How does a smaller apartment complex compete with the large ones?

Question

Hello BPers!

I was looking at a small apartment complex of 10 units and started researching the area around the complex.  Turns out that there are larger complexes in the area that have amenities such as gyms and pools.  Rent would need to be around the same on the smaller complex’s units as they are on the larger one to turn a decent profit.  Is this even worth pursuing or will I just be stuck with 10 units that I can’t rent due to lack of amenities?  Are there other things that the little guys can do to compete?  How do you all do it?

Corby Goade · Answer

That is a good question- thanks for asking. In my experience, those larger complexes are managed by corporate property management, very cold and impersonal, inflexible and often inattentive. I've had many great tenants who were willing to give up some of those amenities in order to have a property manager who answers the phone when they call and takes care of problems in a reasonable amount of time, communicating progress along the way.

Account Closed · Answer

The apartment complex where I live is large and managed by a corporate landlord.  The office and maintenance staff are on site during business hours (not sure about after hours, although there is a system for handling maintenance emergencies).  The place also has a gym and pool, which I don't use, but pay for anyway through my rent.

I like the fact my maintenance requests and other issues are handled professionally when I submit them.  It took me a few tries in the beginning to figure out how the system worked, but I feel OK with it now that I'm familiar with it.  Other apartment complexes in the area are smaller and might not have an on-site staff, but make the news when maintenance issues such as roof and water leaks go unaddressed for a long time (some of the unresponsiveness is due to these properties going through a bankruptcy).

I prefer not to have to pay for amenities I don't use, but if the higher rent gets me professional on-site management, I'll pay the higher rent.

When I rented apartments in the 1970s in Los Angeles, the buildings were in the 50-100 unit range.  There was a property manager living on site who dealt with everything (showing units to prospective tenants and dealing with maintenance issues).  Their office unit was part of their compensation package and they had to be there during business hours, but were free to go out after hours.  Since these buildings were owned by a large landlord company in the area, many of the maintenance issues were handled by the apartment manager knowing which contractor to call (the company had a list of approved contractors and the managers had a budget they had to follow).

Gage Rowden · Answer

That is a interesting question. It depends on what you prefer. Most likely with 10 units it wouldn't make sense to have a PM on site and you would need to do the work yourself. Some people like that and some don't.

However, some people like the larger deals due to economies of scale. It makes sense to have a PM here because after all expenses including PM fee you still have enough left over cash flow to have financial freedom.

Now if you know how to manage a apartment and can get units leased and can deal with renters you might of come across a great deal.

Marcus Auerbach · Answer

Excellent question! There might be some down-sides to the larger complex, maybe good idea to go mystery shopping at talk to a few people. Some people like small better.

We have a ton of brand new 5 star buildings come on line these days, rents are very high, but I would be worried to compete against them with something that was built a long time ago to much lower standards..

How does a smaller apartment complex compete with the large ones?

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