Apartment property managers, also known as operators, were once mom-and-pop concerns. They fixed things, collected rent and stored leases and other paperwork.
These days? Not so much. Experts told ApartmentBuildings.com that multifamily operators need to go beyond filing skills and maintenance efforts to succeed.
“Managing a single community or multi-asset portfolio requires significant sophistication, infrastructure and expertise,” said Chris Moltke-Hansen, Apartment Management Consultants’ CFO.
Added FirstService Residential Senior Vice President Calynne Oyoloker: “With roughly one in three homes in the U.S. now part of a residential community, the scope of property management has become increasingly complex.”
More than Rent Collection
According to Investopedia, property management involves handling “day-to-day repairs and ongoing maintenance, security and upkeep of properties.”
Also included are tenant screening, leasing and rent collection as well as “resident experience, maintenance, expense control, compliance and capital planning—all with the objective of protecting occupancy and maximizing NOI,” said Curtis Holder, director, head of Asset Management with Excelsa Properties.
Many confuse “asset management” with “property management.” While there is some overlap in both functions, “asset managers focus on long-term hold strategies,” explained Parktown Living Senior Vice President Patti Higgins. “Apartment managers translate those strategies into daily action.”
In other words, “apartment management is the operating system of the investment,” said Ballast CEO and Co-Founder Greg MacDonald.
Then and Now
But not so long ago, property managers had different duties in the wake of the Great Financial Crisis. From the mid-2010s through the aftermath of the pandemic, the goal was to increase lease retention and renewals. “Occupancy was rising, so operators shifted their focus toward revenue growth as demand returned,” explained Barrett Lowell, who is Head of Asset Management with Bonaventure.
At the same time, the ownership strategy focused on value-add, with an eye toward pushing rents and increasing valuations. In such cases, apartment operators might have been required to take on deferred maintenance and upgrades.
In the pandemic’s aftermath, operators still handled maintenance, retention and renewals, and continue to do so today. However, “those factors that differentiated multifamily managers during the 2010s are now required minimums that both residents and property owners expect,” Moltke-Hansen said.
“Property managers are much more focused on operational efficiency, rising insurance and labor costs, fraud prevention and disciplined expense management,” Holder added.
And with multifamily ownership becoming more institutional, there’s been more “emphasis on operational discipline, reporting and technology,” MacDonald observed.
Brewer said that efficient management in today’s multifamily world controls expenses, while guaranteeing a stable (and sometimes increased) cash flow. The result is a higher net operating income and a possible increase in the asset’s value.
Because of this, “the strength of the operating platform can be just as important as the asset itself,” Brewer said.
Today’s operators depend on technology more than they did a decade ago. “Online leasing, automated work order systems, digital communication platforms and data dashboards have improved efficiency, transparency and response time,” Higgins said. Proper technology can boost maintenance tracking and lead to more precise reporting.
Then there are the shifting tenant demands, which require operators to be more communicative and responsive than before. “Residents expect responsiveness, clear communication and reliable follow-through,” Oyoloker explained. “These expectations are shaped by experiences in other industries where service standards have steadily improved.”
Changes in the multifamily sector during the past decade mean that “the job has evolved from property oversight to full-scale operational management,” MacDonald said.
Or put another way, “ten years ago, the market drove value, and operations enhanced it. In today’s environment, efficient operations determine whether value exists,” Apartment Management Consultants’ Moltke-Hansen added.
Looking to the Future
Moltke-Hansen commented that the operations side could see greater consolidation, as larger third-party management companies continue to snap up smaller counterparts. “The M&A activity can provide some management efficiencies, as well as potentially benefit industry talent that may receive more career advancement opportunities, as a result,” he added.
The experts said that cost increases would continue to impact property management functions. Oyolokor with FirstResidential explained that ongoing expenses with materials and labor, along with regulatory changes, will “continue to place pressure on operating budgets across many markets.”
Parktown Living’s Higgins also suggested keeping an eye on broader economic issues, including interest rates and inflation, which “will exert an influence on management strategy and daily decision-making.”
Technology will play an expanded role in operations, improving efficiency. Holder with Excelsa commented that owners who combine effective on-site teams with data-driven operational tools will succeed in protecting NOI and thereby create long-term value.
Speaking of owners, Lowell and Moltke-Hansen foresee an increase in multifamily sales, which will, in turn, affect operations and management strategies.
“The transition teams and processes at property management firms will be working in overdrive to ensure property performance and residents are not adversely impacted by an ownership and/or property management change,” Moltke-Hansen said.
Higher deal volume, combined with rent control regulations and changing eviction processes, means operators will need to be flexible and proactive in their compliance efforts. Bonaventure’s Lowell said.
In short, precise and effective operating platforms and skilled personnel will continue to be important parts of multifamily investment strategies and in maintaining resident satisfaction. To that end, “we’re seeing a push toward more integrated models where ownership, asset management and property management are more closely aligned,” Ballast’s MacDonald said.
A previous version of this article appeared on ApartmentBuildings.com.
The post Management and Operations: The Engine Behind Successful Multifamily Properties appeared first on Connect CRE.
