Which of these best describes you when it comes to multifamily asset management?
- Needs Major Improvement – Everything is all out of whack, tenants are unhappy, and your profits are lackluster or nonexistent.
- The Redemption – Things were going downhill, but with the help of a property manager and process tweaking, the success bar is beginning to rise again.
- Clueless “I still have no clue what’s going wrong” – When you feel like everything should be sailing along nicely but your outcomes are the opposite, leaving you scratching your head.
- The Success Story – Perfect asset management balance that results in maximum gains and tenant happiness.
Whether you’re at the top or the bottom of the scale, below is a pragmatic overview of the key secrets behind bolstering multifamily asset management processes to help you reach your investment objectives.
What Is Asset Management exactly, and how is it different from Property Management?
Managing the property is part of asset management, but asset management includes more than that. With asset management, the property is only one asset you’re managing. You’re also managing your investors’ money. It involves increasing the profitability of the investment – increasing income, decreasing expenses, increasing the value of the property, streamlining processes, and executing your business plan.
Of course, a big part of that is managing the property itself. The numbers are important, but you also have to keep tenants happy. The property grounds need to be maintained, the individual units need repairs and maintenance to be done in a timely manner, tenants need to feel safe, rents need to be paid on time, and more.
In a nutshell, an asset manager focuses on the long-term strategies to maximize property value and ROI, whereas a property manager deals with more of the day-to-day matters of finding good tenants, overseeing renovations, collecting rent, paying vendors, financial reporting, and executing leases.
Now, there are tons of moving parts that go into investing in multifamily real estate. However, multifamily asset management is one of the most vital factors to ensure your property succeeds both short and long-term. Because let’s face it – an investment deal can look stellar on paper, but if you are not performing the actions to carry out that said business plan, your property is going to be in trouble.
In summary, a good investment deal equates to a good property that generates profitable results, which is why so many investors hire a property manager who understands the investment side of things to optimize the outcomes.
Should I Self-Manage or Hire a Property Manager?
Some people think they want to save money by trying to manage the property themselves. And while you could potentially save some money, property management is kind of a big deal.
It’s also time consuming and could end up costing you more than what you’d spend on a property manager if you end up with an underperforming asset, unhappy investors, unhappy tenants, etc. You’ve got a lot of other stuff that requires your time – managing investors, executing your business plan, making decisions, working on other deals..
From reducing expenditures, risk management, finding lenders, managing investors, marketing, creating financial projections, and portfolio building, it can all add up and lead to feeling overwhelmed, where both your property and mental health can suffer. Since this is a far too common problem that can lead to burnout and missed asset management steps, this is where hiring a property manager comes into play.
So, to answer the question of if you should self-manage or hire a property manager, the decision to have extra support is up to you and what you are willing to take on. But if you want to have the best shot at staying organized (and sane), then a qualified property manager can be quite a valuable addition to take some of the workload off of your shoulders.
Tips For Working With a Property Manager
Alright, let’s say by now you are on board with the whole hiring a property manager idea. In this case, you will need to know how to optimally manage them and work with them to build a strong team that strives for the same ROI goal. In short, it is all about setting clear expectations upfront, nailing down leadership boundaries, and being on the same page each day to give transparency for both sides. If you would like to dive deeper into the nuts and bolts of this area, check out the interview I did with Anthony Chara.
Here are a few topics we covered:
- What makes a good Property Manager?
- How to find the right Property Manager for your team
- Ideas to increase revenue that will also keep your tenants happy
- Find the balance between being involved and micromanaging
- Tips for increasing profitability by decreasing expenses
- What are some red flags that will help you know it’s time to change your Property Manager?
The Best Multifamily Asset Management
Ways to Add Value to the Property and Decrease Expenses
Besides short-term profitability, you’ll also want to think about boosting your multifamily property’s value. Some items may have a significant initial investment but will pay for themselves in time.
Here are a few ideas for adding value, decreasing expenses, as well as increasing tenant satisfaction:
- Roof or siding improvements
- Better insulation
- Upgrade flooring (For example, vinyl plank or tile. More durable flooring doesn’t have to be replaced as often and is easier to clean than carpet.)
- Updating appliances (especially more economical ones)
- Updating kitchen and bathroom
- Add parking spaces
- Add or repurpose units (For example, sometimes a unit may have been used for storage/maintenance. Convert it back into an apartment and get a significant increase in monthly revenue, plus a boost to the property value.)
- Adding / updating security systems
- Adding or updating a designated gym area
- Improve landscaping
- New HVAC system (newer systems can be more energy efficient)
- LED lighting (often is brighter, meaning it improves security while also saving money)
- Add vending machines in common areas
- Replace older plumbing fixtures with new ones that use less water
Keep Tenants Happy
A lot of adding value to a property ties into tenant happiness. After all, an updated gym and LED lighting not only adds property value in and of itself, but it makes the quality of living go up too. Even so, there are some other value adds that you can opt for that are more geared towards influencing tenant happiness.
For example, using a flexible payment service (where tenants can choose to pay weekly rather than one big payment on a certain day of the month). This gives more budgeting power to the tenant so they can better handle and manage their finances. It can cut down on late payments too since some late payments are due to poor budgeting.
This doesn’t mean you need to collect rent more often. There are services that handle this for you (examples: Flex, Till). They collect the money from tenants and you still get your rent in one payment each month. It makes for a win-win for both sides. These typically have a cost to the tenant, but it is typically less than they’d pay in late fees and gives them peace of mind. Plus some may actually help improve the tenants’ credit score.
Here are some other ideas that significantly improve tenant happiness:
- Storage Units – Whether you have the space to build storage units or collaborate with a third-party vendor, adding storage options for tenants can give them more peace of mind that they will have enough space for their things, and if they’re on-site, the convenience of having it easily accessible, while also increasing monthly revenue.
- Community Gardens – If some tenants would enjoy gardening, adding some community gardens gives them a space to enjoy this hobby. Having tenants maintain some flower beds not only beautifies the property and increases community pride, but also can save on landscaping costs.
- Host Frequent Community Events – Prospective tenants who are shopping around often love coming across properties that are proactive in social engagements. It could be something as simple as craft classes, a larger potluck event, or even an annual food truck community party that they can enjoy.
- Create a Referral Program – Reward tenants for referring their friends to your property. For example, if the person they refer signs a lease and moves in, they get a discount on their next month’s rent. Or you could give them a gift card or even a cash reward (or maybe some other perk). This can reduce your marketing expenses and fill vacancies faster, plus it makes tenants happy to have their friends living nearby.
Ways to Generate Additional Income
Besides rent and the other items we’ve already discussed, here are some additional ways to increase monthly revenue from your property.
What else can you do?
- Move-in Fees – A move-in fee is a separate cost from a security deposit, and is usually about half of one month’s rent. It is a non-refundable fee that you can charge tenants to cover the costs of getting the unit prepped/revamped/cleaned for them to live in. Jake and Gino say they don’t charge a security deposit, but instead have tenants purchase SureDeposit. If other apartment complexes are charging a security deposit of 2 months’ rent and yours only requires half a month’s rent to move in, it’s a lower barrier to entry.
- Late Charges – According to the Late Fee Fairness Amendment Act of 2016, you can charge up to a 5% late fee if your tenant does not pay their rent on time. This can decrease the number of late payments, but for those who pay late, you’re also getting more revenue.
- Renter’s Insurance – You can offer renter’s insurance to your tenants with a small mark-up on the price using services like AppFolio. Renter’s insurance is a great way to gain a little more income while giving your tenants more confidence-boosting coverage if something were to happen, such as premises injury, theft, vandalism, or asset losses due to a fire.
- Coin-Operated Laundry – If the units don’t have their own washer and dryer, putting in a coin-operated laundry area can be an additional source of monthly income. Plus it makes life easier for tenants because they don’t have to go off-site to do their laundry.
- Charge for Utilities – Even if the individual units aren’t metered separately, it’s possible to charge for utility usage. Ration Utility Billing (RUBS) is a way to charge tenants for utilities. You basically divide the utilities costs among all the residents, based on certain criteria. For example, some factors that would affect the calculation would be the size of the unit (it takes more to heat/cool a larger unit), how many occupants are in the unit (more people mean more utilities used), amenities that may use more utilities (like a washing machine, dryer, gas fireplace, etc.).
- Covered Parking – If you have the ability to add some covered parking spots, you can offer these to tenants for an additional monthly fee. It will make them happier and boost income.
- Pet Fees – Allowing tenants to have pets and charging them a monthly fee for that privilege can also make tenants happier, while providing more income. Putting in hard flooring such as vinyl plank flooring will reduce the damage pets can do and could also increase the value of your property as it lowers maintenance costs.
- Short-Term Rentals – Lastly, if you have open units, consider renting them out in short-term sprints to capitalize on them until a long-term tenant comes along. For a 3-6 month lease you can charge a premium. You get to profit from those spaces while you wait for the right long-term fit and support people who need quick, short stays all in one.
The Best Multifamily Asset Management
Conclusion – Asset Manage Smarter, Not Harder
When it comes to multifamily asset management, you don’t have to go it alone. With the help of a property manager, you can divvy up your list of asset management duties to create a well-oiled operation that can position you to crush your investing goals. Even if you choose to self-manage, these suggestions can help you generate additional income and add value to unlock long-term success.
In the end, manage smarter, not harder. It generally makes sense to use a property manager since that lets them focus on what they do best, which allows you to focus on what you do best. The same is true of building your website. Sure, you could spend months building a website yourself for your syndication business, but should you? That’s what we do best, and we’d love to help you.