Rental Housing Journal Utah July 2016

July 2016 - Vol. 8 Issue 7

Rental Housing Journal Utah

2. President’s Message – What It Means To Be An Owner In The Utah Apartment Association

3. Director’s Message – Resident Retention: One of the Keys to Success 5. Ask the Attorney – Tenant Subleasing

UPCOMING EVENTS General Membership Meetings Orem ........................................ Aug 24th 7pm Salt Lake ............................... Aug 25th 7pm www.uaaGeneralMembershipMeetings.com

Good Landlord Class Ogden ............................... Aug 9th 8:30am Salt Lake .......................... Aug 10th 6:00 pm www.GoodLandlordingTraining.com

EVENTS Economic Forecast......................................Sept 13th (Salt Lake Board of Realtors, Sandy)

www.uaahq.org/economic-conference

PAC Luncheon.................................................Oct 12th (TOPGOLF, Murray)

www.uaahq.org/uaa-pac

Landlord Legal Cruise ................. Jan 8th-Jan 15th RC Allure of the Seas, Western Caribbean

www.uaahq.org/cruise

www.rentalhousingjournal.com • Professional Publishing, Inc Official Publication of The Utah Apartment Association Utah’s Leading Advocate for the Rental Housing Industry – 888-244-0401 – WWW.UAAHQ.ORG

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continued on page 4

Rental Statistics Tell Story of Who Rents in Utah

By Taylor Smith Education & Membership Coordinator, Utah Apartment Association

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ccording to information from the US Census 2015 update and from a new report released by the Utah Apartment Association in partnership with KSL.com and Rentler, there are some surprising insights into who in Utah rents, and what type of rental unit they live in.

According to the Census, one out of every three households in Utah rent their housing. That’s approximately 1,000,000 tenants in Utah that rent over 300,000 rental units. Some of those people are continued on page 6

You May Want to Rethink That Lease Renewal if You are Planning to Sell Your Small Plex

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f you haven’t raised your rents already, I’m sure the rent increase notices are in the mail.

I’m also sure that some of you have tenants that you can’t wait for their leases to end so you can move their rents up to market levels. However, before you sign any new lease agreements you need to make continued on page 7

Advertise in Rental Housing Journal Utah Circulated to over 6,000 apartment owners, on-site and maintenance personnel monthly.

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Utah Apartment Association

President’s Message

448 E Winchester St Ste. 460 Salt Lake City, UT 84107 Ph: (801) 487-5619 Fax: (801) 484-8649 www.uaahq.org

What It Means To Be An Owner In The Utah Apartment Association

O Peter Harradine, AIT, CAM Board Chair Utah Apartment Association

ne of the UAA Staff Members recently had a telemarketer call and ask to speak with the owner. He responded “we have 3,500 owners, which one would you like to speak to?”

The flustered call-center employee didn’t know what to make of that, so they said thank you and hung up.

As a member, the Utah Apartment Association is your Association. The board of directors represents the membership and makes decisions on behalf of the Association, but you as a member are the reason that the programs and services offered by the association exist. I think that we should take a great deal of pride in what we have all accomplished together to further the cause of the Rental Housing Industry here in our state

– from the big apartment communities to the property management companies and the landlords with just one or two units, all of us have a stake in protecting our businesses and working together.

But, however great the Association is, we are only as strong as our members are involved. So I would encourage you to become more involved in the Association.

We have many opportunities to help out, ranging from volunteering to help out for an upcoming event, to donating to the political action committee.

One of the biggest things that we can do is reach out to other potential members and tell them about the value of being a member of the Utah Apartment Association.

Most of us know at least one other landlord or vendor who provides a

service to landlords who probably doesn’t even know that the Association exists! So it is time for us all to take ownership of our Association and help it grow; to invite people to our monthly General Membership Meeting, share a copy of this newsletter or ask a supplier if they are a member.

Working together we can continue to improve our industry and grow our association.

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Utah Apartment Association 448 E Winchester St Ste. 460 Salt Lake City, UT 84107 Ph: (801) 487-5619 Fax: (801) 484-8649 www.uaahq.org

Director’s Message

Resident Retention One of the Keys to Success

L. Paul Smith, CAE Executive Director Utah Apartment Association

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t is a truth universally acknowledged in property management that a landlord with high turnover will have more cost and work.

That’s not to say there aren’t costs and work at other times. But it is true that when renters move out, our efforts and money are concentrated as we try to restore a revenue stream as soon as possible.

So seasoned landlords learn quickly an important lesson – if you

can hang on to your tenants longer, you are likely to have less work and less cost. Some experts say each turnover costs an average of $3,000 in turnover expenses (things like cleaning, carpet replacement, marketing, etc) and vacancy cost (the time the place sits unrented times the daily rental amount).

Turnover in Utah can be quite high - the average tenant stays in a rental about 14 months. Over ten years, that’s 8 turnovers. Multiplied by $3,000 each that is $24,000 more expense than having one tenant stay for that whole time.

So what are the keys to retention?

First, understand why tenants move. Only 30% have to, because they buy a home, move out of state or get married. A full 70% of renters that move from your rental will move to another similar rental within 20 miles. Of those who moved to another rental when they

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really didn’t have to, they say they did so because they weren’t getting what they wanted where the where.

The landlord wasn’t A) responsive, B) reliable or C) respectful. So the good news is with better customer service, these renters say you would be able to keep them longer.

Second, implement the following practices to encourage renters to stay longer: ySign y long term leases, if possible, that only expire in a time of year that is convenient for you. There is nothing worse than having a month to month tenant give you notice they are moving at a bad time, like winter. yGive y incentives for renewing a lease and don’t let tenants go month to month. Month to month agreements give them too much flexibility unless you are being compensated by a month to month fee. Try to offer improvements to the property you can tie to renewal like new windows, a new garage door, or

something you should do anyway, if they will stay. Even carpet and paint can be used to lock them into leases (especially if you have to do it anyway if they did move). yAllow y tenants to customize their rental. They will stay longer if you do. Maybe this is letting them have an accent wall the paint color of their choice, their own window coverings, or planting their plants in the yard. If people can customize they will feel more comfortable and stay longer.

Whatever you do, recognize having one tenant, even a mediocre one, for a long time, could be much less work and ultimately make you more money in the long run, than having a new tenant every year.

Work hard to keep them happy and use leases and incentives to lock them in to new long term leases. If you do you will be more successful.

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Rental Housing Journal Utah is a monthly publication published by Professional Publishing Inc., publishers of Real Estate Opportunities in Investing & Real Estate Investor Quarterly

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Rental Housing Journal Utah

Make Your Units Spacious ...continued from page 1 for a second visit from installers.

Select products even qualify for a lifetime warranty.

Now ranging all the way up to 48 in. x 48 in., large format tile is becoming more popular and looks great in multifamily units but requires a different type of mortar.

Be sure to use a mortar specifically designed for large format tile.

Wood

types now feature separate pieces that more closely mirror the look of ceramic tile. You can even grout some new types of vinyl, making the floor look more traditional and unified.

Different installation options include peel and stick technology, as well as click-lock systems, helping reduce labor costs and increase savings. Vinyl is also 100 percent waterproof, which has always made it a good choice for kitchens and laundry rooms.

Laminate

Laminate flooring has also been advancing in durability, versatility

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and style. Not only are laminates scratch resistant, but some newer products are even water resistant – withstanding household spills for as much as 24 hours. This technology allows property managers to install laminate in areas such as bathrooms and laundry rooms.

Due to the advancement of the single lock system, laminates can be installed easily and quickly, reducing labor costs. When it is time to replace or repair units, you will save significantly by replacing a single plank versus the entire floor.

And when you do install laminate, the finished product is going to look better than ever. Digital

printing is so advanced now that certain styles are becoming difficult to distinguish between laminate and more expensive materials like wood.

Tile

Tile is constantly evolving. Floor tile has progressed substantially, becoming sharper and more realistic through those same advancements in digital printing that benefit other materials like vinyl and laminate. Wood tile looks like wood, marble tile looks like marble, and so on. Higher end options allow you to grout and seal at the same time, eliminating the need

Wood flooring is now offering the same easy-to-install features as laminate and vinyl flooring, making it more affordable than it used to be. In the past, property managers had to hire someone to install wood flooring. Options such as engineered and click wood can be self-installed with the same benefits of long lasting, durable flooring at a lower cost.

Innovation and advancement are continuous trends in flooring, allowing more options for property managers to consider.

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Rental Housing Journal Utah ¡ July 2016

Rental Housing Journal Utah

Ask the Attorney Tenant Subleasing

By Kirk Cullimore, Jr. Law Offices of Kirk A. Cullimore

Dear Attorney,

Q: The neighbors told me they think my tenant is listing my house on airbnb.com. I knocked on the door and a stranger answered confirming they paid $2,000 for the month when my lease is only for $1,300. What can I do?

A: First, you should consider an eviction for breach of contract and assigning or subletting the property. But you’ll need to make sure that their actions (including subleasing) is a violation of your lease.

Under Utah law, a tenant generally may be allowed to assign or sublease the property to another tenant. However, even if a tenant is allowed to assign or sublet the property, that does NOT release them from their obligations to perform under the lease (including the obligation to pay rent). If your lease is silent on whether their actions are against the lease, you may have to live with their actions. If your lease forbids assigning or subletting, you should serve your

tenants with two eviction notices against your tenant: (1) lease violations, and (2) assigning or subletting. You’ll also want to serve the guests with a “Five Day Tenant at Will” since they don’t have any legal rights to occupy the property.

This provides them notice of their violation and an opportunity to resolve the issue prior to legal action.

If they fail to comply, you can then file an eviction with the court. But make sure you are documenting the violations just in case you need to convince a judge you are right.

WHAT ARE THE BENEFITS FOR A PARTICIPATING LANDLORD?  Steady Monthly Cash Flow. The rent subsidy or the Housing Assistance Payment (HAP) check is mailed directly to the landlord on or about the first of every month. Direct deposits are deposited on the 1st day of the month.

 Less Turnover, More Profit. Once Section 8 families find a good place to live, they tend to stay. This translates to lower vacancy rates, fewer operating costs and higher profits.

 Some programs at the Housing Authority offer supportive services to help ensure stability in landlord support.

 Elimination of Advertising Costs. Participating landlords  Screening is left to the landlord as you would for any can post available rentals online free at gosection8.com and in the Housing Authority’s main office lobby.

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Call 801-284-4454 or Email chriscollier@hacsl.org Rental Housing Journal Utah · July 2016

resident. Landlords are encouraged to develop their own tenant selection criteria. This can include: credit history, personal references, home visits , and previous rental history. Please remember, all screening must be done in accordance with Federal Fair Housing requirements and evenly applied to all potential residents.

HELP FAMILIES, INDIVIDUALS, VETERANS, THE ELDERLY AND PERSONS WITH DISABILITIES OBTAIN SUITABLE HOUSING TODAY

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Rental Housing Journal Utah

Rental Statistics Tell Story ...continued from page 1 not be able to afford the house without the additional rental income, and for the renters who are often able to live in much nicer areas with better opportunities, schools and neighborhoods than they otherwise could afford. Unfortunately, efforts to increase the supply of these units are often met with indifference by traditional affordable housing advocates and suspicion by municipal governments. low income or young people, as is single individuals, no matter what the common perception, but the stage of life they are in, are much data reveals several surprises. more likely to rent than own their dwelling. This means that there is 19% of Utah rental and will continue to be a strong rental market for smaller rentals, households contain especially in urban areas.

Senior Citizens It is a longstanding perception that renters are mostly younger 18% of Utah tenants families or individuals. However belong to an ethnic an increasing number of seniors minority in Utah are choosing to rent. Some Minorities are 64% more likely are heading to “Senior Communi- to be a renter than their Caucasian ties” that have amenities specifi- friends. Individuals who identify cally geared towards their lifestyle, as minorities are more likely to be while others prefer to rent homes new residents in the state, to live in or apartments in a mixed area. urban rather than rural areas, and Many are choosing to rent to avoid to list home ownership as a less the hassles, costs and responsibil- important financial goal. Because ities of home ownership in their of this it is always important that golden years. landlords continue to ensure that their Fair Housing practices live up 15% of Utah renters live in to the high industry standards that have been set in Utah. households of 5 or more.

It shouldn’t surprise anybody that in Utah we have big families, Where do tenants live?

You can’t drive around Utah and we lead the nation not only without seeing the massive conin the average household size for homeowners, but also with the struction of large apartment comlargest household size for renters as munities that have been recently well. Still, the fact that roughly one built or are under construction. out of every seven tenants in Utah That has led many Utahans to belives in a household that has five or lieve the majority of rental housemore people means that there is a holds live in large apartments. But significant market for homes and according to the data, that is not apartments with a minimum of the case. three bedrooms, and in some cases 31% of rental units in Utah more than that.

25% of Utah renters live alone

are Single Family homes

Rental homes in Utah are a key component of the housing market.

While large families are more And while apartments are able to likely to own than rent a home, command a premium price per

square foot due to their locations and amenities (with an average of 88¢ per square foot compared to 65¢ for single family homes), the market rents for houses continues to be significantly higher than for apartments (with respective averages of $1,199* for single family homes and $785* for apartment units).

Find out more

Understanding who rents and the unit types available will help investors and managers navigate the tricky Utah rental housing market.

For more details about the data used in this article, please visit:

The United State Census www.census.gov/quickfacts Utah Apartment Association Only 37% of the rental Industry Insights Report units in Utah are in an w w w.uaahq.org/industry-inApartment Community sights-report Many people are shocked by And for even more information these numbers because they see so on renter demographics and rental many apartments around them. property inventory, rents, etc., join But single family homes for rent us on September 13th at the annucan be found in every communi- al Economic Forecast conference. ty in every part of the state – from You can find out more details at blue collar neighborhoods to up- uaahq.org/economic-conference. scale new developments. *data reflects statewide averages from the UAA Industry Insights 25% of rentals are in Report

duplexes, triplexes, or fourplexes, townhomes and condos

Housing experts often refer to rental homes and other buildings with less than five rental units as the “shadow market” and Utah has a very healthy shadow market which comprises almost two thirds of the available inventory.

7% of rental units in Utah are basement apartments

Basement or accessory apartments make up one out of every fourteen rentals in our state, and are a key ingredient in creating affordable housing opportunities – both for the homeowners who may

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Rental Housing Journal Utah · July 2016

Rental Housing Journal Utah

Rethink That Lease Renewal ...continued from page 1

sure you are not planning on selling first. Rising rents have caused small plex (2-4 units) property values to increase significantly over the past several months prompting many owners to sell and exchange into larger multifamily properties or different asset classes. If you are considering selling, here are a couple things you need to be aware of: 1. Locking your tenant into a lease is also locking the value of your property into place.

If you sign a one year lease at less than market rents you are asking a potential buyer to take on your existing tenants for a guaranteed period of time. It is not appealing to investors to buy an underperforming property at proforma values. The better plan of action is to leave them on month-to-month tenancy and continue to increase rents anyway.

2. You are turning away owner occupy buyers. The majority of offers that we are seeing on small plex properties are from owner occupy buyers using FHA and VA loans to buy. If you have your units tied up in leases, they may not be able to move into the property for several months or a full year causing these buyers to look elsewhere. These buyers are usually willing to pay more than the typical investment buyer and If you are looking to achieve retail values, these buyers may well be your best audience. For new tenants, consider a monthto-month agreement so that if you do encounter an ‘owner occupy’ buyer they will be able to evict the tenants within a reasonable amount of time and move in to the property.

have curb appeal and does it look livable? Things that may not scare away a seasoned multi-family investor have the ability to stop an owner occupier in their tracks before they ever even write an offer. You might need to hire a landscaper, or spend a few dollars on paint to make sure you give the right first impression.

2. Does your property have deferred maintenance that needs to be addressed? Items such as peeling paint, damaged exterior, missing smoke alarms or carbon monoxide detectors may prevent a FHA or VA loan from funding until they are fixed. Make sure you are asking your broker what you need to do to get the property in condition to qualify for a government backed loan.

3. Don’t let your broker put up For Sale signs in the yard or show your units without an accepted offer. The last thing you want to do is parade a large number of looky loos through the property disturbing your tenant’s peaceful enjoyment of their home. Plus, what do most tenants do when the find out the property they rent is for sale? They immediately start looking for a new place to live!

Tenants know there is usually a rent increase that comes with new ownership.

It is a great time to be a small plex property owner. If your plan is to hold your properties, rents are on the up and cash flows are looking better. If you are planning on selling your property take advantage of these prime market conditions.

It is not every day that residential buyers cross over into the multiThere are a few items you should family market. consider if you are trying to make By Chris Salaz your property more appealing to these owner occupy buyers aside Chris Salaz is Small Plex Broker at SMI Commercial Real Estate, LLC from passing on unwanted leases: . Please contact Chris if you would be interested in receiv1. Think about your small plex ing SMI’s free bi-annual newsthe same way you would if you letter which includes the most were selling your private resi- comprehensive rent and vacancy survey dence. I am not suggesting that in the mid-valley, the SMI Apartment Upyou stage the property or have date. 503.390.6060 Chris@smicre.com open houses. However does it

Rental Housing Journal Utah · July 2016

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Rental Housing Journal Utah

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Rental Housing Journal Utah · July 2016