Asset Management (Part 2)
Asset Manager & Property Management Dynamics
In regard to multifamily asset management, there’s nothing more important than good property management. Effective property management will not only make an asset manager’s life less stressful but will also improve the quality of life for the tenants. Throughout the entire hold period of the property, there should be a strong relationship and constant communication between the asset manager and property management. Selecting the right property management starts when you select the target market for investing.
There are several factors one must consider before choosing a management company; just to name a few: Have they worked with a property similar to this size? Do they manage any properties in your area? What software system do they use? How long have they been in business? How many units do they oversee? Are they licensed? How reputable are your first or second-call contractors? To get to know and feel how that property management operates there could be multiple conversations and meetings before you decide. Once you’ve chosen your management and before the asset is purchased asset managers (AM) are engaging with property management (PM), sharpening the pencil on assumptions and proforma numbers. Hopefully, the PM will have knowledge of the area so they can provide area analysis and underwriting on the property as well. Property management will be part of your team during the walkthrough and inspection of the property. In addition, both AM and PM are going over the business plan to make sure each other is aligned as once the property is purchased the wheels are immediately set into motion.
Typically, asset managers oversee the property on a holistic level, so they rely on the PM to run the day-to-day operations of the property. Some of these tasks are scheduling and following up on maintenance, rent collection, vendor referrals, payments to vendors/contractors, 24/7 emergency support, tenant screening, inspections, data tracking, evictions, advertising, and leasing units. We at Team Saorsa have standing weekly meetings with our property management teams no matter the property size and this enables us to stay updated on the property operations. During these weekly sessions, we discuss occupancy rates, maintenance and collection issues, tenant updates, upcoming unit turns, prospective tenant traction, and other performance metrics. Asset managers lean heavily on their PM for important advice, information, and recommendations. For instance, if a unit has been sitting vacant for a while property management may recommend adding a concession such as 1-month free rent or they may recommend lowering the rental rate depending on what they see in the area. For example, we had a property that was having issues with vacancies, it was situated in a tough but transitioning neighborhood, and our PM recommended a program that finds homes for veterans in need. In our eyes, this was a win-win as we get to help those who’ve served our country and we’re able to fill two of our vacant units through this program. This program even gives 2 months’ rent as a deposit and the rental payment comes directly from the agency. These types of recommendations are vital to getting the investment to run efficiently and more importantly profitably. In conjunction with handling the daily operations property management will be implementing and executing the business plan.
Property management is so important that if one isn’t picked, and your investment strategy was to “manage the manager”, then you should never purchase the property. It’s like buying a Semi Truck without a driver; you’ll end up crashing trying to drive it all while losing a lot of money. Beware though if the PM isn’t the right fit this can derail the investment quickly, we always stay in contact with 2-3 backup companies just in case we need to make a change. No matter if it’s a 9 or 250-unit property, without good property management you are destined to fail. At Saorsa Capital Investments our number one priority is to protect our investors, so we leave property management to the specialists! Now you should understand how important, even before the purchase of the investment, good property management is to asset management. Next installment we’ll chat about maintenance/capital expenditures potential value add tools or money gobblers!
