The Four Biggest Mistakes Apartment Owners Make
Some apartment owners may think that turning a profit at their community is easy. These owners may believe that as long as they stay on top of work orders, collect the rent and maintain a quiet place to live, the money will come rolling in, right? Well, not quite. Although all of these daily activities are crucial, more is needed to truly compete within the marketplace. There are four common mistakes apartment owners make that can quickly cause them to lose their competitive edge and hurt their returns. We’ll go over each mistake below, and how to make corrections before it’s too late.
1. Not hiring the right people
Most apartment owners claim they have the best people working for them, but what is the best way to recruit, train and retain employees? When should an owner do the hiring and when should they outsource? Hiring a Certified Apartment Manager may be the answer. A Certified Apartment Manager (CAM) is an experienced property manager licensed with the National Apartment Association. As is the case with an experienced Realtor assisting buyers and sellers, these professionals live and breathe property management. They are proficient in understanding a community’s industry essentials, marketing, risk management, legal responsibilities, human resource, resident relations, property maintenance and financial management.
Although other organizations such as the National Multifamily Housing Council and the Institute of Real Estate Management also certify managers, the National Apartment Association zeros in on training managers to specifically run apartment communities. Curious as to how to recruit CAM managers? Hiring websites such as Indeed and ZipRecruiter are excellent platforms for recruiting. These sites allow employers to post qualifying questions that filter through resumes, selectively matching employers with qualified applicants. With this in mind, look for the CAM certification on resumes. Most Certified Apartment Managers will also designate the CAM abbreviation after their name. Another place to look is the local apartment association. In addition to being a great networking and training resource, apartment associations are great resources in identifying certified apartment managers who may be looking for work. Prior to making a new hire offer, owners should check references with the candidate’s last three employers and run both a background check and drug test. How to keep a good manager? Pay them well and keep them engaged. Having an established employee manual in place that outlines boilerplate employment policy, base pay and bonuses, holiday schedules and employee evaluation schedules is a good start.
In general, hiring the right property manager is one of the most important things any owner can do. Once hired, a good property manager will be able to use their experience and judgment to help make important decisions regarding whether to outsource or do the work in-house.
2. Not having a budget
A budget is a fundamental property management document. It’s simply a plan with numbers. If you don’t have a budget, you don’t have a plan. By the same token, a budget acts as the glue that holds a community together. Without it, owners are unable to know how well the community is performing. How can anyone be held accountable without first having a standard to be held accountable to? Budgets provide this standard. They give owners the ability to evaluate how their community is performing for the month and how to better prepare. If you are operating without a budget, chances are you are imprudently spending money without rhyme or reason.
What’s the best way to create a budget? Start by opening an excel document and creating worksheets for each section from your community’s profit-loss statement. Examples of these sections include debt expenses, payroll, utilities, repair & maintenance, marketing & advertising and general & administrative costs. After labeling each worksheet, begin importing the actual costs associated with these sections from the last 12 months. Once all the data is entered, it is time to think critically about how and where to spend money for the next 12 months. This can often be an arduous and frustrating process. Don’t get discouraged. Once you’re somewhat satisfied with the numbers, populate the data into one “master budget” spreadsheet and continue to think critically about where the money is going. It is important to plan the income side this way as well. After all, increasing a property’s income begins with a plan. Smart, experienced operators have their onsite staff create the budget for their community. Not only are the people who work onsite mainly responsible for adhering to your budget, they also best understand the day-to-day costs. When onsite managers create their own budget they are more inclined to take ownership of it and more effectively manage the community.
3. Not using property management software
What property management software do you currently use? Does it generate accurate balance sheets, PL statements, rent rolls or other executive-level reports? Does it include lead tracking, a work order generator, check writing and web portal capabilities? Is it a cloud-based system or do you host your own data?Does your firm use one system or many systems that all perform separate tasks?If you feel confident with your answers to these questions, give yourself a pat on the back because you have tackled one of the biggest barriers apartment owners face when running their communities.
If you feel a little uneasy about your answers to these questions, you’re not alone. According to a 2017 Property Management Software (PMS) Buyer Report, 51% of multifamily buyers use spreadsheets or other manual methods to manage their properties. So, how do you fix this problem without blowing the budget? Research industry-leading companies and keep things simple. Two specific property management software platforms I recommend using are Yardi Genesis2 and Resman. Genesis2 is a more affordable version of Yardi’s premier platform – Voyager. Since it was originally a DOS-based system, Genesis2 can at times load slowly. It does, however, deliver all the must-have capabilities for today’s operators including lead and work order tracking, full AR and AP functionalities, analytical reporting with drill-down capabilities, email and letter templates, renters insurance module, and an online resident web portal. Because of its affordability and simplicity, Genesis2 is ideal for smaller firms that control less than 500 units.
Another popular PMS product is Resman. Resman is a cloud-based (software as a service system, SaaS) system that was originally created by onsite property managers. For this reason, Resman is a surprisingly simple program with a strong accounting framework that is geared towards larger firms with 500 units or more. Because Resman began as a cloud-based system, it possesses newer technology than Genesis2, enabling it to load faster and be more compatible with SMS texting software and smartphones. In short, a property management system is crucial for keeping an apartment community organized. The system is a tool used to assist with running a community. What is keyed into the system is what is reported: garbage in, garbage out.
4. Not effectively using the internet.
The internet has generated boundless gains for many organizations. It has streamlined communication between businesses and customers in a way not imagined 10 years ago. As a result, this technology has greatly impacted the multifamily industry. Cloud-based storage platforms such as Google Drive and Dropbox provide owners with file and document access on their laptop and/or smartphone. These secure outlets prevent owners from falling victim to dangerous ransomware viruses and allow them to operate in a virtually paperless manner. Have you ever heard the saying “a business with no sign is a sign of no business?” In today’s market, not having a website is the equivalent of not having a sign.
Through a community’s website, prospective residents should be able to view and apply for an apartment 24 hours a day, 7 days a week. Costar cites a study done by Apartments.com and Google stating “…72% of Americans turn to the internet first when searching for an apartment.” In addition, a website must be compatible with smartphones because according to Rentping.com, “91% of all apartment residents are likely to use mobile next time they are looking for an apartment.”
Savvy operators who keep their sites up-to-date and smartphone-friendly often show up to work with one or more online applications sitting in their inbox waiting to be processed. That must feel like Christmas morning!
And the process for both landlords and residents only gets easier from there. Through online portals, residents can check their account balance, submit work orders and pay their rent. Some portals even allow owners themselves to log in and review their K1’s and quarterly statements. By receiving payments through a property’s portal, onsite staff at some communities no longer handle money, lowering risks of entry error and theft. But simply having an up-to-date, smartphone-friendly website and resident portal is no longer enough. Thanks to digital marketing outlets such as Google, Facebook, and Yelp, prospects are able to easily locate an apartment community best tailored to fit their needs.
Owners who neglect to utilize these marketing platforms often miss out on vital opportunities to reach their target audience. By the same token, through online reviews, residents are able to rate landlords and give feedback on their performance. In a recent article titled Common Marketing Errors Property Managers Should Avoid, Lisa Calgar sites a Kingsley Associates survey that states, “…90 percent of potential tenants rely on online reviews and ratings when searching for a new home.” If this survey is true, that would mean that firms with poor or no reviews are potentially losing 90 percent of their prospects!
As an illustration, there are very little, if any, guidelines to be followed when posting a review. This means reviewers can be as candid and as harsh as they want. These types of reviews could scare prospective residents away and cause long-term damage to your brand. What can you do to mitigate these issues? Be proactive. Establish and review your website frequently and make sure you are using a template that is smartphone friendly. Ensure that your website is compatible with an online portal where prospective residents can view their account balance, pay their rent and submit work orders. Assign a credible company to consistently monitor your online marketing and reputation management. That way, you know when your property has been mentioned and can continuously promote the property to interested residents. In conclusion, operating an apartment community is not as easy as it looks. It involves experience and dedication. Watch out for these four mistakes. Failing to do so could result in a diminished value.