Taking an underperforming apartment building turning it into a money maker is one of the biggest challenges most apartment owner face. Some are able to accomplish this successfully and some don’t. The ones that don’t succeed in this usually find their properties slipping away from them with a high level of differed maintenance and negative cash flow. Many of these owners have to write checks every month to keep their properties from slipping into bankruptcy.
Not all the properties we are looking at need this need this kind of attention, but if they do , there may be an opportunity for us to purchase a property based on its current financial situation an and improve the financials over time, thus creating value in the property.
The first step in the process is to recognize what there is a problem. One of the biggest reasons we see properties not doing well is because the owner wasn’t able to or didn’t recognize the property was not performing up to its potential. Some hope that things will improve or that maybe what they are seeing is only temporary.
Basically, It’s all about the cash flow! If there isn’t enough cash, then the owner is unable maintain the property the way it need to. If the property is run down or has allot of deferred maintenance, then the tenant won’t be happy living there and will move out….And it becomes a downward spiral from there…
What is required to improve cash flow then?
Answer: High quality tenants who will pay their rent on time!
We get high quality tenants by providing a high quality place for them to live that is safe and clean that might have a few nice touches as well. If we do this, we can charge a fair and completive rent which may be an increase over what it was when the property was in a state of disrepair.
Getting high quality tenants is a multi faceted approach….Number one is injecting capital into the building to clean and /or update the exterior and interior of the property to makes the living spaces a place a tenant want to live and are proud to call home. Maybe we add some minor amentias such as washer dryers, cable TV, picnic area, dog park, cable TV or improved air conditioning.
Next, we set up a modern marketing program to advertise our property to them. Many owners don’t have a presence where tenants can find them when they are looking for housing. We like to have a nice modern website showing all the amenities our properties have to offer and an easy way for tenant s to reach us…I don’t want a prospective tenant to get a voicemail message when they call inquiring about our property. If they do, they will go elsewhere where someone will pick up the phone!
We utilize a professional property manager who is skilled at finding, screening and retaining good tenants. It’s important that prospective tenants are screened properly to insure we don’t have any bad apples residing in our communities. This goes back to proving a safe place for our residents to live in.
And that brings the final piece which is tenant retention….Once we have a good tenant in place, it’s important to keep them as long as we can…We do this by providing the best customer service possible. When they call us and say they have an issue somewhere, we need to respond within 12-24hrs to let them know how important they are to us. Our tenant are like gold to us and we need to show them that as well!
If their calls are ignored or acted up slowly, that says allot to them and that is when you will begin to have retention problems arise and an increase in expenses due to higher than normal tenant move outs.
Once we have good tenants in our property, the property clean and safe, a few nice amenities….The the apartment manager, if chosen correctly should be able to improve the occupancy of the building over time….Once we do this the financials will improve and we will be on our way.
What we described above is a scenario that we look for as it provides an opportunity to buy a property that may be undervalued due to the low income it is producing.
If you would like to discuss how you could get involved with us in a project like this, feel free to contact us directly at: 510-863-1447