Multifamily Owners Celebrate, Managers Never Stop Striving to Improve Operations
Submitted by J. Debes
REIS released its pre-analysis of Q2 results today. Highlights were:
-National vacancy rate declined 20 basis points to 4.7%, the lowest in a decade, occupancy improved in 66 out of 82 primary markets
-Effective rents increased 1.3% during the quarter, their fastest pace since Q3 2007, surpassing previous peaks in many markets as landlords continue to eliminate concessions
-Rent growth expected to continue as vacancies tighten
Some would say it’s a golden era for the apartment industry. With such strong fundamentals, operators must resist the temptation to engage cruise control. This business requires constant vigilance because it is a business comprised solely of details – hundreds of details. If neglected, little details slip through the cracks, slowly piling up until they become a ticking time-bomb. When the next down-cycle hits, that bomb detonates leaving a crater of distressed properties.
Successful managers never stop striving to improve operations. At THE CABOT GROUP, we constantly fine-tune operations in the pursuit of greater net operating incomes. Never lose sight of the fundamentals, or the four P’s:
Price – We examine subject properties units – size/finishes/features compare those to competitors in the market. Are they priced appropriately?
Product – We examine the physical plant – are there deferred maintenance items or capital improvements that would improve curb appeal? Most prospects formulate an opinion of a property within the first 30 seconds of a visit based on curb appeal. It is crucial that the prospect formulate a positive response from the curb of the property to the door of the apartment.
Personnel – Competent site staff is crucial to a property’s success. Staff personally interacts with the customers and make all the many small decisions each day that have the greatest impact on a property’s performance. We like to “mystery shop” our staff to evaluate how well they navigate the leasing process. We also like to ascertain whether they have a true understanding of the financial operation of the property. Do they know what NOI is? Do they consider how the decisions they make impact the top and bottom line?
Policies – Policies provided the personnel with a clear understanding of why we do things and how we expect things to be done as well as the time frame in which they must be completed. Does the staff return all phone calls within 24 hours? Communication (which costs apartment operators nothing) has the biggest impact on resident retention. How quickly does the staff prepare vacant units or respond to service requests? Proper administration of the turnover process reduces turnover times, reduces vacancy, and improves the bottom line. Responding quickly to service requests boosts retention.
If you manage with these fundamentals in mind, you’ll catch the wave in a market up cycle before your competitors and avoid imploding in the down cycles.