Arizona Rental Housing Journal - August 2014

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Rental Housing Journal recently had a brief opportunity to get some great advice

from Arizona rental housing expert, Attorney Kevin W. Holliday of Hull, Holliday, & Holliday, PLC.

Q: As an Arizona landlord tenant attorney, if you were to give three pieces of advice to landlords and

property managers, what would they be?

A: 1. Everything should be in writing. Time after time we encoun-ter a tenant who claims the landlord made verbal promises outside the lease agreement (e.g., I’ll replace the dishwasher after you move in”). Anything the parties agree to needs to be included in the lease, or as an

addendum to the lease. If the tenant is required to have the carpets pro-fessionally cleaned at the end of the lease, make that a written additional term of the lease at the beginning. The more precise the parties are in the written agreement, the better. No one can come back later and claim they never agreed to that term.

2. Owning & Operating Rental Property

3. 3 Tips for Low, Middle & High Net Worth Peer-to-Peer Investors

5. Do You Have Insurance on Your Retirement Plan?

6. C23 Property Management Tips for Mastering E-mail©

7. Dear Maintenance Men:

9. The Post-Dated Notice to Vacate

9. Crime Free Multi-Housing Class in Tucson

10. Straw, Sticks, or Bricks…What is Your House Made Of?

continued on page 7

Metro Phoenix Apartment Market

Q2 2014

Apartment residents have long held in high regard such amenities as a fitness

center, a patio, a washer/dryer and a pool, but now of equal importance as those features is having high-speed community-wide Internet service.

Having high-speed community-wide Internet service is now among the most desired amenities accord-ing to a 2013 survey by the National Multi Housing Council. More than 70 percent of respondents said that it was important or very important.

Easy enough, right? Practically every restaurant and coffee shop you visit has wireless Internet service. Most libraries have it. Many college campuses do too. If the corner Star-bucks (and mid-block Starbucks and other corner Starbucks) can pull this off, surely you can too. Is it as simple as expanding the WiFi you already have running in your business cen-ter or around the pool area? It’s not.

As many an apartment manager has discovered, there are a plethora

of significant hurdles to setting up a WiFi system that provides consis-tent, fast and full coverage across a number of buildings and in open spaces.

It would be hard to design some-thing that would be tougher to bring WiFi to than an apartment commu-nity. Concrete. Stucco and wire fram-ing. Metal duct work. Hot-water heaters and washers and driers. Fire-

places. And any number of devices in each unit trying to connect to the Internet. In fact, everything apart-ment communities have in quantity interfere with the microwave level frequencies that WiFi uses.

The vastness of the area to provide coverage is yet another challenge. Most WiFi access points (AP) have an indoor broadcast range of be-

continued on page 4

Campus-Style WiFi Systems: The Amenity for Today

RHJ Asks… Kevin Holliday

By Kasten Long Commercial Group

Vacancy Rates Up – 1st Time Since Q4 2010

Vacancy rates for the 2nd quarter for stabilized 50+ multifam-ily properties increased from 6.5% to 6.8%. This is the first increase in 13 quarters. Vacancy rates for the 50-99 communities decreased 0.02% - but the 100+ increased by 0.36%. Of the 32 metro Phoenix sub-districts sur-veyed, 20 reported increased vacancy rates. Not included in the overall va-cancy rate are 16 recently completed projects (5,725u) in lease-up. Vacancy rates for each sub-district are posted on their web site www.KLCommer-cialGroup.com.

New Construction Remains Very Strong

In Q2, there were 12 new apart-ment projects started (3,389u), most-ly in Phoenix and Tempe. There are a total of 28 now under construction representing 7,496 units. Three proj-ects were completed in Q2 totaling 777 units, two in Chandler and one in Tempe. There are also 67 projects in various stages from initial rezon-ing to final permitting - representing 15,950 units. Details of each proj-ect and a map showing the location of the current construction activ-ity is posted on their web site under “Apartments’ – “Market Data”.

continued on page 8

2 Rental Housing Journal Arizona • August 2014

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Owning & Operating Rental PropertyI am fortunate, as the president

of the American Rental Property Owners and Landlords Associa-

tion – ARPOLA, to speak with mem-bers from all over the country. Usu-ally a member will call or email with a specific inquiry or problem. We are pleased to be able to help. If we do our job right, we take the opportuni-ty to discuss other aspects of owning and operating rental property. Virtu-ally every time, we hit on an issue that needs attention by the owner or property manager.

Just yesterday, a new member called and needed to get a tenant screening done right away. Natu-rally, we helped her by making sure she understood the differences in tenant screening products that are available in the market and directed her to the right place. During the discussion, I determined she owned eight rental properties all in her own name. A major risk, as there are sev-eral personal assets in addition to the rental properties that are all exposed to each other. We are helping her through this as well so that she will be informed and prepared to have a quality discussion with her asset pro-tection provider.

This type of phone call is repeat-ed often at ARPOLA and it got me to thinking. If you own rental prop-erty, you would be better served

if you separated in your mind the ownership aspects and the operat-ing requirements, whether you use a property manager or not. Let’s look at each separately starting with own-ership, as from my experience, it is an area of less focus.

Ownership aspects apply to every owner, as property managers usually don’t provide services in this area. Ownership aspects are unique to you individually and include how to hold title, protecting the asset, incorporat-ing asset protection into your estate plan, insurance and taxes. With the usual and absolute truthful disclaim-er that you should always discuss your personal needs with a qualified provider like your attorney, accoun-tant and insurance provider (and I am none of these), here is a brief look at each.

How to hold title – Rarely should you hold title to your rental proper-ty in your own name although I am amazed at how often this is the case in my discussions with members. If held in your own name, you expose all of your personal assets to any claim from your rental property and vice versa. The right entity for you depends on your unique needs and could vary by state.

Protecting the asset - You should strive to protect yourself from your rental property and your rental prop-

erty from you. You’ve worked hard for a long time to accumulate assets and wealth. You should not want to put what you have worked so long for at risk when significant protec-tion is available. A good asset pro-tection strategy will be specific to your current needs and evolve over time. A complete plan will include all your rental property and other per-sonal assets. It could be as simple as a single entity with a thorough oper-ating agreement or bylaws, or com-plex consisting of several entities and multiple levels of protection.

Incorporating asset protection into your estate plan – This step isn’t for everyone, but if you have accumu-lated significant net worth, it is a consideration. When I have a conver-sation about this with a member it usually starts with a comment about already having a revocable living trust. A revocable living trust is pri-marily a way to avoid probate. Your needs may be that simple or much more complex when you consider all your assets, whether you own other business, your extended family, etc.

Insurance – In my estimation, this is the most widely misunderstood as-pect of being a rental property own-er. In conversations with members, I get the feeling that they hold their insurance agent in the same regard as their surgeon. By that I mean, no

one has ever described their surgeon as the 29th best surgeon. Their sur-geon is always the “best”! Of course they are. How could you ever go un-der the knife thinking your surgeon wasn’t the best? It seems most rental property owners “trust” their insur-ance agent to always do what is best for them. Well, there are reasons in-surance companies have exclusions in their policies. They don’t want to cover certain things as the risk is too high. It is your responsibility to understand what isn’t covered. And decide if that is an acceptable risk for you. The areas I suggest you give at-tention are: is your property covered when vacant, what is covered when vacant, how long is coverage in effect when vacant, how is your deduct-ible applied, is there co-insurance, what are the potential costs to you with co-insurance if a claim is filed, etc. Another area is pool coverage. I have found several instances where the pool is excluded and the owner never knew it.

Tax strategy – Often overlooked, but very important is your tax strat-egy. This becomes more important as the number of properties increase. It gets more complicated as certain asset protection and estate plan-ning techniques are implemented. You need to use a CPA or tax attor-

continued on page 5

Rental Housing Journal Arizona • August 2014 3


‘You Need to Learn Enough to be Dangerous,’ says P2P Pioneer

3 Tips for Low, Middle & High Net Worth Peer-to-Peer Investors

After the economy crashed in December 2007, nascent online peer-to-peer lend-

ing platforms quickly grew. They’ve since evolved into an increasingly popular investment alternative to Wall Street and other traditional op-tions.

Peer-to-peer lending isn’t new and it’s no passing fad, says P2P pioneer Brendan Ross, president of Direct Lending Investments LLC, (www.dirlend.com), which runs a short-term, high-yield small business loan fund.

“It’s a rebirth of the simplest and oldest way of making money: one individual loaning money to another and getting paid back with interest,” Ross says.

What makes this new incarnation different is accessibility.

“Online lenders like IOU-Central and Prosper.com make it easy for prospective lenders to find and fund borrowers through a website,” Ross says. “These platforms have auto-mated the underwriting process, in-cluding checking credit and looking at applicants’ bank accounts, so they

can vet borrowers based on reliable information.”

Each online lending platform op-erates differently, but all vet appli-cants. The lender posts qualifying requests on its website, and private investors decide which to fund, ei-ther in their entirety or in part. At Lending Club, for instance, investors can choose to lend the entire amount requested by a borrower, or as little as $25 to multiple borrowers, which adds protection if one defaults.

Investors can manually choose which loans to fund, or they can ask the platform to choose within certain parameters. Yields on a portfolio of loans can be 10 percent or more, Ross says.

He offers these tips for investors in three tiered financial levels:

• Investing $10,000 to $24,000: Visit the Lending Club and Pros-

per.com websites, and choose the one that most appeals to you, Ross says.

“Open an account in a tax-de-ferred IRA and shift a portion of your investments out of stocks and into lending,” he says.

The reason for that is interest in-come is taxed at a higher rate than the capital gains from stocks. Deferring those taxes until you begin spending from the IRA will help keep a lid on your current tax bill.• Investing $25,000 to $100,000:

At $25,000, you have enough money to start getting professional advice about which loans to choose and how much to invest in each.

“I recommend going to www.lend-academy.com/invest because it’s run by Peter Renton, who’s very knowl-edgeable,” Ross says. “You choose between a conservative or balanced portfolio – I recommend balanced for higher yield -- and they’ll choose the loans for you and put them in your account.”

The fee is just 0.95 percent.

• Investing more than $100,000: Accredited investors have privi-

leged access – they can shop around for private fund pools, Ross says.

“As P2P matures, borrower cate-gories that have always had the high-est yields, such as small businesses, become available as private fund

pools that are managed to deliver the highest yields,” he says.

These pools form mutually ben-eficial relationships with the P2P lending platforms, allowing the platforms to serve a larger volume of borrowers. The private funds get well-vetted borrowers from the plat-forms and manage the funds to the maximum benefit of all their inves-tors.

“Everybody wins,” Ross says, “in-cluding the borrowers, who get fast loans at reasonable rates.”

About Brendan RossMoney manager Brendan Ross is a

peer-to-peer lending first adopter who has become an expert in this non-tradi-tional transaction. The president of Di-rect Lending Investments LLC, (www.dirlend.com), which runs a short-term,

high-yield small business loan fund, he previously ran a number of other

companies, including ReserveAmerica, the world’s largest outdoor recreation

reservation company.

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WiFi ...continued from front page

Owning & Operating ...continued from page 2

tween 25 to 100 feet, so dozens if not hundreds of AP units are required to create complete coverage. These AP units need to be installed with great care and must operate in coordina-tion so that all areas get coverage but that each signal doesn’t interfere with the other.

In most urban areas, all the other devices operating on the license-free radio frequency cause interference with WiFi systems, which weakens the signal and can cause interrup-tions. These devices include mobile phones, baby monitors, radios, two-way radios and other WiFi systems. Couple that with the small antenna most consumer devices have and you have connectivity issue.

Security is increasingly one of the biggest issues in setting up a WiFi system. Hackers target public WiFi systems that are weakly defended or are poorly designed, snooping about for sensitive information to ex-ploit. With the high-profile security breaches in the past few years, users are more conscience than ever of the need for top-quality security.

Perhaps the greatest hurdle in in-stalling community-wide WiFi in apartment communities has been the cost. The electronic hardware and cost of installing the equipment can easily top $100,000 (not to mention on-going maintenance), too great a price tag for most apartment com-munity owners to justify installing, leaving residents to each get their own Internet service.

But a few wireless internet ser-vice companies have developed new equipment, software and delivery methods that solve the issues that have long prevented apartment com-

munities from installing campus-like WiFi. A growing number of apart-ment communities are installing the service and marketing the much-de-sired amenity.

Residents of the Emparrado Apartments, a 154-unit community in Mesa, have been receiving high-speed Internet service since the spring. In addition to faster speeds, resident are most excited about be-ing able to unbundled service from cable providers, saving money, and in the flexibility of service, said Deb-bie Achs, property manager.

“I live here and I am dumping the Internet portion of my cable service,” she says. Most residents don’t want a land line phone, and a good portion want to drop cable TV service, given the increasing cost.

Having campus-style WiFi has made the property more attractive to potential residents, Achs said. “It's been the one amenity that every single potential resident has asked about,” she said. “It's been a huge in-fluence. It just opens the door to new and better things.”

How have wireless Internet ser-vice companies overcome the diffi-culties in having campus-style WiFi in apartment communities?

First, they’ve taken advantage of the high-speed and high-capacity data packages available directly from data center operators. By eliminating the cable or satellite dish companies from the equation, end users get In-ternet service at a fraction of the pri-or cost and the apartment communi-ty owners can establish a new profit source. Installation costs are typical-ly borne by the Internet service com-panies, who earn a return from the

monthly charge to end-users.“The technical solutions were dif-

ficult; we tried many designs that just didn’t perform,” said Rory Conaway, a well-known radio frequency engi-neer and owner of Phoenix-based Triad Wireless, which designed and installed the campus-style Wi-Fi sys-tem that was installed at the Empar-rado Apartments. “But we knew the market demand for campus-style WiFi was strong and worth the engi-neering and technical effort.”

At the behest of Red Hot-Spot Company, a start-up Internet ser-vice provider, Triad Wireless spent more than a year in R&D creating a proprietary Wi-Fi design for apart-ments. Access points are where end users connect to the Internet. Triad’s design uses access points that are a third the size of the smallest access point previously on the market. The small size and increase in power made it possible to design and build a campus-style WiFi system that overcomes stucco, steel, firewalls and a geographically spread com-munity, Conaway said.

Concurrently, Red Hot-Spot de-veloped a proprietary software system that manages each account separately, blocks external sharing, allows each household to have mul-tiple devices connected at any one time, manages gamers, and manages the revenue and service components.

“It seems like a simple task – hav-ing multiple users and multiple de-vices trying to connect from one apartment unit – but it was quite a challenge to develop the software to allow that to happen without con-nection and security issues,” said

Red Hot-Spot President Zach Spain.Security for end users was also

addressed in designing the cam-pus-style WiFi system, Spain said. Rather than users having to rely on the security filter on their home com-puter and devices, which are often outdated or over-matched, users of campus-style WiFi are protected by a commercial security system that filters out threats and dangers before they ever get reach users' computers.

“This is a level of security typical-ly found at Fortune 500 companies,” Spain said. “We knew we had to of-fer that kind of peace of mind on a WiFi system, given that it’s viewed as a shared system and because of the increasing level of threats on the Internet.”

The Phoenix-based company, which is just two years old, has in-stalled campus-style WiFi in a num-ber of communities in Phoenix and Tucson, and expects to start con-struction on dozens of communities throughout the Southwest by fall.

D.J. Burrough is a Scottsdale-based freelance writer. His work has appeared

in Urban Land Institute Magazine, The New York Times, The Dallas

Morning News, The Christian Science Monitor and The Arizona Republic. Red

Hot-Spot is a Phoenix-based wireless Internet service company that creates

campus-style WiFi in commercial and multifamily housing settings. For more

information contact Red Hot-Spot at www.redhotspot.net or call 1-800-468-

6851.

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METRO PHOENIX APARTMENT BROKERAGE EXPERTS

Contact us today for a market update!

Jim Kasten • (602) 677-0655www.KLCommercialGroup.comJim @KLCommercialGroup.com

• Representing owners and buyers since 1998• Over 1,000 apartment communities sold with over 1 Billion dollars in total sales• Unsurpassed “Client” dedication• Maximum value for your property

ney that fully understands rental property. Your tax advisor needs to be fully engaged in the discussions regarding asset protection and how it affects your taxes and cost of tax preparation. Another consideration is should you use cost segregation.

In my opinion, owning rental property is the best wealth strategy. You need to pay attention to owner-ship issues if you are going to realize your highest return and best protec-tion.

Smarter investing, Alan Langston Executive Director

Arizona Real Estate Investors Asso-ciation – AZREIA American Rental

Property Owners & Landlords As-sociation - ARPOLA 480-990-7092

www.AZREIA.org AZREIA serves its 1700+ members through chap-

ters in Phoenix, Tucson and Prescott providing extensive market informa-

tion, education, networking events and support. ARPOLA serves members in all 50 states providing assistance with

ownership and operational aspects of rental property.

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Do You Have Insurance on Your Retirement Plan?

You have insurance on your home, your car, your health. How about your retirement

plan?“People have homeowners in-

surance to protect against fires and floods,” notes independent financial planner Stephen Ng, founder and president of Stephen Ng Financial Group, (www.stephenngfg.com). “They buy insurance to replace their car if it gets wrecked and they buy health insurance to protect them-selves from medical costs.

“But for many people, their big-gest material asset is their retirement portfolio. When I look at a new cli-ent’s portfolio and ask, ‘Where’s your insurance?’ They look at me like I’m crazy!”

Insure your retirement fund by taking steps to safeguard at least a portion of it, Ng says. As you get closer to retiring, the amount you safeguard will be what you need to rely on for your retirement income.

“Your retirement income should be derived from guaranteed sources, such as Social Security benefits and your pension plan,” says Ng, a li-censed 3(21) fiduciary advisor, certi-fied to advise companies about their

401(k) and other retirement plans. “It’s the amount you need to pay the bills and do the other things you hope to do in retirement, so your re-tirement income needs to be a guar-anteed source of income.

“Then you look for your ‘play checks.’ That’s the money you don’t absolutely have to have, so you can still try to grow it, and take risks with it, in the market.”

Ng offers these tips for insuring your retirement plan:

• Invest a portion of your portfolio in annuities.

Annuities are long-term invest-ment options through insurance companies that guarantee you pay-ments over a certain rate of time, which could be the rest of your life or the life of your spouse or other sur-vivor. Note: The guarantee is subject to the financial strength and claims-paying ability of the issuing insur-ance company.

• If you leave your job, quickly roll your employer-sponsored 401(k) into an IRA.

While 401(k)s are a great tool for saving, particularly if your employer

is providing matching funds, if you were to die, the taxes your survivors would pay on your 401(k) would be much higher than on an IRA. That’s because they would have to inherit the money in a lump sum – that could easily take 35 percent right off the top. The lump-sum rule does not apply to IRAs. While your spouse would have the option to inherit your 401(k) as an IRA, your children would not. So, take advantage of your employer-sponsored 401(k), but if you leave the company, convert to an IRA or ROTH IRA. You can also begin transferring your 401(k) funds to an IRA at age 59½.

• Consider converting your IRA to a ROTH IRA.

For protection from future income tax rate increases, you should con-sider slowly converting your tax-de-ferred IRA funds into a ROTH IRA. Yes, you’ll have to pay the taxes now on the money you transfer, but that will guarantee that withdrawals in your retirement are not taxed – even as the money grows. If you plan to leave at least part of your IRA to your children, they’ll benefit from a fund that continues to grow tax-free.

About Stephen Ng Stephen Ng is the founder and presi-

dent of Stephen Ng Financial Group™ (www.stephenngfg.com). Since 1992, he has helped pre-retirees and retirees preserve and increase their wealth by,

in part, helping them avoid common mistakes. He regularly holds financial

management, retirement investing and insurance planning seminars at busi-

nesses, churches and non-profit organi-zations. Ng is a Chartered Life Under-

writer, Chartered Financial Consultant and a Certified Estate Planner. He is

also an Investment Advisor Represen-tative with SagePoint Financial, Inc.,

member FINRA/SIPC. He brings a national and international perspective

to his financial advice, with professional and educational roots in Australia and

Asia, and certifications in 19 states.

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Financial Planner Shares Tips for Protecting Your Savings



by Ernest F. Oriente, The Coach {Article #220…since 1995}

C23 Property Management Tips for Mastering E-mail ©

According to a recent survey by Matrix Information, three billion people around the

globe have access to Internet-based services and E-mail. In addition, this report expects electronic commerce to grow from $3.2 trillion in 2013 to $6.2 trillion by the year 2015. Is your property management company ready for these exploding communi-cation and marketing trends? Is your leasing team ready to handle the E-mail just sent by 15 new prospects re-locating from Paris or Moscow? Read the tips in this article and learn how easy it is to master E-mail and profit from it…it’s just a few keystrokes away!

Tips for using E-mail with prospective new residents:

Ask your leasing teams to always use spell check before sending an E-mail to a future resident

• Have your teams read each E-mail twice before they send it, just to make certain it conveys exactly what they are trying to commu-nicate and it portrays the profes-sional image important to your property management company

• When sending an E-mail, the sub-

ject line must clearly summarize what the body of the E-mail says

• If your leasing teams are using the E-mail “reply” feature to respond to a future resident, make certain they reply by including the infor-mation the prospect sent in their original E-mail note. In addition, ask your leasing teams to include the name of the future resident throughout their E-mail reply.

Tips for using E-mail within your property management company:

When your leasing teams are using E-mail to communicate inter-nally, make certain they understand when to respond by E-mail and when to call the person who sent the original E-mail, depending on the tone or content of the E-mail

• Explain to your leasing teams how and when to use carbon copy {cc} and blind carbon copy {bcc} with E-mail

• Have a written company policy regarding the use of E-mail, clear-ly outlining the rules and expecta-tions of your company. Have this document signed by each person who will be accessing your E-mail

software

• Explain to your leasing teams that deleting an E-mail does not remove it from their computer system nor from the system of the person the E-mail was sent to. During several recent lawsuits, damaging E-mails that had been deleted were used in the courtroom to the surprise of the individuals and their property management companies

• Instruct your leasing teams about the extra care required if they re-ceive an E-mail that has an at-tached document, as this is where most computer viruses are hid-den. Many property management companies do not let their leasing teams send or open attached files

• E-mail files can easily be opened and read so confidential informa-tion like salaries, financial reports, social security numbers or credit card numbers should not be sent by E-mail.

Tips for using E-mail as a marketing tool:

E-mail can also be used as a pow-erful marketing tool to attract new residents or to better service your ex-isting residents. Here are some tips: Aside from a small $15-$20 service charge per month, sending or receiv-ing E-mail is free. When compared to other forms of marketing…hav-ing your leasing teams send E-mails to new or existing residents is their least expensive form of marketing

• Imagine the marketing success your leasing teams will have if they had the E-mail address on the guest card of every future resident who visited their apartment com-munity over the past 12 months…and your leasing teams can stay in touch with these potential new residents for free!

• When your properties are using E-mail to handle resident questions

or maintenance requests, a timely response is expected and required

• Create two separate E-mail lists…one for future residents and one for current residents so you can send appropriate marketing infor-mation to each group

• Create an E-newsletter which can be easily sent out on a weekly or monthly basis. Remember, since sending E-mail is free, your leas-ing teams will have lots more flex-ibility. In addition, E-newsletters portray a professional image about your property management com-pany and are quick to be passed-along to others, thus expanding the reach and exposure for your marketing

• When sending E-mail, have your leasing teams develop a five to seven line signature which is auto-matically placed at the bottom of every E-mail they send out. This signature line will further pro-mote their apartment community, your corporate website and can be changed on a daily basis, if neces-sary

• Use E-mail to stay in touch with the media in your area, especially if your apartment communities have any exciting events or com-munity projects to announce

• The E-mail address at each of your properties should be included on every business card, every bro-chure, on any sales information and with all print advertising.

Want to hear more about this im-

portant topic or ask some additional questions about how to use E-mail as a powerful marketing tool? Send an E-mail to [email protected] and The Coach will E-mail you a free PowerHour invitation.

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Dear Maintenance Men: By Jerry L'Ecuyer & Frank Alvarez

Dear Maintenance Men:I am a firm believer in doing interior

and exterior inspections at my proper-ties. However, as I’m getting older, I find I am spending less time at the buildings, so I need to use my time constructively. What should I include in an inspection report to help me decide what work to do now or later?

Fred

Dear Fred:You are thinking ahead and that is

a good thing! Just because you visit the property less, does not mean the building requires less maintenance and as you know, routine mainte-nance issues evolve into costly re-pairs that could have been avoided. Here are some of the things we pay special attention to:

1: First and foremost, we look for potential hazards. Broken side-walks, poorly lit stairs, missing handrails; anything that can po-tentially cause an injury for a resi-dent or a guest. And, of course,

we make sure those fire extin-guishers are functional and fire escape areas are clear of clutter.

2: It is important to check building exteriors for cracks in the founda-tion, open crawl spaces and any places in brick work or stucco where water might get into the walls during heavy rain. This in-cludes making sure that caulking around vents and piping is suffi-cient. We do a similar inspection of the roof, looking for spots were leaks might occur.

3: Make sure that all of the proper-ty's windows close smoothly and securely and identify any broken panes. Windows that leak or col-lect condensation on the sills can create major problems down the road.

3: Fire Hazards such as dryer vents should be inspected to make sure they are clear of lint and debris. Chimneys are inspected for cracks and proper ventilation. Both gas and electric water heaters pose fire and water hazards. Electrical connections are checked as are gas lines along with water pipe connections and venting.

4: Biannual furnace filter inspec-tions at the end of fall and spring will keep your HVAC systems operating at peak performance, while ensuring dangerous condi-tions are not present.

5: The most costly and damaging of all deferred maintenance is water related.

Plumbing throughout the building must be inspected to make sure that seals are secure, faucets are not leaking and pipes are in good condition. Residents should be encouraged to report leaks and drips. A small leak under a cabi-net can create serious damage if left unchecked.

6: Inspect breaker boxes and all elec-trical equipment:

7: Include washing machines, ga-rage door openers and other me-chanical devices such as garbage disposal units and re-circulation pumps etc. in your inspections. Check for loose wires, water leaks and unsafe conditions.

This is only a partial list and indi-vidual buildings may differ in their needs.

Dear Maintenance Men:It is currently summer time and that

is when we get the most vacancies. How do I keep my residents from moving?

Denise

Dear Denise:According to the 2011 national res-

ident study, "Getting Inside the Head of the Online Renter," the number one factor in a resident's decision to renew a lease is "Quality of Mainte-nance Services."

Additionally, the current Satis-Facts Insite® Index for Work Orders indicates that 18% of all service re-quests are not completed right the first time. And of those, only one-third of residents received notifica-tion that there would be a delay in completing the request.

What the above means is poor maintenance service can lead to higher vacancies. It does not mat-ter if you have 10 units or 100 units; maintenance is a critical tool in the physical well-being of your property and the happiness of your residents. Think of it this way. A service call and parts may cost $250 to service

By Jerry L'Ecuyer & Frank AlvarezDear Maintenance Men:

RHJ Asks ...continued from front page

2 Rental property is a business. Whether you are a property manager with a large portfolio, or a landlord with a single rental, it is a business and should be treated as such. Once emotions become involved, the land-lord/tenant relationship can quickly deteriorate. As the Good Book says, “Be slow to speak and slow to an-ger”. Listen to your tenant’s con-cerns and respond in a professional, businesslike manner. Arguments and accusations do nothing to solve an issue.

3. Keep accurate, consistent re-cords. Each property and each tenant

should have a file containing every contact, addendum, notice, ledger transaction, and tenant interaction. Document everything. If you have a telephone conversation, or an in-person meeting, document the time, date and the substance of the inter-action in the file. Keep copies of all e-mail correspondence. The more ac-curate and consistent your records are the less complicated things will be should problems arise during the tenancy.

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www.rentalhousingjournal .com

Continued on page 11



Apt. Market ...continued from front page

Average Rental Rates For 50 - 99 unit size apartment’s,

rental rates climbed 2.9% since Q2 2014 while the 100+ unit’s increased 2.6% over the same period. The smaller size communities still out-paced the larger projects. The in-creased construction will put pres-sure on existing properties, but going forward, the new communities will skew the average rates with their in-creased rents.

Apartment Sales Volume Up – Es-pecially for 100+ Unit Communities

In the 2nd quarter of 2014, there were a total of 66 apartment sales with 10 units or more, including 3 REO sales. Fourteen of the 66 sales (21%) were “flips” – properties pur-chased within the past few years and resold for a profit. The number of projects sold with 100 or more units jumped from 10 in Q1 to 31, almost half the total sales. There were also two large broken condo sales (James-town and Allison Scottsdale Condos) and one Trustee Sale. Seven transac-tions included a 1031 exchange. In the mid-2000’s, most every transac-tion included an up leg or a down leg of a 1031 exchange. This was a pow-erful force in our apartment market

– and we expect this to happen again.

What’s Driving our Market? There is still significant money

looking for a home and multifam-ily investments appear safe plus of-fer attractive cash on cash returns – especially with the low interest rates and projected upside in value. Many of the larger properties are be-ing driven in this regard, especially REITs. A number of sales were made

with the intent to reposition the as-set – either from cash flow or in some cases, with a major cash in-

fusion. In some cases, properties are being “repurposed” – especially for assisted or long-term care facilities. Grand Canyon University, as part of their major campus expansion, pur-chased two properties in the 30th Av and Camelback area of central Phoe-nix (Colter Meadows and Camelback Vista).

Mortgage Interest Rates Everyone anticipates an increase

in loan rates, but the fact that they have not come off the bottom yet implies a very fragile economy. The question is however, not “IF” – but “WHEN”. The Federal Funds Rate is at a quarter point which is where it has been since December 2008. We may get through 2014 without much

if any increase, but 2015 will likely be a different story. Apartment lend-ers are hedging their bets by offer-ing excellent starter rates, but then bumping the rates after a few years – and then going to a variable rate. Whether you’re buying or refinanc-ing – these are great times. If you’re selling, realize that a buyer can pay more for your property with the low rates.

New Apartment Construction Continues.

As of Q2 2014, there were 95 proj-ects either under construction or in the permitting pipeline represent-ing 23,446 possible units. The domi-nant locations for the new apartment projects are in Tempe, in and around downtown Scottsdale, along the Metro Light Rail, along the southern Loop 202, along the northern Loop 101 and a few in-fill Phoenix sites. Another trend for new construction is along the metro Light Rail – espe-cially as it links the education hubs of downtown Phoenix, the ASU cam-pus in Tempe and east to the four new universities in downtown Mesa. With the slight up-tick in vacancy rates, it may be that the recently completed projects are starting to put pressure on the overall market.

Investment Opportunities We remain very optimistic about

multifamily offering solid invest-

ment opportunities in metro Phoenix. We strongly believe that our popula-tion increase will ramp-up, rental rates and thus values will continue to climb, and all the new construc-tion will mainly affect the larger class “A” properties. Having said that, we are not oblivious to the pending in-crease in mortgage rates, the lack of high-paying wages, the shortage of a skilled work force and the overall fragile US economy.

The Kasten Long Commercial Group specializes in apartment bro-kerage in metro Phoenix and has pro-vided detailed updates to apartment owners on the market since 1998. Their agents have brokered more than 1,000 communities with gross sales in excess of 1 billion dollars.

Jim Kasten, CCIMKasten Long Commercial Group

2821 E Camelback Road, Ste. 600 Phoenix, AZ 85016

602 677 0655 [email protected]

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Size Studio One Bedroom Two Bedroom50 - 99 $508 (1.18/sf) $602 (0.97/sf) $632 (0.77/sf)100+ $568 (1.24/sf) $702 (1.03/sf) $721 (0.88/sf)

3334 W. McDowell Rd. Ste. 20Phoenix, AZ 85009

Office: (602)218-8813 Fax: (602)218-8611Email: [email protected]

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The Post-Dated Notice to VacateAccording to urban legend,

there are teachers who will address their students on the

first day by stating “As of today, you all have F’s. It is your job to work your way out of the cellar to the grade you truly deserve.” Urban leg-end or not, I had such a teacher – AP English…senior year of high school. For fear of a 25-year grade reversal, I won’t mention said teacher’s name. Let’s just call him/her, The Professor.

The Professor was a piece of work; hard, brash, and unyielding in every sense of the word. The Professor treated everyone as if we were al-ready in college. Students with ex-cuses were often ridiculed and those who outright lied were made to exit the class altogether. The Professor had extremely high standards and very little patience. Everyone dread-ed their daily encounter with The

Professor and thought of graduation more like prison release day.

So, imagine the collective groan-ing when The Professor was tapped to represent the faculty and give a speech during the graduation cer-emony. The Professor, really? In the past, the faculty representative was always the “popular” teacher, the one who got the most screams and cheers from the graduating class. The year before, when my sister gradu-ated, the faculty speaker quoted Run DMC. That’s what we wanted – not some long, drawn out soliloquy by The Professor.

The Professor began with, “I want to open by stating three important facts. Yes, I was tough. Yes, I de-manded a full effort from each and every one of you. And yes, you have become better human beings for it.” The Professor went on to explain the

“work your way out of the cellar” philosophy tested a student’s moti-vation, tenacity and confidence. For a student’s grade go from an F to a B over the course of the year, purely based on effort, was more of a moti-vation than to tread water or to just get by with the minimum required to pass the course.

Years later, I still remember his closing, “Whether you’re swimming or treading water, your arms and legs are moving. The big difference is swimming gets you to the shore. Treading water gets you exhaustion.”

So how exactly does The Professor relate to our industry? Well, imagine a new resident arriving for move-in, happily looking forward to becom-ing a part of your community. Upon signing the final page of the lease, they turn in a post-dated notice to vacate. What they’re saying is, “I

have every intention of leaving after one year unless you can convince me otherwise.”

If you knew a resident was on their way out at day one, would you throw in the towel or prove them wrong? It’s the same as the out of the cellar philosophy. Motivation, tenac-ity and confidence mean everything to resident retention. Make the most of every resident interaction, have ready answers (not excuses) and demonstrate there is no better com-munity for your resident through un-paralleled service.

BY Lia Nichole Smith | VP – Edu-cation and Consulting | SatisFacts

Research and ApartmentRatings.com

p

Crime Free Multi-HousingClass in TucsonThe Tucson Police Department

offers a free of charge crime prevention program for multi-

family property managers and own-ers. Benefits of the program have included reduced exposure to civil liability, lower tenant turnover, low-

er maintenance and repair costs, and improved personal safety for ten-ants, landlords and managers.

Tucson Police Department's day-long eight hour course includes crime prevention theory, resident screen-ing, lease agreements, evictions, and

effective response to criminal activ-ity. Speakers include officers in the gang and drug units and attorneys. Class participation is encouraged and actual case histories are dis-cussed. The program is designed to be solution orientated.

Landlords can pay a high price for criminal activity. Property dam-age arising from abuse, retaliation, neglect or police raids can cost thou-sands. Fire resulting from drug man-ufacturing or growing operations can cause a property to be inhabit-able. Good tenants, intimidated by dangerous or criminal activity, will relocate to other properties and/or areas. Loss of rental income, higher expenses and declining property val-ues are the direct result of drug and criminal activity.

The last Crime Free Multi-Hous-ing class in 2014 will be offered from 8:00 AM to 5:00 at the Patrick J. Hard-esty Multi-Service Center 1100 S. Alvernon in Tucson on OCTOBER 9th, 2014. To register for the class, or for non-emergency assistance by a Crime Free Multi-Housing Coordi-nator, contact the operations division for the area, where the property is located:

• Operations Division South, (520) 791-4959 Ext. 114, Officer Terry

Parker

• Operations Division Downtown, (520) 837-7528

• Community Service Officer Moni-ca VanNorman

• Operations Division West, (520) 837-7241, Community Service Of-ficer Kara Curtis

• Operations Division Midtown, (520) 837-7428, Community Ser-vice Officer Becky Noel

• Operations Division East, Officer Sandra Perez, (520) 791-5735 Ext. 209

The Tucson Police Department has a highly trained team of Crime Free Multi-Housing Coordinators, familiar with issues, in their divi-sion of town. They are available to all landlords and property managers to eliminate criminal activity.

Jade Bossert is a licensed real estate broker, with Tierra Antigua Realty,

in Tucson. She specializes in the sale of apartment complexes and can be

contacted at 520-797-6900 or [email protected]

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Straw, Sticks, or Bricks… What is Your House Made Of?

When the big bad wolf, bet-ter known as online re-views, comes knocking at

your door, how solid is your commu-nity’s reputation? Think back to the children’s bedtime story, The Three Little Pigs. Each pig decided to leave home and seek their fortunes. Be-fore leaving, their mother told them, “Whatever you do, do it the best that you can because that is the way to

get along in the world.”The first pig decided to build its

house of straw, because it was the easiest, leaving him more time to play. Is your community built of straw? Are you doing just enough to get by? Residents living at a straw community may feel as though all they are to you is an apartment num-ber and a monthly check. Walking into your office, they may be second

in priority to prospects, a ringing telephone, or even a conversation among co-workers. Straw commu-nities are defenseless to the big bad wolf because cutting corners and in-different service are surefire triggers for negative reviews.

The second pig built its house of sticks. While stronger than the straw, this material had its own shortcom-ings. The second pig chose sticks because he could fashion a sturdy structure quickly and still have the rest of the day to play. Stick com-munities have great intentions when it comes to their residents however, consistency and longevity are often a challenges. By not providing a stel-lar level of service day in and day out, the big bad wolf has no problem lurking outside your door, waiting for an opportunity to pounce.

This brings me to the third little pig. While its brothers teased him because of the playtime he was miss-ing, this pig never wavered in his quest to build a solid structure. The third pig had a “one and done” men-tality. Building his house correctly the first time and preparing for the unforeseen proved to be beneficial for this little pig. The wolf tries to blow the house down and when that doesn’t work, the wolf decides to climb to the roof and enter the house through the chimney. Oh but the third little pig, always prepared for

the unforeseen, had a huge kettle of boiling water to meet the wolf as he came down the chimney, putting an end to the big bad wolf.

Brick communities, although resil-ient, are not immune to the big bad wolf. The wolf knows the communi-ty is strong and well-built, but can’t resist trying to take a shot at its repu-tation. Knowing that a strong online reputation begins with a first-rate onsite experience, brick communities put forth the effort to make the most of every resident interaction. They sacrifice the easy to make residents top priority on a daily basis. And when the wolf does try to get it, they are prepared with a ready response.

Protecting your community’s on-line reputation starts with having the right attitude (work hard, build it right, prepare for anything) along with facing the negative head on with a counter attack. As the mother of the three little pigs said in the be-ginning of the story, “Whatever you do, do it the best that you can be-cause that is the way to get along in the world.” Straw, sticks or bricks…who’s afraid of the big bad wolf?

BY Lia Nichole Smith | VP – Edu-cation and Consulting | SatisFacts

Research and ApartmentRatings.com

p



Dear Maintenance Men: ...continued from front page 7 The Coach: ...continued from front page 6

[email protected]

Interested in Buying or Selling Multi-Family Properties in Metro Tucson?FREE market analysis & automatic email alerts of newly listed properties.

Contact: Jade Bossert, Associate Broker successfully selling investment properties in Arizona since 1979.

Tierra Antigua Realty(520)797-6900 [email protected]

The Professional Approach to Apartment Inves ng

480.305.5600 | www.josephbernard.net

Joseph Chaplik President / Designated Broker

Arizona • • • Oregon • • • Washington

-

Apartment Brokers • Pre-Sale Analysis • Asset Management

1031 Exchanges • Property Clinic

a broken washing machine or water heater, resulting in a satisfied resi-dent. However, a resident having to live with a broken washing machine or intermittent hot water may elect to move rather than dealing with the hassle of calling in repeated service requests. That resident vacating will now cost the owner thousands of dollars in loss rent and rehab work to bring the unit back to rent ready condition. Good maintenance is a year round tool to keeping your in-vestment healthy and your residents paying the rent month after month.

Dear Maintenance Men:I have been hearing the term “Aging

in Place” more and more lately. What does it mean and how does it affect my apartment building?

Harold

Dear Harold:Aging in place is defined as liv-

ing in the community with a level of independence for as long as possible without the need of in home care. The biggest barrier to aging in place is our homes. Most homes and rent-al communities are ill equipped for long term aging in place residents. As an eye opening statistic, the Baby Boomer generation is 25 percent of

the population and the first of the Boomers turned 65 in 2011 and the last will turn 65 in 2029.

As apartment owners and man-agers, we need to pay attention to this aging trend and not be caught off guard. Aging in place means big-ger showers with wider doors, taller toilets, grab bars and bath sinks that will accommodate wheelchairs etc. As your units come up for rehab over time, think about these improve-ments; they might just be money in the bank for the long run.

Bio: Please call: Buffalo Mainte-nance, Inc for maintenance work or consultation. JLE Property Manage-

ment, Inc for management service or consultation Frankie Alvarez at 714 956-8371 Jerry L’Ecuyer at 714 778-

0480 CA contractor lic: #797645, EPA Real Estate lic. #: 01460075 Certified

Renovation Company Websites: www.BuffaloMaintenance.com &

www.ContactJLE.com www.Face-book.com/BuffaloMaintenance

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Author’s note: Ernest F. Oriente, a business coach/trainer since 1995

[32,320 hours], serving property man-agement industry professional since

1988--the author of SmartMatch Alli-ances™, the founder of PowerHour® [ www.powerhour.com ], the founder of

PowerHour SEO [ www.powerhourseo.com ], the live weekly PowerHour

Leadership Academy [ www.power-hourleadershipacademy.com/pm ] and

Power Insurance & Risk Management Group [ www.pirmg.com ], has a pas-sion for coaching his clients on execu-tive 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 re-

cruiting, investment banking, national utility bill auditing, national real estate

and apartment building insurance, SEO/SEM web strategies, national

WiFi solutions [ www.powerhour.com/propertymanagement/nationalwifi.html

], powerful tools for hiring property management SuperStars and build-ing dynamic teams, employee policy

manuals [ www.powerhour.com/prop-ertymanagement/employeepolicymanu-

als.html ] and social media strategic solutions [ http://www.powerhour.

com/propertymanagement/socialme-dialeadership.html ]. Ernest worked for

Motorola, Primedia and is certified in the Xerox sales methodologies. Recent interviews and articles have appeared

more than 8000+ 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 Com-pany, The LA Times, Fortune, Business Week, Self Employed America and The

Financial Times. Since 1995, Ernest has written 225+ articles for the property

management industry and created 400+ property management forms, business and marketing checklists, sales letters

and presentation tools. To subscribe to his free property management newslet-

ter go to: www.powerhour.com. Pow-erHour® is based in Olympic-town…Park City, Utah, at 435-615-8486, by

E-mail [email protected] or visit their website: www.powerhour.com

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Arizona Rental Housing Journal - August 2014

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Transcript of Arizona Rental Housing Journal - August 2014