JF1807: How to Asset Manage A Newly Acquired Apartment Syndication Deal Part 7 of 10 | Syndication School with Theo Hicks
Now that we’ve purchased a property and have management in place, it will still be important for you to work with the property manager. Theo will explain seven different ways to attract high quality residents to your properties. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Joe Fairless: There needed to be a resource on apartment syndication that not only talked about each aspect of the syndication process, but how to actually do each of the things, and go into it in detail… And we thought “Hey, why not make it free, too?” That’s why we launched Syndication School.
Theo Hicks will go through a particular aspect of apartment syndication on today’s episode, and get into the details of how to do that particular thing. Enjoy this episode, and for more on apartment syndication and how to do things, go to apartmentsyndication.com, or to learn more about the Apartment Syndication School, go to syndicationschool.com, so you can listen to all the previous episodes.
Theo Hicks: Hi, Best Ever listeners. Welcome back to another episode of the Syndication School series, a free resource focused on the how-to’s of apartment syndication. As always, I am your host, Theo Hicks.
Each week we air two podcast episodes – we also release these as videos on YouTube as well – and these two episodes (every Wednesday and Thursday) are a part of a larger podcast series that’s focused on a specific aspect of the apartment syndication investment strategy.
For all of these series we offer some sort of document, a template, a PowerPoint presentation, an Excel, some sort of resource for you to download for free, that accompanies the series. All of these free documents, as well as the past Syndication School series can be found at SyndicationSchool.com.
Right now we are on series number 20, which is entitled “How to asset-manage a newly-acquired apartment syndication deal.” If you haven’t done so already, I recommend checking out those first 19 series, because everything we’ve talked about so far is leading us up to this point.
Now, this is going to be part seven, so you should also – if you haven’t done so already – listen to parts one through six of this series. As I mentioned, again, this is part seven. As a refresher, in parts one through three we talked about the top ten asset management duties. These are the things that you need to do after you’ve closed on a new deal. Then we started to get into more specifics on those ten duties.
In part four we talked about how to maintain economic occupancy, so we went over 19 different ways that you can market a vacant unit in order to bring in a high-quality resident.
Then in part five and six we moved on to the asset management duty which focuses on how to actually manage your property management company, because for the majority of those ten asset management duties, you as the asset manager are working in tandem with your property management company.
In part five we talked about how to approach actually managing the company that is in charge of your property, and then in part six we talked about “Well, okay, my property management company that I found, for whatever reason, isn’t working out”, and we went over what some of those reasons could be. And if you have determined that you want to part ways with that management company, we discussed how to approach doing that in order to make sure that the transition to the new company is as smooth as possible.
Now, in this episode, part seven, we are going to go into even more detail on how to maintain economic occupancy. In part four we went over 19 different ways that we’ve seen other syndicators do, and what Joe and his company does, but I wanted to go into a little bit more detail on those strategies, just because during that part four I just listed all of them out and was not able to go into more detail and explain specifically what you should do, and then talk about the ones that Joe and his company actually do.
So we’re gonna go over seven different ways to attract high-quality residents. Now, first let me define what a high-quality resident is to you. Someone who is a high-quality resident is a resident that will pay on time; so they obviously are paying, but they are paying on time. They are someone who treats your building as a whole, as well as the specific unit that they live in, as if it were their own home… And they are courteous to the neighbors. So those are the three qualities of someone who is a high-quality resident.
Now, obviously, a low-quality resident would be someone that’s the exact opposite of that – someone who either doesn’t pay their rent at all, or just doesn’t pay it on time; they’re constantly late. They do not treat the unit or the building, community, the amenities at the property as if it were their own home, and they’re not very nice to their neighbors.
Obviously, you wanna have high-quality residents and not low-quality residents, because having high-quality residents will not only make your life easier, but it will make your passive investors more money in the long run… Because sure, you can fill your apartment up with 100% occupancy at all low-quality residents. Let’s say you’re at 75% occupancy when you take over, and you want to quickly get 100%, so you just essentially lease your unit to anyone who walks through the door. And sure, your occupancy rate will increase in the short-term, but there’s also going to be the other negative financial impacts on the property for bringing in these low-quality residents.
One is you’re most likely going to have higher turnover costs due to either more people leaving, either at the end of their lease, or just skipping or leaving in the middle of the night… Or, in addition to that, once they do leave, since they’re not treating the home as if it’s their own, then you’re likely going to have higher costs. Usually, if the turn costs more, it’s going to take longer to do. So that’s not only a financial impact, but also an occupancy impact as well.
Also, you’re likely gonna have more evictions, you’re likely gonna have a higher bad debt, so that’s uncollected moneys, uncollected funds after someone moves out. So if they owe you a bunch of money and move out – that’s gonna be considered bad debt, because you’re most likely not gonna be getting that money back. And then, of course, a higher amount of delinquent rent, which also leads to a higher amount of bad debt.
The whole point of saying all that is you and your property management company are going to want to proactively implement different marketing strategies and policies at your apartment in order to make sure you are attracting these high-quality residents, and that you are filtering out the low-quality residents.
So what are the seven things that Joe does at his property in order to not only make sure that he is maintaining economic occupancy, but to make sure that he is actually attracting high-quality residents. Some of these are going to be repeats of what we discussed in part four; however, we’re going to go into a lot more detail on these in this episode, so let’s jump right in to those seven different ways to attract high-quality residents to your apartment community.
Number one is going to be advertising. Some interesting facts about how people actually find places to live… Online tools, as determined by Zillow’s Consumer Housing Report, online tools were the number one way that renters were searching for their home.
When a group of renters were asked “What were you doing when you were searching for your home?”, 83% (8 out of 10 people) said that they were using online tools like Zillow, Craigslist, things like that, in order to find their actual rental listings. Then a second one was referrals, which was referral from a friend, relative, or neighbor; that was 57%. Obviously, 83% plus 57% isn’t 100%, just because people are using more than one way to search for homes. People aren’t just looking online, or aren’t just looking at referrals.
So since the vast majority of people are searching for their rental homes online, you’re going to want to have a strong online presence for your apartment community. Obviously, this starts by having a website for your company, and a website for each of your individual properties, depending on the size of deals that you’re doing. For Joe, they have their main company website, and then for each individual property they have a website; so Mira Vista Ranch will have its own website, and [unintelligible [00:12:09].29] will have its own website.
We talked about how to create these websites in an earlier Syndication School series about building your brand.
So that’s kind of the foundation… But you also want to have the online presence for actual rental listings. So once you have a for-rent unit, then you’re going to want to make sure you are advertising those online. Obviously, you wanna have people capable of finding units on the property website, and applying for units on the property website, but how do they find the property website? Are there other ways for them to find your units that’s not through the property website? Well, of course there are.
So you wanna make sure that once you have a for-rent unit, you want to list the units on all of the online real estate and apartment listing services. Your most effective ones are Apartments.com, Craigslist, Realtor.com, Trulia and ApartmentFinder.com.
Something else you can also do is market your listings on social media – Facebook, Twitter and Pinterest. This could be something like you’ve got your company website, you’ve got a website for each property, and you also have a Facebook group for each property that you can work on getting all of the current residents to join, to like, have their friends like it, and then any new resident obviously like it as well, and then you can post your rental listings on there, so that people who follow it know that you have a listing available.
You can also do a paid advertisement. You can target someone – your target demographic – on Facebook. So if you’ve got a unit that’s available, you’re targeting a certain age group, that makes a certain amount of money, that lives in a certain area, that maybe has a certain job or interest, and you can actually target those people specifically on Facebook with your ad.
Now, in order to make sure that these online listings are optimized, make sure that it includes a clear and accurate description of the unit and the community; highlight any of the major selling points of the unit and the property, and then make sure you are investing money into taking professional pictures. Don’t have you or your property manager go in there with an iPhone and take pictures… Make sure you’re paying someone – it could be as little as a few hundred dollars, if you find someone who’s majoring in Photography at the local university to come by and take pictures for you, and send you 200 pictures, and you pick the best 5-10 pictures. So that’s number one, internet advertising.
Number two – the second way to attract high-quality residents to your apartment is to hire a locator. A locator is going to be a company, apartment rental agency more specifically, and literally all they do is help implement the best marketing tactics in order to attract people who are looking to rent a unit, and then they will place that person into a unit based on what is ideal for them. For me, if I was moving back to Cincinnati and I wanted to rent a unit, I could find one myself, or I could go to a locator and say “Hey, I’m moving in three months. Here’s what I need. Can you please find me a few units?” Obviously, because of that, locators can be great resources for landlords, or apartment syndicators and asset managers.
In order to find a locator – it’s pretty easy; just like you find anything these days, you just google it. Whatever market you’re in – let’s say you live in Tampa – just google “Tampa apartment locators” or “apartment locators in Tampa”, and then you’ll get your search results. Reach out to a few of them and see if they are a good fit. Determine what types of residents they find, what their average rent they’re looking for is, maybe what the timeline is… Things like that. The kind of questions you’d ask to qualify a potential resident, you’re just asking it through a third-party.
Then you can either offer them compensation, or generally they’re gonna have their own compensation structure. Usually, it’ll be something along the lines of the first month’s rent for a converted lead, or maybe 50% of the first month’s rent. Somewhere between there, for finding you a resident.
Make sure that when you hire – or if you decide to hire – a locator, you want to try to set up either weekly phone calls, or more likely weekly emails, just to provide them updates on the units you have available. Maybe just each week say “Hey, I’ve got this many one-bed/one-bath, 600 sq. ft. units available. I’ve got this many two-bed/one-bath, 800 sq. ft. units available. Here are the rents. Let me know if you have anyone who’s interested.” So just a quick email each week to make sure that they are up to date on your unit availability. That’s number two.
The third thing that you can do in order to attract high-quality residents is to target local employers and businesses. So based on whatever your target renter demographic is, which you should either know from doing your market research, or you can determine that by reviewing the applications of people who have applied to live in the apartment, and determine where they work; or if they’re university students, where do they go to school; where are they spending the majority of their time. Then you can make a list of either specific employers — again, this depends on the market, because if you live in a really large market, then it’ll be specific employers, but if you live in a smaller market, it might just be like a retail center or a mall. Again, depending on where you live, but creating a list of all the places where your residents work or go to school, or are spending most of their time… And then you are going to want to target those with marketing pieces.
Once you’ve got your list – and it can also include things like tax preparation offices, bus stops and train stations. Anywhere there’s a high traffic and people are spending a lot of time, that are your renter demographic, you can print out and drop off fliers; you can drop off business cards, you can drop off price sheets, floor plans, site maps – whatever marketing material you have about your property, at these locations. But of course, make sure you’re asking for permission first. So don’t walk into the front office of a major employer — don’t walk into Facebook and just walk up to the front desk and drop off a bunch of fliers and walk away. Ask them permission first.
Something else you could do, kind of a level above that, is to actually send a small gift basket with – again, depending on the target demographic – gift cards, it could be wine, toolkits, things like that… To your actual current residents who are employed at the businesses on your target list… And you can thank them for living at your property and then ask them to refer people that they work with. So a little more indirect way of getting people from your target business list, or in addition to just going there and dropping off fliers. You can target a specific resident who works at or goes to this location, and then ask them to be your boots on the ground marketing person, in a sense. Don’t say it like that, but that’s what they are going to do, hopefully. That’s number three.
Number four is pretty simple, but also powerful, and that is to have a referral program. Every single person who owns units should have a referral program, because it’s really no effort on your side, besides initially and an ongoing basis communicating the details of the referral program to your residents.
As I mentioned earlier, the number one way that people are finding homes to rent are through the online tools, but number two, half of the people are searching (in a sense) or are finding their rentals through referrals; they’re asking people “Hey, what’s a good place to live?” So of course, you’re gonna want to have a referral program, so you can capture that half or almost 60% of the rental pool.
So create a referral program. Have either a flier that goes out to residents every few months, let all new residents know about the referral program, send them an email about the referral program… I remember one of the apartments I live in, they always had some theme to it. Thanksgiving they would say — I don’t know what they said, but Thanksgiving, or Christmas, Halloween… Each month they had a theme for their referral program. Be creative about it, but essentially what it is is if a resident refers someone who ends up signing a lease, then you will pay them $300. It’s better to actually pay them money, rather than give them a discount on their rent. So rather than say “Hey, if you refer someone and they sign a lease, 30 days after the execution of that lease, your next month’s rent will be $300 off.” Well, they’re just paying less money, whereas if you actually give them money, it’s a better tactic. That’s why you hear all the car commercials say “Buy our car today and you’ll get $1,000 cash back”, rather than saying “Buy our car today and get $1,000 off.”
As I mentioned, in order to advertise this referral program, make sure that you deliver notes to your resident doors, send out emails, and you can also notify anyone who signs a lease, “Hey, by the way, here’s our referral program.” So that’s number four.
Number five is to financially incentivize your leasing staff. If you have an apartment that’s 50-100 plus units, then either you (if you’re managing it yourself, which is probably not the case) or the property manager on-site manager likely has their own leasing staff, or has hired out people who exclusively focus on leasing out your units, and doing leasing-related activities like marketing, going through the paperwork, showing the units etc. So one thing you can do is you can financially incentivize them to actually lease your unit. Obviously, they’re getting paid a salary; maybe they’re not. Maybe their compensation is based off of their conversion rate, or how many people they lease the unit with, but on top of that you can give them a little bit more of a financial incentive. For example, you can offer them a small bonus every time someone moves in. Something like $50. And again, they might already be getting this from your management company, without you having to say it, but…
Something else you can do, too – rather than every time someone moves in, instead you can set a monthly or a quarterly goal of number of move-ins. You wanna see 50 move-ins this month, or 10 move-ins this month. Or we want to increase our occupancy by 5% by the end of the month – whatever that metric is, set a goal, and then if they hit that goal, they get something along the lines of a $100 gift card, or they get $250 bonus cash if they hit that target. Again, this incentivizes them to lease your units at a faster rate.
The last two – number six is going to be online reviews. The online rating of your apartment community will probably be the first thing a prospective resident is going to see during their apartment search. Remember, 87% of people are searching for apartments online. So if they are searching for apartments in Tampa and they see your apartment come up and it’s got a one-star review, they’re probably just gonna look over it and move on to the next apartment. Whereas if they see a five-star review and you’ve got 100 reviews – well, me personally, and I’m pretty sure the majority of people would investigate that property further.
So the more four or five-star reviews you have for your property, the better. Getting organic reviews are obviously amazing. If you’ve got 100 organic reviews, which means you’ve done nothing to directly gather reviews, that’s fantastic. But regardless, you’re gonna want to implement strategies in order to capture these reviews.
Here are two things you can do in order to proactively attempt to directly gather reviews from your residents. Number one is to ask a resident who has recently filed a maintenance request and had that maintenance request fulfilled very fast and adequately – ask them to review about the service they received. Obviously, you’re gonna have to reply to their message quickly and fix the issue quickly in order for them to leave you a good review. You don’t want to not reply for a week and then not fix a problem for a month and then ask them to leave a review, because you’re probably not gonna get a five-star review.
Also, you wanna make sure that it’s a minor maintenance issue. You don’t want them to write a review about the roof collapsing in on them, even if you fixed the roof pretty quickly, because that’s gonna turn some people off if they think “Oh, the roof could collapse on me at any moment.”
And then another strategy is to set up a laptop station in the clubhouse, in a central location, and kind of transitioning now into the last one, which is resident appreciation party – so if you host monthly resident appreciation parties at the clubhouse, or wherever on site, make sure you have a laptop there and direct people to leave reviews. Have the site open, so they can quickly just leave a review on the property on the laptop, before they leave. So those are two ways to directly gather online reviews, and we’ve talked about the reason why you want to do that.
Number seven, as I’ve kind of already mentioned, is to host resident appreciation parties. This not only helps you retain residents who are already there, but it’ll also help you get more residents, because you can either have people — maybe say “Hey, invite one person you think would be interested in living here to this party”, or just in general, someone’s getting more likely to refer the property to someone else if there’s a sense of community. But we’re gonna go into a lot more detail on resident appreciation parties tomorrow, including essentially an exhaustive list of all the different types of resident appreciation parties you can host at your property.
One last note on the strategies before we close out for the show – make sure that you are not waiting until you actually have the property close before making a marketing strategy, before determining what tactics you’re gonna implement in order to attract these high-quality residents. This is something that you want to create before you have the deal close. Once you put a deal under contract – because the marketing plans are gonna vary depending on the deal… But you should have a general idea of what you wanna do before you put a deal under contract; then once the deal is actually under contract, you should have a more specific plan created with your property management company to determine “Okay, once we close, day one, here’s what we’re gonna do so we hit the ground running.”
That concludes this episode. This concludes the detailed explanation of the seven ways to attract high-quality residents to your apartment community. Now, as I mentioned in the beginning of this show, make sure you listen to or watch parts one through six on how to asset-manage a newly-acquired apartment deal. Check out the other 19 series that we’ve recorded so far; check out all of the free documents from those series, and make sure you tune in to the next Syndication School episode where we will go into detail on those resident appreciation parties.
Thank you for listening, have a best ever day, and we will talk to you tomorrow.