Rental Housing Journal On-Site August 2016 by Professional Publishing, Inc

Rental Housing Journal On-Site

August 2016

3. Why Rental Housing Professionals Should Think About HR

8. Ask the Secret Shopper – Technology vs Customer Service

13. Dear Maintenance Men – Countertops, Leaky Roofing and Cleaning FIberglass Bathtubs

5. NAR Identifies Top Markets Where Renters Can Afford to Buy

9. The Value of Good Budgeting

15. Western Region Tops in Rental Property Investment in U.S. New Report Says

6. Rising Sea Levels Threaten to Put Nearly 2 Million U.S. Homes Under Water 7. Rents Rising Fastest Among Low-End Apartments

10. What Safeguards Do You Tie to Your Lease Offers? 12. 2016 Trends Tradeshow - Mark Your Calendars!

18. 5 Keys That Sway Tenant Decisions About Your Rentals 21. Top 10 Worst Property Management Mistakes

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

Six Steps for Pierce-Kitsap-Thurston an Effective Outperforms Metro Seattle Market Preventative Maintenance Plan By Tom Cain, Apartment Insights

Seattle - Apartment Insights 2nd quarter results show this quarter broke records for the lowest vacancy rate at 3.32% and largest quarterly rent increase of 4.4%. Not considering rent levels, the market here outperformed metro Seattle this quarter according to Tom Cain, the firm’s principal. The data are from his Seattle firm’s statistics and trends on 50+ unit properties in Pierce, Kitsap and Thurston counties.

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

aintenance costs in rental apartment communities have increased by 1.3 percent over the past three years and are expected to continue growing, according to a recent survey from the National Apartment Association. Repairs are difficult to predict and – without a proper system in place – property managers can easily overlook certain areas until something breaks and needs a replacement. Be proactive and develop an effective preventative maintenance plan to keep units maintained and reduce the risk of potential repairs or even long term damage.

Vacancy: 3.32% The market vacancy for our nonrandom survey of conventional, stabilized 50+ unit properties in all three counties is 3.32%, a major drop from the first continued on page 11

ollowing the recent non-specific terrorist alert to apartment communities on possible terrorism, most landlords are looking at ways to assist the government and make their apartment communities safe and secure for their residents. However, there are other concerns management should also be aware of. On the one hand, landlords should not racially profile certain groups. They should treat all prospective and current residents the same. On the other hand, landlords should be aware of safety issues involving the condition of apartment building and surrounding

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Professional Publishing Inc., PO Box 6244 Beaverton, OR 97007

Be Aware Of Safety Issues, But Don’t Discriminate

areas, as well as individuals that frequent the premises. The law does not require landlords to provide security at apartment communities. The Arizona Residential and Tenant Act (ARLTA), however, may confuse some residents. A.R.S. § 331324 states in part: A. The landlord shall: 1. Comply with the requirements of applicable building codes materially affecting health and safety as prescribed in section 9-1303. 2. Make all repairs and do whatever continued on page 17

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Rental Housing Journal On-Site · August 2016

Rental Housing Journal On-Site

Why Rental Housing Professionals Should Think About HR

ith the minute-to-minute demands of managing and servicing rental properties, who has time for HR? Best hiring and retention practices can take a back seat to maintenance repairs, rent collection, showings and listings, right? It’s true that HR usually can’t compete with maintenance emergencies and other such urgent matters, but it needs to be part of the regular routine. HR done well gives employers the tools to create a great workplace and to ensure compliance with employee-related laws and regulations. It sets and maintains a solid, stable foundation. Ignoring HR—or doing it poorly—is like building on unstable land: the foundation will eventually crack and, in a crisis, the structure will collapse. Bad HR is bad for business.

HR Helps You Create a Great Workplace Let’s imagine a common scene: two prospective tenants have taken their lunch hour to visit a couple of nearby apartment complexes. The two places have similar rates and offer comparable perks to renters. Nevertheless, the prospective tenants rule out the second one almost immediately after entering the property.

At the first location, they’re greeted warmly by the apartment management staff. They have to wait a few minutes to be seen, so they have a moment to take in the office atmosphere. The front office is busy, but not chaotic. Maintenance and janitorial employees pop in and out, and their interactions with the office manager are courteous and efficient. Overall, the employees seem happy, and the office has a welcoming vibe. At the second location, the prospective tenants are seen to immediately, but there’s no warmth to the place. The employee at the front desk mutters that

today was supposed to be his day off. Two others argue audibly in a back office. The employees clearly don’t want to be there, and the applicants conclude they feel the same. They leave, without having looked at any of the available apartments, and drive back to the first place. When employees like where they work, they tend to be happier. That’s good for customers, clients, and prospects too—it makes the place they come to for business (or residence!) a happier place, a place they like to be. And when employees dislike their work-

place, their disapproval shows. Having angry or disengaged employees is the fastest avenue to negative reviews and a negative reputation. Whether a business has a good or bad reputation is no mere matter of chance: it’s largely a consequence of doing HR well or poorly. Doing HR well means valuing and honoring the work and contributions of employees, attending to their working conditions, establishing consistent employment practices and policies, setting clear channels for communication, building a workplace culture of collaboration and camaraderie, and providing perks and benefits when possible. Doing HR poorly means choosing to neglect one or more of these areas.

HR Helps You Comply with Laws and Regulations HR is also about the law, meaning HR can be a headache and a half. But whether or not an employer attends to HR, the laws and regulations are going to be there. And ignoring them has consequences. Every employer needs to know about federal laws like the Fair Labor Standards Act (FLSA) and the Family and continued on page 19

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Rental Housing Journal On-Site · August 2016

Rental Housing Journal On-Site

NAR Identifies Top Markets Where Renters Can Afford to Buy The top markets with the highest share of renters who can afford to purchase a home are: • Toledo, Ohio (46 percent) • Little Rock, Arkansas (46 percent) • Dayton, Ohio (44 percent) • Lakeland, Florida (41 percent) • St. Louis, Missouri (41 percent) • Columbia, South Carolina (41 percent) • Atlanta (40 percent) • Columbus, Ohio (38 percent) WASHINGTON, PRNewswire – The U.S. homeownership rate has slowly fallen in recent years to currently its lowest level since 19651, but new research from the National Association of Realtors® reveals that there are affordable metro areas right now with above-average hiring and a large segment of current renters who earn enough income to qualify to buy a home. NAR reviewed employment growth, household income and qualifying income levels in nearly 100 of the largest metropolitan statistical areas2 across the country to determine which areas with employment gains above the recent national average also have the largest share of renters who can cur-

rently afford to buy a home. Of the top 10 metro areas with the highest share of renters who earn enough to buy, nine were either in the South or Midwest – including three cities in Ohio. Lawrence Yun, NAR chief economist, says there’s been a significant increase in renter households – both young adults and those who lost their home – since the Great Recession, and especially in metro areas that have seen robust job creation and a resulting influx of new residents. This has led to a multi-year run-up in rents in several markets that have contributed to many of these renters’ inability to advance into homeownership.

Rental Housing Journal On-Site · August 2016

“Even in a time of expanding home sales, steady job growth and historically low mortgage rates, the homeownership rate recently tumbled to its lowest level in over five decades as many renters struggle to juggle escalating rents without commensurate income gains,” he said. “However, this new study reveals that there are several affordable, middle-tier markets with solid job gains and a large segment of renters who earn enough to buy.” The top 10 metro areas highlighted in NAR’s study were all outside of the West Coast and each had a share of renters who qualify to buy3 that was well above the national level (28 percent).

• Tampa, Florida (38 percent) • Ogden, Utah (38 percent) According to Yun, it’s no surprise that many of the markets with the most renters qualified to buy are in the Midwest and South. The median existing-home sales price in these two regions continue to be lower than the Northeast and West4, and while many of these areas were slower to recover from the recession, improvements in their local labor markets in the past year have pushed their hiring levels to at or above the national average growth rate. “Overall housing affordability and local job market strength play a pivotal role in a renter’s decision on whether continued on page 20

Rental Housing Journal On-Site

Rising Sea Levels Threaten to Put Nearly 2 Million U.S. Homes Underwater SEATTLE – Nearly 2 million U.S. homes would be lost if the oceans rise by six feet as scientists expect by the year 2100, according to a new Zillow® analysis. The endangered homes represent just under two percent of the national housing stock, and are worth a cumulative $882 billion. New research published in the scientific journal Nature found that sea levels could rise six feet by the year 2100, mostly due to melting Antarctic ice sheets. This new estimate nearly doubles previous expectations for rising oceans. Using data from the National Oceanic and Atmospheric Administration,

State United States California Texas New York Florida Pennsylvania Georgia North Carolina New Jersey Virginia Washington Massachusetts Maryland Alabama South Carolina Louisiana Oregon Connecticut Mississippi Hawaii Maine New Hampshire Rhode Island Delaware

Number Total Value of Homes Percent of of Homes Median Value at Risk of Homes at at Risk of of Home at Being Risk of Being Being Risk of Being Underwater Underwater Underwater Underwater 1,867,801 1.9% $882 billion $296,296 42,353 0.4% $49.2 billion $891,269 46,804 0.6% $12 billion $195,029 96,708 2.1% $71 billion $495,712 934,411 12.6% $412.6 $262,626 billion 2,661 0.1% $730 mil$188,505 lion 24,379 0.7% $10.2 billion $291,409 57,259 1.6% $20.6 billion $266,693 190,429 7.3% $93.1 billion $365,233 46,287 1.8% $14.4 billion $252,985 31,235 1.3% $13.8 billion $291,965 62,069 3.1% $51.2 billion $551,866 64,299 3.1% $19.6 billion $233,937 12,735 0.8% $3.8 billion $234,987 83,833 4.4% $45 billion $369,047 80,080 5.9% $13.2 billion $139,042 4,959 0.4% $1 billion $179,424 18,173 1.6% $13.2 billion $414,616 5,572 0.7% $1 billion $148,161 37,556 9.1% $25.3 billion $475,345 5,412 1.0% $3.1 billion $436,798 4,064 0.7% $1.7 billion $337,320 4,853 1.5% $2.9 billion $454,559 11,670 3.1% $3.6 billion $261,802

Zillow Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Resea rch. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.

Zillow identified which homes would be affected by the predicted six-foot rise in ocean levelsi. More than half of all homes that would be lost are in Florida, and they account for nearly half of the lost housing value as well. In all, one in eight Florida homes would be lost. More than 9 percent of homes in Hawaii would be underwater; 81 percent of those are in the capital city of Honolulu. Thirty-six coastal cities would be entirely underwater, and nearly 300 cities would lose at least half their homes. The at-risk homes along the waterfront are 58 percent more valuable than

Zillow is a registered trademark of Zillow, Inc. i The National Oceanic and Atmospheric Administration (NOAA) provides data on which parts of coastal states will be flooded for various levels for the sea to rise (https://coast.noaa. gov/slrdata/). We combined this data with the location and value of homes in each state and city to determine the value of housing at risk if sea levels rise to six feet.

the average U.S. home. The biggest difference in home values is in Maine, where homes at the water’s edge are worth $436,798, more than three times the statewide median home value of $138,900. By contrast, homes at risk of rising oceans are less valuable than the typical home in Hawaii, Maryland, Washington, and Oregon. “As we move through this century, homeowners will have to consider another factor when it comes to their homes – whether rising sea levels have any impact on them,” said Zillow Chief Economist Dr. Svenja Gudell. “It’s easy to think about how the ocean levels can

affect the coasts in an abstract sense, but this analysis shows the real impact it will have on nearly two million homeowners - and most likely more by the time we reach 2100 - who could lose their homes.” Among coastal states, Pennsylvania, Oregon and California have the lowest share of homes at risk of being underwaterii. Just 0.1 percent of homes in Pennsylvania would be lost if the ocean level rises six feet.

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Of states with homes that would be underwater if sea levels rise six feet. Alaska was not included in the NOAA data. ii

SOURCE Zillow

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

www.rentalhousingjournal.com Rental Housing Journal On-Site · August 2016

Rental Housing Journal On-Site

Rents Rising Fastest Among Low-End Apartments SEATTLE – Median rent for the least expensive multifamily rental homes is rising faster than median rent overall, and only a small portion of all new apartments is at the low endi, according to the latest Zillow® analysis. Instead, most new apartment construction is at the top of the market, where luxury units command top prices from wealthy renters. Zillow analyzed median rents in 15 major housing markets across the country and found that median rent for the least expensive third of apartments was outpacing the overall rental marketii.

Metropolitan Area Los Angeles-Long Beach-Anaheim, CA Chicago, IL Dallas-Fort Worth, TX Philadelphia, PA Washington, DC Miami-Fort Lauderdale, FL Boston, MA San Francisco, CA Seattle, WA San Diego, CA St. Louis, MO Tampa, FL Denver, CO Charlotte, NC Sacramento, CA

The trend is especially prevalent in California. In Sacramento, for example, the price of the least expensive rental homes rose 33 percent over the last year, while overall median rent rose just 7 percent. Cheaper apartments were more in line with overall rent appreciation in Denver and Seattle. The least expensive rentals rose 9 percent in Denver over the past year, while the rental market as a whole rose 7 percent. In Seattle, the least expensive rental homes rose 14 percent and the entire rental market rose 9 percent.

Zillow Rent Indexiii (ZRI) among Low-End Apartments

Low-End ZRI YoY Change

ZRI Among High-End Apartments

$2,029

27.5%

$1,155 $1,020 $1,102 $1,551 $1,482 $1,908 $2,456 $1,263 $1,754 $693 $934 $1,164 $868 $1,186

6.4% 16.3% 17.9% 7.7% 14.2% 17.3% 24.6% 13.7% 21.7% 5.5% 13.1% 8.6% 12.0% 32.7%

About Zillow Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the

“There’s a growing divide in the rental market right now,” said Zillow Chief Economist Dr. Svenja Gudell. “Very high demand at the low end of the market is being met with more supply at the high end, an imbalance that will only contribute to growing affordability concerns for all renters. We’re simply not building enough at the bottom and middle of the rental market to keep up with demand. As a result, these segments are becoming very competitive, as both new renters look to find their first place and existing renters get shut out of homeownership because of extremely limited for-sale inventory.

Apartment construction at the low end needs to start ramping up, and soon, in order to see real improvement.” In Tampa, Fla., 93 percent of apartments built after 2014 were among the most expensive. In Miami, 69 percent of listed new construction was among the most expensive and just 11 percent was among the least expensive. Charlotte, Denver and Seattle had the smallest percentage of low-end construction built after 2014 -- just 4 percent of new construction in Charlotte was among the least expensive third of rental homes and only 7 percent in Denver and Seattle.

High-End ZRI YoY Change

Entire Multi-family Rental Market ZRI

Entire Multifamily Rental Market ZRI YoY Change

$3,176

20.8%

$2,370

6.7%

17.2%

53.5%

$1,947 $1,712 $ 1,792 $ 3,229 $ 2,367 $ 2,684 $5,944 $2,409 $ 2,992 $1,059 $1,513 $2,060 $1,535 $1,946

-1.0% 8.0% 6.7% 25.7% 6.3% -1.0% 29.3% 20.8% 21.9% 8.1% 16.6% 13.9% 14.0% 28.4%

$1,580 $1,324 $1,234 $1,904 $1,626 $2,178 $3,026 $1,763 $2,101 $936 $1,196 $1,604 $1,195 $1,350

1.0% 5.5% 3.0% 1.0% 5.3% 3.9% 9.2% 8.7% 6.1% 0.4% 5.7% 6.5% 3.4% 7.4%

8.5% 11.2% 14.2% 13.3% 10.7% 16.8% n/a 7.4% 11.2% 25.3% n/a 6.6% 4.2% n/a

79.2% 63.5% 68.9% 55.7% 69.4% 68.4% 56.3% 65.4% 64.2% 61.6% 93.1% 60.0% 71.3% n/a

quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the biannual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle. Zillow and Zestimate are registered trademarks of Zillow, Inc.

A property is considered new construction if it was built in the calendar year of, or before, the year it was listed on Zillow. In this analysis, the rental listing years included were 2015 and 2016, so new construction is anything built in 2014 and on. i

Rentals in each metropolitan region are assigned to the bottom, middle, or top tier of rentals based on their estimated rental price. Each tier contains one-third of the rentals in the metro region, and the thresholds defining each metro tier are computed separately for each metro. For data on the middle tier of rentals in this analysis, refer to the Zillow Rent Index (ZRI), here. ii

Percent of New Percent of New Construction Construction in Low-End in High-End Since 2014 Since 2014

cludes the value of all single-family residences, condominiums, cooperatives and apartments in Zillow’s database, regardless of whether they are currently listed for rent. It is expressed in dollars. SOURCE Zillow – http://www.zillow.com

The Zillow Rent Index (ZRI) is the median Rent Zestimate® (estimated monthly rental price) for a given geographic area on a given day, and iniii

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Rental Housing Journal On-Site

SK THE SECRET SHOPPER Technology vs Customer Service

echnology has revolutionized the way many companies and entire industries do business; including property management. In some rental offices, everything from leasing to rent collections, purchasing and maintenance requests, etc., are being logged, inputted, tracked or entered into a variety of computer programs and databases. All of these processes are designed to improve accuracy, efficiency, customer service and the bottom line. However, depending on how these programs are administrated and maintained will ultimately determine what it’s really costing in customer service and resident relations. Following is a concern from an on site manager to illustrate this point: Q: The property management company I work for is very progressive and seems eager to try every new software program that comes out. Therefore, my maintenance workers, leasing staff and I spend countless hours attending meetings and training sessions in order to understand and implement these programs on site. Due to the amount of input work required for tracking purposes and all of the reports that are generated, not only is my leasing staff often bogged down, but so are some of my mainte-

nance techs. This means that it’s taking longer to get apartments ready for new residents. On the busiest weekends of the month, prospective renters are being turned away and asked to come back because a leasing consultant working alone cannot handle multiple resident requests, the amount of incoming traffic AND all the computer/paperwork they are responsible for submitting at the end of each week. Many times on the weekends and during the week, we are forced to close our office and pretend like we are not there just so we can have some uninterrupted time to “catch up” on the volume of paperwork we are expected to complete. We are in such a vicious cycle with this situation; I just can’t see a way out. What do you suggest? A: It must be extremely exciting working for a company that is always moving forward with innovative programs. On the other hand, it must be equally frustrating dealing with programs designed to enhance efficiency and improve customer service when they leave little time for actually serving the needs of the very customers you are tracking and recording! My first suggestion would be to have your leasing staff keep a daily log for one

month detailing the amount of time they spend being trained/administrating the leasing aspects of their jobs, versus actual time spent with clients. I would encourage you to have your maintenance staff do the same exercise; track the amount of time they spend receiving training/inputting information regarding their make readies and work orders, versus the amount of time they spend doing actual work. (Note: Travel time to and from meetings and training

sessions should also be noted since this time away from the job affects employee productivity and impacts customer service too.) At the end of the 30-day period, prepare a report of your findings and present the information to your supervisor. Then, be prepared for a “brainstorming” session to come up with some solutions that will work for your specific circumstances, the size of your staff and continued on page 20

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Text REALESTATE-ROI to 44222 to receive a digital copy of this year's Real Estate Opportunities in Investing (ROI) Finding Investing Success in Today's Housing Market 8

Rental Housing Journal On-Site · August 2016

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

Executive Director - Jim Wiard Treasurer - Sheri Druckman

Board President - Brett Stevens Vice President - Becky Sanders Vice President of Suppliers Council - Rob Pendleton Immediate Past President - Kris Buker

Secretary – Laura McGuire

The Value of Good Budgeting

t’s hard to believe that budget season is already upon us. Where has the year gone? Of the many educational and training classes designed to enhance our association members’ skills and improve their property financial performance, one of the most popular classes at WMFHA is our recently held Budget Boot Camp. There is no more necessary personal skill to grow and advance in our industry than an intimate knowledge of financial management. Understanding financial and accounting concepts, exploring ways to improve the financial success of your property, and realizing that your property is a real estate investment add complexity to your job description. The budgeting process is one of the most important efforts you will make as a property manager. The more time you spend understanding your property’s financial performance, the better your budget will be and the better financial success your property will enjoy. The Operating Budget is a management tool used for planning and control of a property’s financial operations. The budget is the basis for establishing measurable goals as well as planning for their accomplishment and evaluation of their achievement. Trying to operate a property without a good budget is like trying to reach your destination without a complete roadmap – it is very difficult to get where you want to go. The most important person in making sure an apartment property is successful financially is the site manager. The site manager administers policies and procedures, many of which pertain to financial operations. This is the person who is making the day to day operating decisions and carrying out the duties of marketing the property, managing residents, collecting rents, ordering supplies and approving expenses, supervising staff and overseeing the general operations of a property. The manager’s knowledge, skills and ability to make good decisions directly contributes to the financial performance of the property. Budgets consist of estimates of income and allocation of funds to appropriate expense accounts to pay the property’s anticipated bills. The operating budget lists planned income and expense amounts for each month and for each account. Budgets determine the financial position of a property for a future time period. The budget is not just a guess of what someone thinks will happen. It is a management tool, a plan of action, a guide to achieve a desired financial result. The budget sets goals, outlines the plan to accomplish those goals and assesses how well those goals have been achieved. The budget can be used to direct daily operations and to control costs and expenditures. The budget serves as guidelines, can indicate the level of management efficiency, forms the foundation for im-

• A physical inspection is performed and a capital improvement plan is developed. • Overall ownership goals are revisited.

proved performance, measures performance of the manager or management company, sets a cash flow schedule and monitors cash flow, and provides a forecast of future performance. The budget should match the owner’s investment goals. The greatest impact on the bottom line can be found in maximizing the revenue side of the equation. This involves a thorough understanding of rent trends, market conditions, customer preferences, branding strategy and a commitment to service. Employee skill development in the area of leasing is critical to meeting income assumptions. So too is a strong maintenance and property upkeep program. WMFHA has valuable training for leasing professionals and for maintenance service technicians that are critical to employee development. Analyze current and historical performance, discuss goals and objectives, re-visit current policies and programs, conduct an extensive property inspection, prepare a thorough market rent comparison, obtain bids, evaluate contracts, and involve staff feedback. Evaluate each expense line item with industry best practices in mind, looking for ways to maintain the physical property and resident service level yet identify ways to reduce costs. Reductions in the major expense categories of utilities, maintenance repairs and payroll require diligence and creativity. Don’t forget to develop a capital expense budget, both short term and long term. Most often, the budget is aimed at big picture and long range goals such as to increase cash flow, raise NOI, improve the physical product, pay down financing, provide pride of ownership or enhance property value. What do owners want from their property management? They want positive cash flow from a stabilized, well maintained property that provides a decent rate of return on their financial investment. The budget works to outline the accomplishment of this goal. Budgeting is an evaluation process, a thought process. Budgeting begins with information gathering: • Account by account entries are reviewed.

Rental Housing Journal On-Site · August 2016

• An analysis of historical actual information is performed. • Variances between actual performance and past budgets are reviewed. • Income goals are re-determined. • Market knowledge is essential.

Budgets should be realistic. Instead of guesswork, budgeting is a skill, an exercise that requires concerted effort. The budget becomes the management plan for the coming year and directs staffing and decision-making efforts at all levels. Budgeting and financial management are management tools. They are methods professional real estate managers use to improve performance, meet ownership goals, maximize property value and allow for smooth, stable, successful management of an investment property. Areas of most importance to site managers are: • Generating, collecting and maximizing income • Working within budget parameters

• Economic trends are evaluated.

• Controlling expenditures while maintaining the physical property

• Management programs and policy assessments are conducted.

• Ensuring value and benefits for the costs incurred

• Staff feedback is solicited.

• Lowering operational risks

• Bids are obtained.

• Knowing and satisfying the owner’s goals for the investment property

• Contracts are evaluated or re-negotiated.

continued on page 17

Rental Housing Journal On-Site

What Safeguards Do You Tie to Your Lease Offers? By Ellen Calmas

t’s pretty obvious that occupancy drives revenue, and leasing (among other things) drives occupancy. What’s less obvious is that there are times it makes more sense to let a prospective lease walk away. Property owners and managers spend millions of dollars annually screening prospective residents to gain better insights into their ability to afford, retain and adhere to the specifications of a lease. Screening results in a rejection, an acceptance without conditions, a conditional lease offer, or a lease offer with mandatory requirements. The conditional and mandatory categories typically include safeguards for timely rent delivery and/or protection against future inability or unwillingness to pay rent on time. Herein lies the rub in that the prospective resident who agrees to extra conditions upfront – no matter how relatively easy or onerous – is typically the resident who wants to perform reliably. Yet sometimes things work out and other times they don’t. That’s why safeguards are tied to lease offers in the first place – to protect the property company.

So what’s the implication when a prospective resident declines a conditional or mandatory lease offer? A few options come to mind: • The prospect can’t afford what’s being asked • The prospect doesn’t want to move in with the lease offer terms • The prospect doesn’t want pay rent on time

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Pick any one of the above and you’re better off letting that prospect walk away. Yet with upwards of 35-45 percent of all lease acceptances falling into a conditional or mandatory category, it makes sense to have alternatives built into your lease offers to help protect a community’s bottom line that also contribute to increased leasing velocity. NPS Rent Assurance does just that as an alternative to a higher security deposit that enables prospective residents to better afford move in costs while demonstrating their commitment to deliver rent reliably throughout the life of a lease. Residents who enroll in our rent budgeting program linking rent to payroll tend to stay in their apartment homes over 550 days, or twice the industry average, so things work by design. On the flip side, the prospect who walks away from a lease offer that includes rent budgeting flunks a secondary, less obvious layer of screening that illustrates either their financial insecurity or their future intention to fall down on their lease. Stated differently: prospects typically enroll in our program unless they really don’t want to put structure in place to assure their rent will be paid on time

– and that’s not a resident you want to move in. Period, full stop. For more information on NPS Rent Assurance, you can download their recent white paper at http://www.npsrentassurance.com/nps-position-papers About the Author: Lease options for landlords – Ellen Calmas is co-founder and executive vice president of Neighborhood Pay Services, LLC / NPS Rent Assurance and brings 25+ years marketing communications experience with Fortune 500 and entrepreneurial companies to her role in strategic planning and marketing and sales support. She is also responsible for brand positioning, outbound marketing and digital networking as well as coordination of partner programs. Ellen has held senior management positions for marketing communications firms serving such clients as GlaxoWellcome, Bausch & Lomb, Avon Products, Heinz USA, AT&T, The House of Seagram, among others. She actively supports numerous health, civic and arts organizations throughout the Boston area and currently holds board positions for Silent Spring Institute, a leading research and advocacy group dedicated to identifying links between women’s health and the environment. She received her B.S. from the Roy H. Park School of Communications at Ithaca College. She can be reached at 617.209.3048 ext 104.

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Rental Housing Journal On-Site · August 2016

Rental Housing Journal On-Site

Pierce-Kitsap-Thurston Outperforms quarter’s 3.97%. The vacancy rate was 3.79% a year ago. The rate for all properties including those in lease-up is 4.13%, down from 4.49% last quarter.

Pierce: 3.34% The vacancy rate in Pierce County dropped from 4.14% to 3.34% this quarter. It was 3.81% a year ago. The lowest vacancy rate is 3.00% both in Fife and Puyallup. Tacoma North Central showed the greatest improvement among the seven submarkets. The weakest submarket is Tacoma South, where the vacancy rate dropped significantly to 3.96%. Kitsap: 3.88% Last quarter’s vacancy rate of 4.22% for Kitsap improved to 3.88%. The vacancy rate was 3.01% a year ago. The lowest rate of 2.42% is in the Poulsbo/Bainbridge Island submarket. Silverdale is the softest submarket at 4.19%. Thurston: 2.82% Thurston County improved again this quarter. The vacancy rate declined from 3.08% to 2.82%. A year ago it was 4.31%. Lacey is the strongest submarket with a vacancy rate of 2.65%. Rental Incentives Pierce: $6 per Month (0.6%) Kitsap: $0 per Month (0.00%) Thurston: $1 per Month (0.10%)

...continued from page 1

The overall rate for rental incentives for the three-county area is 0.2% versus 0.5% last quarter. Remarkably, Kitsap has had zero percent for three straight quarters. Five percent of the properties are offering rental incentives, down from 9% last quarter. Rental incentives are having a negligible impact in the three-county area. Rents: $1,059 per Unit $1.23 per Square Foot Average rents climbed $45 to $1,059 per month and $1.23 per foot, an increase of 4.4% over last quarter. They increased 10.2% over the past year. Rent increases averaged 7.47% per year over the last 3 years. Pierce: $1,049 per Month $1.22 per Square Foot Kitsap: $1,134 per Month $1.33 per Square Foot Thurston: $1,016 per Month $1.19 per Square Foot Rents increased $41 in Pierce, $57 in Kitsap and $45 in Thurston. Submarkets topping the list for largest rent increases over the past quarter are Silverdale and Lacey. The highest rents of $1,418 are in the Poulsbo/Bainbridge submarket.

New Construction There are 1,464 units under construction which is virtually the same as the first quarter. The majority of these are in Pierce County. There are another 1,315 units that have successfully com-

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pleted the design review and permitting process. Additionally, 3,219 units are in the earlier stages of the construction pipeline. Featured in the photo, the 143-unit Little Tuscany opened this year. It is located in Olympia and is managed by Fulcrum Real Estate Services.

Observations We have been surveying the Pierce market since 2006 and the Kitsap and Thurston markets since 2009. This quarter broke records for the lowest vacancy rate at 3.32% and largest quarterly rent increase of 4.4%. Not considering rent levels, the rental market here outperformed metro Seattle this quarter. A variety of factors underlie the market’s rapid pace. Among them, first and foremost, is job growth. Pierce is by far the largest county in terms of total units. Annual nonfarm job growth here was 3.5% through April. In Thurston and Kitsap it was 2.5% and 1.7%, respectively. Strong housing price increases make it tougher for renters to buy. And with inventories so low, there’s not much to buy. This makes it more difficult for renters to leave apartments. On the supply side there just aren’t enough units coming online to help much with easing the rent increases. As noted above there are 1,464 units under construction. Compare this with metro Seattle’s 22,300 units under construction.

Certainly, metro Seattle is a much larger market. It is 3.2 times bigger based on total units in 50+ unit properties. Nonetheless, it has over 15 times as many units under construction. We anticipate that with the rapidly rising rent levels and very low vacancy rates, more developers will be taking notice of Pierce, Kitsap and Thurston counties. 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

Trends 2016 – Education Conference & Trade Show Mark Your Calendar!

32ND

32nd Annual TRENDS 2016, December 6th, Washington Convention Center, Seattle TRENDS is ‘THE’ Oldest and Largest Northwest Rental Housing Education Conference and Trade Show

OVER 1,500 PEOPLE attend TRENDS TRENDS hosts a 215 Booth TRADE SHOW The admission to TRENDS 2016 includes the TRADE SHOW, WORKSHOPS AND LUNCH all for $65 if payment is received by November 28, 2016, $80 after November 28, 2016. Ticket Discount Available — When Purchasing 9 or more Tickets Call: 800-335-2990 or e-mail: events@RHAwa.org

Who attends TRENDS?

• Rental housing property owners • Property managers • Leasing agents • Maintenance personnel and portfolio managers This year TRENDS will be celebrating it’s 32nd year of production in a VERY big-way. The conference draws over 1,500 attendees and hosts the biggest industry trade show of 215 exhibits. The TRENDS education schedule offers 40 outstanding workshops. This year’s TRENDS should be the biggest conference ever. TRENDS is the premier annual education conference and trade show for Northwest rental housing ownership, management and maintenance. TRENDS is a national award-winning event.

See the TRENDS website at www.trendsnw.com

Washington State Real Estate Clock Hour (3 CRE credits) workshop credits are also available for an additional $25.

TRENDS is brought to you by: Washington Rental Owners Association (WROA); The Institute of Real Estate Management (IREM) and

TRENDS is also very proud to hold the distinction of being the longest running a continuously produced event at the Washington Convention Center.

Rental Housing Association of Puget Sound (RHAWA). TRENDS is produced by Larry Diamond. larryd@isomedia.com

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This years TRENDS Education Conference will again feature several wellknown national and many regional speakers. As well as, several dozen highly regarded local industry practitioners participated as workshop panelist. The TRENDS ’16 workshop schedule is one of the best ever offered.

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Rental Housing Journal On-Site · August 2016

Rental Housing Journal On-Site

DEAR MAINTENANCE MEN Countertops, Leaky Roofing and Cleaning Fiberglass Bathtubs

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Dear Maintenance Men: I have a unit with old laminate counter tops. The counter tops are sound, but are very dull and faded looking. Can the tops be saved? I don’t want to replace them at this time. Do you have any suggestions? Bill

Dear Bill: It will be impossible to make your counter tops look new again, however with a little bit of elbow grease, we can give them a new lease on life. First thoroughly clean the counter top with Soft Scrub or similar product, rinse completely. The laminate rehab prod-

ucts are wax-based sealers found in name brands like Gel Gloss or Minwax. They can be in paste, liquid or spray form, however do not use auto wax. You may want to apply these products from time to time as the counter tops lose their luster.

Dear Maintenance Men: I own 8 units and enjoy doing minor maintenance around my building. One of my current projects is to repair three persistent leaks on my roof. The property has a flat roof. Can you give me some advice on tracking down these leaks? Don

Dear Don: Flat roof leaks can be extremely tricky to trouble shoot. Water intrusions tend to travel, then drop at the lowest point of your roof and ceilings. A careful inspection would include checking following: 1. Flashing around vent stacks and gravel stop roof edges. 2. Exposed roofing nail heads. 3. Drainage systems on the roof or directly adjacent to the building. 4. Exposed roofing that is devoid of grave or stone cover. 5. Roof seams or laps. 6. Blisters and water pooling areas on the roof. Some solutions and preventative maintenance: a. Caulk all flashings and exposed roof seams with roofing Henry’s 208. It comes in gallon or tube form. b. Caulk any exposed roofing nails. c. Score blisters with a utility knife and inject Henry’s 208 with a caulking gun into the blister opening. Apply pressure until cement oozes out of the cut. Install desired size of cap sheet as a patch. d. Cover any exposed roofing material with gravel or stone. (This keeps the sun from rotting the material.)

e. Secure any loose gutters and clean out drainage systems. f. Seal any cracks in the stucco, water can wick into these cracks. g. You may want to consider installing roof drains in the areas that rain water pools the most. h. To help keep cracks from coming back, use fiberglass webbing with your patch material. continued on page 19

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Rental Housing Journal On-Site

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Rental Housing Journal On-Site · August 2016

Rental Housing Journal On-Site

Western Region Tops In Rental Property Investment in U.S. New Report Says

newly released rental ranking report on the attractiveness of real estate investment in the top 75 U.S. metropolitan areas shows the top 10 performing metros in 2015 were: • San Francisco • Seattle • San Jose • Louisville • San Diego • Los Angeles • Denver • Portland • Austin • Atlanta “Big cities along the West Coast, (including San Francisco, Seattle, San Jose, and Portland) have remained dis-

proportionately represented at the top of the Rental Rankings throughout 2015. In fact, they occupy six of the top ten national rankings—a trend we have seen consistently over the two years of this report,” the report states. The report by All Property Management is designed to help investors, property managers, and landlords throughout the U.S. “The Northeastern states remain the least attractive for rental property investment, mainly due to woeful property value appreciation and slow job growth in its metropolitan areas,” the report states.

Western region tops in rental property investment The top performing region in the report was the western U.S., which the report says is currently the best region for rental property investment, thanks largely to the impressive rent increases and property value appreciation found there. Other highlights include: • Vacancy Rate: Worcester, Mass. had the lowest vacancy rate with 3.05% • Birmingham, Alabama came in in the bottom spot with a 17.67% vacancy rate

• Rent Variance: The percent change in median rent was best in Buffalo, NY. At 16% • Hartford, Conn was worst at -6% All Property Management, is a subsidiary of Buildium.com , operator of the largest online network of property management services. The report features insights into the attractiveness of real estate investment in 75 major U.S. metropolitan areas, over all four quarters of 2015. The higher a metropolitan areas ranking, the better ROI for rental housing within it. The report includes a breakdown of regional performance trends continued on page 22

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Preventative Maintenance Plan These tasks and inspections are more than likely being done already. This plan and checklist is meant to minimize mistakes and lapses in your maintenance calendar. Start your standing checklist with these six maintenance essentials:

1. Air Filters Coordinate with your maintenance staff to change each unit’s air filter every one to three months to eliminate the chance of any potential risks to your systems and any health issues for your tenants. Leaving dirty air filters unchecked can lead to mildew growth and decreased air flow. Not only does this impact tenants but can increase the energy consumption and potentially cause major damage to the HVAC system. On average, eight percent of a property’s energy consumption is air conditioning. 2. Mechanical Systems: Hvac and Water Heaters It’s better to spend a little money on a few inspections than a lot for last-minute repairs or replacements. Have your HVAC systems and water heaters inspected at least twice a year, before the summer and winter months, to ensure there isn’t any damage or warning signs. Dirty coils, worn parts and faulty controls on your HVAC system and water heater are a few of the signs that can go unnoticed. Take your proactivity a step further and add one or two more additional visual inspections to prevent a potential breakdown. When planning, keep in mind seasonal transitions and temperature changes. 3. Energy-Efficient Lighting Upgrades Constantly swapping and changing incandescent light bulbs takes quite an amount of your maintenance staff’s time. Simply upgrading to LED bulbs will decrease operating and energy costs, as these bulbs use 84 percent less energy and can last for more than 20 years. Imagine not worrying about changing bulbs until 2036. Upgrading LED lighting requires a slightly higher upfront investment, but there is a tremendous amount of return on that investment over time. 4. Fire Safety Alarms and Equipment Fire departments respond to about 108,000 multifamily residential building fires in the United States every year. Take whatever precautions you can to keep your property off that list. Check and change batteries in smoke and carbon monoxide (CO) detectors, and make sure every unit is equipped with a working and functional fire extinguisher. Consider upgrading units with smoke and CO detectors that include lithium-ion batteries. These sealed alarms last 10 years without needing a new battery. After 10 years, you simply toss the entire unit and get a new one. Today there are even Wi-Fi enabled products that alert your resident’s smartphone and / or staff of any potential smoke or CO detected.

...continued from page 1

5. Water Damage Minimize or eliminate water damage threats by regularly checking common indoor areas such as sinks, water heaters and washing machines. Consider installing leak detection sensors in high-risk areas that will alert your staff via smartphone of leaks so they can immediately address problems and possibly avoid expensive water damage. Make sure there is proper sealing of gaps and cracks of doors and windows. Risks and existing water damage can be spotted outdoors in the landscaping and irrigation, gutters and roofing. Have all these areas properly inspected and ensure water is draining properly. 6. Resident Security Renters are 85 percent more likely to experience break-ins than homeowners. Smart home technology can help boost security and can also lead to significant savings for property managers. Securing the property with keyless entry locks also makes it significantly easier and less expensive to re-key, decreasing the workload of maintenance requests. This technology also allows renters to grant access for service calls, admit access remotely while away and manage the system through a convenient app on their smartphone. Lighting is another area to consider when increasing security. As you maintain, repair and swap bulbs on flood lights and other outdoor fixtures, consider upgrading to motion-sensor LEDs. As technology advances, these smarter fixtures are becoming much more affordable, and they’ll create peace of mind for residents while possible deterring potential crime and other security risks. The bedrock for an effective preventative maintenance plan is partnering with the right third-party service providers and procurement sources. Look for suppliers and service providers that offer a combination of services, from MRO product fulfillment to products and installation services for capital projects and installation services for all of the above. Consolidating vendor touch points and points of contact can lead to significant savings. By Scott Matthews, Director, Strategic Accounts, The Home Depot Scott is responsible for managing national accounts and e-commerce while overseeing business-to-business relationships. During his 25 years at The Home Depot, he has served in a variety of roles and capacities, including Regional Pro Sales Manager, District Manager and Store Manager.

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Rental Housing Journal On-Site · August 2016

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

Board President - Brett Stevens Vice President - Becky Sanders Secretary – Laura McGuire Vice President of Suppliers Council - Rob Pendleton Immediate Past President - Kris Buker Executive Director - Jim Wiard

Treasurer - Sheri Druckman

The Value of Good Budgeting ...continued from page 9 • Add property value Value can be added by: raising rents; lowering turnover; lower personnel costs; collection of charges; reducing staff turnover; ensure quality vendors do work at good prices; and going green. Understand your property’s financial workings. Learn all you can about the accounting functions for your property and what financial goals the owner has for his property, and you will be a more successful manager. Your budget is a collaboration of work from several different positions, all with one common goal: to meet the fiduciary responsibilities for the investors / owners of your property. It will be modified from the original draft, and those modifications are the direct result of meeting a strategic plan developed by the executives within your organization. No matter what it looks like when you have the final draft in hand, remember, it is YOUR budget. Own it, and achieve it! As the Washington state affiliate of the National Apartment Association, WMFHA members benefit from excellent training opportunities through NAA’s Certified Apartment Manager (CAM) and Certified Apartment Port-

folio Supervisor (CAPS) designations. Both designation courses offer a robust financial management curriculum. The CAM course may be taken online as well. Make sure to budget in 2017 for ample employee training as well as attendance at industry events such as our EdCon trade show and the popular Washington Apartment Outlook forecast luncheon. Investing in your employees is an investment in your company future and properties under management. 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 425656-9077. Be sure to follow the activities of our members on our Facebook page.

Rental Housing Journal On-Site

Be Aware of Safety Issues

...continued from page 1

is necessary to put and keep the premises in a fit and habitable condition. 3. Keep all common areas of the premises in a clean and safe condition. This does not mean management must provide security. It simply means that if repairs are necessary and are the responsibility of management, it must make them. Many landlords provide courtesy patrols, but these are not security guards. Random criminal acts occur on virtually every property. It is advisable for communities to encourage their residents to maintain property insurance, such as automobile and renter’s insurance, to adequately protect them is such an act takes place.

Watch For Certain Signs When dealing with crime, there are certain areas landlords should look into. These include: • Ask renters to watch for any activities they consider suspicious. Tell them to report these to the FBI or local law enforcement agency. • Check to see if new residents turn on the unit’s utilities. Individuals who use their apartments for criminal purposes often do not turn these on. • Watch for persons who pay their leases in advance and in cash. • Look for generally suspicious or unusual behavior. Examples of this include: ··Excessive traffic. ··Residents and guests entering and leaving the unit at odd hours. ··Residents who have a lot of cash and expensive cars, but do not ap-

pear to be employed. ··A barely furnished apartment. This could mean that the resident plans to stay for only a short period of time ··Student residents who do not appear to leave the unit to attend class. • Conduct a thorough and complete screening of applicants and ask for photo identification. Try to get a valid photo identification to match up with a prospective renter. Fake driver’s licenses and passports are easy to forge or buy on the street. • Increase your inspections of both vacant and occupied rental units. Remember, under state law you have the right to enter your rental with a twoday written access notice. • Watch for unusual packages delivered to the property. You should also set up procedures for accepting and storing packages delivered to residents. Remember to use common sense, but don’t discriminate. The bottom line is to look for suspicious activity with multiple indicators, not just a single incident. Educate residents with CrimeFree programs, Block Watches and, if appropriate, notifications of criminal acts that occur on the property and who to call if they have information that could assist the investigation. Andrew M. Hull, Esq. Hull, Holliday & Holliday, PLC www.doctorevictor.com 602.230.0088

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Rental Housing Journal On-Site · August 2016

Rental Housing Journal On-Site

5 Keys That Sway Tenant Decisions About Your Rentals By Larry Arth, Equity Builders Group

ow great would it be if you knew what your tenants or future tenants are thinking about rental properties? It has been my experience that landlords tend to put all their energy into what they as landlords want without getting in tune with what the tenant wants. The nice thing about owning my own investment properties, as well as working with hundreds of investors, is we collectively acquire the economies of scale knowledge. Through this experience we have discovered the key to getting and keeping happy tenants is knowing what they think and the key factors in their decision-making process. Their thought patterns can change with the economy and their own personal financial situation, so you need to constantly keep on top of this. Through a lot of interviews and surveys here is what we have found:

Top 3 reasons a tenant may move Current lease expiring: As I mentioned above, most landlords do not try to understand what their tenants want and as a result they are not motivated to renew their lease. So a top reason given as to why they move was, “My lease

was expiring.” Sad but true. Do not let this happen to you. I learned early on in the business world that success is all about building relationships. I knew I had to build a strong relationship with my tenants, and those long-term lasting relationships would translate into long-term loyal clients for my real estate investing. Job relocation or new job: Relocation for jobs tends to be more common place for the professional white collar workers. I have in the past addressed getting two- and three-year leases at the time of lease. Their response to this may give you clues as to whether they foresee

job relocation in the future. People who wish to take on a two or three year lease typically feel pretty secure in their long term stability at the current location. Moving out of parents home: This, now more than ever, is common place. It is suggested that about a third of young adults age 18 to 30 have been living with their parents as a way to save money. Often referred to as the basement kids because they live in their parent’s basement. These may be great tenants but finding payment history will be more challenging. As an apartment or single family rental home may be a new expense for them, you

want to be sure they can afford to make your rent payments.

5 keys that sway tenant decisions about your rentals Price of unit: One of their primary concerns is price. When probing deeper, we realized that this is better illustrated as value. It may be human nature to look at the price but it ultimately comes down to value. When they compare what your rental offers versus another rental they want the best value. You want to be sure to promote the benefits and attributes that your rental continued on page 23

Rental Housing Journal On-Site · August 2016

Rental Housing Journal On-Site

Think About HR

...continued from page 3

Dear Maintenance Men ...continued from page 13

HR departments, but small and midsized companies can often afford to have only one person in charge of these matters. These one-person HR Departments often have many other responsibilities demanding their attention (like setting rentals rates, calculating taxes, and advertising vacancies). Consequently, HR often gets less priority, putting these organizations at risk.

Medical Leave Act (FLMA), the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act, the Equal Pay Act (EPA) and the Affordance Care Act (ACA). Every law won’t apply to every employer, but violations can be expensive, so an employer shouldn’t just assume they’re exempt. Even simple oversights can be costly. A company can incur fines simply for not having the proper labor law posters displayed! States too have their own labor-related laws, covering everything from minimum wages, to payroll deductions, to sick leaves, to travel reimbursements, to what questions employers can ask applicants. Twenty-three states even have social media privacy laws! Municipalities are getting more and more into the action as well: some cities have their own minimum wages and sick leaves, among other ordinances. To handle all these laws and regulations, large companies have their own

Bottom Line It’s vital to the health of an organization to put at least one person in charge of HR and give that person adequate time to attend to it – and not only during times of an HR crisis. Whoever oversees HR matters needs time to do research or seek the advice of other HR professionals. With sufficient time and resources, an HR individual or team can help ensure that the organization has a great and compliant workplace. And that’s good for increasing income and reducing expenses, no matter what the business! By The Mammoth HR Pros At Mammoth, our mission is to make HR approachable, simple and intuitive for small and medium-sized organizations nationwide. We serve over 15,000 businesses and offer live, 1-on-1 consultations with our certified HR Pros, a state-of-the-art online portal, exclusive HR compliance tools, support for all 50 states, live online chat assistance and more. Whether you need an employee handbook, answers to your HR questions, or help understanding the rules and regulations, our on-call HR team is here to help. And they’re awesome – 95% of our clients say they’d recommend us to others. Visit us at mammothhr.com.

Rental Housing Journal On-Site · August 2016

Dear Maintenance Men: How do I get a fiberglass tub clean without scratching the surface? John Dear John: The nice thing about fiberglass tubs and showers is that no matter how dirty they get, they are fairly easy to clean up. Be careful not to use any abrasives on the fiberglass, such as scouring pads, steel wool or gritty cleaning solutions. “Soft Scrub” may be used sparingly on soap scum buildup. “Lime-Away” may be used for hard water mineral deposits, but read the directions and look for the fiberglass warning or approval statement. If you have very tough stains, moisten a cloth with clean Acetone solvent or nail polish remover. Do not let the Acetone pool as it may soften the fiberglass material. Acetone and many other cleaners have very strong vapors, so it is important to ventilate the area properly. After all the cleaning is done, the fiberglass surface may be dull. Use a fiberglass conditioner and glossing

paste to bring the tub or shower back to its original condition. You can use a product called “Gel Gloss” to bring back the shine. Bio: Please call: Buffalo Maintenance, Inc for maintenance work or consultation. JLE Property Management, Inc for management service or consultation Frankie Alvarez at 714 956-8371 Jerry L’Ecuyer at 714 778-0480 CA contractor lic: #797645, EPA Real Estate lic. #: 01460075 Certified Renovation Company www.BuffaloMaintenance.com www.ContactJLE.com www.Facebook.com/BuffaloMaintenance

Rental Housing Journal On-Site

NAR Identifies Top Markets ...continued from page 5

to buy a home or sign another lease,” adds Yun. “The good news is that other recent NAR survey data shows that those residing in the two regions were the most likely to say that now is a good time to purchase a home.”5 Concludes Yun, “With mortgage rates now at their all-time low, these identified markets are well-suited for the many renters financially capable and interested in taking advantage of the stability and wealth-building benefits owning a home can provide.” The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries. According to the U.S. Census Bureau, the homeownership rate fell to 62.9 percent, which is the lowest since 1965. 2 Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. NAR adheres to the OMB definitions, although in some areas an exact 1

Ask the Secret Shopper ...continued from page 8

match is not possible from the available data. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/List4.txt. 3 Qualifying income is based on a 3 percent down payment in each metro area’s median home price in 2015. Federal Housing Administration (FHA) loans require 3.5 percent down payment. The rankings of these metro areas would all hold if under a 3.5 percent down payment assumption. 4 The median existing-home price in June 2016 was the lowest in the Midwest ($199,900) and South ($217,400) regions. 5 According to NAR’s second quarter Housing Opportunities and Market Experience (HOME) survey, 80 percent of respondents living in the Midwest and 77 percent of those in the South believe now is a good time to buy a home. Information about NAR is available at www. realtor.org. This and other news releases are posted in the “News, Blogs and Videos” tab on the website. Statistical data in this release, as well as other tables and surveys, are posted in the “Research and Statistics” tab. Source National Association of Realtors

your community. For example, perhaps employees could “trade off” in their roles daily, weekly or monthly. Maybe during the busiest times of the month, one leasing consultant would be exclusively responsible for interacting with prospective renters (i.e. Conducting tours, closing the sale, doing the follow up work, etc.), while another employee is made responsible for all data entry, reporting, move-in paperwork, lease renewals, etc. A similar arrangement could be made between maintenance workers so at least one employee would be able to work uninterrupted turning apartments, while another is responsible for handling the ordering, work orders, data entry, etc. Again, the solution(s) to your situation will depend on many factors, but the important thing is to be in communication with your supervisor regarding the challenges you are facing. If quality customer service to future and current residents is being compromised for the sake of standardization, speed and efficiency, then perhaps it’s time to reevaluate some of the systems that are

in place. After all, your customers don’t really care how quickly you can enter their traffic source or how efficiently you can input their work orders into your computer system. What is important to them is your AVAILABILITY. Of course if you are so busy processing paperwork that you don’t have time to serve your future or existing residents you won’t have this problem for very long. When faced with a leasing office that is often closed or a phone that goes unanswered, your prospective renters and residents will eventually take their business elsewhere. If you are interested in leasing training or have a question or concern you would like to see addressed, please reach out to me via e-mail. Otherwise, please contact Jancyn for your employee evaluation needs: www.jancyn.com ASK THE SECRET SHOPPER Provided by: Joyce (Kirby) Bica Former owner of Shoptalk Service Evaluations Consultant to Jancyn Evaluation Shops E-mail: shptalk2@gmail.com Copyright © Joyce (Kirby) Bica

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Rental Housing Journal On-Site · August 2016

Rental Housing Journal On-Site

Top 10 Worst Property Management Mistakes By John Wilhoit Jr., www.multifamilyinsight.net

he question that will come to mind as you read this is “who does that”? The unfortunate answer is too many people. We are in an industry full of talented people. Mostly. If these mistakes are occurring with your assets it is probably time to look for new management, first to stop the damage and second to remedy the potential of on-going issues and the exposure they present. Suffice to say these are all ….. bad.

1. Allowing a danger to public safety to persist Suspect electrical, known illegal drug use, endangerment of children, domestic abuse, violent behavior. No good choices here. All or any similar issues must be addressed in real time once known. 2. Creating, encouraging or allowing fraudulent acts. No one should be skimming off the top. PM is a business. If you cannot do the business without a very high level of integrity then get out of the business, please. 3. Keeping a bad hire. Other than fire or natural disasters keeping a bad hire is one of the costliest mistakes. It is one thing to make the mistake, quite another to allow it to persist and potentially cause more damage. 4. Bad tenant screening (or no tenant screening). Anymore, the expense of obtaining a background screening is really, really cheap insurance. Having this tool available and failing to implement is trouble waiting to happen.

5. Letting water run. Indoors. Out doors. Running water is seldom a positive. Find the pliers. Call the plumber, the roofer, the candle stick maker- whoever has the answer Get that water stopped. Same day. 6. Allowing insurance to lapse. ‘nough said. Murphy’s Law lives here. 7. Ignoring maintenance calls. News flash… they do not go away. Good will is hard to earn, easy to lose. If management doesn’t care about your customers who will? 8. Ignoring renewals. The number one objective to retaining a stable income stream is making sure your customers are staying with a proactive renewal policy. No renewals policy, no stable income. 9. Lack of record keeping. Uncle Sam eventually catches up and when he does it’s like an ocean wave hitting a single piece of sand. Keep good records. File tax documents on time using quality service providers. 10. Avoiding the telephone. There are varying policies regarding telephone etiquette and responsiveness. Implement a policy and stick with it Your customers and potential customers want consistency. Having the attitude of “they’ll call back” is self-deception. “They” (potential tenants) do not. They talk to the next person that picks up the phone. 10(a). Unavailability of Product (as commented by Vicki Sharp). “Having empty units with none available to show is an obvious candidate for being one of the seven deadly sins in

property management. It’s one thing to be momentarily out of units during make-ready “season” yet quite another issue altogether to have zero units available for showings, because ____ (fill in blank). Livable space is our product. Having this livable space in condition for showing to potential paying customers is why property owners hire property managers. Granted, this sets financial considerations aside. To quote Malcolm X “by any means possible” try to have one unit available at all times”. 10(b). Lowering credit standards (as commented by Mark Dewey). “Reducing credit qualification standards during the application process. This gives an immediate bump to occupancy but at too high a costs. Reducing credit standards creates a “downward” spiral as collections and other similar activity increases. Basically, you are taking good product

off-line only to see your average revenue per unit decrease over time”. 10(c). Under-estimating preventative maintenance costs (as commented by Terry Graves). Under estimating the need to do your monthly and quarterly preventative maintenance. Mr. Wilhoit is the author of two books: How To Read A Rent Roll: A Guide to Understanding Rental Income and Multifamily Insight Vol 1 – How to Acquire Wealth Through Buying the Right Multifamily Assets in the Right Markets. 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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Western Region Tops in Rental Property and a look into early indicators for Q1 2016 and the rest of the coming year. A couple of examples of the information in the report such as this on Seattle and Portland:

Seattle rental property investment ranking “Seattle saw the same slight dip in rankings that many West Coast cities experienced in Q3, but rallied for a strong Q4. Low insurance and property taxes and low vacancy rates kept Rain City firmly in the top ten,” the report states. 2015 Best Rental ROI in the US #3 Best Rental ROI in the West #3 Average Vacancy Rate 3.37% Property 5.56% Appreciation Index Future Rental #17 Availability Index Rent Variance 18.08% 2015 Jon Growth 3.35% (quarterly average) Job Availability Index #18 Capitalization Rate Average 6.20% Average Days on Market 43 Tax & Insurance Cost Index #2

Portland rental property investment ranking No.8 “Portland saw low vacancy rates and high rent variance fuel a good year for Portland’s rental market, though like many West coast cities, the City of Roses did experience a slump in Q3, fall-

...continued from page 15

ing to 49th place overall. However, a moderately strong job market and very strong property appreciation values in the first half of the year helped Portland maintain its spot in the top ten,” the report states. 2015 Best Rental ROI in the US Best Rental ROI in the West Average Vacancy Rate Property Appreciation Index Future Rental Availability Index Rent Variance 2015 Jon Growth (quarterly average) Job Availability Index Capitalization Rate Average Average Days on Market Tax & Insurance Cost Index

#8 #7 3.43% 6.03% #27 5.94% 3.17% #33 4.28% 52 #5

The Rental Ranking Report is calculated with a combination of U.S. real estate, rental housing and jobs reports, along with property appreciation forecasts. A comparison of quarter-over-quarter and year-over-year data is analyzed to discover how rental markets are changing. The nine indicators that are used include: • Vacancy rate • Rent variance • Capitalization rate • Property appreciation • Job growth • Days on market • Future rental availability index

• Job availability index • Tax and insurance cost index With the U.S. homeownership rate falling to its lowest rate since 1967 in July 2015, this has been a banner year for many rental property owners, with vacancy rates at their lowest since 1993. The rental market in the U.S. reached $173B in 2016, and although rents rose significantly, they still increased at a lower rate than that of the median U.S. home price. In addition to these market statistics, some of the results from this year’s report include: “Our inaugural report was created to serve as a valuable resource for real estate investors, property managers and landlords throughout the U.S.,” Michael Monteiro, co-founder and CEO, Buildium, said in a release. “Our team compiled data from a variety of sources to bring together the most useful information and help those in the real estate industry source new properties and to help in setting rents and fees, assessing value and benchmarking performance. The report also looked at other factors pertaining to the quality of real estate investments. Some additional data points include the capitalization rate, or the comparison of median rental prices to median property values. Dayton, Ohio had the highest percentage at 13.15%, and property appreciation, where San Francisco had the highest percentage at 7.34%. The report also looked into job growth where San Jose, California had the highest growth at 19.11%, days on the market San Francisco had the lowest number of days at

33 and future rental availability, where Austin, Texas experienced the best percentage at -1.47%. Finally, the research also included data on job availability, where it compared population numbers to current job openings San Jose had the highest availability at 36, and the cost of insurance premiums and property taxes, where Salt Lake City came in with the lowest cost.

Looking forward for 2016 “As we open up 2016, we are seeing small but steady increases in many of these trends, as forecasts seem to be brightening across the board,” the report concludes. “While not all reporting is available this early in the year, a look at the key indicators … shows that the same cities seem to be struggling. That said, even in those cities many of the numbers are making incremental improvements that—if they continue— could spell a strong overall rental market for 2016. For the full Rental Ranking Report, visit http://www.allpropertymanagement.com/ rental-ranking/ Resources: All Property Management Buildium

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5 Keys That Sway

...continued from page 18

will offer them so they realize the value of your property. Location of the unit: Convenient location is of utmost importance. Knowing real estate is all about location, you want to sell the location of your unit. What is the reason you manage the property or why did you buy the property where you did? Share this within your ads. For example: near bus stops, near many businesses and places of work, near shopping or close to main roads and highway. Crime statistics: People of course want to feel safe. Assuming you purchased the property because it was in a desirable and safe neighborhood, share this with your tenants. It is what they want and telling them up front will keep them from having to guess or figure it out. School systems: First, remember that housing laws prohibit discrimination against children and “familiar status” is a protected class. You do not want to get into the conversation about having children. However mentioning the quality schools in the area is important to them. Community amenities: Tenants too want a home not just a place to live. Share with them what is in the community or the nearby area. The walkability score can be a big benefit to them. These are things that your tenants are thinking about. When you can address these triggers up front, you will stay ahead of your competition and keep your phone ringing.

Any good business does research and a lot of surveys to find out what their customers want. As renting property is your business, you want to stay on top of what a tenant thinks, so you can stay ahead of your competition. It is the little things that are remembered.

A few little differences can mean a lot to a tenant These little differences in how we manage our properties have people wanting to stay and rent with us. As families outgrew their homes they would ask us if we had any other properties that were bigger, as they wanted to maintain our relationships. Their friends were always inquiring about renting from us. We have great reputations as property owners who care about their tenants. As a result, the only time people moved is if they left the area or if they bought a house.

You all heard of, or personally live the “Pride of ownership.” When you can create this same type of pride for your tenants, you have created a great partnership that will have them renewing their lease. A person’s home is his castle. It is his independence. Even though they do not actually own the home, you want them calling it their home. When they feel great about where they live and are happy with it, they will call it their home and they will treat it like their home. When you show you genuinely are interested in a happy partnership where you provide a nice home and maintain the home in turn for happy tenants who pay on time, you have a successful business that is scalable and your investment portfolio can flourish.

About the Author: Larry Arth is a landlord and the founder and CEO of Equity Builders Group, a Florida based Real Estate investment Group. As a 36 year veteran to real estate investing, Larry understands that we are now in a global economy and as times have changed, investment strategies must change as well. Larry is an international recognized consultant and speaker and assists hundreds of investors per year, both foreign and domestic to realize their investment potential. He analyzes locations across the country for economic strength and the locations that yield the largest most sustainable return on investment. Within these locations he seeks out and gathers the best teams to deliver sound, high performing and most importantly sustainable turnkey investment. He works with investors to ride the wave of each area-specific market surge. Larry’s primary focus is offering (Non Listed) safe and sustainable turnkey investments to the passive investor.

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Rental Housing Journal On-Site · August 2016