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ON-SITE
Vol. 22 Issue 1
January 2013
Published 22 Years
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TO
PUGET SOUND APARTMENT OWNERS, PROPERTY MANAGERS & MAINTENANCE PERSONNEL
Published in association with: Washington Apartment Association, IREM & Washington Multifamily Housing Association
Overall Rents Flatten; SR 520 Tolls Impacting Eastside Submarkets
Seattle - Apartment Insights survey shows rents flattening after three quarters of impressive gains, and SR 520 tolls negatively impacting some Eastside submarkets, reports Tom Cain of Apartment Insights. The data are from his Seattle firm’s 4th quarter statistics and trends on 50+ unit properties in the King/Snohomish market. VACANCY: 4.75% The vacancy rate for conventional, stabilized 50u+ properties in the King/Snohomish market is 4.75%, down from 4.85% last quarter, and 5.25% a year ago. Snohomish County was responsible for the improvement this quarter. Its vacancy rate fell from 5.28% to 4.70%. King at 4.76% vacancy remains about the same as last quarter. Continued on page 7
Apartment Insurance Costs Increase for the Second Consecutive Year According to National Multi Housing Council Report The cost to insure apartments increased by 9.5 percent between 2011 and 2012, marking the second consecutive year of rising insurance expenditures according to the National Multi Housing Council’s (NMHC) Apartment Cost of Risk Survey (ACORS). The survey covers data from more than one million apartment units, the largest number of units covered by the survey to date, operated by 55 apartment firms, tracking three principal components of insurance premiums: property, Professional Publishing, Inc PO Box 30327 Portland, OR 97294-3327
general liability and workers’ compensation. The 9.5 percent increase in 2012 came entirely from property risk costs, with general liability and workers’ compensation costs staying virtually unchanged from 2011. “Respondents noted that their greatest challenges in 2012 came from obtaining adequate and affordable coverage in traditional catastrophe risk zones. In fact, catastrophe exposed properties were the major drivers of the increase in premium costs and higher deductibles,” said
Current Resident or
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Rick Haughey, NMHC’s Vice President of Property Operations and Technology. “With U.S. catastrophe losses in 2012 expected to be moderately higher than average due to Hurricane Sandy, the outlook for insurance costs in 2013 remains uncertain. This uncertainty mitigates what would be downward pressure on 2013 catastrophe rates due to strong underwriting capacity for primary insurers and reinsurers.” Continued on page 11
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TRENDS 2012 A Huge Success! Over 1,500 people attended the 28th Annual TRENDS Education conference and Trade show. TRENDS is “THE” largest and oldest Northwest rental housing management and ownership education conference and trade show. See the TRENDS website at www. trendsnw.com. The 28th Annual TRENDS was held December 11th at the Washington Convention Center, Seattle. TRENDS is the longest running a continuously produced event at the Washington State Convention Center. 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. TRENDS 2012 included the largest regional industry trade show featuring over 215 exhibitors and offered 43 education workshops. View the 28th Annual TRENDS workshop schedule at www.trendsnw.com Continued on page 3 Page 18 Washington Apartment Association
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HOW TO CONVERT A PROPERTY TO SMOKE-FREE HOUSING Page 6
Chapter 27 Institute of Real Estate Management HOW TO GET STARTED IN REAL ESTATE INVESTING
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On-Site Northwest • January 2013
ON-SITE TRENDS ...continued from front page Rental housing property owners; property managers; leasing agents; maintenance personnel and portfolio managers attend TRENDS. The 29th Annual TRENDS show will be held
December 10, 2013. TRENDS is brought to you by: • Washington Apartment Association (WAA) • The Institute of Real Estate
Management (IREM) • Rental Housing Association of Puget Sound (RHA)
TRENDS is produced by Diamond Productions 206-779-5890
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On-Site Northwest • January 2013
3
ON-SITE
Dear Maintenance Men: By Jerry L'Ecuyer & Frank Alvarez inspection will eliminate non-issues and help point you in the right direction and may even solve the leak mystery. The amount and intensity of rain will contribute too many roof leak mysteries. Often a light rain will cause a leak in an area that would not leak in a heavy or prolonged rainstorm. The reason is material swell. A light rain is not “wet” enough to swell surrounding wood or roofing material and cut off the leak. Mind you, this is still a leak that needs fixing. The deep penetration of water in a heavy or wind driven rainstorm will cause a leak by sheer volume that would not have leaked in a light rainstorm. Roof flashings are a common
Dear Maintenance Men: I have a conundrum! My roof is in good shape, however I have a mystery leak or to be more precise I have a moving mystery leak. In other words, when it rains, the roof does not always leak in the same place. This is driving me crazy. Sam Dear Sam: A good roofing troubleshooter is worth their weight in gold. Here at Dear Maintenance Men, we love a good mystery! First things first; have your building inspected by a reputable roofing company or roofing inspector. The
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source of leaks that drip far from the source of the water intrusion. A roof flashing can be found were the roof material meets a transition area such as a chimney, a wall, a pipe or other structure. Shifted or lifted composite shingles or roof tiles will cause water to come into contact with the felt paper under the roofing material and a break in the felt or roofing paper will cause a leak. Debris on the roof, valley, top caps, gutters etc can form water dams and cause leaks. Watch overhanging trees as well as they can damage the roof and cause leaks. Dear Maintenance Men: I have a Carbon Monoxide Detector question. The building I manage is an “all-electric” building with attached garages. Do I need to install a CO detector in each unit? Dan Dear Dan: I don’t think your situation is all that uncommon. We have run into this install problem before. We consulted with the Orange County Fire Authority and Randy Lindenberg from National Gas Consulting in Orange County. Because every building is unique in its construction and design, a proper
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assessment will need to be made based on the location of any gas-operated appliance in an all-electric building. The general rule is; if an all-electric building has a gas-operated appliance and shares a common wall with the residential units, Carbon Monoxide or CO detectors will be required. For example: You will need to install CO detectors in your all-electric building if you have attached enclosed garages. CO detectors will also be required if the building has an attached laundry room with a gas water heater or gas dryer. We also recommend installing a CO detector in the laundry rooms that contain a gas appliance. Keep in mind; automobiles, wood fireplaces, barbecues and any other combustible material can cause carbon monoxide. Owning an “all-electric” building does not necessarily eliminate the need for CO detectors. Dear Maintenance Men: I hear a soft pisssst sound in the walls. My husband says it might be a gas leak, I think it is a water leak. Now to complicate things, we don’t smell gas and we don’t see any water. Could this sound be anything else? Julia Continued on page 5
ROOF 7 sales@axisroofandgutter.com www.axisroofandgutter.com
Gutter/Downspout Cleaning
ReRoofing
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Underground Drain Cleaning
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Walkway & Concrete Cleaning
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Chimney Flashing Repair
Window Cleaning
Carport/Flat Roof Cleaning
Parking Garage Cleaning
Gutter/Downspout Repairs
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On-Site Northwest • January 2013
ON-SITE Dear Maintenance Men: ...continued from page 4 Dear Julia: You have our condolences, but it could be worse, at least it is not a slab leak! The chances of the sound being a gas leak are slim as the gas is under low pressure. The chance of smelling rotten eggs on the other hand would be high. Our guess would be your issue is a water leak. The possible reason you are not seeing any water evidence is that the leak is very small and the water is atom-
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STAFF Publisher Will Johnson • will@propubinc.com
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izing as it is leaving the pipe. The atomizing action is aided by the fact that the pipe is most likely a hot water pipe and the water is turning to steam. Because the pipe is making noise, this should help in locating the leak. Once you locate the source of the leak, open the wall large enough to complete the repairs and leave the wall open for a few days or until all the moisture is gone.
Serving the Portland/Vancouver Multifamily Housing Industry More than 21,000 Distributed Monthly www. TheLandlordTimes.com The statements and representations made in advertising and news articles contained in this publication are those of the advertiser and authors and as such do not necessarily reflect the views or opinions of Professional Publishing, Inc. The inclusion of advertising in this publications does not, in any way, comport an endorsement of or support for the products or services offered. Metro Apartment Manager is produced monthly and is published by Professional Publishing Inc. An Oregon Corporation.
PO Box 30327 Portland, OR 97294-3327. (503) 221-1260 • (800) 398-6751 Copyright 2013. All rights reserved.
Q U E S T I O N S ? Q UESTIONS? QUESTIONS? We need more Maintenance Questions!!! To see your maintenance question in the “Dear Maintenance Men:” column, please send submission to: Questions@ BuffaloMaintenance.com 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. #: 01216720 Certified Renovation Company Websites: www.BuffaloMaintenance. com & www.ContactJLE.com
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INSTITUTE OF REAL ESTATE MANAGEMENT President • Barry Blanton VP Finance • Mark Grey
Past President • Faye Crow
VP Membership • Glen Bachman
VP Communications • Christy Mays
How To Get Started In Real Estate Investing There are many methods for acquiring wealth available across the globe today. One of the most easily accessible ways even for the new investor is real estate investing. Many people have made millions of dollars by investing in the real estate market in one form or another. Real estate is a profitable vehicle for the investor who is dedicated to learning about all of the different types of investments, option, risks
and potential rewards that come with real estate investing. There are many different ways to invest in real estate. Here are some of the more common ones people use to get started. Find investment deals in real estate in: New York City Los Angeles Chicago Houston Boston Seattle 1) Rental property. This is one of those rare real estate investments where you can make money even if you pay top dollar for
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the property. The reason is you are going to hold onto this property for the long term. You're only requirement is the property generate a positive cash flow. This means after you sum up all of your expenses on the property like financing cost, taxes, insurance and a vacancy rate, the amount you are collecting in rent surpasses this figure. This is one of the classic "get rich slow" methods of real estate investing. You are making a small amount of money each month from the property in rental income, and you are also slowly building up equity in the property over time as you pay down the mortgage. 2) Pre-construction investment. This is also known as buying property on "spec" or on the speculation that when the property is finished it will sell for a much higher price than you have invested in it. This is seen mostly in new condominium projects where investors fight to buy the units before they are built assuming the price will come up once construction is complete. I have known investors who have purchased several condo units in a facility being built and put $5,000 down on each unit as a down payment. Then
before the property was even constructed "flipped" their contract to an end buyer who was willing to pay them 4 to 5 times their down payment just to get in on the deal. The problem with this type of investing is it normally only works when a market is going up regularly. In a down market like we are experiencing these types of deals are much harder to find but they are still out there. There are still part of the country that are very desirable to live in and are experiencing market growth. 3) Flipping houses. This is a type of property investment that has made leaps and bounds in the last few years thanks to the popularity of many popular home improvement and house flipping shows on cable networks in the last few years. This has become a very dangerous thing as people who have no idea what it actually takes or costs to renovate and flip a property are buying homes because they think "I saw it on television and I can do that" Television doesn't show you the whole picture. You have to be aware of all of the hidden costs like marketing the property, closing costs, Continued on page 17
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On-Site Northwest • January 2013
ON-SITE Overall ...continued from front page The impact of all the new units hitting the market this quarter is reflected in the overall vacancy rate, which includes properties in leaseup and out-of-service. This rate edged up 40 basis points to 5.87% vacancy. The lowest vacancy rates are in the city of Seattle. The Seattle North submarket that lies between 85th and 145th is 3.02% vacant. Following are First Hill, Capitol Hill and the Seattle North Central submarket that extends from the ship canal north to 85th. These are all under 3.5%. The highest vacancy rates are in the Bothell, Federal Way and Eastside North submarkets. Vacancy rates in these areas are in the 6.5% range. RENTAL INCENTIVES: $22 (1.93%) Over the past year rental incentives declined from $36 to $18 per month ending in the third quarter. This quarter they bumped up to $22 (1.93%). Incentives are 2.04% in King and 1.81% in Snohomish. In both counties 31.6% of properties are offering incentives, virtually the same as last quarter. ABSORPTION: +1,228 There were 1,228 units absorbed this quarter, up from 1,015 in the third quarter.
RENTS: $ 1,140 per Unit $1.35 per Square Foot Rents dropped $2 to $1,140 per unit. In the year ending in the third quarter, rents had increased 6%. So, we are not surprised that rents have leveled off after such a strong run up. In downtown Bellevue, rents had increased a staggering $236 per month in the half year period ending last quarter. This quarter the average rent remains virtually unchanged at $1,757 per unit. This is $131 higher than the next priciest market, downtown Seattle. Rents in downtown Seattle remain basically unchanged over the past half year. It stands to reason that prospective tenants would consider more affordable submarkets with rents this high in these two downtown markets. South King County continues to offer the least expensive units. In Des Moines, Burien and SeaTac apartments are renting from $846 to $865.
Anne opened this quarter (see photo). Holland Partner Group is the developer and Holland Residential is the manager. There are 7,973 units currently under construction that are scheduled for completion in 2013. In the past 30 years, only in 1989 and 1990 were there more units completed, and then it wasn't by much. For 2014 our current projection is for 3,509 units to open. These projects are either under construction or scheduled to break ground early next year. In addition there are 6,720 units
that are in design review and later stages. Lastly, rezoning has been granted to developers on sites totaling 13,588 units, and another 394 units are waiting to be rezoned. The grand total for all the units under construction and planned for 2013 and beyond is 31,790 units. OBSERVATIONS The rental market flattened out after three consecutive quarters of impressive rent gains. On the plus side, the vacancy rate fell to 4.75%, Continued on page 16
NEW CONSTRUCTION There are currently 11,687 units under construction, up from 10,450 units last quarter and 6,457 units a year ago. Of the units currently under construction, 78% are in the city of Seattle. The total for 2012 is 3,599 units. The 284-unit Union on the east slope of Queen
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PSE is offering Direct Install Sample Kits that include ENERGY STAR® qualified CFL and LED light bulbs, a WaterSense® showerhead, and a section of pipewrap that will aid in your review process.
Incentives apply to existing multifamily properties with five or more attached units located in PSE service area and dependent on installed equipment efficiency and energy type. PSE’s programs are tariffed services, and are subject to change or termination without prior notice. Always refer to our website for the latest offerings.
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ON-SITE
Investors Anticipate Opportunities in Commercial Real Estate across All Major Property Sectors in 2013, According to Latest PwC Real Estate Investor Survey™
As
Greater Investor Optimism in Retail, Especially for National Regional Malls; Technology Office Markets and Warehouse Sector Showed Steepest Cap Rate Declines in Q4
2012 drew to a close and the industry's recovery progresses, commercial real estate offered varied investment opportunities across each major sector and a diverse number of cities, even though macroeconomic uncertainties still exist, such as the fiscal cliff, according to the fourth quarter 2012 findings of the PwC Real Estate Investor Survey. According to the report, investors in the office sector are showing a greater acceptance for slower growth and less apprehension about moving further out on the risk spectrum. Although core trophy assets remain the preferred target of both domestic and international investors, aggressive pricing and improved fundamentals have resulted in certain investors looking to buy either core in strong secondary markets or lessthan-core in primary markets. "The commercial real estate industry continues to show its investment durability as assets command attractive spreads over fixed-income
investments and offer more stability than stocks, while most property sectors continue to post occupancy gains and rental rate growth," said Mitch Roschelle , partner, U.S. real estate advisory practice leader, PwC. "Foreign investors are particularly bullish on U.S. commercial real estate as they look for stable investments during uncertain times abroad. In 2013, Survey respondents expect to see an uptick in sales activity as property owners cull portfolios to take advantage of the low cap rate environment. And as investment capital continues its trend of matriculating beyond just apartments, cap rates are expected to compress across the entire asset class." Investors Becoming More Comfortable with Buying in the Retail Sector The above chart illustrates that the decline in overall capitalization (cap) rates has extended to the retail sector. According to the fourth quarter Survey findings, investors remain
optimistic about investing in the national regional mall market despite a slow-moving economic recovery and a challenging retail landscape. Buying opportunities remain few and far between, especially for Class-A+ and Class-A malls, with huge barriers to entry making highquality malls thrive, which also keeps owners from selling them. According to surveyed participants, yields have compressed too much for well-leased strip shopping centers that some are considering buying value-add in great locations due to a lack of new supply. For power centers, challenges mainly stem from rising Internet retail sales, merchant consolidations, and an inability to easily shrink into urban streetscapes. In the fourth quarter of 2012, the average overall cap rate, the initial return anticipated on an acquisition and a reflection of an investment's anticipated ownership risk, decreased in 24 of the surveyed markets, held steady in seven, and increased in just
one of them. The overall cap rate shifts remain irregular with tech office markets (i.e. San Francisco) and the warehouse sector both showing some of the steepest declines. The national warehouse market's cap rate compression, where the average overall cap rate declined 40 basis points, reflects the optimistic outlook held by most surveyed investors. The average overall cap rate declined again in the Survey's national Central Business District (CBD) office market, marking nearly ten instances of quarterly declines since the first quarter of 2010. Moreover, the current average of 6.70% is the lowest reported for this market since the second quarter of 2008. Due to this cap rate compression, some Survey participants are taking time to identify CBD assets to sell – while others remain in search of select buying opportunities. In the apartment sector, surveyed participants believe market conditions continue to favor sellers, but Continued on page 9
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On-Site Northwest • January 2013
ON-SITE Investors ...continued from page 8 some investors sense that rents may have peaked for now and that certain markets have become overpriced. In addition, investors remain attentive to the near-term impact of new construction. Consequently, this market's average initial-year market rent change rate dipped for the second consecutive quarter, suggesting less upside in this market. Investor Outlook Through 2015 The PwC Real Estate Barometer included in the Survey tracks the anticipated performances of the four main property sectors (office, retail, industrial, and multifamily) from 2012 to 2015. For the office sector, even though the sector's recovery as a whole lags behind other commercial property sectors due to lower job creation among office-space using companies, as well as an evolving work environment, many metros are benefiting from a lack of new supply. As a result, the barometer places 35.2 percent of the U.S. office stock in expansion by year-end 2012. This percentage is expected to grow through 2015. Pockets of strength exist in the retail sector and are starting to outnumber the weaknesses in certain trade areas. The barometer places 45.6 percent of the U.S. retail stock in recovery by year-end 2012. As the industrial sector continues to recover, occupancy gains are being reported in most industrial markets across the country. As a result, the portion of U.S. industrial stock in recovery is expected to grow annually through year-end 2014. By year-end 2015, the expansion and recovery phases of the real estate cycle will dominate this sector. Underlying fundamentals for the U.S. multifamily sector remain extremely positive through 2015 due to pent-up demand and a growing preference for renting instead of buying. The expansion phase of the cycle will dominate this sector for the next four years. "While the recent slowdown in the country's economic recovery and job gains has reduced leasing activity across much of the nation's office sector, it has not had the same impact on the warehouse sector, with many surveyed investors calling the sector extremely healthy," stated Susan Smith , editor-in-chief of PwC's quarterly real estate investor survey. "While the U.S. multifamily sector remains a top investment choice, concerns about new supply and overpricing do exist, which has some investors looking to other sectors, like retail, which had been a bit taboo for many investors for quite a while, but is starting to regain attention even with the rising popularity of e-commerce." Information about subscribing to the PwC Real Estate Investor Survey can be found at www.pwc.com/us/ realestatesurvey. About the PwC Real Estate Investor Survey™ The PwC Real Estate Investor Survey, now in its 25th year of publiOn-Site Northwest • January 2013
cation, is one of the industry's longest continuously produced quarterly surveys. The report provides overviews of 33 separate markets, including ten national markets -- regional mall, power center, strip shopping center, CBD office, suburban office, flex/R&D, warehouse, apartment, net lease, and medical office buildings. The report also includes a review of 18 major U.S. office markets including Atlanta, Boston, Charlotte, Chicago, Dallas, Denver, Houston, Los Angeles, Manhattan, Northern Virginia, Pacific Northwest, Philadelphia, Phoenix, San Diego, San Francisco, Southeast Florida, Suburban Maryland, and Washington, DC. In addition, the report covers three regional apartment markets - Mid-Atlantic, Pacific, and Southeast, and two regional warehouse markets - - East North Central and Pacific. In addition, the National Development Land Market is included in the sec-
ond and fourth quarter issues while a comprehensive lodging report is included in the first and third quarters. The fourth quarter 2012 report also features up-to-date information relating to forecast periods, structural vacancy replacement reserves, forecast values, tenant improvement allowances, and vacancy assumptions. In addition, each issue of the survey contains over ten tables of market data focusing on value expectations, tenant improvement allowances, forecast periods, structural vacancy, and growth rates.
more by visiting us at www.pwc.com. Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +. © 2012 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
About the PwC Network PwC firms help organizations and individuals create the value they're looking for. We're a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out
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N
ow that the holidays are behind us, anyone who was not able to move before they rang in the New Year will be resuming their search for a new home. Follow up is the key to closing the sale when no decision is made on the first visit. However, many leasing people still hesitate to keep in contact with their prospective renters or make call backs on the appointments that are no
10
shows. This question may shed some light as to why this occurs: Q: I know I should probably follow up more on my guest cards and also call people who make appointments and don’t show up, but calling people back makes me feel like I’m “bugging them.” If they’re really interested, won’t they just come back or call me?
It does seem “logical” that a person interested in your community will just naturally get back in touch with you. However, there are a multitude of options out there right now. Besides, renting an apartment is a lot of hard work, and it’s also a MAJOR buying decision. People who are looking for a new home NEED YOUR HELP! They will continue to need assistance until they reach a decision about where they want to live. If you think back to the last time you made a major purchase, it’s likely that the salesperson helped you with your buying decision. It was probably their knowledge of the product, combined with pointing out how it would meet your needs, which were some of the determining factors in your decision. This would require the salesperson to have excellent product knowledge, establish ALL your needs (i.e. size, style, color preference(s), budget constraints, etc.) and then close the sale. However, if you weren’t quite ready to decide and then looked at and considered other options, you may have forgotten about some of the benefits of the product you looked at initially. This is where the follow up
work comes in. The salespeople who keep in touch with their prospects can continue to sell the benefits of their product long after the prospect has left the sales floor. This will deepen the relationship that was established so there is a sense of commitment on both sides. Now imagine your most recent prospective renters and the circumstances causing them to relocate. Put yourself in their place and think about all the decisions they have to make as a result of their move. If you have an apartment at your community that will work for them and you are sincerely interested in meeting their needs, why wouldn’t you follow up with them? Of course if all you care about is just renting an apartment and not the person who will be living in it, then you’re right: You would “just be bugging them.” People can recognize a phony a mile away. On the other hand, people are also pretty good at detecting when someone sincerely cares about them and has their best interests at heart. The follow up work you do will come off as a true expression of your desire to meet the Continued on page 11
On-Site Northwest • January 2013
ON-SITE
Apartment ...continued from front page Additional key findings: The mean (nonweighted) average for the total cost of risk increased 9.5 percent in 2012, driven by an increase in property cost of risk, which accounts for 70 percent of the average apartment firm’s total cost of risk. The mean average property cost of risk increased by 10.4 percent and average per occurrence deductibles increased to $118,000 from the unusually low average deductible of $66,000 in 2011. The mean average general liability cost of risk remained virtually unchanged in 2012 after a 9 percent increase last year.
The mean average workers’ compensation cost of risk in 2012 also remained similar to 2011 at $1,038 per full-time employee. Property terrorism insurance takeup rates increased to 91 percent in 2012, compared to 85 percent in 2011. A slight decrease in property terrorism insurance rates was also reported. About the Survey The ACORS contains information about property, general liability, umbrella, workers compensation, D & O, professional liability, employment practices, environmental, and newly added insur-
ance lines including terrorism and cyber liability. Fifty-five firms representing over one million apartment units supplied data on rates, deductibles, retentions, key coverage terms, claims history and more for the key lines of coverage. Firms that completed the survey can receive exclusive access to the full data set, along with the report analysis by Conning Research and Consulting on behalf of NMHC. Non-participating NMHC members can download an executive summary and a PowerPoint summarizing the results at www.nmhc.org/ goto/61017.
Based in Washington, DC, NMHC is a national association representing the interests of the larger and most prominent apartment firms in the U.S. NMHC’s members are the principal officers of firms engaged in all aspects of the apartment industry, including owners, developers, managers and financiers. One third of Americans rent their housing, and more than 14 percent live in a rental apartment. For more information, contact NMHC at 202-974-2300, e-mail the Council at info@nmhc.org, or visit NMHC’s web site at www.nmhc.org.
Shoptalk ...continued from page 10 needs of your prospective renters, if you genuinely care about them. If you have a question or concern that you would like to see addressed next month, please ASK THE SECRET SHOPPER by making contact via e-mail. Your questions, comments and suggestions are ALWAYS welcome!
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ON-SITE
A Property Management Regroup How To Do It And Why It Works! © By Ernest F. Oriente, The Coach Regroup…is this a new management trend? Not a chance! Regroup is simply an opportunity to end one month’s business cycle, recap the performance at each property you manage and outline a plan of success for the new upcoming month. Why does it work? Because it allows each person on your team to assess their performance from the previous month, and to make any necessary adjustments for the new month. Here’s how it works.
Scheduling and preparing regroup: Regroup should be scheduled during the slowest time of each month and should start before your leasing office opens in the morning, if possible. A solid and productive regroup takes about two hours and will require about one hour of preparation by your resident manager. Be certain to have a blank chalkboard or a standing easel for taking notes and keep distractions to a minimum. Regroup is also a time to build on the creative juices from each person on your team, so make regroup a spe-
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cial part of each month and allow for everyone to have equal time to share their feedback. Simply stated, there are no wrong questions or topics discussed at regroup and your team will respect and respond positively to this freedom. Tip From The Coach: As the supervisor for your properties, it is critical for you to attend regroup and actively participate in them. Your preparation for each regroup should begin by reviewing the agenda from the previous month with your resident manager, to assess if the to-do list from last regroup was accomplished. Then, review together the new regroup agenda making certain your resident manager’s gameplan is consistent with your company goals and expectations. Running the meeting: Each month’s agenda for regroup should begin by reviewing the financial information important to your company and its investors. This might include “actual” revenue and income versus budget, resident retention percentages, collection is-
sues or expense performance versus the budget. Then, have your resident manager address any problems experienced during the past 30 days or any upcoming issues that will affect the property. Next, map a calendar of activities that will enhance the performance for this property. This might include a monthly event to thrill your residents, a new marketing plan, or a special focus on your resident referral program. This part of regroup is where the creativity of your team really starts to roll and if you listen closely, you will hear many “golden” ideas. Lastly, have your resident manager recap the team goals for the new month and be certain the meeting always closes on a positive note! Tip From The Coach: As the supervisor for this property, take detailed notes during regroup, then send a brief memo to your resident manager recapping the day. Include in this memo a to-do list for the upcoming month, so your resident manager will clearly know what is expected. Clear communication is Continued on page 13
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A Property ...continued from page 12 the cornerstone of management success. Meeting individually with your team: At the close of each regroup, plan to spend another thirty minutes more with your resident manager to recap the day, cheer their success, and discuss the specific performance of each individual at the property. During this meeting ask your resident manager if he/she needs any additional support or training to develop their skills or the skills of their team. This is the most important part of regroup as time spent developing your team for future opportunity, will make for pro-active management which means you always have a sharp person ready to be promoted to the next position. Tip from the Coach: In the same spirit of the individual meeting you have with your resident manager, ask him/her to have a similar meeting with each member of their leasing team. This will help to grow their skills as a leader and you will want to attend the first few meetings to be certain the agenda for the individual meetings are exactly as you expect. In fact, as a manager, always “inspect what you expect”. A good rule of thumb!
Wow! Such an important topic and so much to share! Incorporate regroup into your next 30 day business cycle and see for yourself how successful the time is spent! Need help planning your agenda? E-mail a quick note to ernest@powerhour. com and the Coach will send you a sample agenda in ten minutes. It’s easy! The Coach says so! Want to hear more about this important topic or ask some additional questions? Send an E-mail to ernest@powerhour.com and The Coach will E-mail back to you a free invitation to be a participant on a PowerHour conference call. Author’s note: Ernest F. Oriente, a business coach since 1995 [29,760 hours], a property management industry professional since 1988--the author of SmartMatch Alliances--and the founder of PowerHour...[ www.powerhour.com and www.powerhourseo.com and www. pirmg.com ], has a passion for coaching his clients on executive leadership, hiring and motivating property management SuperStars, traditional and Internet SEO/SEM marketing, competitive sales strategies, and high leverage alliances for property management teams and their leaders. He provides private and group coaching for property management companies around North America, executive recruiting, investment banking, national utility bill auditing [ www.powerhour.
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com/propertymanagement/utilitybillaudit.html ] national real estate and apartment building insurance [ www. powerhour.com/propertymanagement/ insurance.html ], SEO/SEM web strategies, national WiFi solutions [ www. powerhour.com/propertymanagement/ nationalwifi.html ], powerful tools for hiring property management SuperStars and building dynamic teams, employee policy manuals [ http://www.powerhour.com/propertymanagement/employeepolicymanuals.html ] and social media strategic solutions [ http://www.powerhour.com/propertymanagement/socialmedialeadership.html ]. Ernest worked for Motorola, Primedia and is certified in the Xerox sales methodologies. Recent interviews and articles have appeared more than 7000 times in business and
trade publications and in a wide variety of leading magazines and newspapers, including Smart Money, Inc., Business 2.0, The New York Times, Fast Company, The LA Times, Fortune, Business Week, Self Employed America and The Financial Times. Since 1995, Ernest has written 200+ articles for the property management industry and created 350+ property management forms, business and marketing checklists, sales letters and presentation tools. To subscribe to his free property management newsletter go to: www.powerhour.com. PowerHour® is based in Olympic-town…Park City, Utah, at 435-615-8486, by E-mail ernest@powerhour.com or visit their website: www.powerhour.com
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WASHINGTON MULTI-FAMILY HOUSING ASSOCIATION President • Jay Olson Vice President • Joe Manca Past President • Cassandra Haavisto Treasurer • Mike Ashbrook Secretary • Gail Duke Vice President of Suppliers Council • Barry Savage Executive Director • Jim Wiard
18300 Cascade Ave. S., Suite 130 Tukwila, WA 98188 (425) 656-9077 (425) 656 9087 (fax) admin@wmfha.org
How to Convert a Property to Smoke-Free Housing
E
stablishing a Smoke-Free Policy in an apartment community is becoming a growing trend with landlords in Washington and across the country. Property owners find this kind of policy is good for business and a clear win-win, lowering costs and risks for an owner and providing a healthier, safer, greener environment for happier residents. Smoke-free policies can help landlords protect their residents from the dangers of second-hand smoke and provide benefits for their owners’ investments. The benefits to owners include reduced cleaning and maintenance costs to turn over apartments at move-out, fewer property fires caused by careless smoking, reduced insurance costs as a result of reduced claims, lowered risk of resident warranty of habitability liability claims over adverse health effects caused by smoke, and the increased marketability of a healthier, safer living environment for residents. The financial benefits to owners are clear: managers can realize up to $3,000 in cost savings from turning over one
heavily smoked in unit. Having a smoke-free building, with a clean, green, sustainable environment, will preserve and enhance property resale value. Surveys have shown that the vast majority of renters favor policies eliminating smoking in apartment homes, and they would pay higher rent to live in a healthier, greener community. 92% of all Washington renters surveyed stated they prefer smoke-free housing, including 75% who smoke. Simply put, residents place a premium on smoke-free housing policies in rentals, and your employees will have a healthier work environment. Providing a safer living and working environment is no small matter. Smoking related fires are often caused by cigarettes. Careless smoking is the #1 cause of devastating apartment fires, from the standpoint of huge property loss and loss of life. Second-hand smoke has been determined a Class A carcinogen and contains over 4,000 chemicals, of which, 11 are known cancer causing
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poisons and 250 are known toxins. Second-hand smoke has been linked to diseases such as cancer, asthma, heart disease, respiratory illness and low birth weight. Smoke-free housing allows residents to enjoy their home without being exposed to the deadly chemicals found in secondhand smoke. Eliminating smoking in an apartment building is the only way to protect residents from unpleasant odors and the health risks of second-hand smoke. One of the initial concerns regarding no-smoking policies was confusion about legality and fair housing laws. Smoking is not a protected class. It has been well documented that creating a policy banning smoking inside apartments and in common areas of apartment communities is legal, non-discriminatory and does not violate any fair housing laws. In fact, the U.S. Department of Housing and Urban Development (HUD) has issued a notice strongly encouraging the conversion of pubic housing to a 100% smoke-free environment. The majority of housing
authorities in Washington have required the creation of smoke-free policies in their communities and see the value of protecting the health of low-income families. Bottom line, property owners and managers have the right to set reasonable rules or policies that protect their investments as well as the health and welfare of their residents. Some municipalities have enacted new ordinances requiring residential housing to be smoke-free. In Oregon, new law requires landlords to disclose in writing to prospective renters whether they have a no-smoking policy or not. Landlords nationwide and locally have developed a reasonable stepby-step process for implementing a smoke-free policy in their communities. 1.) Determine when you want to start. Give a reasonable time frame for conversion. 2.) Develop a policy and decide what areas the policy will cover. Continued on page 15
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ON-SITE ...continued from page 14
The policy would include residents, guests, employees and vendors. 100% smoke-free includes prohibiting smoking in the interior of all units, in any common areas, on patios or balconies, and within 25 feet of any building. If possible, you may create designated smoking areas, for example a nice outside gazebo on the property which may be far away from any buildings, play areas or other well traveled public spaces. Develop a No-Smoking Lease Addendum or new lease language (sample lease addendum language is available on the websites shown at the end of this article). Initiate all new leases with the new no-smoking language included. Train staff on the benefits of nosmoking policies and the reasons the property has chosen to implement this rule. Communicate the policy by notifying residents of the reasons for going smoke-free and the benefits to the community (a sample resident notification letter is available on the websites shown at the end of this article). Give existing residents a time period in which the new policy will become effective and an opportunity to sign the new
lease addendum. For existing residents who are on term leases which expire at a future date, it is advised to make the effective date for the new policy for those residents upon lease expiration and renewal. Keep in mind, residents who smoke do not need to move out. Smokers simply cannot smoke inside their apartments, in common areas or in proximity to buildings where smoke can drift into other apartments. 7.) Post signage alerting residents and guests that smoking is not allowed on the property. 8.) Market and promote the benefits of smoke-free living as an amenity that your community offers. It may set you apart from the competition. 9.) Enforce violations of the policy just like you would any other rule, such as loud music, parking infractions, clutter, etc. Use a system of progressive warning letters and document, document, document. In Washington state, residents can now smoke marijuana in the privacy of their homes. No doubt, this has added to the occurrence of complaints about smoke and odors drifting into other apartment units. A landlord’s best response to this is to convert a property to smoke-free by
enacting a no-smoking policy. Keep in mind that formal reasonable accommodation requests can be made with regard to medical marijuana. Note, however, that landlords are not necessarily required to make accommodations for a resident to smoke, especially when an alternate accommodation may be possible. Many properties have crime and drug free lease addendums as part of their lease language. Those properties should notify residents that the new law does not invalidate these addenda and that the property still prohibits controlled substances.
Implementing a no-smoking policy may be in the best interest of a property owner and is not as challenging as one might suspect. There is clear precedence and many resources for making this happen, and now may be the time to act. For more information, please feel free to go to these sources below or call us at the Washington Multi-Family Housing Association at 425-6569077: www.smokefreewashington.com www.smokefreeoregon.com www.smokefreehousinginfo.com
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ON-SITE Overall ...continued from page 7 an indication that the market is still very healthy. On the minus side rents and rental incentives reversed their positive trend. It is interesting to note that nearly 60% of the 3,599 units that opened this year did so in this fourth quarter. It is safe to speculate that this level of new inventory certainly impacted this quarter's performance. We can
expect the same level of new units, about 2,000 on average, for each of the next four quarters. The rebounding residential market is another factor to be considered. Inventory in King County is way down, 43% fewer homes on the market at the end of November than a year earlier, and the lowest inventory since 1999. Values are rising and
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interest rates are at record lows. Closed sales in November were up 19% annually. It appears that the SR520 bridge toll and shutdowns are negatively impacting some Eastside submarkets. Many drivers are avoiding this toll to cross Lake Washington on this bridge. Volume is down 30% after the toll was implemented at the end of 2011. There were three submarkets with major rent reductions, all on the Eastside. Average rents in Kirkland, Redmond and Bellevue East all declined 3% this quarter. The vacancy rate increased an average of 45 basis points in these areas when the overall market's vacancy rate decreased 10 basis points. SR520 is the primary route to Seattle for both Kirkland and Redmond. The Bellevue East submarket accesses both SR520 and I-90 across Lake Washington to points west. The downtown Bellevue and Eastside North submarkets have also been adversely affected. There were three submarkets in the King/Snohomish market that had significant vacancy increases. Of these, Bothell had the largest, increasing from 5.02% to 6.71% vacancy.
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ON-SITE How To ...continued from page 6 carrying costs if it doesn't sell right away, etc. You need to make sure you are buying the property at a significant discount to cover yourself completely. 4) Buy and hold. As mentioned above, real estate tends to gain value over time. Bad properties in bad neighborhoods will accrue equity if given enough time. History has shown us that even when a large market correction occurs like has happened now, properties eventually do recover and increase in value. The secret is to make sure the property is at least covering it's own costs while you wait for the equity to build up in it. 5) Lease options. Not everyone has perfect credit. For those who have credit issues finding a lender to purchase a home
can be an impossible task. They need time to get their credit repaired. These people are perfect candidates for lease options. They will pay above market value for the house and put a non-refundable down payment down. They are willing to pay for the privilege of rebuilding their credit while working towards a path of home ownership. For these people, a lease option presents a solution to their lending problem and buys them the time they need to get their credit and/or income ready to go to a traditional lender. Media Contact: James Paffrath RealtyPin.com, 1-(866) 960-8649, james@realtypin.com News distributed by PR Newswire iReach: https://ireach.prnewswire.com PR Newswire (http://s.tt/1ygg7)
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WASHINGTON APARTMENT ASSOCIATION President • Rob Trickler
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Treasurer • Gina deWeber
Secretary • Donna Lee Smitt
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by online reviews. Give this a minute of thought and you'll realize that you also read reviews make decisions based on what you have read. Also, the number of reviews the community has on Google Places, the rating, and frequency of those reviews is correlated with the visibility of your listing according to research and local search ranking factors. http:// www.davidmihm.com/local-searchranking-factors.shtml Increase review today by adding calls to action: The testimonials page on your website is not only a great place to add great reviews about your apartment community and company, but is also a great page to add a call to action for residents to leave reviews. We made it easy by adding links to read and write reviews for Google, ApartmentRatings.com and Yelp. Make certain you and your teams are actively asking for reviews: Have call outs in your email signatures, on the leasing desks, and on all social media channels asking residents to leave reviews on the channels
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