Arizona Rental Housing Journal November 2014

Professional Publishing Inc.PO Box 6244, Beaverton, OR 97007 Current Resident or

PRSRT STD US

Postage PAIDSeattle, WAPermit #741

Advertise in Rental Housing Journal ArizonaCirculated to over 10,000 Apartment owners, On-site, and

Maintenance personnel monthly.

Call 503-221-1260 for more info.

October 2014 - Vol. 6 Issue 10Rental Housing Journal Arizona

WWW.RENTALHOUSINGJOURNAL.COM • PROFESSIONAL PUBLISHING, INC

A Monthly CirCulAtion to More thAn 10,000 ApArtMent owners, property MAnAgers, on-site & MAintenAnCe personnel

I follow the market closely. Spot-ting trends is important to our members, as any insight to the

future is very valuable to real estate investors, including rental property owners who manage their own prop-erty, as well as property managers providing good counsel to their cli-ents.

Every month through ARMLS®, I track the number of closed leases. ARMLS makes this easy with their RENT Check™ chart. Since January, we are seeing the number of closed leases down virtually every month from the same month last year. While several factors may play into this (discussed later), it is the first time in 14 years we have seen an adjustment to the prevailing trend. I recently

saw a chart from Tina Tamboer of the Cromford Report showing the data on an annual basis reflecting about a

9% drop. This more clearly reflects the trend and I have included it below.

2. Industry Review: The Home Depot & ARPOLA Discount Program3. 5 Strategies to Ensure Family Business Success4. 4 Principles for Staying Cool Under Pressure – and Succeeding

8. Dear Maintenance Men:9. Not Screening Tenants? You May Attract the Industry’s Cast-Off Renters10. For All Those New Female Entrepreneurs, the 5 C’s for Building a Successful Business

The Kasten Long Commercial Group (KLCG) has specialized in multifamily brokerage in

metro Phoenix since 1998 and over the years has helped many investors significantly increase their net worth by starting with small properties and then moving into larger apartment communities. The progression from small to large is obvious – and it’s important to understand what loans might be available as you step-up in the size and value of your properties. We’ve asked two mortgage profes-sionals for their insight. See if you can follow a few key points: who guarantee’s the loan, the cost for the loan, and the differences in pre-pay-ment.

Residential Financing (1 to 4 units)

Almost everyone starts their continued on page 6

Understanding Financing as Your Portfolio Increases

Trouble on the Horizon?

Landlords, from time to time, have to file with the appropri-ate court to evict their tenants.

This procedure is called an Eviction Action, also known as a Special or Forcible Detainer Action. Evictions are filed for nonpayment of rent, vio-lation of the lease, or failure to move after written Notice. While most of these cases are routine in nature, a landlord should be aware of follow-ing the proper procedures. Failure to do so can result in the case being dismissed and, if the tenant is repre-sented by an attorney, paying the ten-ant’s attorney’s fees.

Some of the more common ways to lose your case are the following. First, and foremost, is not complying with the Notice requirements of the Arizona Residential Landlord and Tenant Act. Before a landlord can even file an eviction action through the courts, the tenants must be given proper written Notice. Also, the Notice must be properly served or delivered to the tenant.

Service of a NoticeThere are only two ways to legally

serve a tenant a Notice. One is per-sonally handing the Notice to the tenant or an occupant of suitable age at the tenant’s residence. The other method is sending the Notice certi-fied or registered mail, but you can-not start the running of your Notice period until either five days after mailing or after the tenants sign for the mailing, whichever occurs first. Posting of Notices on doors is not legal serve of Notices. Failure to legally serve the Notice will result in

www.rentalhousingjournal .com

continued on page 3

How to Lose an Eviction Case

Trouble on the Horizon?

I follow the market closely. Spotting trends is important to our members, as any insight to the future is very valuable to real estate investors, including rental property owners who manage their own property, as well as property managers providing good counsel to their clients.

Every month through ARMLS®, I track the number of closed leases. ARMLS makes this easy with their RENT Check™ chart. Since January, we are seeing the number of closed leases down virtually every month from the same month last year. While several factors may play into this (discussed later), it is the first time in 14 years we have seen an adjustment to the prevailing trend. I recently saw a chart from Tina Tamboer of the Cromford Report showing the data on an annual basis reflecting about a 9% drop. This more clearly reflects the trend and I have included it below.

I have written, in this publication, about the unmistakable strength of the rental market throughout every market cycle of the last decade, including the bubble and bust. So, does this trend indicate the first signs of a decrease in demand for rentals? The answer – we don’t know, yet. We are seeing rising rent rates, low days on market and reasonably normal seasonality. All of these would indicate continuing strong demand. The trend, however, emphatically shows that we all need to watch it very closely and be prepared to adjust our approach to how we operate. If demand is lessening, what are the possible actions you might take? Well, a few different scenarios could play out. Here are a couple:

• A reduction in demand without a decrease in supply – This would normally affect price to the downside and increase length of vacancies. Increasing your marketing or locking current tenants into a longer lease term could protect you in this scenario.

• A reduction in demand and a corresponding reduction in supply – Little to no price impact or significant change to days on market.

What if the current trend isn’t a statement on a reduction in demand? This could easily be true. Maybe fewer properties are being leased through MLS as owners and property managers are marketing in

continued on page 5

2 Rental Housing Journal Arizona • October 2014

RENTAL HOUSING JOURNAL ARIZONA

Our industry is changing, and technology is one of the drivers of this change. That

is why I was interested to read the press release on the new partnership between ARPOLA and The Home Depot. The benefits of this partner-ship directly affect Rental Housing Journal readers. Specifically, The Home Depot now has a way to treat you – the rental property owner, property manager and service pro-viders on rental property – differ-ently based on how you do business.

The program has three major

components:

• Savings specific to three primary times work is being done on rental property – maintenance and repair, rent turns and property improvement/updating. It includes exclusive pricing discounts, special product offers, volume pricing, coupons and even a time and cost saving delivery option.

• Information and education on the right solution to your problem the first time – knowing what to buy and saving when

you do. While this may be more important to less sophisticated owners and operators of rental property, the information may prove to help even the most advanced operator.

• Advanced management tools to simplify and control your purchases.Will you save? There’s no doubt

that you will. The everyday exclu-sive pricing discounts up to 5% are clearly posted right on ARPOLA’s website. The discount is based on product category. You will receive 5% on plumbing and hardware, 4% on appliances, electrical and light-ing, and lesser amounts in other cat-egories. The current Special Product Offer is 15% off on smoke detectors. This is significantly better than The Home Depot’s current retail promo-tion during Fire Prevention month. It is also important to you, as many local laws and building codes have been updated to require the new 10 year battery life. If you have a larger purchase of $200 or more, you receive a coupon for $20 off when you regis-ter for the program, potentially a 10% savings. How much you save depends on your needs and how

well you use the different aspects of the program.

Not every aspect of the program is ideal, as you may have to change the way you purchase to reap some of the benefits. This is true for receiv-ing the exclusive price discounts in the program. When you join ARPOLA and register for the Home Depot Program you are given access to ARPOLA’s exclusive purchasing portal with The Home Depot. You buy directly through this portal on-line then pick up your purchase in the store, or have it delivered. While not completely intuitive, the portal works very well and has several tools to assist in making the buying process easy. It is expected to save you a lot of time, as well. For some of you, this way of purchasing will be easier and more time efficient. For others, the change could prove to be cumbersome. As a society, we are ordering more and more of what we buy on-line. In the future, this may prove to be the primary purchasing process for your rental properties, too. It all seems headed that way.

The informational and education-al component is just getting started, so it is difficult to analyze the impact

Industry Review: The Home Depot & ARPOLA Discount Program

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]

$1700STARTING AT

Apartment Signs

[email protected]

18” x 24” signs in your choice of designs at affordable prices

by RENTAL HOUSING JOURNAL

2014 PROFESSIONAL PUBLISHING, INCsigns.indd 1 5/30/14 3:59 PM

$1700STARTING AT

Apartment Signs

[email protected]

18” x 24” signs in your choice of designs at affordable prices

by RENTAL HOUSING JOURNAL

2014 PROFESSIONAL PUBLISHING, INCsigns.indd 1 5/30/14 3:59 PM

... continued on page 5

Rental Housing Journal Arizona • October 2014 3


dismissal of the eviction.

Proper Wording of a NoticeThe language of the Notice must

also be properly worded. For instance, a five-day Notice to pay or move must identify the tenant, address of property, amount of rent past due, late charges due under the lease, and if rent is not paid, legal action will be taken to evict them. Simply writing “your rent is late, please pay” or something similar would not be adequate to inform the tenant of the allegations against them. Also, if the tenant is given a Noncompliance Notice to correct behavior or violations (e.g. unau-thorized pets or occupants, not main-taining the rental, etc.), the Notice must be very specific as to what the alleged violation is, when it occurred and any other information to inform the resident of the violation.

Non-compliance by the Landlord

Another possible way to lose your eviction case is to not do necessary or needed repairs to the premises when requested by the tenant. Landlords have a duty to make all necessary repairs and many courts may not evict a tenant if the landlord deliber-ately or negligently does not do these repairs. Tenants can claim retaliation

by the landlord for failure to make repairs and the remedy is a defense to the eviction, plus two month’s rent or actual damages, whichever is greater.

Suing After Regaining Possession

Other possible defenses are the tenant has moved and no longer occupies the rental. An eviction is only to regain possession of the rent-al property and if the tenant has moved and returned keys, there is no issue of who is entitled to possession for the court to determine.

Be Professional, Be Prompt, Be Prepared

An unwritten defense is not being prepared when you come to court, not having witnesses who have per-sonal knowledge of the violation, being rude or argumentative to the judge. The golden rule applies – “be professional, be prompt, and be pre-pared”.

Andrew M. Hull, Esq.HULL, HOLLIDAY &

HOLLIDAY, PLCwww.doctorevictor.com

602-230-0088

Non-family businesses can learn a lot from fam-ily businesses, says Henry

Hutcheson, a certified Family Busi-ness Advisor and founder of Family Business USA consultancy.

“Family businesses outperformed non-family businesses during the boom years leading up to the 2008 recession, and during the 2001 and 2008 recession years,” he says, citing a recent Harvard Business Review study.

Hutcheson, author of the new book, “Dirty Little Secrets of Family Business,” (http://dirtylittlesecret-soffamilybusiness.com), says family businesses were less likely to lay off workers during the lean times, and more likely to maintain their empha-sis on socially responsible programs.

But that’s just the businesses that survived.

“Many closed their doors,” he notes.

With 25 years of business man-agement and family business con-sulting experience, Hutcheson says he’s seen the patterns that can lead to major problems. And they’re almost always preventable.

“The factor that enables family businesses to rise to the top is trust: Family members can potentially trust one another far more than non-family members,” he says. “But trust can erode – when a family member can’t or won’t perform at the neces-sary level; when there’s a sense of entitlement; drug abuse; laziness. And that can have serious, business-killing consequences.

“If the business is professional-ized, there will be a way to deal with those issues. But too often, safe-guards are not in place.”

Hutcheson offers five top success strategies for family businesses:

Keep the lines of communication

open. Schedule regular family meet-ings to discuss issues of concern and topics such as business transition, business performance, and responsi-bilities. Include all of the family members, no matter where in the hierarchy their jobs fall – exclusion creates animosity. Create a family manual that lays out the ground rules for how the meetings will take place to ensure everyone gets a chance to be heard and impediments to communication are left at the door.

Assign clear roles and responsi-bilities. As a family member, it’s natural to feel that everything is “my” business. However, not every-thing is every family member’s responsibility. Job definitions pre-vent everyone from jumping in to tackle the same problem, and help ensure the business runs smoothly.

Keep good financial data. The downfall of many small businesses and family businesses is not having solid data. Have a single point of contact to manage the finances. If you’re small enough, you can rely on a family member. Otherwise, you’ll need to bring in a qualified accoun-tant. You may cringe at the cost for

this, but the difference between a good accountant and a bad one is the difference between knowing exactly where you are on the road and try-ing to drive with a mud-covered windshield.

Avoid overpaying family mem-bers. Market-based compensation is fundamental and essential. Parents in family businesses tend to overpay the next generation, or pay everyone equally despite differing levels of responsibility. Both are bad practic-es. The longer unfair compensation practices continue, the messier it will be to clean up when it blows up.

Don’t hire relatives if they’re unqualified. Competence is key. Family businesses are a conundrum: The family aspect generates unquali-fied love, while the business side cares about profits. Thus, family members will be hired to provide them with a job, even though they’re not qualified. The remedy is to get them trained, move them to a role that matches their skills, or have them leave.

“More than 70 percent of all busi-nesses are family businesses – they account for a significant number of

continued on page 5

Eviction Case ...continued from front page

1/8 Page4 7/8” x 3 5/8” bwOn-Site4

ON-SITE-NW SEATTLEVALLEY, METRO, ARIZONA APT. NEWSSalsbury IndustriesFeb, Apr, Jun, Aug, Oct, Dec

1010 East 62nd Street, Los Angeles, CA 90001-1598Phone: 1-800-624-5269 • Fax: 1-800-624-5299

1/8 Page4 7/8” x 3 5/8” bwOn-Site3a

ON-SITEVALLEY, METRO, ARIZONA APT. NEWSSalsbury Industries

Jan, Mar, May, Jul, Sep, Nov,

The Industry Leader in Quality

Order Factory Direct!Contact Us Today for a Free Catalog!

1010 East 62nd Street, Los Angeles, CA 90001-1598Phone: 1-800-624-5269 • Fax: 1-800-624-5299

Octoberp September

p

5 Strategies to Ensure Family Business SuccessAdvisor Shares Tips for Avoiding Common Problems

www.rentalhousingjournal.com



PROPERTY NAME

NAME

CITY STATE ZIP

Send for your FREE subscription to Professional Publishing, Inc., PO Box 6244 Beaverton, OR 97007 • (503) 221-1260 • fax (503) 221-1545

EMAIL ADDRESS PHONE

ADDRESS

RHJ ARIZONA FREE SUBSCRIPTION

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

We all ask ourselves the same desperate question from time to time:

How am I going to make this work?!“No matter how well we’ve done

laying the groundwork for every-thing to run smoothly – becoming educated, choosing the right spouse, treating others well -- we all face sit-uations that challenge us,” says Dr. Robert J. Cerfolio, a world-renowned cardiothoracic surgeon known as “the Michael Jordan of lung sur-gery.”

“If we can keep our cool and adhere to some basic principles, we can not only meet any challenge – we can perform with excellence.”

A high-performance athlete in high school and college, Dr. Cerfolio parlayed his talents and focus into pursuing his medical career and cre-ating a happy family with his cher-ished wife, Lorraine, and their three sons.

But after battling breast cancer, Lorraine recently passed away. Cerfolio, author of “Super Performing at Work and at Home: The Athleticism of Surgery and Life,” (www.super-performing.com), shares the princi-ples that helped him through that greatest of all challenges and lesser ones along the way.

“Apply these principles in work, sports and life in general, and you can become a super performer,” he says.

Pressure equals opportunity. It’s when something matters that the pressure starts to build; this is where the rubber meets the road for sports-to-life analogies.

“In sports as in life, remember your training; follow through just like you did during practice; visual-ize success; believe it will happen,” Dr. Cerfolio says. “With friends, for example, high-pressure moments can be those times when they need you. The best way to have great friends is to be a great friend.”

Strive to hit .400 every year – keep your eye on the prize; write it down. “My high school gave out an award each year to the best student athlete in each grade,” he says. “I wrote down that I wanted to win the Klein Award in the ninth, 10th and 11th grades, and to win the most presti-gious award at the senior gradua-tion, the Deetjen Award.

He accomplished most of those goals, and a key to those achieve-ments was writing them down and placing the paper where, for four

years, he could see it every night.“By writing them down, I had

made my goals clear and objective.”

Lean toward a “we-centered” ego rather than a “me-centered” one. “When I traded in my baseball uni-form for surgical scrubs, I noticed the importance of stripping the many layers of the ego I once had,” Dr. Cerfolio says. “This is really impor-tant: Your ego doesn’t need to be vis-ible to everyone -- or even anyone but yourself.”

Being a top performer requires ego – it helps fuel self-confidence and provides some of the motivation necessary to achieve. But it should not hinder the performance of your team: your coworkers, friends and family. Over time, by keeping your ego to yourself, it becomes easier to enact a team-oriented ego, rather than a “me-oriented” one.

Time to quit? Rub some dirt on it. In life, work is unavoidable, so embrace it, go big, and appreciate the rewards. No matter how difficult the challenge you face or how much it may hurt to meet that challenge, push through and give it your all.

“Yes, there’s a chance you won’t succeed, or won’t succeed to the

degree you’d like. But you stand zero chance of success if you don’t

meet that challenge and give it every-thing you’ve got,” Dr. Cerfolio says. “You owe it to yourself and your team, whether that’s your ball team, your family team or your work team. When you sign up for any team, by definition you promise your time, effort and 100 percent commitment. You have to be at every game and every practice on time and ready to go.”

Robert J. Cerfolio, MD, MBA, is the James H. Estes Family Endowed Chair

of Lung Cancer Research and Full Professor Chief of Thoracic Surgery at

the University of Alabama in Birmingham. He received his medical

degree from the University of Rochester School of Medicine, surgical training at

the Mayo Clinic and at Cornell-Sloan Kettering hospital, and has been in

practice for more than 26 years. The author of “Super Performing at Work

and at Home,” (www.superperforming.com), Cerfolio, who was a First Team

Academic All-American baseball player in college, is a world-renowned chest surgeon and recognized as one of the busiest and best thoracic surgeons in

the world.

4 Principles for Staying Cool Under Pressure – and Succeeding

Athlete & World-Renowned Surgeon Shares Tips for Becoming a ‘Super Performer’



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

new jobs and a large portion of the GDP,” Hutcheson says. “But that’s not the only reason they’re so impor-tant.

“They’re motivated by profits, but also by other important consid-erations: pride in the family name, building something for future gen-erations, philanthropy. For those rea-sons, they contribute in tremendous ways to social stability. They make our communities better.”

Henry Hutcheson is president of Family Business USA and specializ-

es in helping family and privately held businesses successfully man-age transition, maintain harmony,

and improve operations. His newest

book is “Dirty Little Secrets of Family Business: How to

Successfully Navigate Family Business Conflict and Transition,” (http://dirtylittlesecretsoffamily-

business.com); he’s also quoted in “Kids, Wealth, and Consequences”

and “Sink or Swim: How Lessons from the Titanic Can Save Your

Family Business.” Hutcheson grew up working for his family’s busi-

ness, Olan Mills Portrait Studios. He studied psychology and has an MBA from Columbia Business

School, and is a popular speaker at professional, university and corpo-

rate-sponsored events.

5 Stategies ...continued from page 3

Troubles ...continued from front page Home Depot & ARPOLA ...continued from page 2

I have written, in this publication, about the unmistakable strength of the rental market throughout every market cycle of the last decade, including the bubble and bust. So, does this trend indicate the first signs of a decrease in demand for rentals? The answer – we don’t know, yet. We are seeing rising rent rates, low days on market and reasonably normal seasonality. All of these would indi-cate continuing strong demand. The trend, however, emphatically shows that we all need to watch it very closely and be prepared to adjust our approach to how we operate. If demand is lessening, what are the possible actions you might take? Well, a few different scenarios could play out. Here are a couple:

• A reduction in demand without a decrease in supply – This would normally affect price to the down-side and increase length of vacan-cies. Increasing your marketing or locking current tenants into a longer lease term could protect you in this scenario.

• A reduction in demand and a cor-responding reduction in supply – Little to no price impact or signifi-cant change to days on market.

What if the current trend isn’t a statement on a reduction in demand? This could easily be true. Maybe fewer properties are being leased through MLS as owners and proper-ty managers are marketing in other ways. Maybe demand is so strong operators are avoiding the Realtor

fees. There are certainly reasons to suggest a different interpretation of the data.

Back to my original premise. The reduction in closed leases through a consistent source of data over a sig-nificant period of time requires you to be on guard about a possible mar-ket change that could have signifi-cant impact on how you operate. It is better to recognize the trend, follow the data and be prepared to act than to not know about it or worse, not care.

We will continue to watch the trend on closed leases and study other factors including rent rates and days on market that could confirm an actual trend. Right now it is too early.

Alan LangstonExecutive Director

Arizona Real Estate Investors Association – AZREIA

American Rental Property Owners & Landlords Association - ARPOLA

480-990-7092www.AZREIA.org

www.ARPOLA.orgAZREIA serves its 1700+ members

through chapters in Phoenix, Tucson and Prescott providing extensive mar-

ket information, education, networking events and support. ARPOLA serves

members in all 50 states providing assistance with ownership and opera-

tional aspects of rental property.

this will have for our readers. In speaking with Alan Langston, ARPOLA’s president, the informa-tion provided will be extensive over time. The objective is to take com-mon product needs for rental prop-erty and provide information on that product from the perspective of a rental property owner or operator. The outcome will be an informed purchasing decision based on criteria important to you and the class of rental property needing the work. This concept is different and address-es the basic need of buying the right solution for the issue you have. Example: What size motor does the garbage disposal need for your prop-erty? An informed decision may sig-nificantly lower the initial cost of acquisition and long term cost. Also, there is an informative article in their blog on smoke detectors. A timely addition considering the special product offer pricing available through the program.

What the catch? There is only one, and it isn’t much of a catch. You have to be a member of ARPOLA. With ARPOLA’s dues being only $35 a year, it isn’t much of an inhibitor. The dues for owners that manage their own properties, property man-agers and services provider are all the same - $35. During the launch of

their partnership with The Home Depot you receive a $10 welcome gift card and a $20 Off Purchase of $200 coupon making the net cost to join ARPOLA only $5 if you can use the coupon.

ARPOLA has an aggressive vision to aggregate a large percentage of rental property owners, property managers, rental property owners associations and landlord associa-tions of single family and small multi-family rentals across the coun-try, says Langston. They believe pro-viding information to their members to help them make informed deci-sions specific to their needs will increase members’ effectiveness and directly improve their profit. Negotiating special pricing for best of class services and products is a direct offshoot of that vision and saves their members directly in cost and indirectly in reducing risk and exposure. Time will tell on how well they deliver, but their latest partner-ship with The Home Depot confirms they are serious about executing on their vision.

By Luke Miller, Contributing Editor, Rental Housing Journal



Understanding Financing ...continued from front page

apartment investment career by pur-chasing a rental home or a small apartment. Investor loans for a house or a 2, 3 or 4-unit apartments are the same – it’s all residential financing. Typically terms would be a fully amortized loan over 30 years, 25% cash down with no prepayment penalty. Lenders look mostly at the buyer’s credit and pay little attention to the properties cash flow, however, the property cash flow can aid with the qualifying. The ancillary costs are minimal and you can use an inex-pensive residential appraisal. The loan is secured by both the property and the borrower’s guaranty.

In addition to the favorable financing, the merit to the smaller properties is that they provide great hands-on training without high-dol-lar exposure. Learning how to deal with tenants, landlord responsibili-ties, accounting and how to work with your CPA and taxes is all help-ful in developing a strong base of knowledge. The negatives to own-ing a number of small apartments include: properties are spread-out and that they typically require hands-on management and mainte-nance. Obtaining many residential loans can be a problem.

Once an investor decides they like

apartments, they want more. Now the economy of scale becomes more important. Four 4-plexes are fine but 16 units in one complex would mean that the maintenance personnel would only need to work in one location. The travel times are reduced and they might have enough room for a maintenance area. A property manager could be hired so the investor does not need to be on site daily. A bookkeeper would be hired to do the records. The next step is to buy a larger number of units at one time. The additional income pays for the extra services. So what changes? The financing.

Small apartment financingSmall apartment financing is

much more dependent on the finan-cial strength of the property and less on the borrower. The property must meet several financial measures including cash flow and debt service ratio. The Net Operating Income (NOI) must exceed the Debt service by 25% or more. That is to say that the debt service ratio must be typi-cally 1.25 or greater. The loan today will not exceed 75% of the appraised value. That value is set by the NOI of the property and to comparable sales. The property is the main source of repayment and so must meet lender standards. The borrower must be able to pay their own debts and not be a drag on the property as

well as having a good credit score.When buying a larger apartment

(five or more units) the costs for acquisition are increased. The lender will want a thorough real estate appraisal, not a residential one. That cost can be several thousand dollars. Other third party reports such as an engineering report and environmen-tal report may be required. Insurance costs may be higher also.

The benefit is that the sales price of the apartment is adjusted to reflect these costs and to make it a viable deal financially. That analysis means you need to understand the num-bers. Are the costs presented normal for the area? Are they reasonable based on the age and condition of the property? Are the rents about the same as the area or are they higher or lower? Why? Are insur-ance claims outstanding? For what? Why?

A lender will evaluate the deal in light of their own guidelines for expenses and norms. Knowing what they will want to see is very impor-tant. A good commercial broker can find the best lender with the pro-gram that fits your needs. This includes not only the rate, but also the pre-payment penalties, partial releases, and record keeping.

What is a pre-payment penalty?

PROFESSIONAL PUBLISHING, INC

Solar Safe Pool Covers serving Phoenix & surrounding areas.

Call for a free estimate (623) 869-6015ROC 273992, ROC 274062

With a PowerLock Pool Cover by Solar Safe Pool Covers, you can “hibernate” your commercial pool in the off season and save thousands of dollars over the lifetime of the pool cover. In fact, most commercial pool covers can pay for themselves in as little at two seasons by reducing the operating costs of the pool. You can turn off or drastically reduce the pump and chemical costs of operating the pool in the off season and the pool will be safe and secured!

We will save you money on unheated pools!

If you are heating your pool during the cooler months, a Solar Safe Thermal Pool Cover will save you money every minute the cover is on. A Solar Safe Thermal Pool Cover can save you thousands on energy costs! The first year’s savings are often more than enough to pay for the pool cover! Solar Safe manufactures it to fit your pool exactly!

We will save you money on heated pools!

SAVE MONEY ON YOUR POOL THIS WINTER

www.solarsafepoolcovers.com89039-arz-solarsafe-201409.indd 1 10/13/14 2:22 PM

... continued on page 7

[email protected]



Understanding Financing ...continued from front page

Paint - Custom paints, Interior/Exterior, Apartment Turns

Maintenance - Turnkey maintenance

Resurfacing - Counter-top, Tub and Tile surround

Concrete - Refinishing Stain & Polish, Handicap Ramps

Gate/Fence - Fabrication & Repair

Drywall - Repair, Custom Work

P.O. Box 11325 Glendale, AZ 85318

24 hour scheduling service

602-931-8900

Nu SystemsServices Inc.

ROC263730-236515-134207

RESIDENTIAL REMODELInspiring home remodeling in Phoenix, Arizona.

From concept through completion, the Ecce Design Team removes the frustration from home

renovations allowing you to continue your daily responsibilities.

602-714-1322 P.O. Box 44535 Phoenix, AZ 85064

ROC264058

Lenders want to keep their money in an investment for a certain period of time. They do not necessarily want the money back as soon as pos-sible. They charge a pre-payment penalty if you want to pay off early. Prepayment penalties come in sev-eral varieties. Most are a percentage of the loan amount that decline every 12 month period (5, 4, 3, 2, 1). Some are soft meaning that if you sell the property, you can waive the pre-payment penalty. If you decide to sell the property you need to check to see if that will cause a pre-pay-ment penalty. It is generally easier to get into a loan than out of it. You should review your plans with your broker so they can find the best fit for your plans. Not all lenders charge a pre-payment penalty, but they will have slightly higher rates. Some will allow you to sell part of the property and pay off that part of the loan so they will release that property from their loan. They will charge a higher rate for that. For example, if you bought 16 4-plexes and decided to sell them off individually you might not be able to do that. Be sure you go over your plan before you sign for a loan and understand the terms well.

Recourse or non Recourse that is the question!

Most small apartment loans are recourse to the borrower. That means if the loan terms are not met the

lender can require the borrower to pay the loan themselves. Non recourse loans are those that do not require the borrower to be financial-ly responsible for the loan except for certain provisions such as fraud. These loans require extensive third party reports and front end expens-es. They may require detailed records. They will be locked out for a period meaning you can not repay them for any reason during that time. The pre-payment penalties will be tied to the face rate of the note versus the corresponding Treasury bill or bond for the time left on the loan (Yield Maintenance). This dif-ference will be charged for every month the loan is paid early. Some may also require a third party to administer the pre-payments. This is called defeasance.

The interest rates may be quite good for these loans; however the borrower must make certain they are acceptable to him or her and meet their goals. These loans are often sold on Wall Street or to government agencies. As you grow your invest-ment portfolio you will become very familiar with financing options. Until then, seek the advice of a good mortgage professional.

Your plan needs to include many considerations. The exit strategy is a major part of your acquisition. After five years you will need to refurbish the units, take out some of your

equity or take a much needed vaca-tion. This requires a decision. Will you sell the investment and move up to increase your income? Will you refinance and enhance this invest-ment? While you can not know what the future will bring, you can be pre-pared to make those changes with the least economic impact on your financial condition. Talk through your expectations with your mort-gage professional and make the best possible decision with the data avail-able.

Each borrower’s situation is dif-ferent. Review your plans with your CPA and consult a professional mort-gage broker to get the best advice on how to maximize your gain with the least amount of effort. Many people have made large amounts of money dealing in the apartment market. This did not happen accidentally. Choose the best for your team and let’s make things happen!

Contacts:Robert Cloud, Pinnacle Capital Mortgage Corp., 602 282 3880,

[email protected] Greg Burckle, USA Mortgage Corp.,

602 282-3804, [email protected]

Jim Kasten, Kasten Long Commercial Group, 602 677 0655,

[email protected]

The Kasten Long Commercial Group has specialized in apartment brokerage in metro Phoenix since 1998. Agents have brokerage more than 1,000 com-

munities with gross sales in excess of 1 billion dollars. The company also pro-

vides weekly updates (by e-mail) on apartment sales and publishes an apart-

ment market update on a quarterly basis – past issues are available on the

company’s web site (www.KLCommercialGroup.com).



Program funded by APS customers and approved by the Arizona Corporation Commission.

Lower Energy Bills for You and Your ResidentsGet free energy-saving products for each living unit

in your multifamily property!

The APS Multifamily Energy Efficiency Program

(MEEP) offers free energy-saving fixtures like CFL

bulbs, low-flow showerheads and faucet aerators

to existing multifamily communities.

MEEP also helps you save energy and money in the

common areas within your facility, such as clubhouses,

offices, laundry facilities, pools and vending areas.

Energy efficiency upgrades made to just a few areas

can yield big energy savings.

Save energy and money with MEEP. Get started today. Visit aps.com/mfp or call (866) 727-1097.

APS_1408015_10wx75h_MEEP_AZJ_ad_r6.indd 1 8/14/14 2:05 PM

By Jerry L'Ecuyer & Frank AlvarezDear Maintenance Men:

Dear Maintenance Men,Now that we have changed our clocks

for Daylight Saving, I’m a bit concerned about the lights at my apartment build-ing. I have various fixtures, sensors and timers, not one of which turns on the lights at the same time. Some don’t turn off or on at all. Any suggestions?

Burt

Dear Burt:There are two ways to effectively

control exterior lighting: 1. A timer clock.2. A photocell for detecting light

and darkBoth time clocks and photocells

have been around forever. We prefer to activate landscape lighting with a photocell as it is virtually mainte-nance free. A photocell will ensure the property has light only when it is needed and turn off automatically with the approach of daylight. Be sure the photocell located where it can “see” ambient light and not near an artificial light source.

A time clock needs constant atten-tion in order to keep up with the changing seasons and adjustments

for longer or shorter nights. There is nothing more frustrating than seeing the property all lit up at 5pm and it only gets dark at 7pm or even worse; the lights turn on at 7pm and it has been dark since 5pm. Remember: the safety of your residents is at its great-est risk when it is dark and the lights are out.

Dear Maintenance Men:I’m getting ready to have one of my

rental units painted and the painter typically sprays the walls and ceiling as opposed to rolling on the paint. I’m a bit worried about my smoke and CO Detectors. I’m I being overly cautious?

George

Dear George:Overly cautious? No! We think

you are right to worry. The paint and construction dust can contaminate the smoke/CO detectors and lessen their sensitivity. It is important to either cover the detectors in a protec-tive plastic bag or remove them dur-ing the painting and construction work. While you are there, check the batteries and dates of installation. If you remove the detectors during painting, don’t forget to reinstall them before the next resident moves in.

Dear Maintenance Men:Garbage deposals are getting me

down! I am forever getting calls to unblock them or replace rusted ones. They seem to be a source of constant problems. Are there any alternatives?

John

Dear John:The first issue may be education.

When a new resident moves into a unit; explain how to use the garbage disposal, what should and should not be put through the unit. Show them what to do if the disposal jams and where and how to use the un-jam key. (The un-jam key should be attached to the side of the disposer.) The same information should be dis-tributed to all existing residents as well.

To answer your question about an alternative to a garbage disposal: We recently met with a small Southern California company that makes an item to eliminate the garbage dis-posal unit altogether. The product is called SemperScreen and it looks just like a standard sink drain strainer. The difference is in the strainer itself. The strainer is a fine stainless steel mesh permanently attached which will only allow water to drain and

keep debris from going down the drain and into the pipes. In other words, the new drain strainer is used to replace the garbage disposal unit. Because it is permanently installed, the residents cannot remove it. The garbage disposer is removed the SemperScreen replaces it. This prod-uct can be found at: www.semper-screen.com .

Please call: Buffalo Maintenance,

Inc for maintenance work or consul-tation. JLE Property Management,

Inc for management service or con-sultation 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.

Facebook.com/BuffaloMaintenance



Most do-it-yourself (DIY) landlords, individuals who manage their rental prop-

erties without assistance from prop-erty management companies, don’t properly screen prospective tenants. That’s according to a survey on land-lord habits conducted on behalf of Real Property Management by an independent Boston-based research firm, Liminality Inc.

The survey, which included a national probability sample of more than 150 DIY landlords nationwide, revealed:

• Only 51% of DIY landlords conduct criminal background checks

• 23% of DIY landlords sometimes or never conduct credit checks

• Only 51% of DIY landlords contact past landlords for referencesThis oversight can create many

problems and headaches for the landlord down the road, such as late rent, damage to the property and evictions. Perhaps even more trou-bling is that DIY landlords with lenient or non-existent screening pol-

icies actually attract the industry’s cast-off renters.

That’s because diligent landlords and reputable property management companies essentially weed out undesirable tenants with their screening policies. When criminals learn their backgrounds will be checked, they turn to a property owner who is not so meticulous.

Why would DIY landlords put their property investment in poten-tial harm’s way by not thoroughly conducting background checks? A common problem many DIY land-lords face is not having the essential resources or knowledge for properly managing their rental property. Understanding the many tenant-landlord laws, Fair Housing Regulations and guidelines, know-ing what questions to ask and not to ask a potential tenant and where to go to perform criminal background and credit checks can be overwhelm-ing for any landlord.

However, when landlords who don’t screen tenants combine the inherent risks in renting with the thought that their applicant pool may have a higher percentage of

criminals than the industry, it becomes clear that incorporating standard background checks is a must.

If landlords cannot implement thorough screening procedures themselves, then it behooves them to hire a property management firm. These professional companies have policies in place to conduct rigorous background screenings on behalf of their property-owning customers, which includes credit, employment, rental history, criminal and sexual offender checks. This means land-lords can rest easy and collect their return on investment without worry-

ing about what baggage their tenants may bring into their properties.

Don Lawby is the president of Real Property Management, the leading

rental property management franchise. He has more than 40 years’ experience in the real estate industry and he holds

the honor of being named to the Swanepoel Power 200: The Most

Powerful People in Residential Real Estate.

Not Screening Tenants? You May Attract the Industry’s Cast-Off Renters

www.rentalhousingjournal .com



By Marsha Friedman

Small businesses have made a huge recovery since the eco-nomic crash in 2008 and that’s

good news for all of us. Since we ac-count for 63 percent of new jobs, our success puts people back to work. That, in turn, helps us even more – people with paychecks buy stuff!

And here’s more good news: Women are launching more busi-nesses than ever – 1,288 a day, according to a recent analysis by American Express. That’s up from 602 in 2011-12. Since 1997, women-owned businesses rose by 68 per-cent.

As a female entrepreneur who will soon celebrate my company’s 25th anniversary, I’m well aware of the challenges these brave new CEOs face. I’m not exaggerating when I use the word “brave.” My experi-ences have taught me that courage is essential to launching and growing a successful business – particularly if you’re a woman. Why? Because we tend to be more risk adverse than men. We worry more about financial

security and losing it all. Making the right decisions requires overcoming those fears.

Courage is one of what I call my 5 C’s for building a business. They’re the guiding principles I’ve learned through the ups and downs and all the mistakes. If I rely on the C’s as a sort of compass, I find I can always guide us back to smoother waters.

What are the C’s?

CaringIt starts with caring enough about

yourself and your dreams to stay committed to achieving your goals. (Giving up is never a good option!) You have to care enough about your-self to firmly believe that you deserve success and the good things that come with it.

Just as important is caring about your staff and creating a positive work environment for them. Protect their sanity from the clients who want to chew them up and from new hires who don’t fit in and hurt morale. Be supportive when stress-ful situations arise in their lives out-side of work. And ensure everyone

has the knowledge and tools they need to be successful.

None of us gets far at all if we don’t care about our customers. Give them the best exchange possible for their money; define expectations so that they understand the end prod-uct you are delivering and for which they are paying. Be willing to listen to their concerns, take responsibility for mistakes, and correct them.

CourageThirty years ago, I probably

would never have said it takes cour-age to lead a small business, but without it, I assure you, you’ll fail. There are dragons and quicksand and dark woods all around. You’ll find them in the day-to-day prob-lems, the obstacles you didn’t see lying in wait, the risks you must take, and the stresses involved with honoring your obligations to every-one working with and for you.

Trust me, your courage will grow every time you push your fear behind you and deal with what frightens you. Which will also help you build confidence.

ConfidenceThink of the many challenges

you’ve faced in your life, and the many times you’ve overcome them. Bring that confidence to your busi-ness. Believing that you can reach for and achieve your short- and long-term goals is essential to getting you there.

CompetenceCompetence comes from knowl-

edge and experience. Hone it by staying up on the trends and disrup-tions in your industry. One of the most important roles a CEO plays is as the visionary for his or her com-pany. That means you can’t, and shouldn’t, take on jobs within your company for which you’re not quali-fied. You’ll make yourself miserable and your business will suffer. Hire an accountant to handle the finan-cials. Get marketing help if that’s not your thing.

As for employees, take the time to hire competent people who you’ll trust in their jobs – and then trust them!

CommitmentStay dedicated to your goals no

matter how difficult that becomes. That may mean taking painful mea-

For All Those New Female Entrepreneurs, the 5 C’s for Building a Successful Business

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

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

continued on page 11



Entrepreneurs ...continued from front page 10

Roc#148170

602-369-5717Great Prices

Interior Repaint Specialists Drywall & Texture Repairs

15+ years of ServiceValleywide

Free Estimates

1833 E. Baseline Rd., #262Gilbert, AZ 85233

Pa ramount Pa inting, inc.

sures, as it did for me after the 9/11 terrorist attacks put the brakes on the economy. There came a point for my business when all hope looked lost. I had to make drastic cuts, including letting go beloved employees. For more than a year, I ramped up mar-keting efforts, diversified our servic-es, and took other steps to get the business out of the red. In 2005, I succeeded – and it has been upward and onward ever since.

Building my business has been one of the most rewarding experi-ences in my life. I get a lot of pleasure from helping our clients meet their goals. I enjoy coming to work and spending time with the team I’m blessed to call part of the family. We laugh loudly and often!

If you’ve recently launched a new business, know that you’ll encounter challenges. Don’t panic! Remember the 5 C’s and forge ahead with car-

ing, courage, confidence, compe-tence and commitment.

Marsha Friedman is a 24-year veter-an of the public relations industry. She

is the CEO of EMSI Public Relations (www.emsincorporated.com), a national firm that provides PR strategy and pub-licity services to businesses, professional firms, entertainers and authors. Marsha is the author of Celebritize Yourself and

she can also be heard weekly on her

Blog Talk Radio Show, EMSI’s PR Insider every Thursday at 3:00 PM EST. Follow her on Twitter: @mar-

shafriedman.

Want to build your business?Start by building your education.

rhj.theceshop.com | 888.827.0777

An online CE platform with easy and convenient options that fit your

schedule. Enroll in your real estate continuing education courses today

and save 20% with promo code RHJ20.

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]



Documents

Arizona Rental Housing Journal November 2014