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California Multifamily Professionals – Please Read This!

The Consumer Product Safety Commission issued a sizeable recall notice on 11/8/18 for ~616,000 gas water heaters that were made between April 8, 2011, through August 1, 2016, which were primarily sold in California.  While anyone and everyone should check their water heater to see if they have an affected unit, multifamily owners and managers should also be proactive in determining if these recalled units are serving any of their communities – especially considering that approximately 1,200 apartment communities were built in California from 2011 through 2016 which represents an estimated total of just over 150,000 units.

Additional Resources & Information 

  • The official recall notice can be viewed on the CPSC website at https://goo.gl/zHy3LE
  • Consumers should go to https://www.waterheaterrecall.com, input their model and serial number and complete the form to determine if their water heater is subject to this recall
  • Consumers with Whirlpool, U.S. Craftmaster, or American Water Heater brand water heaters can call toll-free (866) 854-2793
  • Consumers with Reliance, State, A.O. Smith, and Kenmore brand water heaters can call toll-free (866) 880-4661

Hope this is helpful in some way and please don't hesitate to post questions and comments if there is anything else that I can do to help!

John Griffith

 

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What Causes HVAC Systems to Fail and How to Prevent It

What Causes HVAC Systems to Fail and How to Prevent It
Preventative maintenance goes a long way in keeping HVAC systems operating as they should be, but breakdowns can still occur. These complex systems are made of many components. Without being familiar with how HVAC units and their many parts work, diagnosing issues can be difficult. Especially when you’re managing large multifamily properties, it’s helpful to know about some of the most common causes of HVAC problems, as it can save you, your team, and your residents from a lot of frustration.   Swollen Capacitors  Air conditioners cannot run on their own when their capacitors stop working. The job of a capacitor is to start the motor and to help keep it running. It does this by sending jolts of the energy it stores to the fan. Without the jolts, the fan simply can’t get going. There are a few ways to tell if a capacitor has gone bad. A visual inspection is often the easiest, as a swollen capacitor is a problematic capacitor.   What causes capacitors to swell? Gas is created when the conductive electrolyte within the capacitor decomposes, which happens with time or damage. Capacitors have a lifespan that can vary but is definite. The HVAC systems that house them can outlive them, meaning there naturally comes a time when a capacitor must be replaced. Swelling is a sign that the time has come, as any swollen capacitor has reached its end. You can tell that a capacitor is swollen when its shape has become altered, usually resembling a can of soda ......
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What Is The Safest Investment You Can Make In Real Estate

The truth be told there is really no SAFE investment in real estate, there are however investments with less risk and STNL (Single Tenant Net Leased) properties are a strong leader. A STNL property is typically structured under a  triple net lease.   Under this type of lease   the tenant is solely responsible for all costs relating to the leased asset, above and beyond the base rent.    This includes the real estate taxes, building and liability insurance and maintenance and repairs.    Generally, a new STNL lease will be for a longer term (15-20 years) with options to extend and increases at set periods (either annually, or every 5 years).   This limits the chance for income fluctuations and allows for an investor to really know what their expected income and return projections will be for a long period of time. Acquiring a STNL can be a more secure investment when you have a strong tenant, you can get a local operator, regional operator or a national credit tenant. A local operator can be an individual that has this one location or a few locations, these are the more riskier of the three as the smaller operators are more susceptible to the local market fluctuations.  To offset this risk though, many operators will cross collateralize their lease with the other locations, and many times also offer a personal guarantee on the lease. A regional operator is a company that has several locations in a state or region of the country, these operators usually ......
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Top 5 "Kid Friendly" Amenities for Apartment Communities

Top 5 "Kid Friendly" Amenities for Apartment Communities
I recently posed a question to a group of developers...What if you started looking at your communities from the standpoint of children being the residents, instead of the adults? Now obviously, I'm not talking about a community where every unit is filled with slides and see-saws or kids roaming the grounds like Lords of the Flies. But it's a question to highlight what can be done if the primary motivation for the planning of amenity space, marketing and the overall feel of a community was done with children in mind.With 33% of all renter households (14.3 million) having minor children, it's an important question. And as more and more residents with children decide to rent instead of buy, having a true "family friendly" community can become a huge differentiator in the marketing and retention of tenants.So what would a community that is designed around the family and actual children look like?Onsite Daycare This may be a game changer when it comes to "family friendly" communities. One of the most significant issues for families is finding quality child care close to their residence. Having an on-site daycare within your community solves many problems for working parents and could be a tremendous asset to your residents. We see partnering with a local daycare to open in a retail section of your community or underused space. You get a great tenant that genuinely adds value to your community, and your residents get a one-of-a-kind amenity. On-Demand Babysitting With services like Care.com, you can set up a "portal" for your residents......
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Top 5 Amenities Renters REALLY Want (and 5 they don't)

Top 5 Amenities Renters REALLY Want (and 5 they don't)
Everyone in the industry these days is talking about amenities. What renters want, what they don't, and what they will want in the future. The problem is, most developers aren't listening to the actual renters. Over my career, I have spoken with 100's if not 1000's of renters, listening to their wants and needs for a place to call home. Contrary to popular belief, not every renter is a millennial who wants a smoothie bar in their bathroom. The vast majority of renters have simple needs in a building or community when it comes to amenities. Real Closet Space When I say "real," I think we all know what we are talking about. Not the closets with one bar that can fit a shirt and jeans. We're talking about walk-in closets or ones with built-in storage. Renters these days are older or moving from established households and have more clothing. Many developers are "afraid" to take a portion of a bedroom to enlarge a closet, but I can tell you from first-hand experience, I think most of us would like larger closets and a smaller bedroom. More Storage This is a must-have for most renters these days. Unlike prior years, when renters were younger with very few things, today's renters are older and have amassed a lot of items. It's important to give residents enough space to make a difference, especially when units are small. I've never seen a renter say "I'm going to give up all my possessions so I can live in......
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Mortgage Broker, Direct Lender, or Mortgage Banker?

There are three sources where a commercial or multifamily borrower can obtain a loan.  In this article we will discuss each avenue.  This article is not intended or is it applicable for owner-occupied one-to-four family properties. Direct Lender A Direct Lender can be any of these sources: bank, life company, pension fund, credit union, mortgage REIT, or even a private or public mortgage funder. Each type of lender has their advantages, but the one thing remains consistent is that every lender has their preferred box for the type of loans they will provide.  Here is a list of common preferences:  loan sizes, LTV, property underwriting requirements, DSCR, asset age, asset type, asset class, tenant profiles, location, demographic statistics, asset competition in the market, borrower credit profile, and borrower background profiles. If you happen to know all the lender’s parameters before you file an application and know that you will meet all of them, then go ahead and file.  Otherwise, you most likely will end up with a different outcome than you anticipated or worse, have spent a lot of time and money and not have your loan approved. A Direct Lender is also known as a Balance Sheet Lender, meaning the loans they close are made to be held. Mortgage Banker Sometimes there is a very fine line between what constitutes a direct lender versus a mortgage banker.  While the mortgage banker has the same loan preferences as the direct lender, they typically will not keep the loan, may only keep a......
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How Can Cities Address the Affordable Housing Crisis

A few weeks ago I wrote about the prospect of the repeal of Costa-Hawkins act in California.  This measure is being pushed by tenant rights groups claiming it will help with affordable housing.  Although I do believe there is an affordable housing crisis, I do believe that the repeal of Costa-Hawkins  would only be a short term relief and significantly hurt affordable housing in the long term.  So what can cities do to address the affordable housing crisis? Cities have many tools available to them, and if utilized correctly can significantly positively impact the affordable housing market.  It boils down to simple economics, if a developer can build affordable housing, and make money doing so, then they will.  How can cities promote the development?  It starts first with the approval process.  After the cost of land and actual hard construction costs, the time cost and soft costs are the highest expenses for a developer.  The city of Dallas did this earlier last year.  They passed measures to streamline the process to construct affordable housing.  By streamlining local administrative review of plans, and lowering the costs of permits they have made it easier for developers to develop low income housing.  With faster approval processes and lower costs affordable housing becomes that much more attractive to a developer.  Another benefit for streamlining the process is that it minimizes the risk to a developer, and like any other investment development is a risk vs. reward calculation, with lower risk translating to lower demand for r......
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What Foreign Companies Should Know Before Opening in the US

By George Pino From demographics to understanding the permitting and planning processes of each city, there is much to consider when foreign companies look to expand into America. We’ve all heard it before… “The American Dream” and “America the Land of Opportunity.” We have heard it so often that it has all but become a cliché; however, it would seem the entire world has heard the saying and in many ways have taken it up as a call to action. Over the last decade, we have seen an unprecedented amount of foreign investment into the United States, not just in dollars, but in companies looking to expand into different markets.  For many foreign companies, the US has become their “emerging market.” Although the recipe for the American Dream is easier than in most other countries around the world, it still does require hard work, persistence, and a little luck.  For foreign companies and concepts looking to expand into America must also keep in mind other pitfalls, especially when it comes to commercial real estate and leasing. First and foremost is the securitization of the lease.  Many times a newly formed US-based subsidiary looking to lease commercial property may not have independent financials, credit history, or significant assets in the US. This may lead to some landlords requesting guarantees from the foreign parent.  Although this sounds like a pretty easy and straight forward solution many landlords will not accept a foreign entity to securitize a commercial lease as they are concerned about the collecta......
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What You Need To Know About The Rent Control Measure.

The Affordable Housing Act which was presented by Assemblymembers Richard Bloom and David Chiu as AB 1506, died in the Assembly’s housing committee earlier in the month. Now a new proposed ballot measure plans to repeal the 1995 Costa-Hawkins Rental Housing Act. Costa-Hawkins Act, the state law which more directly effects 5 of the 15 California cities with rent control, applies to large housing developments built prior to 1995 and does not include single-family homes, condos, and duplexes. Currently, in these markets, the landlord has the right to raise rents upon a tenant moving out and second, prevents the capping of rent on units constructed after February 1995. In Los Angeles City, rent control is applied to units constructed prior to October 1979, under the Rent Stabilization Ordinance, and yearly increases are capped at 3 to 8 percent (as set by the Rent Control Board) for the controlled units.   As a self-described union for renters, the Alliance of Californians for Community Empowerment (ACCE), filed the paperwork along with Michael Weinstein, President of AIDS Healthcare Foundation. Citing that California is facing a growing demand for affordable housing, a rise in homelessness and the historic housing crisis is pushing out low- and middle-income renters out, at times even in cities with some rent control. Supporters like the ACCE, say they have been gathering signatures easily, as people are expressing enthusiasm for the proposed November ballot. They have already collected 100,000 signatures, of the total 365,880 signatures needed by June to qualify for the ballot.   Critics like the California A......
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The Americans with Disabilities Act for Landlords And Property Managers

The Americans with Disabilities Act, commonly known as “ADA” is a federal civil-rights law protecting the rights of people with disabilities. The ADA places guidelines for access to: Employment State and local government programs, services and buildings Access to places of public accommodation such as businesses, transportation, and non-profit service providers Telecommunications George Bush signs the Americans with Disabilities Act of 1990; standing left to right Reverend Harold Wilkie, Sandra Parrino of the National Council on Disability; seated left to right, Evan Kemp, Chairman of the Equal Employment and Opportunity Commission, George Bush, Justin Dart, Chairman of the ‘s Committee on the Employment of People with Disabilities. Washington DC, USA, 26 July 1990. (Photo by Fotosearch/Getty Images). The scope of the law is fairly broad and addresses many of the obstacles affecting the participation of people with disabilities within society. Many of the ADA’s civil rights protections parallel the Civil Rights Act of 1964, and the protections it established for racial, religious minorities and women. Occasionally, management companies may be faced with a lawsuit for non-compliance with ADA laws.  These compliance problems are usually preventable as many times they result from violations which stem from the lack of proper guidelines, policies, procedures, and/or practices regarding accessibility. Implementing current policies can go a long way toward avoiding the expense associated with ADA lawsuits. As owners, landlords, managers, and tenants can be jointly and severally liable in the event of non-compliance. Making it important to ensure you have safe practices in place to address......
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