When you move into investing in multi-family properties it is important to utilize asset management to strategically set goals for your property. Your multi-family unit is essentially a small business unto itself and having savvy asset management can make a massive difference in the profit of your property.
What is asset management and how does it stand alone from property management?
Asset management monitors the economic and operating performance of the property. You oversee the process and workflow of the property from acquisition to disposition. This is a role where you can strategically operate the property and direct your team to implement your plan. You work to uphold the goals and desires of the owners (which may be yourself and others) and the investors.
This is NOT property management.
Property management handles the day to day operations of the property and works to achieve the goals and plans of the owner by working with asset management to provide guidance and plan accordingly.
So you have just purchased your first multi-unit property. After you make the deal is when the real work begins. How you handle that investment is what determines your success.
We are going to talk about the top 12 ways to make income and reduce your expenses. How can you look at your property and make it the dynamic property it is meant to be? How you handle your investment is how you can experience success with it. Most people focus on rents but that is only one of many options available to you to make your investment a success.
When you are partnering and finding the property management to work with, you want them to understand your plan and give feedback and recommendations. It's very important to have a symbiotic relationship with your property management.
As an asset manager you have multiple responsibilities:
- Clearly defining the roles of your property management team.
- Property inspection
- Income and Expense certification --understand what is driving and detracting from the revenue
- Creating the take over plan: You come in and process way before underwriting the deal to understand where you can find value in order to create and implement the plan. You have to understand the plan and the impact it has on not only the property but the area around it.
- Upholding the owner’s objectives for the property--is this a longer term hold with a certain package of renovations more suited to long term hold, or a short term hold with focus on repositioning branding and marketing that will drive value today but has more surface renovations?
- Loan requirements-- you want to make sure the loan you are putting on the property will work with your business plan. You also don’t want to package a short term loan with a long term hold. You want to find the best ‘tool’ to suit your property.
- Strategic overseeing of the property--you want to look at the ongoing performance of the property against the performa and make adjustments based on how you are performing month in and out over time. You have to look at BOTH the big picture and the line items which includes things like: time and budget for construction and reposition and ensuring you have to have time for your plan to be implemented.
Now that you understand the role and responsibilities of an asset manager, it is important to understand the drive of position. That lies in the core value that we believe supports the best asset management.
If we can focus and make this a better performing community and a better place to live, it will benefit the tenants and drive the value of the property.
With this core value in place you can find many different ways specific the the unique property, market and tenants to improve the property, however, here are 12 hacks we recommend to increase the overall profit and performance of your property.
Top Income Drivers
- Rent increases or Capturing on a Basic Loss
You can go in as a new manager and re-release your property units at a new rent increase. However, there is an opportunity to see what renovations or upgrades can add long term value. Usually you are looking at a time span of 2-5 years when calculating potential returns on your upgrade investment.
- Additional Income for the Sub Market
Be transparent with your property versus other properties. Be clear on what is happening in surrounding properties. Usually the largest property in the area is going to drive the ability of what you can do on your property. You have to sync with the market in your area or it will most likely negatively affect your property. What has the submarket warranted? This applies to everything from rents and fees, to amenities.
- Contracts for the Properties
Look at all the contracts in place for the maintenance and care of the property. Are there current contracts that can be negotiated? An example of these contracts include: trash, landscaping, utilities, wi-fi/cable. Some revised or newly implemented contracts can even drive income to the property. A few examples of these are: laundry, solar, cable.
- Decrease Your Vacancy/Turnover Time
We have created a standard template for the term process that creates a highly efficient and clear process to be implemented by our team. This template looks like a list of what you want done after move out, the contractor list to do it, and a step by step process for property managers to follow.
- Keeping or Changing your Tenant Base
You make your community better and stay aligned with the overall purpose of the property when you consider your ideal tenant base. If you raise rent 300-400 dollars, you may be switching out your entire tenant base which may require a rebranding of your property etc. Does the cost equal the profit?
- Income Increases that Don’t Increase Tenant Fees
In addition to the mentioned laundry, cable etc. if you have a longer term contract you can think outside of the box with something like cell towers. Many properties have space on an adjacent lot. Putting a cell tower on that lot can add up to $144,000 a year to your property in income. Look to the future and look to where the world is going. Look at your RUBS -- Ratio Utility Billing System. If you include utilities in rent, you can build back a set amount by renegotiating your utility contracts while keeping tenant rent stable. On the expense side if you upgrade things like your toilet and showerheads with cost reducing or ‘green’ replacements you can essentially upgrade the value and income of the property without affecting the tenants.
If people don’t know you are there, you can’t meet the demand. The more people come out to see your property the more the value of the property goes up. What you want are properties with people on a waitlist for your units. Websites, Facebook ads and social media are all simple marketing techniques that can go a long way. You can implement rent bumps between $55 and $110 dollars with pure visibility. People are willing to pay more for rent because the property is highly desirable. Note that when implementing rent increases with this hack, you want to make sure you are realistic with your tenant base and the increase is focused right where your tenant base should be.
With fees you want to look at the temperature of the surrounding market. What fees are other properties requiring? Pet fees? Parking fees? Property application fees? This can get really creative based on the market. An example is a property we had with a pet washing fee; tenants could bring their pet down to the pet wash station. You can also add a trash valet if there are units that are far from the dumpster, or covered parking in areas where weather is extreme. When looking for fees specific to your property and market ask: What does this property and area warrant and how can I find that value?
- Add Additional Units
This can be simpler than you think, especially with larger properties. Maybe a unit is being used to house the office and you can find another place to put the office or build an office and create another unit, or consider turning a basement into storage units. Increasing the value of your property in hidden ways is how you will stand out from other owner operators.
- Add Amenities
Is your property underserved and lower cost because it doesn’t have the amenities package that nearby properties have? Look at the cost to add the amenity and what income it would drive. How much time will it take to make your money back? This could be a park, a pool etc. What do surrounding properties have that you don’t, and do you have the space to add that amenity effectively?
- Identify and Decrease the Top Expense Drivers
Where is your property underperforming when you are buying it?
Here are a few good questions to ask: What systems can be implemented to make management more efficient? Are there too many maintenance people? How smooth is the application process?
Where is it underperforming and how can we make it perform better?
Look at maintenance contracts, utility efficiencies such as green program implementation, and at finding ways to maximize your property space.
- Help Tenants Help You
You can create something we call tenant training. A huge money waster is unreported repairs such as leaky faucets. Usually this is a result of a tenant’s former frustrating experiences with property management. When you ‘train’ tenants you are showing by example but also stating verbally the importance of caring about the property consistently and efficiently by keeping it in smooth working order. In addition, you can create a tenant referral program: Tenants stay longer when they are living near their friends.
When you broaden your idea of property profit past the rents, you have an untapped goldmine of possibility. Use these tips to ask yourself ‘where are all the other pieces I could use to make this property run better?’ The answers will give you increased profit and property value.