We recently were offered an opportunity to lease-up and manage an apartment complex that is in the works. It is an old warehouse that is being converted to 70+ units. We have been tasked with trying to get the units occupied while construction is underway, our target is 80% occupancy (or better)before construction is complete. I'm hoping members with experience on larger projects such as this can offer insight, specifically regarding the leasing component while construction is in progress. I am hoping to hear about best practices, challenges, tenant incentives offerings, as well as common deal components between the owners and the management company. Any advice you may have is welcome and appreciated. I'll bullet out some of the details below, but if additional information is needed, please let me know. Thanks in advance to this awesome community!
- Little background, we currently manage just under 700 units in our area. The majority are 1-4 units, but we do have a couple 10-20 unit buildings. One of our current investors is branching out in to this and wants us to assist.
- Construction to begin by the end of the year, completion targeted in June, but won't be holding our breath- We're anticipating a solid 6 months of time to getting the building occupied
- Total of 5 floors, construction will begin on the top level and should provide examples of finished units hopefully by the end of first quarter 2019. We won't be able to show prospective tenants the units however, but this should allow for marketing at that point.
- Intending to lease a trailer to remain onsite, with unit renderings, sample materials, etc. and of course people can sign up there. Trying to determine how much time we have our agents actually on location for this, or if it is even worth it, all comments welcome
- Virtual 360 tours of units so interested parties can view online and of course links to sign up
- We will be managing the building going forward, so have discussed "leasing" bonuses up front while reducing our standard management charge for the first few years (thought is it will be challenging 'pre-leasing' the units, but maintenance should be mild since it will be new construction)... Any thoughts/concerns/recommendations on this?
- Any experience by anyone trying to fill units still under construction? Is it way more difficult than we are thinking? Is 80% occupancy achievable or is it much more difficult to fill unfinished units than we are expecting? Anything I haven't even considered?
I don't want to turn this in to a huge first post so I will leave it at that for now, but anyone willing to share your expertise, I am happy to provide additional details if needed. Again thanks in advance for anyone willing to share and discuss!
I don't do property management but have seen larger projects leased up 300 to 400 units. The buildings are built in phases and can take up to 3 years or longer to complete. It can be like building houses in a subdivision. The warehouse they must have gotten with the land for dirt cheap because 70 units is generally non-profitable to build unless you can command really high rents. Construction and labor materials are way up so most projects do not pencil unless in the hundreds of units and up.
I do have one client building about 80 units in Utah but will command very high rents per door with snow and skiing close by. You need to look at absorption levels in the area for rental multifamily units with similar amenities that will be offered and finishes. Also check building and construction permits with city or county to see what competition is coming online.
Will they have an elevator in this place or just stairs? If it is stairs the demographic base renting to tenants can be more limited. Different units can go for different rent levels not only because of bath and bedrooms but also if in unit laundry, views from balcony,etc.
Their timeline to build seems a little optimistic. Weather patterns can halt construction schedules and push things out much longer than expected. Velocity of lease up depends on demand for the area and that pricing rent level expected per door.
Thanks @Joel Owens and @Matt Clark for the responses, much appreciated. You gave a lot of good insight to consider which I will be sure to share with my team, as well as the owners. We are still in the beginning stages and working on the proper way to structure our portion of the deal with the owners, which will compensate us for our services, as well as identify any unknown costs or issues we may have not considered, so this feedback is truly helpful. We have a good relationship with this investor and would like to make this new endeavor good for everyone involved .... a proper 'win-win' as they say.
I think the intention is to get tenants signed up, but not to officially move in until construction is totally complete. I will need to confirm this, but can foresee it being another challenge to getting the place occupied. The building is in a good location, densely populated, that has been going through a lot of 'revitalizing'. They are expanding the local high school which is just down the street, so we're hoping the already high demand for living continues to increase.
The building will have a mix of 1-3 BR units, two elevators, a nice entrance lobby/common are on the ground level, laundry in each of the units, with some higher end lofts on the top floor. Again, this is all still subject to change, but is our current understanding of the expectations. While we will handle basic maintenance requests and hire out larger jobs for our current properties under management, we are not affiliated with any aspect of the construction. Our job is filling the units and then maintaining them once construction is complete.
Thanks again for the comments and anyone else please keep them coming.
Any tips on how to entice potential tenants? 'Reserve your unit now and receive' 10% discount for the first year... first month free, etc.
Good marketing tips, strategies that have worked well, or haven't worked well... Thanks BP!