Top Multifamily Asset Management KPIs & How To Use Them!

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This Money Monday$, find out what the top multifamily asset management KPIs are and learn how you can utilize them to your advantage!

VIDEO TRANSCRIPTION

00:05
because that’s the time that we do this
00:06
every week
00:08
come rain or shine snow or we’re going
00:10
to see
00:11
how or not we made it in on the monday
00:14
mondays whenever we had that ice storm
00:15
didn’t we we did not
00:16
we did not we had all right well okay i
00:18
didn’t say anything about snow i said
00:19
rain or shine so i mean you know i mean
00:21
we’re not the
00:21
usps here right no no i know actually i
00:24
don’t think they were doing anything on
00:24
that day either
00:25
because you couldn’t get on the highway
00:27
i didn’t do anything that week but that
00:28
said welcome to money mondays everybody
00:30
we do this every monday 3
00:31
30 central talk about a bunch of
00:33
different topics usually spend about 15
00:35
20 minutes presenting different topics
00:37
today’s topic is ooh top multi-family
00:40
asset management kpis and how to use
00:42
them
00:43
and basically we’ll present that and
00:45
then at the very end we’ll do q a
00:46
it doesn’t have to be q a about what
00:47
we’re presenting it could be about
00:48
anything
00:49
right and um you know we’re here to help
00:52
teach people add value
00:53
in any way we can so do not all right so
00:55
before we hop into this man
00:57
why don’t you give everybody a
00:58
definition of
01:00
what is asset management versus property
01:02
management i think people always kind of
01:03
get those two confused right
01:05
yeah i know that’s a good question right
01:06
so the way to think about it is the
01:08
property management is the team that is
01:11
doing the day-to-day
01:12
management of the property they’re the
01:13
boots on the ground they’re the boots on
01:14
the ground they’re making sure rents hit
01:16
the bank
01:17
they’re making sure their service
01:18
requests get repaired right
01:20
they’re doing that kind of stuff they do
01:23
not
01:23
necessarily know what the owner’s
01:25
business plan is they should
01:27
right but they’re not the ones that are
01:28
living and breathing it and nor do they
01:30
you know usually they’re not reporting
01:32
to the investors they’re reporting to a
01:33
specific person
01:34
which is the asset manager the asset
01:37
manager is the person who’s kind of
01:39
responsible for
01:40
implementing the business plan that’s
01:42
expected of that property
01:43
and kind of help course correct right so
01:45
a good way to think about it is the
01:46
asset manager might be the captain on
01:48
the ship
01:49
right the rest of the people on the ship
01:51
is the property management company
01:52
the captain’s kind of saying where we’re
01:53
going and everybody’s making sure
01:55
they’re deserved
01:56
events happened here all the other stuff
01:58
yeah so they’re doing the property
01:59
management is always kind of doing the
02:00
daily grind right
02:01
like you say collecting rents work
02:04
orders
02:04
filing evictions you know setting up
02:07
vendors and getting units turned right
02:09
you know whereas the asset manager is
02:11
always looking at it more holistically
02:13
right you know okay this year you know
02:15
we’re on course to distribute this
02:16
amount of money
02:17
that equates to this return is that in
02:19
line with what we projected
02:21
you know they also have the power uh to
02:23
fire the property management company
02:25
to get different insurance to you know
02:28
maybe help
02:29
um you know facilitate a refinance
02:32
they’re gonna be that level so you got
02:34
property man you got the property
02:35
property
02:36
management asset management and then
02:38
typically the owners
02:39
slash investors are up here right so the
02:41
asset management is the conduit
02:44
between the property management and the
02:45
investors right they’re there for
02:47
investor relations and other things as
02:49
well right but typically asset
02:51
management is going to be
02:52
property level stuff right so let’s hop
02:55
into this thing we’ve got a lot of
02:57
different kpis that we kind of track
02:59
right none of these are in any
03:00
particular order they’re all very very
03:02
important right
03:03
you know we provide bi
03:06
uh to our third-party clients as well as
03:08
we have access to it here at disrupt
03:10
equity
03:10
right bi is a part of real page real
03:12
page is the accounting and
03:14
property management software that we use
03:16
and it tracks a lot of this stuff right
03:18
and it tracks it in a way where it’s
03:19
actually
03:20
you know useful it’s got graphs and
03:22
charts and and
03:23
you can project out on certain things
03:25
and you can also determine what trends
03:27
are happening
03:28
so you know i’d encourage you to at
03:29
least ask for that if your property
03:31
management company is using real page
03:33
ask for bi or business intelligence that
03:36
typically that module i think is free or
03:38
part of it
03:39
correct you know maybe it is maybe it’s
03:41
not maybe there’s a little bit of cost
03:42
involved but it’s worth it
03:43
right so we’re to hop right into this
03:46
occupancy
03:47
boom i would say that’s one of the most
03:49
important ones
03:50
you know you typically more specific
03:53
physical occupancy right physical
03:54
objects it’s the percentage of people
03:56
of of all the units in the property how
03:59
many what percentage of them have people
04:00
in it
04:01
doesn’t mean paying people right people
04:04
that are paying but it means just
04:05
physically occupied so as a buyer right
04:08
the question you really want to ask is
04:10
what is your
04:10
economic occupancy right not your
04:13
physical so
04:14
two different kinds of occupancy the
04:15
economic occupancy is really saying hey
04:18
of all the people on the property of all
04:20
that i bill out
04:21
so to speak right what percent is
04:23
actually being collected
04:25
yep and from that you can get a good
04:26
sense of how many people are paying
04:29
right so you might have a property
04:30
that’s 100
04:31
physically occupied and zero percent
04:33
economic right well you’re probably
04:35
somewhere on the west coast or new york
04:36
right where
04:37
your tenants are taking advantage and no
04:38
one’s paying any rent right and you
04:39
can’t get rid of them right it’s called
04:41
delinquency right you know i mean that
04:42
delinquency is when people are
04:44
delinquent on the rent they’re not
04:45
paying the rent
04:46
right and economic like fair said is
04:48
extremely important
04:49
right because it’s misleading to say oh
04:51
we’re 100 occupied on all of our
04:53
properties
04:54
but if only 50 of the people there
04:56
actually paying
04:57
rent that’s ultimately where the rubber
04:59
meets the road that’s the most important
05:00
thing you need to be asking yourself
05:02
right
05:02
in normal times delinquency is one or
05:04
two percent typically maybe
05:06
three or four in more challenging parts
05:08
of the country right
05:09
but it was a it was it was a rounding
05:11
error when you’re analyzing deals right
05:13
now
05:14
because of cobid and because of eviction
05:16
moratoriums it is extremely important to
05:17
track
05:18
economic occupancy as well as physical
05:21
occupancy
05:22
right so let’s talk about loss to lease
05:23
man you know this is something we track
05:25
pretty closely yeah so lost elise right
05:27
it basically is talking you know this is
05:28
actually another really important metric
05:29
right
05:30
it’s basically saying hey ben moved into
05:32
the property 11 months ago
05:33
he was paying 800 a month now
05:37
if a new person moved in for that same
05:39
unit right let’s say i’m charging that
05:40
person
05:41
a thousand dollars right or ben’s coming
05:44
up for the renewal right
05:45
well that 200 difference between what
05:48
the old lease is and what the new lease
05:49
i can put in place is
05:51
that’s my loss to lease right what am i
05:53
losing to old leases is kind of how to
05:55
think about it
05:55
why is that important right it’s
05:57
important because it gives you a real
05:58
it’s a really good indicator of what the
05:59
market is willing to pay today
06:01
right if i know like we have a property
06:02
we bought all we’re doing is burning off
06:04
lost to lease right what does that mean
06:06
that means that we’re just bringing
06:07
everybody from where they are to the
06:09
current market
06:10
absolutely if by doing that we can
06:11
implement our business plan that’s a
06:12
good deal yeah
06:13
so i mean and in some cases that’s all
06:16
you really have to do
06:17
right you know they’ve already they’ve
06:18
jacked it up to a sustainable um
06:20
you know point and you just gotta just
06:23
gotta close that gap
06:24
right so noi or net
06:27
operating income right you know now this
06:30
is something that you know we track both
06:33
pre-buy right you know as we’re
06:34
analyzing deals as well as during
06:36
you know the whole period as well as
06:37
when we go to sell the deal it’s very
06:39
very important right where’s your noi at
06:41
net operating income is the difference
06:43
between total income and total expenses
06:46
right you’re going to get noi below that
06:48
you’re going to have cap x and you’re
06:50
going to have your debt service your
06:51
debt service as people remember we’ve
06:52
talked about this in the past is your
06:54
mortgage
06:54
right so that’s always below the line so
06:56
when people say below the line
06:58
they mean noi noi divided by a cap rate
07:02
gets the value of the property
07:03
so it’s a very important metric to to
07:05
determine and keep up with even when
07:07
you’re
07:08
just holding the property right you want
07:09
to see is your noi going up
07:11
right there should be some kind of a
07:13
trend going in the right direction
07:15
and i think that that’s important to
07:16
kind of keep up with as an asset manager
07:18
um renewal percentage of expirations
07:21
right so
07:22
this is how many of the people that are
07:24
gonna they’re having expired leases
07:26
right let’s just say
07:27
in june you have your is property’s to
07:29
have 20 right
07:30
and of those 20 you’re able to renew you
07:33
know 10
07:34
right so your renewal percentage you
07:36
know that you’re able to capture is 50
07:38
right now typically you want it to be
07:40
closer to 60 or 70
07:42
covid times or a little bit different
07:43
than normal times
07:45
you know um some people have challenges
07:47
and you don’t want to renew them because
07:48
they owe you
07:49
back rent uh they’re just not in the
07:52
position the financial position that
07:53
they were before
07:54
whatever the reason might be right but
07:55
that’s typically what that percentage is
07:57
going to be and that’s something that
07:58
you should track
07:59
right renewals are important keeping
08:00
that back door closed
08:02
is something that people as an asset
08:03
manager you need to be tracking that
08:05
right
08:06
this is a fun one average unit turn cost
08:08
we were literally talking about
08:10
this morning so you want to kind of go
08:13
through this one
08:13
ultimately so what is turning into this
08:15
first question right turning a unit is
08:17
basically ben lived in the unit
08:18
then moved out i have to now as an owner
08:21
get the unit ready
08:22
right maybe ben i have to paint the
08:24
walls because you know the walls got
08:25
dirty he lived in it for 10 years right
08:27
so my cost to turn the unit and get it
08:30
rent ready is my unit turn cost
08:32
and so i mean you know you want to
08:34
really understand that it varies by unit
08:35
it varies by property varies by
08:37
demographics right i mean some areas
08:39
unit terms units get worn a lot more
08:41
aggressively than other areas
08:42
yep and so anywhere from a thousand to
08:45
five thousand dollars is maybe where
08:46
that number is
08:47
typically hopefully close to that
08:49
thousand dollar mark right but again
08:51
it really varies and so it’s an
08:52
important measure to understand and try
08:54
yep and i think to coincide with that
08:56
right the average
08:57
time to turn units right you know you’re
09:00
typically wanting to do that one or two
09:01
weeks
09:02
sometimes especially nowadays with you
09:04
know supply chain shortages and some
09:06
other things right that’s not
09:07
necessarily always possible
09:08
because you’re waiting on supplies or
09:10
what have you but in normal times
09:12
you’re gunning for one or two weeks so
09:14
that means when somebody moves out
09:16
till two and then and you’re going to
09:17
have it hopefully pre-leased or at least
09:19
along that way
09:20
that somebody’s moving in there within
09:22
you know two or three weeks of that time
09:23
frame
09:24
right you know so that’s average time to
09:26
turn units as well as an important
09:28
factor
09:28
if it’s taken your team two months three
09:31
months to turn a unit you’re gonna know
09:33
that there’s some
09:33
problem there right what is it right is
09:36
it that our maintenance people are
09:37
overwhelmed
09:38
is it supply chain problems is it
09:40
something else
09:41
right you need to dig into those numbers
09:43
because that could be
09:45
you know for telling that there’s
09:46
another problem at the property
09:48
right you know tenant turnover
09:51
right so this is the amount of people
09:54
that are turning over on the property
09:55
and not renewing essentially and not
09:56
renewing right
09:58
you know there are certain parts of the
09:59
country where that number is pretty high
10:02
right it’s just a very transient market
10:04
or you know
10:05
people don’t typically stay in you know
10:07
long-term leases
10:08
you don’t want them to stay in the most
10:10
parts of the country it’s even the type
10:11
of the asset class right like a property
10:13
with a bunch of townhomes
10:14
right is more likely to get people to
10:16
turn to not turn right and stay and
10:18
review
10:19
than a property that’s a bunch of one
10:20
bedroom units small one bedrooms right
10:22
just in the nature of the you know the
10:24
property that’s actually a good point so
10:25
let’s let’s let’s
10:26
let’s key on that a little bit right so
10:28
one bedrooms obviously got single guys
10:30
gals
10:31
they’re moving more frequently right you
10:34
know whereas with a family
10:36
a town home unit two three bedrooms it’s
10:38
gonna be more challenging or or they
10:40
might be there because they like the
10:41
school district that it’s in or they’ll
10:42
go to that school that’s right next the
10:44
property right
10:45
there’s going to be less turnover right
10:47
and we’re not saying that one business
10:49
model is better than others we like to
10:50
see a good mix
10:52
of ones twos and threes you know that
10:54
doesn’t always happen
10:56
there’s also ultimately deals that are
10:57
good on either side of that spectrum
10:59
but if you can get a good mix of those
11:01
one twos and threes then you’re going to
11:03
be able to
11:04
you know kind of offset you know maybe
11:06
that turnover
11:07
cost that you’re going to have right
11:08
because turnover obviously costs you
11:10
every time you have to touch that that
11:12
unit it’s going to be a cost right and
11:14
like ferris said
11:15
on the low end it’s a thousand bucks i’d
11:17
say it’s probably more typically like
11:18
three to five
11:19
right between all the things that you
11:20
have to do so the less people that turn
11:23
over less people move out
11:24
less time you have to do that right so
11:26
talking about expenses
11:28
and outlays of cash uh the operating
11:31
expense ratio what is that my friend
11:35
it’s basically what is the ratio and i
11:37
was actually just talking about this
11:38
just now right before this
11:40
for a deal here in houston that we were
11:41
looking at and i was talking about
11:43
broken i’m ultimately telling them hey
11:44
the problem with this deal is the
11:45
expenses are just killing it right it’s
11:47
you know it’s a 70 expense ratio right
11:50
the ratio of
11:51
income to expenses the income you know
11:53
basically expenses were 70
11:55
of all the money generated right and so
11:57
there wasn’t really much left over
11:58
yeah and it you know and just to be
12:00
clear the expenses it’s before paying
12:02
debt service
12:03
before paying asset management fee right
12:05
and capex
12:06
and capex and so on that deal i was
12:09
telling them the problem is the income
12:10
just isn’t there
12:11
right the expenses are what they are i
12:12
mean taxes aren’t going to change right
12:14
but
12:14
just the deal’s not generating enough
12:15
income and uh dealing with 70
12:18
you know you’re not going to get the
12:18
right price point you actually brought
12:20
up a good point some people are going to
12:21
say oh
12:22
they’re going to all automatically
12:23
kneejerk two expenses are high yeah
12:25
right but you just hit it on the head
12:26
right
12:26
in that case the income was low and it
12:29
was very hard to get the income
12:31
up in relation to the expenses right so
12:33
you’re gonna have that higher percentage
12:35
now typically what we’re seeing just
12:38
some for some rules of thumb here
12:40
is probably 55 to 65 depending on the
12:43
the vintage of the
12:44
the asset where it’s located at right
12:47
in terms of that expense ratio and where
12:49
it should shake out at
12:50
right now for newer properties you know
12:53
in certain locations it could be as low
12:55
as maybe even 40 or 45
12:57
right then that’s now you’re kind of
12:59
getting into that class a asset
13:01
or something that’s a little bit newer
13:02
because it’s gonna have a lot less
13:04
expenses in general right there’s not
13:05
going to be the maintenance headache
13:06
problems that you’re going to have
13:08
right so we just went through a lot i’m
13:10
going to pause i’ll see you guys a few
13:11
more of them a few more
13:12
all right so if anyone has any comments
13:14
questions feel free to ask them right we
13:16
are here to answer them live let’s go
13:17
through a few of them
13:18
let’s go so ronnie says uh what’s up
13:19
guys what’s up ronnie long time no see
13:22
uh ride says hello everyone hello hello
13:25
hello
13:26
and let’s see any other comments
13:28
questions now i think that’s it so let’s
13:30
go
13:30
oh come on guys let’s get interactive on
13:33
this thing this is important stuff right
13:34
you know i mean
13:35
we’re essentially these are the things
13:36
that disrupt equity
13:38
uh chases and and tracks on a daily
13:40
basis and
13:41
i think as asset managers you need to
13:43
understand these things so ask questions
13:45
it doesn’t have to be about asset
13:46
management though right so
13:47
availability percentage right you know i
13:50
would say that
13:51
that’s just usually we look at it on a
13:53
on a per floor plan basis
13:55
right how many one bedrooms are
13:56
available how many two bedrooms are
13:58
available how many three bedrooms right
14:00
now why is that important right you want
14:02
to kind of get into that and the
14:03
importance of the um
14:04
it just helps you understand can i push
14:05
rents can i not right if i have
14:07
zero availability in my three bedrooms
14:09
and 20 availability in my one bedroom
14:12
i probably need to push the rents on the
14:14
threes and reduce the rents on the ones
14:15
boom
14:16
so um and that’s why that that’s why
14:18
that metric is important
14:19
right it’s going to help you course
14:20
correct you know throughout the year on
14:23
you know
14:23
supply and demand right there’s going to
14:25
be certain things that you’re going to
14:27
notice in certain sub markets
14:28
that are going to be just more in demand
14:30
than other things
14:31
right in that case the three bedrooms
14:34
are yeah pretty much in demand
14:35
one bedroom’s not so much all right lead
14:38
to lease all right so so let’s leave
14:42
basically it’s about it talking about
14:43
how many leads came into it or
14:45
how many of them did you actually
14:46
convert into leases yeah right you want
14:48
to track that you want to understand
14:50
what is my conversion right right that’s
14:52
really what it is how many
14:53
have the 100 people that i got to come
14:54
through the door whether they were drive
14:56
by
14:56
google facebook anything else what
14:59
percent of those people turned into an
15:00
actual lease because ultimately that’s
15:01
all that matters i can have a thousand
15:03
people come through the door and if i
15:04
get no leases it wasn’t valuable
15:05
yeah so you got the wrong you got the
15:07
wrong leads right remember what we do
15:09
folks you know i mean we ultimately are
15:10
running a business our clients
15:12
are the prospective tenants right you
15:15
want them to come through the door and
15:16
they want you you want them to buy the
15:17
product that you’re selling
15:18
which is one of the available floor
15:20
plans right so if you’re constantly
15:22
getting people in
15:23
that aren’t interested in your product
15:25
or can’t afford your product
15:27
then you need to you need to really
15:28
course correct on your marketing right
15:29
because
15:30
ultimately if you’re only marketing to
15:32
class a tenants and
15:33
you have a class c property guess what
15:36
you know even if they do stumble in the
15:38
front door which is probably less likely
15:39
that they even would but let’s just say
15:40
that they do
15:41
they’re not going to lease because
15:42
they’re not that is not the type of
15:44
asset class that they’re looking for
15:46
right so you’re marketing to the wrong
15:47
people um build
15:49
versus collected right this is a big one
15:51
that
15:52
since covet i mean we were tracking this
15:53
pre-copied but it’s become even more
15:55
important right so you’re billing out
15:57
let’s just call it 100 grand a month
15:59
right that’s what you’re billing but
16:00
what you’re collecting is the more
16:01
important number these days right
16:03
so if you’re only collecting 50 grand
16:05
out of the 100 once again it goes back
16:07
to that economic occupancy that means
16:09
you’re on 50 percent
16:10
it means 50 of the people are paying
16:12
rent
16:13
the other 50 percent are living there
16:15
rent free and you’re eventually they’re
16:16
gonna have to evict them or hope that
16:18
one of these rental relief programs
16:20
actually gets off
16:21
and and pays some of the uh the delta
16:23
there right so it’s a very important
16:25
number that we’re tracking
16:26
weekly at this point um kind of
16:30
in tandem with that number of evictions
16:32
right
16:33
you know we haven’t really had a whole
16:34
lot of these over the last 12 months
16:36
um but we we assume that over the next
16:38
six to 12 we absolutely will
16:40
right um and normal times you’re gonna
16:43
have to you know track that more
16:44
frequently and
16:45
hey how many are coming up you’ll
16:47
usually be able to plan them out
16:49
you know and then ultimately that’s
16:51
going to be part of
16:52
you know units that you’re going to have
16:54
to turn and those units are usually
16:56
going to be on the higher end of how
16:57
much things are going to cost right
16:58
so instead of that thousand dollars that
17:00
disgruntled tenant that’s going to get
17:02
evicted is probably going to jam you
17:04
up and destroy most of the unit so now
17:06
you’re probably in the five to seven
17:07
thousand dollar range
17:08
right so something that that you have to
17:10
plan accordingly so you can turn the
17:11
units and they’re not offline too
17:13
too uh too long right um
17:16
another one that we really like to track
17:18
average time to respond to maintenance
17:19
requests
17:20
right that’s an important one you know
17:22
because
17:23
at the end of the day when when your
17:26
tenants walk out that door after signing
17:27
that lease
17:28
the most interaction that they’re going
17:30
to have with the staff the property is
17:32
going to be the maintenance staff
17:33
right are they responsive do they know
17:35
what they’re talking about do they have
17:36
good customer service right
17:38
you know do they get out there quickly
17:39
and fix the problem right
17:41
if your maintenance staff isn’t getting
17:43
out there quickly or
17:44
you know maybe they get out maybe they
17:46
respond but it’s it’s taking
17:48
six weeks to you know order that part or
17:50
whatever that’s gonna look badly maybe
17:51
that’s not your fault
17:52
but you know ultimately that that’s
17:54
something that you need to track
17:55
and make sure that that that plus just
17:58
the amount of work orders in general
18:00
and how many work orders you did the
18:02
year the week prior are
18:03
a couple metrics that we track every
18:05
week absolutely right no no
18:07
let’s keep going so monday mondays every
18:09
monday 3 30 central
18:11
right we spend the first 20 minutes
18:12
talking about different topics today
18:13
we’re talking about
18:14
asset management metrics yeah and we do
18:16
the last 10 minutes q and a we are in
18:18
the last 10 minutes
18:19
i see a lot of questions came in so
18:21
we’ll go through them so you have
18:22
comments questions we were happy to
18:24
answer it it didn’t have to be about
18:25
asset management we’ll talk about
18:26
anything
18:27
you know so first one from our boy
18:29
ronnie top three mistakes
18:31
asset managers make you know i think
18:34
you know there’s there’s a couple things
18:36
that i would i would highlight right
18:38
you know not managing cash correctly
18:40
yeah and and
18:42
to expand on that one though really
18:43
importantly really understanding
18:45
what is being spent yeah on everything
18:48
yeah
18:48
even the stuff that the managing company
18:50
might be sweeping under the rug
18:51
yeah no that’s i mean that’s cash
18:53
management right you know i mean and
18:54
really
18:55
you know um taking you know um
18:59
the property management’s word for it
19:00
right that they’re getting what you said
19:01
that they’re gonna get done
19:02
right you know i would say i dig deeper
19:05
right um
19:06
and dealing with the lender and lender
19:08
requests and
19:09
lender draws and underestimating
19:12
um how long that process takes right and
19:14
that goes back to
19:16
number one which is cash management
19:18
right absolutely if you’re putting if
19:19
you’re saying oh i’ll get around to that
19:20
draw next week or next month
19:22
and then you realize that it takes two
19:24
to three months to actually get the
19:25
drawback
19:26
well guess what you’re going to have
19:27
some pissed off vendors so that all goes
19:29
back to cash management i think you know
19:31
i mean
19:32
those are challenges and and mistakes
19:34
that we’ve made cash management right
19:36
cash management management and also i’ll
19:37
add one more
19:39
moving too fast in the business plan
19:41
yeah right it’s better to slow roll it
19:43
at first get it get us get the property
19:45
just
19:45
to where everybody understands
19:46
everything everybody is trained
19:48
everybody
19:49
is aware of the business plan all of the
19:51
mechanics are out of the way you slowly
19:53
roll out simple things like
19:55
princess parking or covered parking then
19:57
start once everybody understands
19:59
the real situation at the property right
20:01
then go full blast with the capex
20:03
that’s the other one no i think that’s
20:05
important right you know because if you
20:07
look at it like this right you’re
20:08
you’re you’re buying a new property so
20:10
now you’re new ownership maybe
20:12
the old property management company took
20:14
all the employees so now you have new
20:15
employees on a new property
20:17
right and then on top of that you have
20:19
all of this chaos of a major rehab
20:21
and on top of that you’re also like but
20:23
usually if you’re doing if you’re just
20:24
going quickly with your rehab
20:26
you’re essentially putting a square peg
20:27
into a round hole because you’re saying
20:30
before you even bought the property what
20:31
you’re going to do first is hey slow
20:33
roll get a better feel for the property
20:35
is the chiller that you maybe have
20:36
problematic
20:37
is the boiler problematic right really
20:39
understand the situation of the property
20:41
so you can then best spend that rehab
20:43
dollar
20:43
no i agree i agree you know that’s
20:45
that’s that’s a that’s a good question
20:46
ronnie you know you gotta
20:48
and realize that mistakes will be made
20:50
right you just have to be able to
20:52
manage those right you know it’s all
20:53
about mitigating things more so i had a
20:55
good answer okay ben you never give me
20:56
credit
20:57
let’s keep going so ronnie also asks uh
20:59
what point do you hire an asset manager
21:01
versus being the asset manager
21:04
as the principal of your firm that’s a
21:06
good question as well
21:07
ultimately you know asset management is
21:10
critical to the business it is where you
21:13
ride or die in terms of your reputation
21:15
so it’s something that you can never
21:16
gloss over right but at the same time
21:19
it also takes a lot of time and effort
21:20
so you and your business need to figure
21:22
out
21:23
what that point time is right do you
21:25
bring someone on like we decided to
21:26
bring someone on early on
21:27
yeah right so you can freeze the second
21:29
yeah two hours a second higher
21:31
right to free us up to be able to go and
21:33
put together deals right that’s
21:35
ultimately where our time is best spent
21:36
not asset management but asset
21:38
management is more important than
21:39
putting together deals so
21:40
you know it’s kind of different things
21:41
yeah i think you know just to kind of
21:42
add to that right i think you you
21:44
ultimately need to balance your workload
21:46
and you know i would say
21:47
you know up to maybe four or five deals
21:50
you can maybe effectively balance them
21:52
depending on how heavy of a lift they
21:54
are
21:54
and how good of a property management
21:56
company you have if you have a rockstar
21:58
property management company that really
22:00
does a lot of the heavy lifting for you
22:01
it’s going to make
22:02
your life as an asset manager a lot
22:04
easier now if you have
22:05
a bunch of dirt bags and they’re not
22:07
doing a good job and you’re constantly
22:08
having to jump in and
22:09
dive on that grenade it’s gonna be even
22:11
more challenging right but i’d say at
22:13
four or five
22:14
you know you’re gonna have enough money
22:15
kind of coming in from the asset
22:16
management fees that maybe you should
22:18
look at at least try to get somebody in
22:19
there
22:20
even at a junior level that can kind of
22:22
do some of the administrative and
22:24
analysis work for you that’s probably a
22:26
good
22:27
time to start thinking about it all
22:28
right let’s keep going then
22:31
david because i’d ask is it normal
22:34
to see a loss to lease equal to
22:36
one-third of the actual rents for
22:37
example
22:38
just did some underwriting on a property
22:39
that brought 78k gross but lost to lease
22:42
was stated at 27 000.
22:44
the answer is no i mean ultimately we
22:46
can decide today on our property let’s
22:48
say ben and i have a property that
22:49
averages a thousand dollars rents on the
22:50
effective
22:51
we can decide today guys our new rent is
22:54
five thousand dollars
22:55
we now have a whatever a four thousand
22:57
dollar
22:58
spread in los delis lost to lease it’s
23:00
really the market this is where it’s
23:02
really important to go look
23:03
at the last 60 days of leases yes have
23:06
they been getting that new market
23:07
because maybe
23:08
maybe uh you know a chick-fil-a winning
23:10
across the street and everybody wants to
23:11
move to that area because everybody
23:12
loves chick-fil-a
23:13
right uh for four thousand dollars more
23:15
i don’t know you know maybe they’re
23:16
getting that history right but really
23:18
look at the look at the most recently
23:20
says that’s the most telling thing of
23:22
what market actually is
23:23
and a lot you know to that point right
23:25
analyze the rent roll right the rent
23:27
roll is going to show you that stuff
23:28
right you’re going to die
23:29
that’s why people why do people look at
23:30
the rent roll right it’s to study those
23:33
types of things but yeah
23:34
bottom line you could smoke the the the
23:36
gross potential ran up whatever you want
23:38
right you know and and people typically
23:41
when they go to sell
23:42
that’s a strategy that they’ll do
23:43
because then they’ll say well see you
23:45
know i mean that’s
23:46
and then then a naive buyer will say hey
23:48
well maybe i can get that
23:50
when really that was just some mythical
23:51
number that the seller just
23:53
plucked out of the air and put on the
23:54
rent roll all right so next question
23:57
from owen best place to look for
23:59
qualified asset managers how do you keep
24:01
consistently with on-site staff
24:03
consistently and putting data into
24:04
system to provide consistent
24:06
and accurate kpi info uh since info out
24:10
is only as good as info in no garbage in
24:12
garbage out right we’re both tech guys
24:13
we understand that concept and
24:15
ultimately it’s training
24:16
absolutely so a couple things so let’s
24:17
see so the best place to look for
24:18
qualified asset managers
24:20
right it depends on what your goal is
24:21
right some firms we do as well right we
24:23
provide asset management as a service
24:24
for people right on the management side
24:26
for for people that want to pay for that
24:28
now if you’re looking to hire your own
24:30
asset manager ultimately it’s what we’ve
24:33
kind of we’ve gone through multiple
24:34
asset managers what we’ve kind of
24:35
learned is
24:36
someone with more of a financial
24:40
financial financial analysis acumen
24:44
is more important than someone with
24:45
industry experience you could teach some
24:47
of the industry experience right because
24:48
everybody’s going to want their thing a
24:49
little better
24:50
differently right but what you can’t
24:52
teach is someone to be savvy with
24:53
numbers knowing how to
24:54
dig in traverse really analyze right and
24:57
so
24:58
um you know this is where the other
24:59
thing is we all go to a lot of these
25:01
events
25:03
you know figure out who in those events
25:04
might be a good fit no
25:06
you want and you really want someone
25:07
especially you know as you’re getting
25:09
started you want someone with a drive
25:10
right if you’re
25:11
looking to hire someone in house you
25:13
need someone that’s got to drive because
25:15
there’s a lot that goes on and
25:16
you know most people get burned out by
25:18
it yeah i mean i think you know
25:19
and ultimately like any other hire right
25:22
you know you have to put some resumes or
25:24
you have to put some
25:24
job applications out there and you know
25:26
see what you get right
25:28
but it has to be you know like ferris
25:29
had mentioned right somebody that has
25:31
the right personality
25:32
and then you can mold them into
25:34
multi-family centric people right or
25:36
whatever asset class you’re in
25:38
um you know but to your earlier question
25:40
right
25:41
garbage in garbage out right that’s a
25:42
training that’s a training issue and you
25:44
have to
25:44
there’s a constant reiteration of that
25:47
training right this is the way that you
25:48
have to input the data
25:50
because usually typically the software
25:51
is not the problem it’s not some
25:52
software glitch
25:54
right you know it’s just going to spit
25:55
out the number that it was put into the
25:57
system in the first place right
25:58
so you have to constantly train yourself
26:00
and this is where like
26:01
for us right on the management side we
26:03
give owners access to
26:05
the data themselves right it’s not just
26:06
another manually entered report it’s the
26:08
real data in the system so if that’s not
26:10
right then hey there’s someone putting
26:11
something in incorrectly so
26:13
that’s the first thing i can tell people
26:14
i tell the star team on the manager side
26:17
don’t create more work for ourselves
26:18
that could result in an error
26:20
right stick to the core stuff that has
26:22
to be right like the lease in the system
26:24
is the release otherwise we’re not
26:26
charging the right amount so there’s a
26:27
bigger problem
26:27
yeah right and so that’s part of it then
26:29
as an owner right there’s a fine line
26:30
because i experienced on the management
26:32
side
26:32
where owners ask for things that are
26:34
burdensome right versus things that
26:35
aren’t and so understanding
26:37
you know that dynamic right hey i want
26:39
to ask for this and just understanding
26:40
what impact it actually has
26:42
right and so but to your point i mean
26:43
it’s a good day today and good data out
26:45
and
26:45
you should be able to expect your
26:46
management company to give you accurate
26:48
data yeah and there’s always going to be
26:49
a little bit of mission there’s always i
26:50
mean yeah we make mistakes i mean
26:52
but at least in the data in like one
26:54
site we i expect it to be accurate and
26:56
luckily it usually is right it’s some of
26:57
the other stuff that’s more manual yeah
26:59
yeah
26:59
yeah it is where they say or something
27:01
and yeah you know
27:02
that one turns into a seven um so just
27:05
something to keep in mind right
27:06
yeah all right let’s keep going all
27:08
right bobby jenkins sorry i got all my
27:10
questions about low
27:11
income housing and multifamily have
27:13
either of you had experience how are
27:14
utilities allocated
27:16
so we have not done any low income
27:19
housing
27:20
per se ourselves our management team has
27:22
definitely done several of those yeah
27:23
um you know utilities i think yeah it’s
27:26
just ultimately
27:27
there each low-income housing has
27:28
different set of rules you have to
27:30
follow the rules right there’s a max
27:31
that you could charge
27:32
understanding your rent plus your
27:34
utilities and then are you going over or
27:35
not and sometimes that max is on the
27:37
rent
27:37
sometimes that maxes on all expenses all
27:40
right all charges
27:41
and so and there’s compliance companies
27:42
out there yeah there’s companies
27:46
and you should pay those come if you’re
27:47
going to buy we call it so low income
27:49
housing right those are called litec
27:50
litec deals if you’re going to buy a
27:51
like tech deal please pay the company to
27:54
go through the terms and just make sure
27:56
you understand it just so
27:58
whatever business plan you thought you
27:59
were going to do is actually legally
28:01
allowed to be done well and also there’s
28:02
reporting right there’s comp there’s
28:04
ongoing
28:04
reporting and compliance that you have
28:06
to go you have to adhere to so you just
28:08
need to understand that right but yeah
28:10
don’t really have a whole i mean we’ve
28:11
had section 8 tenants right but we’ve
28:14
never had a section 8 property or low
28:16
income housing tax
28:17
credit property so what else we got we
28:20
got a couple more questions or what
28:23
all right let’s see so ronnie asks best
28:24
tips to optimize the lender draw process
28:29
man get the lender out of the process
28:31
yeah yeah that’d be something
28:32
to keep more cash on hand yeah if you
28:34
can if you can not
28:35
escrow versus escrow i think we’ve kind
28:38
of gone to the other side of the
28:39
spectrum
28:40
um you know now it’s all deal-dependent
28:41
everybody so don’t take my head off for
28:43
this right but
28:44
it’s a lot easier when you’ve got the
28:46
money in your own manager account
28:48
and you just have the property
28:49
management go through the draw process
28:51
with you and near the bank at that point
28:53
um it’s going to keep people the money’s
28:55
going to be flowing better
28:57
vendors are going to get paid more
28:58
quickly because ultimately the lender
29:00
makes it a real challenge
29:01
you know and i know that they do that
29:02
for compliance reasons on their side too
29:05
but there has been certain times when
29:07
we’ve waited three four five months
29:09
and this was pre coven for draws to get
29:12
processed
29:13
and you can imagine what that did to our
29:15
properties it jammed us up it jammed up
29:17
the vendors
29:18
people were upset you know and we
29:21
ultimately had to get threatened
29:22
threatening with uh with the lender to
29:24
get them to actually act on something
29:26
and so my thing is is if you can get
29:28
them out of the process
29:29
you know that’s probably the best option
29:32
but i would say the second best option
29:33
if you have to escrow it is just
29:35
be up front right you know you know that
29:37
the work’s gonna be done in a week or
29:38
two
29:39
go ahead and start that draw process
29:40
because by the time they send an
29:42
inspector out there
29:43
it’s already going to be done
29:44
paperwork’s going to be in there don’t
29:45
wait until it’s 100 complete and
29:47
everything’s done
29:48
everything all the eyes are dotted and
29:50
t’s are crossed
29:51
right because you’re just pushing that
29:52
out even more two three four weeks
29:55
right and your vendor’s gonna be the one
29:56
that’s ultimately gonna hold the bag on
29:57
that one
29:58
so something to keep into consideration
30:00
absolutely so
30:01
any comments questions we are already at
30:03
time so we’ll take one more if we got it
30:06
see uh one of them is i’m carlos asking
30:09
what kpis were discussed so far go ahead
30:10
and watch the replay carlos
30:12
yeah we got a lot and then this is not
30:13
an all-encompassing video folks right we
30:15
can only talk about the stuff for 20
30:16
minutes
30:17
but you know these are some major ones
30:19
that we like to track so
30:20
you know take that into consideration
30:22
and drop some of the comments people are
30:23
going to watch this after the fact if
30:24
you guys know of any that you really
30:25
like to track
30:26
you know we want it to be interactive
30:28
we’re help we’re here to help everybody
30:29
out to do the business the right way
30:31
anything else that’s it all right well
30:33
before we before we wrap up before we
30:36
wrap up
30:37
oh my gosh multi-family investor network
30:40
conference
30:40
a big conference we do three times a
30:42
year but we’re only going to do twice
30:44
this year so it’s the last one for the
30:45
year i think right what what
30:46
i don’t think we’re gonna do another one
30:47
later are we i thought we were doing a
30:48
third one i don’t know
30:51
the team wants to do a third one i guess
30:52
i didn’t think about it because
30:54
we usually try to do three we this one
30:56
we would have done like may or june’s
30:57
but
30:58
kind of late but we’ll figure it out
30:59
maybe maybe we’ll do three maybe we’ll
31:00
do another one
31:01
regardless it’s gonna be just as
31:02
fabulous miami so
31:04
when you’re going to miami ben’s going
31:06
to make sure to get sunscreen so he
31:07
doesn’t burn that bald head of it
31:08
definitely definitely in a hat
31:10
and it’s probably going to steal one of
31:11
my hats yes uh miami july 24th we’re
31:14
excited we had a ton of interest so
31:16
maybe we’ll sell this one out we’ll see
31:18
i mean we’ve got a lot of interest so
31:19
far
31:19
and what’s good looking forward to save
31:21
some people some money use the coupon
31:22
code disrupt for 100
31:24
off oh so mfinvestornetwork.com
31:28
go check it out we’re getting some great
31:30
speakers some great panels
31:32
you know ultimately it’s all about
31:33
networking as well and who’s that
31:35
who can’t yeah it’s miami come on i
31:37
don’t know people like seriously
31:39
i’m more excited to go to miami than i
31:40
am to just be doing a conference event
31:42
let’s be honest
31:43
i probably have to admit the same you
31:45
know but in the meantime
31:47
if anybody wants to check out some of
31:48
the great resources some of the great
31:50
stuff that we have to offer
31:51
checklists webinar replays podcasts that
31:54
we’ve been on
31:55
it’s all at the toolkit
31:58
disruptequity.com
31:59
toolkit check it out it’s completely
32:01
free we’re not trying to sell you
32:02
anything
32:03
this is just a great thing that’s nice
32:05
and you know um
32:06
put together and shanna ultimately does
32:08
a great job keeping up with it so
32:10
check it out there and you know
32:12
hopefully get a little bit more
32:13
information that we provide right so
32:16
what are we talking about next week
32:18
next week we’re talking about
32:20
multi-family investing market update
32:22
oh oh oh so we’re middle of 2021
32:25
obviously
32:25
in debt market projections and more oh
32:28
my gosh that one’s gonna be crazy
32:30
that’s gonna be crazy so check it out
32:32
next week
32:33
money mondays what time do we do it 3 30
32:36
central every week

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