The days are long past when managing a multifamily community was primarily a matter of collecting rent, paying bills and maintaining the physical asset. Adding value is now a standard part of the job, because of the much-discussed evolution of the profession into a strategic role. In broad terms, the mission is to think like an owner, rather than a caretaker. But the question remains: What do owners and asset managers really want? Strategies for meeting the needs of ownership stem from a handful of trends that are reshaping the property manager’s role.
- Fee compression. Management fees vary widely depending on the size of the property, the size of the owner, the market and the size of the cash flow stream, so it’s hard to pin down ranges for property management fees. A decade ago, the fee was 4 percent; today, it’s 3 percent.
- Labor squeeze. Good multifamily managers are hard to find, a fact exemplified by rising compensation. Ten years ago, the annual salary for managing a 400-unit asset in Atlanta was $40,000; today, it is between $65,000 and $75,000 for someone to manage a comparable community.
- Savvy clients. Institutionalization of ownership has raised the bar for information gathering and financial reporting.
- Technology. Robust development has raised competition, held down yields and forced owners to sharpen their pencils. As some traditional property management functions are automated, a growing number of properties are eliminating the on-site manager’s position
So how do property managers meet the rising expectations of the asset managers they serve? In a competitive, fast-changing environment, meeting client expectations calls for unprecedented sophistication about business strategy, finance and other areas. Experts name five key areas to focus on.
Create value. Managers should look beyond the physical confines of an asset in order to understand its place in the larger market. Read the owner’s prospectus, be better understand the client’s goals.
Speak the language of finance. Managers should always bear in mind that each decision they make has an impact on the asset, which is, after all, an investment vehicle that creates cash flow. Even if the manager is to ownership in really simple return metrics—things as simple as payback period or cash-on-cash return—it signals to asset managers that you understand this piece of real estate as an investment vehicle.
Triage effectively. But before recommending any new items, managers must think about the economic payback. Apart from safety issues and legal mandates, every proposed expenditure should ultimately be tied to cash flow.
Serve as a resource. Property managers should aspire to serve as the go-to information resource for ownership. Rather than merely reporting what’s happening at a community. How are consumer preferences changing, how are tenant demands changing, what’s influencing whether tenants are staying or going.
Be creative and communicate clearly. Property managers must speak up whenever they have an idea about improving a property’s performance, even when the topic doesn’t fall within their stated job description. And when they do speak up, managers should take care to convey information effectively and deploy it in the field.