By running buildings on autopilot, management teams miss opportunities to provide better services to their residents as well as to collect additional income.
By Adam Frisch and John Ambrosini (MultiHousingNews.com Article) — One doesn’t have to search New York City for long to find examples of less-than-acceptable management practices in residential buildings such as dated lobbies, dull curb appeal and unsupervised superintendents. It fact, it is common for management firms with portfolios of small multifamily buildings to let them run on autopilot, often having one overworked manager overseeing anywhere from 10 to 20 buildings. This leads to both a highly stressed employee and an underserved asset, not to mention a multitude of unhappy residents. This strategy, or rather a lack thereof, may be effective for a time. However, by running buildings on autopilot, management teams miss opportunities to provide better services to their residents as well as to collect additional income.
One income-generating strategy that management firms often overlook is harnessing the power of lease renewals.
During a down market, the common wisdom is to refrain from increasing rent when renewing leases. After all, if the rental market is already suffering, it seems to make sense to do everything possible to ensure that one’s renters stay put. However, if a property management company doesn’t increase renewals at a time when rents are decreasing on original leases, then they’re not making up the difference on what they lose on original leases.
While many brokers who have worked on the commercial and acquisitions sides of real estate claim that residential buildings are a simpler product than office or retail buildings, it could be argued that they are not simpler, but instead are simply different. With that said, it’s important to manage even the smallest residential buildings with the same seriousness that one would use in overseeing enormous Midtown office buildings.
The efficiency of having a leasing brokerage and property management team under one roof is unparalleled. Residential brokers can send weekly updates, or even more frequent communications at times, to the property managers. Real estate operations that combine many different functions can provide information for pro-formas on new buildings and on renovations based on potential payback. When considering an acquisition, these companies can use a multidisciplinary approach.
It is important to negotiate residential lease renewals in a customized manner. In terms of construction work, it is not uncommon for residential property management teams to outsource this work to a construction firm. However, within full-service operations, these matters can be handled in-house which saves owners significant sums on design, filing and construction costs.
Highly efficient processes such as those outlined above take landlords and property managers from one resident’s move-out through repairs or construction right through to the next resident taking possession. Often, they can add a month’s rent to the building revenue stream simply by managing their apartment turns aggressively. This approach of keeping all necessary functions within one company is a large part of what allows full-service real estate companies to manage residential buildings in a highly efficient manner.
John Ambrosini joined Sierra Real Estate in 2016 as director of property management. He has over 25 years of experience in the management of NYC properties—and his responsibilities have included the oversight of a wide and diverse array of institutional, educational, retail, commercial, industrial, manufacturing and residential clients.
Adam Frisch was the exclusive residential broker for Sierra Real Estate before founding his own company, Sierra Residential, in 2013. He is now the principal of Lee & Associates Residential NYC, the first residential division of the national Lee & Associates brand.