Aside from buying the deal right, implementing the right property management on the deal is absolutely crucial to the success of the property. Finding creative ways to maximize operational performance, both in driving revenue and controlling expenses is always a challenge, but with proper planning and execution, you can take advantage of trends in property management and stand out from others.
So, here are five key property management trends and considerations to keep an eye out for:
1) Staff Retention Is Hard Whenever there is a good economy, retaining good people always becomes a problem. If you have property management in your deals or manage your own team, retaining your in-house and on-site talent continues to be an operational challenge for many managers and owners.
To hang on to good people, you need to become an expert at old-fashioned relationship building, recognition, and helping them meet their personal career goals. If they are performing and the business is doing well, you can also reward them financially. As long as the employee is an active part of the team and engaged with the business, they will stick around.
2) Everybody is Going Digital Over the past 5 years, there has been a massive wave of people that use mobile phones instead of their PCs to access and consume information from the Internet. Social media has become the predominant application where people are spending their time. The days of posting an ad on Craigslist and getting flooded with emails are over. Today, prospective tenants go to places like Facebook Marketplace, watch a video, and send an instant message in response to a post.
Integrate these technologies with your property management system and you will be able to manage showings more efficiently and accelerate the process of onboarding tenants.
3) Demographics are Changing The United States has more immigrants than any other country in the world. We are built on immigration. In a research report by the Pew Research Center, they estimate that by 2065, Asians will make up some 38% of all immigrants and Hispanics will make up 31%. In many large markets – especially in the sunbelt states – these immigrant populations gravitate toward multifamily rentals. What’s more, the most important marketing source is word-of-mouth through their community.
So, depending on where your properties are, you may need to build a multilingual customer service team to handle the needs of this diverse and growing tenant base.
4) Tenant Amenities are Rightsizing As time passes, people are opting to work from home and employers are looking to use their office space in other ways or just getting smaller spaces altogether. For property managers of some property classes, this means creating workspaces for these tenants that allow for meeting rooms as well as incorporating high-speed internet and offering work areas with printing and copying. The days of amenities such as tennis courts are gone.
If you have areas in your properties that are not much used anymore, consider repurposing those expense dollars for a community garden or building out an outdoor entertainment center.
5) Old Fashioned Customer Service is Still a Must-Have There is no substitute for good customer service. I’m not talking about putting a doorman at your Class C property. Instead, I’m referring to providing the basics for comfortable living; things such as friendly staff, a clean property that tenants can be proud of, responsive maintenance teams, and modern touches like online account handling and payment acceptance.
Anyway, these trends present opportunities for property managers and us as real estate entrepreneurs to up our game and stand out from competitive properties.
Are you seeing any trends I didn’t mention? Please leave them in the comments. We would love to hear from you.
If you learned something from this video, give it a thumbs up and check out our podcast Bulletproof Cashflow in the podcast app you prefer, and subscribe to the new YouTube channel. We are working on getting new content out all the time to help you build your success in the world of multifamily.
Have you felt like you wanted a deal so bad you could taste it? I know the feeling, believe me. I’ve been the real estate business for more than 15 years. It wasn’t until I set my sights for multifamily that now I’m always looking for my next killer deal.
The other day, someone reached out asking me about how I got started. I’ll sum it up in one word: mentors. Your success in the real estate business depends on your knowledge, experience, and your network. When I started out in single family, then transitioned to multifamily, I leaned on mentors to make sure I wasn’t making any big mistakes and show me the way to make the most for myself and my investors.
In real estate, like any other business, you will be entering into the unknown. You will need to leave your comfort zone and face challenges that are new unfamiliar. Mentors will be a huge asset to your success. The great thing is that on the other side of your comfort zone is the future you are seeking.
My mentors have been a big part but my whole business. Even to this day, I lean on in-person and virtual mentors to help me with everything from real estate acquisition to business management. By virtual mentors, I’m talking about masters in the respective field that I follow on YouTube and Facebook as well as books of people no longer around today. There’s no way I could have done this without guidance from others.
When I was getting into multifamily, my mentor said I needed to find a property management company with experience and scale that I can lean on. I listened to him and found a group that is doing a very good job. From there, I continued to build out my team of brokers, inspectors and contractors.
Aside from the steps, here are the six things my mentors taught me:
1. Keep a positive mindset and believe in yourself. Stay away from negative people and surround yourself with can-do, no excuse action-takers. 2. Follow systems that work. Don’t reinvent the wheel. Use proven systems to underwrite and run your properties. 3. Listen carefully to your mentors. Look to people that are 10 years from where you are today and do what they say to do. They are successful for a reason. Follow their advice. 4. Understand that persistence brings success. Absorb materials from only 2 to 3 mentors. Go deep with all their material. Line up your team and build credibility and take that first step. 5. Don’t ever quit. There will be days that things just don’t work out. You must stick with it. If others have built fortunes doing this, you can too.
A mentor will also tell you that can’t do it all by yourself. Investing in real estate needs support from many different professionals. There are property managers, brokers, inspectors, banks, attorneys, investor partners, accountants, and even mentors. I’m sure you heard of that old adage that you are only as good as your weakest link so choose your team carefully and never forget the first thing I told you about negative people.
Getting in multifamily is a business and the dollars you are leveraging is substantial. You want to make sure that your team members have the same ethics, morals, and business philosophy as you do. This is not to say that you will not make mistakes and or changes along the way but when you start out defining the qualities you want in your team, it makes identifying the team members much easier. For example: If your goal is to get to 500 units, you are not going to use a real estate attorney that is just starting in real estate. You want someone who knows the business and has experience to look for pitfalls. Rather, you can ask that attorney if they would like to review the contract after your primary attorney reviewed so they can get the experience.
With that said, once you establish your team, be loyal to them. For example: If you do some networking and someone hands you a property you like that they want to sell. Most people would just work directly with the seller. Let me suggest you call the broker on your team and let them go to work for you. By allowing the broker that closed 10 transactions for you in the past year go to work, they will get you the price and terms they know you are looking for. In addition, you will be the one they call when they find a deal that has to be sold fast. This is something I know from experience. If people know they can rely on you and you watch their back, they will watch yours.
Anyway, I hope that this will help you in getting you started. .
If I provide any value to you, please share. Thanks and I’ll talk to you again soon.
Let’s talk about getting loans for your multifamily deals. Here is a rule of thumb: the easier a it is to get a loan on a deal, the less money you will make. There are many different types of loans. The easiest one to get is a residential loan, which is 1 to 4 units and you must live in one of the units. For this discussion, a house isn’t considered an investment simply because it doesn’t produce cash flow. If we contrast a house, you will have a down payment, pay PMI or private mortgage insurance and an interest rate based on your personal credit score, your debt, employment and other factors. To get that loan, you have to prove that you personally have the cash flow to afford the debt on the house because the bank doesn’t consider it an income producing investment.
The opposite is true on an income producing property, like multifamily. Picking and investing in the right multifamily deal is one of the most important things you’ll do starting out. Structuring the right equity, debt, getting a good rate and cash flow on your deal is incredibly important. In this case, your biggest partner on the deal is the bank because they are usually putting up 60 to 80% of the debt on the deal depending on how you structure it. So, financing is extremely important. You need to know financing and the various ways on how to get the deal done because it costs you money. A difference of a only a quarter of a point in interest on a large deal can mean paying hundreds of thousands of dollars more per year. Many times a bank will offer an interest-only loan at a certain percentage above Treasury rates when financing these types of deals. You’ll need to compare rates to find the best one and length of term for your situation.
Another thing to make sure you line up the equity side, or your down payment. Unlike buying a house, you don’t want to pay the principle down. The objective is all about how much money you can cash flow on a monthly basis. As the land value appreciates and rent increase because you are driving appreciation in the property, you still get cash flow. The cash flow covers the debt payment and gives you passive income. There is no upside in paying more to bring drive the debt side down. With that said, I like to do long amortizations as I want to reduce the monthly payment and maximize cash flow. This will vary on the type of loan and what the bank is willing to do on the property. And if you are working on a larger deal, you should spend more time negotiating rates and terms with the bank.
Here are the 3 things the bank is going to look for when they are considering your multifamily deal:
1. First, they are going to look at your net worth, which includes liquidity and assets. 2. Then, they will look at your credit. They will be looking for lates, bankruptcies and other blemishes. 3. Finally, they will look at your track record and experience in buying and managing real estate.
To get started, you need net worth and liquidity. Whether you have it yourself or you lean on partners that have the liquidity and net worth. This means partnering with experienced syndicators that have done multifamily deals in the past or have a foundation in good sized commercial real estate.
Then, make sure your credit is in good shape. There are many credit repair companies out there that will work to get rid of the tradelines impacting your score. If you know your credit is lacking, I’d suggest you start on that today so you can be ready when you find a deal.
And for your track record, you can lean on your property management company. If you can find a company that manages many units, they have a good reputation and are easy to work with, you will be good.
Anyway, let me know what you think. Do you have any lenders, credit repair or property managers you’d like to recommend in your area? Leave them in the comments.
A common term I hear in real estate is “The bigger the deal, the easier it is.” It wasn’t until I had begun to acquire a large portfolio of single-family homes many years ago that this fully resonated with me. I can tell you from first hand experience the bigger the deal, the easier it is and the more lucrative it is as well.
So here are my 5 Money-Making advantages of Multifamily deals
The first reason is cash flow. Because of scale, cash flow on a multifamily is always because you have more rents coming in. The bigger the deal the less risk you, your lender and your investors have. If you have a single family house and the tenant bounces, you lose 100% of your income. For some properties, this could be your entire profit for the year. If you have a 10 unit and you lose a tenant, you still have 9 rents coming in to pay your expenses, mortgage and your stakeholders.
Secondly, the economies of scale are better. If you have 10 single family houses verses a one 10 multifamily, you have six roofs to repair, six lawns to mow, six tenants spread out through out your city or town and property management is more expensive. In your 10 unit multifamily you have one roof, one lawn and your tenants are centrally located. Economies of scale are in your favor.
Third, because you have larger cash flow, you can afford to hire property management to manage your tenants and keep an eye on your property. You can focus on finding and finance more deals.
Fourth, larger deals yield more cash back at sale. When you go to sell your property, you can typically get more money for them because you control the deal and you can force appreciation by making improvements. Keep in mind the multifamily is a business. You can improve the tenant experience and push up rents because people will want to live and stay in your apartment complex.
And fifth, there are so many ways to save on taxes, that there should be an entire section on this one! Unlike single family, you can do a cost-segregation study on your deal and accelerate depreciation. This means you will have have tax “losses” on paper that offset investment income. You can also do a 1031 Like-Kind Exchange that allows you to move gains from from real estate property to another one all tax free. This is huge for you guys that are building wealth in single family and get hit with taxes once you move that cash out of the deal and into your bank account.
So, here are the five biggest advantages to investing in multifamily, but there there are many more. If you are interested in creating more wealth at a faster rate, adding multifamily deals to your portfolio is the way to do it – either by yourself or partnering up with someone. Let me know what you think. Leave a comment.
I received a message yesterday night after my last video. They person asked what it takes to become a multifamily syndicator.
Here are the five qualities I rely on every day:
1) You Must Be Determined
Like any business, there are days when things don’t go your way. Sometimes, you are disappointed because someone let you down. When things go hard, you go harder. I will work to make things happen. I will reach out to people and travel in person if needed to meet face to face to hash something out. Having that “whatever it takes” attitude is a core principle for me. When you are making the leap either from single family or from zero, you need to be determined to get past all the no’s you will encounter.
As a syndicator, we have processes that take us from start to finish, but there are always challenges and there is no clear map to get to the end sometimes. So clear determination is a must to see your deals and your dreams through.
2) You Must Be Trustworthy Another core principle is that you need to be trustworthy. People need to be able to recognize you are a trustworthy person. If you cannot trust yourself with handling your money, forget about raising money from others. If you are looking for investors to put up thousands of their hard-earned money into your deal but you have a hard time managing your own, you may need to revisit your options.
3) You Must Have a Track Record
When I say track record, it doesn’t need to be in real estate syndication, but it does help. For some of you, it could be that you have experience doing fix-n-flips or wholesaling and you consistently earned profits from money borrowed from lenders and investors.
For others, you may have a proven track record in the corporate world. I started out in single family more than 15 years ago but also built a career as a Chief Information Officer in the financial services industry. I can point to my operational and budget management experience.
If you are just getting out of college with no experience in the real estate world it will be tough to start out on your own. However, you can partner up with others that are in the syndication game either in cash or sweat equity.
Ultimately, investors need comfort that their money and the asset itself are in good hands. You need to demonstrate you have the business acumen to execute on the plan you outlined.
4) You Must Know Your Numbers Knowing how to analyze and put a deal together is crucial. You don’t need to have 15 years of experience analyzing deals. Rather, you can partner with someone who has the knowledge and experience. Regardless, you need to have an understanding of how the numbers work, know how to read a given market, and know the verbiage used by brokers, lenders and sellers. You don’t want the lender asking you if you would like to do an “IO Loan” and you have no idea what they are talking about.
5) You Must Appreciate Your Team Many great leaders talk about gratitude and with a good reason. When you are positive and appreciate the work that your partners, property managers and vendors are doing for you – and you tell them – it will make all the difference in the world. People like to know that you recognize their efforts. And when you do recognize, they will work that much harder for you. It will help you make each day a positive experience and help you on your path towards everyday greatness.
Tell me what you think. What qualities have made you successful? Leave a comment and let me know.