pace of construction, vacancy in most submarkets remains below the traditional recontinued on page 18

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Rental Housing Journal On-Site ¡ October 2016

Rental Housing Journal On-Site

8 Ways to Profit By Properly Managing Your Commercial Leases

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

R

eal estate is a relationship-dependent business, and no relationship is more important to real estate than the landlord/tenant relationship. Yet no relationship in real estate deals with more divergent interests.

The lease is the bond that holds this crucial relationship together and selecting the right lease clauses and leasing approaches can add significant value to a property or prevent unnecessary losses. The following are some examples of lease clauses and leasing decisions that can help increase property value.

1. Strong tenant screening standards Leasing to quality tenants is the best way to maintain a successful investment. Not only should the tenant have a solid business plan that can operate in harmony with the rest of the tenants in the building, they should have some business experience, be well capitalized and have good credit.

If they have weak credit it makes sense to require a co-signor or guarantor on

the lease. The guarantor should be responsible for paying the rent during the full term of the lease. After the end of the initial term, you may consider letting the co-signor/guarantor off of the hook if you are confident with the business model and the rents have consistently come in on time.

Even if you have the benefit of a very successful business interested in your space, it is equally important to make sure that the lease contains language that discusses what happens if the tenant sells the business or a portion of the business. For example, if the owner of the business sells all or part of the business to a new president, this is a significant change in responsibility and you may want to include language that specifies that any new business owner be a party to the existing lease.

both tenants and landlords use the same measurements to establish what is being rented.

Every lease should include a drawing, usually attached as an exhibit. This drawing typically spells out the total square footage being leased. Unfortunately, not all landlords have accurate space measurements available for every space they own. BOMA has drafted up standards for all building types to use as reference. These standards are generally accepted. You can find them here: http://www.boma.org/standards/Pages/ default.aspx.

Most importantly, one needs to establish the rentable square footage. The rentable square footage is typically more than the usable square footage.

This is because many buildings have common spaces that tenants and their visitors use, such as restrooms, elevators, hallways, janitorial closets, electrical/phone communications rooms, and generator spaces. These areas are loaded into the rentable square footage.

This additional percentage is called the

2. Clear definition of space being rented The Building Owners and Managers Association (BOMA) discovered years ago that negotiations are easier when

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load factor. Additionally, leases need to define the percentage of a building that is used, and if necessary, the percentage of a campus in a multi-building complex. A well-organized landlord will have a current and accurate schedule of rentable and usable square footages and space that is added into the load factor. Ignoring the shared area that the landlord has to maintain is a boon for a tenant and a loss for a landlord.

For example, if an 11,000 square foot building has a useable square footage of 10,000 square feet and has a 10 % load factor, that 1,000 square feet needs to be added to the lease for a total rentable square footage of 11,000 to take into account all of the square footage the tenant is using.

Owners, Managers & Maintenance Personnel: Weather Preparedness Are You Ready for Mother Nature’s Worst?

Cash Flow Management for Owners of Smaller Properties

Darcy Jacobsen, Buildium

Julie Johnson, Smart Choice Realty

Resident 2.0 — Using Technology to Revolutionize the Resident Experience

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Building Value: Using Insights to Execute Asset Performance Jennifer Staciokas, Pinnacle

The Legal Anatomy of an Eviction — aka — 50 Minutes of Law School Rob Trickler, Atty.

The 3 Principles of a Thriving Property: - Branding - A Defined Purpose - Creating On-Site Culture Tracy Atkinson, Goodman Real Estate

Small Property Owners — Taking the Trouble Out of Security Deposit Disputes Kellie Tollifson, T-Square RE

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Rental Housing Journal On-Site

Better Investment - Rent or Fix & Flip?

What is the better investment within the current market?

D

o you ever find yourself wondering what the best investment is based on the current market and how long the current market will make that investment profitable? Most real estate investors typically have two main investments to choose from; fix and flip or buy, fix and rent. Through my position as president of IRC Enterprises (www.IRCEnterprises.com), I have the benefit of running companies that help investors in both of these markets from Portland down to Eugene.

My general advice is to always have a balanced investment portfolio, but the right timing can make you much larger profit margins, as well as save you from taking unneeded losses.

The fix and flip market has been very profitable for the savvy investors over the last few years. Our clients have typ-

ically seen 20 to 50 percent ROIs, but those margins are being squeezed. It has notably helped, though that Oregon has become a redemption rights state.

This has kept most of the large, national investment companies out of Oregon, leaving plenty of deals for local investors to take on without too much competition. While other markets around the nation are tightening up and Oregon continues to be one of the top places to live, this will start changing.

We’ve also had the benefit of very low inventory on the retail sales market, which has helped keep the retail sales prices high enough to support fix and flip investments.

Currently there are still deals to be had as a fix and flip investor, but they are getting much harder to find unless you are willing to lower your profit

expectations. In my best professional opinion, this will continue for no more than one to two years, and two may be stretching it. This is why we have been suggesting that our investors start looking for properties that they can buy and hold as rentals.

Keep Your Tenants Longer

As most long-term successful investors will tell you, you must be willing to be flexible and adjust your investment strategy along with market demand.

Ideally, you will adjust before the market so that you can stay ahead of the game. I would suggest that all investors slowly add to their rental property portfolio over time as it will create a great, passive income stream. If you want your primary long-term focus to be on the fix and flip market, then there is a way to work rental properties into the ongoing strategy.

Everyone is aware of the current rental market and how much rent has increased over the last couple of years.

Most likely, rent will start to plateau within the next year or so, but it’s very continued on page 19

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Rental Housing Journal On-Site · October 2016

Rental Housing Journal On-Site

The Elements of Fire, Ice and Water

By John Wilhoit, Jr., www.multifamilyinsights.net

W

eather affects every property differently. I’ve seen buildings side-by-side where wind completely removed one roof while leaving the building next door intact. The elements like heat (fire), snow, water and ice take a terrible toll on property assets. They are a constant, never ending source of pressure that can only be deflected, but never full addressed.

Fire (heat), ice and water are the three constant weather elements affecting your real estate. Each asset standing today that is still standing in 30 years will have survived almost 11,000 days of weather.

Here is something we can all agree on; 30 years from now every property in operation will be 30 years older. Such a simple statement, yes? Unfortunately it is untrue. Some assets will be no longer having been demolished. Other assets will be younger than their actual years because of redevelopment or substantial rehabilitation.

One major reason for the variance in useful life is the affect of weather and the quality of the building materials (weather appropriate) used for construction.

Consider a brand new roof; with picture perfect maintenance. Still, the life of this particular major capital expenditure is 20-25 years. This precludes dam-

age from wind, hail or manmade gaffs.

Like death and taxes there is no way to avoid fire, ice and water Fire (heat from the sun) naturally breaks down every chemical known to man over time. This includes roofing, any sealant in use (around windows, caulking in baths and kitchens), rubberized water line en-casements, flooring.

Ice. Ice, as they say, is a law suit waiting to happen. Like certain family members, you can’t stop them from showing up and hope they only stays for a short while.

Water. The worst of the lot as it can boil in the heat (causing damage), melt in the sun (finding it’s way into the smallest of cracks) and yet freeze again (expanding those small cracks). Worst of all… it never goes away. There is seldom a seasonal break from H2O. In an attempt to direct water to flow where we choose, we build storm drains, washout’s, breaker walls, waterways, culverts. And yet water still takes a toll as even this infrastructure requires maintenance to assure that water goes where we direct. In some instances, once water finds its path it can be near impossible to divert.

Like death and taxes, it seems there is little we can do about the elements.

The best thing to do is be pro-active in affected areas (interior and exteri-

or) in an effort to stay one step ahead.

Sometimes this is simple, like having working gutters. Other times hard, like when the snow budget is blown to pieces by a hard winter.

No matter the season, we cannot ignore weather’s affect or pretend as if there is little or no costs to address the elements. They will be here long after we have moved on to our next act.

About This Blog Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. For more information, visit: http://www.MultifamilyInsight.net

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Rental Housing Journal On-Site

DEAR MAINTENANCE MEN Roofs and Winterizing

By Jerry L’Ecuyer & Frank Alvarez

Dear Maintenance Men: When is the best time to do an annual roof inspection? Can you give me some pointers as what to look for when I inspect the roof?

Tom Dear Tom: The best time is before it rains! However, we find summer and fall to be most the prudent time to inspect and repair the roof. In other words, don’t wait to do roofing work after the first rains of winter. The roofing contractors will be very busy and costs may go up or you may have to wait in line for the work to get done. Inspect the roof during the summer and fall and get the roofing work done before it becomes an emergency. During the roof inspection, pay close attention to the flashing.

Flashing is used to transition between the roofing material and the building or a change in roofing direction or angle.

Flashing can also be found where pipes or a chimney come up through the roof.

The flashing is sealed with roofing tar and water leaks can form when the sealing tar cracks or separates from the building or the flashing material. Look for curled up roof edges on composition roofs, low spots on flat roofs and

6

bird nests in tile roofs. Check all roof drains and cut away any trees branches that are touching or overhanging the roof. While you are inspecting the roof, check the gutters. Winter storms have a way of loosening gutters and filling them with gunk thereby causing them to lose their pitch and pool water. Pooling or overflowing gutters can deteriorate fascia boards and siding.

Dear Maintenance Men: I’m getting my work check off list started before winter comes. Do you have recommendations of what should be on the check list?

Lisa Dear Lisa: After checking and repairing any roof damage, we recommend looking at the outside walls of the property.

Stucco, wood siding or other vertical surfaces, is the building’s skin. Cracks, breaks and other damage to the siding

invite “infection” to your building. This “infection” can take the form of wood rot, mold, siding delaminating or separation from the subsurface, material breakdown of the stucco will cause discoloration and crumbling. Common siding material found in most buildings is stucco, wood, brick, vinyl or concrete panels etc. Water intrusion of the siding can find its way through the smallest cracks by capillary action or more directly from misaligned sprinklers or other water sources. A little known and continued on page 19

Rental Housing Journal On-Site · October 2016

Rental Housing Journal On-Site

By John Triplett

A

5 Key Research Findings About Tenants And Rentals

new survey designed to help property managers and owners gain insight into what tenants care about the most in their apartments shows insight on: • What will they pay more for?

• What drives them crazy?

• What makes them happy?

• What makes them sign a lease or renew a lease?

• What makes them move on from a property?

The rental survey was done by Buildium in the summer of 2016 and the company said it was created because, “As property managers or owners, naturally you want to highlight the best assets of a rental, benchmark rentals against the competition, and discover which convenience features will encourage great tenants to stick around. That’s why this report was created.”

The study looked at regional differences, age and professional cohorts to look for trends.

“Overall, we came away impressed with the desire of tenants— particularly apartment tenants—to use digital communications, not only to find a place to rent, but also to keep in touch with property managers,” the company said in the report. “Moreover, we noticed a direct connection between a tenant’s relationship with their property manager or landlord, and how they felt about their rental.”

There were 5 basic findings: • 74% of tenants like or love their rental, but 54% are likely to move out next year.

• Location. Location. Location.

Renters want (and will pay for) a great neighborhood.

• Most commonly sought amenities are washer/dryer in unit, highspeed internet and central air.

• Tenants seek online convenience features like ePay, tenant portals, and text alerts.

• Loving a rental and loving a property manager go hand in hand.

No. 1 - 74% of tenants like or love their rental, but 54% are likely to move out next year More than half of the renters surveyed reported that they like their residence (52%), while nearly another quarter (22%) said they love it.

However, yet another quarter had a less positive feeling about their home, with 11% saying they don’t care, 12% saying they don’t like their rental, and 3% saying they actually hate where they live.

Unsurprisingly, a tenant’s likelihood of moving over the next year is in direct approximation to these feelings.

Those who loved their rental were least likely to report plans to move (only 17%). When those tenants did plan to move, it was usually for reasons

Rental Housing Journal On-Site · October 2016

such as job relocation or moving in with a boyfriend.

Those who hated their rental, however, were most likely to report plans to move (58%). When tenants are looking for a new place, the most common place for them to look is to ask around with friends, family or colleagues. Next on their list is to hop online and look at listings: first on Craigslist, and then secondarily on Zillow, a Google search, or ApartmentList.

No. 2 - Location. Location. Location.

One clear trend that emerged from all of these questions was that location is key.

“When we asked renters what they most love about their homes, two of the top three answers were a great location and a nice, safe neighborhood,” the report says.

In fact, quiet emerged as a motif throughout the survey, with tenants indicating they would pay more for it, or that they seek it out in a new place to live.

6 things tenants would pay more for The report says property managers and owners might consider six amenities the report found tenants say they do not have now but would pay more for: • Swimming pool

• Fitness center • Designated pet areas • Onsite storage areas • Doorman or security access • Garden or community garden

No. 3- Most sought amenities are washer/dryer in unit, internet and central air When it comes to the amenities inside of an apartment, renters leaned toward the all-inclusive the survey shows.

The most desired choice was an inhome or in-unit washer/dryer unit, followed by included high-speed internet, central air, and included heat and hot water.

These choices did have a bit more variety along generational lines, with the 70+ preferring included utilities as their top 3 (Internet, Cable TV and heat and hot water) while all three younger groups prioritized an in-unit washer/ dryer and high-speed Internet.

Millennials wanted included heat and hot water, while those from 33 to 69 erred on the side of central air.

“If it makes sense to bundle services in with your properties and raise the rent, consider doing so. This is something tenants will expect to pay extra for, and could be a draw for your listing,” the report suggests. continued on page 23

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Rental Housing Journal On-Site

As Increased Apartment Construction Catches Up With Demand And Political Pressures Stifle Rents, Google May Be The Best Way For Operators To Continue Raising Rents

A

ll is fair in love and war, and portfolio managers that love revenue and rent increases are using Google (of all things) to win the war for the most profitable renters. And, its working!

Let’s take the bay area for example, easily one of the hottest markets in the United States. In 2015, San Francisco experienced double-digit increases in apartment rents with occupancy rates unaffected by these skyrocketing increases. This year has been a bit of a different story. Although rent increases are still at a more than acceptable 3.7% for most of the Bay, it’s a far cry from the boom of 2015.

With many renters unable or unwilling to pay premium rent in San Francisco choosing to look to the east in Oakland, the battle to capture renters willing to “pay-to-stay” has turned to SEO and Google search results to maintain high single digit and even double digit annual rent increases in the cooling San Francisco market.

The counter-pressure from construction completions on 2016-2017 San Francisco rent increases is turbocharged in the political arena with city leaders asking private developers in San Francisco to rent 20 percent of units in new apartment buildings at below-market prices. Requirements like this take

an even bigger bite out of developers and property managers margins, placing even more importance on maximizing revenue from the market-rate 80%.

Search engine optimization or SEO in short, is a process that highly skilled digital marketers use to optimize apartment websites for search engines like

Google, Yahoo and Bing, improving the community’s visibility with potential renters online. Apartment SEO is a bit trickier, as the SEO company must understand the complex arena that is multifamily real estate. The last thing a community wants to do is end up ranking for searches that only bring unqualified renters.

Apartment SEO that is done right puts developments miles ahead of their competition. If two apartment sites are promoting the same category of units in the same neighborhood, the search engine optimized community is far more likely to get leased in a shorter time and at higher rent rates. It quite simple, if the ideal renters can’t find you, they find someone else and somewhere to live.

Search engine optimization is essential to San Francisco apartment owners and managers because: The overwhelming majority of renters are more likely to choose one of the first five actual propcontinued on page 20

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Washington Apartment Outlook Forecast

t WMFHA’s recent Washington Apartment Outlook economic forecast luncheon, Perspectives and Projections for 2017, 700 attendees were treated to exceptional information on the state of the housing industry in Washington and in the local region.

These are both exciting times and concerning times. The rental housing industry provides an invaluable resource to hundreds of thousands of people and families who choose to rent their housing.

The housing industry helps people find the home that’s right for them.

Renting is more popular than ever before, due to changing preferences and demographics.

To meet this increased demand, more housing development and supply is needed. In addition, the housing industry needs to change and innovate products and services to meet customer preferences.

More and more people are moving to our state. Employment and wages have been showing steady growth. People are choosing the flexibility and affordability of rental housing. Professional residential property management is a growing career opportunity for many.

The positive jobs picture is buoying demand for apartments, which is increasing occupancy levels in apartment buildings and underscoring the need for more apartments. New apartment construction has accelerated in response to the growing demand, but the level of activity remains well below historical levels and is insufficient to meet apartment demand.

In communities across the country, apartments work – helping people live in a home that’s right for them. Whether its young professionals starting out, empty nesters looking to downsize and simplify, workers wanting to live near their jobs, married couples without children or families building a better life, apartment homes provide a sensible choice to meet their specific housing needs.

In Washington State, there are 885,000 residents in 500,000 apartment homes, supporting nearly 200,000 jobs and contributing over $20 billion to the economy.

Despite the good news that the industry is growing and serving more and more families, political pressures to address housing and affordability are resulting in local laws that harm the housing industry and the residents we serve.

Amy Forth, Altura - Greystar Catherine Johnson, Residence at Mill River - Prodigy Eugene Khala, College Terrace - Greystar Mike Dawson, Colfax Square - Douglass Properties Sarah Knutson, Ashton Apartments - Avenue5 Staci Grogan, Fairwood Apartments - FPI Taylor Winebarger, Jake at Indian Trail - Greystar

Alexandra Lappano, Stonehorse at Wandermere Douglass Properties Chana Chiquiti , The Homestead - Greystar Hannah Ripley, Prarie Hills - Greystar Kameron Bacon, Eagle Rock - Greystar Neepa Ladwig, Vintage at Spokane - FPI Samantha Bishop, River House at the Trailhead Avenue5

Alesya Gadomskiy, Silver Creek,FPI Amanda Beaudoin, Stonehorse at Wandermere Douglass Properties Brittany Parker, Copper Hill - FPI Jessica Fowler, Riverside 9 - Weidner Michele Weigand, Englewood Gardens - Avenue5

Donald Johnston, Lions Gate - Weidner Douglas Harris, Mongomery Court - FPI Jacob Mellick, Jake at Indian Trail - Greystar Sergio Rodriguez, Affinity at South Hill - FPI

Hanna Herndon, Tree Top - FPI Terry Lee Quinto, Silver Creek Apartments - FPI

Jordan Poulton, The Reserve at Shelley Lake Douglass Properties Kari Croston, Whimsical Pig,Avenue5 Katrina Miller, The Blake Apartments - Greystar Shelby Nichols, StoneHorse at Wandermere Douglass Properties

Patrick Berish, Whispering Hills West - Prodigy Sonni Gardner Dennison, Revere Ridge Madrona Ridge

Short term, detrimental initiatives that can be effectively considered a form of rent control, created by public officials without the input of the industry that is being regulated, occupied much of the day’s event.

Kathryn Hedrick, who works with state lawmakers, painted a picture of the value of cooperation and education with our state officials to help create policy that moves us forward, not backward.

State Senator Joe Fain spoke on the excellent reputation WMFHA has in Olympia with members of the legislature, and encouraged solutions-driven discussions.

WMFHA government affairs team of Joe Puckett and Brett Waller brought attendees up to speed on all the recent legislation from Olympia and in Seattle.

All of these recent laws restricting how housing providers do business can be complicated and confusing.

However, rental housing providers must be aware of all new housing laws that impact their rental services so that they can ensure compliance with new requirements.

Joe and Brett encouraged members to be aware, active and involved. There

Affinity at South Hill - FPI Altura - Greystar Artisan - Douglass Properties Country Homes Court - Black Realty Management Hilby Station - Greystar Morning Glory Circle - Douglass Properties Residence at River Run - Prodigy Village on Broadway - Avenue5 Village Square - Black Realty Management

continued on page 21

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Grandridge Place - Avenue5 Rockcliffe Apartments - Black Realty Management Rosewood Club Apartments - Pinnacle The Homestead Apartments - Greystar

Blake Noll, Vintage at Spokane - FPI Brian Gardner, Copper Landing - FPI Drew Smith, Forest Creek - FPI Joe Calia - Douglass Properties John Calico, The Residence at Tullamore - Prodigy Salvador Talavera, Maple Ridge - Avenue5 Scott Schurosky, Big Trout Lodge - Greystar Tom Clark, Prarie Hills - Greystar

Colfax Square/Sandhill - Douglass Properties Vintage at Spokane - FPI

Brandon Higgins, Forest Creek - FPI Caitlin Rogers, Graymayre Crossing Douglass Properties Derek Gothmann, Riverhouse at the Trailhead Avenue5 Jamie Cruz, Vintage at Spokane - FPI Jess Stewart - Douglass Properties Kaston Pedersen, Hilby Station - Greystar Ramiro Rodriguez, Parkside at Maribeau - FPI

Artisan - Douglass Properties Residence at River Run - Prodigy Residence at Tullamore - Prodigy

Corina Chamberlain - Avenue5 Dayna Lamb - FPI Dina Khala - Greystar

are more proposals being considered

by Seattle to limit the way the industry serves our residents and will increase the costs and risk associated with managing rental housing, further limiting housing supply and exacerbating affordability.

National Apartment Association Chairman of the Board Marc Ross outlined the many benefits the National Apartment Association provides to members in the state of Washington.

All WMFHA members are members of the national association, which works to support and advance the housing industry at the federal level.

Attendees were treated to a local and national economic update from Greg Willett, Chief Economist for RealPage.

Greg reported that Seattle is a top economic expansion market for both absolute job production and growth rate.

Seattle’s homeownership rate at 55.4% is well below the declining national average of 62.9%. Absorption rates and demand for rental housing is very strong locally and nationally, supporting the need for more rental supply.

U.S. and local apartment occupancy remains strong, continuing is tre-

Copper Landing - FPI Jake at Indian Trail - Greystar Residence at Tullamore - Prodigy Stonehorse at Wandermere - Douglass Properties

Aspen Apartments - Madrona Ridge Big Trout Lodge - Greystar Copper Ridge - FPI Lincoln Village - Prodigy Pine Valley Ranch - Avenue5 Regency Park Apartments - Avenue5 The Reserve at Shelley Lake - Douglass Properties The Ridge at Midway - Greystar

Join us as we honor excellence in property management on February 22, 2017 For more information visit our website at wmfha.org Rental Housing Journal On-Site · October 2016

9

Rental Housing Journal On-Site

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Rental Housing Journal On-Site · October 2016

Rental Housing Journal On-Site

Time to Winterize Your Property

By Mary Girsch-Bock in Business, www.propertymanager.com

I

t’s that time again. Shorter days and cooler nights mean winter is not too far away. Unless your properties are in the Bahamas (lucky you), it’s time to prepare for the winter months. Even property managers in a mild climate need to prepare for the cooler and wetter months ahead.

Creating a checklist of items that need to be checked, changed, or replaced will ensure that any repairs can be done on a timely basis before winter arrives. Be sure to check both occupied and vacant units for the following: Interior Windows – All windows should be checked for cracks and drafts. Promptly replace any windows that have cracks and replace any seals or weather stripping.

Doors – All doors should be checked for worn weather stripping, with worn strips replaced if necessary. Worn, warped doors should be replaced.

Water Heaters – While not a winter item, it’s wise to check water heaters for

any signs of leaking. Prompt repairs or replacement will eliminate costly water problems during the winter months.

Roofs – It’s imperative that all roofs be checked for wear or leaks and repaired immediately. Winter rains and heavy snow put a lot of pressure on a roof, increasing the likelihood of costly roof repairs in the middle of winter.

Fireplaces – If your properties have working fireplaces, they should be checked for ventilation prior to use.

Outside the unit, the following items should be checked: Exterior Windows – Windows need to be checked outside as well, with outdoor sealant replaced if needed. No matter how weather tight the interior of the window, if the sealant is damaged on the outside, cold air will get into the unit.

Stairs and Walkways – Sidewalks and exterior stairways need to be inspected for cracks and breaks. While this should be completed routinely, if

you’re in an area where snow is a possibility, even an inch or two can cover those cracks, leading to a potential injury, and possible lawsuit.

Patios and Balconies – These should also be checked periodically, but wet weather and snow accelerates wood damage, again creating a possibly dangerous situation.

Chimneys – If your building has working fireplaces, a check of the chimney may be in order. Birds frequently find their way into chimneys, creating nests, and a potential fire hazard for your tenants. While this not be neces-

sary everywhere, it should be considered, particularly if it’s been a while since chimneys were checked.

Depending on the type of properties that you manage, your list may become longer or shorter. Property managers that manage primarily single family homes will want to place furnaces and basements on the list as well. Whether your list is long or short, getting started early will eliminate many of the common maintenance problems normally experienced during the long winter months.

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Rental Housing Journal On-Site

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Alexander Findlay, Leilani on Greenwood - Weidner Anela Bucan, Campo Basso - Epic Anthony Pavia, Carriages at Fairwood Downs - Pinnacle Brandy Hildebrand, Belara Lakeland - Greystar Kelly Cunningham, Avana at Forbes Creek - Greystar Lindsey Chukueke, Link Apartments - Greystar Lorraine Millar, Bay Court at Harbour Pointe - Greystar Mark Behnen, Skye at Belltown - Mill Creek Nakata Alston, Lakeside Landing - Mission Rock Sarah Sandifer, Stadium Place - Pillar Travis Maxwell, The Mill at Mill Creek - Greystar

Hanna Satterfield, Deer Run Terrace - Indigo Gina Worden, Vintage at Bremerton - FPI Sharen Ahrens, Conservatory - Independent Living Zane Sanderson, Windham Historic - Indigo

Alexandria Gerke, Brisa - Greystar Alicia Shumovich, Altia - Pinnacle Amanda Jinkens, The Mercer - Avenue5

12

Delia Shaffer,Interurban Senior Living Independent Living Jackie Gutierrez Quiambao, Terravita - Pacific Crest James Neil, Windstone - Pinnacle Jessica Rodgers, Cliffside Apartments - Prometheus Kathleen Sullivan, Green Lake Village - Alliance Kenneth Harrington, AMLI South Lake Union - AMLI Larry Skay, Park 212 - Epic Lauren Sprague, Merrill Creek - ConAm Lydia Porter, Pike Motorworks - Avenue5 Monica Hart, Fort Vancouver Terrace Apartments - Indigo Rebecca Cade, Sierra Sun - Mission Rock Robbie Nicpon, West Mall Place - Epic Sara Potts, Edgewood Park Apartments - AMC Shelby Gihsmann, The Arbors at Edgewood - Greystar Shelley Amarillas, Vintage at Bellingham - FPI Stacy Bozeman, Rollin Street Flats - Indigo Tammy Melsness, Simon's Mill - Edison47 Vivian Bricker, Kendall Ridge - Thrive

Brandon Shelton, Bailey Farm Apartments - Greystar Brian Rundlett, Floater - Epic Elizabeth McFarlane, Waters Edge - Madrona Ridge Jennifer Jenkins, The Cove Apartment Homes - Weidner Jennifer Yotter, Meridian Pointe - Indigo Julia Stoner, Metro 112 - Simpson Karen DeWild, Celebration East Senior Living Independent Living Karianne Loesl, AMLI Mark 24 - AMLI Kia Lo, Grammercy Apartments - Fairfield Martha Martinez, Bridges at Northcreek - Thrive Melanie Miller, Lakeside - Mission Rock Rosa Espinoza, Lake Washington - FPI Saniya Regmi, Overlook at Magnolia - Weidner Susan Hernandez, Campbell Run - Thrive Tristan Redal, Carriages at Fairwood Downs - Pinnacle

Aaron Steeves, Apple Park - Mission Rock Brent Swanson, Six Oaks - Pinnacle Charlene Lott, Montclair Heights - Avenue5 Ikechukwu Anyakora, Park 212 - Epic Jonathan Mason, Dexter Lake Union - Alliance Karen Adair, Andorra on Lake Ballinger - Weidner Leigh Ann Novotny, AMLI 535 - AMLI Lucy Lebinac, West Mall Place - Epic Michelle Delorme, The Sinclair - Edison47 Michelle Zaidi, The Knolls at Inglewood Hill - AMC Rachel Winn, Polo Club - Mission Rock Rinna Oleynik, Plum Tree Park - Pinnacle Tatiana Astrahan, Kendall Ridge - Thrive Tyrone Evans, Angeline - Madrona Ridge

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Adriana Vargas Avila, Axis - Alliance Alexia Rainwater, Timbers at Issaquah Ridge - Simpson Benjamin Levin, Urban Center - FPI Cam-Quy Cao, The Enclave - Pinnacle Casey Phillips, The Meyden - Pillar Charlene Cleary, Metropolitan Towers - Greystar Chelsea Allbee, Vintage at Bremerton - FPI Christina Freidline, Guinevere - Epic Eliana Rosas, Spruce - Greystar Emily Mansell, LEVA on Market - Alliance Ethan Williamson, Walton Lofts - Thrive Janelle Campbell, AMLI South Lake Union - AMLI Loreina Balderas, Link - Greystar Mark Mueller, Eleventh - Thrive Micah Perkins, VIVA - Alliance Rai'Shelle Matthews, Atrium on James - FPI Richard Davis, The Mark on 4th - Fairfield Robbie Campbell, Beaumont - Avenue5 Roma Solomakha, Panorama - Madrona Ridge Taylor Solomon, Avignon Townhomes - Gables

Adrian Guirado, Fort Vancouver Terrace - Indigo Carlos Maceratini, Stockbridge - Epic Hoai Khac Luong, Oregon 42 - ConAm Ivan Grancharski, Starboard - Thrive Jason Mills, The Woodlands - Indigo Jose Villegas, Elan Redmond - Berkshire Joshua Feston, Silver Oak Apartments - Indigo Lilian Kukosh, Borgata Apartments & Townhomes - Thrive Mich Luzader, Erlands Point - Edison47 Michael Beau Roswell, Polo Club - Mission Rock Valeriy Chmukh, Heron View - Weidner

Alex Gurdian, Chelsea at Juanita Village - Thrive Andres Anaya, bridges@11th - Madrona Ridge Casey Michel, The Mercer Luxury Apartments - Avenue5 Clint Irvin, Timbers at Kenmore - ConAm Craig Fanger, The Lakes - Prometheus Curtis Tade, Emerson Apartments - Prometheus Daryl Rutledge, Joseph Arnold Lofts - Greystar David White, Yauger Park Villas -Thrive Jedd McDaniel, Creekside Village - Greystar Joe Cagle, Heritage Hills - Weidner Jose Enciso, The Link ,Greystar Kenny Thomas, Sierra Sun - Mission Rock LaMarr Chapman, Bella Sonoma - FPI Matthew Ralph, AMLI Wallingford - AMLI Micah Fisher, Quilceda Creek - FPI Michael Supino, King Arthurs Court - Epic Paul Rustin, Heronfield Apartments - Pinnacle Santos Montoya, Equinox - Greystar Shawn Town, Mark on 8th - Greystar Velid Ramic, Nine and Pine Apartments - Indigo Victor Martinez, Pike Motorworks - Avenue5

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Rental Housing Journal On-Site ¡ October 2016

Rental Housing Journal On-Site

Aaron Balding, The Outlook - Greystar Alexander Betchley, Cambridge Apartment Homes -Thrive David Faulkner, Creekside Village - ConAm Elvia Vargas Avila, Dexter Lake Union - Alliance Ernesto Romero, Chelsea at Juanita Village - Thrive Jacob Lee Mathers, LEVA on Market - Alliance Jaimen Struck, The Martin - Greystar John Nebel, Cascade Meadows Apartment - Indigo Joshua Dailey, Sierra Sun - Mission Rock Mario Martinez, Polo Club - Mission Rock Nazar Fandych, Promenade at the Park - Epic Pavel Tsygankov, West Ridge Park Apartments - Thrive Roger Byron, The Meyden - Pillar Viktor Voropay, Colonial Square - Weidner

Carlos Castellanos, Casablanca - Epic Cesar Yanez, Metro 112 - Simpson Curt Havener, Shorewood Heights - Pinnacle Don Sundgren, Cielo - Berkshire Doron Jones, Stadium Place - Pillar Edgar Roman, Cambridge Court - ConAm Ilimdar Shakhpazov, Metropolitan Towers - Greystar Mehdi Hajidavalloo, Urban Center - FPI Todd Baerny, Somerset - Greystar Yasha Shakhpazov, AMLI 535 - AMLI Aaron Steele, Swiss Gables - Epic Chris Cannon, Issaquah Terrace - Pinnacle Christian Hicks, The Commons in Federal Way - Greystar Daniel Cousino, Somerset - Greystar James Yeater, 206 Bell - Greystar Kyle Clark, Park 3025 -ConAm Nathan Knopp, West Mall Place - Epic Valentyn Kostenkov, Watercrest Apartment Homes Weidner

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Rental Housing Journal On-Site · October 2016

CONGRATULATIONS TO ALL OF OUR EMERALD AWARD NOMINEES! FINALISTS WILL BE ANNOUNCED IN NOVEMBER

13

Rental Housing Journal On-Site

3 Things Possum Has Done to Local Apartment Search

By Jake Meador, Rentpingmedia.com

L

ast month Google rolled out an update that affects how they rank local businesses for users looking for local goods and services.

The update is being called “Possum” by search marketers.

Briefly, Possum seems to have done three main things: • First, Possum changed the way Google values the location of the business vs the location of the searcher.

• Second, Google is now better able to recognize associated businesses.

• Third, search results are affected more by small variations in keywords.

First, let’s talk about the location point Prior to Possum, the location of the local business, park, school, church, etc. played a major role in determining rankings in local search. For example, if someone searched “Italian restaurants in Naperville IL,” Google only showed them restaurants that are actually located in Naperville. If your restaurant was not within the Naperville city limits, Google wouldn’t rank the local listing for that query.

The goal here seems to have been more precise, specific search results.

If someone searched for “veterinarians in Denver,” Google assumed that you literally wanted vets working only in Denver proper. But often that is not how things worked in practice.

The problem is that most of us don’t think about cities in terms of their city limits, but in more general, area-based terms. So someone might search “Italian restaurants in Naperville” but not mean they only want restaurants in the Naperville city limits. They may just be using “Naperville” as a kind of general shorthand for anything reasonably close to their location or to Naperville.

Possum addresses this problem in a simple way: It places less emphasis on the business’s location and more on the searcher’s location. So now if you are in southeast Naperville and search “Italian restaurants in Naperville,” you might get restaurants from Naperville but you may also get restaurants from Bolingbrook, a suburb located adjacent to Naperville. This is because Google has decided, presumably based on user data, that results based on user location will be higher in quality than results based on business location. That’s the first big change.

Second associated businesses Second, Google has gotten better at recognizing when two different businesses are associated with each other.

This allows them to make sure that they are showing a wide range of local businesses on the search result page, rather than showing a bunch of businesses that all belong to the same ownership group.

Third small changes in keywords Third, one of the stranger things we are seeing is that small changes in keywords, things like “Italian restaurant in Naperville” vs “Italian food in Naperville,” have produced dramatically different search results in local search.

Seattle

If you have more questions about Possum or about apartment SEO in general, you can read the longer post I wrote for Rentping here about the change.

About the Author: Jake Meador is a blogger, content curator, and social media consultant with Rentping Media, an apartment marketing company located in Lincoln, NE.Jake holds a BA in English and History with a minor in International Studies from the University of Nebraska-Lincoln.

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Rental Housing Journal On-Site

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Rental Housing Journal On-Site

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Rental Housing Journal On-Site · October 2016

Rental Housing Journal On-Site

Hot Market Causing Construction overall vacancy rate which includes properties in lease-up increased from 5.78% to 5.96%.

There are three submarkets under 3% vacant. They are Edmonds, Tukwila, and the submarket which is north and east of Everett.

As submarkets go, we have devoted the most space to Ballard. Initially we expressed our concern about the massive amount of units that were in the new construction pipeline relative to the existing inventory, which was quite small. After the initial surge of new units entered the market in 1Q14, the overall vacancy rate including properties in lease-up hit 21%. The market rate for Ballard was 6.8%, peaking in the fourth quarter of 2014 at 10.5%. No other submarket was anywhere near that rate. Metro Seattle was 4.6% vacant that quarter.

Ballard’s ability to recover from that onslaught is quite remarkable. This quarter Ballard has a market rate of 4.1%, down from 5% last quarter. Average rent here is $1,866 per month and $2.68 per foot.

Incentives Rental incentives remain at $6 per month, the same as last quarter. In the two-county area for the third straight quarter, 12% of the properties are offering incentives.

Absorption: + 2,043 Overall, there were +2,043 units absorbed this quarter, down from 2,633 units in the second quarter. The South

...continued from page 1

Lake Union submarket absorbed the most units at 372.

RENTS: $1,588 per Unit

$1.91 per Square Foot Rents climbed $39 to $1,588 per month and $1.91 a square foot, an increase of 2.5% over the previous quarter. Over the past 12 months rents increased 9.5%.

Downtown Seattle continues to be the most expensive submarket with rents at $2,337 per month and $2.92 per square foot. This is followed by downtown Bellevue at $2,202/$2.50 and South Lake Union at $2,075/$2.75.

Des Moines, SeaTac and the area north and east of Everett continue to offer the lowest rents again this quarter.

Rents in these submarkets are just under $1,150 per month.

New Construction There are currently 23,370 units under construction, up 1,070 units from last quarter. It’s 715 units more than a year ago. Fifty-seven percent of these are in the city of Seattle, 21% on the Eastside, 13% in South King, and 9% in Snohomish County.

Featured in the photo, the 125-unit Publix opened. It is located in Seattle’s Chinatown International District and is managed by Blanton Turner.

There are 10,592 units that have either been built or are under construction for completion in 2016. Not all of these will make their target dates by the end of the year. We have preliminary information for the next two years. We are tracking 14,049 units that are scheduled for

a 2017 completion. For 2018 the count is 7,479 units, a number that will get much larger as we get closer to 2018.

The grand total for all of the units in various stages of the pipeline is 72,056.

This is 7,697 units more than last quarter. In the past two years the pipeline has grown 50%!

Observations Third quarter results show continuing strength. The vacancy rate is up very slightly, but is still just under 4%.

Rents increased 2.5% for the quarter and 9.5% over the year.

We are very fortunate that developers have responded to the demand for apartments. In the 50+ unit market we track, more units have been built in each of the past two years than in any year except 1989. That’s about 9.300 units per year. This year will be no exception. But demand has still outpaced supply. In theory the apartment market is at an equilibrium point when the vacancy rate is 5%.

In King County, nonfarm employment is up 4.1% over the year in August.

Metro Seattle is one of the brightest spots in the country for job and wage growth. But are we now attracting too much attention from developers?

The 72,000 units in the pipeline represent a 36% increase of the existing inventory. Of course many projects that enter the pipeline will fall by the wayside for a variety of reasons. Still, this is a very large number, and for us a cause for concern. The 23,370 units under construction will obviously be com-

pleted. This represents 11.75% of the existing inventory, a very significant number in itself.

While we are considering the threat of too many units entering the market in the future, let’s also look at a few statistics underlying the rosy job growth.

Boeing and Microsoft have both made small cutbacks recently. There are 2,300 manufacturing jobs that were lost in King County in the past year. Construction was up 7,400 jobs, but these typically disappear once a construction boom ends.

For decades Tom Cain has supported a variety of industry organizations and events with his data and expertise as a foremost expert in the apartment industry. His company surveys the five counties in Central and South Puget Sound.

This article highlights survey results that subscribers can access from an online database of all 50u+ properties.

Apartment Insights also provides customized rent reports and market reports. www.apartmentinsightswa.com 206-632-2220

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Rental Housing Journal On-Site

Seattle Market Report ...continued from page 1

Preparing Your Furnace ...continued from page 1

placement level as a net of 8,800 units were absorbed in the first two quarters, pushing rent growth. Soaring rents in Seattle have been moving tenants into first-tier suburbs for more affordable options. The increased renter demand coupled with new inventory is generating double-digit rent gains in many of these locales. As a result, people will need to go to outlying cities such as Tacoma and Olympia for rents that average under $1,000 per month. Robust tenant demand combined with a slower development pipeline in these areas has produced the lowest vacancy in the metro, making the ability to find affordable housing more acute. Even though apartment deliveries will rise to the highest level since 2000 during 2016, the majority of the units are market rate and will place further upward pressure on rents.

Investors from near and far are seeking safety in the metro’s apartment assets and driving valuations higher.

The region’s strong economy, led by its vibrant job market, is boosting apartment demand and in turn cash flows.

Strengthening operations are increasing competition for available assets.

At the top end of the market, the sizable construction pipeline is providing new buying opportunities. Institutions and large funds are especially active in Seattle neighborhoods such as Capitol Hill and the University District where light-rail stations recently opened, as well as on the Eastside. In these locations, single-family home prices tend to be beyond the means of many renters. Cap rates for premium properties

in these areas can dip below 4 percent.

Rising costs, meanwhile, are moving both renters and investors to the outer reaches of the region. Here buyers will find lower entry outlays and higher first-year returns. Assets in Pierce and Thurston counties, as well as the northern part of Snohomish County, can trade at cap rates in the 7 percent range and above.

clogged with dirt, pet hair or debris, the flow of warm air can be hindered, which means that the heating system will work harder to keep areas warm and comfortable. If this happens for extended periods of times, the system could break down. Make sure the furnace filters are checked on a routine basis to ensure they are clean and they are replaced on a regular basis as needed.

2016 Multifamily Forecast Employment: Job growth will reach 3.0 percent in 2016 with the creation of 57,750 positions. This is the fourth consecutive year that employers added more than 50,000 workers to staffs. Last year, 55,000 positions were generated.

Construction: Strong job gains are putting pressure on the existing multifamily market. After 9,331 units were delivered last year, completions will near 15,000 rentals in 2016. This is the largest addition to apartment inventory since 2000.

Vacancy: A 30-basis-point contraction in vacancy was posted last year on net absorption of 10,000 units. This year, the highest inventory additions in more than 15 years will push vacancy up 30 basis points to end 2016 at a stilltight 3.9 percent.

Rents: Strong tenant demand and new inventory flooding the market will result in effective rents increasing 7.3 percent to an average of $1,455 per month in 2016. Rents have surged 41 percent in the last five years, including a 9.1 percent jump last year.

Tip #2: Clean the inside of the furnace.

The inside of the furnace, often at the base of the heater, is where dust and other debris will start accumulating.

You should consistently make sure this area is clean through routine maintenance of your heating system. Once it’s clean, it will function efficiently and will be less prone to breaking down in the future.

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annual maintenance will ensure the furnace is in proper working conditioning and the HVAC technician can identify potential problems that are unseen that could cause expensive repairs down the road.

Rental properties require a little bit of attention to detail during the bitter cold of winter and taking the extra time to do that will keep your tenants comfortable and allows for the heating system to stay in good working order so you don’t have to plan for any unexpected repairs or premature replacement of the system.

Written by Brooke Strickland, freelance writer for Specialty Heating & Cooling. Specialty Heating & Cooling is a full service heating and cooling company in Tigard, OR

Tip #3: Keep vents clear of obstruction.

Obstructing furnace vents could cause your whole system to not work effectively and could cause it to break down so make sure vents are clear of furniture like couches or bookcases.

While you’re looking at the vents, be sure to open them up and clean the insides so they are free of dust or other debris that may cause clogging or potential break down.

Tip #4: Get a professional tune-up.

Hiring a professional heating and cooling company to complete an annual maintenance of the heating system is a great investment and one that should be done at the turn of the season. An

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Rental Housing Journal On-Site

Better Investment

...continued from page 4

unlikely that they’ll decrease. If you have ever wanted to start building a rental portfolio, now is the time to do so. Lending rates are still very low and rents are at an all-time high. This mix will make a lot of properties’ cash flow much better than in typical markets. Within our property management company, we see clients purchasing single family homes and walking into $300 – $500 per month net profits, even after paying our management fee. If you are unfamiliar with rental properties, this is unheard of. Typically, if you breakeven, you are doing well as you end up profitable after the tax write-offs and appreciation of property value.

If you don’t like the idea of maintaining a rental portfolio for the long term and want to stick to fix and flip deals, you should consider it as a way to get through the times when the market squeezes the profits out of them.

What I mean by this is that you can start holding some of your single family home deals as rentals. If you buy them and fix them up with cash, you should look at refinancing them into traditional financing and get your money back.

Next, rent them out for a monthly profit as a holding strategy. The reason I only suggest using single family home rentals for this strategy is for the ease at which you can liquidate them in the future when the fix and flip market comes back. You are able to sell these to anyone, not just investors.

If you start taking on this strategy now, you’ll be able to pay higher dollar amounts on the wholesale market than the fix and flip investors you are com-

peting with, almost guaranteeing that you will win at auction when you bid.

You also get to profit off the monthly income and then profit again when you sell them in the future due to normal market appreciation.

The main takeaway is that as an investor, the best strategy you can have is a fluid one. Don’t get stuck in one form of investing. You should always be a student of the market, willing to adjust your investment strategy based on current and upcoming market changes.

There really is a way to make a profit in all market types, it’s just a matter of recognizing the proper opportunity and seizing it when the time is right.

Christian Bryant President – IRC Enterprises President – Portland Area Rental Owners Association Follow me on LinkedIn h t t p : / / w w w. i r c e n t e r p r i s e s. c o m / s i n gle-post/2016/09/19/Better-Investment--Rent-or-Fix-Flip

Rental Housing Journal On-Site · October 2016

Dear Maintenance Men

...continued from page 6

often forgotten solution to leaky windows is the clogged weep holes along the bottom of the window frame and track. These weep holes clog with dust and debris and very easily can cause water to enter the building through the window frame or even through small cracks in the stucco or siding at the edges of the window frame.

Dear Maintenance Men: It won’t be long before we need to change our clocks for winter. I’m a bit concerned about the lights at my apartment building. I have various fixtures, sensors and timers, not one of which turns on the lights at the same time. Some don’t turn off or on at all.

Any suggestions?

Brian Dear Brian: There are two ways to effectively control exterior lighting: 1: A timer clock.

2: A photocell for detecting light and dark

frustrating than seeing the property all lit up at 5pm and it only gets dark at 7pm or even worse; the lights turn on at 7pm and it has been dark since 5pm.

Remember: the safety of your residents is at its greatest risk when it is dark and the lights are out.

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

Both time clocks and photocells have been around forever. We prefer to activate landscape lighting with a photocell as it is virtually maintenance free. A photocell will ensure the property has light only when it is needed and turn off automatically with the approach of daylight. Be sure the photocell located where it can “see” ambient light and not near an artificial light source.

A time clock needs constant attention in order to keep up with the changing seasons and adjustments for longer or shorter nights. There is nothing more

19

Rental Housing Journal On-Site

Increased Construction

...continued from page 12

erty website suggestions in the results page. 99% of all San Francisco apartment searches start online, with the majority of those powered by Google.

Renters trust Google and other search engines and operators that make sure their property website has a standalone presence in the top positions for the keywords Bay Area renters are searching, increases not only the property’s trust but the asset value as a whole. A property that is tops in Google has millions of dollars more in blue-sky value that can be cashed in at the time of a sale. Communities looking to take advantage of these facts and gain highly qualified visitors to their website, need to rank as high as possible on Google and other search engines for the most searched keywords.

In the San Francisco market, over 8,100 local people search the keyword “San Francisco apartments” per month.

Even if a property only received a visit to their website from 10% of them that is 810 hot qualified visitors per month.

If only 5% of the 810 could afford the highest possible rent, that is 40 people who you want to talk to before they call anyone else. If you close 10% of those, you just leased 4 units at the highest possible rent. Now if you also take a hyper-focused keyword like “luxury apartments San Francisco” with 320 people locally searching per month and assume 10% of those contact you, you now have 32 even more qualified leads.

If you close 10%, you just signed another 3 units. In only 2 keyword examples the property leased 7 units at the highest possible rate and MultiFamily Traf-

fic ranks each client property website for 100’s of keywords with a focus on the 15 most searched.

Getting ranked on Google is game-changing for San Francisco communities that previously did not appear anywhere on search engines for any of the most searched terms before. This

is why many operators in San Francisco are employing SEO and Google AdWords campaigns before anything else; they protect rent margins and 100% occupancy.

San Francisco is expecting to add over 9,000 new apartments to its market before the year is up with over 8% of

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these new units are with Management companies already working with MultiFamily Traffic. To be competitive in the City by the Bay you should have a plan on how to capture the most lucrative of renters before the property even enters lease up.

The fastest way to get units leased at a premium rent rate is to put your website in front of the hottest renters as they search Google for luxury (highrent) apartments in San Francisco. The theory is simple, if you can put your community right in front of the 5% of renters who will pay the highest rent, you don’t have to worry about slowing down your increases to cater to the 95% that won’t pay that price. If you want to lease your units at the highest possible rent, it’s all about presenting to the best target demographic.

By developing customized SEO and Google AdWords campaigns the winners in the San Francisco rent war are seeing ROI’s that cover the additional marketing expense in the rent rate difference of in many cases, only one unit.

The US apartment market is extremely competitive and a property’s online presence is more important in San Francisco than possibly any other city in the country, but the news is still good.

In every case, in every market SEO can make a good market “great” for the top communities on Google. In many markets, a 1 or 2 percent increase in rents year over year is good, what we are seeing in San Francisco is unheard of, but it’s an asset managers job to maximize the opportunity presently in San Francontinued on page 23

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Rental Housing Journal On-Site · October 2016

Rental Housing Journal On-Site

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

Board President - Brett Stevens

Executive Director - Jim Wiard

Vice President - Becky Sanders Treasurer - Sheri Druckman Vice President of Suppliers Council - Rob Pendleton Immediate Past President - Kris Buker

Secretary – Laura McGuire

Washington Apartment

...continued from page 9

mendous rise since the end of the recession. Resident retention continues to increase steadily. U.S. rent growth remains robust, especially since we’re deep into this economic/market performance cycle.

Ongoing building in Puget Sound remains drastically elevated relative to the historical norm, and mirroring a national trend, Seattle and Bellevue’s urban core submarkets are experiencing the highest growth.

According to Greg, annual rent growth probably is near its peak for this market cycle right now. But the outlook is still very healthy.

A fixture at WAO is Mike Scott from Dupre+Scott Apartment Advisors.

Mike gave an entertaining and informative update on local housing trends, reporting that new housing construction continues at record pace, with upwards of 50,000 new units coming online in King, Pierce and Snohomish Counties in the next 3 years. Seattle will have the largest share of these new units.

Despite already high new construction the past several years, vacancy trends continue to decrease as rent trends continue to increase. Mike forecasts that vacancy rates will remain relatively steady through 2017 but increase in 2018 and 2019.

Although rent growth is expected to remain steady in the next 12 months

due to supply-demand factors, Mike cautions that operating expenses continue to rise, which will have a negative impact on NOI over time.

Market dynamics for rental housing continue to evolve as our economy grows locally and nationally. The Washington Multi-Family Housing Association will continue to represent the housing industry and our members with professionalism, innovation and service. We are lucky to be part of such an important service industry and will support both industry needs and public policy advancement.

We thank all of our members for a successful forecast luncheon and look forward to many more outstanding events in the future.

For more information about the Washington Multi-Family Housing Association, our educational opportunities, networking events or legislative efforts, or to sign up for membership, go to www.wmfha.org or call us at 425-656-9077. Be sure to follow the activities of our members on our Facebook page.

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21

Rental Housing Journal On-Site

8 Ways to Profit

...continued from page 3

pays for operating expenses. In cases of tenant improvement construction, the lease should address what happens if there is a delay with the construction.

Delays are often caused by contractors not showing up, materials not being available and permits not being released by government authorities.

In today’s world rent is not just rent for the space being leased, but also includes parking bill backs, signage rental, storage space rental and overage charges for the extra use of utilities after hours (for office buildings). It is important to take all of these things into account.

4. Clear definition of who covers which expenses Successful leases also include a clear definition of which party pays for what expense. The following is a list of potential expenses to consider: 5. Detail on the penalties for infractions and non-compliance Landlords need to ensure their leases include penalties for late rents as well as penalties for non-compliance with other lease terms. If a tenant stays over the expiration of their lease term, penalties of 150 – 200% of the rent is typically charged. This may sound onerous but landlords need strong tools to help negotiate future rents when leases expire and need to be extended. It is expensive to move tenants in and out. Such expenses include brokerage commissions, tenant improvements and attorney fees.

The time lost without revenue compounds the costs to building owners.

Holdover penalties are preferable to de-

fault clauses. Default clauses in the end will force a tenant out of a building, while holdover costs are more likely to be used to negotiate a ‘peaceful’ settlement and a lease renewal.

6. Don’t forget rent increases Once the owner and the tenant have agreed on a lease it makes sense to plan for the future. Costs of operating properties increase every year and landlords will want to recapture these operating increases.

It is not unusual for a Landlord to bill the tenant for additional costs outside of the base rent. Annual tax and insurance increases (over base year,) as well as increases in the cost of building operations should be passed through as well.

Often a landlord will also have negotiated an increase in the base rent either as an annual increase, or through the use of another mechanism, such as operating cost increase adjustments, CPI increases or through the use of a percentage rent clause.

Additionally, if the tenant is happy and pays on time, the landlord will want to keep them at the property for longer than the initial term of the lease and will want to pre-negotiate a renewal into their lease. This is extremely beneficial to a landlord.

cess of other tenants. Landlords must carefully decide how to balance their needs against the tenant’s needs. This has a lot to do with the rental cycles.

Whether signing during a landlord’s market or a tenant’s market, landlords need to optimize their lease to their benefit while still keeping or obtaining the tenant.

8. Keep the property attractive to tenants Even the most well written lease will fail to obtain or retain a tenant if the landlord is not committed to the physical condition of their building.

A landlord must continually improve the building to attract or satisfy quality tenants. Not updating or upgrading a building or its systems (on the inside and the outside,) is a prescrip-

tion for lower rent and an excuse for a tenant to move out. Taking tenants for granted is a dangerous business. Even with high moving costs, tenants will move if the landlord does not take care of their space.

A thorough lease should protect the business interests of both parties; it should clarify expectations and protect the integrity of the property. It should also allow for all contingencies to give both parties confidence in the success of the relationship. Landlords looking to maximize the income of a building must pay attention to the lease clause details and their obligation to take care of their tenants. That is the only way to ensure that the building continues to grow wealth.

7. Optimize the lease terms As a landlord tries to estimate their opportunity cost for each tenant they need to calculate the cost of free rent, tenant improvements, leasing fees, vacancy, early out clauses, go dark clauses, and cancellation clauses tied to the suc-

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Rental Housing Journal On-Site · October 2016

Rental Housing Journal On-Site

5 Research Findings

...continued from page 7

No. 4 - Tenants seek digital convenience features Another trend which emerged strongly in the report was the desire of tenants to conduct rental-related business online.

The report says, “Across the board tenants reported a lower level of access to conveniences than they desire. Offering options such as online listings, electronic leases, electronic payments, and online maintenance requests/tracking—in addition to waiving movein or pet fees and offering flexible leasing options—will likely increase your number of rental applicants.”

In particular, “We asked tenants about online portals (property management sites where they can connect, get information, file maintenance tickets and pay rent) and the option to pay rent electronically. In both cases, tenants showed a strong preference—regardless of age cohort—toward using portals and ePay.” More renters want to pay rent electronically. Where 37% of renters indicate they can currently pay online, 59% indicated they like or would like to pay rent via ePay methods.

The report said this information on digital convenience is an opportunity for property managers and owners to gain a competitive advantage and differentiate their properties.

No. 5 - Loving a rental and loving a property manager go hand in hand “Our data shows there is a direct correlation between liking a property manager and plans to move house in

the next year. Making the extra effort to connect with tenants may significantly reduce repeat vacancies over time, and ensure you are holding on to the tenants you most value,” the report says.

Feelings about property managers tended to be significantly more negative overall than feelings about landlords and this “may present a real business opportunity for property management,” the report said.

The reason tenants may like landlords more, the study found, is that tenants of single-family homes may have been more likely to have found their rental through a word of mouth referral. Thus there was a potentially higher number of landlords with a personal relationship to their tenants.

Summary Buildium writes, “The 2016 American Renters Report gives us a lot of insight into what is going on in the minds of tenants in the U.S, but certainly one clear pattern emerged from these findings. Tenants—and in particular millennials—have growing expectations regarding the availability of online tenant services. This extends from initially finding a property to the leasing process and to ongoing payments, requests and communications.

“Overall, it seems to be worth the effort for property managers to build relationships with tenants, as that will potentially extend the vacancy cycle over time.

Moreover, property managers and landlords should look carefully at what community and home amenities renters value most in order to prioritize property upgrades or to emphasize particularly appealing features in marketing vacant listings.”

Methodology: The 2016 American Renters Survey was conducted by Buildium from June 6-17, 2016. The survey responses were a random sample commissioned from Market Tools. The survey had an incidence rate of 97%, with a 95% level of confidence and a margin of error of +/- 3.3%.

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Increased Construction

...continued from page 20

cisco and other Bay Area cities.

As far as the developments in Oakland, SEO is no less important. Rents may be lower but so is the cost of land and development so the importance on capturing the highest margin your property can demand is just as important.

Another hot market for apartment SEO is Sacramento because of its short supply for units and solid job growth the market, Sacramento has seen an 11 percent increase in rents over the past year. Much like San Francisco, if a Sactown property wants the highest end of that 11% average they need to find a way to have their property stand alone in Google search results so they are called first by the big money renters.

No matter what Bay Area city your assets are in, if you only use ILS services that list your property on an aggregated page next to hundreds of other competing properties, you are essentially placing your property in a “bidding war” on a list of commoditized list and you had better offer the most features to command your higher rent. But, if you can have renters calling your community before anyone else, you can fill your units and let everyone else slow their rent increases as they fight over the tire kickers.

The first step is knowing what the top searched keywords are in your city and where your website ranks for them.

Multifamily Traffic has a dedicated research team that performs this as a free service for anyone. You can call that team directly and have your research

back free of charge in less than 1 hour in most cases. They are available at 888-683-5885.

The next step is looking for a partner that can drive renters to you without asking you to make changes to your website or overcharging you for the work they do. There are many SEO providers that charge thousands per month for a mixed bag of results. You want to work with a firm that understands the industry and can guarantee results for a price you can fit in your budget.

Once you get your property to the top of the search results you will hear the results in the form of hundreds of calls to the leasing office. Make sure your staff is ready to follow up quickly. If you wait to set an appointment the renter is likely to go back to square one and look at an ILS placing both you and themselves right back in the “cattle call”.

About the author: Matt Easton is EVP of MultiFamily Traffic the leading apartment SEO and digital marketing provider. MultiFamily Traffic works with 500 communities across the U.S resulting in thousands of leases signed every day.

Matt can be reached at 303-803-7372 or www.MultiFamilyTraffic.com

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