Multifamily Asset Management is the rarely talked about, but vitally important, required aspect of multifamily investing success. It is key to realizing the profits investors expect.
Vinney Chopra shares some of the critical steps successful operators take to make their multifamily investment operate to achieve peak performance and maximum returns for their investors.
Multifamily Asset Management is not property management. Asset managers manage and work with property managers. The asset manager is hired by and reports directly to the syndication principal / sponsor. They are not responsible for interacting with investors.
or Originally, Vinney sub contracted out the property management. After some dissatisfaction, Vinney’s company, Moneil took the management in house.
Asset managers engage weekly with property management to keep them focused on the immediate operational task at hand. Additionally, they make certain progress is being made towards the end goal. These calls can occur in person, but more often is done through phone or video calls.
Each weekly call will address specific key performance indicators including:
The property management team consists of the following members:
The number one responsibility of the Community Managers team is leasing units and rent collection. This is achieved through regular communication with the residents so that they understand residents intention regarding the renewal of their rental agreement.
Marketing available units using all of the social media websites that target people looking for apartments in your neighborhood. There are several tricks management must be savy to in order to keep your property as a top offering. When these are employed, your property is featured more prominently and you receive multiple inquiries from prospective residents.
Additionally, the management team must deliver the service from their customers, the residents. This means promptly attending to the service requests, and following up with the residents to gauge their satisfaction.
Paying attention the physical appearance of the grounds goes a long way to communicating pride in the property. Management must walk the property daily and recognize and correct any problems or potential problems as soon as possible.
This level of care can provide referrals from your happy residents to their family and friends who can become future happy residents. Only when you are in tune with your residents can you achieve expected rental retentions.
Management must constantly evaluate their staff and answer the question, “Do we have the right people in place and the needed equipment to complete the job?”
When your team acquires or is working to sell your property, your management team is critical to the transition.
Prior to acquiring a property, It is important to establish accounts with all utilities and vendors to make certain all of the services continue and there is no interruption in service.
When you are ready to sell, your property management team must make certain your rents hold steady. Any dip in occupancy can create problems with valuations and the sale. Your property management will be the face for your property and company when dealing with open houses, and property tours for commercial real estate brokers and investors.
When Asset Management and Property Management work together, they can create an inviting community for both current and future residents. Here are some of the physical property traits Vinney has employed that work.
Each week I ask my guest what is the Biggest Risk they see that real estate investors face.
BIGGEST RISK: Declining Occupancy. If occupancy goes down just a few percent, it can really hurt your
How to manage the risk?: Do not hesitate to act. Provide incentive to property management to keep the property occupied at and above 95%. For instance, the office is closed on Saturdays as long as the occupancy is above 95%.
BONUS RISK: Delinquencies; Why is the rent not being paid on time.
How to manage the risk? Pay attention to the rent as a percentage of income. If the residents do not make enough income, they cannot easily pay the rent.
EXTRA Bonus Risk: Walkways must be free from trip hazards.
How to manage the risk?:
Bring in someone from the outside to inspect the condition of your property. When you are looking at your property day in and out, you can lose sight of certain conditions that need to be addressed to avoid any needless injury, claim or lawsuit.
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Text: LEARN to 474747
The lessons learned while growing from 2 to 2400 Multifamily Units are many.
Growing up, Ivan Barratt saw his father collect rent checks from renters and recognized that getting paid from renters was a great way to get paid.
After college, Ivan started his career in real estate working for an Indianapolis area developer. While working for this developer, he learned all facets of real estate development, and made a lot of money. His real estate fortunes seemed certain.
When the 2008 crash happened, everything stopped. With the path to easy riches closed, Ivan had to find another way to create his real estate fortune.
When the dust settled, Ivan found himself several hundred thousands dollars in debt. Instead of taking the easy way out, filing bankruptcy and walking away from his pile of debt, he committed to repay all his debt.
To survive the crash, Ivan and his family had to make some sacrifices. Without the big paycheck, they had to reduce their living expenses. They turned their luxury condo into a rental and moved into one of their rentals.
Real Estate sales had provided him a tremendous paycheck, but it could be feast or famine. Recognizing he needed some predictable, recurring income, Ivan got out of development and started a property management firm in a spare bedroom.
Lesson: Live within your means.
Property management gave him the chance to create recurring income, which was great. At the time, there were lots of owners who could not sell their homes and became reluctant landlords. They needed property management.
In addition to creating recurring income, he recognized that property management gave him contact with owners who wanted out. These relations with frustrated owners gave Ivan first dibs on investments, sales and purchase opportunities. This additional income provided him the funds needed to pay off his debts which allowed him to keep his credit and reputation in tact. Ivan credits much of his success to his decision to pay off his debts. Making good on his debts kept him in good graces with the local power brokers. Because he made good, these contacts rewarded him with opportunities he would have missed had he elected to not pay back the money.
Lesson: Make good on your commitments.
Where do you start on your journey to 2400 units? You start with the first unit. The crash of 2008 was a humbling experience for Ivan and thousands of other investors. Once he came to terms with his predicament, he realized if he was ever going to accomplish his goal of thousands of units, he had to get the first unit.
Lesson: The next deal is the most important deal.
Ivan credits his father’s interest in motivational books and tapes for helping him with the needed mindset to stay positive. Some that stuck with him; “The journey to 10,000 units starts with the first deal.” “Focus on what has to be done today.” “Do what others won’t today so you can do what others can’t tomorrow.”
Today, his company, Barratt Asset Management, BAM, manages over $300 million assets under management of which $210 Million are owned through Syndication. BAM is a vertically integrated company, providing property management, and syndication of multifamily properties.
The challenge of managing people and working to keep them motivated is a task much more difficult than doing a real estate deal. Allowing the little mistakes to happen and your support staff to learn and grow from their mistakes takes a lot for an owner who is used to doing everything them self. However, it is absolutely necessary if you want to grow.
Lesson: Mistakes will happen and are necessary for learning. Allow for mistakes.
By delegating and trusting others, Ivan is able to focus his visionary talents. He is able to work on the business, and practice what he is truly gifted at, attracting capital and investors.
In order to become a big company, you have to first see yourself as a big business that is currently small. This mental shift is key. You have to create a vision of where you want to go and communicate this to others, employees, investors, clients, etc. Without a vision, you will stay small and own a job at your small company.
Each week I ask my guest what is the Biggest Risk they see that real estate investors face.
BIGGEST RISK: Debt Maturity Risk - If capital markets dry up and you cannot get financing.
How to manage the risk?: Long term financing w/ fixed interest rates - HUD market rate loan with an interest rate lock for 35 years. HUD provides financing up to 85% to cost including: acquisition, renovation, reserves, all in.
For more go to:
www.barrattassetmanagement.com/
Ph: (317)762-2625
Technology is disrupting Multifamily Property Management, and the results are impressive.
Neal Bawa, founder of Grocapitus Investments and Multifamily U is a technologist by education, who came to real estate investing out of necessity. It was when his boss elected to purchase a building rather than continue to pay rent, that Neal was forced to learn on the fly how to make the new property ready before their lease expired and penalties ensued.
Like most of us, the lessons learned under pressure are permanent. Having caught the bug for real estate, Neal first invested in single family homes, but soon realized the challenge to scale. Then he found and invested in thirteen syndications as a passive investor. However, he was not getting the returns he expected.
Realizing there was a vacancy problem that was preventing him and his fellow investors from receiving distributions, he asked the syndicator if he could market for prospective residents. Soon, he developed a system that was generating qualified prospects to managers who were able to fill the vacancies. When the property filled up, investors started receiving distributions. The increased NOI drover the value up, and again made investors very happy.
When the asset managers asked Neal what he wanted in return, he asked for permission to participate in their weekly asset management calls. They told him the calls were boring, full of acronyms, and he would not like them. But he did.
Over the course of 200 such calls, he got a front row seat to the inner workings of multifamily operations on a day to day basis. He realized that each person in the operation had a particular expertise, but no one person, knew all the pieces. Except for him, the note taking technologist. Neal realized he had learned something that not everyone else knew.
To make certain he did not forget these newly learned lessons, he started a wildly successful Meetup group in San Francisco where he shared everything he learned about multifamily investing. Soon the members became motivated, and wanted to invest with Neal. He had the knowledge and the support to become a multifamily syndication sponsor.
In the 200 weekly operations meetings, Neal recognized some limitations in the existing property management system for filling vacant units. As a technologist, he identified the choke points where it was time for technology to disrupt the status quo.
Neal developed a technology hardware and software system with virtual assistants that attract, screen, schedule, and remind prospective tenants of their scheduled tour for his properties. For 2018, his system attracted 30,000 qualified resident prospects for properties he owns. This flood of qualified prospects accounted for 64% of all leases signed. Now, property managers are able to focus on showing units, signing leases and do more operational tasks without the distraction of marketing for empty units.
Now that the units are full, Neal realized a second opportunity to leverage his technology and disrupt the income stream to add more value to the property. There were missed sales opportunities for add ons like carports, washers & dryers, etc. Neal observed that property management income was a percentage of all rents collected. While they were focused on a big number like the apartment rent, they did not get motivated about a little number that would pay them an additional $1.20 commission for leasing a carport for $40 per month.
For Neal and his fellow investors this lack of focus was keeping them from realizing a significant long term value. The $40 per month carport rent was $480 per year in income. That same $40 per month translates, at a 6 cap rate, to an additional $7,680 in property value per carport! If you have 100 carports, that’s as much as $768,000!
So, how do you get someone to focus on something they don’t value? You don’t. Instead, Neal again leveraged his technology and created a follow up task for his virtual assistants. Now, the virtual assistants contact the new residents to make the additional sales. And his property managers take care of what they do, lease, collect rent and turn units.
Since these beginnings, Neal started Multifamily U and Grocapitus Investments which are education and multifamily syndication investment platforms. Today, he syndicates multifamily properties all over the US and continues to apply the lessons he learned, and the technology to make his properties more profitable.
Each week I ask my guest what is the Biggest Risk they see that real estate investors face.
BIGGEST RISK: Opportunity Zones. When millions of dollars are pumped into distressed areas with no fundamentals for growth, why will these areas become successful?
How to manage the risk?: Don’t invest as a Class C area with no growth potential solely as a strategy to avoid paying capital gains taxes. Be wary of investing in an opportunity zone if you do not understand the fundamentals in the area.
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Financial Freedom is the end goal for every working American. Some day, you hope to have enough to feel secure that you can live comfortably without the stress or worries or need to continue to work.
Dr Ross Stryker realized that working as an orthodontist until he died was not the path to financial freedom. The decision to go to a financial freedom seminar about real estate, changed his outlook forever.
The American worker has been indoctrinated to regularly invest in the stock market for retirement. Buy dollar cost averaging, starting aggressive, and as you reach the age of concern, dial back the risk to some municipal bonds that pay 3 to 4 percent. Then when you retire, withdraw up to 4% and live happily ever after.
If you study this model closely, you will come to the conclusion that this will not allow you to continue to live the lifestyle you are accustomed. You need to consider an Alternative Investment, maybe cash flowing real estate.
Passive income is the goal. In real estate, the opportunities for passive income are numerous. You can buy single family turn key properties, invest in note funds, etc working with people dialed into the market providing returns well above 3-4%. This is a good option for someone looking for more control.
However, Ross recognized the challenge of scale that exist when investing in single family properties. He liked real estate, but really wanted to be able to scale. Something he could share with others.
After sifting through multiple real estate asset classes, multifamily mobile home, retail and assisted living, he landed on self storage.
While Self Storage is a want instead of a need. He recognized a positive characteristic about Self Storage: Americans love our stuff. In good times, we buy stuff. In bad times, we don’t want to get rid of our stuff. As long as we have more stuff, the demand for self storage will remain strong.
Dialed into the asset class, he had to determine where to invest. Looking for opportunities, his team identified that coastal and large metro areas were heavily saturated with existing self storage. The underserved opportunity exist in the midwest secondary, tertiary and rural markets.
There are multiple ways to get into self storage. You can buy an existing property, build new, or convert an existing vacant property.
Limited supply is another benefit. Self storage has been identified by many cities as unwanted. They have passed building ordinances, rules and zoning laws, etc to make developing any additional self storage difficult for any future potential competitors.
For passive investors, the obvious choice is to utilize third party management property management. There are multiple name brand professional operators that have all the expected marketing and infrastructure to attract and manage clients and send owners the check.
BIGGEST RISK: Each week I ask my guest what is the Biggest Risk they see that real estate investors face.
BIGGEST RISK: Going it alone
How to manage the risk: Get involved in a group of like minded investors and or mentor group.
BONUS RISK; Don’t go to big too fast.
How to manage the risk: Start with something small that is manageable.
For more go to: https://www.smartassetopportunities.com/