valley (eugene/albany/corvallis/salem) rentla housing journal - may 2014

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May 2014 - Vol. 8 Issue 4Rental Housing Journal Valley

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By Clifford HockleyPresident Bluestone and Hockley Real Estate Services

As you purchase real estate as-sets for future success you have some basic planning is-

sues to consider:

1. Usually real estate investors es-tablish an initial investment time frame for each investment, typi-cally 5-10 years with a median hold time of seven years.

2. This usually works off the ini-tial purchase costs and gives you some time to improve the opera-tion of the property and allow it to appreciate in value.. With time and physical and managerial up-grades you can improve the pros-pects for consistent returns.

The Basics Some of these upgrades might in-

clude

a. Improving the building

1. Replacing roof and gutters,

2. Completing a new paint job,

3. Resurfacing the parking lot

4. Repair of damaged siding,

5. Improving the landscaping and site signage

6. Replacing the HVAC units,\ With high energy efficient units

7. Completing Interior proper ty upgrades

b. Improving Management

a. Increasing rents

b. By reducing vacancy

c. Reducing tenant turns

d. Improving customer service

e. Generating ancillary income

f. Changing lease terms by increas-

ing common area costs tenants will pay

3. I recommend setting an exit date keyed to cash flow, expense and, appreciation of the asset and tax implications.

After the BasicsOnce you have completed the ba-

sics and the investment is making a significant return and has appreci-ated in value, you have a few choices to make about the future of that spe-cific investment

• You can keep the property,

o This means you will most likely need to refinance at the end of your first loan term

o You will have to decide if you want to pay it off and if there are benefits to paying

it off.)

• Refinance the property and use the proceeds to reinvest in a larg-er property

• Sell the property through use of a 1031 exchange and trade in to an-other property

• Sell the property and pay taxes and depreciation recapture.

• Gift shares of your property to loved ones or charity ( if you have an LLC) Real estate investments, espe-

cially in the short term, don’t always make money. A number of issues can present themselves throughout the process, but its important to remem-ber not to panic and sell the property too soon. Give your self a change to renovate the property improve the occupancy rate and deal with the

Continued on page 6Continued on page 5

2. Why to Go Green?

3. Dear Maintenance Men:

4. A Message from Your President

5. How to Turn an Unhappy Resident Into a Raving Fan!

7. Final Accounting Tips

By Mary Girsch-Bockfrom

It’s safe to say that property man-agers are constantly in search of ways to improve their proper-

ties. While some are obvious, others may not be quite so apparent. For instance, do you really know what your residents think of your club-house? Are they happy with prop-erty staff? Is staff response to com-plaints prompt or nonexistent? If you’d like to know more about what how your tenants really feel consider a survey.

Resident surveys are a great way to find out what your tenants are re-ally thinking. It’s inexpensive, con-venient to distribute, and the answers are honest (as long as the survey is anonymous). But all surveys create two potential issues: what kind of questions should you ask in order to get the most out of the survey re-sults, and how do you convince your target market – your tenants, to com-plete it?

Here are some suggestions you may find useful:• Keep it short. Most people don’t

mind filling out a survey, as long as it’s not three pages long. Any-thing longer and most people will either quit filling it out or simply not start in the first place.

• Consider what method you will use to deliver the survey, but re-member to make it as simple as possible for tenants to respond.

• Provide an incentive to respond if possible. While you’ll want to keep some survey responses con-fidential, a survey on clubhouse improvements or amenities does not have to be.

• Eliminate ‘yes/no’ answers on the survey. If your tenant says ‘yes’ they would recommend the property, or ‘no’ they wouldn’t

How to Use a Resident Survey to Improve Your

PropertiesPositioning Family Real Estate Ownership for Future Results

2 Rental Housing March Valley • May 2014

RENTAL HOUSING JOURNAL VALLEY

May 2, 2014 8:00 AM - 10:00 AM Spectrum Exhibitor Early Registration (Portland, OR)

May 6, 2014 1:00 PM - 5:00 PM OR Landlord/Tenant Law Part 1 (Portland, OR)

May 7, 2014 9:00 AM - 5:00 PM Fair Housing Class (Portland, OR)

May 9, 2014 9:00 AM - 12:30 PM NALP: Rental Policies and Procedures (Portland, OR)

12:00 PM - 1:00 PM It's the Law Lunch Time Series: Terminating Tenancies - Which Form, Which Strategy? (Portland, OR)

May 12, 2014 8:00 AM - 12:00 PM Customer Service for Maintenance (Portland, OR)

May 13, 2014 8:00 AM - 5:00 PM Air Conditioning Maintenance & Repair Part I (Portland, OR)

May 15, 2014 5:45 PM - 9:30 PM ACE Awards Ceremony (Portland, OR)

May 16, 2014 9:00 AM - 11:00 AM NALP: The Market Survey Presentation (Portland, OR)

May 20, 2014 8:00 AM - 5:00 PM Air Conditioning Maintenance & Repair Part II (Portland, OR)

1:00 PM - 5:00 PM OR Landlord/Tenant Law Part 2 (Portland, OR)

May 21, 2014 12:00 PM - 1:00 PM PDX Monthly Luncheon: Section 8 Rules (Portland, OR)

May 23, 2014 9:30 AM - 4:00 PM Accounting & Client Trust Accounts (Portland, OR)

May 27, 2014 9:00 AM - 1:00 PM New Hire Training (Portland, OR)

May 29, 2014 8:00 AM - 12:00 PM Project Management (Portland, OR)

Multifamily NW

Events Calendar

16083 SW Upper Boones Ferry Road, Suite 105, Tigard, OR 97224 503-213-1281, 503-213-1288 Fax www.multifamilynw.org

Why to Go Green?By Pam McKenna

Let’s face it; people have started to roll their eyes at the term “going green”. We see

it in politics, on the news, in fashion, through construction, and in technol-ogy. The term has been co-opted by ad agencies to sell products and we receive a constant stream of messag-es; reduce your carbon footprint, eat organic, turn down the thermostat, take colder showers, ride your bike, recycle and reuse…. it can be over-whelming!

Yet, you shouldn’t underestimate the impact you can have by making a few changes. Everything we do has an impact on our environment, how you shop, how you eat, how you travel and how you operate your business. A record number of prop-erty management companies are fo-cusing on going green, which means avoiding waste and improving the natural environment. So how can you have an impact at your commu-nity through the way you manage?

Start by reviewing your building’s energy efficiency. An energy audit

can be performed by a trained profes-sional and in some areas can be com-pleted for no out of pocket costs to the owner. The audit should include weatherization, added insulation, window replacement, heating and cooling upgrades and common area lighting. Look for local programs like the Energy Trust of Oregon that cre-ate a higher rate of return for your ownership not only through reduc-ing utility costs but through rebate programs.

Go paperless in the office. This will reduce your operating costs and increase your business productivity. Electronic signatures are legal today allowing you to create a seamless leasing process from start to finish. Software today will allow you to rent apartments online through the web-site, complete your lease once ap-proved, submit work orders online, communicate with your residents directly and creates a more efficient way to conduct business with less data entry and wasted paper.

Educate and encourage your resi-dents to be Eco-Friendly. Did you know you can actually reduce your carbon footprint based on where

and how you live? Maintaining an environmentally friendly building for your residents is an added value and is a very strong selling point in the Northwest. Set up a community garden with fresh vegetables. Not enough space for this at your com-munity? Plant an herb garden in pots for residents to use. Help your resi-dents find local farmers markets for fresh locally grown produce. Encour-age residents to shop and eat local, within walking distance if that is an option. Create green spaces around your building with healthy trees and plant materials that improve the air quality. Post building energy usage to validate the impact the residents have by monitoring their usage. Of-fer convenient composting and ef-fective recycling options. Advertise your public transportation options and provide a Tri-met Transit Tracker digital display in your lobby. Post Google Bike Maps to encourage use of nearby paths and trails. For move in gifts, provide refillable bottles with green cleaning products and re-usable grocery bags.

Review your maintenance prac-tices. Walk with your landscaper to develop ways to reduce water us-age such as smart irrigation based on evapotranspiration controllers that determine irrigation efficiency.

Choose products that are sustainable and environmentally-friendly. In-stall motion sensors in maintenance closets and shops. Check that faucets are working correctly with low flow aerators and showerheads. Install digital thermostats for more precise controls. Save cardboard boxes from move-ins for new rentals and up-coming move outs to reuse. Switch to electric golf carts instead of gas powered. Start using low VOC paint and participate in the appropriate paint recycling programs. Use the I-pad or smart phones for maintenance requests. Only order online and re-duce the number of orders placed to reduce delivery truck use.

Learning how to manage resourc-es more efficiently can improve your bottom line. It creates a positive envi-ronmental impact for your residents and the surrounding community. Go-ing green is not just a fad or a trend – it is a viable option for those looking to respect the environment and im-prove things for future generations. I challenge you to be the advocate for your community, to improve the bot-tom line for your owners and reduce the impact your business has on the environment.

Pam McKennaMultifamily NW President

Save the Date for Fair Housing Education May 7 - CAM Fair Housing

What: Enhance your professional growth in the multifamily industry. This 8-hour class will detail and cover every aspect of federal, state and local Fair Housing laws. Who: Sharon Jackman, Certified Fair Housing Trainer Where: Hilton Garden Inn, 14850 Kruse Oaks Drive, Lake Oswego, OR 97035 Time: 9:00am - 5:00pm

May 22 - Reasonable Accommodations

What: Don’t be caught off guard when a resident or applicant requests an exception to your policies. This class details the steps a landlord needs to take in the Reasonable Accommodation process. Who: Andy Hahs, Bittner & Hahs, P.C. & Diane Hess, Fair Housing Council of Oregon Where: Eugene Hilton, 66 East 6th Avenue, Eugene, OR 97401 Time: 12:30pm-2:30pm

June 2 - Fair Housing for Leasing

What: Learn the Do’s and Don’ts of how to follow the Fair Housing rules when leasing an apartment or single-family residence. Who: Sharon Jackman, Certified Fair Housing Trainer Where: Hilton Garden Inn, 14850 Kruse Oaks Drive, Lake Oswego, OR 97035 Time: 9:00am-11:00am

July 7 - 10 Common Fair Housing Mistakes to Avoid

What: Learn the most common Fair Housing mistakes, like personal statements and intent vs. effect, and how you can avoid them! Who: Sharon Jackman, Certified Fair Housing Trainer Where: Chemeketa Eola Events Center, 215 Doaks Ferry Road NW, Salem, OR 97304 Time: 9:00am-11:00am

July 8 & 18 - Fair Housing for Maintenance

What: Do you realize your Maintenance Professionals are more likely to interact with residents than your office staff? Make sure they are prepared!

July 18: Who: Fair Housing Council of Oregon Where: Housing Works, 405 Southwest 6th Street, Redmond, OR 97756 Time: 1:00pm-4:00pm

July 8: Who: Sharon Jackman, Certified Fair Housing Trainer Where: Hilton Garden Inn, 14850 Kruse Oaks Drive, Lake Oswego, OR 97035 Time: 9:00am-11:00am

Register online: multifamilynw.org Questions? Call 800-632-3007

please v is i t us at www.rentalhousingjournal .com

Rental Housing Journal Valley • May 2014 3


Dear Maintenance Men:I am starting my planning for a major

kitchen cabinet remodeling project in my rental units. However, I am having a difficult time making material and de-sign decisions. What recommendations can you give?Allen.

Dear Allen,When doing a kitchen or bath ma-

terial selection, cohesive and func-tional design is important. Kitchen and bath rehabs are some of the most expensive work you can do in an apartment unit and proper plan-ning is a must. In order to appeal to a larger segment of the population, try to keep the interior color scheme to neutral earth tones. Cabinetry qual-ity varies greatly. Don’t let the cabi-net fronts fool you. Manufactures de-signed their cabinets to look good at first glance. Keep in mind, being in a rental environment, the cabinets also need to hold up to abuse. Look at the actual construction of the cabinet box or frame. There is no need to use cus-tom cabinets to fit your existing lay-out. The use of prefabricated modular cabinetry can greatly reduce the time and cost to have a finished kitchen or bathroom. Using real wood cabi-net fronts with 3/8” plywood sides is essential for durability. The drawer fronts and sides should be connected with a dovetail or other positive lock construction. Drawers that are held together by nails will not hold up to tenant abuse, nor will particle board constructed cabinets.

On a side note; if you are gutting the kitchen or bathroom, use this time to relocate and add more elec-trical outlets and under cabinet light-ing.

Dear Maintenance Men:I am looking into alternative methods to cleaning my apartment carpets. I am aware of both dry chemical carpet clean-ing and steam cleaning. What is the dif-ference and which do you recommend? Martin

Dear Martin:The two primary methods of car-

pet cleaning are dry cleaning and hot water extraction or steam clean-ing. First, let’s dismiss a couple of misconceptions; dry cleaning is not technically dry, but more of a “mois-ture-controlled” process and steam cleaning does not use steam, it is a process of hot water under high pres-sure.

Carpet dry cleaning methods use chemical cleaning solutions to ex-tract dirt. There are three methods:

Dry Foam: The foam is applied to the carpet and allowed to dry, then vacuumed up along with the dirt.

Dry Chemical: A cleaning solu-tion is applied to the carpet and a machine spins a large bonnet from

side to side to absorb the dirt from the carpet.

Dry Compound: An absorbent mixture resembling wet sawdust is spread over the carpet. A machine brushes the mixture into the carpet to absorb the dirt. When the mixture dries, it is vacuumed out, taking the dirt with it.

The dry method does not get as much of the deep dirt out, but is very effective at cleaning the visible por-tion of the carpet and the carpet may be ready for traffic within an hour.

The wet carpet cleaning method uses hot water extraction to force a hot water based cleaning solution into the carpet under high pressure and then sucks it back out of the car-pet along with the dirt.

There are two water extraction methods:

Portable Extraction: The carpet is cleaned by a small machine using hot tap water and powered by the elec-tricity source in the house.

This is the typical DYI method of steam cleaning; some professionals also use this system.

Truck Mounted Extraction: This uses a large cleaning machine mounted on a truck or van. The wa-ter is heated to a higher temperature and is shot into the carpet at a higher velocity than is possible in portable machines.

Out of all the methods listed above, we recommend the Truck Mounted Extraction method. We be-lieve it is the most effective way to clean, mostly because the heat kills bacteria and the extra power sepa-rates dirt. These powerful machines also pull most of the water back out of carpets, leaving them damp but not wet. The carpet may be ready for traffic within a few hours or more.

One a side note: Most major carpet manufactures listed on the Carpet and Rug Institute (CRI) website (A nonprofit trade association), recom-mend the use of hot water extraction systems to clean carpets.

Dear Maintenance Men:I am running into a hot water issue with my 100-gallon gas fired water heater. The tank is about 5 or 6 years old. The tenants are complaining of not getting enough hot water. I have checked the tank and the thermostat is working, the water is hot. Everything seems fine, so why are my residents not getting the hot water they need?Jim

Dear Jim:The water heater may need a bit

of maintenance. The first thing to do is clean out the sediment at the bot-tom of the tank. This will require a shutdown of the heater for a couple of hours and some hands and knees work. Most 100-gallon gas water heaters have a clean-out port at the front of the tank. The port is either round or oval. Be sure to get a new

clean-out port gasket before starting this job. Once the water is drained and the port opened, remove all the sediment from the tank. You can ex-pect to haul out one to two buckets of calcium buildup. (Sediment removal should be done once a year.) Remov-ing the sediment will greatly im-prove the heating efficiency the water heater. Because of the age of the tank; while you have the port open, check the inlet dip tube and the anode rod

inside the tank. If the anode rod is corroded, replace it by pulling it out from the top of the tank and inserting a new one. The anode rod is a sacrifi-cial zinc rod that helps keep the tank from corroding. The second item to check is the cold-water inlet dip tube. Cold water entering the heater is routed to the bottom of the tank by the dip tube. If the tube is corroded, broken or missing, the tank will de-

By Jerry L'Ecuyer & Frank AlvarezDear Maintenance Men:

Continued on page 4



velop hot and cold areas, leading to complaints about short-term hot wa-ter. The dip tube is located inside the cold-water inlet pipe. Replacements for both the anode rod and dip tube can be found at most plumbing sup-ply houses.

QUESTIONS? QUESTIONS? QUESTIONS?

We need more Maintenance Quetions!!! To see your maintenance

question in the “Dear Maintenance Men:” column, please send submission

to: [email protected] Please “Like” us on Facebook.com/

BuffaloMaintnance Bio: Please call: Buffalo Maintenance,

Inc for maintenance work or consultation.

JLE Property Management, Inc for management service or consultation

Frankie Alvarez at 714 956-8371 Jerry L’Ecuyer at 714 778-0480

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

Certified Renovation Company Websites: www.BuffaloMaintenance.

com & www.ContactJLE.comwww.Facebook.com/BuffaloMaintenance


VALLEY

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A Message from Your PresidentExciting news! ROA

is currently work-ing on a new website for laneroa.com. As a member you will be able to pay your

renewals online, sign up for work-shops, edit your member informa-tion, have access to the current ROA Bulletin, and the bulletin archive! The website should be fully updated and running soon, but please take a moment to look at it. As members, you will be able to set up a log-in and password for the member-only part of the website at www.laneroa.com.

Please note that beginning June 26, 2014, ROA General Meeting ad-mission will be $15 for ROA Mem-bers and $20 for non ROA Members. Your $15 admission covers any or all of the evening’s activities, which in-cludes our costs for room fees, equip-

ment fees, the live helpline session, speaker fees, hotel service fees, and a buffet dinner, along with coffee & dessert. Even with the price increase, we believe our General Meeting of-fers a great value to our members at a great price.

ROA will be testing the waters…when we hold our regular week-day workshops in the afternoon at the Hilton Garden Inn from 12noon to 1:30, we will also hold a work-shop that same evening from 6pm to 7:30pm on the same topic for mem-bers that cannot make the noon-time workshop. However, the evening workshop will NOT include a meal or beverage, so please bring your own if you’d like to. The cost for the evening workshop will be $20 for ROA members and $25 for non-members, but we must have at least five people signed up to hold the

class. Please call the ROA office if you would like more information on this: 541-485-7368.

Section 8 Update: At present time, there are no substantial changes since our last update. We will keep you posted in upcoming bulletin issues.

As you know, in January of 2014, seven ORHA forms were revised be-cause of law changes, so I encourage you to discard any of these seven forms in your inventory that con-tained law changes (forms #1, 2A, 2B, 5, 30, 35 & 45) and purchase the new, update form version. Please be sure to call the ROA office if you have questions, or call the ROA Helpline at 541-242-2850.

Many thanks to our featured speaker in April, David C. Willis, of State Farm Insurance, who spoke on “Landlord’s Insurance vs. Rent-er’s Insurance”. We appreciate his

knowledge and expertise on what landlords need to know to protect themselves! A thank you also goes out to David for his raffle prize!

We hope to see you at our general meeting on Thursday, May 22nd for a very informative presentation by Jen Klingensmith and Allen Gardner, of Gardner, Potter, Budge, Spickard & Cascagnette, LLC. You won’t want to miss their expert advice on habit-ability, disclosures and penalties - what landlords must know to pro-tect themselves! Our Affiliate Spot-light speaker of the evening will be Tia Politi, ROA Board Member and Property Manager of Acorn Property Management.

We’ll see you on May 22nd!Jim Straub, President


VALLEY

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This can happen when you least expect it: An unhappy resident has just arrived in your leasing

office while your telephone is ring-ing, budgets are due in 25 minutes and six future residents are waiting to tour your wonderful apartment community. Time to panic, right? Not a chance! Read this article and use these three easy steps to handle an unhappy resident while turning them into a raving fan.

Listening carefully: The moment you realize you have an unhappy resident, take a deep breath and ask this person in a soft voice, if they would be kind enough to join you in your office. This gives you a few seconds to gather your thoughts and will give the two of you the privacy to have a reasonable conversation. Plus, you really do not want your current residents nor any future resi-dents to hear this unhappy conversa-tion. Next, ask your team to hold all your telephone calls, clear your en-tire desk and take out a blank sheet of paper to take notes. At this point, ask your unhappy resident to begin telling you exactly what the problem is. Take detailed notes while listening patiently, making certain not to inter-rupt him/her while they are speak-ing. Remember, your resident is not attacking you personally, so keep your cool during this entire conver-sation. Once your resident is finished explaining why they are unhappy, ask him/her this key question, “Is there anything else you would like to tell me?” This is a key question be-cause it signals to your resident that their turn is now done and you are ready to address and answer their concerns.

Tip From The Coach: Before ad-dressing the concerns from your resi-dent, let’s be certain we understand what’s at stake when handling resi-dent problems and why it’s impor-tant to handle each resident as if they were liquid gold. A typical resident pays $800 per month or $9,600 per year. In addition, anticipate that each

of your current residents will refer two prospects a year to your apart-ment community, which represents another $19,200 in new revenue and if each of these referrals send you two more referrals this year, that’s another four more new residents at $38,400 annually. So, $9,600 + $19,200 + $38,400 = $67,200 in potential new revenue, per resident, per year. Can you clearly see why we must convert unhappy residents into raving fans?

Diffusing the situation: Once your resident has shared with you exactly why they are unhappy, start your half of the conversation by thanking them for their comments. Next, say to your resident, “Let me see if I un-derstand you completely.” Restate this person’s concerns as you slow-ly read from your notes. Reading your notes slowly does two things: 1) It gives your resident a chance to calm down; and 2) It shows that you were truly listening to what they had to say and are ready to take action. Now, apologize if you or your team made any mistakes and look for at least one or two points with which you can agree. By conceding a point or two right away, you show that you are not defensive about their concerns and that you really want to solve their problems, not duck blame or make excuses.

Tip From The Coach: When-ever you are interacting with a cur-rent resident or a future resident, customer service experts call this a “moment of truth”. When you are dealing with an unhappy resident, this is called the “pinnacle of perfor-mance”. SuperStars in the property management profession do not mind handling an unhappy resident be-cause they see this as an opportunity to shine—to win this resident’s long-term loyalty.

Converting an unhappy resident into a raving fan: OK, now comes the easy part. Ask your unhappy res-ident exactly what action steps they would like to see you take. Promise your resident that you will do ev-

erything necessary to fix or handle the concerns they have shared with you and tell them exactly when and by what time, they can expect the problems to be handled. Now, look to resolve these problems as quickly as possible--well in advance of the day and time you promised your resident. Motorola calls this, “under-promise, over-perform” and they have used these magic words

to create a multi-billion dollar com-pany. Next, take the time to either call this resident or visit them in-per-son, to tell them the concerns they had shared with you are now fixed and resolved. In addition, take a few minutes to write a small note apolo-gizing again for their unhappiness and thanking them for expressing their concerns. At last, your resident

How to Turn an Unhappy Resident Into a Raving Fan!

by Ernest F. Oriente, The Coach {Article #213…since 1995}

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

Resident Survey ...continued from front page

isn’t nearly as important as knowing why or why not.

• Choose a few areas you wish to include on the survey and stick to those. For instance, it you’re thinking about upgrading the clubhouse, ask what tenants like about the existing club-house – then list some potential new features you are consider-ing and measure the responses.

• Same thing goes with staff. If you’re concerned about staff response to tenant complaints or interaction with tenants, ask tenants about it on the survey. Questions about the level of

courtesy tenants feel they re-ceive or if their concerns are always handled promptly can help to point out problem areas that you may not be aware of.

• Perhaps the most important thing to remember is that it’s pointless to send out a survey just for the sake of sending out a survey. Study the tenant re-sponses, look for patterns, and start immediately to address those concerns.

PropertyManager.com a Service of AppFolio


VALLEY

Continued on page 6



should be completely satisfied that you have addressed their important

concerns and you have earned their respect and goodwill.

Tip From The Coach: Ready to convert your former-unhappy resi-dent into a raving fan? Consider purchasing the book “Positively Outrageous Service”, written by T. Scott Gross. His book gives you a step-by-step plan for creating rav-ing fans, and will give you lots of fun and great ideas for converting very unhappy residents into your best re-ferral sources. I have read his book several times and highly recommend you read his pearls of wisdom. In fact, once you are done reading his book, you will realize that handling unhappy residents is really the best way to win new friends!

Want to hear more about this im-portant topic or ask some additional

questions about raving fans? Send an E-mail to [email protected] and

The Coach will E-mail you a free Pow-erHour invitation.

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

[31,930 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., Busi-ness 2.0, The New York Times, Fast Company, The LA Times, Fortune,

Business Week, Self Employed America and The Financial Times. Since 1995,

Ernest has written 225+ articles for the property management industry

and created 400+ property manage-ment forms, business and marketing

checklists, sales letters and presentation tools. To subscribe to his free property

management newsletter go to: www.powerhour.com. PowerHour® is based in Olympic-town…Park City, Utah, at 435-615-8486, by E-mail ernest@pow-

erhour.com or visit their website: www.powerhour.com


VALLEY

vagaries of the local economy. There could be external factors, such as the area’s real estate market, local em-ployment and health of the area’s economy that are creating stumbling blocks for you.

For example many years ago we managed an apartment property that was located close to a freeway and jobs. That property was like a slot machine, we never had a vacan-cy. Not three miles away we had an-other property that ran a continuous 10 % vacancy rate, and had a hard time attracting quality tenants. You would think that three miles would not make a difference, but it did. (The same issues apply to commer-cial properties. )

Bottom line not all properties make money. If you make a mistake and buy the wrong property and you are not making money, try to see if you can fix it in less than twelve months. If that is not possible take your lumps and get out. If you can sell it for more that you purchased it for, you may want to wait until you have owned it to evade short term capital gains taxes. (These are high-er than long term capital gains tax-es, which apply after the first year)(Please confirm your particular situ-

ation with your CPA,>. Consult with real estate professionals and your CPA to understand what options you may have for selling the property or holding out for improved cash flow.

The futureImagine you are now at the end

of your investment career. Your as-sets are all in a trust and you want to have your kids enjoy the fruits of your investments. You have many choices.

First you need to establish if your heirs want the real estate invest-ments, or just want the cash. If they want the real estate investments then you have to strategize five things:

• Which one of your heirs will take over from you?

• What is the operating/ownership structure of your entity in the event there are multiple heirs?

o Will all of the future heirs have a vote in decision making or will there be a leader/manager

o You may want to consider as-signing a family leader ( though this may cause friction based on conflicting family needs)

• Do you need money from your in-

vestments till you pass?

• Do you want to give to charities?

• What are the tax implications?Once you have considered these

questions and assigned future lead-ership, what is the best course for your investment to take? Here are a few strategies we have used in the past that have seen success.

• Shift from residential properties to single tenant commercial prop-erties for ease of management.

• You could invest in an UpReit and have the kids inherit the UpReit shares

• You could give to a charitable or-ganization and create a genera-tion skipping trust, so the grand-kids get the money (to avoid some state taxes)

• Sell your assets and pay the taxes (not your best choice, especially if you sold assets and traded up over and over again using 1031 exchanges.)OR…Leave well enough alone and

have them figure it out after you die. ( At over $10,500,000 in estate value, combined federal estate taxes kick in, in many states estate taxes

start at over $1,000,000 so the tax hit is not huge if your estate tax is un-der $10,500,000.( Every case is differ-ent please check with your CPA and estate Attorney). So this is not a bad idea.

SummaryAs you plan ahead you need to

always plan on your final exit from your real estate investments. As your need for cash and your desire to man-age the details of your real estate em-pire diminishes (it may or may not), you need to simplify your decision making. The more assets you have the more confusing the variables. At that stage you may only want a pain free check every month. Worrying about tenant retention and the health of your investments should eventu-ally become a job for the next genera-tion. You want to reach this point but it takes years of skilled planning to position yourself, your family and your investments for future success. So, Don’t wait till the last minute to reposition your portfolio, include these decisions in your long range planning and your life will be much easier and less stressful.


VALLEY

Future Results:...continued from page 5

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By Jim Straub

I’ve noticed a trend in Helpline questions lately about Final Ac-countings. By now, I believe you

know the basics: a final accounting must be post-marked on or before 31 days after you receive posses-sion of the property from your ten-ant, and it must itemize the amount of the deposit you initially collected from your tenant, the amount and the reason you are withholding por-tions of the deposit, and the amount the tenant owes you or the amount of the deposit you’re returning to the tenant.

Those basics can leave lots of room for interpretation, and I’d like to offer you a few tips on final accounting:

1) I have seen some landlords err on the side of caution and give too much information in their final ac-countings. How can that be? This is one of the few times where offer-ing more information than you’re required to give can actually create drama where there might not have been any. I’m thinking specifically of the portion of the final account-ing where you itemize what you’ve withheld.

Oregon landlord tenant law only requires you to state how much of the deposit you’ve held and why. For me, this means providing a clear

itemization and an amount, such as “window cleaning - $45” or “damage to door - $75”. This does not mean “window cleaning , outside only – 3 hours at $15 per hour” or “damage to door – labor $45 per hour plus $35 supplies – sandpaper, spackle, mask, etc. (receipts enclosed).” Technically, both approaches are correct. How-ever, the second approach practically begs the tenant to call you to dispute that it took 3 full hours to clean the window or that your cleaning person shouldn’t have charged you $15 per hour when they’re only making min-imum wage at their job or in the sec-ond case, that you could have bought the supplies considerably cheaper at a local hardware store than at Home Depot and that they shouldn’t be charged for a sanding mask because that’s just part of doing the work and the person making the repairs should have already had one.

The point is that you don’t owe the tenant this additional itemized infor-mation. Now, generally speaking, most tenants know they are going to be charged for damages and cleaning when they leave that work behind to be done by you (or someone you hire). So they’re not surprised when they get the bill for “cleaning” or “re-pair” at “x” charge. When you pro-vide them with receipts and a specific itemization, though, it can really set

some tenants off emotionally. They usually don’t have the background in home repair and are surprised by how much these things actually cost when you break them down. So don’t give them any information that you’re not required to and that might confuse or anger them.

When do you have to disclose these details? Only when a court or-ders you to, generally when the ten-ant has filed a small claims court case against you. Then, and only then, are you required to provide this informa-tion to the tenant. Now occasionally, I’ll get a final account dispute from a former tenant (which I always re-quire that they put in writing to me, so that I can analyze their concerns line by line) and I have a decision to make. There are times when provid-ing more details to a former tenant who is disputing the final accounting may prevent them from filing against you in small claims court. If I believe my tenant will see how carefully I’ve documented all of the work done and have receipts for each and every little thing, then I know it’s possible they won’t risk the time, effort and cost associated with a small claims case. In that case, there are times when I’ve provided a more specific breakdown. I always take it on a case by case ba-sis, though.

2) What makes a good final ac-

counting breakdown and helps en-sure you’ll win in any small claims court case? Good documentation, a reliance on knowledgeable contrac-tors and other professionals in the housing maintenance and repair field, and receipts. As long as you can demonstrate you have charged your tenants fairly, meaning the go-ing, professional rate for work and repairs done, you should be fine. This means either hiring a profes-sional to do the work or, if you do the work yourself, being sure that you don’t charge your tenant more than a professional would have charged you to do the work. In other words, when you do a job, make sure you’re not just pulling a dollar figure to charge from out of the air. If you’re ever called to defend your figures, you’re going to have to show where you got the dollar figure you charged the tenant.

This also applies to the hourly rate charged. It’s fine to say, “I called a contractor and they told me they charged $50 an hour, so that’s what I charged” as long as the total cost doesn’t exceed what the contractor would have charged to do the whole job. In other words, if the contractor would have done the job for $50 an hour in two hours for a total of $100 and, instead, you did the work and

Final Accounting Tips

Continued on page 6



charged $100, great. However, what you cannot do is decide to do the work yourself, take six hours to do the work, charge the tenant $300 (6 hours x $50), and say it’s fair because you charged the same rate as a con-tractor. Whenever you’re weighing what to charge your tenant, always keep the total job cost in mind and be sure it’s fair.

3) Your best ally when completing final accountings is a licensed and bonded contractor. The most airtight situation for a landlord is when the contractor actually does the work for you and sends you an itemized invoice upon which you can rely for their professional opinion. The in-voice should list exactly what work was done, the amount of time the job took to do, and the cost for time and materials. You should also request that the contractor note if there is any damage done by the tenants that they were not able to repair or return to the condition it was in when the tenants received the property, and also note what the depreciated value of the property is.

For instance, let’s take the door repair I mentioned above. A ten-ant has punched a hole in the door and you’ve hired a contractor to patch it so the door is salvageable. However, even with the patch, the door doesn’t look like it did before the hole was punched and it, there-fore, isn’t worth as much. In other

words, it has a depreciated value. How do you determine what that depreciated value is? Your best bet is to ask the licensed professional. Again, if you ever found yourself in court defending the amount that you have charged your tenant, a judge wants to see that you have re-lied on the expertise of a professional experienced in the area at hand and that you didn’t just pull a number out of the air. Whether you do the work yourself or hire a contractor to do the work for you, I always rec-ommend calling a professional to ask their opinion about depreciated value to rental property. (Most are happy to take the time to talk to you and will hope that you remember their expertise the next time you do need to hire a contractor.) Then, it’s perfectly legal to charge your tenants both the cost of the repairs and a de-duction for the depreciated value of the property. After all, you paid for the repairs and, even after the work is done, the door is still not worth what it was before. The tenant owes for that, and you should withhold it from the deposit.

As you can see, final accountings can be tricky and there are, as much as we sometimes don’t like to admit it, some grey areas. I hope this in-formation has clarified some of those areas.

Accounting Tips:...continued from page 7

valley (eugene/albany/corvallis/salem) rentla housing journal - may 2014

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