Effective Property Management = Higher Likelihood of Success
You may have heard that you make your money in real estate when you buy a property, meaning your purchase price determines success. However, while there is some truth to that, if you don’t have effective property management, it will be very difficult to maximize the returns no matter the purchase price.
Not all property management is created equal. Here are some of the many things property management does for an asset and some of the key issues to remember when evaluating multifamily investments through the lens of property management.
Inspections and licensing
City inspectors are people too and making their jobs more straightforward could be the difference between passing or failing an inspection. This is one of the key ways that onsite management is a difference maker. Professional property management will know what issues to fix before an inspection and will be quick to make the correction if there is an issue. They build relationships with cities and make sure issues are addressed quickly and efficiently.
One of Exponential’s points of difference is our in-house property management team. They understand the value of maintaining relationships with city officials built on trust. These relationships are backed by a track record of successful inspections and quick responses to issues. We take that reputation very seriously and do everything we can to protect it.
Crime prevention and response
By making early contact with community policing resources and building a rapport with the beat officers, professional property management begins making critical inroads with law enforcement. Making them feel welcome often leads to a greater law enforcement presence and a safer community.
At Exponential, we welcome our law enforcement partners. We open up our facilities to give officers a comfortable place to work. There have even been instances of law enforcement using club houses as a substation. We’ve even kept a favorite brand of coffee on hand. It’s the least we can do.
Human Resource Management
Unless you’re a CPA, salesperson, referee, social worker, and babysitter with the construction know how of Chip Gaines… you’re going to need a team to run a property. This is generally where apartment owners see the most immediate benefit from professional property management.
At Exponential, we pride ourselves on well trained teams. Each team member at our properties understands the numerous issues that are involved in running a property and is trained in how to respond. Whether it is handling work orders, finding new residents, handling new leases, or keeping accurate accounting records, our teams are prepared. Knowing this value, we keep our teams even after a transaction. That means we can place people where they want to be and in a position for which they have a passion. This allows us to continuously coach our people for the long-term benefit of our investors.
Weather and Disaster Response
When weather strikes at 2 AM, someone is getting that phone call that the power is out or there is a problem with the roof. Most investors would rather that call go to property management. In a third-party management situation, often the owner will hear about the event on the news before the office is open again.
Exponential’s in-house management team is on call to coordinate response and communication during severe weather or unforeseen events. Whether it is calling the power company, tarping the roof to prevent leaks or removing fallen branches, our team can quickly respond.
Market Trends for Rents and Amenities
One of the clearest advantages of professional property management is first hand knowledge of resident expectations for amenities and the amenities’ value in monthly rent. With more data points across more properties, there is an understanding of what rents and amenities may command in a submarket. For example, their knowledge of neighboring properties would let you know that a dog park might be standard for one area and a differentiator or simply unnecessary in others.
At Exponential we understand there is a difference between knowing how much to charge and actually leasing for that rate. We not only have the market knowledge, but the ability to implement updated rents. There have been occasions when our management team has taken over properties from third party management groups that have not raised rent to keep up with the market and immediately increased rent $200. This was before even beginning to renovate the property.
Monitor construction workflow
If your property is undergoing renovation, property management can be the difference between efficient rehab and budget busting cost overruns. Having a property manager that will work with the contractor to keep the job on time and on budget is invaluable.
At Exponential, our property management sets the scope of work and timelines with the general contractor and ensures that materials are ready for the subcontractors, saving time and material markups.
Coordinate unit turn prioritization
When going through a value-add on a property, knowing which units to renovate and when to do the work is critical to maximizing value. Often, the choice of which unit and when to renovate it is left to the maintenance team rather than using predetermined business logic to inform that choice. Professional property management will know which unit types are most in demand. Exponential’s property management weighs every notice to vacate against dozens of factors including current rent, potential increase, and renovation team availability to determine which units to make-ready and which to renovate.
Whether a resident is late with the rent, brought home a new puppy or violates his lease in another way, someone has to communicate the issues and, potentially, assess fees or initiate eviction. A professional property manager can help ensure that the lease terms are enforced legally and according to local statutes. Remember, lease enforcement goes both ways and the property owner must comply with the lease terms as well. Property management takes on much of this responsibility.
It’s easy to be focused on the income side of a P&L statement, but it’s often the expenses that make or break an investment. On many work-force housing properties, implementing a water conservation program can lead to big cost savings. Further, making sure there are spending controls on office supplies, maintenance items, and other purchases can hold on-site teams accountable.
At Exponential, we look for every opportunity to reduce expenses. Each employee has oversight to prevent unauthorized or wasteful spending. We have had occasions where prior owners did not have tight controls on spending, and we were quickly able to improve the property’s profit via our training and spending policies.
Ultimately, the role of a property management company is to protect your investment and earn you money, so be sure to remember that when you’re out there interviewing. Will the management company closely watch the accounting? Will they make sure units are quickly ready to rent when someone moves out? Will they treat it like it’s their asset? Will they look for ways to achieve cost savings? It’s your hard-earned money, make sure you have the right team protecting your investment!
Over the last decade, Exponential Property Group has given hundreds of investors the opportunity to grow their net worth using multifamily real estate. Go to exponentialpropertygroup.com/invest to learn how you can too.
In Part 3 you’ll learn about the benefits of investing in the value-add category of multifamily.