Property Management Revolution

Tuesday, December 27, 2005

Building from the Ground Up

A few months ago, I began working with a new company in the real estate investment industry. Along with managing the relationships with third party fee management companies, we decided to start managing some of the properties ourselves. Upon my employment with the company, a property was acquired needing the services of this owner/operator property management division. I was therefore thrust into the management of a property without any preparation for the individual property combined with a lack of policies and procedures for the management as a whole.

Trial by fire is both invigorating and draining. I was given a pro-forma budget for the property and a blank slate. I began by hiring an experienced property manager in the market local to the property. This value-add step was the most important to the successful management of the property. Being 80% student occupied, I needed someone with seasoned experience in the field and was able to find a capable person locally.

I began compiling legal documents including a lease and formulated a draft which our local legal counsel and I worked through. With the property manager in hand and a lease ready, we took hold of the property. This skeleton of a "property management company" became the operating manager of the property.

The difficulty, obviously, with all of these is that the stability provided by a proven property management company was not there. This foundation, therefore, was to be created and is being created as we speak. Now that my property manager is familiar with the property, has begun hiring a staff, working with our marketing director and preparing leasing staff, I have been freed a little to set the groundwork for our company. Although this is a bit backward, it gives me the opportunity to test different approaches, run the practical applications through my on-site staff and be creative with our strategy.

The July & August 2005 issues of the Multifamilypro Magazine featured an article entitled, "The New ROI: Return on Individuals Keeps Paying Off." This article and the headline have been my motto for the last few months. I truly believe that if I staff this company with amazing people, and I invest into those people, money will just flow out of their ears! That means I have to commit a serious portion of my capital to the property. The nice thing is, I can pretty much fund this capital with the vacancy budgeted, as it will reduce as a result of my investment. Even upon acquiring this property at 99% occupancy, I know with this staff that I will be able to increase rents and retain the occupancy levels.

Along with the Return on Individuals concept, I want to see a few other items flow from the property management company. The first is making document handling as easy as possible. There is no reason in the property management industry that paperwork has to consume so much of our time. A great relationship I was able to bring into my property is with On-Site Manager. Josh, from On-Site has partnered with me to develop a paperless product that is easy to manage. From the time a prospect fills out an application to their move-out, everything is kept online and easily manageable. All forms are auto-filled from the information the resident entered upon applying and can be kept up-to-date by my leasing staff easily. Now, of course, original documents with signatures must be kept, but that is the extent of the paper that my leasing staff has to deal with.

The second, which is tied with the first, is having a fool-proof comprehensive property management software. An article by James M. Lennox, CPM in the September/October 2005 issue of the Journal of Property Management entitled, "Sea of Change: Advanced operations structures could be future of property management.", casts a vision of a property management software that is all encompasing and brings the on-site experience of property management to the highest corporate level and integrates the expertise of upper-level management with the day to day activities of each individual property. My vision of a property management software is even more encompassing. The article states that, "Let's reach for the high ground and embark upon some truly remarkable, exciting changes in our industry." It is my desire to be the vanguard in this push for "remarkable, exciting changes." A commercial tenant at this property is in the software development industry. Part of the up front capital expenditure of each property is to invest into a comprehensive software package that will transform the property management industry.

With the skeleton of a property management company in place and the vision for a solid foundation, we are going to take this property to a new level of management. This involves day by day problem solving and revolutionary thinking for ever aspect. This blog will attempt to document that revolution and discuss the various aspects of revolutionary property management with anyone who would like to participate.

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