Property Management

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Mastering the Make-Ready Process

There are so many moving parts when a unit undergoes the make-ready process, execution can be stressful and overwhelming for an unprepared management and maintenance staff. If that’s the case, the make-ready process will cost a property excessive capital in maintenance and upgrades while losing important revenue due to extended vacancies. But with the right tools and tactics, a make-ready can be a smooth and efficient transition that will ultimately be well worth the dedicated time, money, and effort. Listed below are some excellent  tools and procedures to optimize the make-ready process. 

Technology

Lease expiration management plays a crucial role in the make-ready process. Being able to efficiently monitor and manage current and upcoming vacancies will largely dictate how efficient performing a make-ready will be. There are an abundance of revenue management/lease expiration software programs on the market property managers can use to simplify lease, revenue, and market monitoring. That being said, it is always important to maintain a human element when using technology, as the software should be viewed as a tool, not an employee replacement.

Click here to see a list of accredited lease management software programs. 

Walk-Throughs and Preventative Maintenance

Management should be regularly performing walk-throughs to monitor the state of each unit.  The walk-throughs offer a number of advantages. First, management can bill tenants for any damage done to the unit and maintenance can make the necessary repairs that may have prolonged the make-ready period. Second, walk-throughs allow maintenance teams to make any repairs  that would otherwise become a larger problem as time passed such as leaks, mold, or structural  irregularities. In the end, proactive management and maintenance shortens the make-ready to-do-list and reduces a unit’s vacancy duration.

The make-ready process begins the instant management sends out a notice to vacate the unit. In addition to consistent walk-throughs, performing inspections prior to a unit becoming vacant will help understand what is needed to complete the make-ready. Furthermore, pre-inspections will minimize unexpected maintenance problems, prepare the renovation team to execute the make-ready processin a single, efficient effort, and ultimately reduce the total time the unit is vacant.

Staff Incentives

Having a proactive maintenance staff is one thing, but being able to combine that with a knowledgeable, well-trained management team is what turns a good property into a great one. If the property staff is running like a well-oiled machine, cooperatively working towards a common goal the make ready process should be a breeze. A good way to ensure everyone is on the same page is offering the staff incentives based on how fast a make-ready is completed along with the quality of their execution. With everyone’s bonus being tied to each other’s performance, the staff is encouraged to excel as a team. Additionally, the cost of incentives is minimal compared to the loss in revenue from having a vacant unit on the books for too long.

Bonus Tip

Sometimes a staff has to start multiple make-readies at the same time, which can be overwhelming, even for the most prepared of staffs. One way management can get a head start on the make-ready process is having leases expire on Mondays. When leases expire at the beginning of a week, often times tenants will move out over the weekend. This reduces the number of days a unit is vacant, as it allows management to begin the make-ready process a few days early while the tenant is still paying rent on the unit.

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Tenant Turnover

Yesterday we talked about tenant retention and some characteristics that motivate them to renew their lease. Using the aforementioned strategies will certainly help minimize resident turnover, but even a property with desirable amenities and excellent service, there will always be a situation where a good tenant has to move out. As soon as a unit becomes vacant,  the following actions taken by management and ownership are crucial in terms of cost and revenue.  

Check out this article from Multifamilyexecutive.com that offers some beneficial tactics owners can use to offset the disadvantages of resident turnover and potentially turn a negative situation into a positive one.

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Tenant Retention

Property owners are always looking for a competitive edge when it comes to the never-ending battle of attracting and retaining good tenants. Naturally, having a clean property, attractive curb appeal, desirable amenities, and a convenient location are all major factors in bringing in new tenants and filling vacant units. But what does it take to get the best tenants to sign on the dotted line when lease renewal season rolls around? 

It’s a combination of a property’s physical amenities and the quality of service provided by a management team that motivates a resident to move out or renew their lease. We think it’s more about the intangibles, rather than the physical attributes the property offers that keep tenants coming back. If a property has a friendly, inviting community with a management team that prioritizes honest relationships and high-quality service tenants that value these characteristics in a property will be encouraged to remain a resident for, ideally, many years to come.

In an article from Multifamilyexecutive.com, author Melanie G. French, the Executive Vice President of Operations of Cortland Partners, offers a well said explanation on what it takes to retain tenants, build trust and cooperation among the community, and the importance of a property’s staff to demonstrate genuine care for the needs and wants of their tenants.

Click here to read French’s article in its entirety.

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The Benefits of Ratio Utility Billing Systems (RUBS)

Lately, we’ve been discussing property value and how it’s directly affected by increased revenue and/or lowering operation expenses. So today we’ll explain how implementing ratio utility billing systems (RUBS) can be beneficial for property owners in regards to higher revenue and property value. 

A ratio utility billing system  is a method of calculating the utility consumption of a tenant based on factors such as unit square footage, occupancy, or number of bedrooms. Residents are then billed on a monthly basis based on their calculated utility consumption. Using RUBS throughout a property has a multiple advantages such as fast implementation, returns on utility expenses, and an immediate increase of cash-flow. Additionally, tenants can be resistant to raised rent rates, so implementing RUBS is a good alternative to achieve a similar increase in revenue.

Perhaps the biggest advantage of RUBS is the encouragement a property’s community feels to conserve utilities as a whole. Conserving utilities benefits tenants as it lowers their monthly bill while owners see a decrease is overall operation expenses. Furthermore, implementing RUBS give tenants more incentive to report maintenance problems like leaking faucets or toilets. According to Multifamily Utility Company Inc., on average, tenants use anywhere between 5% to 40% less utilities when RUBS are announced and implemented. Also, The Environmental Protection Agency (EPA) and National Apartment Association (NAA) have both concluded RUBS encourage utility conservation.

By pushing utility costs to tenants, owners can decrease utility expenses, benefit tenants by making them aware of wasteful utility usage, and protect themselves from fluctuating utility priceswhile creating a consistent stream of revenue. Ultimately, implementing RUBS can be beneficial for a property owner in almost every situation.

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Increased Value Through Increased Income

In our previous blog post, we discussed a few general strategies property owners can use to increase the value of their multifamily property. We briefly mentioned how increasing income is one of the primary ways of raising property value, and with so many ways of doing so, we thought it would be a disservice to readers to not further elaborate on the subject.

First and foremost, a property will never reach its full potential with a high vacancy rate. Nothing hurts a property’s income more than a high number of empty units, so finding and retaining quality tenants is a top priority. Factors such as advertising, marketability, and curb appeal go hand-in-hand with acquiring and maintaining tenants, but that’s a another discussion in itself. 

Once an adequate vacancy rate has been achieved, only then can a property manager begin to truly maximizing property income. So what are the best “bang for your buck” strategies owners can implement? Hands down, the number one income booster for an owner is raising the base rent for each floor plan of the property. Even small increases like a 2-3% bump in rent can result in thousands of extra revenue dollars a year.

Additionally, building scheduled rent increases into leases can ensure a property is staying on par with its comparable market and remaining competitive. Raising rent increases income on an exponential level, so owners should always be looking to get the most revenue out of their units and amenities. Although, if a property owner is going to increase rents, they’ll have to spend money to make money. Raising rents have to be executed in conjunction with property improvements, otherwise, tenants won’t renew leases and move on to a property where they getthe best value for their money. 

One of the best justifications of raised rent rates is updating units. Even though unit renovation requires an abundance of time and money, a property will not survive if it’s out-dated. So renovation kills two birds with one stone by keeping a property up-to-date and competitive while increasing the revenue and value of a property through rent increases.

Renovations don’t have to break the bank. There are numerous inexpensive materials that achieve the same aesthetic affect as more expensive products. Alternative materials like vinyl flooring or lightweight granite can save money while achieving the same look and feel as hardwood floors or quartz countertops. Ultimately, the key is renovating for your target audience. Spending extra capital on upgrades B or C class tenants don’t desire can be a waste of money and lead to higher vacancy rates. 

Sometimes a property has updated units, popular amenities, and low vacancy, but still has room for increased revenue. In this case, there are a number of inexpensive, and sometimes free, strategies owners can use to create extra revenue streams. One source of free revenue is charging an application fee. Every potential tenant must go through a background check, and can create a potential problem for your asset, so application fees offset that risk. Implementing a pet fee has the same affect.

Parking is another source of untapped revenue properties can capitalize on. Even though not every demographic is willing to pay for covered parking, owners can implement an opt-in reserved parking program many tenants will find convenient. Reserved parking can generate hundreds of dollars in monthly revenue, efficiently organize the parking lot, and give tenants piece of mind regarding the safety and security of their vehicle. 

Most multifamily properties require tenants to pay an upfront security deposit. The deposit protects owners and their assets and while acting as incentive for tenants to take care of the unit. having said that, security deposits can be a point of distrust in the tenant/owner relationship. Owners wonder if their units will be taken care of and tenants wonder if they’ll ever get their deposit back. One solution to this problem is a mandatory, non-refundable move in fee. Owners get to retain the move in fee and tenants see a lower barrier to entry. Furthermore, once a tenant moves out, owners can use the move in fee to turn the unit for future tenants.

All of the examples provided above are strategies owners can use to justify raising rents, which will lead to an increase of income, and hopefully achieve the ultimate goal of maximized property value.

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Increasing Value

You just won the bid on that property you’ve been working towards for the past few months, so what’s the next step? Well, first you celebrate, because it’s no small feat beating the competition to become the new owner(s) of a multifamily property. Once you’ve toasted to your hard-fought victory, it’s time to start making the most of your investment. The most important factor in maximizing return on investment is increasing the value of your property as much as possible. 

Looking at it from the most simplistic standpoint, value is affected in two ways: Increasing income and/or decreasing expenses. Having said that, there are an abundance of ways to maximize your property’s income and minimize its required expenses. The most successful properties simultaneously and efficiently achieve both of these goals.

A good starting point to raise the value of your new property is making minor repairs and improvements you noticed when you initially toured the property. Improvements like fixing cracks in sidewalks, replaces window screens, or repainting doors or balconies will give your property the face lift it needs to rejuvenate its curb appeal. This can be an inexpensive way of increasing the marketability of your property and a stepping stone to greater improvements that will elevate it a new level of value.  

When it comes to decreasing expenses, one of our first courses of  action is implementing water conservation. Toilets use the most water out of all the bathroom fixtures, so installing low-flow toilets can save property owners a fortune in utilities. Also, toilets tend to leak, so proactive maintenance will save money in the long run.

In addition to water conservation, employing the right amount of staff is very important. Employing too many people can be a waste of man power and capital, so don’t be afraid to layoff a few employees if the property doesn’t benefit from their presence. Furthermore, hiring the right employees can greatly increase your properties value. For example, hiring a maintenance crew with a diversity of skills has multiple advantages. Most importantly, a multi-skilled maintenance crew reduces the need of deferred maintenance, thus, lowering overall property expenses. Additionally, being able to perform in-house maintenance means repairs and improvements can be completed much faster.

This post is meant to merely touch on a few examples of increasing value through increased income and decreased expenses, so keep an eye out for our upcoming blog posts as we will be discussing maximizing incomes and minimizing expenses in greater detail.

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Offering the Right Amenities for Millennials

In one of our recent blog posts, we generally discussed how the millennial generation has impacted the real estate industry. We learned millennials are on pace to make up a large portion of the renter’s population for many years to come, and how they are redefining the desired product renter’s look for in a multifamily property. So today, let’s take a deeper look into some of the specific amenities that can fulfill the demand of the average millennial tenant.

In this day in age, millennials are rapidly setting new trends and constantly changing their wants and needs. So when it comes to property amenities, it’s crucial to implement features that will stand the test of time.

One of the most popular amenities among millennials is an updated, inviting pool/outdoor area that can be used to socialize with roommates, friends, and fellow tenants. If there is square footage to spare, coupling a few pergolas with comfortable, colorful outdoor furniture can result in a relaxed, resort-like setting resulting in a lot of usage by tenants. Whether it’s for a pool party, working outside on a nice day, or just relaxing in the sun with friends, providing that comfortable outdoor space is very attractive to millennials and can be a convincing factor when it’s time for lease renewals.

Another amenity millennials love that can prove equally beneficial for property managers and owners is a valet trash service. For the tenant, it’s as simple as eliminating that annoying walk to the dumpster, millennials love that convenience, and it will easily become the most frequently used amenity on the property.

For the property manager or owner, a valet trash service has multiple benefits. First of all, it increases your property’s overall curb appeal, which is what often gets tenant prospects in the door. Secondly, it’s often coupled with a recycling option, another feature millennials are interested in, thus further increasing property marketability. Lastly, valet trash services create another stream of revenue, consequently increasing the overall value of the property. It may not be a tangible asset, but once owners and renters experience a valet trash service, they appreciate the benefits and convenience provided.

Click this link to watch a video provided by NationalDoorstep.com to learn more about the benefits of valet trash services and how it works. 

Now for unit amenities. From a cosmetic standpoint, you can satisfy millennial demands without breaking the bank and completely re-doing the units. Wood-like flooring is still desirable, especially when coupled with nice kitchen counter tops and cabinets. For millennials, more is less, so it’s better not to over-design units. A clean, minimalist approach allows tenants to put their personal touch of creativity on the unit, making it feel more like home, and hopefully retaining their lease for an extended period of time. 

In regards to utility features, one of the most desired features by millennials is a washer/dryer connection. Much like the valet trash service, eliminating a trip to the laundry mat or on-site laundry room is a convenience millennials are gladly willing to pay for in cash and square footage.

Another simple feature owners can use to increase unit appeal is adding USB ports to wall plug-ins. Millennials are constantly using numerous USB-charged devices to work, stay connected via social media, or simply surf the internet. So having the freedom to use their devices anywhere in the unit is major bonus for millennials. It’s a relatively inexpensive amenity to add, and a surprising selling point during property tours potential tenants will find very useful. 

If owners are looking for a touch of luxury to add to their units, remote-controlled lighting and air conditioning is a huge bonus most tenants have never had the pleasure of enjoying. Nothing beats turning off the lights without having to leave the comfort of your bed. Having said that, it might not be the most cost efficient amenity, so a good substitute is an adjustable light dimmer on wall switches.

These are only a few examples of features millennials desire in an apartment, so you can click here to see more features that can be added to a property to attract more millennial tenants.

Not every multifamily property has to target millennials as their primary tenant demographic to be successful, but as time progresses they will become the majority of the renting population. So it would be beneficial to at least start understanding what the millennial generation look for in a living space. Once that has been achieved, owners can do what’s best for their property to keep vacancies low while retaining millennial renters for years to come.

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Implementing Renter’s Insurance

Renter’s insurance is starting to become offered, and sometimes required in leases at an increasing rate across the country. Considering the pros and cons of implementing a renter’s insurance plan, it is important to understand the best approach for your property.

Not only can renter’s insurance protect tenants and their belongings from events such as fires, floods, leaks, and theft, but it can also act as another line of defense for a property owner when it comes to liability. So in many cases, it can prove very beneficial to offer or require your tenants to purchase a renter’s insurance plan.

Click here to learn more about how renter’s insurance benefits both the tenant, and the property owner.

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Millennials in Multifamily

Over the past few years, a growing trend in the multifamily industry has been the prominence of renters from the Millennial generation. Now more than ever, millennials are looking to rent instead of buy, partly because they don’t want to be tied down by a 15-30 year mortgage on home, especially if they acquired debt from student loans. Naturally, as millennials grow older and start families they will look towards buying homes, but for now, millennials are here to stay in the renting sector.

As of last year, the U.S. Census Bureau found that millennials have overtaken baby boomers as America’s largest generation. Furthermore, earlier this year, Yardi Matrix reported millennials hit their prime renting years between 20-34 years of age, which should add roughly 2 million millennial renters to the market this year. The same report stated the amount of millennial renters will peak in 2024 with an astounding 70 million millennials looking to rent. Based on these figures, millennials should drive a heavy amount of demand to the multifamily industry for the next 7-9 years.

Not only are millennials flooding the housing market with their rent-first mindset, but they are also redefining the desired product needed to fulfill demand. Upgrading to black or stainless-steel appliances is most likely not enough to captivate the average millennial renter. From an aesthetic standpoint, millennials tend to lean towards rustic, modern designs with clean and quality materials that can provide a comfortable social experience.

Here’s a quick video from Multifamilyexecutive.com where some of the industry’s leading architects discuss what millennials look for in a living space. 

They have grown up in a time of surging technological advances, so millennials look for features like a cool computer cafe/lounge with fast internet, USB wall plugins, or even light dimmers and remote-controlled fans in their units. These are just a few examples of characteristics that any generation might prefer and enjoy, but with so many options at their disposal, millennials will give their business to whoever provides the best overall experience.

From an apartment owner’s perspective, it may seem expensive catering to the millennials as a target market, but there are affordable materials and strategies that can achieve their desired product. Also, millennials are generally willing to pay the extra cash to live in a comfortable, clean, inviting space with a location that is convenient to reach work or social events. The millennial generation is, and will continue to be a large part of the multifamily market for many years to come, so it’s no surprise to see the market shifting in a new direction.

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Selecting the Right Property Management Group

Hiring a good property management group can make or break the success of a property. Choosing the wrong company can tank an entire operation in an instant, while making the right selection can prove to be profitable rather than costly. Every management company will insist they are the best of the best, but it’s up to you do the research and decipher which company is the best fit for your current, and maybe even future properties. 

There are a number of things to consider when interviewing a property management company such as cost, track record, maintenance operations, marketing/advertising,  and so on. Every company operates differently, so you need to know what you’re looking for in a company before you start your search. Contract discussions should only begin if the company meets your management expectations from an operational standpoint.

Perhaps the most important rule of thumb when looking for a property management company is to ALWAYS interview multiple companies before making a selection.  Managemyproperty.com does a great job in simplifying what you should and shouldn’t do during the hiring process while providing additional detail, if desired.

Click here to learn more about the best way to find the right property management company for your real estate.