New Earthquake Retrofit Standards Proposed for Santa Monica

Written by Apartment Management Magazine on . Posted in Blog

building-safety

The Building and Safety Department of Santa Monica has made recommendations to Update the Technical Standards of the City’s Seismic (Earthquake) Retrofit Provisions of the Municipal Code. The recommendations were presented to and approved by the Building and Fire Life Safety Commission and have been forwarded to the City Council. The Council has agendized this item for discussion on December 6, 2016. Sources in the City estimate that a formal ordinance will go to the Council in February, 2017. Happy New Year?

In the months prior to developing the new standards City Staff drove by and looked at all multi-family residential and commercial buildings in town and reviewed building records in order to compile an inventory of Potentially Seismically Vulnerable structures. In so doing they identified 2,813 Vulnerable Buildings. Of this total, 582 were considered retrofitted and will not require further work while 2,231 properties are either not retrofitted or will require further analysis. The inventory list is in draft form pending verification against building records. It is expected that the list will be eventually available on line for owners and others to consult.

The recommended standards for 2-story buildings are the same as the City of Los Angeles 2015 standards. However, 2-story buildings with a moment frame and a final permit will be deemed already complete. 3 and 4- Story, Soft Story Buildings with previous approved retrofit work will have to analyze the entire story above the weak story for lateral load behavior.

The recommendations do not deal with the question of the possible pass-thru of costs to tenants as this is a matter to be determined by the Rent Control Board following passage of the ordinance.

The new updated law will contain administrative provisions for compliance and verification of retrofit projects.
There will be time limits to complete requirements. The final time limits are in discussion. The general milestones for time limit compliance are propose to be:

  • Notification by the City of Santa Monica to the building owner;
  • City of Santa Monica to record notice with the County of Los Angeles Registrar/Recorder
  • Submission of a structural analysis of the building reporting either compliance or recommendation for retrofit;
  • Provide the City with confirmation that the “Tenant and Occupant Advisory” notice to the tenants has been provided to each tenant;
  • Application for a building permit and submission of retrofit plans;
  • Obtain a building permit;
  • Start of construction;
  • First building inspection;
  • Final building inspection and approval;
  • Release of recorded notice

Any notification to a building owner of a Potentially Seismically Vulnerable Building is appealable within 60 days from the date of the notice. Appeals will be heard by the Building and Fire Life Safety Commission. Appeals must be of a technical nature and cannot be related to financial hardship or non-technical matters.

It is expected that a City webpage will be available for more information.

Get your checkbook ready!

NEW RENT BOARD STORIES PART 1: THE WEST HOLLYWOOD TURTLE FOUNTAIN DECISION

Written by Apartment Management Magazine on . Posted in Blog

landlord-law_2

The type of rent control action which annoys property owners the most are rent decrease decisions. The Santa Monica Rent Board rendered approximately 4,890 of these decisions since April 1979 and West Hollywood issued approximately 4100 of them since June 1985.  The West Hollywood is actually worse because they began issuing decisions more than six years after Santa Monica did and because it has far fewer controlled rental units. West Hollywood Commissars love rent decrease decisions almost as much as they love Halloween, (which has actually been declared a holiday in that crazy city).

Santa Monica rent decrease decisions have been much less oppressive since the published decision was issued in Santa Monica Properties v. Santa Monica Rent Control Board (2012) 203 Cal.App.4th 751. In that case the Santa Monica Rent Board went too far by attempting to regulate the timers and the heat of the Jacuzzi and sauna at a luxury apartment building.  The Court of Appeal reversed the Board’s decision with an opinion which found that, “. . . the minimal reduction of adult recreational services of a type commonly found only in luxury housing does not justify decreasing rents without evidence that the rent thereby became excessive or the landlord thereby realized an unjust or unreasonable return on the investment in the property.”

The Santa Monica Properties decision reduced the severity of rent decrease decisions in Santa Monica, but unfortunately, West Hollywood Rent Stabilization Commissars refuses to recognize any adverse rent control decision unless their name is on it. Therefore, on April 26, 2016 they rendered the infamous “Turtle Fountain Decision” which they awarded monthly rent decreases for all tenants in a 36-unit apartment building based on the following; (1) reduced accent lighting in plant containers ($3 per unit); (2) vines on pool fence removed while painting the building ($8 per unit); (3) reduction of tables and chairs in the pool area ($6.50 per unit); (4) removal of hallway carpets areas ($20); and (5) non‑functioning turtle fountain by the pool ($3 per unit).

The most outrageous of the rent reduction above was the rent reduction granted for the removal of the turtle fountain. This was based on the following testimony;  “[Tenant] testified that there was a working turtle fountain at the  mid­ point of the pool, between the pool and fence. [Supporting witness] testified that the fountain, on the pool deck, made an arc of water into the pool.  Now, the turtle fountain is still connected, but it is rusted and not working, [Tenant] added.”  The rent decrease decision did not even attempt to say the rent reduction was based upon a “substantial reduction in housing services.”  Instead, it states that the reduction was based upon “a substantial decrease in the turtle fountain.”

The decision was quickly appealed to court and the judge issued a stay order was to prevent the tenants from reducing their rents based on the reduction of “housing services” described above.  And if you don’t believe it, go to West Hollywood Rent Stabilization Department and ask to read Rent Board Story D-4078. But don’t go there on Halloween because every City office is closed that day. That’s a good thing.

L. Jacobson  October 2016

LANDLORDS SUE RENT CONTROL BOARD FOR VIOLATION OF VACANCY DECONTROL LAW

Written by Apartment Management Magazine on . Posted in Blog

rent-control

On May 16 ACTION Apartment Association, a non-profit association of landlords, sued the Santa Monica Rent Control Board for a judicial decision as to whether the RCB’s prohibition of passing on actual water billings to tenants violates the Costa Hawkins Vacancy Decontrol Law.  The complaint alleges that the vast majority of apartment buildings in Santa Monica are master metered for water meaning that the Water Division bills the landlord for the water used by the tenants.  New buildings must be designed to allow separate metering and direct billing from the Water Division to the tenants but older buildings were not designed or constructed to allow this.  Despite this situation, the RCB has insisted that landlords must absorb the cost of water used by the tenants rather than allowing a sharing arrangement whereby each tenant pays an agreed share of the water bill.

The complaint alleges that the State vacancy decontrol law allows landlords to establish the initial rental rate by agreement with new tenants and that as part of the rental agreement the parties can agree that the tenant pay an agreed share of the water bill.  Prohibiting landlords to establish a water-pass-through agreement places landlords of these buildings at a competitive disadvantage with owners of newer buildings with separate metering and fosters excessive use of water by tenants.  This latter situation creates a special hardship for landlords because the water rates in Santa Monica are scheduled to increase by over 41% from 2014 to 2020 and the City has placed criminal and civil penalties on landlords if their tenants’ use of water causes the landlords’ buildings to exceed the mandatory curtailment requirements.

To accomplish its purpose, the RCB has created its own definition of “rent” to include water.  The lawsuit alleges that the term “rent” has an ancient and well recognized meaning.  Absent special circumstances, it is the cost of housing.  It includes the water pipes but not the water.  All other utilities, such as, gas, electric, telephone, and internet services, are separately billed and paid by tenants and not considered part of the rent; but in Santa Monica the water utility is treated differently for these older buildings.  This is yet another example of extreme rent control as practiced in Santa Monica.

A ruling in favor of the landlords in Santa Monica would be a binding precedent for all landlords in the State as the basis of the lawsuit is that the State enacted Costa Hawkins Act preempts any inconsistent municipal ordinances.

Donald Woods, Esq.

dwoods@donaldwoodslaw.com

Santa Monica Ordinance Prohibiting Short Term Rentals is being challenged in Court by Los Angeles Law Firm

Written by Apartment Management Magazine on . Posted in Blog

airbnb-lawsuit

The City of Santa Monica has enacted an ordinance that effectively prohibits AirBnb-type vacation rentals; this ordinance is being challenged as unconstitutional through a class action filed in the Central District of California (Los Angeles) by the Los Angeles law firm of Esensten Law on behalf of property owners in Santa Monica who have lost substantial income and potentially face imprisonment of up to six months as punishment for renting out their property as short-term vacation rentals.

The last few years have seen a massive growth in the market for online short-term vacation rentals utilizing websites such as AirBnb and HomeAway, which allow property owners to earn additional income by listing their properties for short-term rental while they are away on vacation or otherwise.  The rapid growth of the market for such rentals is a reflection of the benefits provided to both travelers and owners.  However, because such vacation rentals are typically at least 50% less expensive than hotels, the impact is felt by hotels in lower occupancy as well as by cities that obtain less revenue from taxes paid by hotels.

By its express terms, the Ordinance prohibits all persons from engaging in “vacation rentals,” whereby the owner does not simultaneously reside on the property with the renter.  The Ordinance also contains a partial ban on “home sharing,” where the owner simultaneously resides on the property.  To use the home sharing exception, the listing owner must obtain a City-issued business license, which is available only to property owners residing in their Santa Monica properties.  The advertising of any such vacation rentals or home sharing is also prohibited by the Ordinance.

The impact of the Santa Monica Ordinance is substantial and financially devastating to the thousands of owners in the City of Santa Monica who offer their otherwise vacant properties for short-term rental to earn additional income.

The City of Santa Monica has been vigorously enforcing the Ordinance, budgeting $410,000 to employ three inspectors to ensure enforcement of the Ordinance during the first year of enactment.  In enacting the Ordinance, the City of Santa Monica estimated that the complete ban on vacation rentals would slash Santa Monica Airbnb listings from 1,700 to 300.

The class action filed by Esensten Law seeking to invalidate the Ordinance is based on the violation of the dormant Commerce Clause of the Constitution of the United States, which prohibits legislation that discriminates against interstate commerce.  Based upon the constitutional violations, the class action seeks to have the Ordinance declared invalid and to prevent enforcement of the Ordinance by way of an injunction, which is a Court Order prohibiting the City from enforcing the ban on vacation rentals, as well as seeking a return of the fines the City has already collected and will collect until the case is tried before the Court.   The motion for an Injunction, the motion to certify the class of Santa Monica property owners effected by the Ordinance and a motion by the City of Santa Monica to have the litigation dismissed are pending before Judge Otis Wright.

LA LA LAND APARTMENT NEWS

Written by Apartment Management Magazine on . Posted in Blog

Industry News

Big Brother Wants to Peep at Your Papers

The Los Angeles City Council wants apartment owners to provide renters with a written disclosure of rights prior to signing any buyout agreement. They also want any completed agreements to be filed with the City. Agreements must provide a 30-day period in which the tenant can rescind for any reason. Failure of owners to provide the disclosure will make the contracts voidable at any time and subject the owner to a lawsuit by the tenant or prosecution by the City. The council instructed the City Attorney to draft and return with an implementing  ordinance. This is expected to become law in early 2016. Will City Attorney staff now wear referee uniforms and be issued whistles?

Airbnb Flirts with Apartment Industry

Airbnb has pulled off one of the biggest scams in the history of commerce. It has built a $38 billion dollar business by providing housing accommodations without paying one cent to apartment building owners when their tenants rent out apartments to tourists. It’s like having a free hotel and not paying anything for rent, taxes, insurance, employees, utilities, repairs or maintenance. Since many apartment building owners have resisted their scheme, Airbnb has developed a romance plan which it hopes will woo more owners to its lair. Dubbed the Friendly Building Program, Airbnb is offering 5-15% of the nightly rentals to participatimg owners. It is not clear at this time whether they are making this program available in Los Angeles.

Despite the fact that currently most Airbnb rentals in Los Angeles are illegal, the City has no qualms about collecting the Transient Occupancy Tax on them. They have cut a deal with Airbnb to collect the taxes despite most rentals being in violation of City laws. The City is trying to develop regulations to deal with short-term rental but the regulatory wheels don’t move as quickly as the tax wheels.

Gentrification of Los Angeles Neighborhoods-Who’s at Fault?

Gentrification of neighborhoods is the latest sin that the left-leaning press and political agitators want to blame on apartment owners. Government policies for years have discouraged development, created a shortage of housing, causing dramatic rental inflation during a time of otherwise low inflation. Meanwhile, extreme rent control policies have not allowed rents on in-place tenants to keep pace with cost increases. So when newly vacated or developed units are only affordable to more affluent renters than those who previously resided in an area, apartment owners get the blame. And when apartment owners look for ways to escape the prison of below market rents that tenants have enjoyed for many years, sometimes for many decades, the accusatory finger is again wagged in our direction.

Erualdo Gonzales, an associate professor of Chicana and Chicano Studies at Cal State Fullerton, hardly an apartment industry apologist, was quoted in the LA Times with a brilliant observation of government’s role, “Change may be normal, in a general sense, but gentrification is not. Gentrification is often a process that involves private-public partnerships. In Santa Ana, this is the case. Change was engineered.”

At the heart of much gentrification are government policies to upgrade areas to increase city revenues from sales, property and transit occupancy taxes. And let’s not forget the role campaign contributions play in rewarding government decision makers who approve the deals with developers that fuel the demographic shifts.

Wes Wellman

Wellman Realty Company

310-829-7423/wes@wellmanproperties.com

BRE Lic. # 00467451

ACTION Apartment Association Teams up with Apartment Management Magazine of West LA

Written by Apartment Management Magazine on . Posted in Blog

santa-monica

We get it. Ours is an industry under siege. Housing providers are plagued by over-regulation, ever increasing taxes and fees, escalating costs, frivolous lawsuits, relentless press bias, partisan community organizing, politically motivated judges and anti-owner elected officials at every level.

Owners need an industry gladiator to help repel the forces massing against it. ACTION Apartment Association, Inc. is that warrior.

actionassociationWe have been in this fight since 1979 in Santa Monica. We formed to fill a vacuum left by the traditional industry organizations who were more interested in selling forms than fighting corruption. ACTION is the first word in our name and our first order of business. We are committed to litigation, advocacy and advice, in that order. Why litigation first? Because the courts, although not necessarily our friend, are the last line of defense against the relentless attacks by the politically motivated elected officials and the pesky, dark-money-funded public interest law firms.

We have filed a class-action lawsuit to get the legal right to have new tenants share the mounting cost of water in buildings without separate meters. As you know water costs are mushrooming and there is no incentive for tenants to conserve.  Owners have been saddled with the burden of fines and fees from the excessive water use by their renters. Attorney Don Woods, who represents us, has an article in this issue explaining our suit in more detail. Please see page X.

Although we started in Santa Monica, we seek to broaden our footprint. That is why we have partnered with Apartment Management Magazine to begin to communicate with and defend a wider apartment industry audience. In this issue you will begin to notice an editorial shift. We are committed to providing timely, relevant and interesting reporting that will be a valuable monthly resource for you. We are not fond of articles about dead bolt locks and estate planning. We are not fans of advertisements posing as news articles. We want to give you News You Can Use.

ACTION Apartment Association,  inc. is an open shop not an old boy clique. We welcome input from the owner community. We love volunteers who will lock arms and work with us. Our emails are below and we encourage your feedback. Enjoy, Learn and Fight.

Elaine Golden-Gealer | President: elaine@elaine360.com                                    

Wes Wellman | Founding Director: wes@wellmanpropperties.com

No Credit? No Problem: How to Minimize the Risk of Renting to Tenants with Less-than-Perfect Credit Scores

Written by Apartment Management Magazine on . Posted in Blog

Shared post by Appfolio

co-sign

What property manager doesn’t prefer to rent to tenants with excellent credit scores? These types of people have already demonstrated that they pay their bills on time, reducing the risk of future headaches when rent comes due. But the reality is that not all renters have near-perfect credit; according to recent reports, the average credit score in the U.S. falls in the 675-699 range and the fact that this is an average means that many Americans have credit scores below this number. Some property managers can’t afford to only accept applicants with fantastic credit if they want to keep their properties full, but there are things you can do to reduce the risk associated with renting to people with less than ideal credit scores.

Tips to Minimize Risk when Renting to Tenants with Low Credit

There are some ways to protect your business and still approve renters who may not have great credit scores or even any credit history at all.

Require a guarantor or cosigner: A cosigner is a third party who will agree to pay the rent if the tenant doesn’t. Very often, rental properties that house a lot of young people, especially students, ask for a cosigner. Young adults may be fine tenants, but they haven’t had a chance to establish their own credit history yet. A parent or other family member may be happy to guarantee that the rent will get paid on time. This helps transfer the risk to a third party and allows people who have not established credit yet to get a good start.

Ask for a larger deposit: State laws may limit the amount of deposit that landlords can require, but there is usually some flexibility. If a tenant has good credit, a property manager may only ask for a one-month deposit, but if possible, it might be fair to ask for a larger deposit from a tenant who has poor credit. This extra deposit helps cover the risk that the tenant won’t make timely payments or even be able to pay at all.

Ask for rent in advance: Some people with poor credit may have access to funds to pay their rent. If it’s legal and possible, the property manager may ask poor-credit applicants if they can pay their rent a few months in advance. For example, instead of just requiring a deposit and the first month’s rent, the property manager might ask for the deposit and two month’s rent. In this case, the applicant would actually be paying ahead one month on each due date.

Require automatic payments: Rental managers might give tenants different options to pay their rent. But requiring automatic, online payments from tenants can help ensure timely payments.

Communicate early and often: It makes sense to have renters make online payments. It might also help to send online text or email messages to remind renters to pay the rent before rent day. It’s also sensible to follow up quickly if a rent due date has been missed because younger renters without established credit may require a bit more guidance.

These compromises may make it possible to approve more rental applications, but always remember to stay within the law and follow fair housing guidelines.  In order to offer a bit more flexibility, it’s important to come up with ways to transfer the risk and in some cases, provide a bit of guidance as the renter pool gets younger. Property managers are human too; some may be motivated to give certain applicants a second chance to rent a home and improve their credit.

BUILDINGS MAINTENANCE & MANAGEMENT EXPO OFFERS BIG DATA, TECHNOLOGY AND SUSTAINABLE SOLUTIONS IN ANAHEIM OCTOBER 25

Written by Apartment Management Magazine on . Posted in Blog

bld_siteheader_date2016_5

Irvine Company, So Cal Edison and So Cal Gas Host Smart Buildings Seminars, Exhibit Hall and Networking

The Buildings Maintenance & Management Expo (BMME) featuring educational seminars by Irvine Company and So Cal Edison, building management industry speakers, exhibitor showcase and networking opportunities will be held Tuesday, October 25 at Anaheim Convention Center. Admission is free.

“Sustainability initiatives, new technologies, policy mandates and funding incentives are shaping the future as public and private sector leaders explore, source and integrate smart building solutions,” said Scott Kitcher, conference co-sponsor and President & CEO of Sustain OC, formerly Clean Tech OC.

Buildings management, sustainability and operations seminars will be held on topics such as microgrids, energy storage, seismic retrofits, security, compliance and smart systems. The Orange County Sheriff Department will hold a special active shooter and crisis management clinic, and presentations by leading utility, energy and industry experts include:

* Rich Bluth, Irvine Company
  * Caroline McAndrews, Southern California Edison
  * Corey Lee Wilson, International Facility Management Association
  * Scott Kitcher, Sustain OC (formerly Clean Tech OC)
  * Mark Walter, Biix Smart Building Software
  * Heather Williams and Shane Millhollon, Orange County Sheriff Department
  * Stephen C. Duringer, Duringer Law Group
  * Andrea Marr, Regatta Solutions Energy Services
  * William Exeter, Exeter 1031 Exchange Services LLC

Facility managers, commercial real estate developers, architects, engineers and government officials are invited to access the latest products, services and clean tech equipment in the exhibit hall. This event is co-hosted by The Register, International Facility Management Association, Apartment Association of Orange County, Sustain OC and Buildings Maintenance & Management Magazine. Hours are 8:30 am to 4:00 p.m. For pre-registration and more information, please visit www.buildingsexpos.com.

Editors Note: For interviews or media credentials contact: David Kuff at davidjeffrey99@gmail.com

 

Landlords and Natural Disasters

Written by Apartment Management Magazine on . Posted in Blog

By  | Original post from RentPrep
natural-disaster-prepMost parts of the United States are subject to at least one kind of natural disaster, and some areas may be impacted by several different kinds. These disasters can often be tragic and cause devastating losses in lives and property. As a property owner, it’s always a good idea to educate yourself on what natural disasters could take place in your area. Then, you can create a plan for dealing with them during and after they occur.

What is a Natural Disaster?

A natural disaster is a significant event that occurs because of normal functions and actions of the Earth and its forces. Examples of natural disasters include:

  • Earthquakes
  • Hurricanes
  • Tornados
  • Floods
  • Wildfires
  • Tsunamis
  • Drought
  • Landslides
  • Sinkholes
  • Volcanos
  • Blizzards
  • Extreme weather, hot or cold

Natural disasters, depending on the severity, can affect an area economically and cost millions of dollars of state and federal money to help the region recover. The impact on a property owner can be significant and even in the best case scenario, natural disasters can create plenty of stress, damage and tenant issues for landlords.

Regional Risk Factors

The biggest natural disaster risks can be broken down into regions, where certain types of natural disasters are most likely to occur. There is no single area that is completely safe from natural disasters, but some areas have increased odds while others remain relatively disaster free for long periods of time. Let’s review the biggest natural disaster risks for each major geographic region of the United States.

Northeast United States

This area is subject to incredibly powerful storms in this area are called nor’easters. These macro storms get their name from the direction the wind is coming and bring heavy rain or snow, hurricane-force winds and coastal flooding in some instances. Severe winter storms can cause power outages that last for a few days or a few weeks in extreme cases. These storms can also interrupt road travel and cause property damage.

Southeast United States

In the states that border the Gulf of Mexico and the Atlantic Ocean, the biggest natural disaster risk has to be hurricanes. From the first of June through the end of November, the area is susceptible to tropical storms and hurricanes. Hurricanes bring strong winds, heavy rain, and high waves that can affect coastal communities. A hurricane’s heavy rain can cause flooding inland so distance from the coast is not always a relief from damage. Tornados are also common in this region and can cause plenty of damage.

Midwest United States

From North Dakota down to Louisiana, the likelihood of tornados here are high during certain parts of the year. Known as Tornado Alley, this region generates many tornados every year. With strong winds, tornados can decimate a small town in just a few minutes, and cause extensive damage and loss of life. The Midwest is also subject to flooding disasters due to heavy spring rains.

Mountain West United States

Due to the dry nature of the region, the Mountain West’s biggest risk comes from wildfires. With huge expanses of dry forests and acres of grassland, a small spark can ignite a wildfire that can threaten homes and lives. Another risk of natural disaster in the Mountain West region comes from earthquakes, as several significant fault lines run throughout the region. While there hasn’t been a large earthquake in the area for decades, scientists have determined that it’s not a matter of if, but when.

West Coast United States

Similar to the Mountain West, the West Coast is most likely to be affected by wildfires, but the increased activity of earthquakes in this region catapult this type of natural disaster to the top of the risk list. Even moderate earthquakes can cause damage to structures, and the region has a history of several large earthquakes that have resulted in extensive damage and loss of life.

Natural Disaster Risk Areas

Thanks to decades of study and tracking, scientists and researchers can calculate the areas of the country with the highest risk of natural disasters as well as those places with the lowest risk of natural disasters. Several reports have been created to give residents an idea of what kinds of natural disasters they are most likely to face, depending on where they live.

Here is one report that ranks the top 10 states most likely to have natural disasters, as well as what residents are most likely to encounter there:

  1. Texas—tornados, floods, wildfires, hurricanes, floods
  2. California—earthquakes, wildfires, flooding, severe weather, tsunami
  3. Oklahoma—tornado, snow, flooding, wildfires
  4. New York—snow, ice, tropical storms
  5. Florida—hurricanes
  6. Louisiana—hurricanes, flooding
  7. Alabama—hurricanes
  8. Kentucky—flooding, tornados, mudslides, severe weather
  9. Arkansas—heavy rain, snow, ice, tornados, flooding
  10. Missouri—ice storms, snow, tornados, flooding

This report reveals both the highest risk cities, as well as the safest cities, in the United States:

High Risk Cities

  • Dallas-Plano-Irving, Texas
  • Jonesboro, Arkansas
  • Corpus Christi, Texas
  • Houston, Texas
  • Beaumont-Port Arthur, Texas
  • Shreveport, Louisiana
  • Austin, Texas
  • Birmingham, Alabama

Low Risk Cities

  • Corvallis, Oregon
  • Mt. Vernon-Anacortes, Washington
  • Bellingham, Washington
  • Wenatchee, Washington
  • Grand Junction, Colorado
  • Spokane, Washington,
  • Salem, Oregon
  • Seattle, Washington

It’s easy to see that where the Southeast and Midwest intersect, there are more chances for residents to encounter natural disasters. It’s always a good idea for landlords and property owners in general to get familiar with the risks associated with their region, so that proper preparation can begin.

Landlord Plan for Natural Disasters

No matter where you live in the United States, as a homeowner and landlord, you should find out what natural disasters may occur where your properties are located. There should be plenty of state and local resources on how to prepare physically for a natural disaster.

Insurance

As a property owner, consider reviewing your current insurance policies and see what kind of coverage you have signed up for. Some areas require separate insurance for certain disasters that is outside of a standard policy. For example, if your rental property is located on a flood plain, your standard homeowner’s insurance may not cover any damage by a flood and you would need to purchase a separate insurance policy for floods. Follow your insurer’s advice on listing the features of the property and even taking pictures to document everything before disaster strikes. Also, educate your tenant on renter’s insurance.

Records

Keep your information about insurance and so forth in a safe place so you can access it after the natural disaster occurs. If you live in the same area as your rental property, keep hard copies of important documents where you can access them easily. It’s a good idea to create digital copies and store them in the cloud or in an online storage facility like Dropbox or as attachments to an email. Even if you are without a computer or power, you will eventually be able to access the documents. They may be the only versions left if your own home is affected severely.

Tenants and Lease Agreements

It’s also important for landlords to become familiar with the laws concerning the destruction of rental property and how that affects the lease agreement. If the laws are vague or non-existent, landlords can include wording in the lease agreement for clarity in the event of a natural disaster that destroys or otherwise makes a rental property uninhabitable. For example, will rent be temporarily abated while the property is being restored or repaired or will the lease be dissolved?

In other words, make sure the lease agreement has specific wording that covers provisions if the rental property is partially or completely destroyed. Of course, check with a landlord tenant attorney to ensure that your lease is compliant with state laws on the subject.

Structural Preparations

Depending on what types of natural disasters your area is prone to, there may be some things you can do to minimize damage to your rental property. For example, if your rental is in a high hurricane area, consider replacing standard windows with impact resistant glass and installing hurricane shutters. In an earthquake area, take the time to anchor large appliances, like refrigerators, with hooks and straps. For rental properties in wildfire zones, choose landscaping that places shrubs and trees several feet away from a structure. Taking the time now to prep a rental property can mean the difference in thousands of dollars worth of damage and may even lead to keeping tenants safer.

Other Factors

Other factors to consider when it comes to rental properties and natural disasters:

  • Whether a lease is terminated because of a disaster.
  • What happens to the tenant if the rental property is uninhabitable.
  • If the tenant’s job and income is affected by the disaster and how that can impact the ability to pay rent.
  • How the tenant might pay rent on time if normal methods are not stable (mail delivery, electronic banking, etc.).
  • How tenants become informed about the steps for them to recover from the loss of personal belongings or injury claims due to the disaster through FEMA or other avenues, as well as from their renter’s insurance policy.

In order to minimize the amount of stress and to ease the financial burdens for landlords in the event of a natural disaster, the best advice is to be prepared. While there is no way to predict where and when a natural disaster will take place, you can control your level of preparation and ensure the best possible scenario for your property and your tenants.

Landlord Resources

Centers for Disease Control and Prevention: Natural Disasters and Severe Weather

Federal Emergency Management Agency: FEMA

USA.gov: Disasters and Emergencies

Red Cross: Prepare for an Emergency

You can also go online and search for your state’s division of emergency management or emergency department for resources and guidance specific to your state.

What steps have you taken to protect your property from a natural disaster and minimize the stress of a devastating aftermath? Please share this article and let us know your thoughts in the comments section below.

Learn more about RentPrep at RentPrep.com

Apartment Sales Prices on the Rise: Key Factors Every Investor Must Know

Written by Apartment Management Magazine on . Posted in Blog

By: Brian & Vincent “The Apartment Specialists”

apartment-for-sale

Clients are always asking us, “When is the right time to buy?” or “I really want to cash in on my property. Is this the peak of the market?” Both of these great questions are constantly coming from our clients and our overseas investors. The answer is always the same: In every market, at any given time, you will find opportunity. You see, following the trends is wonderful, but looking behind the trends, at the nuts and bolts of what drives a market is the true key to success. Anyone can follow a trend and make a couple of good real estate purchases, but the key to long term success is to continually buy and sell strategically, all the while increasing your total portfolio’s net worth.

Today’s apartment sales are moving fast, and investors from all over the globe are honing in on Southern California with the keen understanding that California will always be a great rental market in which to invest. After the Great Recession, there have been shifts in our local apartment industry and much has changed since 2008 & 2009 when vacancy rates had sky rocketed, rental rates dropped, rent concessions were commonplace and, let’s not forget, litigation was rampant.

Today, if you have your pulse on the market, you understand that values are up, vacancy rates are stable but rental rates are still a bit sluggish. It’s true, you heard that right. Values are up but rental rates are sluggish. You may debate this statement, asking if it’s somewhat of an oxymoron for apartment values to be up while rental values are sluggish. With interest rates at historic lows and Wall Street still going strong even with only a 2.6% rental growth rate from last year, apartment sale prices are up and solid, showing a steady increase since the 1st quarter of 2012.

There are key financial indicators to look at when asking why apartment prices are rising up to nearly pre-Great Recession prices and in some areas of Los Angeles County, prices are the same if not greater. The Federal Government with all their antics have actually helped to stimulate the economy with QE 1, 2 and 3, effectively generating some positive effects for the Los Angeles County metro areas.

After the beginning of QE3, unemployment rates have dropped from 8.1% to 7.6%, adding approximately 89,400 jobs to our local economy in the greater Los Angeles area, the largest growth in over ten years. Also, foreign investors causing bidding wars on single family investments are now frustrated with single family homes and are moving into the apartment investment arena.

Despite the onset of positive circumstances, there are still concerns amongst conservative and doomsday investor naysayers who look at today’s low CAP rates and ask, “Where is the upside?” To them I say, look for the silver lining and there you will find upside. The opportunity is the fact that we are living in the times of the lowest interest rates in history, and with inflation still low at only 2.1% with only a slight increase from 2013, our economy continues to hold steady. You cannot miss out on cashing-in on these rates, not to mention that Fed chairwoman Janet Yellen has committed to continue these low rates for an extended period of time. Commitment to low interest rates means we as consumers can capitalize on this low cost borrowing.

Guess who else sees the opportunity? That’s right…developers! Developers have caught on to the apartment wave and have wasted no time adding to construction jobs and building over 12,000+ new apartment units. Planning ahead is the best way to leverage your real estate investments.

In larger properties, many investors have turned to lower energy costs and water costs by shifting usage to alternative methods. Saving on these overhead costs is like adding rent valve to your investment property.  As the old saying goes, “A penny saved is a penny earned”. By retrofitting and lowering water consumption and energy costs, a San Francisco based apartment portfolio was able to save $500 million dollars annually.

More upside potential you will see in the near future that will increase the value of your current apartment purchase or long term apartment holdings is the fact that rental rates have been sluggish for the past 5 to 6 years. Next year, we are projecting a rent forecast growth of 3.3%; this during a moderate climate of economic development. Think of the long term upside on rental rate increases in a thriving and robust economy and what that means in value to you. The demand for apartments in Southern California is stronger than ever with an occupancy rate averaging 96%. Not to mention, future forecasts indicate that we will have a shortage of housing in California by the year 2016.

Knowledge is power, and educating yourself to become an astute investor will help you make calculated decisions that will insure long term growth and stability. In this market there is much opportunity to take advantage of, with a 1031 Exchange, or simply cashing out on today’s prices. No matter how you see yourself and your property in this market, there are opportunities for you to increase the value of your property. Whether through a rental increase, repositioning process, or simply taking that equity built and moving it to a more stable asset, there are more choices and options to build your investment portfolio. And if you are one of the few who opts to pay the IRS and not cash in on depreciation because of fear of not getting top dollar for your investment, perhaps this is the perfect time for you as well. No matter where you are situated in today’s market, there is opportunity.

The key to benefitting in this market is patience, a keen vision for opportunity, and the ability to work with a professional who understands this market and the operations of an apartment building. Wherever you stand, in today’s real estate market, from a small multi-family investor to a large, well seasoned investing veteran, just remember that today is filled with opportunity.

What will you do to be successful in this market? Will you sit by passively and watch? Or will you be an active participant, cashing in on these opportunities? The choice is yours.

Brian and Vincent are the owners of Lotus Property Services, Inc. and are active leaders and real estate brokers in the apartment industry. Brian frequently writes for numerous trade magazines and speaks at numerous seminars. Vincent sits on numerous industry boards and is a frequent writer and speaker for industry events. As industry experts, Brian & Vincent have sold and managed over 1 billion dollars in real estate assets. To contact Brian or Vincent, you can call or email: brian@lotuspropertyservices.net 626. 582. 8001 ext. 104 vincent@lotuspropertyservices.net 626. 582. 8001 ext. 102