At Origin, we design lifestyles for the residents who call our multifamily buildings home. This is how we’re disrupting the industry, outperforming our competitors, and adding value for our investors. One crucial key to multifamily real estate ownership is effective property management. Many of our competitors choose to have property management teams on staff. However, it’s not enough to just hire the right people and expect your properties to perform. That’s why at Origin Investments we take a different approach.
We instead choose to outsource some aspects of property management responsibilities across a network of partners. This helps us benchmark performance and receive the best from each company. Our partners free us from tenant screening, rent collection, human resources and other operational details. We are then able to focus on creative aspects of acquisition, development, business plan execution and other property investment management decisions that create more wealth for our investors.
A Reciprocal Relationship with Third-Party Property Managers
The property management business is largely templated because companies become more efficient when they have standard processes, scalable expenses and enterprise-level tools that work across many multifamily properties. Choosing companies that have the fundamentals down is crucial, and I’ll cover how we do this later in the article.
But what sets Origin apart as a real estate manager is that which can’t be templated — our unparalleled attention to detail and extensive knowledge of the unique needs of each of our properties. We provide guidance on strategy, pricing, capital expenditures, and back-end reporting. Our partnership allows our property managers to focus on the things that matter most to the residents – what they experience in their homes. And when they can focus on this, our sales outperform.
We also provide advanced sales training to our property management partners and additional training based on changing market conditions, in addition to the standard processes, regulations and systems trainings. For instance, in March 2020, we held two virtual training sessions, focusing on touchless tours and personalized digital navigation in response to the outbreak of COVID-19. We find our dynamic trainings provide regular check-ins that are extremely motivating.
Another critical differentiator is that we provide real time insight and performance analytics that our on-site teams use to make informed decisions. This helps us be anticipatory rather than reactionary. In other words, we don’t sit back and wait to address negative resident experiences. We instead strategically create positive touch points with our residents, with help from the property manager, enhancing the resident experience. Some examples of this anticipatory approach include installing custom closets, dropping in for a hotel cleaning, throwing thematic parties, bringing in food trucks to the property and sponsoring local events.
We also benchmark our performance with a business intelligence platform and a resident engagement/customer service software to provide actionable insights and drive future improvements. And we choose to partner with multiple property management companies so that we can leverage the most successful strategies and deploy them more widely. Sharing operational tips like resident engagement and digital marketing strategies allows us to remain agile.
How We Find the Best Multifamily Property Managers
We have vetted several dozen prospects for nine of our 16 assets. It’s a rigorous process, and to ensure success, we developed a system to assess a manager’s potential to fulfill our needs based on their experience and past performance. These are the guiding principles we use to choose the best property managers for our properties:
- Do the research. Our property management company hiring process is intense. Before we even agree to meet with a potential partner, we begin the vetting process by conducting extensive research of the company’s current properties. We inspect the online experience, resident reviews and social media programming provided at each of their properties. We analyze the rent growth and occupancy of the company’s other properties in our submarkets. If we see success, we want to determine whether their success is because of their process improvements or despite them. We also investigate what their employees are saying on Glassdoor.com.
- Match the property manager to our business plan. We choose property management companies that have experience with the business plans for each of our multifamily properties. The garden apartment renovation, for example, shows how a value-add property investment, aimed at enhancing revenue, benefits from a company with deep construction management expertise. For our core real estate investments, by contrast, we hire apartment management companies to maintain a steady rental income stream with preventive maintenance from skilled technicians, while the property manager for a Class A luxury rental would focus on providing excellent customer service to retain their building’s elite status.
- Size up the organization’s capabilities. The size of an apartment management company is not necessarily the best predictor of its success. At Origin, we always consider property management companies with a regional footprint who provide focused input and a significant commitment to us. These advantages are sometimes lacking in big firms that can lose sight of small clients. We limit our real estate portfolio to large regional growth markets and match that footprint to strong partners who can share employees among sister properties, or draw from within the organization to fill short-term needs. Their local saturation also helps us develop submarket metrics that we can track to challenge ourselves to outperform.
- Drive renter retention with employee retention. In a high-turnover industry, with fierce competition for prime positions, location and pay is a constant battle. We strategically engage companies that offer training programs, paths to promotion, employee tools, and team-oriented cultures. Decades of research has found high job satisfaction correlates with high customer satisfaction. We deliberately select partner management companies that have three-star or higher ratings on glassdoor.com. Manpower mastery and customer service are in the DNA of the best property managers.
- Respect local authority. Development projects in particular need a partner who understands regional regulations. Local limits and expenses can account for 30 percent or more of development costs, the National Multifamily Housing Council estimates. At one of our properties, our property management company tapped its local contractor network to meet our construction deadlines. A strong working relationship with local authorities helped our property manager expedite permits and cut construction downtime. Their established vendor relationships also saved time and money by eliminating the need to find, research, and meet with prospective service providers. This is particularly important today given new constraints on the construction industry that vary by market.
Working Together to Decrease Turnover and Increase Rental Rates
Finding the best property management firms is just a first step in ensuring a successful outcome at our multifamily investments. We don’t just hire these firms and let them run the business. We are active managers who talk daily with our onsite managers to address issues early and reward workers directly for exemplary work. We also provide our property managers with best-in-class online tools to take applications, screen prospective tenants, handle rent payments, and submit maintenance requests. Likewise, we provide our residents with user-friendly apps to communicate with management, become part of the community, and receive updates.
But, as much as we vet our partner firms, inevitably we face situations in which a change is required. One recent example occurred at our 26-year-old garden apartment community. We intended to renovate the property’s 400 units and during this work the incumbent property manager fell behind. They missed construction deadlines and mismanaged quality control and costs. Worst of all, the mismanagement was having a negative impact on the resident experience. In this case, the existing property management team was just unable to execute our vision. So, we transitioned property management to a company with proven development expertise and they brought the project back on track.
The new property manager gracefully smoothed ruffled feathers of the construction team and tenants, moving residents to other apartments as work progressed and scheduling renovations with minimal disruption. In the three months prior to the management transition and in the three months following, the average days vacant at the property dropped from 48 to 32 percent and the occupancy grew from 87 to 91 percent. Best of all, the property scored higher in online reviews and it has proved to be a quality asset with steadily increasing rental income since the change was made.
At Origin, we ultimately hire property managers who are competent, trustworthy, a good fit for the property and able to maximize rental income. By working together with our property management partners, we provide amazing experiences for our residents and create those “instagrammable moments” that convey to residents and potential residents that their lives will be better if they live at our property. And it’s when we create this sentiment together that turnover decreases, rental rates increase, and ultimately, we generate the best possible returns for our investors.