By: Brain Gordon & Vincent M. Medina
Owners of Lotus Property Services
A Prescription for Successful Management!!The age old idea of good customer service is still the key to running a healthy real estate portfolio today. In the midst of the real estate boom in the early 2000’s through 2007 many landlords forgot to service their existing tenants and when the market crashed and tenants moved out, those same landlords were left with many vacant units.
Although our economy has improved in many ways, rental rates have still sluggishly remained low with little growth in various areas throughout the country. In fact, some areas have not reverted back to the glory days of the last real estate boom and are suffering with cash flow issues. The question we must ask is: Why? We can almost guarantee you that the most likely answer is VACANCY, that scary word that so many of us dread. But when you break it down, the solution to your problem becomes quite clear: Simply rent your vacancies, or better yet keep your existing tenants from moving!
You see, there are different schools of thought when it comes to the management of a property and the reality is that there are many different approaches, however, there will always be an approach to management that is simply better, faster and that downright get results in a shorter period of time. In this fast moving rental market, you need to be on pace and up to speed with changing rental micro-markets and be ready with new ideas to improve the operations of your property. As a real estate investor, you must come to the realization that times have changed and we have entered a new era that requires the archaic ideologies of the past to be rejuvenated with the spirit of NOW. You must update your thinking to be current with the times and create a fool proof system that you can count on to improve your property’s cash flow.
The reason why the world famous McDonald’s restaurant chain is so successful is not because they have the best food in town but because they are fast , have great marketing campaigns and have a system of running their business as a whole that is superior to all of their competitors. As a real estate investor, you must see your property as a business; one that will operate best under a system that gives you peace of mind and bottom line creates results. If you can add the art of customer service, the science of marketing and business management to your investment’s operations approach, then you will succeed where others fail.
The problem today is real estate investors with vacant units are falling short because they are doing exactly the same thing the guy with vacancies down the street is doing, all the while getting bad results. We want you to think out of the box! There are entire books dedicated to the topics we will discuss in this article but few investors actually apply them. We want you to put yourself in the mindset of the expert and learn “the science behind successful property management”.
We am going to give you a couple of tools, both classic and novel concepts that we want you to follow to improve your property’s operations. Of course there are many more we can mention, but these are a basic starting point that will uplift and change your property operations for the better!
Stage One – Servicing your existing tenant. This is the most important defense against vacancy! First we want you to start providing the absolute best customer service offered in our business to your existing tenants because happy tenants stay in their units and don’t look to move. When tenants are happy there is no reason for them to look anywhere else because they are 110% satisfied. In fact they would hate to leave your property and wade into uncharted waters. Start this practice immediately. Servicing your existing tenants must become a priority; changing a $35 mini blind is much cheaper than the turnover cost from a unit becoming vacant.
A small item like a broken mini blind may seem miniscule to you but may be the straw that breaks the camel’s back and pushes your tenant to look elsewhere being enticed by a great financial motivator called “the move-in special”. Take care of your tenant’s needs!
Secondly, maintenance requests: do your best to have a 24 to 48 hour turn around and always make call backs to the tenant. Make sure your tenant is satisfied with the job done. If they are not content, do what it takes to see that you make them happy. This practice shows that you care about the tenant’s well-being. People like to know that you are genuinely concerned. This is one of the most cost effective ways to keep a low vacancy rate not only in bad economic times, but even more so in good economic times. Now that you’ve done your best with the servicing of your current tenants there will always be move-outs, especially in this economy because of tenants losing jobs or buying homes. This is where Stage Two of improving your property operations kicks in. In order for this strategy to truly work, you must be completely honest with yourself and commit to a goal for your property. In other words, have an exit strategy. When we say this, we want you to know exactly what you want to do with your building in the next 5, 10, 15, and 20 years ahead. This is a crucial element in the successful running of your property because you can create a clear path based on exactly where you want to be and when you want to be there. In the first part of Stage Two, we want you to analyze your property’s good and bad points (condition, location, tax base, tenant profile, amenities, etc.)
We want you to be completely honest with yourself when creating this list and be as truthful as you possible. Of course, you cannot change the location of a property or other similar variables, but you will at least be able to identify weak and strong points of your property. This property analysis will give you a clear idea of where your property stands.
Second, you will need to create a tenant survey to give to all of your tenants to fill out, asking them questions that you decide will help you to better know and service your current tenant profile and at the same time improve your property’s performance. Trust me when we say that your tenants will be brutally honest where you are not and will tell you exactly where they think you are failing. Never let the tenants get the idea that you are going to put tons of money into fixing up the property (unless you plan on doing so). When giving them this survey be clear that the objective of the survey is an attempt by you to do your best within your capabilities to make them happy.
Now that you have basically analyzed your property and gathered up all your surveys, you will need to change hats and put on your casual clothes so that you can get out and walk your rental market and neighborhood in order to complete a thorough Market Survey. We like to call this part “Knowing your Market and Owning it”. How can you see where you sit in the big picture if you don’t know what the competition is doing and what is happening in your surrounding area?
Pretend you are a prospective tenant and visit vacant units, take pictures, ask what kind of move-in specials they are offering, get familiar with what they are doing so you can do it better. While involved in this process We have made great contacts and have met amazing on-site managers who have eventually come to work for me. Participating in this practice is an important part of knowing your market and owning it, because you not only see for yourself what others are doing but you will know what you look like in the eyes of the prospective tenants, then you can make the necessary changes to rise above the competition.
Again, we must emphasize your need to be customer oriented, friendly, kind and sincere. People can read a fake from a mile away. You will also need to start keeping a detailed log of prospective tenants who have come to see your vacant unit and in this log have a section where you can call back and ask them why they did or did not rent. This is yet another tool to help you improve your property and operate under a new proven system of operations. Now that you have all this information from your property analysis, tenant survey, market survey, and vacancy logs, the fun begins.
Remember the point of gathering all this information is so that you can take out all the guesswork and put the “Science of Successful Property Management” to work for you. Get your proven results based on research, not guess work. This information will help you in many ways, from creating a successful tenant retention program to creating a marketing plan for your vacancies. Most importantly, it will aide you in formulating a future plan for your property and real estate retirement fund.
Remember the scientific method from Grammar school: Ask a question, do background research, construct a hypothesis, test your hypothesis with an experiment and come to a conclusion, i.e. GET RESULTS! In a simplified way this is all you are basically doing. Don’t gamble with your retirement fund, take your real estate portfolio and do what the experts do. If this seems like too much to handle then seek the advice and guidance of a professional property management company that operates along these guidelines. Good Luck and happy trails, in the words of the great philosopher Ralph Waldo Emerson “Nothing great was ever accomplished without enthusiasm”, so enjoy the journey to successful real estate investing!