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Commentary: The Benefits of Self-Reliance for Multifamily Owners

Posted on Jan 26 2020 - 9:35pm by 2!xMyNQ#FV8h4U

JVM Realty Corp.’s Jay Madary shares his perspective on property management options.

 

By Jay Madary  (MultiFamilyExecutive.com Article

“Should we manage our own properties, or should we engage a third-party firm?”

At some point, that’s a question every company that owns apartment communities has to ask itself.

There are certainly plenty of solid fee managers out there that do great work. And for many ownership groups, self-managing their properties simply isn’t an option. They may not have the resources to build a management staff or may not have the necessary technologies and infrastructure in place. For these owners, fee managers obviously are the way to go.

Ownership groups that are entering a market for the first time and don’t have property management personnel with an abundance of experience in that market may also want to turn to a fee manager that knows the area well.

In my opinion, however, self-managing properties is the prudent course of action for owners with the staffing and resources to do so. Among the benefits are:

1. A nimbler and more streamlined decision-making process. Self-managing a community enables an owner-operator to pivot when market conditions change and to adjust operational strategies and tactics quickly. Decisions about capital improvements can be made efficiently and opportunities to increase NOI can be seized much more quickly.

Unfortunately, when a third party is running a community, the communications between owner and manager aren’t always streamlined. They can at times be cumbersome, and the decision-making process can slow down. This can negatively impact property performance.

2. Control over technologies and procedures. A self-manager has total control over the revenue management and operational software that is used at its properties and can configure reporting exactly how it wants it. Its team members become true experts in these solutions and processes.

A fee manager is often required to use software and systems that it might not be especially familiar with. They can use the basic functionality of the software, but they might struggle with the more complicated elements that require deeper training.

3. Skin in the game. Because an owner-operator is an investor in its communities, it can make sure the interests of its fellow equity investors are adequately considered. A third-party firm may not always keep these concerns top of mind because they don’t interact with the investors as often as the owner-operator does. It may overspend to drive revenue, as it is rewarded based almost exclusively on revenue.

4. More stable and more invested on-site teams. If a fee manager has challenges with another property that it’s managing, there’s really nothing stopping it from moving a great associate from your property to the struggling property and then replacing that high performer with an associate with less experience.

As third-party firms gain or lose management deals, they are apt to move their team members around to maximize their revenue, which is understandable. They have a business of their own to manage. The result can be instability at your properties.

Also, a fee manager’s associates are most likely more loyal to their employer than your properties and residents. When you manage the properties that you own, you have total control over the culture in which team members are fully invested.

In the end, we believe self-managing our apartment portfolio is the most effective way for us to achieve our investment objectives, promote operational efficiencies, and have a high-performing portfolio.