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What Are First Steps In Plumbing Emergencies In Rental Property?

By
By The Editors
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What to Do During Plumbing Emergencies In Rental Property

How to handle plumbing emergencies in rental property is this week’s maintenance tip from Keepe, the on-demand maintenance company.

If you manage rental property, you and your tenants are bound to experience plumbing emergencies at some point. The problems can include broken pipes, gas leaks, blocked drains, faulty taps and tenant-caused issues that can lead to plumbing disasters.

Being prepared and knowing what to do when this happens is your first step to reducing damages and repair costs.

While having a professional plumber on call is the most important factor for having your plumbing issues promptly fixed, here are the steps you should take to minimize damage in a plumbing emergency.

Examples of plumbing emergencies

Plumbing emergencies in rental property are those that require immediate action now, especially when your tenants call, such as:

  • Clogged sinks, toilets, bathtubs or shower drains
  • Leaky faucets, toilets, water heater, hoses
  • Broker water lines
  • Burst or frozen water pipes
  • Sewer system backups

First steps to take in plumbing emergencies in rental property

Turning off the water supply is the first step, as the most common plumbing emergency in residential rental housing is water leaks or water flooding an area.

Do you know where all the water shut-off valves are?  Many times a property manager may not even know the main source of a water leakage. It could be sewage water or domestic water leaking into your rental from another source.

Find your shutoff valves ahead of time so you know where they are when you need to quickly shut off the water. The valve could be in the building somewhere or out by the street.

Sewage Backups: Call a Professional Plumber

Sewage backups usually happen when there is something wrong with the sewage pipes under your foundation. Tree roots can sometimes lead to a blockage, or an incorrect installation may lead to serious problems.

If you see a pool of brown smelly water in your yard, the first thing you should do is to shut off the water. Don’t try to fix a sewage-related problem yourself; you could expose yourself to harmful bacteria. Call the water utility company or septic company, who will send a trained professional to investigate and fix the problem.

Overflowing Toilets: Turn off the Water Supply

A clogged toilet can quickly overflow when flushed, leading to unsanitary issues and immense water damage. Caution your tenants about paper towels, tissues, wrappers and even baby wipes, all of which can all easily clog your plumbing and cause toilets to overflow.

Your first step is to find and turn off the water-supply valve beneath the toilet tank to prevent more water from entering the bowl. Then, deal with the clog or call the plumber.

Broken Water Heater: Flush the Water Tank/Call a Professional

As a water heater begins to malfunction, your tenants may experience water that’s too cold or too hot or has a strange color or odor. Having a professional flush the hot-water tank may solve color and odor problems as well as improve the heater’s efficiency. If you notice a leak, it may be time for replacement.

In conclusion

Acting fast can save your rental property from major damage and prevent any significant costs.

Keep your emergency plumber’s contact number close, and be prepared with these essential steps to avoid damage during a plumbing emergency.

Best of all, be sure your tenants notify you immediately when there is a plumbing emergency, as the longer they wait, the more damage to your property.

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6 Ways To To Rid Smoke Smells From Rental Units

Salt Lake City rents increase sharply over the past month

By
John Triplett
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Salt Lake City rents increase sharply over the past month

Salt Lake City rents have increased 2.4 percent over the past month, and have increased sharply by 10.5 percent year-over-year according to the June report from Apartment List.

Median rents in Salt Lake City stand at $1,019 for a one-bedroom apartment and $1,303 for a two-bedroom.

This is the sixth straight month that the city has seen rent increases after a decline in December of last year.

Salt Lake City’s year-over-year rent growth lags the state average of 12.3 percent, but exceeds the national average of 8.4% percent.

West Valley City rents increase sharply over the past month

Salt Lake City rents West Valley City rents increase sharply over the past month

West Valley City rents have increased 4.9 percent over the past month, and are up sharply by 17.6 percent in comparison to the same time last year.

Currently, median rents in West Valley City stand at $1,222 for a one-bedroom apartment and $1,441 for a two-bedroom.

This is the sixth straight month that the city has seen rent increases after a decline in December of last year.

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Will You Be Ready When the Eviction Moratorium Ends?

Everything Landlords Should Know About Emotional Support Animals

No Guns In My Apartments: Can A Landlord Say That And Put It In A Lease?

Can I Say “No Pot In My Apartments” When It’s Legal In My State?

National Rent Prices Jump Again in June, As Upward Trend Continues

By
John Triplett
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National Rent Prices Jump Again in June, As Upward Trend Continues

National rent prices jumped again in June by 2.3 percent and now are up 9.2 percent so far in 2021, according to the latest report from Apartment List.

In previous years, rent growth from January to June is usually just two to three percent, the report said.

“Although the pandemic created some softness in the rental market last year, 2021 brought the fastest rent growth we have on record in our data. Nationally, and in many individual cities across the country, rents have now surpassed the level where they would have been if rent growth had not been disrupted by the pandemic,” said housing economists Chris Salviati, Igor Popov, and Rob Warnock in the report.

The report said that individual cities have also seen “pandemic pricing” come and go.

“This month, rents caught up with pre-pandemic expectations in a handful of major markets including Austin and San Diego. Meanwhile, prices remain below the pre-pandemic trend in some of the hardest-hit markets, like New York and San Francisco.”

Boise, Gilbert and Chandler lead mid-sized rent-price growth

The report says mid-sized cities continue to boom.

“As expensive coastal cities watched rents plummet throughout 2020, another group of mid-sized markets were heating up.  The pandemic and remote work spurred demand for the space and affordability that these cities offered, and in response, rent prices grew even as the surrounding economy struggled. Even while rent declines in expensive markets have reversed course, the cities where rents have been growing fastest are continuing to boom,” the Apartment List report says.

Rent Prices Jump Again in June, As Upward Trend Continues

In addition, the pandemic “did not start a new trend in these markets, so much as accelerate an existing one. For example, from 2017 through 2019, rents in Mesa, Ariz., increased 25.5 percent, the fastest growth in the nation over that period. Similarly, Fresno, Calif., ranked third for fastest rent growth, while Chandler, Ariz., ranked sixth.”

Conclusion

The national rent prices report concludes by saying, “More broadly, rental inventory across the nation remains tight, and as vaccine distribution continues to gain momentum, we may be seeing the release of pent-up demand from renters who had been delaying moves due to the pandemic. Whereas last year’s peak moving season was halted by the pandemic, this year’s seasonal spike appears to be making up for lost time.”

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Will You Be Ready When the Eviction Moratorium Ends?

Everything Landlords Should Know About Emotional Support Animals

No Guns In My Apartments: Can A Landlord Say That And Put It In A Lease?

Can I Say “No Pot In My Apartments” When It’s Legal In My State?

Multnomah County Extends Tenant Rent Relief Application Period To 90 Days

By
John Triplett
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Multnomah County Extends Tenant Rent Relief Application Period To 90 Days

The Multnomah County Commission has voted to add another 30 days to the time tenants have to apply for rent relief as there are more than 10,000 pending applications currently.

The commission, meeting in a virtual session, voted to approve an ordinance adding one month to the 60 days of protection approved by the Oregon Legislature in SB 278 before the statewide eviction moratorium ended on June 30. Tenants must apply for the rental assistance during the 90 day period and then  have until February of 2022 to pay back rent.

Most of the applications for rent relief assistance in Oregon have come from Multnomah County.

The ordinance says, “Of the estimated 15,148 households who have applied for state-funded rent assistance, approximately 10,202 reside in Multnomah County. The average total annual amount of short-term rent assistance distributed in Multnomah County under pre-pandemic conditions was approximately $10 million. The County and its partners are now responsible for distributing almost $100 million, requiring a significant reorganization
and expansion of its systems. The scale of projected need as compared to other Oregon counties requires additional time for service providers to process applications,and to meet the legislative intent of Senate Bill 278.”

In terms of how landlords feel about the extension, Liam Frost, senior policy advisor, said he spoke with Deborah Imse, Executive Director of Multifamily NW who said she is opposed to the extension.

One property manager told the commission that the extension to 90 days would introduce more risk for landlords into the equation. She explained there are five main pots of money all with different requirements for tenants to access to pay landlords.

Tenants must provide their landlords with documentation that they have applied for the assistance, and must still pay all of their back rent by February 2022 to avoid being evicted.

The additional 30 days on top of the state’s 60 days was approved “to help ensure that all applications filed in Multnomah County can be processed on time. Also, many tenants who start applications abandon the application commissioners said.

Commissioner Susheela Jayapal said according to a study from Portland State there are an estimated 60,000 households across the state that say they cannot pay next month’s rent. She said there continues to be an overlapping public health and economic crisis.

“I am concerned that while the extension is necessary, it is still not sufficient,” Jayapal said. She said SB 278 protections for renters and payments for landlords is “complicated and confusing.”

“I sympathize whole hardily with landlords who are concerned our action will create further delay for them – especially small landlords,” she said but rental assistance will ultimately flow to landlords where they can get 100 percent of back rent from the landlord reimbursement fund.

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Will You Be Ready When the Eviction Moratorium Ends?

Senate Bill 278: Additional Tenant Protections (But Appropriate Burdens)

By
Brad Kraus
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Senate Bill 278: Additional Tenant Protections (But Appropriate Burdens)

Oregon SB 278 moves some of the burden from landlords to tenants, and tenants must provide to the landlord documentation verifying they are seeking rental assistance as attorney Brad Kraus explains here.

Bradley S. Kraus
Attorney at Law, Warren Allen LLP

During nearly every month over the past year, executive or legislative discussions or actions were in motion to change Oregon landlord-tenant law in response to the COVID-19 pandemic. Couple these with the multitude of often different local laws enacted during those same months, and how anyone expected everyday landlords to keep up is unclear.

This past month was no different. The Oregon legislature, deciding the tenant protections they just enacted in Senate Bill 282 were not enough, subsequently passed Senate Bill 278.

This new law creates an opportunity for a tenant to put off any non-payment eviction notice, or enforcement action of the same, if one has been served, for 60 days if certain conditions are met. However, unlike previous tenant protections, the burden to invoke these protections is now properly placed within SB 278—on the tenant. Further, SB 278 makes up for some shortcomings in prior laws related to the Landlord Compensation Fund, correcting the same via this subsequent legislative action.

As an overview, Senate Bill 278 does not change the fact that July’s rent is due and owing on time. Senate Bill 278 creates an odd “if/then” framework related to tenant protections, depending on where a landlord is in the eviction process. To invoke the protections provided by SB 278, the tenant must provide to the landlord documentation verifying they are seeking rental assistance. This documentation can be provided through nearly any method to the landlord, including email or text message.

If a landlord receives this verification, then a 60-day stay to the process commences, and further action is either prohibited—or required—of the landlord. For example, if the landlord has not yet served a Non-Payment of Rent notice and documentation consistent with SB 278 is provided, the landlord is prohibited from serving that notice for 60 days. If no rental assistance is received for 60 days covering the amounts due and owing for that period and the preceding 60-day period, the landlord may serve a Non-Payment Notice thereafter, and no further stays may be invoked by the tenant.

If the landlord has served a Non-Payment Notice—or has commenced eviction proceedings—the tenant may still invoke the protections by providing the landlord documentation at any time, including at or before the first appearance. If this occurs, the landlord cannot continue with the eviction if it is filed, and the court must stay the eviction and schedule a new first appearance no earlier than 60 days later. If rental assistance is procured and the landlord receives the rent, the eviction must be dismissed. If rental assistance is not procured, the landlord may continue with the eviction process at the reset date.

The above protections properly place the burden on the tenant—not the landlord—to seek out, and provide verification of, rental-assistance efforts. This is one correction that was desperately needed, as prior versions of COVID-related laws required no proof, documentation, or evidence of economic hardship, and were ripe for abuse. As an appropriate concession for these protections, Senate Bill 278 also corrected compensation issues that were built into HB 4401 and the Landlord Compensation Fund. It retroactively compensates landlords the 20 percent unpaid rent they were forced to waive in conjunction with access to the Landlord Compensation Fund monies.

Far too often throughout the past year, the executive and legislative actions taken during COVID-19 placed burdens on landlords for a situation not of their making.

I spoke to many landlords over that time, and none took issue with assisting those who were actually affected by the pandemic. While it is unfortunate that the legislature enacted this law due to its inability to get rental assistance out the door, SB 278’s protections require the appropriate party to act to invoke the same. Further, it assists with making landlords whole, correcting HB 4401’s rent-waiver requirements.

About the Author:

Oregon Senate Bill 278 moves some of the burden from landlords to tenants, and tenants must provide to the landlord documentation verifying they are seeking rental assistance
Bradley Kraus, Portland attorney

Brad Kraus is a partner at Warren Allen LLP. His primary practice area is landlord/tenant law, but he also assists clients with various litigation matters, probate matters, real estate disputes, and family-law matters. A native of New Ulm, Minnesota, he continues to root for Minnesota sports teams in his free time. You can reach him via email [email protected] or 503-255-8795.

Fair Housing Matters – Landlord Liability for Tenant-on-Tenant Discrimination

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How Do You Tell A Routine Maintenance Request from a Real Emergency?

By
Hank Rossi
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How Do You Tell A Routine Tenant Maintenance Request from a Real Emergency Landlord Hank?

How do you tell when a tenant has a routine maintenance request or a real emergency is the question this week for Ask Landlord Hank. Remember Hank is not an attorney and he is not offering legal advice. If you have a question for him please fill out the form below.

Dear Landlord Hank:

What the tenant thinks is an emergency needing repair and the landlord considers an emergency repair are often two different things. How do you as a landlord decide what is a real emergency vs. just a pesky tenant request? –Sam

Dear Landlord Sam:

In the beginning of the landlord/tenant relationship, when I’m giving tenants their keys, I explain what is an emergency and who to call (not text or email).

An emergency is an issue that can cause damage or injury to human life or the property, like a fire, flood, loss of air conditioning in Florida in the summer, sparking electrical outlets or circuit breakers, etc.

If there is a fire, call 911 and then me.

If there is a flood (meaning water running outside the area it is supposed to be in, like a toilet-supply line leaking on the floor, not a toilet “running,” or a tub with water coming out around it, not a drip from the faucet), then CALL ME, not text or email as I’m usually driving, so I can walk the tenant through turning off the water to the property to limit damage to the building and its contents.

We take tenant maintenance requests seriously and the requests are handled as quickly as possible.

Sincerely,

Hank Rossi

How Do You Tell A Routine Tenant Maintenance Request from a Real Emergency?
Landlord Hank says, “In the beginning of the landlord/tenant relationship, when I’m giving tenants their keys, I explain what is an emergency and who to call (not text or email).”

Ask Landlord Hank Your Question

Ask veteran landlord and property manager Hank Rossi your questions from tenant screening to leases to pets and more! He provides answers each week to landlords.

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Do I Have to Paint and Replace Flooring for a Long-Term Tenant?

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Everything Landlords Should Know About Emotional Support Animals

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CFPB Warns Landlords: Report Rental and Eviction Information Accurately

By
John Triplett
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CFPB Warns Landlords: Report Rental and Eviction Information Accurately

Accuracy when landlords report rental information and eviction information, and accurate reporting by debt collectors and others is going to come under increasing scrutiny from the Consumer Financial Protection Bureau (CFPB) as the eviction moratorium comes to an end.

The agency is warning in a bulletin to landlords and others of their obligations to accurately report rental information and eviction information.

“As the federal eviction moratorium and other pandemic rental protections come to an end, the CFPB wants to protect families from being denied housing on the basis of inaccurate information,” the agency said in a release. “Inaccurate rental and eviction information on a tenant-screening report or a credit report can unfairly block a family from safe and affordable housing.”

Consumer Financial Protection Bureau warns landlords

The CFPB said it plans to look carefully at whether landlords, property-management companies and debt collectors are furnishing accurate information to credit-reporting agencies (CRAs) and complying with their dispute-handling obligations under the Fair Credit Reporting Act (FCRA). The CFPB plans to pay particular attention to whether data furnishers are reporting arrearages that include:

  • Amounts already paid on behalf of a tenant through a government grant or relief program; and
  • Fees or penalties prohibited by CARES Act section 4024(b) or other laws.

The bulletin also puts CRAs on notice that the CFPB will be looking at whether companies are:

  • Following appropriate procedures to include only accurate rental information in individuals’ consumer reports;
  • Reporting rental information that belongs to the consumer who is the subject of the report;
  • Reporting accurate and complete eviction information, including having reasonable procedures to include the disposition of the eviction, prevent the inclusion of multiple entries for the same eviction action, and prevent the inclusion of eviction records that have been expunged or sealed; and
  • Properly investigating when consumers report inaccuracies.

“Errors in your tenant-screening report shouldn’t hold you back from having a place to call home,” said CFPB Acting Director Dave Uejio in the release. “For families already struggling to make ends meet, an inaccurate report can be the difference between homelessness or settling into a safe and affordable home.

“Landlords and consumer-reporting agencies have clear obligations under federal law, regarding the accuracy of information reported about tenants, and to conduct timely investigations when consumers dispute information. They need to get this right. The CFPB will closely monitor their compliance, and we will use all the tools at our disposal, including enforcement, to protect consumers during this critical time.”

In the event the CFPB identifies CRAs or other data furnishers not meeting their obligations under the FCRA, the CFPB will take appropriate action to address violations and seek all appropriate corrective measures, including remediation of harm to consumers.

You can find the compliance bulletin on the Compliance Resources section of the CFPB’s website.

As of May 2021, an estimated 6.7 million renter householders were behind on their rental payments, according to the CFPB.  Consumers contacting the CFPB reported financial distress caused by the pandemic.  Many of these consumers reported that they were current on rental payments before the pandemic, only to fall behind after losing their jobs due to the pandemic.

The agency said consumers reported multiple issues with debt-collection practices related to eviction, such as receiving notices for outstanding account balances – in some cases for amounts higher than their rent payments – for apartments they had been evicted from earlier in the pandemic. Other consumers reported receiving collection notices for charges they viewed as questionable, such as fees for damaged property or outstanding utility balances.

Also the agency said some consumers have reported receiving debt-collection notices following an eviction for outstanding account balances for apartments they had been evicted from earlier in the pandemic. Other consumers reported concerns that their eviction would have detrimental effects on their ability to secure future housing.

U.S. Supreme Court Declines Landlords Appeal To End CDC Eviction Moratorium

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Will You Be Ready When the Eviction Moratorium Ends?

Everything Landlords Should Know About Emotional Support Animals

No Guns In My Apartments: Can A Landlord Say That And Put It In A Lease?

Can I Say “No Pot In My Apartments” When It’s Legal In My State?

6 Ways To To Rid Smoke Smells From Rental Units

By
Holly Welles
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How to Remove Smoke Smells From a Rental Unit

Here are 6 ways to rid smoke smells from your rental units because sometimes despite a landlord’s best screening efforts and a property manager’s rules against smoking, you can still end up needing to remove smoke smells from a rental unit. Maybe you have no-smoking rules, and your tenant did not smoke, but had guests in the rental unit who did, so here are some ideas.

By Holly Welles

Your tenants just moved out, and instead of leaving a clean, fresh apartment behind, they’ve left a unit that reeks of cigarette smoke. The smell permeates every corner of the property and now poses a health hazard to neighbors and future residents.

Property managers may be discouraged by the damage that lingering smoke creates. Not only will it cost resources to repair, but it can delay apartment showings for new tenants. Fortunately, there are various ways to remove smoke smells and make an apartment or home livable again. Here are the critical moves to take.

1. Air It Out

The first course of action should be to open all the windows and doors and air out the unit. Portable fans on opposite ends of the apartment will push out stale air while simultaneously pulling in the fresh breeze. Allow them to run all day, if possible.

Landlords might also hang several bags of activated charcoal around the property to absorb odors. Expedite the process by using a few air purifiers as well.

2. Deodorize Carpets To Remove Smoke Smells

Remove smoke smells from carpets with baking soda. Sprinkle the white powder over the stinkiest areas and allow it to sit for a few hours before vacuuming.

This deodorizing method is generally safe for all carpets. However, it may not be strong enough to eliminate more stubborn fumes. In this case, property managers should hire a professional dry cleaner or replace the carpeting altogether.

3. Mop Hard Floors

Next, tackle hardwood and tile floors. Sweep the surface to remove dust and dirt. Then, apply a disinfectant and mop it up using warm, soapy water. Water should be replaced periodically so stinky ash and residue aren’t spread around the floors.

If a mop doesn’t do the trick, steam the floors to melt the tar and oils from smoke molecules. Otherwise, a professional cleaner might be needed.

4. Replace the HVAC Filter

Each unit’s HVAC filter should be changed every few months. However, after a smoker’s lease is up in your rental unit, replacing the filter becomes an absolute necessity.

Switching out the filter is simple, relatively affordable and will help eliminate odors left from cigarette smoke. Plus, it will allow the entire system to work more efficiently and effectively improve the unit’s air quality.

5. Scrub the Walls

The stale stench of ash and cigarettes can cling to the walls, too. In some cases, tar may even harden on the walls and discolor them. Remove both soot and foul smells by scrubbing walls down with a solution of white vinegar and warm water. Landlords can also use a mixture of ammonia and water, allowing it to sit for a few minutes before rinsing the walls.

For tougher stains, try trisodium phosphate (TSP). This is a cleaning product that is mixed into hot water, which you can then apply with a sponge or brush. It contains about 75 percent TSP and 25 percent sodium carbonate. This compound degreases the tars in cigarette smoke, making them easier to remove. If this method doesn’t work, priming and repainting might be necessary.

A note: Phosphates and phosphate detergents are banned in several states, because as they make their way into bodies of water, they can increase algae and bacteria growth, which reduces the amount of oxygen other wildlife may need. If you’re in an area where TSP is banned, look for low-phosphate substitutes, like Seventh Generation, Simple Green, Clorox’s Green Works, or Orange Power Cleaner.

6. Call a Professional Remediation Service

Sometimes, smoke damage is so severe that the stench has infiltrated every nook and crevice of the property. If this happens to be the case, it’s best to call in a professional. They’ll use stronger chemicals and industrial cleaning methods that a typical consumer simply can’t find elsewhere.

While hiring a professional cleaner may sound expensive, it’s best to think of it as an investment in the property’s success. After all, prospective tenants appreciate units that smell fresh and clean.

Guard Against Future Smoke Damage

Landlords can prevent further damage and smoke smells by screening potential renters before allowing them to sign a contract. They might also include a no-smoking clause in the lease agreement for the rental unit. Outline fines and additional cleaning fees to discourage guests from disregarding the rules.

By acting preemptively, property managers can avoid another situation where they have to remove smoke smells,  and keep both current and future tenants happy and healthy.

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Will You Be Ready When the Eviction Moratorium Ends?

Everything Landlords Should Know About Emotional Support Animals

No Guns In My Apartments: Can A Landlord Say That And Put It In A Lease?

Can I Say “No Pot In My Apartments” When It’s Legal In My State?

U.S. Supreme Court Declines Landlords Appeal To End CDC Eviction Moratorium

By
John Triplett
-
CDC Extends Eviction Moratorium For The Last Time

The U.S Supreme Court in a 5-4 decision declined an appeal from landlords to end the CDC Eviction Moratorium.

The court action will leave the eviction ban in place until the end of July.

Chief Justice John Roberts and Justice Brett Kavanaugh joined the court’s three liberals in the majority. Kavanaugh cast the pivotal vote, saying he was letting the ban stay in effect even though he thought the CDC had exceeded its power.

“Because the CDC plans to end the moratorium in only a few weeks, on July 31, and because those few weeks will allow for additional and more orderly distribution of the congressionally appropriated rental assistance funds, I vote at this time to deny the application,” Kavanaugh wrote.

Dr. Rochelle Walensky, the director of the Centers for Disease Control and Prevention (CDC),  earlier signed an extension to the eviction moratorium further preventing the eviction of tenants who are unable to make rental payments, according to a release. The moratorium that was scheduled to expire on June 30, 2021 is now extended through July 31, 2021.

This is intended to be the final extension of the moratorium, the CDC said.

“The COVID-19 pandemic has presented a historic threat to the nation’s public health. Keeping people in their homes and out of crowded or congregate settings — like homeless shelters — by preventing evictions is a key step in helping to stop the spread of COVID-19,” the CDC said in the release.

Counter: Targeted relief works better than an eviction moratorium

The National Multifamily Housing Council (NMHC) said in a release that the “nationwide, one-size-fits-all, federal eviction moratorium is out of step with the significant progress made in controlling COVID-19 and restoring the economy.”

The NMHC said that “the pandemic has already shown that targeted, efficient relief works.

“As we transition away from unsustainable moratoriums, we remain committed to implementing workable solutions for renters facing housing instability and helping the country recover. NMHC looks forward to working with the administration on proactive, comprehensive solutions and highlighting the efforts our members have undertaken over the last year to support and assist their residents,” the organization said in the release.

Previously the council released a set of ideas, called industry principles, that it said offer proactive and practical steps housing providers can take to work hand-in-hand with residents and “demonstrate the good faith with which property owners and managers have supported their residents.”

Oregon Approves 60-day Eviction Pause for Renters to Pay

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Will You Be Ready When the Eviction Moratorium Ends?

Everything Landlords Should Know About Emotional Support Animals

No Guns In My Apartments: Can A Landlord Say That And Put It In A Lease?

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Potential Pitfalls of NNN Properties and a Savvy Alternative

By
By The Editors
-
Potential Pitfalls of NNN Properties and a Savvy Alternative and DST investing and 1031

By Chay Lapin
President of Kay Properties and Investments

  • NNN properties seem like passive investments but actually require regular management.
  • Overconcentration is a key risk when it comes to investing in NNN properties.
  • DSTs (Delaware Statutory Trusts) provide an alternative way to invest in NNN properties.
  • Diversification and true passivity are unique advantages of DST investments.

Frequently investors are seeking out reduced management and or passive real estate investments. Real estate owners are simply tired of the three T’s (Tenants, Trash, Toilets) and are looking for alternative options to consider.

One option that a lot of investors are being sold by their real estate brokers are Net Leased properties, which are commonly known as “triple net leases” (or “NNN”). Some Net Lease properties can be nearly 100% passive. Investors will want to carefully understand how the unique net lease is set up, as some leases may actually have active management responsibilities for building upkeep. A client will also want to keep a monthly check in to make sure that the tenant is abiding by their net lease structure and that they are actually paying the various bills (e.g. Common area expenses, Property Taxes and Insurance). It is not uncommon for a large corporation to have a glitch and be late paying property taxes, and this could affect your building if not caught in an appropriate time frame.

If an investor is going to be placing their entire 1031 exchange proceeds or cash allocation in one net lease property, there are key points that an investor should understand prior to investing:

  • Concentration Risk – Placing all of your eggs into one basket
  • Tenant bankruptcies and restructuring – Lease Rejection
  • Store Closures – “Dark Stores”
  • 1031 exchange closing risk
  • Asset and property management responsibilities – unpaid tenant taxes, collecting reimbursements, refinancing, lease term burn off and value erosion, lease renewal and negotiations, legal expenses, insurance issues, etc.

Another option for investors that are looking for a 100% passive investment is a DST (Delaware statutory Trust). A DST is an entity that can hold investment real estate structured to take 1031 Exchange monies and after tax dollar investments. DST properties can be used as opposed
to NNN properties but still providing access to net lease type properties (FedEx, Amazon, Walgreens, CVS and many others).

  • Potential Diversification – Don’t put all your eggs into one basket! It is important to note however that diversification does not guarantee protection against losses or guarantee profits.
  • You can close potentially on a DST in 2-3 days – helps to potentially reduce 1031 exchange
    closing risk.
  • Non-recourse financing with DSTs as opposed to partial and full recourse with NNN
    properties.
  • Back up – Use a DST as a backup ID in case your NNN deal falls apart.
  • DST as a home for leftover funds to cover your exchange and avoid boot.
  • Professional asset and property management in place.

DST examples:

DST # 1
A portfolio of 15 corporate backed FedEx distribution facilities, Walgreens pharmacies and CVS pharmacies located throughout the country.

DST # 2
A portfolio of 20 single tenant net leased properties to tenants such as CVS, Tractor Supply, McDonald’s, Advanced Auto Parts, Auto Zone, DaVita Dialysis, Dollar General and Dunkin Doughnuts.

DST # 3
A single tenant VA Medical Hospital on a 20 year lease with the General Services Administration (GSA) – The United States Government

Potentially protect yourself and your family by investing in multiple DST’s. This allows your 1031 equity to be diversified over 100 to 300 million dollars worth of institutional quality real estate,  instead of buying one 1-3 million dollar net lease property and having to actively manage it yourself.

About Kay Properties and www.kpi1031.com

Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market. Kay Properties team members collectively have over 115 years of real estate experience, are licensed in all 50 states, and have participated in over $21 Billion of DST 1031 investments.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed. Securities offered through Growth Capital Services. Member FINRA/SIPC. Kay Properties and Investments, LLC and Growth Capital Services are separate entities.

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