Successful apartment management is hard work, but these proven techniques provide a simple road map to improve revenue, cut expenses and maximize property value.
Fast Forward Property Management executives constantly aim to help property owners discover new ways of making their investments more profitable. Over the years, while interacting and working with some amazing people, a wealth of incredible information has been amassed.
Property owners have shared their secrets to success. Following are some of those secrets and strategies for success both in managing property and in life.
One simple credo for successful property owners and managers is that they must not only have winning attitudes but be committed to succeeding. They constantly train to become better at their jobs, seeking methods for increasing their properties’ income and reducing expenses. They willingly ponder new ideas in order to manage their properties more efficiently and profitably.
Those who are set in their ways and who believe that they know all there is to know about property often prove not as effective as those that constantly train and absorb new ideas and techniques to make and save money.
Key ways to stay on top of the trends include attending seminars and reading books and magazine articles that improve business and personal life. Units magazine, for example, regularly offers articles pertaining to running a profitable rental business, such as this article, which will provide proven techniques that help to maximize income.
Increasing Revenue
There are countless opportunities for apartment managers to increase revenue. Additional sources include renting a community’s extra parking spaces or extra storage, a laundry room, renting out a clubhouse, offering advertising space for residents and their businesses in the community newsletter, and providing vending machines for snacks or DVDs and more.
Properties that do not include water, sewer and trash in their rent can advertise lower rental rates and then bill for these services separately. Utility expenses regularly increase, and most residents feel better about a utility increase than they do about an increase in their rent.
Charging the correct rent figure is absolutely crucial. It must be set at the most profitable market value. Prices that are too low produce a lower-than-optimal cash flow. Conversely, if prices are too high, current residents will be driven away and these rates will dissuade prospective residents from signing leases.
Effective ways to ensure that rent is set at the best price include surveying rents listed for comparable communities and units in the same market and touring nearby, comparable properties to see how they compare.
Keep the long-term balance sheet in mind when determining rent. Often, an apartment at top dollar can take two months or more to rent. Had rent been set at a lower price, the vacancy could have been filled sooner and thus made better returns at year-end. In other words, higher rent can be detrimental to long-term earnings.
Be sure to collect rent on time and vigorously pursue rent that has not been paid. Write a late fee into the lease and enforce it when rent is late. Though some might feel inclined to let certain residents off the hook, making special exceptions could be considered discrimination. Further, some people will take advantage of owners when timely rent collection is not enforced.
Human nature is to give top priority to bills that charge late fees, so residents are likely to pay those first. For example, credit card and car payments enforce substantial penalties for late payments. If these bills have enforced deadlines and rent does not, it is very likely that rent will be paid last.
When rent is not received on time, make sure to file a three-day pay-or-quit notice—in other words, a notice that gives the resident three days to pay or be evicted—the next day. An eviction can take months to process, and waiting to file the correct forms delays the procedure. Then, if the resident catches up on payments in the meantime, the legal proceedings can easily be stopped. Please realize that eviction rules vary based on state and local law.
Reducing Expenses
There are many ways to reduce expenses. Whether a community is self-managed or uses a property management company, managers should regularly check the following areas:
Review insurance policies annually. Rates change regularly, and what might be the best deal this year may not be the best value the next. Be aware that the insurance company that is cheapest for one property may be the highest for another. Make sure to know the value of the community so it is not under- or over-insured. Also review liability and workers’ compensation insurance policies regularly.
To ensure the community receives the best rates and service, check insurance companies’ ratings with Standard and Poor’s and with A.M. Best Rating Company. Managers can lower premiums by regularly reviewing and implementing safety standards. By being on top of risk management, managers can reduce property insurance, workers’ compensation and liability insurance premiums.
Reassess property taxes. Property taxes can be reduced through appeals and reassessment. Having the county reassess the property often comes at no charge and ultimately can save hundreds of thousands of dollars over the long term.
Settle disputes before the matter goes to court. Being called to court for evictions and any other lawsuit not only is time-consuming, it can be prohibitively expensive. Additionally, judges tend to favor residents, so spending a great deal of money on legal fees only to lose the case is foolish. It usually is best to settle disputes with clients out of court. Handle matters privately or use a mediation service to reach an agreement that satisfies all parties.
Even paying a resident to move out quickly, despite the fact that they owe rent, can help owners save money in the long-term because the apartment is available sooner for a new resident.
Buy in bulk. Owners of large portfolios can save on construction materials, including paint, carpet, building supplies and appliances, by buying in bulk at wholesale prices. This could cut expenses by nearly half. Many large retail hardware stores have commercial divisions where sales clerks are willing to negotiate—the more purchased, the better the deal. A related option is to combine purchases with other owners or a large property management company.
Hire a maintenance staff. Consider hiring a maintenance staff or a property management company with a maintenance staff. Contractors ultimately cost more because they must cover expenses such as advertising to find clients. It often takes contractors longer to finish projects because they are working on multiple projects simultaneously.
Minimizing Vacancies
Vacancies are the banes of existence for owners and managers. Each amounts to lost income that can never be recovered. Therefore, it is essential that available apartment homes are filled as quickly as possible. These proven rental techniques can help lead to lower vacancy rates.
Maintaining excellent customer service and maintaining the property are of the utmost importance. Never lose a resident because of their dissatisfaction with living in the building or with the treatment they received from staff.
The key to reducing vacancy rates begins from the first phone call and initial meeting with prospective residents. Make sure that staff always answers the phone in a consummately professional manner. It is just as important to be friendly, well-dressed and professional when taking prospective residents on property tours. Mystery shop the property to make sure that staff is behaving correctly.
Among the no-no’s are managers or leasing agents who will unlock a vacant apartment for viewing, but instead of conducting an engaging sales tour highlighting the property’s features, stand outside and smoke a cigarette. A surprising number of building managers act like it is a huge hassle or inconvenience to show a vacant unit. That is no way to entice people to move into the building.
Gone are the days of residents flooding into a property because of an ad that appeared in the newspaper or a “For Rent” sign posted in the front window of a vacant unit. Rental properties must have effective marketing plans to attract residents in today’s competitive market. Online advertising, including a website, has become a must, as are attractive images to accompany these ads.
Strategically placed ads, both online and in local papers, renewed several times a week, will keep people interested and the calls flowing. Effective marketing, in conjunction with charging the correct rate and maintaining the facilities, should help retain residents and ensure a low vacancy rate.
Using Proven Rental Techniques
Finding qualified and reliable residents requires a lot of work and due diligence. Put each applicant through a rigorous background check, including credit history, criminal background and prior eviction judgments. Many online services specialize in these processes.
Verifying bank accounts, previous landlord references, and proof of income will pay off in the long run, increasing the probability that the residents will be responsible and pay their rent on time.
True Peace of Mind
Owners must ensure that all aspects of their operations are fully compliant with federal, state and local laws, including tax laws, fair housing, building codes and legal actions. Legislation and laws pertaining to rental properties change regularly and significantly. It is absolutely crucial that owners are educated about such alterations. Not knowing these laws’ fine points can be costly. Stay educated by reading units and your local apartment association newsletter or magazine and by attending apartment association seminars and trade shows.
Most owners wish they could put their investments on automatic pilot and maintain their cash flow, with no extra work. The longer they remain in the business, the more they realize that successful property management is hard work.
Ryan Schindler is Vice President of Marketing for Fast Forward Property Management, based in Petaluma, Calif. He can be reached at 707/766-8100 or ryan@fastforwardpm.com.