So what steps can I take to minimize the risks right now of owning Apartment buildings in San Diego?

So what steps can I take to minimize the risks right now of owning Apartment buildings in San Diego?

A question was poised on www.sdcia.com 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 apartment buildings right now?

That was a good question and one I had not been thinking about as much lately because of all the buying and flipping of properties I was doing. Until I had a bunch of rentals I needed to get occupied so I didn’t have a huge vacancy rate.

Well 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 your grossly under rented you need to retain as high a percentage of possible of your current apartment tenants.
        • Keep a reminder in your calendar 60 days before there 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 and also a good idea to find out why. Try to keep them.
      • Either have a nicer product or better rents.
        • Improvements
        • Spend money on items that may cause emergency calls first or are unsafe. These issues will happen and if possible deal with them on your own time rather than them dictate to you. 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 bang for your buck is to
        • Paint the unit.
        • I like to make sure the texture looks good (does not have to be perfect just not patches everywhere) and then paint the place in a two tone color. A wall color and white for the ceiling. This will initially cost more 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.
        • 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
      1. 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 if you want a 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 give you a call.
    4. HAVE GOOD SYSTEMS IN PLACE
      1. 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 upon what we are doing. In addition it allows me to more 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.
      2. Here is a quick example of a sample turnover procedures.
      • Once someone gives us notice to vacate (here is a 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 walkthroug, letters to go out to tenant with instructions on ours and there responsibilities)
      • Once it is vacant
      • (i.e. 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 calls gets the rest of there 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 THERE OWN code which we inform them to not give out to anyone because it is tracked (see sample form letter we EMAIL to prospects). We are then able to log on to see who and when 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 there email address if they decide not to rent with us now we can update them in the future about upcoming vacancies 6 ,12,18,24  months from now when they may be thinking of moving again.

          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 and so does 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 a 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)
            • etc.
          • All of these are put into docusign for email/electronic email distribution. An email get’s sent  out via email which is signed by both parties (legally binding) and no paper has to be printed. The fully executed copy goes in there 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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