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Continued on page 3

October 2013

Vol. 5 Issue 10

Get Social With The Landlord Times

Dear Maintenance Men:

We are thinking of offering free WiFi at our 25 unit apartment build-ing. What are the steps involved and what are your recommendations?Ryan

Dear Ryan:

Very interesting question! The short answer is hire a professional IT company who has experience in large wireless Internet installations.

For the long answer, we contacted Paul at Acutech Network Services, Inc. www.Acutech.net . We have worked with Paul’s IT company for over ten years knew he would have a good answer:

Today, consumer-grade wireless routers and access points are fairly easy to install and work well in most single family homes or small busi-nesses and they will provide good coverage over a 100-150’ area and mar-ginal coverage up to 200’. In a 25 unit building, one access point will not pro-vide the coverage you will need. Without seeing the building, my edu-cated guess is you will need about 6 access points. Now if you use con-sumer grade products, 6 access points will give you 6 totally independent SSID’s. (The SSID is what you see on your laptop or smart phone and con-nect to. Essentially, it is the connection point to the wireless network.) This will mean your residents will have to pick from one of 6 devices to connect to. For you, it will mean you will have 6 devices to manage, including man-aging passwords. And worse yet, because all these are independent devices, you may end up with “chan-nel conflicts” where two or more devices compete for the same channel and knock each other off. When this happens, your residents will experi-ence lots of dropped connections.

In situations like this, the proper way to setup wireless is to use a cen-trally managed, commercial grade system with multiple access points. The access points on these systems each give better coverage than a con-sumer grade product designed for sin-gle family homes. They also function more like a cell phone network. In other words, there is a single connec-tion point (or SSID) for the entire net-work. You can initially establish a connection at one end of the building

By Jerry L'Ecuyer & Frank Alvarez

Denver Colorado Market OverviewMultifamily Housing Update 2Q13 September 2013 by RED CAPITAL GROUP®

2Q13 Payroll Trends and Forecast

The Denver labor market exhibit-ed strong momentum during the second quarter as establishments added workers at a robust 33,200-job, 2.7% yearover- year pace, repre-senting the sixth consecutive quarter of 2.5% annual growth or faster. The 2Q13 result was on par with 1Q13’s 32,700-job advance, paced by rapid hiring among construction, energy and professional and technical ser-vice firms as well as food service and lodging concerns. Seasonally-adjusted data suggest that year-over-year comparisons may understate the strength of the labor market. This series indicates that Denver employ-ers created 16,600 jobs during 2Q13, the largest one-quarter add recorded since 1999. RCR found that home prices as well as the usual national income and payroll variables strong-ly effect Denver payroll growth, and in this case in a very positive way as metro home prices are expected to grow at 5.7% to 7.5% annual rates through 2017. Consequently, the forecast calls for sustained annual employment gains in the mid– to high-30,000-job range for the next several years.

2Q13 Absorption and Occupancy Rate Trends

Robust space demand persisted in the second quarter as tenants net leased 1,134 units, according to Reis, in line with 1Q13’s exceptional 1,154- unit absorption performance and more than three times the 2Q12 net total. Supply was largely offsetting, however, as developers completed 991 units, limiting sequential and

occupancy growth to 10 basis points to 96.2%. Axiometrics same-store surveys of larger properties uncov-ered a 95.6% 2Q13 average occupan-cy rate, up 50 bps sequentially and 50 bps year-on-year. Every Reis sub-market posted positive absorption with the exceptions of Aurora-South and Englewood, where total leased units were flat. Two submarkets posted occupancy rate declines (Denver-South and -North) entirely due to supply. Reis project that heavy supply will trim occupancy 110 bps by 2017. Our absorption model is considerably more optimistic, fore-casting that strong payroll growth and home price increases will drive further heavy apartment demand, contributing to a 170 bps tightening to 97.9% by YE2016.

2Q13 Effective Rent TrendsReis report that effective rents

increased $9 (1.1%) sequentially in 2Q13, representing the fastest growth recorded in a year. Expressed on a year-over-year basis, rents were higher by 3.5%, ranking Denver 8th among the RED 50 markets. Axiometrics surveys unearthed evi-dence of still faster growth in the large, professionally-managed stra-ta. This service found that same-store properties achieved a $71, 7.0% year-over-year advance to an aver-age of $1,085, up from a 6.3% 1Q13 metric. Properties constructed since 2012 recorded 2.0% sequential and 5.9% y-o-y advances, reaching a 2Q13 average rent of $1,444. Reis rent forecasts also are relatively con-servative, foreseeing peak gains of 4.6% in 2014, followed by gradual cooling to the low-2% range in 2017.

RCR models are considerably more optimistic again. The models suggest that strong absorption and supply trends and rapid home price appre-ciation will drive rents sharply high-er in 2H3 and 2014. Gains in the mid-4% range are possible in 2H13, accelerating to the 5%-6% area in 2014.

2Q13 Property Markets and Total Returns

Sales velocity decelerated during the spring quarter as buyers and sell-ers regrouped following an extraor-dinary six-month period in which more than 50 investment quality assets exchanged hands for total pro-ceeds of approximately $1.7 billion. Thirteen transactions valued at $5 million or more closed during 2Q13 for total proceeds of about $322mm. The average price of units sold was $116,978, up from $90,892 during 1Q13. Trade picked-up over the sum-mer as 17 properties exchanged hands during 3Q13 for over $475mm of proceeds and average price of $109,764/unit. Recent trade was heavily weighted toward suburban garden properties. B– and B+ class properties were valued at cap rates in the low– to mid- 5% range. Infill trophies are likely to continue to trade in the mid-4% area. To reflect the strong demand for Denver assets, RCR elected to edge the generic B+ cap rate down 15 bps to 5.0%. Applying this level and model derived occupancy, rent and termi-nal cap rate forecasts, we estimate that a Denver investor would expect to earn an 8.6% 5-year unlevered IRR, 4th highest among the RED 46 markets.

Payroll Job SummaryTotal Payrolls 1,281.1mAnnual Change 33.2(2.7%)2013 Forecast 32.8m2014 Forecast 36.9m2015 Forecast 38.8m2016 Forecast 39.0mUnemployment 6.8% (Aug.)

Occupancy Rate SummaryOccupancy Rate (Reis) 96.2%RED 50 Rank 5th 21stAnnual Chg. (Reis) 0.4%RCR YE13 Forecast 96.5%RCR YE14 Forecast 96.8%RCR YE15 Forecast 97.3%RCR YE16 Forecast 97.9%

Effective Rent SummaryMean Rent (Reis) $885Annual Change 3.5%RED 50 Rank 8thRCR YE13 Forecast 4.9%RCR YE14 Forecast 5.7%RCR YE15 Forecast 4.0%RCR YE16 Forecast 3.9%

Continued on page 2

2 The Landlord Times - Colorado • October 2013

COLORADOMarket Overview ...continued from front page

RED CAPITAL GROUP

For more information about RED’s research capabilities contact:

SubmarketEffective Rent Physical Vacancy

2Q12 2Q13 Change 2Q12 2Q13 Change

Arapahoe County $1,094 $1,138 4.0% 5.2% 4.0% -120 bps

Arvada / Broomfield $786 $824 4.8% 3.9% 4.8% 90 bps

Aurora-Central-Southeast $711 $722 1.6% 5.0% 3.2% -180 bps

Aurora-Central-Southwest $709 $737 3.9% 6.8% 5.0% -180 bps

Aurora-North $643 $670 4.3% 2.8% 3.2% 40 bps

Aurora-South $986 $1,016 3.0% 4.6% 4.1% -50 bps

Denver-Central $943 $968 2.7% 4.0% 3.5% -50 bps

Denver-Downtown $1,075 $1,118 4.0% 1.8% 7.9% 610 bps

Denver-Far Southeast $740 $757 2.2% 4.3% 3.6% -70 bps

Denver-North $1,440 $1,452 0.8% 8.4% 10.6% 220 bps

Denver-Northeast $878 $908 3.5% 4.0% 4.7% 70 bps

Denver-South $782 $819 4.7% 5.0% 4.2% -80 bps

Denver-Southeast $767 $799 4.1% 3.8% 2.3% -150 bps

Douglas County $1,058 $1,088 2.9% 3.5% 3.2% -30 bps

Englewood / Sheridan $741 $754 1.7% 4.4% 4.4% 0 bps

Golden / Wheat Ridge $805 $829 3.1% 3.0% 2.0% -100 bps

Lakewood-North $760 $776 2.2% 4.8% 3.3% -150 bps

Lakewood-South $918 $944 2.9% 2.5% 2.0% -50 bps

Littleton $829 $851 2.7% 7.1% 4.5% -260 bps

North Glenn / Thornton $801 $835 4.3% 4.6% 3.8% -80 bps

Westminster $782 $807 3.2% 4.3% 3.2% -110 bps

Metro $855 $876 2.5% 3.9% 3.8% -10 bps

SUBMARKET TRENDS

Daniel J. Hogan, Director of Researchdjhogan@redcapitalgroup.com614-857-1416

James P. Hensley, Senior Managing DirectorHead of Mortgage Originationsjphensley@redcapitalgroup.com800-837-5100

Trade & Return Summary$5mm+ Sales 13Approx. Proceeds $322mmAvg. Cap Rate (FNM) 6.5%Avg. Price/Unit $116,878Expected Total Return 8.6%RED 46 ETR Rank 4thRisk-adjusted Index 3.61RED RAI Rank 21st

RED CAPITAL Research | October 2013

MARKET OVERVIEW 2Q13 | DENVER, COLORADO

Property Name (Submarket)Property Class/Type (Constr.)

Date ofTransaction

Total Price /<Appr. Value>(in millions)

Price /<Appr. Value>

per unitEstimatedCap Rate

Legends at Lowry (Glendale) A-/GLR (2012) 30-Apr-2013 $27.8 $185,000 5.8%

Broadstone Cornerstar (Aurora-South) B+/GLR (2009) 22-Jul-2013 $68.1 $170,282 5.1%

Belmar Villas (Lakewood-South) B / GLR (1970) 28-Jul-2013 $40.6 $127,516 5.4%

Arabella (Aurora-South) B-/GLR (1980) 31-Aug-2013 $20.2 $129,167 5.3%

Avena Apartments (Northglenn/Thornton) B / GLR (2008) 25-Sep-2013 $61.3 $159,091 5.1%

NOTABLE TRANSACTIONS

96.2%

96.8% 97.0%97.8% 98.1%

86%

88%

90%

92%

94%

96%

98%

2Q 07 2Q 08 2Q 09 2Q 10 2Q 11 2Q 12 2Q 13 2Q 14 2Q 15 2Q 16 2Q 17

Avera

ge

Occupancy

Rate RED 46 AVERAGE DENVER

Metro Occupancy Rate TrendsSource: Reis History, RCR Forecasts

6.4% 6.5% 6.6%6.4% 6.3%

5.9%

7.7%

8.5%

6.5%5.6%

5.8%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13

Ave

rag

eC

ap

Ra

te

MOUNTAIN REGION DENVER

Metro Cap Rate TrendsSource: eFannie.com, RCR Calculations

-2,000

0

2,000

4,000

6,000

8,000

2Q 07 2Q 08 2Q 09 2Q 10 2Q 11 2Q 12 2Q 13 2Q 14 2Q 15 2Q 16 2Q 17

Unit

s(T

12

Mo

nth

s)

ABSORPTIONS COMPLETIONS

Metro Absorption and Supply TrendsSource: Reis History, RCR Forecasts

The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting orfinancial advice, or recommendations to buy or sell currencies or securities or to engage in any specific transactions. Information has beengathered from third party sources and has not been independently verified or accepted by RED CAPITAL GROUP. RED makes no representa-tions or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report.RED cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third partysources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer toparticipate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please con-sult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed herein are subject to change with-out notice due to market conditions and other factors.

MARKET OVERVIEW 2Q13 | DENVER, COLORADO

RED CAPITAL Research | October 2013

3.5%4.3%4.5%

5.8%3.8%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2Q 07 2Q 08 2Q 09 2Q 10 2Q 11 2Q 12 2Q 13 2Q 14 2Q 15 2Q 16 2Q 17

Yo

YR

en

tTr

en

d

RED 46 AVERAGE

DENVER AXIOMETRICS SAME-STORE

DENVER (REIS/RCR)

Metro Effective Rent TrendsSources: Reis, Inc., Axiometrics, RCR Forecast

7.5%

8.9%

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

2011 2012 2013f 2014f 2015f 2016f 2017f

Y-o

-Y%

Ch

an

ge

U.S.A. DENVER MOUNTAIN REGION

Metro Home Price TrendsSource: FHFA Home Price Indices and RCR Forecasts

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2011 2012 2013f 2014f 2015f 2016f 2017f

Y-o

-Y%

Ch

an

ge

U.S.A. DENVER

Metro Payroll Employment TrendsSource: BLS, Institute for Economic Competitiveness at UCF & RCR

To contribute an article call 503-221-1260

or email info@propubinc.com

COLORADO

The Landlord Times - Colorado • October 2013 3

COLORADO

Dear Maintenance Men ...continued from front page

By Katie Poole

Putting yourself in the tenants shoes may not be something you’ve done often, if ever. As

our clients, it’s very important to know what tenants want and what will make your best residents rent long-term. High tenant satisfaction can not only enhance retention and occupancy rates, but also lower expenses and improve your bottom line. With so much riding on the sat-isfaction of your tenants, it is criti-cally important to stay close to their priorities, perceptions and concerns.

To be heard is a universal human need, and our tenants are no excep-tion. Treat an existing tenant the way

you’d treat a new one. From the first meeting through the end of the ten-ancy, practice active listening. This means don’t interrupt them, main-tain eye contact when in person, acknowledge what they’ve said and repeat back what you’ve heard to make sure they feel understood. Take an interest in each resident’s busi-ness and stay in touch with them regularly, not just when they com-plain or it’s time for a renewal. When a tenant calls to complain, you should listen, empathize, and solve the problem. Don’t make excuses. Most often tenants just want some-one to listen to their stories or con-cerns.

Keep all lines of communication

open with your residents. Don’t be a stranger. It’s not enough simply to provide a lot of services to tenants. Being available in person can sway that renewal decision. Be timely in your responses to requests or ques-tions your tenants will have. Not only are we bound by laws in our response times to some repair requests, but it is also a good busi-ness practice to respond within a reasonable time. Recap conversa-tions in writing to maintain a paper trail of important communications. If you’re going to be unreachable at any time, be courteous and let them know how to handle any emergen-cies in your absence as you would expect this of them contractually.

While it’s important to stay in touch and build a good working relationship with your residents, you also need to respect their need for privacy. Don’t make up excuses to “stop by” or leave notes for your ten-ants at the property unless absolute-ly necessary. Not only could this be construed as harassment but it can also be annoying. The rental is their home. By law, you must give tenants plenty of proper notice before pay-ing any visits to the property. Make clear your inspection policies and practices at move-in so that it is clear when they can regularly expect you.

Lastly, would you live in your rental comfortably if you had to? Is

What Renters Want

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COLORADO

(let’s say through access point #1) and then walk to the far end of the building without dropping a connection. As you move away from access point #1 and your signal becomes weaker, the central management device tries to find you another access point to con-nect to with a stronger signal and man-ages the handoff in such a way that the connection does not drop … essentially the way a cell phone network works.

Given these systems work with a single router & firewall, you will only need one connection to the Internet, you will only have one SSID for your entire network, and you only have one central place to manage passwords.

The downside of these systems is they are more expensive than con-sumer grade products and are much more complicated to program which is why I recommend the use of someone who specializes in this technology.

Dear Maintenance Men:I have 25 or so units (condos/

houses) all spread out and I am not sure how to handle keys. I hate to think that a previous resident will come and access the unit after they have moved out, but the $50 replace-ment of the lock has prevented me from replacing it every turn. I have heard about those easy to rekey locks

where you simply put a pin in the front of them. Do you have any ideas how to manage this?

Brian Dear Brian: As you are aware, you should always change locks on a unit turnover. You never know who might have keys to that unit. I think we can find a simple solution to your problem. Since your units are spread out and not all in the same building, a swap system can be put into place. Supply yourself or your maintenance team with two or three lock sets and when you get a vacancy, swap out the existing lock set with the spare set. The unit now has a new or different lock set and the old lock set can now be swapped into another unit the next time you have a vacancy. This system only works safely if your units are spread out geographically.

Another system that works very well with all rental units is the Kwikset Key Control Deadbolt system. This system allows the owner or manage-ment company to have one master key and the ability to rekey the lock with-out removal. It only takes a few moments to rekey a deadbolt. With this system, a temporary vendor key can be setup while the unit is being made rent ready. When the unit is rented, simply rekey and hand the new

resident their new apartment key. http://www.kwikset.com/SmartSecu-rity/Key-Control.aspx

Dear Maintenance Men: What is a pre-hung door and why

would I want to buy one over a regu-lar door?Matt

Dear Matt:Pre-hung doors come already

installed in the door frame. The com-ponents include the door, outside frame and the hinges. Before the advent of “Pre-Hung Doors”, hanging a door required a skilled installer. Now a door can come already in its frame with the hinges in place. You must start with a rough opening, which means the old doorframe must be removed. The skill required is mini-mal and you can often do a profes-sional looking job the first time.

COLORADO

QUESTIONS? QUESTIONS? QUESTIONS?

We need more Maintenance Questions!!!

To see your maintenance question in the “Dear Maintenance Men:” column, please

send submission to: Questions@BuffaloMaintenance.com

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4 The Landlord Times - Colorado • October 2013

COLORADO

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the yard manageable? Do the appli-ances work consistently and to their potential? Is the unit weatherized to help keep the energy bills reason-able? Your rental should be a place that you can be proud of and that tenants will maintain with integrity. If you make sure that your property stands out as well-kept, then you can ask for slightly higher rent rates than those that don’t. Be flexible in your concessions. If tenants are offering to make improvements and they won’t be able to take with them at move-out, help them out. Help can mean purchasing the materials

for a desired project while the ten-ants pay a contractors labor, or split-ting the costs with your renters to add new internet jacks to a back bedroom. Spending on upgrades may hurt the bottom line over the short term, but improvements will pay dividends in long-term tenants. Offer a fair deal, use comps to explain your offer, and communi-cate your position clearly. If a prop-erty is well-maintained, it gives ten-ants a reason to stay.

COLORADO

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Landlady Katie ...continued from page 3