Rental Housing Journal On-Site March 2017 by Professional Publishing, Inc

Rental Housing Journal On-Site

March 2017

3. The Informed Investor - Why Use 1031 IRC Exchanges? 5. 2017 Educational Conference and Exposition 9. Addressing Housing Affordability

10. Examining the National Boom in Markets Demand for Luxury Apartments 11. Dear Maintenance Men - Sidewalks, Fencing and Toilets 18. Survey on Home Buying By Gen X, Millennials and Boomers 21. The World is Searching for Reliable Property Managers

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

4Q16 Market Overview

6 Keys to Writing A Lease The Right Way

Multifamily Housing Update Seattle, WA

Payroll Job Summary Average Payrolls

1,676.5m

Annual Change

59.3m (3.7%)

RCR 2017 Forecast

59.1m (3.6%)

RCR 2018 Forecast

55.6m (3.3%)

RCR 2019 Forecast

51.6m (2.9%)

RCR 2020 Forecast

49.4m (2.7%)

RCR 2021 Forecast

46.0m (2.5%)

Unemployment (NSA)

3.6% (Dec.)

4Q16 Payroll Trends and Forecast The rate of Seattle employment growth accelerated for the fourth consecutive quarter as establishments added workers to payrolls at a 59,300-job, 3.7% year-on-year rate during 4Q16, up from 3.6% during the prior period. Seven of 12 industry super-sectors expanded at 4% rates or faster, led by personal and other services (9.1%), construction (8.2%), transportation (8.1%) and information services (7.3%). Subsector performance was highlighted by software (+2,500 jobs/4.7%), computer system design (2,000 jobs/5.2%) and healthcare services (7,900 jobs/4.4%). The booming cloud computing industry was the primary tech catalyst. Education services added employees at a 1,000 (3.5%) job annual pace, the first positive print in more than a year. Only the Jet City’s seminal aerospace industry shed jobs, trimming headcounts at a 5,000-slot, -5.6% y-o-y rate, the worst quarterly performance since 2008. Seasonally-adjusted data are somewhat at odds with the nominal results. This series show a net gain of 9,100 jobs October to December, representing the slowest quarterly add of 2016, and the fourth smallest

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By John Triplett, Rental Housing Journal

he webinar was by Buildium. com and run by Darcy Jacobsen, Director of Content, and Sam Driver, Product Director, and an experienced property manager at the company. During the webinar, they polled the group of property managers on a number of questions, and the first one was:

How many different leases do you use in your business? “The most common is one lease, especially when the units are often similar. And, especially with smaller operators, one lease works.” Driver said. “However we are finding it is not uncommon to shift to a two- or continued on page 10

U.S. Home Flipping Increases 3 Percent In 2016 To A 10-Year High Average Gross Flipping Profits and ROI at New Record Highs

TTOM Data Solutions, curator of the nation's largest fused property database, today released its 2016 Year-End U.S. Home Flipping Report, which shows that 193,009 single family homes and condos were flipped — sold in an arms-length transfer for the second time within a 12-month period — in 2016, up 3.1 percent from 2015 to the highest level since 2006, when 276,067 single family homes and condos were flipped. Home flips in 2016 accounted for 5.7 percent of all single family home and condos sales during the year, up from 5.5 percent in 2015 to a three-year high

but still well below the peak in 2005, when 338,207 single family homes and condos were flipped representing 8.2 percent of all sales. The report also shows that 126,256 entities — including both individuals and institutions — flipped homes in 2016, up less than 1 percent from 2015 to the highest number since 2007, when 143,266 entities flipped properties. Meanwhile, the share of flipped homes that were purchased by the flipper with financing increased to an eight-year high of 31.5 percent in 2016 while the median age of homes flipped increased to 37 years — a new high going back to

2000 — and the median square footage of homes flipped decreased to 1422 — a new record low going back to 2000. "Home flipping was hot in 2016, fueled by low inventory of homes in sellable or rentable condition along with a flood of capital — both foreign and domestic — searching for the returns and stability available with U.S. real estate," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "The combination of more home flips and a greater share of financing for flip purchases resulted continued on page 12

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The Informed Investor – Why Use IRC 1031 Exchanges? Roger W. Bowlin | Real Estate Transition Solutions, LLC

s real estate investors, we are continually looking for ways to maximize a property’s cash flow and return on equity. One way to do this is to increase the leverage on a property, as long as the cost of capital (interest rate) is sufficiently below the property’s Cap Rate. Another method is to “buy up” to a larger property. The key to this strategy is to employ a tax-deferred exchange (1031) when repositioning your investment portfolio. Instead of paying tax on the gain and recapture of depreciation, this defers the tax and keeps these dollars working for you - essentially creating an interestfree loan from the government as long as investment real estate continues to be held. The Internal Revenue Code section 1031 allows investors to do just that! The popularity of 1031 exchanges rests primarily in its ability to preserve one’s equity invested in real estate and allows investors to purchase higher value properties or multiple properties with the tax-deferred proceeds from

their relinquished property. Utilization of a 1031 exchange allows investors to defer both the long-term capital gains of 15% or 20% (depending on one’s annual income) as well as the Net Investment Income Tax of 3.8%. However, it should be noted there are both pros and cons to utilizing a tax-deferred exchange, a sampling of which are detailed in the table below:

Pros • Deferral of Capital Gains & Net Investment Income Tax • Possible increase in cash flow due to preservation of equity • Opportunity for change in real estate type (retail, office, multifamily, NNN, etc.) as well as undivided fractional ownership structure (Tenant in Common or Delaware Statutory Trust) • Step-up in basis upon death of property owner for their heirs Cons • Exchanges are inherently complicated and improper execution may lead to paying tax • Real estate exchanged into is inherently illiquid

CONSIDER ALL YOUR 1031 EXCHANGE OPTIONS

Looking for income?

• Eventually tax will need to be paid if exchanged property is sold and not exchanged continuously You may be asking yourself - why would the federal government allow such an investor-friendly ‘section’ to be included in the Internal Revenue Code? The history of IRC 1031 began nearly 100 years ago, when tax-deferred exchanges were first mentioned in the Revenue Act of 1921. At that time, it was not uncommon for property to be traded for other property. Due to the fact that monetary value was difficult to establish when cash consideration was not present, the exchange was not considered to be a taxable event. Soon thereafter, in 1924, the code was amended to allow only ‘like-kind’ exchanges, eliminating tax deferral when exchanging stock or personal property for real estate. Very few updates were made to the exchange code until 1984. Over the next 30 years, the code has been clarified and slightly modified to allow for Forward Exchanges, Delayed Exchanges, and exchanges to and from both Tenant-InCommon (TIC) and Delaware Statutory Trust (DST) ownership structures. Over the 10 years between 2004 and 2013 nearly $3 billion of property

has been exchanged using IRC 1031, of which $1.9 billion was exchanged by individuals. These statistics are according to the most recent data available from the IRS’ Statistics of Income Division. Tax-deferred exchanges can be applied in a number of situations depending on the property owner’s investment objectives. Perhaps the most common scenario in which we assist investors is restructuring their real estate portfolio to simultaneously reduce active management, increase cash flow and provide both real estate property type and geographical diversification. Our firm, Real Estate Transition Services, looks forward to sharing with the RHJ community our knowledge acquired through advising on and executing exchanges. Throughout our series, we may reference previous topics discussed. Please visit us at www.RETransition.com for an archive of all previous topics as we move through this educational series. Furthermore, please do not hesitate to contact us as RWBowlin@Re-Transition.com if you have a question as it relates to your specific situation.

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Rental Housing Journal On-Site · March 2017

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Rental Housing Journal On-Site

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Rental Housing Journal On-Site · March 2017

EdCon Wednesday, April 19, 2017 - 8:00 a.m. – 5:00 p.m. Meydenbauer Conference Center, 11100 NE 6th St, Bellevue, WA 98004 EDUCATION – TRAINING – TRADE SHOW – MAINTENANCE COMPETITION

Presented in Partnership with:

Learn, Connect, Grow 2017 Education Conference and Exposition

Featuring the Maintenance Mania® competition Hosted by the Washington Multi-Family Housing Association

Pricing Regular (March 18-April 7) $89 | Member $109 | Non-Member

You Don't Wanna Miss This! 8:00 a.m. 8:30 a.m.

Conf. Kick-Off

9:00 a.m. 9:30 a.m.

Inspecting Multifamily

Plumbing Repair Techniques

Maintenance Leaders Panel

Appliance Repair Refrigerators

Leadership A Balcony View

Mastering Your Mystery Shop

Relationships & Renewals

10:00 a.m.

Trade Show

10:30 a.m. 11:00 a.m.

Renovation Management

Budgeting For Maintenance

Hoarding Awareness

Appliance Repair Range, D/W

Think Tank Brainstorming

Converting Leads To Leases

Changing Trends In Multifamily

11:30 a.m.

Trade Show

12:00 p.m.

Lunch

12:30 p.m. 1:00 p.m.

Changing Technologies

Maint 101 A Day in the Life

Resident Satisfaction Thru Maintenance

Appliance Repair Washers

Social Media Marketing

Resolving Conflict

Career Development Leadership Panel

1:30 p.m.

Trade Show

2:00 p.m.

Time Mgmt for Maintenance

Managing Turnovers

Maint/Mgmt Teamwork

Appliance Repair Dryers

Recruiting Good Talent

Market Trends & Analysis

Legal Issues Forum

Maintenance Mania Competition and EdCon After Party

3:00 p.m. to 5.00 p.m.

Room #404 Registration

Breakfast and lunch included, plus prizes!

Room #401/402 Registration

2:30 p.m.

Room #403 Registration

Late Registration (After April 7) $99 | Member $119 | Non-Member

Room #405 Registration

Room #406 Registration

Room #407 Registration

Room #408/409 Registration

EdCon is Presented in Partnership with:

Gold Sponsors

...ontinued from page 6

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EdCon - WMFHA

Title: Move Up In Your Maintenance Career! Maintenance Leaders Panel

EdCon ...continued from page 5 Registration, Breakfast, Trade Show and Networking: 8:00 a.m. Breakfast Sponsors ABC Towing The Plumbing & Drain Company

Bag Sponsor Brook Furniture Rental

Lanyard Sponsor Buy-Rite Carpet Wholesaler

Special Conference Kick-Off:

8:30 a.m.

Notebook Sponsor Roto-Rooter

Title: LEARN, CONNECT, GROW

Hear from key industry executives how you can LEARN new skills, network and CONNECT with peers, and GROW your career. Start the conference off right with a lively introduction to the day.

9:00 a.m. - 10:00 a.m.

Room 401/402: Zach Howell – BEAR Consulting Services

Title: Inspecting Multifamily Properties This course will be a photo tour through a typical multifamily property. We will discuss the methodology of collecting data, identifying potential future damages, understanding maintenance needs, and documenting the need for proper inspections and actionable repair protocols.

Room 403: Lance Shippy, Chris Blamire – Roto-Rooter A “Plumbing 101” course focusing on water heaters, faucet repairs, Whirsbo Pex and best practices in plumbing. This class will include lots of Q&A to answer your most challenging plumbing issues. There will be a “Stump the Professional Plumbers” segment, so bring your questions, plumbing concerns and find the right answer from two seasoned industry professionals. Room 404: Dave Wendt - Avenue5 Residential, Eddie Zimmerman - Thrive Communities, Aaron Hansen, CAPS – Palladium Real Estate Services

Rental Housing Journal On-Site · March 2017

In this class you will learn to diagnose all typical refrigerator failures including the self-defrosting system, fan motors, thermostats, and compressor components to name a few. We will discuss in detail maintenance and proper use and care for tenants to promote longevity of many of the components requiring cleaning on a regular basis. Basic understanding of a Volt/Ohm meter will be discussed to aid the attendee in understanding fundamental meter reading skills.

Room 406: Jessica Fern – FPI Management Inc.

Be there at 8:30 a.m. and have a chance to win a $500 Amazon gift card!

Title: Plumbing Repair Techniques and Tips

Room 405: Matt Faber and Timothy Burdick – National Trainers, Frigidaire

8:30 a.m. - 9:00 a.m. Title: Appliance Repair - Refrigerators

Center Hall Stage: Pam McKenna – Greystar, Walt Smith – Avenue5 Residential, Kari Anderson – Thrive Communities

Class Session One:

Learn how the "LEARN, CONNECT, GROW" concept impacted their upward mobility of our panelists and what they look for in FUTURE leaders in their organization. The importance of LEARNING all you can whenever you can. The importance of CONNECTING with mentors, leaders and peers to build your network of support and resources. The GROWth of your career is in your hands. Have a goal, make a plan - take ownership!

Title: Leadership: A Balcony View

This session will focus on the introduction to individual leadership, team leadership and how values play a crucial role in the execution of both. We will discover how looking at the property team from “the balcony” allows us to lead the team in a direction that each employee can engage in. Room 407/408: Amy Curtis – ConAm Management, Jessica Dahlgren – ConAm Management

Title: Relationships and Renewals, How To Get The Rent Increase!

Getting the renewal and the rent increase starts by building a foundation, the relationship with your resident. Learn the pain points of your residents and overcome the objections by designing your customer experience from the ground up.

Room 409: Genevieve Mentele – Thrive Communities, Angie Agliam – Avenue5 Residential

Title: Mastering Your Mystery Shop

Our goal as teachers and instructors is to lead a holistic approach to the shop experience, customer service experience, and ensure a comfortable setting for questions and answers. This seminar will focus on interactive role playing and learning from each other. Walk away with more confidence in the shop experience, develop a more rounded approach to delivering customer service, and establish better rapport with prospective residents.

EdCon - WMFHA

TRADESHOW AND NETWORKING: 10:00 a.m.

10:30 a.m.

Explore the EdCon Trade Show and learn about some of today’s leading edge products and services that can help you achieve your business goals!

Room 406: Think Tank Brainstorming Event!! 2017 Think Tank Brainstorming Session! You won't want to miss our 5th annual Think Tank - WMFHA's very own brainstorming extravaganza!

Class Session Two:

10:30 a.m. – 11:30 a.m.

Room 401/402: Gary Bender – Thrive Communities

Title: Reno Like a Pro (Renovation Management)

Learn how to successfully manage large or small property renovation projects, and the importance of scheduling, vendor management, budget control and product specifications. Managing and adhering to schedules, maintaining good communications and clear assignments are the key to successful renovations. Room 403: Donn Garrett, Rachel Grimes – Allied Residential

Title: Budgeting and Financial Management for Maintenance

This class is intended as a refresher for those who have been in the industry for awhile and need some pointers on budget management, as well as those new to the industry. Develop good habits and awareness of the role of maintenance budgeting and how maintenance affects the property’s overall bottom line. Learn the importance of good move-out inspections, ordering procedures, vendor relations and an organized maintenance shop. Room 404: Laura McGuire – Woodspear Properties

Title: Hoarding Awareness for Multifamily Professionals

It is estimated that more than one million people in North America are living in so much clutter that they can barely walk through their homes, find a place to sit or a surface to rest a plate. Hoarding is characterized by three main components: An accumulation of “things”; These “things” significantly clutter living space to the point that rooms can no longer be used for the intended purpose; and Discarding “things” causes extreme distress. Learn about hoarding and fair housing in this important seminar. Room 405: Matt Faber and Timothy Burdick – National Trainers, Frigidaire

Title: Appliance Repair – Range and Dishwashers

Led by our Career Development Committee, our Think Tank Team will guide you through several rounds of collaborative idea generation for today’s business challenges. If you have a problem - you will leave with several solutions! This is not your average “sit back and listen” workshop; this is a “roll up your sleeves, we are in this together BRAINSTORMING EXTRAVAGANZA”!! Room 407/408: Becky Sanders – First Pointe Management, Ron Burkhardt – AMLI Residential, Billy Pettit – Pillar Properties, Pam McKenna - Greystar

Title: CHANGING TRENDS IN MULTIFAMILY – A Panel Discussion

Our industry is changing rapidly. New innovations in leasing, marketing and maintenance are changing the game. To be successful, companies need to proactively stay ahead of the ever-moving curve. Learn from executives whose companies are on the cutting edge of new and innovative technologies and practices. Room 409: Matt Bernardy and Demetri Themelis – Knock Rentals

Title: Converting Leads to Leases: Technology's Place in the Leasing Process

We will explore how to be most effective when using technology in the leasing process through the lens of a customer's intent. When 'intent' is high, customers are more transactional and technology can provide for faster conversions at minimal effort/cost. When 'intent' is low however, there is no replacing the power of a sales professional's personal influence in guiding a lead towards a successful outcome (conversion/lease). We will explore different stages of the customer journey and highlight areas where technology is most effective.

LUNCH, TRADESHOW AND NETWORKING: 11:30 a.m. – 12:30 p.m. Lunch Sponsors NPI - The Plumbing & Drain Company

All new dishwashers have internal inherent energy reduction changes based on DOE regulations. During this class you will learn how these changes are implemented into the new dishwasher wash system. We will also cover dish and glassware cleaning complaints, and how to determine component fault and diagnosis.

...continued on page 14

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Rental Housing Journal On-Site · March 2017

Rental Housing Journal On-Site

Market Overview ...continued from page 1 calendar quarter advance in the past five years. RED Research’s Seattle payroll forecasting equation employs three lags of the dependent variable, the rate of change of U.S. job growth, ten-year Treasury (-) and federal funds (+) rates and the growth of personal consumption expenditures (-) as independent variables. The 95.4% adjusted-R2 (SE=0.5%) model projects further powerful economic growth throughout the 5-year forecast interval. In spite of projected soft U.S. GDP growth after 2017, SEA headcounts are expected to expand by 2.5% or faster annually through 2021, with gains remaining above 3% in 2017 and 2018. Occupancy Rate Summary Occupancy Rate (Reis) 94.9% RED 51 Rank 44th Annual Chg. (Reis) +0.2% RCR YE16 Forecast 93.7% RCR YE17 Forecast 93.2% RCR YE18 Forecast 93.3% RCR YE19 Forecast RCR YE20 Forecast

93.5% 94.2%

4Q16 Absorption and Occupancy Rate Trends Reis upwardly revised Seattle net 2Q and 3Q16 absorption by a net of 1,136 units (34%) to a six-month record high 4,437, resulting in a 30 basis point occupancy rate revision to 95.2%. But the service’s 4Q16 demand estimate paled in comparison. Reis counted 727 net 4Q move-ins, the lowest fall quarter metric since 2011. Although 4Q16 supply receded to a seven-quarter low 1,442, Seattle occupancy fell –30 bps sequentially to 94.9%. With 201718 supply burdens expected to intensify further occupancy losses should be expected.

Axiometrics surveys of 574 stabilized, same-store properties recorded market occupancy of 94.7%, down –60bps sequentially and -40bps year-on-year. Performance was consistent across classes as A, B and C quality properties averaged between 94.6% (“A”) and 94.9% (“C”). High-rises bucked the national trend, recording levels similar to the class-A average (94.2%). Every submarket saw occupancy fall y-o-y, except Sea-Tac, Auburn and Beacon Hill. Sea-Tac posted highest occupancy (97.6%) followed by North Seattle (95.6%). Redmond (95.4%/-0.2%) led tech precincts, and Downtown/QA was nearly stable on 94.8%/-0.1%. The strength of SEA space demand makes modeling increasingly challenging. RCR’s absorption model ARS fell to 90.7% from 91.1% in 3Q16. After absorbing 7,052 units in 2016, the model projects net fills of 6,116 and 6,395 units in 2017 and 2018. Good numbers but unequal to the task of absorbing the 17,723 units in the pipeline. Occupancy is forecast to drop -160bps by YE18; recover thereafter. Effective Rent Summary Mean Rent (Reis) Annual Change RED 50 Rent Change Rank RCR YE16 Forecast RCR YE17 Forecast RCR YE18 Forecast

$1,435 11.3% 1st 4.8% 5.0% 3.9%

RCR YE19 Forecast RCR YE20 Forecast

3.1% 2.4%

4Q16 Effective Rent Trends Reis likewise upwardly revised Seattle rent trends in nearly every quarter since 1Q12, including 330 to 390 basis point increases in each of the previous five quarters, raising the period compound annual rate from 7.9% to 9.5%. After posting a $54 (2.9%) sequential advance in 3Q16, the service reported a moderate

-$4 (-0.3%) decline in 4Q16, the first rent decrease in seven years. Expressed on an annual basis, rents climbed 11.3% in 4Q16, still fastest among the RED 50 peers, 440bps above #2 Sacramento. On form, Axiometrics same-store, stabilized property surveys had a different take, recording a 6.0% yearon-year effective rent increase following a typical seasonal fall quarter sequential quarter decline. Class-C maintained its longstanding segment lead, gaining 8.4%, topping classes-A (6.5%) and –B (5.1%). The largely A-quality high-rise segment chalked a 5.4% advance. SeaTac (11.0%) was submarket rent leader as well. Only two neighboring submarkets (Kent and Federal Way) posted gains faster than 8.4%. Conversely, infill high rent submarkets Downtown (5.0%), Redmond Rent revisions notwithstanding, RCR was able to specify a solid 96.7% ARS forecasting equation but with a meaningfully higher standard error (0.76% v. 0.66%) than 3Q16. The model finds that strong job, income and home value growth will support 5% rent growth through 2018. But our forecast for weaker U.S. growth thereafter will push growth below the SEA 3.9% average by 2019. Trade & Return Summary $5mm+ / 80-unit+ Sales 30 Approximate Proceeds $1.564mm Average Cap Rate (FNM) Average Price / Unit Expected Total Return RED 46 ETR Rank

4.8% $243,243 6.9% 23rd

Risk-adjusted Index RED 46 RAI Rank

2.93 37th

4Q16 Property Markets and Total Returns The property market experienced a seasonal pick up toward year end as 30 trades closed during the fourth quarter

for proceeds of $1,6127million, up from 26 transactions for $1,077mm during the third quarter and 25 closings for $949mm in the year earlier period. The average price of units sold was $246,471, an increase of 11% quarter-over-quarter and 18% year-on-year. Indeed, the unit price metric was third highest in Seattle series history. Private buyers continued to dominate trade, accounting for 64% of invested principal, compared to 57% during the year’s first nine months. Private equity buyers also were more active, posting a 17% market share, up from 10% during the first three quarters. Institutional buyer participation, by contrast, declined. Cap rates were mostly sub-5%, with trophies trading in the 4% to 4.5% range. Value-add situations exchanged hands in the 4.75% to 5.0% area. Some suburban class-C’s yielded as high as 6.0%. Reflecting renewed investor confidence in the resiliency of the SEA market in the face of supply pressure, we trimmed 20 basis points from the purchase cap rate proxy to 4.6%, lowest since 3Q13. With a terminal cap of 5.14% and model derived rent and occupancy point estimates RCR estimate an investor would expect to earn a 6.9% annual total return on a 5-year hold, ranking 23rd among the RED 48 peer group. Estimates for 3Q16 were 7.0%/23rd. In spite of higher model standard errors Seattle moved up one place among the peer group in the riskadjusted return rankings to 37th.

continued on page 17

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Proud to be a one-stop shop for rental housing providers + managers, we offer: rental forms, tenant screening services, classes, a resource helpline, and effective government advocacy. Belong today – joinRHA.com  Learn more about membership at: RHAwa.org | Membership | Benefits + Services

Rental Housing Journal On-Site · March 2017

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

Addressing Housing Affordability:

Positive perception of apartments and their residents is on an upswing.

here is growing recognition that renters are a large and diverse group of Americans, including those who can afford to buy a house but instead choose to rent. Much of this shift is attributed to continued economic anxiety caused by the recent collapse of the housing market, but its origins are also based in the changing demographics and needs of the country. Apartments are a smart choice for many people because homeownership is not for everyone, and renting fits people’s needs at various points in their lives. With apartments now playing a greater role in housing Americans, political risk for the apartment industry stemming from a lack of supply and rising rents is even more significant. Housing affordability, an issue that previously held limited attention, has become a mainstream concern. The National Apartment Association (NAA) and National MultiHousing Council (NMHC) are working with Beck Research and SKDKnickerbocker to help local leaders understand that the country needs more apartments. Government officials strongly agree that communities benefit from having

a supply of apartment types at different rent levels. According to recent research, government officials agree that apartments contribute to successful communities. People understand that one-size-fits-all thinking does not work for housing; people from many walks of life and at many points in their lives choose to rent. Apartment homes provide millions of people the ability to live in the right housing for them at the right time of their life. Providing rents at all price points gives people the chance to find the right apartment for them and their family, where they are able to live without the debt of a mortgage. Homeownership is not for everyone, and available apartments at a variety of rents helps ensure there are housing options for everyone. Apartments are one way for the market to meet the needs of different people, since healthy, vibrant communities have a mix of rental and ownership options. America's changing economy and demographics mean more and more people are choosing apartments over a single-family house, but apartment owners and builders are struggling to keep up with the demand.

A Moment To Shine at The Second Annual Eastern Washington Emerald Awards Over 300 people gathered at the beautiful Davenport Grand Hotel in Spokane on February 22nd for the second annual Eastern Washington Emerald Awards! At this elegant luncheon event, 19 Emerald trophies were awarded in 12 categories. Please join us in congratulating the following 2017 Emerald Award Recipients. Leasing Agent of the Year 1-150 Units: Sonni Gardner Dennison

Curb Appeal 1-150 Units: Residence at Tullamore

151+ Units: Chana Chiquiti - Greystar

151+ Units: The Reserve at Shelley Lake

Madrona Ridge

Assistant Manager of the Year 1-150 Units: Hannah Herndon - FPI 151+ Units: Shelby Nichols

Douglass Properties

Prodigy

Douglass Properties

New Development of the Year Jake at Indian Trail - Greystar

Over the next decade, the number of renter households could rise by up to 4 million. If we had a wider range of housing options, we would be able to tackle the affordable housing problem. This would increase the supply of housing and make it more affordable. State and local governments need to work with multifamily housing developers to remove obstacles to building more affordable apartments. Harvard University estimated that there are only 58 affordable units for every 100 very low-income households in 2013. We need to do more to encourage the construction or renovation of affordable apartments. Affordable housing is an economic issue that impacts our communities and can be improved by increasing the supply of apartments. Improving housing in America is the best way to help the middle class. The following are proposals for increasing the amount of affordable housing: • Encourage more private sector investment in existing affordable housing properties, an area where federal funding has fallen short in recent years. • Encourage re-purposing of existing real estate into rental apartments. • Expedite the often lengthy and costly permitting, review and approval process for any project with a significant percentage of affordable housing. • Sponsor more public land swaps or land donations so developers can build affordable housing on underutilized or vacant properties. • Increase federal funding for affordable housing so more people who qualify for subsidies would actually receive them.

new construction, rehabilitation or major improvements to affordable rental properties. • Adjust zoning requirements for parking, groundfloor commercial space and other requirements that raise construction costs, in exchange for building more affordable units. • Adjust zoning rules to allow density bonuses, which would incentivize the construction of affordable units in a property by allowing for an increase in the total number of units the developer could build than they could with the existing zoning without affordable units. • Provide tax rebates or other incentives for apartment owners who voluntarily set aside a certain number of their existing apartments as affordable housing. Housing affordability is an economic issue that has become a major public policy concern. Now, more than ever, policymakers must recognize that renters are a large and diverse group of Americans that contribute to their communities. Millions of Americans rent by choice, but shortages of apartments drive rents up and impact a large slice of America. Government officials need to back a wide range of affordable housing proposals to build more and rehabilitate current housing stock to better meet this challenge. WMFHA looks forward to continuing to serve our elected officials and our rental housing industry members. To get involved in the future of the industry and improve your success, call us at 425-656-9077 or checks us out at www.wmfha.org.

We’re here to serve.

• Expand tax incentive programs that lower the cost of development by reducing or eliminating property taxes on

Maintenance Technician of the Year Community of the Year Derek Gothmann - Avenue5 1-150 Units: Affinity at South Hill

FPI

Maintenance Supervisor of the Year 151+ Units: The Homestead Apts. 1-150 Units: Jacob Mellick - Greystar Greystar 151+ Units: John Calico - Prodigy Affordable: Vintage at Spokane - FPI Community Manager of the Year 1-150 Units: Taylor Winebarger -

Greystar

Community Service Award Greystar

151+ Units: Jessica Fowler - Weidner

Industry Partner of the Year Compass Construction

Portolio Manager of the Year Dina Khala - Greystar

Volunteer of the Year Ty Fowler - HD Supply

Presented in Partnership with

Rental Housing Journal On-Site · March 2017

Rental Housing Journal On-Site

6 Keys to Writing a Lease ...continued from page 1 three-lease template model, especially if there are significant differences in the properties. If you are an owneroperator, you tend to have one. If you are managing for different owners, who have different kinds of units, then you tend to see more” types of different leases, he said.

The poll showed that: • 62% use a one-lease template • 30% use multiple lease templates • 5% use a custom lease by the owner • 2% custom lease by the tenant Do you know the difference between a lease and rental agreement? A rental agreement is for short term tenants (often 30 days). It is usually automatically renewed at the end of the period unless either the renter or landlord ends it with written notice. These are month-to-month rentals, and the landlord can change the terms with notice.

A lease is a contract that grants a renter the right to occupy a rental unit for a specific period of time (often 6 months, or a year) as long as the tenant complies with the terms. The landlord cannot raise the rent or change those terms unless the tenant agrees.

Will you deal with short-term rentals? Qualities of a good lease “One of the things that has been hot in the industry lately is really how to handle a very short-term tenant,” Driver said. “This is the sort of Airbnb problem that has been out there for a long time or the vacation rental. That is something worth thinking about when you are drafting an exemption, an exclusion or a whole new lease that describes the behavior for any short-term leasee.” “These laws are changing quickly and it is well worth your time keeping abreast of the changes,” he said.

What about the issue of multiple tenants who may or may not be related? “Another one is this number of tenants problem that is worth addressing directly. When you see the opportunity, especially in a student housing situation, to be able to charge for multiple tenants there are some things to consider,” Driver said. “What we have found the courts will support is the number of bedrooms times two persons, plus one extra person as adults that meet that test. And so it is not unreasonable for your lease to actually contain language that describes that so you know that is very defensible.”

Rent plus what other fees and utilities? Driver said from a tenant perspective, they want to know, “How much am I going to pay you each month and what is that covering?” “We will see on the utility side this becomes a little tricky, especially for

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housing that was originally a condo and then bills you would not normally see in a rental – water and sewer – that are starting to show up as extra utilities. We do not have a lot of good case law that breaks that down, so we end up treating them all like normal utilities. So the more detail you give the better. The thing that we find that gets people into trouble with utilities and fees in general is not being clear enough about what they exactly mean. “ “A good example of what is avoid is something like, ‘I am going to charge you an extra $50 a month for a certain amount of electricity, then you have to pay overage fees after that.’ That creates a huge logistical nightmare for you and your team to manage. So we definitely want to shy away from that,” Driver said.

Penalties, violations and fines “We are seeing what used to be in homeowner association or community areas, start to creep more into rental areas. You need to condition people’s expectations and the way you do that is with the lease. So if you spell out all the penalties and fines you put yourself in a great situation so you can see this as a source of revenue and as a source of control over the quality of the residents you get in your units,” Driver said. Pet policies, smoking policies “This is an area that has seen a radical shift over the past couple of years. It had been most common for people to get pet deposits if they took pets at all. A pet deposit basically means ‘I am retaining some money in escrow and continued on page 19

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Rental Housing Journal On-Site · March 2017

Rental Housing Journal On-Site

DEAR MAINTENANCE MEN Sidewalks, Fencing and Toilets Dear Maintenance Men: What is the difference between Cement and Concrete. I hear people use both terms to describe a sidewalk or building. I understand there is a difference, but don’t know which one means what! George Dear George: Great question! Many people including those in the building industry mix the two terms up. Cement is a binding agent used to hold other materials together. You may have heard the term “Portland Cement”. Portland cement is not a brand name, but the generic term for the type of cement used in almost all concrete today. Portland cement is a mixture of ground sintered limestone or calcium, silicon, aluminum and iron all ground into a very fine powder. Concrete is a mixture of aggregate, gravel, sand and Cement. Mixed together with water and you have Concrete, a stone like material. Another way remember which is which: Cement has a soft “C” sound like soft powder and Concrete has a hard “C” sound like a hard sidewalk. Cement and the resulting concrete has been around for a long time. The process goes all the way back too Ancient Macedonia and was used extensively by Roman Empire to build

the aqueducts, the Pantheon and many other Roman structures.

Dear Maintenance Men: I am replacing a number of rotted pressure-treated 4x4 fence posts on my property. Why do some posts rot and other do not. I cannot see any rhyme or reason for one post to be good the other bad. How can I avoid this trouble in the future?

Kent

Dear Kent: The issue of the rotting posts lies in the Tree Growth Rings and their location. The rotting posts may have centered growth rings. If you look at the 4x4 post end, the growth rings will be either centered or not centered. A centered growth ring is common in post made from a peeler core. The tight centered growth rings of the peeler core will not accept pressure treatment as well as a post with off-centered growth rings. Chances are the fence you are repairing may have a mixture of peeler core posts and off-center growth ring posts. A Peeler core is the by-product of plywood manufacturing. A log is turned on a lathe to produce plywood veneer and the center that remains is called a peeler-core. When buying pressure treated post, look for off-center growth rings.

Dear Maintenance Men: I am trying to do my part to conserve water and have found my toilets are the biggest offenders. The toilet constantly fills every five or ten minutes. I have replaced the fill & flapper valves but the problems persist. I’m at my wits end about this! What can I do besides replacing the toilets?

Benjamin

Dear Benjamin: Leaks at the Flush Valve are possibly caused by a damaged flush valve seat which may have a hole or the rim is pitted or cracked. The seat is the large drain hole at the bottom of the tank. A temporary repair may be to sand the seat with a steel wool pad or wet/dry sandpaper. This will remove the calcium build-up. If the seat is damaged, replacing the seat will be the next option. “Fluidmaster, Inc” makes a Flusher Fixer Kit that can be cemented directly on top of your old worn flush valve seat. This is a quick fix that may not work on all toilets. If the seat kit does not work, you will need to replace the valve seat. This can be accomplished by removing the tank from the base of the toilet: Turn off the water to the fill valve, disconnect the water line and remove any water from the tank. Unscrew the two or three brass bolts under the tank and carefully lift

the tank off. Once the tank is removed, turn it upside down. Remove the rubber “Spud” washer from the tank. Spin the large nut from the threads and then push the valve seat through the tank. Reverse the procedure when installing the new valve seat. Always install a new “Spud” washer and new brass bolts and washers. Be sure your toilet tank is installed level, as this will aid in its operation. The new flush valve will give the rubber flapper a smooth seat for a positive seal. Bio: If you need maintenance work or consultation for your building or project, please feel free to contact us. We are available throughout Southern California. For an appointment please call Buffalo Maintenance, Inc. at 714 956-8371 Jerry L'Ecuyer is a licensed contractor & real estate broker. He is currently on the Board of Directors and Chairman of the Education Committee of the Apartment Association of Orange County. Jerry has been involved with apartments as a professional since 1988. Frank Alvarez is the Operations Director and co-owner of Buffalo Maintenance, Inc. He has been involved with apartment maintenance & construction for over 20 years. He is also a lecturer & educational instructor. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com

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Rental Housing Journal On-Site

U.S Home Flipping ...continued from page 1 in a 18 percent jump in the estimated dollar volume of financing for home flip purchases, up to $12.2 billion for the flips completed in 2016 — a nineyear high." "Investors in search of flipping returns are increasingly willing to move to secondary and tertiary housing markets and neighborhoods with older, smaller properties that are available at a deeper discount," Blomquist continued. "Given that many of these markets are more affordable, we are also seeing a higher share of the flipped homes sold to FHA buyers, with that share reaching a four-year high of 19.6 percent in 2016."

Home flipping profits reach new record high in 2016 Homes flipped in 2016 sold for a median price of $189,900, a gross flipping profit of $62,624 above the median purchase price of $127,276 and representing a gross flipping return on investment (ROI) of 49.2 percent. Both the gross flipping dollar amount and ROI were the highest going back to 2000. Among 117 metropolitan statistical areas with at least 250 home flips in 2016, there were 11 with an average gross flipping profit of $100,000 or more in 2016. "Our strong wage growth is still supporting rising home prices, which

when combined with the historically low number of homes for sale in Seattle, gives home flippers substantial returns on their investments," said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. "I believe flipping serves as a negative for any housing market because it further erodes housing affordability, but if there's a demand for it in the market, it's a trend we will continue to see."

for flipping is in lower-priced neighborhoods with properties that need significant repairs, according to Brett Chotkevys, co-founder of Helpful Home Solution, which flips properties in Los Angeles and other parts of Southern California. "We do pretty much a full gut on the houses we buy. Most of those we buy are pretty nasty … they're falling down, there are druggies living there," said Chotkevys, noting that a typical rehab for his Los Angeles flips will run $40,000 to $50,000, and it's not "inconceivable" for him to spend six figures on a Los Angeles fix-and-flip. "We like south central (Los Angeles) a little bit more. The barrier to entry is lower. We can pick up properties in the 200s. … There are normal people not making gobs of money that can afford to buy these houses." Media Contact: jennifer.vonpohlmann@attomdata. com Data Licensing and Custom Report datasales@attomdata.com SOURCE ATTOM Data Solutions http://www.attomdata.com

39 zip codes where at least one in five home sales was a flip in 2016 In the Los Angeles metro area, which accounted for six of the 39 zip codes with a home flipping rate of at least 20 percent in 2016, the best opportunity

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Rental Housing Journal On-Site · March 2017

Rental Housing Journal On-Site

Consumer Confidence in Housing Hits All-Time High News Provided by Fannie Mae

he Fannie Mae Home Purchase Sentiment Index® (HPSI) increased by 5.6 percentage points in February to 88.3, a new alltime high. Five of the six components that comprise the HPSI were up, and three hit record highs. The net share of Americans who reported that now is a good time to buy rose 11 percentage points, while the net share who believe that now is a good time to sell rose 7 percentage points. Consumers also demonstrated greater confidence about not losing their jobs, with the net share rising 9 percentage points. On net, the share of respondents reporting that their household income is significantly higher than it was 12 months ago increased 4 percentage points. Additionally, more Americans expect home prices to go up, with the net share rising 3 percentage points. The net share of those who think mortgage rates will go down over the next 12 months remained unchanged for the third consecutive month. "The latest post-election surge in optimism puts the HPSI at its highest level since its starting point in 2011. Millennials showed especially strong increases in job confidence and income gains, a necessary precursor for increased housing demand from first-time homebuyers," said Doug

The net share of those who say mortgage rates will go down over the next twelve months remained constant for the third consecutive month at -55%. The net share of Americans who say they are not concerned about losing their job rose 9 percentage points to a new survey high of 78%. The net share of Americans who say their household income is significantly higher than it was 12 months ago rose 4 percentage points to 19% in February, continuing the increase from January and reaching a new survey high. Duncan, senior vice president and chief economist at Fannie Mae. "Preliminary research results from our team find that millennials are accelerating the rate at which they move out of their parents' homes and form new households. However, continued slow supply growth implies continued strong price appreciation and affordability constraints facing millennials and firsttime buyers in many markets."

Home Purchase Sentiment Index – Component Highlights Fannie Mae's 2017 Home Purchase Sentiment Index (HPSI) increased in February by 5.6 percentage points to

88.3. The HPSI is also up 5.6 percentage points compared with the same time last year. The net share of Americans who say it is a good time to buy a house rose 11 percentage points to 40%, rebounding strongly from last month's survey low. The net percentage of those who say it is a good time to sell increased by 7 percentage points to 22%, reaching a new survey high. The net share of Americans who say that home prices will go up increased by 3 percentage points in February to 45%.

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About Fannie Mae's Home Purchase Sentiment Index The Home Purchase Sentiment Index (HPSI) distills information about consumers' home purchase sentiment from Fannie Mae's National Housing Survey® (NHS) into a single number. The HPSI reflects consumers' current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit continued on page 22

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EdCon - WMFHA

EdCon ...continued from page 7 Class Session Three:

12:30 p.m. - 1:30 p.m.

Room 401/402: Dave Wendt - Avenue5 Residential

Room 407/408: Sheri Druckman, CAPS - Greystar; Natasha Amira, CAPS - Avenue5 Residential; Russ Pengelly – Zillow Group Rentals; Rob Kellum – SUHRCO Residential; Sloane Cerbana – WMFHA (Moderator)

Title: Is Your Building SMARTER Than YOU? How Changing Technologies Title: LEADERSHIP LEGACY! - A Career Development Panel Affect Maintenance Learn how the "LEARN, CONNECT, GROW" concept impacted their The sophistication of managing and maintaining a physical property is changing with changing technologies. Newer construction techniques have changed how we maintain our buildings. Learn the latest innovations in property maintenance. Room 403: Bobby Rubalcaba - Greystar; Jeremy Monahan, CAMT - Greystar Title: Maintenance 101: Day in the Life of a Maintenance Professional Are you a new Service Team member? Want to get a better idea of what your maintenance team members face on a day to day basis? This workshop will give an overview of the many details, challenges and resident impacts the maintenance teams encounter on a daily, weekly and monthly basis. Room 404: Steve Huson – ConAm Management

Title: Maintenance, The Key to Resident Satisfaction

The Leasing Team gets them in the door…but we all know it is the Maintenance Team that keeps them there! The quality and reliability of the on-site maintenance team is the key to resident satisfaction, lower turnover, and maximized profitability of your community. This session will highlight the top impact areas, give tips for success, and increase your awareness of the many touchpoints a maintenance professional has on the resident. Room 405: Matt Faber and Timothy Burdick – National Trainers, Frigidaire

Title: Appliance Repair - Washers

In this class the participant will learn the basics of cleaning and repair of the unitized laundry center. Repair and replacement of parts with high failure rates will be covered in detail. Complete disassembly of a laundry unit will take place for a first hand real world experience for the participant. Room 406: Angela Flick - Greystar

Title: Social Media: It’s Not About You, It’s About Them

In this session, participants will learn what it means to engage in an authentic social media strategy. Social media is no longer a one track marketing effort. It now requires an approach that blurs the lines between reputation management, customer experience, lead generation, search engine optimization, and other digital marketing techniques. To be successful, communities need to stop thinking about how they benefit from social media and more about how social media benefits their customer.

upward mobility of our panelists and what they look for in FUTURE leaders in their organization. The importance of LEARNING all you can whenever you can. The importance of CONNECTING with mentors, leaders and peers to build your network of support and resources. The GROWth of your career is in your hands. Have a goal, make a plan - take ownership! Room 409: Consulting

Heather Blume, CAS - Behind the Leasing Desk Training and

Title: It's Not About YOU! Dealing With Difficult Residents

Interpersonal conflict is a fact of life and can arise at almost any time in our industry. Resolving conflict is a key part of a manager’s role. Do it effectively by taking a positive, courteous and non-confrontational approach. Learn how to deal with residents and their issues in a positive way.

TRADESHOW AND NETWORKING Class Session Four:

1:30 p.m. – 2:00 p.m. 2:00 p.m. - 3:00 p.m.

Room 401/402: Zach Howell – BEAR Consulting Services

Title: The Myth of Time Management for Maintenance

This course will dispel the typical approach of managing time and focus on new era workloads and how to organize and approach the constant influx of information and tasks that are all viewed as a priority. Learn methods of saving large blocks of time, real world techniques for trouble-shooting and diagnosis, and tips for prioritizing and performing work. Room 403: Tori Magee, CAM – Avenue5 Residential, Aidin Edraki – Avenue5 Residential

Title: Managing The Turnover Process

From managing lease expirations to properly planning and executing the turn of an apartment home – a successful turn process requires teamwork and communication! Learn the important steps to developing an efficient plan for managing the turns at your community.

...continued on page 20

Rental Housing Journal On-Site · March 2017

Rental Housing Journal On-Site

253-565-2488 Rental Housing Journal On-Site Âˇ March 2017

Rental Housing Journal On-Site

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Rental Housing Journal On-Site Âˇ March 2017

Rental Housing Journal On-Site

Market Overview ...continued from page 8

The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice, or recommendations to buy or sell currencies or securities or to engage in any specific transactions. Information has been gathered from third party sources and has not been independently verified or accepted by RED Capital Group. RED makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. RED cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third party sources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.

Rental Housing Journal On-Site Âˇ March 2017

Rental Housing Journal On-Site

Survey on Home Buying By Gen X, Millennials and Boomers

n improving economy, multiple years of strong job growth and the notable increase in home values in most markets fueled a greater share of home buying from Generation X households over the past year, according to a new survey on home buying from the National Association of Realtors. The National Association of Realtors 2017 Home Buyer and Seller Generational Trends study, which evaluates the generational differences of recent home buyers and sellers, found:

Highlights of the survey on home buying: • One consistent finding for the last four years has been that buyers 36 years and younger (Millennials/ Gen Yers) is the largest share of home buyers at 34 percent. • 46 percent of buyers 36 years and younger that had debt reported having student loan debt with a median loan balance of $25,000. • While only 27 percent of buyers 37 to 51 have student loan debt, they have the highest median balance of debt at $30,000. • Buyers 52 to 61 are more likely to buy a multi-generational home. • Buyers 62 to 70 typically move the longest distance at a median of 25 miles and are least likely to make compromises on their home purchase. • All generations of buyers continue to consult a real estate agent or broker to help them buy and sell their home. Much of the spotlight in recent years has focused on the several challenges millennials are enduring on their journey to homeownership. According to Lawrence Yun, NAR chief economist, lost in this discussion are the numerous Generation X households who bought their first home, started a family and entered the middle part of their careers only to be rattled by job losses, falling home values and overall economic uncertainty during and after the Great Recession, according to the release. This year's survey reveals that debt and little or no equity in their home slowed many Gen X households from buying sooner. Recent Gen X buyers delayed buying longer than millennials because of debt, were the most likely generation to have previously sold a distressed property and were the generation most likely to want to sell earlier but couldn't because their home was worth less than their mortgage. Furthermore, Gen X buyers indicated they had the most student loan debt ($30,000). "Gen X sellers' median tenure in their previous home was 10 years, which puts many of them selling a property they bought right around the time home values were on the precipice of declining," Yun said in the release. 18

"Fortunately, the much stronger job market and 41 percent cumulative rise in home prices since 2011 have helped a growing number build enough equity to finally sell and trade up to a larger home. More Gen X sellers are expected this year and are definitely needed to ease the inventory shortages in much of the country." The uptick in purchases from Gen X buyers this year (28 percent) was the highest since 2014 and up from 26 percent in 2016. Millennials were the largest group of recent buyers for the fourth consecutive year (34 percent), but their overall share was down slightly from a year ago (35 percent). Baby boomers were 30 percent of buyers, and the Silent Generation made up 8 percent. Survey of home buying generational breakdowns: • Younger millennials (ages 26 and under) • Older millennials (ages 27-36) • Generation X (ages 37-51) • Younger boomers (ages 52-61) • Older boomers (ages 62-70) • The Silent Generation (ages 71-91)

Influence of rising cost of rent on home buying This year's survey also brought to light how the soaring cost of rent in many areas is likely influencing the decision of middle-aged parents to buy a home with their young adult children in mind. Younger boomers were the most likely to purchase a multi-generational home (20 percent; 16 percent in 2016), and the top reason for doing so was that children over 18 years old either moved back home or never left (30 percent; 27 percent in 2016). "The job market is very healthy for young adults with a college education, but repaying student debt and dealing with ever-increasing rents on an entry-level salary are forcing many to either shack-up with several roommates or move back home," said Yun. "This growing trend of delayed household formation is one of the main contributors to the nation's low homeownership rate." A new survey on home buying by generations from the National Association of Realtors Student debt is not just a millennial problem Debt, particularly from student loans, appears to be a portion of the household budget of buyers in every generation. While millennials were the most likely to have student debt (46 percent), their typical balance ($25,000) was lower than Gen X buyers ($30,000). A combined 16 percent of younger and older boomer buyers also had student debt, with a median balance of over $10,000 for each group. Among the share of buyers who said saving for a down payment was the

Rental Housing Journal On-Site · March 2017

Rental Housing Journal On-Site

6 Keys to Writing a Lease ...continued from page 10 I will return if it is unused.’ Bummer if you are in California because that is heavily restricted on what you can charge” and the deposit you can get, Driver said. There is some worry there that a pet deposit and a security deposit can overlap. “So there are a bunch of things that are happening, some of which are now being described as “pet fees” which are monthly recurring fees that have no expectation of being repaid. But increasingly pet rent. And there are very few jurisdictions in the U.S. that actually address this. But it effectively becomes another class of rent that can be charged. This is great because it is basically well understood as rent and you are going to see nice recurring revenue that you may or may not share with your owners. It takes care of the pet habitation but does not compromise your security deposit later. So keep an eye out for some of those things in your jurisdiction and talk to your fellow property managers and your attorney friends. Because this pet rent thing is coming on strong. We are seeing it rise up everywhere,” Driver said.

Maintenance fees and court fees property managers may collect Leases may have a clause that allows managers to collect maintenance fees. Depending on who the management company uses for repairs and property maintenance, they may charge a markup for cost of services and keep the difference from the owner as management income. Court fees are another area to collect if a property manager has to bring an action against a tenant to collect late fees or an eviction. “Describe these fees in detail in your leases so you have a reasonable expectation of being able to collect them. Hopefully this should mirror what is shown in your management agreements with your owners,” Driver said. They did another poll of property managers on: Where did you get your lease? “I ended up drafting my own, with lawyers,” Driver said. “I did that because I wanted to have a clear idea how lease clauses worked because I was new to it. And so I really just wanted to go through it line by line and clause by clause to make sure that it was doing what I wanted,” Driver said. “What I can report is that is relatively uncommon,” he said. “There are so many sources of leases out there that people basically see this as a commodity and say, ‘Yeah I can find one online or my buddy’s got one.’ “ What people said in the poll about where they got their lease: • 34% from MLS or real estate association

• 29% drafted my own with lawyer • 17% online search or service • 15% from colleagues or partners • 5% from a government agency The MLS is the most common in the industry. But Driver recommends drafting your own with a lawyer. “There is so much opportunity in your lease to improve your business and potentially your day-to-day operations,” Driver said. “One of the things we often hear is the terms of a lease, and variation between leases, is that it can make a fair amount of work for the office during rent collection and violation, and potentially even down the road to eviction if there is a lack of consistency in the lease,” Driver said. The 7 basics of the lease agreement • Identity of the property manager • Address of the property • Description of the property, storage, parking, etc • Additional facilities included gym, pool, etc • Names of all tenants • Limits on occupancy tenants and minor children • Put in a note that the lease contract represents entire agreementeliminates verbal deals How to handle future rent increases Next when it comes to lease terms there are many standards, such as which day you collect each month and other items. But one item to think about is future rent increases. “One of the things that is often a real challenge is the ability to develop a relationship with the tenants around future rent increases. You want to be friendly enough with your tenants and have them like you, but not enough so you feel badly raising the rent,” Driver said. “Many of us have been in the situation where the resident has a story, and we feel sympathetic, and makes us question whether we can raise those rents. Think about using this lease as a guideline to help with that. We are not friends. We are in business together. Setting up that expectation and that attitude can be very helpful for your team and the backstop is always the lease,” Driver said.

Occupancy and guest limitations While you do not want the lease to go on and on, “It is important to deal with occupancy and guest limitations. There is now a generally accepted occupancy limit as mentioned above was the two times each bedroom, plus one adult. This is the precedent from most jurisdictions,” Driver said.

Rental Housing Journal On-Site · March 2017

“If you don’t specify this, you are starting behind the eight ball,” Driver said. “You are not going to be in a position to enforce much if you have not set a standard to which they have agreed to and signed on the dotted line. So the best thing you can do is specify all the things for which you do have some worry and occupancy and guest limitations are definitely going to be one of them. You want to be able to say ‘those are the agreements in our community’ and ‘no can do’ otherwise,” Driver said. “Where it gets a little tougher is around behavior control,” Driver said. He advises to be consistent with all tenants and enforce with all tenants the same rules. Otherwise you could open yourself up to a Fair Housing Act charge “if you let one tenant slide, and then enforce it on another in another situation,” he said. “Define the rules that you (as a property manager) feel comfortable with that are going to protect you and your business, particularly from fair housing violations, but also from extra expense. And then, just consistently apply them,” Driver said. Should the lease be between the tenant and the owner, or the tenant and the property manager? “It depends on the nature of the relationship between the owner and the residents,” Driver said. “So the short answer is preferably, unless we are an owner-operator, it should be with the property manager. And the reason to do that is that you, as a part of your service to the property owner, is to provide a buffer and isolation, particularly for an investor client. So there are some activist owners who want to get involved in your business, but I think most of us do this because we don’t want to work for somebody else. And so the default answer is the lease should be with the property manager” who is: • Generally more aware of what is changing in the law than the owner • More aware of what is happening in the neighborhoods

Sloppy payers as a revenue source “Late fee policies, while kind of an unfriendly concept, are actually a great source of revenue for a lot of property managers. Some share them with owners but many actually keep them as sort of a cost of doing business and it is a good revenue source for their property management business,” Driver said. “You are looking for what we call sloppy payers. These guys are a good thing as long as you do not have too many of them. These are the folks who always pay in month, but frequently don’t pay on time. So you reliably collect a late fee. It can be a pain in the neck to wait to collect that and make sure you have enough to pay your bills. But if you have enough of a float and enough of a cash flow, then we see some property managers plan for 20 percent to 30 percent sloppy payers across their portfolio. And that is all money in their pocket. “They are often not sharing these with the owners basically saying, ‘This is the fee I charge because I have to track them down and collect money.’ And so by building a stable business where you can tolerate the lateness, this ends up becoming relatively low-risk income. And, you can start designing your resident portfolio for it. It does require consistent enforcement of the late-fee policy,” Driver said. 6 qualities of a great lease • Accessible, such as electronic leases • Consistent – legal protection • Transparency – ability for tenants to pay in multiple methods • Profitable – fees and fines • Security – check in with your lawyer • Ethical – fair housing and security deposits About Buildium.com Buildium.com and All Property Management are the chosen solution of more than 12,000 property managers and HOAs. Keep up with lease information and all the changes in the laws with our weekly email newsletter. Sign up here.

• More aware of the competition for good tenants “It is far more likely that you as the property manager are going to get the outcome you want if you sign and manage the leases with the tenants,” he said. But some states may require the lease be in the owner’s name, so you need to check state laws he said.

EdCon - WMFHA

EdCon ...continued from page 14 Room 404: Malli Maurer and the Team from Beardslee Apartments

Title: Teamwork Makes the Dream Work!

The purpose of this presentation is to help you define your idea of a high-performing office team, get you focused, passionate, and cohesively working together because you are ONE TEAM. This class will help you to create a high-functioning, quality service, unified team, all driven by communication and support of each other, what we like to call teamwork! Room 405: Matt Faber and Timothy Burdick – National Trainers, Frigidaire

Title: Appliance Repair - Dryers

In this class the participant will learn the basics of cleaning and repair of the unitized laundry center. Cleaning of lint from the dryer vent and strategic parts of the dryer to maintain safe operation will be covered along with other maintenance critical to maintaining longevity. Repair and replacement of parts with high failure rates will be covered in detail. Complete disassembly of a laundry unit will take place for a first hand real world experience for the participant. Room 406: Sloane Cerbana - WMFHA

Title: Recruiting and Retaining Top Talent

With the continued rapid growth of our industry, the need for NEW and qualified talent is greater than ever before. But where do you find them? In this session we will discuss the importance of “ABR” (Always Be Recruiting), how every member of your team can be part of your recruiting efforts, and we will identify resources for tapping into the veteran and technical pools of actively and passively job seeking candidates. Additionally, we will explore how to KEEP that great talent that you worked so hard to identify! Room 407/408: Joe Puckett – WMFHA, Randy Redford- Puckett & Redford, Brett Waller - WMFHA

Title: Legal Issues Forum

Learn from Landlord-Tenant attorneys the most pressing legal issues and landmines in our industry. For risk management and asset preservation, it is imperative to know what to do, what not to do and what to watch for in our current legal and regulatory environment. Room 409: Dylan Simon - Collier's International

Title: State of the Market - Analysis and Trends

Learn from one of the most successful real estate brokers in our market. Dylan Simon will present an overview of the Seattle apartment market as it stands today, including an analysis of recent rent & vacancy trends, sales metrics, development pipeline, and regional employment growth. He will also share his forecast for what the future of the market holds.

Maintenance Mania Competition

3:00 p.m. – 4:30 p.m.

Join the Maintenance Mania competition, with an opportunity to qualify for the national Maintenance Mania competition in Atlanta at the National Apartment Association (NAA) Education Conference. Racing against the clock, you will Presented by compete against each other to see who is the fastest in eight maintenance-focused challenges. The finale of the event concludes with a Race Car competition, where the competitors build a model car using at least one maintenance product or part and race it down a pinewood derby-style track. Cash prizes are offered for top times, including a $500 cash prize for the best overall time.

EDCON AFTER-PARTY:

3:30 p.m. – 5:00 p.m.

Featuring Emcee DJ Ice Mike! Stay and enjoy good food and drink, and great company! Network with peers – catch up on old times, and meet new people.

Silver Sponsors ABODA American Technologies, Inc. Brook Furniture Rental HandyTrac Moen Precision Concrete Cutting Shaw Industries The Plumbing & Drain Company Wilmar Maintenance & Repair Products Trade Show Exhibitors: 1Up Floors ABC Towing Agency Security Group, LLC ALN Data American Floors and Blinds Apartment Advantage Staffing Arborwell Assurant Specialty Property Bath Fitter Bellevue Insurance Bio Management NW Buy-Rite Carpet Wholesaler Cadet Manufacturing The Chimney Specialist Colliers International WA Community Northwest Conservice CORT Criterion Brock Dog-ON-It Parks Elite Resurfacing Entrata Fast Water Heater Fikes Products Fischer Plumbing & Fischer Restoration ForRent.com

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Gorman Roofing Services Grace Hill Image360 Interstate Restoration Jade's Jet City Cleaning Knock Rentals Locker Solutions - Luxer One Preferred LP Corp Maintenance Supply Headquarters Minol, USA Model55 Mono Rooftop Solutions NPI Pacific Lamp & Supply Parking Boss Premier Paving and Sealcoat Property Staffing Associates Puget Sound Energy RedRock Resurfacing ServPro of Central Seattle Shine on Signs & Graphics TransUnion United Asset Services Valet Waste Waste Recovery Systems Zillow Group Rentals

This is What People Have Said About EdCon! • "Thanks for the great event! We had a lot of fun!" Kiril Urekeanu - Allied Residential • "I enjoyed the conference very much. The classes were amazing and the speakers well prepared." Cindy Lien-Kessner, CAM - ConAm Management • "I am especially pleased with all of the knowledge that three of my staff members, new to the industry, were able to take away after just one day at the EdCon. They are still excited about it this morning." E.A. - Community Director with Pinnacle • Some of the examples given were great and I was so excited to use them upon return to the office." Anonymous Attendee Survey

“Maintenance professionals are essential to the success and viability of the multifamily housing industry,” said former NAA President Doug Culkin, CAE. “NAA is extremely proud to be able to shine a light on such an outstanding group of individuals through the Maintenance Mania® program.”

2017 Maintenance Mania Events

There are eight events in the Maintenance Mania® competition*. Each event is open to every Maintenance Mania® participant. To be eligible to compete at the national competition in Atlanta (and win an expense paid trip), you must compete in all events and meet eligibility rules. 1. AO Smith Water Heater Installation 2. CFG Faucet Installation 3. Fluidmaster Duo Flush Toilet Conversion 4. Kidde Fire & Carbon Monoxide Safety Installation 5. Frigidaire Ice Maker Installation 6. Kwikset Key Control Deadbolt Test 7. Seasons Ceiling Fan Installation 8. Motorola and Niagra Conservation Race Car Competition *To qualify for the National Championship, you must complete all eight events 20

• "I loved Heather's class about dealing with difficult residents and how to calm them down. I feel that the skills taught will be beneficial for myself and my team." Anonymous Attendee Survey • "Great marketing ideas!" Anonymous Attendee Survey • “I attended EdCon for the first time yesterday. I have been in the industry for 11 years and heard Toni Blake speak before years ago at a Pinnacle meeting. I have also attended TRENDS for many years and even spoke in a panel last year but I have to tell you, that was the best seminar I have ever been to! From start to finish. The venue was easy to navigate in and out of, the speakers were incredible, knowledgeable and spoke about vital topics, The lunch and snacks were well coordinated, timed and delicious. The whole event ran so seamlessly. I loved the stamps on the vendor cards and the Think Tank. I love the keynote speech at the start of the day rather than at the end. I even loved the lanyards vs. pins that always damage my clothes. All the little touches made it a class act all the way. I will be there with bells on every year. I would also love to volunteer in next year’s event if possible. I would be happy to help in any capacity. Let me know how I can help. I am with Essex Property Trust at Castle Creek currently.”Felicity Alexander • “It is so much fun, we have so many amazing and brilliant people in our industry. I enjoyed it.” Aaron Stright, HNN Associates Rental Housing Journal On-Site · March 2017

Rental Housing Journal On-Site

The World is Searching for Reliable Property Managers

#starttoday

By Marc Courtenay, www.propertymanager.com

irtually every month I meet or hear of a rental income property owner who wants to expand their portfolio. They’re searching throughout the 50 states for deals that make sense to them. Of course finding a lucrative “cap rate” is a challenge in today’s world. With interest rates still at historical lows, the return-oninvestment (ROI) is also very low. The “cap rate”, aka capitalization rate, is the rate of return on a real estate investment property based on the income that the property is expected to generate. Are you aware of the cap rates nationwide? Knowing what they are, especially in your state and the surrounding states in your region gives you a competitive advantage. On your web page or social media page you’d be able to offer your insights.

Those insights based on up-to-date information and exceptional awareness will attract prospective clients who are looking for reliable, competent property managers to do business with. Are you one? In other words, are you more informed and more savvy then other property managers? For example, do you know what ROI is all about? Are you conversant on these important terms of business effectiveness? The ROI is, generally speaking, a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of similar investments. It’s a very important moving target. To measure the amount of return an investor will receive relative to the cost of that investment, minus management and other overhead expenses, will give

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Rental Housing Journal On-Site · March 2017

Rental Housing Journal On-Site

Consumer Confidence ...continued from page 13 consumers' evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

About Fannie Mae's National Housing Survey The most detailed consumer attitudinal survey of its kind, Fannie Mae's National Housing Survey (NHS) polled 1,000 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). As cell phones have become common and many households no longer have landline phones, the NHS contacts 60 percent of respondents via their cell phones (as of October 2014). For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide

support in the future. The February 2017 National Housing Survey was conducted between February 1, 2017 and February 21, 2017. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.

Detailed Hpsi & Nhs Findings For detailed findings from the February 2017 Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results. To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here. Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae. com and follow us on twitter.com/ fanniemae.

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Rental Housing Journal On-Site · March 2017

Rental Housing Journal On-Site

Survey on Home Buying ...continued from page 13

most difficult task, millennials were weighted to be representative of sales most likely to cite student loans as the on a geographic basis to 93,171 recent debt that delayed saving (55 percent), homebuyers. Respondents had the followed by Gen X (29 percent) and option to fill out the survey via hard copy or online; the online survey was younger boomers (9 percent). "Repaying student debt also appears available in English and Spanish. A to be slowing some current homeowners total of 5,465 responses were received who went to graduate school and now from primary residence buyers. can no longer afford to sell and trade After accounting for undeliverable up because of their loans," added Yun. questionnaires, the survey had an "Nearly a third of homeowners in a adjusted response rate of 5.9 percent. NAR survey released last year said The sample at the 95 percent confidence student debt is preventing them from level has a confidence interval of plusor-minus 1.32 percent. selling a home to buy a new one." The recent homebuyers had to have More millennials moving to the purchased a home between July of 2015 suburbs…with their kids Similar to previous years, roughly and June of 2016. All information is two-thirds of millennial buyers are characteristic of the 12-month period married. One aspect of their household ending in June 2016 with the exception that has changed is the number of of income data, which are for 2015. children in them. In this year's survey, About NAR: 49 percent of millennial buyers had at The National Association of Realtors, "The Voice for Real Estate," is America's largest least one child, which is up from 45 trade association, representing more than percent last year and 43 percent two 1.2 million members involved in all aspects years ago. of the residential and commercial real estate With more kids in tow, the need for industries. more space at an affordable price is increasingly pushing millennial buyers outside the city. Only 15 percent of millennial buyers bought in an urban area, which is down from 17 percent last year and 21 percent two years ago. "Millennial buyers, at 85 percent, were the most likely generation to view their home purchase as a good financial investment," added Yun. "These strong feelings bode well for even greater demand in the future as more millennials settle down and begin raising families. A significant boost in new and existing inventory will go a long way to ensuring the opportunity is there for more of them to reach the market." Millennial buyers and sellers overwhelmingly go online and use a real estate agent Survey on home buying by generation Regardless of age, buyers and sellers continue to see real estate agents as an integral part of a real estate transaction. In this year's survey, nearly 90 percent of respondents said they worked with a real estate agent to buy or sell a home. This kept for-sale-by-owner transactions down at their lowest share ever (8 percent). Not surprisingly, online and digital technology usage during the home search has increased in recent years. Although millennials and Gen X buyers were the most likely to go online during their search, they were also the most likely to buy their home using a real estate agent (92 percent and 88 percent, respectively). On the seller side, millennials were the most likely to use an agent (90 percent), followed closely by Gen X and younger boomer sellers (each at 89 percent). "Online and mobile technology is increasingly giving consumers a glut of real estate data at their disposal," NAR President William E. Brown, a Realtor from Alamo, California, said in the release. "However, at the end of the day, buyers and sellers of all ages – but especially younger and often DIY-minded consumers – seek and value a Realtors 'ability to dissect this information and use their expertise and market insights to coach buyers and sellers through the complexities of a real estate transaction." NAR mailed a 132-question survey in July 2016 using a random sample Rental Housing Journal On-Site · March 2017

prospective clients a “realistic” ROI. It’s also a valuable talking point that can help you communicate professionally with existing clients as well. Candidly, if you’re an honest, reliable property manager, there are hundreds, even thousand of “other managers’ clients” who need you and are most likely looking for someone like you this very moment! How are these distressed and discouraged residential single or multi-family rental property owners going to find you? How can prospective clients know you exist and know your core competencies? If they’re not fortunate enough to be referred to you, then they need a media that will help them to discover you. An ad, an email, a banner, a great website that clearly and professionally says, “If you own rental property and you want dependable, outstanding service we’re here for you!” is imperative. Before you begin your ad campaign or employ whatever medium is most affordable for you, be absolutely certain

you can live up to the hype. Can you “under promise and over deliver”? Most landlords and residential rental property owners have an easier time finding a mortgage, a refinance, or more potential rentals to buy than finding a property manager who keeps their word. If you’re a reliable, diligent, wellinformed and very competent as a property manager, then you may be that sought-after exception. Again I ask, “Have you found an effective way to tell the world about you?” Make sure you ask your existing clients if they’ll give testimonials, referrals and recommendations. Have some of them on your impressive website. You do have an impressive website? Your reputation is your most important asset when it comes to the property management business. Insure that yours is the very best possible, and then spread the word! The world is looking for you now.

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Rental Housing Journal On-Site · March 2017