If you do not visit Phoenix Market Trends you may not have seen that we have published a few articles that may be of interest to our readers here at Arizona Apartment Investor.

With a lot of lender owned and short sale multifamily properties selling we put together some steps to help lease them since most will be vacant or you’ll make them vacant before repositioning.

1.  Filling A Vacant Income Property After The Purchase: How To Get The Income Flowing.

Property prices have dropped a lot for all property types.  Although rents have dropped as well they are still at levels which allow both multi-family and single family income properties to cash flow.  The article below reviews a good rental area where prices are very good as are the prospects.

2.  Phoenix Area Real Estate Investments That Cash Flow

This is an interesting read for the longer term and in real estate, investing is longer term so it would behoove you to know where the populations are moving, how and why.

3.  The Shifting Suburban Landscape And The Current Economic Crash

Bank owned properties are very attractive but not always.  We reviewed the market to see at what discount they are selling in proportion to list price and normals sales. 

4.  What To Offer On A Phoenix Bank Owned Home?

Homes are affordable now an many are very inexpensive at around $40.00 and sometimes less per square foot.  Often these are big homes with don’t make the best investments as rental income properties.

5.  $40.00 Per Square Foot Newer Phoenix Valley Homes: The Affordable Big.

This is just starting.  For about half a year now there were restrictions on how many loans an inventor could have and still buy properties.  If you had 4 or more you were out of luck, having to resort to expensive financing with made the investment not work, but now that number has grown to 10.  So investors can dive into this tremendous market filled with cash flow properties, good financing options and lots of potential for wealth building.

6.  Financing Up To 10 Properties Is Available Again.

Artur Ciesielski, (Certified Commercial Investment Member) 602.628.4349

Recently we revived a simple way to help lease a property in any market but especially in a tough rental market.  See the post here: How to lease a home or apartment in a tough rental market.  That -cleanliness- was one thing of many that can be done. 

Another good way to stand out from the competition in most properties except luxury homes is to get rid of the carpet.  Carpet detracts from the property.  They are usually worn and most owners put in cheap, not just in expensive but cheap carpet which will be quickly worn out and a year from now useless.  Even if you put in carpet people know that carpet is dirty even if it looks clean: they know how bad it can be especially in rental properties: carpet makes the property look older and more worn.

So what do you put in.  The choices are tile and laminate or a combination of the two.  Nice tile and a decent laminate have a lot of positive qualities.  These qualities expand beyond the simple fact that they are cleaner.

Tile is best in the living room, kitchen and bathrooms as well as the hall way: laminate is good in the bedroom, hall way and living room.  You can buy a laminate floor and have in installed for about the same cost as carpet.

These hard surface flooring materials are more durable and cleaner.  A nice light or medium shade laminate will also make the rooms feel larger.

In our experience putting in hard surfaces has paid off big.  It has paid of in less maintenance, lower turn over cost and lower vacancy rates: it puts us a head of the competition.  We know because we ask.  Sometimes a prospective tenant will choose an apartment with hard surfaces and olderkitchen vs a new kitchen and carpets.

We’ll look at other ways to increase income, reduce management costs and make renting homes and apartment a more pleasant experience in future articles.

The recent Apartment News a publication of the Arizona Multi-housing Association reports that vacancies in the valley are at "record levels"

In the valley rents dropped by $3.00 to $770.00 on average.  This is, "the first year to year decline in the same quarter (3Q’08) since 2003.  Vacancies stood at 13 percent, a record high for the Valley."

While the data compiled is for larger properties the smaller properties those 3-20 units have similar results.  From what I have seen and in doing the occasional rental survey, vacancies - both economic and physical are up. 

Competition has increased.  Driving through neighborhoods potential tenants are faced with many choices even in some of the more desirable rental neighborhood where vacancies were usually low.

It is difficult to find a tenant and a lot of effort has to be forth to entice them to even look at units.  Even in the advertising outlets there has been a surge of properties. 

So why so many vacancies if homes are so difficult to buy?  Well, homes are difficult to purchase but not in all segments.  In fact, sales of homes under $125,000 have increased 5,200% over last year.   The spurt of affordable housing has enticed quite a few tenants to buy homes. 

Increased competition from rentals includes homes and some tenants have moved into single family homes.  A very common occurrence is consolidation of families from multiple living units to one: families and friend are moving in together.  On the other hand we have had some interest from people who have decided to rent their home which has a higher mortgage and find a lessexpensive apartment: though this is a very small slice.

Either way, the rental market -whether for apartments or homes- is soft.

Phoenix Asbestos Inspection Important for Healthy Home

If you live in Phoenix and are a potential home-buyer or are remodeling a home built prior to 1980, you may be at risk for asbestos exposure. The Agency for Toxic Substances and Disease Registry stated that a large industry in Arizona is still present because of mines operated by Asbestos Mines, a division of Arizona Asbestos Inc.

Now seeking to redefine the way asbestos is handled, the Asbestos Institute is stationed in Phoenix and is one of the largest training facilities for asbestos abatement in the world. Those involved in real-estate should be aware that asbestos exposure can cause health concerns for you and your family.

Used in many building applications throughout the 20^th century, asbestos was a hot commodity due to its qualities as being heat and fire resistant. The inhalation of asbestos fibers causes a severe lung-ailment known as mesothelioma. With many at-risk occupations such as construction and factory sites, Arizona ranked 28^th in the United States from asbestos-related deaths in the past 23 years. Mesothelioma treatment is limited to a handful of options and patients who contract the disease are given poor prognosis.

The Arizona Department of Environmental Quality is committed to protecting the public from asbestos-containing materials by educating and assisting with asbestos removal, transport and disposal. The removal of hazardous substances must be performed by professional abatement contractors who are trained in these matters. Eco-friendly options must be considered when the removal is complete.

The use of recycled building materials as forms of insulation completely replaces the need for asbestos. These alternatives include cotton fiber, cellulose and lcynene. Studies show that these materials can reduce energy costs in the home by up to 35 percent each year. Turning your home asbestos-free is essential for living in a safe environment for you and your family.

We recently leased a condo for a client in Scottsdale.  The last tenants had to be evicted (not tenants we brought) but guess what they did?  The property was clean, very clean when they moved out but once the new tenant moved in one room had no power! 

An electrician had discovered that inside each of the electrical contacts the insulation had been removed from each wire: this is a clear and probably fire hazard the electrician indicated. 

Why did they do it?  I won’t answer for them but this put at risk the entire building: at risk of fire.  This sort of stuff is very uncommon but, it raised the question to what extent should you do an move in and move out inspection?  That is something each owner needs to answer them selves but make sure you insurance is up to date.

There are very good property managers out there and there are both pros and cons to hiring individual agents or larger management companies, but you need to vet them carefully: you’re relying on someone to run your business.

A question I get quite often, mainly because I work with buyers and sellers of investment properties, including homes and multifamily, is: what are the rents in a particular area. 

A buyer needs to know this to establish the value of the property being considered: to evaluate the demand and supply in a particular neighborhood: and the gauge the ability to pursue other techniques to increase his/her return, things like repositioning.

A manager -whether an owner manager or a hired manager- needs to know the market to keep vacancy rates low but also to maximize the return and track any trends.

When a property may go up for sale or an owner needs to evaluate the investment, he/she will also need to know -that is of course if they don’t already know- what the rental market is like, what are the trends, and what affect will they have on the price and in who’s favor will the negotiations tip. In each stage the access to reliable rental data is vital.

But how to you get that data and how do you ensure it’s the best data?

There are many ways to get rental data.  Some people assume that looking through a paper is good or craigslist: others ask a Realtor: and yet others do a rental survey.

The two former data gathering sources can be used as an overall gauge but this is never as accurate as the latter: the rental survey, and it is this that I want to focus on. 

The Rental Survey.

A rental survey a concise study of the rental market -whether single family homes or multifamily apartment - which involves more then a surface view: it involves getting into the details by getting a first hand look at your competition. To get the most accurate rental data you should do as many of the following activities as possible.

1.  Drive the neighborhood and see how many signs are up? Are they individual owners or management companies.  If you see signs over and over the same location it could mean multiple things but higher vacancies are one of them: this could also signify a very transient neighborhood and tenants that move often lower your income and increase risk.

2.  View the apartments or homes if possible.  It’s not the rates themselves that are singularly important.  What is a tenant getting for the rent.  Which utilities are included or not and who is responsible for what.  In addition the condition of the property is very important: flooring, paint, state of the kitchen and cleanliness are very important and have a large affect on the rental rate.

3.  Speak with the owners or management companies to see how long the property has been available  and are there any concessions offered.  Each is a good source of information but you need to vet it as well as you may not get the whole story.

4.  Talk to a management company of Realtor who does management in the area.  Some Realtors do management and some -though few- do a rental survey themselves.  You may want to talk to someone like that but be courteous about requesting free information if you’re not a client.  It takes a lot of work to do a proper survey.

5.  Talk to fellow investors who do work in the area.  Some real estate investment clubs and organizations have enough members that you’re bound to find someone who is in the know.  In Greater Phoenix there are several clubs but AZREIA is the larges and the meeting are a great source first hand information.

6.  Then compare to active listing in the various sources available to see any discrepancies between what is being offered and what is actually happening; You can also compare what you have found to a general survey of rental rates in Phoenix, like this one to see if there are any trends.

Just as you would want to know where you customers will come from, how much they earn, and spend before you open any sort of business you want to know the same for an investment property because this is where your cash flow will come from and you want to know the quality and value of that cash flow. 

Even small discrepancies can affect values greatly.  Over time an owner can lose lots of income due to improper rental pricing or loss of value when selling.  A buyer can be in a much stronger negotiating position if he/she knows the strength of the income and any market pressures on it.

A rental survey should be part of any due diligence for a buyer and seller and a regular activity for managers/owners of a property. 

Part of our service for our clients is a rental survey when buying or selling an investment property.

Unlike running a rental house a multifamily building is more akin to running a business especially when you have more then one or when the total unit count starts to rise.
it sounds very simple to invest in a multifamily property.   You buy, you manage, or delegate, wait and spend the profits.
There are a lot of people who have created great wealth or continuing stream of passive income but its not as easy as it seems but is also not as difficult. 

Like mentioned above, managing a multifamily property is a business, so it’s wise to consider some of the things mentioned below.

The Location is of vital importance, not matter if its a very low income apartment or a class A property, if you want to achieve results then the location is crucial.  Even placement withing a neighborhood or community can make your building one of high occupancy or vacancy. 

As any business you want to have a location which is convenient for the tenant.  That means shopping, transportation routes and lots of jobs near-by.  But from the stand point of an owner its easier to lease properties that are not in large groupings.

Cost and Inflation.  Each year weather you want it or not your cost will increase even though the rents may stay flat or fall.  Make sure you have resources to cover those down times.  Even a short spurt of 50% vacancy from turnover can create a big expense and a huge set back if you don’t have the funds to prep the units for releasing. 

Of course you can lease a run-down apartment but you’ll be reducing the value of your property and don’t expect tenants to respect your property if you don’t or can’t.  Multi-family buildings have other costs, including hazard insurance, liability insurance, grounds keeping, landscaping, trash removal, snow removal, advertising, property taxes and maintenance. The rent you charge should cover all of these, plus utilities.

Management:  This is crucial.  Bad management can make the best initial investment a total disaster no matter if you are the manager or you have a management company.  Consider this carefully when deciding to purchase an investment property, a multi-family property or single family home for the matter. 

Management will be in charge of a very large assess.  Handing over your property to a management company is like giving the reigns of your business over into the hands of a manager a non-owner.  Rarely will you find a management company that cares about your expenses and income as much as you do, so choose carefully. 

I know quite a few stories of management gone bad.  In, fact some of these prime properties can be purchased at a reduced price because either a property is run down or the tenants are paying below market lease rates.  If you’re going to be the manager make sure you get paid for your time. 

Repairs: If a property is lacking repairs then you will lose tenants, or at least good tenants.  It’s very common for tenants to move because an owner or a management company fails to make necessary repairs.   A good solution would be to make it a guarantee that you’ll fix something within a period of time.  If you do this do it carefully though.

I don’t want to scare you off from investing in multi-family properties.  They are a great way to create a continuing stream of  passive income but it’s still a business which needs nurturing and care.  It won’t run itself.  It’s also not as difficult as it seems but you need to put together a good team to help you.

There has been a lot of press about staging homes and many new companies have come on the market to fill that gap advising and performing staging on homes for sale.  Other people do it them selves and many agents have been advising staging for years.  Even simple thing like removing clutter is part of staging.  But, have you though about staging a vacant apartment for lease?

Usually staging is quite pricey, especially if furniture is involved and for leasing purposes it just too expensive, but apartment rental owners can do some very simple things that make apartments much more attractive and will reduce you vacancy rate and attract better tenants.

Over the last year we have been doing just that, staging vacant apartments.  First thing is that the unit which you stage must be prepped and cleaned and the exterior must be attractive.  The assumption is that even with out staging the apartment is ready and fully rent-able . 

Staging’s function is the make the apartment more attractive; make is look warm and welcoming and this must be done with reusable items and with no furniture and on a small budget.

There are 2 main targets of staging; 2 places where it will make the biggest impact.
The kitchen and bathrooms are often the most important places for prospective tenants followed by the other rooms.
Staging a kitchen is fairly simple.  All you need are a few items that will add color and texture.  These can be things like a neutral bowl filled with potpourri, a few cook books, a towel, maybe a bottle of wine, glasses and a bottle opener.  Arrange these so that there is some balance.

In the bathrooms put some nice towels on the towel-racks and bathtub, a small vase with faux flowers and things like a soap dish with a nicely wrapped soap bar, a bowl of colorful beads and a few candles.

While it may be odd to see a landlord arranging towels I assure you that this works.  All our apartments that have had this treatment attracted better tenants and leased out more quickly then ones that we did not stage.  All the items are kept in two small boxes for easy transport.  It takes about 15 minutes to set everything up and less to remove it.  We didn’t spend more then $100,00 on all the items and they are all reusable and expandable if they get damaged.  The most important thing is that everything is new and attractive.