Working in apartment property management is challenging. Even though it can teach you some special skills (especially if you want to own apartment buildings yourself one day), it’s definitely not for everyone.
That said, it can be a gratifying job. Everyone wins when you take great care of your tenants and employees, and the owner is happy. Plus, you have the opportunity to build a great community that can live on even after you move on.
Apartment Property Management Basics
To help prepare you for the ins and outs of this career field, here are a few things apartment property managers regularly have going on.
Marketing your complex is one of your most important jobs. Even if you live in an area where it’s relatively easy to keep a low vacancy rate, you still need to stay on top of marketing. Indeed, you want a large pool of potential tenants applying to live at your property anytime. It’s much easier to find great quality tenants from an extensive collection than a very small one, and attracting quality tenants is the name of the game.
Even though the internet opens up great marketing opportunities, don’t shy away from offline methods. For example, you can build relationships with local businesses to help gain referrals. In addition, you can look into billboards, putting a decal on your car, or having events open to the public.
As referenced earlier, you want the highest quality tenants coming to live in your apartments. Even though it’s difficult to judge how someone will treat the property, there are a few good indicators to look into:
- Credit history: Do they pay bills on time?
- Previous landlords: Were they happy the tenant left, or did they love how easy they were to work with?
- Employment: Do they have a regular paycheck to sustain the monthly rent?
- Vehicle: Do they maintain their car, or is it falling apart and trashed? They may treat your apartment the same way!
- Background check: Do they have a criminal record or previous brushes with the law?
Even though it takes time to screen tenants, it’s much easier to turn away potential tenants from the beginning than to kick them out and deal with repairs/community consequences later.
Landlords love apartment complexes because it allows them to use the power of scale. Versus just renting out a few single-family homes, they can use the same amount of land to house a few hundred tenants!
Having many units also multiplies the risk of maintenance issues. At any one time, you can expect something to need work around the complex. For example, one person’s dishwasher can break because a Tupperware fell and melted onto the heating element. A roof gets damaged during a storm and is now leaking. An angry tenant kicks a hole in the wall. That little dog (that met your weight limit for pets) leaves urine stains all over the carpet.
Because there is always so much work to be done, most large complexes employ their own maintenance staff. Even though they can’t do everything, having a friendly, competent maintenance staff will help take a huge load off your shoulders!
Even though you don’t need to be an accountant, having some bookkeeping knowledge and experience will help. Good property managers can read numbers and know what’s going on. That allows them to advise the landlord on potential actions to help keep the business in the black.
Here are a few metrics you should track:
- Maintenance expenses (materials and labor)
- Marketing expenses (advertising budget, time spent, etc.)
- Turnover rate
- Number of new tenants walking in the door and how they found you
- Rent payments (on-time, late, etc.)
- Cost trends (this year vs. the last several years)
In any business, numbers tell a story. To understand the story being told, apartment property managers should get comfortable with spreadsheets like Microsoft Excel. Reliable property management software will also help track everything we’ve discussed, including service requests and maintenance schedules.
The Challenges of Apartment Property Management
Apartment management is so unlike managing a single-family home. Property management for apartment complexes tends to bring unique challenges for several reasons.
Even if you have a small complex, you will deal with at least two tenants or upwards of a dozen or more. That challenges your management skills because the more people you have living in smaller spaces, the more likely you will get complaints.
For example, almost any apartment complex that isn’t built out of solid concrete will have downstairs neighbors complain about their upstairs neighbors. All it takes is one person with a heavy foot, a dog constantly jumping around, or a few rowdy kids to thud on the ceiling all day long.
Another example is messiness. You may have 15 clean tenants in a building, but the 16th makes a huge mess. They leave stuff out in the walkways, garbage on the sidewalk, or don’t clean up after their dog, all of which will elicit complaints from their neighbors.
When that happens, you must lay down the law because you’re in charge.
YOU ARE THE HOA
Homeowners associations tend to get a bad rap sometimes. They’re seen as too strict and overbearing, forcing homeowners to do certain things they may not want to.
But guess what—apartment management essentially means YOU are the HOA. So when someone is causing a mess, being too loud, or just not following the rules in general, you’re the bad guy! And you’re the authority who is expected to rectify unpleasant situations.
There is a good side to this, though. You get to screen the tenants as they come in, whereas an HOA can’t do that. Plus, you control how the complex’s rules are set up, and you can easily display them on a website.
When working with a series of single-family homes, physically going to the tenants to collect rent is a pain. You may be lucky with your tenants paying on time, but that’s rarely the case.
With apartment management, you can easily visit all of your unpaying tenants within an hour and do your collection. As part of your lease agreement, you can set a particular hour and day of the month for all unpaid rent to be collected.
Either way, an online system is the best method to collect rent for apartments. If you manually process those checks every month, you’re adding unnecessary time and effort.
If your apartment complex has even four tenants, that’s four times the maintenance you need to attend to compared to just one tenant! Appliances break down, leaks occur, bugs get into the building, old tenants move out, and new ones come in.
Because a complex has more regular maintenance than a single-family home, you’ll want an excellent way to track your maintenance projects. Something as simple as an Excel spreadsheet can work, but you definitely want to consider a cloud-based application instead. That way, you or your partners can access maintenance issues from anywhere.
LOCAL LAWS AND REGULATIONS
Renting out a single-family home has different legal guidelines than renting out apartments. If you aren’t familiar with the local requirements, consider talking to a lawyer or looking through your state and city’s laws regarding multifamily housing.
Apartment Management Companies
Being a landlord is tough enough, but if you’re taking care of everything in your apartment rental business, you may add more stress than you really need. For this reason, looking for an apartment property management company to help take the load off your shoulders is an excellent idea.
For those on the hunt, I have good news and bad news. The good news is there are a lot of great, reputable companies out there that will gladly manage your apartments for you. The bad news is that it can be challenging to select the right one. There are several factors to consider, from cost and the services provided to experience.
Here are a few tips to help you find the best company for you.
Comparing apples to apples
The first thing to remember is to make sure you’re not comparing apples to oranges. Because there are so many complexities in this industry, this is an easy trap to fall into if you don’t pay close attention to the contracts and proposals.
For example, one company may offer a much lower management fee than its main competitor, but it’ll likely make up for that cost somewhere else. On the other hand, maybe their leasing fees are higher. Or it could be they’re new to your market and still getting a feel for the area.
While you probably won’t be able to line up everything, weigh the pros and cons as you examine each company’s strengths and weaknesses.
Experience is everything
Let’s face it—this isn’t the most innovative industry in the world. So while it’s nice to see a few young faces on a team of property managers, the main thing you should look for is experience.
- Experience and knowledge of your local area, including its laws
- An extensive background in managing apartments specifically (not detached single-family homes)
- A history with their company, so they understand its culture and won’t leave
- The ability to build rapport and relationships with tenants (because they’ve done it hundreds of times)
That does not mean you want someone who doesn’t use their brain. On the contrary, when a new type of situation arises, such as an emergency in the complex, you want someone flexible enough to deal with it well.
But in general, you’re looking for a team that knows the business like the back of its hand!
Management companies don’t come cheap
Obviously, the cost is an essential factor in doing business. A property manager that charges only $50 per unit may appear to save you a lot of money over another that charges $150. But there’s a reason why that second company can charge higher prices. It may not be easy to see at first, but that premium is likely justified somehow. Maybe it’s their more extensive experience or ability to retain tenants longer than the industry average.
Even though it will hurt your pocket a little more initially, it’s probably worth the investment in the long run to avoid a “budget” property manager.
Visit their properties
You probably already know this, but it’s still worth saying. If you really want to see how an apartment management company operates, visit a complex they’re already managing. Try to get a tour and see how well the company takes care of you as a potential tenant.
You can also ask for references to speak with existing tenants. Hopefully, these tenants will be honest with you and help you decide.
The last place to look is the Web. Most of the big companies out there will have reviews online. Even if there aren’t very many, every little bit helps. These reviews may also help reinforce (or contrast with) your observations while visiting the property.
Remember that unhappy tenants and customers are more likely to write a review than someone satisfied with the service.
Should You Go Mixed-Use?
What could be more appealing than an apartment building with the comfort of having businesses, stores, and offices right below it? A mixed-use property offers exactly that. Offering simple and close commutes to work or the grocery store will likely keep your building occupied but can also add to the risk of being the cause of other issues from fire hazards and pest infestations to security concerns and tenant disputes.
For anybody looking to sink some capital in real estate rentals, it’s better to be aware of what questions to ask and the risks involved before investing in a mixed-use building to avoid loss of money or possible confrontation with occupants in the building.
HOURS OF OPERATION
While your lease may specify specific hours of minimal noise for your tenants, the businesses below them may operate during the late night hours. Make sure to know the hours of operation for other businesses in the building and that your possible tenants are aware of their hours.
Popular businesses in a mixed use property may get a lot of traffic—foot and automobile—so having extra insulated floors and ceilings to reduce noise will help. Also having extra parking available specifically for tenants would cause less problems with other business owners within the building.
If there are restaurants below your tenants’ apartments, improper ventilation could cause the building to smell of fried, burnt, or bad food. Be sure to find out what type of ventilation or odor control systems are used in them and also inspect the apartments units upstairs to make sure the ventilation systems are working and you cannot smell any odors coming from the ground floors.
Having restaurants or supermarkets below your units may cause an infestation of rodents and bugs if they do not abide by cleanliness and waste management specifications. Know the waste disposal schedule for the businesses below and keep a trash room separate for your tenants.
If you decide to invest in a mixed-used building, be sure to check out how the utilities for the businesses below are metered. Also determine whether the utilities are paid by the individual tenants or if they are incorporated into the monthly rent. Make sure your residents are only paying for the consumption of utilities for their units and not extra due to the business in the building.
Having commercial business below your residents will mean a substantial opportunity for non-residential access to the building. Be sure to prevent strangers from entering your residential building with a security system of some sort. Also pay attention to the amount of traffic in the businesses below—a bank or office will have less foot traffic and regular business hours compared to a coffee shop or bar and grill restaurant.
Mixed-Use Preference Statistics
A poll conducted by the National Association of Realtors in 2017 found that 62% of millennials stated they would rather live where there is more public transportation and have access to closer shopping areas. The same study also revealed that 49% named a short commute to work as a deciding factor in determining where to live. So while more Americans find it appealing to live in mixed-use buildings, make sure to do your homework before you purchase to avoid complications in the future.
Whether you intend to invest in apartment complexes or are looking to specialize in apartment property management, it pays to know what challenges and rewards await you. A little due diligence goes a long way to save you from potential misadventures you’re not aware of.