You’ve just closed your multifamily apartment syndication deal. You should take a moment to celebrate. Then the real work can begin.
Yes, apartment management — and all commercial real estate management — is highly complex. And it demands a long-range commitment. Expect to be asset managing for at least the next five to 10 years.
The secret is to break this role into smaller, more digestible tasks. Below, we’ll examine four of those crucial responsibilities.
Business Plan Execution
This step is more of a guiding principle — one that encompasses every other step. Essentially, you should keep making sure that every part of your business plan is being enacted.
For starters, keep close tabs on your budget. Are your operating expenses staying within an acceptable range? Are your projected premiums on target?
Your property management company should list all of your income and expenses in a software program. If you have access to that software, check it periodically. If not, the company should send you a financial report at the end of every month or even more often.
Thus, you can keep comparing financial projections to reality. And you can discuss any discrepancies with the management company. Find out what caused them and how you can overcome unexpected losses.
Weekly Performance Reviews
Weekly performance reviews can help you stick to your plan. To begin, establish your key performance indicators (KPIs), the data points you wish to monitor. If you’d like, your management company can help you determine your KPIs.
Using the acronym MOM, you can organize your KPIs into three categories: money, occupancy, and management.
The money category could include the following:
- Gross potential income, the amount you’d earn if you rented all your units at market rates.
- Gross occupied income, the money you’re actually making.
- The amount of money collected the previous week.
- The money collected month to date.
- The month-to-date delinquent number.
If this last number seems high, find out why and how your management company is addressing the issue.
For its part, your occupancy category might feature these seven KPIs:
- The number of pre-leased units.
This group can include vacant units and units with leases expiring at the end of the month, so long as they have new leases already signed.
- The number of eviction notices distributed in the past week.
- The total number of eviction notices on the books.
- The number of scheduled setouts.
- The number of denied tenant applications, which indicates the quality of the leads your management company is supplying you.
- The number of lease renewals.
- The number of people on your waiting list.
You want this final number to be as large as possible. Properties with excellent reputations tend to have long waiting lists. A long waiting list will also give you extra security whenever evictions or move-outs are numerous.
The management group, meanwhile, could include these stats:
- The current occupancy rate percentage.
- The total number of units occupied during the past week.
- The number of move-ins in the last week.
- The projected number of occupied units — including those that are pre-leased — along with a projected occupancy percentage for the end of the month.
- The number of filed evictions.
- The number of skips, people who don’t move in when they told you they would.
- The number of transfers, those who move from one of your units to another.
- The total number of vacant units.
- The number of vacant units that are rent-ready and not rent-ready.
With all of these numbers, look out for trends. If, for instance, the number of evictions or vacant units keeps going up, create an action plan with your property management company to deal with the issue.
Moreover, early on, set expectations for these data points. And share those expectations with your management company so that everyone’s working toward the same goals.
As an asset manager, you’re in charge of investor distributions, paying your investors at the frequency you’ve established. It might be once a month, once a quarter, or once a year.
However often they go out, it helps if your management company sends the distributions. Then you could just oversee the process.
Also, your investors will decide how to receive their payments: by check, direct deposit, or another means. Be sure to check with your management company to see if they can send payments via those methods. If not, you, your investors, and the company can work out an alternative.
Apartment syndication asset managers ensure that all interior renovations, exterior renovations, and building upgrades are completed on schedule and on budget. Once again, your management company will take care of the day-to-day work.
You’ll fund your renovations with your existing capital, or you’ll secure a loan from a bank.
If you have a lender, you’ll communicate with it throughout the renovation. That’s because your lender will likely supply you with payments as you go along rather than handing you a lump sum at the outset. If you didn’t reach certain budgetary and scheduling benchmarks, that lender would likely cease payments.
In all of this, try not to be overly aggressive as far as how many renovations you request or how fast you want them done. Instead, collaborate with your management company to set a rigorous yet realistic schedule, one that doesn’t overtax its resources.
How do you renovate a multifamily complex with residents, though? Well, you might begin with your vacant units. You could then transfer certain tenants to those upgraded vacant units while you renovate their residences. Or you could just raise rents, inducing some people to move out.
Additionally, you might ask people if you could renovate their homes while they’re still living there. In exchange, you might put them up at a hotel or offer them the upgraded unit at no extra cost. You could devise your own creative solutions as well.
In short, by handling these tasks, your management should be more manageable.