Asset Management Questions for Experienced Apartment Investors
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
Hello everyone,
I am trying to compile a list of the best asset management practices from active apartment investors. If you have experience with asset management and multifamily properties, could you please provide an answer to a one, a few, or all of the following questions?
Thanks!
Hi Theo! I have a couple of rental properties and my regular FT job is in commercial real estate asset management (big properties). I would suggest creating your own basic custom spreadsheet that gets updated and sent to you monthly by your PM (unless they already have their own and you like it). I would want the following:
-A detailed income statement that compares monthly and YTD line items and shows $ and % variance. I would ask the PM to provide notes on any variances past a threshold that is meaningful to you. Sometimes it may be a simple timing variance (landscaper billed at the end of the month so your budgeted $50 for September vs. $0 actual will even out with $100 in October for ex.) vs. something you may care more about.
-A letter or summary at the front that breaks out any operational issues (evictions, maintenance issues, late rent, etc.) which I would expect to be called/emailed about in real time prior to the report. The reporting should not replace regular communication.
-A rent roll showing unit, tenant, commencement/expiration dates, rental rate
-A leasing update, assuming you have vacant units or upcoming vacancies to see metrics on # of tours, feedback, where they are in the process.
-A summary/tracking sheet of any budgeted capital expenditures
Hi Theo! I have a couple of rental properties and my regular FT job is in commercial real estate asset management (big properties). I would suggest creating your own basic custom spreadsheet that gets updated and sent to you monthly by your PM (unless they already have their own and you like it). I would want the following:
-A detailed income statement that compares monthly and YTD line items and shows $ and % variance. I would ask the PM to provide notes on any variances past a threshold that is meaningful to you. Sometimes it may be a simple timing variance (landscaper billed at the end of the month so your budgeted $50 for September vs. $0 actual will even out with $100 in October for ex.) vs. something you may care more about.
-A letter or summary at the front that breaks out any operational issues (evictions, maintenance issues, late rent, etc.) which I would expect to be called/emailed about in real time prior to the report. The reporting should not replace regular communication.
-A rent roll showing unit, tenant, commencement/expiration dates, rental rate
-A leasing update, assuming you have vacant units or upcoming vacancies to see metrics on # of tours, feedback, where they are in the process.
-A summary/tracking sheet of any budgeted capital expenditures
Thanks @Lizzie Carver
Any thoughts?
Thanks for calling out!
1) In terms of the call with the property management, my recommendation is to have a weekly check up call. Prior to the call have the reports send out to you - this can be achieved via virtually any property management software these days by selecting an existing report or creating a custom one and setting up a frequency of the report being sent to your email.
The reports should include rent rolls, income statement, balance sheet, general ledger, accounts receivable (rents received and/or pre-paid), as well as monthly bank statements reconciled against your property management account.
2) As for which ones are the most critical ones, it depends when you have purchased the property and where you're at from a re-positioning stand point and how many units (percentage-wise have been turned around). It's very critical to stay on top of things, especially at the beginning of the process. After the re-positioning is completed and you have majority of the units turned around with new leases/tenants in place, you can potentially reduce the frequency of calls with your property management, and stay on top of things through the reports and calls on as needed basis. However it takes a while to get to this point.
Some of the key metrics in genera: tenants' turnover rate, occupancy, average days to lease, property management fees, revenue growth. Keep in mind the list is not all inclusive.
3) see #1 for the report types I expect.
4) As mentioned above, the applications of today are pretty well established (for instance, QB or Appfolio) to handle the standard and custom reports as well as the frequency its generated and distributed.
5) Look at a property management company as your partner. Are they someone you want to work with for a very long time? Does their track record speak for itself? What are tenants saying about them? How professional do they act when a new potential tenant reaches out. (You can play a role of one and see if they act up the par to your expectations). Are there overall policies align with your policies for your other properties. Are they willing to change things if needed? Do the employees of a property management company enjoy working there? Are you offering any incentives to them for doing a great job? Their overall business acumen. Are they engaged on social media.
As an asset manager, you have to always look ahead, evaluate your current market, your property current standing, is your income growing, are you adding additional streams of income, is your expense staying steady/decreasing, are the tenants happy with the property management (always check the social media), is property management taking good care of tenants, are they having any community events. The list can go on, but I'd need several pages to cover everything.
@Theo Hicks great response by @Alina Trigub above. She's right you could go on for several pages, perhaps even a book, so I'll try not to do that...
Nowadays I own the management company and I have a CEO in charge of it so our process is a bit different than groups that use third party management. But, I used to use third parties and still have two left on third party so I can opine as to both methods.
1. We talk nearly every day because as a vertically-integrated organization our acquisitions and operations divisions are a cohesive team, sharing information on markets, assets, performance, etc because this information is not only valuable in measuring performance on the portfolio but on forecasting the viability of potential acquisition targets. With our third-party assets we have a conference call with the regional and the on-site general manager on a weekly basis for each property. Discussions center around issues at the property, leasing, collections, occupancy, marketing, capital improvements and general discussion of just about anything.
2. The only metric important to me is our income relative to the projections that we presented to our investors when they made their investment. That is how our investors grade us and thus this is how we grade our property-level teams. Every line item is part of that discussion as we track every detail of forecasted versus actual performance for each income and expense account. We then place focus on the accounts that are out of line with projections. For some properties it might be vacancy loss. Others might be bad debt loss. While others might be payroll expense. Whatever it is, when these are out of whack we discuss strategy on how to bring them back in line. Certainly all of the items on your list and Alina's list are part of the discussion because income or expenses being out of whack originate from things like occupancy, turnover, traffic, evictions, leasing ratios, etc.
3. On a weekly basis I want to see a boxscore, occupancy, occupancy forecast, delinquency report, leasing reports, accounts payable and cash on hand. On a monthly basis, all of the above plus income statement, deposits, budget variance, general ledger, balance sheet, trial balance, rent roll, expiration reports, maintenance reports and probably a dozen more that just don't come to mind as I type.
4. Some are emailed, others I get automatically through Realpage Business Intelligence which is a module of our property management and accounting system. The good part of vertical integration is we have enterprise-grade software and data with dashboards and graphs and all the bells and whistles to see problem areas at-a-glance at any time, in real time.
5. Watch it like a hawk. Most people posting on BP about syndications and multifamily investing focus 95% of their discussion on how to find a deal, how to raise capital, and whether they need an LLC. There's very little discussion about asset management. But the thing is, finding a deal, forming the entities and raising the money take weeks to months. Managing the asset takes years to decades and your ability to build scale depends on your ability to execute. Screw it up and you have a short career. But so much of it is dependent on your property-level staff and your management company--so you have to watch it like your career depends on it--because it does!
Thanks for calling out!
1) In terms of the call with the property management, my recommendation is to have a weekly check up call. Prior to the call have the reports send out to you - this can be achieved via virtually any property management software these days by selecting an existing report or creating a custom one and setting up a frequency of the report being sent to your email.
The reports should include rent rolls, income statement, balance sheet, general ledger, accounts receivable (rents received and/or pre-paid), as well as monthly bank statements reconciled against your property management account.
2) As for which ones are the most critical ones, it depends when you have purchased the property and where you're at from a re-positioning stand point and how many units (percentage-wise have been turned around). It's very critical to stay on top of things, especially at the beginning of the process. After the re-positioning is completed and you have majority of the units turned around with new leases/tenants in place, you can potentially reduce the frequency of calls with your property management, and stay on top of things through the reports and calls on as needed basis. However it takes a while to get to this point.
Some of the key metrics in genera: tenants' turnover rate, occupancy, average days to lease, property management fees, revenue growth. Keep in mind the list is not all inclusive.
3) see #1 for the report types I expect.
4) As mentioned above, the applications of today are pretty well established (for instance, QB or Appfolio) to handle the standard and custom reports as well as the frequency its generated and distributed.
5) Look at a property management company as your partner. Are they someone you want to work with for a very long time? Does their track record speak for itself? What are tenants saying about them? How professional do they act when a new potential tenant reaches out. (You can play a role of one and see if they act up the par to your expectations). Are there overall policies align with your policies for your other properties. Are they willing to change things if needed? Do the employees of a property management company enjoy working there? Are you offering any incentives to them for doing a great job? Their overall business acumen. Are they engaged on social media.
As an asset manager, you have to always look ahead, evaluate your current market, your property current standing, is your income growing, are you adding additional streams of income, is your expense staying steady/decreasing, are the tenants happy with the property management (always check the social media), is property management taking good care of tenants, are they having any community events. The list can go on, but I'd need several pages to cover everything.
@Alex Franks thank you! Good to "see" you here on BP!
We do a weekly phone call that is scheduled and often times talk/email several times during the week as well. During the call we go over maintenance issues, our capital improvement plan, new vacancies and leasing activity. We also talk about issues that are happening and what we can do to better the property for our residents.
As far as metrics, I have access into their software, so I can see real time data as it is entered. e go through some of that data on the call.
I invest out of state, so I do have a few people that drive by the properties. I am going to get someone to mount a GoPro on their vehicle and drive the property for me once a month as well. I haven't implemented that yet, but Kevin Bupp said he does that for his properties.
@Todd Dexheimer @Alina Trigub @Brian Burke Thank you! Great advice as always. We're lucky to have you here on BP!
Wow, I'm glad I clicked "follow" on this thread ;)
I will take you up on and bring Jon along with me.
Sounds like a plan.
I will take you up on and bring Jon along with me.