A question was poised on the SDICA forum that I thought would be a good one to address.

The question was, “what steps can I take to minimize my risk of buying and owning an apartment buildings right now”?

Great question

Ask and you shall receive. Here is what I am doing to keep my properties operating effectively.

    1. Tenant retention
      • You’ve heard the old saying in business it’s easier to keep a client than to get a new one. Well, your tenants are your clients, and unless you’re grossly under-rented, you need to retain as high a percentage of possible of your current apartment tenants.
        • Keep a reminder in your calendar for 60 days before their lease expiration, so you can talk to them about renewing. If they are going to move, it’s best to find out as soon as possible. It’s helpful to find out why because sometimes you may be able to convince them to stay if its an issue that is rectifiable.
      • Have a Nicer Product or Better Rents (Or Both)
        • Tenant Improvements
        • Start by spending money on items that are unsafe or may cause emergency calls. These issues will happen, and if possible deal with them before it becomes a problem. Being proactive goes a long way. It also saves a lot of money and aggravation not to get calls at midnight.
        • When making improvements to the units, some of the best ways to get maximum bang for your buck is to:
          • Paint the unit – Two-tone color choices (wall color and white ceiling) are always a good idea. This will cost more initially, but once it is complete you will rarely ever have to paint the ceiling. You also want to paint the base, case, and doors a nice white color in semi-gloss. The more you can make the place feel like a home rather than an apartment the better rents and retention you will get.
          •  I like to make sure the texture looks well-done. It does not have to be perfect,  but you definitely do not want patches everywhere.
          • If you’re looking for a good painter, I highly recommend TruLine Painting. I’ve used them on all of my projects and they really do a great job of giving my units a quality facelift.
        • Update the interior doors & hardware
        • Flooring – I like to use as much tile and or laminate (the stuff that looks like wood) as possible. It costs a little more the first time but lasts 5 times as much as carpet and you will probably get about 5% more in rent.
    2. Get ahead of the game
      • If you have vacancies coming up get on it quick and return calls immediately.
    3. Track the market
      • Do rent surveys & talk to other apartment owners of similar buildings in the area where you own property (send me an email or drop a comment if you want to know how to do rent survey report & spreadsheet). This is also a great way of finding properties for sale. Make sure to give everyone you talk to your information and let them know that if they ever think about selling to give you a call.
    4. HAVE GOOD SYSTEMS IN PLACE
      • We automate as many of the processes as possible by having good checklists of activities we do repetitively. Instruction sets are created on each item to make sure that we do it correctly and consistently. It’s hard to figure out what is and is not working if you don’t do things consistently so you can track them. It makes it so much easier to improve on what we are doing. In addition, it allows me to easily hire people and get them up to speed quickly, or, if I lose someone, I know how to do that task and I am not held hostage or overly dependent on any one person.

Here is a quick example of sample turnover procedures.

  • Once someone gives us notice to vacate (sample of one of our move out inspection flow charts)

For example we have our systems for

        • Pre-marketing,
        • Final walk through (see sample flow chart of walk-through) letters go out to tenant with instructions on ours and their responsibilities.
      • Once it is vacant we will: walk through checklists for repairs, vendor coordination, property showing, applications etc.)
        • A few things we do to make it more efficient: Use an electronic Realtor (sentry) lock box. This device allows my assistant to generate up to 10 random codes daily from the office. When someone calls my google voice number, I get a text with the voice message which I forward to her which goes in our database. She then calls them back to get the rest of their contact info including an email. We then send the prospect an email with instructions on how to get to the property, how to enter, and THEIR OWN code which we inform them to not give out to anyone because it is tracked (see sample form letter below which we EMAIL to prospects). We are then able to log on to see who looked at the property so we can follow up to see if they are ready to fill out an application and why or why not. Also now that we have their email address, if they decide not to rent with us we now can update them in the future about upcoming vacancies 6 ,12,18,24  months from now when they may be thinking of moving again. This is crucial for renting out units fast.
        • Viewing instructions for our units

          • If they want to fill out an application, we  use my smart move/transunion credit/criminal check which they do online and either pay for or they give us the cashiers check and we then pay for (I like this way better because they are more committed after giving us the credit check fee) which we get a copy of along with the prospect. With this service, I do not have to collect social security codes and worry about certain compliance issues. In addition, it also speeds up the process. We then get an approve or disapprove based on our criteria and can then make a decision.
          • Once an application is accepted we send them an approval letter/email/phone call and let them know they will shortly receive a lease package via email for electronic signature using a service called docusign which is legally binding.
          • My assistant puts together the resident package which includes some of these items
            • lease agreement
            • resident welcome manual which spells out the rules in detail and what is expected from all parties
            • non smoking/drug addendum
            • maintenance addendum (look on blog for sample)
          • All of these are put into docusign for email/electronic email distribution. An email get’s sent out which is signed by both parties (legally binding) and no paper has to be printed. The fully executed copy goes in their file which is on our computer server for any reference in the future.

Hopefully this can give you some ideas on better ways to operate your apartments which will reduce your risk. As always feel free to give me a call or drop me an email to discuss further.

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