Investment Property Update June 2012 by James Joseph

I n v e s t m e n t P ro p e r t y U p d a t e

ISSUE #0412.02

THE ONE SOURCE FOR ALL OF YOUR INVESTMENT PROPERTY NEEDS

Lighthouse _By James Joseph _Apartment Specialist

In This Issue Disposal Statute Disabled Housing Selling Depreciation Listings Pool Safety Maintenance Men Directory

2 2 3 3 4 5 6 7

How many movies have we seen where the storm rages and the ships at sea are tossing and turning some capsizing? As they near the shore the captains fix their sights on the lighthouse in order to be guided safely home. Despite the sophisticated equipment captains have access to, to help guide them towards their destination, captains still rely on a very important nautical navigational tool to guide

Is There an Apartment Market Bubble? often results in excess supply financed

Featured Article Summer Time is here! Is your pool facility safe and up-to-code? Find out. See Page 5.

Visit Jim’s Blog for up to the minute real estate information at: www.jjipu.blogspot.com You’re reading the DIGITAL version of the Investment Property Update!

Like Joseph Apartments

on Facebook.com

https://www.facebook.com/JosephApartments

Keat Foong, Executive with higher levels of low interest-rate Editor debt so that when supply eventually Multi-Housing News exceeds demand and interest and cap

http://www.multihousingnews.com/

MHN: In many of the top U.S. markets, apartment pricing appears to have returned to, or be close to, peak levels achieved in 2007. In certain cases, cap rates are once again sub-4 percent. Is there a possibility of a bubble developing in multifamily real estate driven by the low cost of capital, low yields in alternative investments, aggressive projections of apartment incomes in valuation and/or any other factors? Generally, I do not see a bubble in the for-rent apartment housing market at this time, but it is on the horizon with arrival dependent upon the relationships between supply and demand and interest and cap rates for each market. This is really nothing new; it is, after all, a cyclical business. The strong apartment market fundamentals over the past two years, when coupled with low interest and cap rates, have resulted in values improving substantially from the trough. While this has aided operators, investors and lenders in recouping most of their losses from the downturn, it has also stimulated interest in the asset class, resulting in prices being bid up for existing properties and making development more financially attractive. This is a good thing. However, this success over time

rates inevitably rise, the value of the projects fall to as much as the debt or lower, potentially creating significant losses for the stakeholders if they have to sell or refinance a property. This outcome can be mitigated. In order to diminish this outcome, the stakeholders are banking on strong revenue growth, particularly in the early years of the holding period, and similar going-in and going-out cap rates. (We expect the U. S. apartment market to remain strong until 2014 when supply exceeds demand, slowing

Apartment buildings, particularly those in core markets, are selling at high prices now. down rent growth to 4.0 percent in 2014 and 3.0 percent in 2015 from a peak of 5.5 percent in 2012. ) I think a good part of the interest and cap rate risk can be constrained by borrowers and lenders if they do the following: 1. Limit mortgage loans to 75 percent to 80 percent loan-to-cost and/or loan-to-value ratios to create a cushion when the down turn occurs; 2. Require debt service coverage ratios of at least 1.20 to increase the borrower’s likelihood of making the mortgage payments when revenues

them to safety: the Lighthouse. So it is today. When one looks at the real estate and finance market since 2008 it really is a catastrophe. I don’t mean in the sense of the investment - that is solid. Rents are solid, properly values have declined by much less than commercial or single family. What has changed is the financial market and the real estate public. As far as it goes with agents and loan offices still working their trade. I was given the opportunity to speak in front of the Orange County Apartment Association last year and had to do some research for the talk. In that decline; 3. Minimize the number of projects financed with interest-only loans; require loans to amortize, further reducing leverage; 4. Make loans with longer maturities at lower interest rates to ride out the trough; 5. Work with experienced and financially strong borrowers; 6. Calculate property values using going-out cap rates based upon reasonable estimates of the risk premium and forward 10-year bond yield; 7. Diversify loans by borrower, geography (markets and submarkets) and product to limit risk; 8. Base revenue growth upon forecasts taking into account that supply will eventually exceed demand, resulting in slower revenue growth and lower occupancy rates. Ronald G. Johnsey, President, AxioMetrics Inc. We do not currently see a bubble in apartment values. If our forecasts for apartment rent growth prove accurate—and we forecast positive, but decelerating rent growth over the next several years—apartment values look to be in proximity of fair value, maybe even a little cheap. Our main benchmark is the fixed income market. Unlevered IRR premiums to 10-year Treasuries, BAA corporates and high-yield bonds (a case can be made to compare return hurdles to any three of these indices) are all inline or larger than historical averages. If we are in a bond bubble—and we don’t pretend to be smart enough to answer that question—then yes, apartment asset values may be inflated. However, if such proves to be the reality, a lot of other asset classes may also be inflated,

preparation I came across figures that have the wisdom and credibility that is said that the number of apartment trans- needed to guide apartment owners through The few of us remaining in the storm. If you want to know the value of your the business as realtors and apartment building or want to find a buyer lenders have the wisdom for it in today’s market, let me know. If you and credibility that is to discuss the exciting opportunities needed to guide apartment want that are available to you as alternative inowners through the storm. vestments once you sell, give me a call. I actions 5 units and up (not values) was am just a phone call away. Call, click or visit down by a whopping 82% from the peak me today. I am here to guide you through in about 2005. What that means is that the storm! there are a lot of apartment brokers and loan officers that are doing something James Joseph else for a living. The few of us remaining in the business as realtors and lenders

not just apartments or commercial real estate in general. Ray Huang, Residential Sector Analyst, Green Street Advisors Inc., an independent real estate research firm. Apartment buildings, particularly those in core markets, are selling at high prices now. We are seeing deals consummated at capitalization rates in the low 4’s—a historic low. Have investors taken leaves of their senses? Perhaps. Jim Clayton has a nice paper (http:// www.cornerstoneadvisers.com)_that shows that the average cap rate between 1990 and 2008 had a spread of 262 basis points over Treasury yields. The 10-year Treasury closed at 2.31 percent at the end of this week. If long-term spreads give us a sense of the risk premium for real estate, this suggests cap rates should be more like 5 percent instead of 4 percent—unless we can reasonably expect rents to rise faster than normal for a period of several years. I am not sure we can in fact expect that. To me, the principal driver of low cap rates is the attractive financing being provided by the GSEs. This allows for healthy cash flows, even in the presence of low cap rates. The problem will arise when GSE multifamily loans come due. If rates rise in the next five to 10 years and rent growth is disappointing, maturity defaults may come back to haunt us. Richard K. Green, Lusk Chair in Real Estate, Professor, Price School of Public Policy and Marshall School of Business, USC. Used with permission.

Recovery in L.A.’s Apartment Market The report notes that renters By George E Adams, III UCCI INVESTMENT GROUP

Apartment rents in Los Angeles are projected to increase moderately in the next two years even as vacancies rise, according to a report released Wednesday by USC’s Lusk Center for Real Estate. The 2012 Casden Multifamily Forecast predicts average rents in the county will increase 7.9 percent to $2 a square foot in this year, and 9.6 percent to $2.04 a square foot by the end of next year. Vacancies are expected to rise slightly, with increases continuing next year as rent growth slows. The annual Casden study, which analyzes apartment markets in Los Angeles, Orange, and San Diego counties and the Inland Empire, showed across-theboard increases in rents and vacancy rates in the region. The improvement was strongest in Los Angeles and San Diego.

have been moving out of the so-called shadow market – rentals of single-family homes, townhouses, and condos – and into traditional apartment complexes. “A sharp drop in new construction, the dwindling supply of shadow-market units, and improvements in the macroeconomy have strengthened fundamentals on both the supply and demand side,” forecast author Tracey Seslen said in a statement. “This is boosting asking rents, reducing or eliminating concessions, and filling units.” The number of new apartments coming on the market in Los Angeles decreased 53 percent to 2,483 units last year, and is expected to stay near that level this year. But the economy could put a damper on the multifamily market, the study warns. While 35,000 to 40,000 jobs are expected to be created this year, the county’s unemployment rate has remained at 11.8 percent in February. In addition, falling home prices may prompt more creditworthy renters to buy homes. Best regards, George. 310.961.8488 DrGeorge@DrLoan911.com www.DrLoan911.com

News and Opinion

Investment Property Update

By Emily Osterberg AAOC, Apartment News Managzine There have been a wide variety of new laws in Orange County, affecting the multi-housing industry in individual cities, at the county level, and throughout the state. Two hot topics have been recycling and new laws for unlawful parties, or loud and unruly gatherings. Below is information regarding both these issues. Fact & Fiction about New Waste Disposal Statute, AB 341: AAOC has recently spoken with many members who are concerned about AB 341, a new law that passed last year concerning recycling. Since it was signed into law, there has been a significant amount of movement within the waste hauling industry to address the new state requirements.

trash haulers in every city in Orange County utilize the MRF system. FICTION: All multi-family dwellings must have a recycling program implemented by July 1, 2012. FACT: All Multi-family dwellings DO NOT have to implement recycling programs by July 1, 2012. The law reads “On and after July 1, 2012, a business that generates four cubic yards or more of commercial solid waste per week or is a multifamily residential dwelling of five units or more shall arrange for recycling services, consistent with state or local laws or requirements, including a local ordinance or agreement.” The law also states that jurisdictions will need to implement a program that includes education, outreach, and monitoring. This means until a local jurisdiction mandates on-site separation for recyclable materials, you do not need to have a recycling bin on your property. As of now, there is no such ordinance in Orange County requiring this. There has also been no mandate on the size of container or a baseline percentage that must be recycled. Each business or multi-family dwelling will determine the level of service and items to be diverted.

The 75% diversion rate is a statewide goal, not a local mandate on cities and counties. FICTION: You must use your franchise city’s waste hauler to pick up your recyclable materials. FACT: If you do decide to offer on-site separation at your property, the franchise waste hauler in most cities is not the only option for servicing your recyclable product and it pays to identify options. Donating recyclable items or receiving revenue for recyclable items will keep you in compliance. The Waste and Recycling Division Administrator for Procure America is Sophia Vallozzi and she can be reached via email at S.Vallozzi@Procureamerica.org or by phone at (949) 272-4255. Procure America has agreed to assist our members with a free review of waste and recycling programs, as it pertains to your AB 341 compliance. Further, they will provide a full contingency based (shared savings) strategic plan to the members. The key objectives are to assist in identifying additional ways to lower cost within your waste continued on page 6

Work Begins on Housing for the Disabled in Orange County _By Dees Stribling

Contributing Editor Multi-Housing News http://www. multihousingnews.com/

Santa Ana, Calif.— Ground has been broken for Vista Del Rio, a 41-unit affordable housing property in Santa Ana, Calif., a city in Orange County. The development is a collaboration between AMCAL Multi-Housing, the Foundation for Affordable Housing and the Community of Friends. The goal of the project is provide physically disabled adults with affordable housing that Issue # 0412.02

includes on-site services and various amenities. As with all AMCAL developments, the social services aspect of the property—which comes at no cost to the tenants—is designed to increase or maintain disabled tenants’

independence by providing independent/support living training and vocational services. The property will include both oneand two-bedroom units. Vista Del Rio will also be built to exceed Title 24 en-

Contact James Joseph today for your investment property needs!

ergy standards and be LEED silver certified. To provide convenient living environment for tenants, all kitchens are handicap- accessible and have garbage disposals, dishwashers and other amenities.

recent years, including family and senior apartments, as well as for-sale housing in emerging urban neighborhoods. Since 2003, AMCAL has been awarded over $392 million in low-income housing tax credits.

The project has been about seven years in the works. Financing, mainly through low-income housing tax credits and loans from the city Santa Ana, has made for a slow process.

A Community of Friends is a regional nonprofit affordable housing developer that specializes in affordable properties for people living with mental illness. The Foundation for Affordable Housing specializes in affordable housing and has developed 100 rental properties in four states. Used with permission.

Based in Agoura Hills, Calif., AMCAL has developed housing throughout the state since 1978, focusing on the workforcehousing sector in

Phone: 562.236.0088

Investment Tools

Selling Your Real Estate Because You Want To

Orange County Legistlative Watch: New Waste Disposal Statute Certain trash haulers in the county have been sending out letters stating that owners must offer on-site separation by July 1, 2012 in order to be in compliance with the law. This is not true. Unfortunately, programs with the best intentions can often be misinterpreted, twisted and leveraged. AB 341 has the potential of being such a program. AAOC has asked Procure America to review the statute and provide guidance regarding AB 341; particularly the new mandated requirements and their impact on California apartment owners. Procure America is a national expense reduction firm with a division solely dedicated to waste and recycling cost reduction strategies. Their waste and recycling department is staffed with former executives from the waste industry and they provide an insider’s perspective on strategy, policies and programs initiated by the waste haulers. Here is what they have to say about AB 341: FACT: Mandatory commercial and multi-family dwelling recycling will go into effect July 1, 2012. If your city is currently taking your mixed waste to a Material Recovery Facility (MRF), you are in compliance and do not need to subscribe to the city’s waste hauler’s recycling program. All

Investment Property Update

Email: Lisa@josephapartments.com

by Richard Warren The BiggerPockets Blog When you’ve been investing real estate for a long time you may reach a point when you are ready to sell. Perhaps you’ve had enough of the headaches of being a landlord, maybe you want to pursue other opportunities, or are ready for a lifestyle change. This is not to be confused with desperation to sell for financial reasons. If your back is against the wall financially you may be forced to accept terms that are anything but attractive. But if you are looking to sell because you want to but don’t really have to, then you are in the driver’s seat. If time and money are not a factor in your desire to liquidate your real estate holdings then the process is much the same as it should have been when you entered the business. Savvy investors have a game plan when they jump in the real estate

waters, those that don’t plan usually fail. You need to have a plan for liquidating as well. Taking Stock - The first step is to accurately assess where you are. As a real estate investor you should certainly know the value of your holdings, cash flow, status of leases, condition of your properties, amount owed on mortgages, and any deferred maintenance or other issues that may be lurking. There is one aspect of your portfolio you may not pay much attention to – potential tax liability. One of the benefits of owning rental properties is the ability take a tax deduction for depreciation even though you don’t experience any real out-of-pocket loss. Unfortunately that depreciation is recaptured when you sell. This means that you could have a tax liability even if you don’t have a significant profit. The problem may be exacerbated if you have refinanced and taken cash out of your properties along the way as many investors have. There are strategies that can be employed if you are in this situation. That’s why you should consult your tax advisor before making any move to liquidate. Taking Action - The market in your area may dictate your next move, especially if sales are slow.

If you aren’t concerned about ner will allow you to avoid being how long it takes your best action perceived as a desperate seller. Be may be quiet networking. Let the sure to plan wisely, consult your people in your sphere of influence tax pro, attorney, and any other know that you may be interested advisers you are working with. in selling some of your properties. You entered the business with an Often the best deals you make eye on making the best deals and when acquiring investments hap- greatest profits possible. Shouldn’t pen by word of mouth. Why would you leave the same way? selling be any different? If you have tenant ocWhy Use a Professional Property Manager? Professionals make it a hassle-free experience. cupied properties you You might especially want to consider hiring may wish to look at your a property manager if any of the following tenants as potential things are true: buyers. Of course, that You live further than a couple of blocks away means reliable and qual___from your rental property. ified tenants, not probYou’re not a home maintenance specialist. lem renters. If you own You don’t have at least 10-12 hours per month the property free and ___to deal with property tasks. clear or have substantial You don’t want to have to make yourself equity you may want to ___constantly available in case of emergency. hold a note for the seller. You don’t have a good working knowledge of These notes can always ___ever-changing landlord-tenant law. be resold if you wish. You’re fed up with dealing with difficult or Other investors may be ___non-paying tenants. interested in acquiring Contact Candy Livesey at 562.236.0102 or at CLivesey@AmbassadorPropertyMgmt.com your properties, though you shouldn’t expect the Property Managers Quiz AMBASSADOR PROPERTY same price you could re- Brought to you by: MANAGEMENT ceive from a retail buyer. The point here is to explore all possibilities rather than just blindly listing your properties. Liquidating in a slow and methodical man-

Depreciation: Does It Affect How Much Tax

I annually Pay On My Investment Properties? depreciation over the useful life of the asset, known as the costrecovery period. This can reduce an investor’s taxable income, by thousands of dollars each year. Here are some items which the IRS allows a depreciation schedule:

By Phil Atwan Exchange Resources Inc., VP

• Residential Rental Property (building) - 27.5 years • Commercial Rental Property (building) - 39 years • Refrigerators, ranges, dishwashers, carpeting, furniture - 5 years • Land improvements: (landscaping & shrubbery, fences, sidewalks, septic systems, water pipes) - 15 years

One of the largest tax breaks for owners of investment property comes in the form of depreciation, or the loss in value of a property over time due to physical deterioration. In other words, it’s the decrease in value of property over time as the building structure begins to wear and tear with age. The IRS allows investment Tax depreciation on a residential property owners to take a tax or commercial investment loss every year based on this property is a deduction against Issue # 0412.02

Help Us...Help You! An Owner’s BEST resource.

JOIN TODAY!

assessable income FREE FORMS CD with EACH new allowing the owner to Membership...a $50 VALUE! reduce the amount of Membership Makes a Difference taxation payable. In some situations Membership in AAOC opens doors of opportunity as you seek to broaden your knowledge of the investors who have industry and maximize your potential as an owned their properties industry professional. You will receive professional for more than 20 years assistance that will help you acheive your have created new professional goals. You can own or manage a single depreciation to help unit or thousands of units – AAOC offers something for everybody! offset taxes by utilizing a §1031 Tax Deferred Exchange. The Call 714-245-9500 or §1031 Tax Deferred Exchange is one of Visit www.AAOC.com the last tax shelters allowed by the Internal Revenue use in a trade or business. This Service. It is a transaction in basically includes any real estate which a taxpayer exchanges held for investment, except your investment property for like primary residence and second kind investment property, which family home. defers the payment of capital gain taxes and the recapture Questions? Give us a call. of deprecation taxes. The IRS (213) 479-8800 defines like-kind property as all PhilAtwan@EarthLink.Net real property held for investment www.ExchangeResources.Net purposes, or the productive

Contact James Joseph today for your investment property needs!

Phone: 562.236.0088

Email: Lisa@josephapartments.com

Listings

Investment Property Update

Exclusive Listings ALHAMBRA 4 Units $735,000 4 beautiful homes on 1 large lot. 2 Duplexes with a dividing wall. 4 bedroom, 2 bath, and 1 bedroom, 1 bath. ALHAMBRA 7 Units $985,000 Centrally located, 7 units of 1 bedroom, 1 bath. Updates include copper plumbing in 2009. 24426 Eucalyptus Ave., Moreno Valley 5 Units 4 Bed/ 2 Bath $799,999

604 N Eastwood Ave, Santa Ana 5 Units 1 Bed/ 1 Bath $724,999

545-589 Weber St., Pomona 12 Units 1 Bed/ 1 Bath & Studios $1,149,990

JOSEPHAPARTMENTS.COM

If you would like to advertise with the IPU, Contact Lisa Weeber at (562) 236-0088 Investment Property Update, established in 1982, is an independent investment property newspaper published monthly with an audience of local apartment owners, property managers, and local real estate agents. Viewpoints expressed in the Investment Property Update are those of the respective writers, and are not necessarily held by the publisher. The Investment Property Update accepts advertising from businesses desiring to reach the investment property readership. No endorsement by the publishers in implied or should be inferred in any manner in regard to any specific advertiser. The publisher can not accept responsibility for the products or services offered through advertisements. The publisher reserves the right to refuse any advertisement. If your property is currently listed, please disregard this notice as it is not our intention to solicit other broker’s listings.

$1,125,000

COSTA MESA 9 Units $1,799,000 9 large 1 bedroom 1 bath. In an area of new development. Copper plumbing and large grass area. DOWNEY 14 Units $1,990,000 Majority 2 bedroom 2 bath. Patios and balconies. 2 to 1 parking ratio. Fullerton 6 Units $938,000 Professional management in place. Close to 5 and 91 freeways. Long-term tenants. LA HABRA 4 Units $415,000 4 Studio apartments. 4 tuck under carports and 2 open spaces. Whittier 8 Units 8 Single apartments in a good area.

$789,000

Disclaimer: The information in this newsletter is believed reliable but is not warranted or guaranteed. Before any reliance or use, this information should be independently verified.

Contact James Joseph today for your investment property needs!

Phone: 562.236.0088

Email: Lisa@josephapartments.com

Summertime: Pool Safety and Pool Law for Owners By Jacqueline May Editor

Multi-Family Mobile Home

You are eligible for a FREE Property Value Analysis. Please click on this image to be directed to complete a form to receive your analysis.

Issue # 0412.02

ANAHEIM 4 Units $525,000 Four-plex with 4 single car garages, 2 parking spaces and laundry.

BELLFLOWER 10 Units 10 units in a great area of the city.

FOR MORE INFORMATION ON ANY OF THESE LISTINGS, PLEASE CALL LISA AT (562) 236-0088 OR VISIT

Pool Safety

Financing for All Real Estate Investments

ARCADIA 4 Units $1,125,000 Meticulously well-maintained. Units include 2 bedroom, 1 bath. Laundry room and garage spaces are included.

13919 Coteau, Whittier 20 Units 2 - 3 Bed $2,300,000 Long Term Tenants

ALHAMBRA 5 Units $1,050,000 Near San Marino, this property boasts full occupancy and well-maintained living space

ANAHEIM 12 Units $1,285,000 12 units of 1 bedroom, 1 bath. Recent improvements. Units include walk-in closet.

1275 W. Grand Ave., Pomona 2 Units 2 Bed/ 1 Bath $339,000

Investment Property Update

The warm weather is already here, and summer itself is just around the corner. Apartment owners with a pool know having one can be a tremendous asset, but that it also presents a liability. This summer, owners across south-

the safety of the occupants. Here are some helpful tips to get you on the road to a safe pool this summer: 1) Check state and federal requirements. 2) Be aware of the federal law that took effect in 2008. It requires pools and spas

This summer, owners across southern California need to be reminded to have insurance and safety measures up to date. ern California need to be reminded to have insurance and safety measures up to date. A pool or spa in an apartment complex is labeled as a public pool or spa, and there are laws in place specifically for such. Officials recommend contacting the local health department to find a qualified pool and spa safety inspector to ensure the safety of the water quality, equipment and the physical conditions. It is crucial that an apartment owner make the extra steps to have safe and up to date facilities, for

to have suction outlet covers. If the pool has a single main drain or suction outlet, the operator must install a section anti-entrapment device. 3) Ensure your pool’s water quality is regularly monitored and adjusted. The CA code states the operators take a daily record of information regarding pool quality. 4) Have a certified pool safety inspector verify that the pool facility, pool surface, tiling, cement, walls, ladders and railings are all in working order.

Issue # 0412.02

Retail

Parks

Oﬃce

Single Family

Industrial

Residences

Mixed Use

Joe Mercado

(866) 405-6500 Toll Free (818) 606-5190 Direct Continuing to Provide Financing That Best Meets Our Clients Investment Objectives and Individual Needs

5) Ensure you have posted the proper signage and information regarding the pool. The California Public Swimming Code has important rules about informing guests of the absence of lifeguard supervision and more. 6) Pools, according the CA code, must have ground-fault electrical interrupters. 7) Inform your occupants

Contact James Joseph today for your investment property needs!

to be safe by the water, by providing them with a pool safety pamphlet. A helpful list of safety rules for swimmers can be found here: http://www. burbankca.gov/index. aspx?page=728. More information on public pool law and safety requirements can be found online from the California Department of Public Health website.

Phone: 562.236.0088

Pool law and safety compliance is crucial to the proper running of such facilities. Owners must seek the professional advice of a legal advisor and a pool safety inspector. Investment Property Update guidelines are in no way a substitute for proper legal advice.

Email: Lisa@josephapartments.com

Maintenance

Investment Property Update

Dear Maintenance Men: By Jerry L’Ecuyer & Frank Alvarez

at most plumbing supply houses.

Dear Maintenance Men: My property has 100-gallon gas fired water heating that serves four units. It is about 8 years old. The tenants are complaining of very little hot water. I have checked the tank and the thermostat is working, the water is hot. Are my residents making up stories? What am I missing? From, Thorne

Dear Maintenance Men: My plumber just informed me that my 10 unit building has “Type M” copper piping. He says Type M has thinner walls than the more robust “Type L” copper pipe. Could this be the reason I am having more water line pinholes leaks? From, Dave

Dear Thorne: The water heater may need a bit of maintenance. The first thing to do is clean out the sediment at the bottom 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 expect to haul out one to two buckets of calcium buildup. (Sediment removal should be done once a year.) Removing the sediment will greatly improve 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 sacrificial 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 develop hot and cold areas, leading to complaints about short-term hot water. The dip tube is located inside the cold-water inlet pipe. Replacements for both the anode rod and dip tube can be found

Dear Dave: A number of things can cause copper water line pinhole leaks. Having the thinner Type M copper pipes may result in your property having pin hole leaks sooner than with the thicker Type L pipe. However, thin Type M pipe is often only a contributing factor when it comes to pinhole leaks. Typically, water chemistry, incoming water pressure, recirculation pumps and poor construction methods are part of the contributing factors in pipe leaks. Check with your city or water distributor in your area to get information on the water chemistry and hardness. Adding a water softener to the incoming water supply will help protect both the pipes and water heater. Reducing the water pressure with a pressure regulator will reduce stress on the pipes. If you have a recirculation pump for the water heater, it will help to install a timer to control the amount of time the pump is active. Moving water produces a lot of friction in the pipes. Set the timer to operate the pump only during high demand hours. Doing these easy fixes, may add life to your existing pipes. If poor construction methods are involved, re-piping may be your only solution in addition to the above solutions. Dear Maintenance Men: My wife is busy creating a honey-do/ spring cleaning fix-it list for around the house. She got me thinking I should do the same for the exterior of my apartment building. However, I don’t know where to start and I don’t want to ask my wife!! What do you suggest be

on my list as well as the priority? From, George Dear George: Look at fire, flood and blood issues first. Check the roof Your §1031 Tax-Deferred Exchange Qualified Intermediary and gutters for debris. Exchange Resources, Inc. (ERI) acts as one of our Spring storms can Nations largest independent Accommodators. Staffed damage roofing matewith in-house legal counsel, we facilitate 1031 Tax rial and loosen gutters. Deferred Exchanges both nationally and globally. ERI specializes in Simultaneous, Delayed, Reverse, Build to For flat roof system Suit, Personal Property (Business - Bulk Sale), and Hybrid check and clean all roof exchanges, as well as holdback accounts for clients throughout the United States. Our professional and drains and scuppers. experienced staff includes both a Legal Department To keep your residents with experienced Attorneys and Certified Exchange safe at night, reset the Specialists® who are available to handle all your §1031 Tax-Deferred Exchange questions. light times or install photocells to control the outside lights. Phil Atwan Double check at night Vice President to make sure you have adequate coverage. For resident comfort, Direct: (213) 479-8800 repair or replace damToll-Free: (877) 799-1031 PhilAtwan@EarthLink.Net age or warn window www.ExchangeResources.Net screens and check for any cracked or broken windows. Bugs are often more active in spring and check for proper operation. This the residents will now be opening is great opportunity to inspect all windows to let in fresh air. Walk the garages and carports. Check around the building and check all for accumulated junk in the gathe wood trim and stucco for water rages, which could lead to a fire damage. safety issue. Once all these chores Peeling paint and stucco have been completed, you can add will lead to dry rot in the wood the lipstick! Color flowers for the and effloresces or deterioration in garden, trim paint to brighten the the stucco. Check balconies and look and a smile for your residents. stairways for damaged surfaces and Now you are ready to start your loose steps or rails. Irrigation sys- summer to do list. tem may have been off for the winter season; turn on all sprinklers To ask a question for the column and check for proper operation. or for an appointment for consulReplace any damaged heads and tation or management, contact look for pipe leaks. Adjust sprinkler Lisa Weeber. CA contractor lic: heads for proper coverage and reset #797645, EPA Certified Renothe timers for warmer weather. It vation Company and DRE lic: is important that the sidewalks are 01460075 Please view our webnot watered as this can increase sites at possible slip and fall accidents. www.BuffaloMaintenance.com Open and close each garage door, & www.ContactJLE.com

continued from page 2

and recycling programs (within your current supplier contracts), stay compliant on all local, state and federal regulations and raise the service level to you and your tenants. If you are interested or would like more information, please visit their website at: www.procureamerica.org. Loud and Unruly Gatherings Ordinances: New party laws or “Loud and Un ruly Gatherings” ordinances, as they are often called, are becoming more frequent in cities throughout Orange County. The cities of Orange, Newport Beach, Issue # 0412.02

San Clemente, Irvine, and recently Westminster, have all passed laws that help abate the nuisance of an unruly party. AAOC is not opposed to these types of laws, but want to ensure that owners are not held responsible for the actions of their tenants without a reasonable cause. As mentioned in a previous article, last year AAOC worked with the City of Newport Beach on a Loud and Unruly Gatherings Ordinance and believed the amendments made would protect landlords who were not involved in the event causing the problem. However, we realized the enforcement of the new law was not

what we originally thought it would be when one of our members received a $500 invoice from the City with no notification that an unlawful party had occurred. We want to ensure that this doesn’t happen to any other landlord in the City. We are currently working with the City to resolve this issue, but may be turning to members in Newport Beach for support. Recently Westminster passed an ordinance relating to loud parties as well. While original language would have included a landlord in the definition of “responsible person”, even if they were not in-

Contact James Joseph today for your investment property needs!

Phone: 562.236.0088

volved with the party, the AAOC was able to work with the City to remove landlords completely from being held accountable, unless they were aware the party was taking place. The law will punish only those responsible for the unlawful party, with a fine taking place after a second response to an unruly gathering with in a period of 14 days. If you have questions on this or any other legislative issue, please contact Emily Osterberg, Director of Government Affairs, at (714) 245-9500 or eosterberg@aaoc.com

Email: Lisa@josephapartments.com

Investment Property Update