You don’t have to be crazy to work here: we’ll train you! That is on the front page of the manager’s handbook … if there was one! I’ve been a Property Manager for what seems like a million years. Here’s what my training track looked like: I got a call on a Tuesday afternoon in 1990-something, “Hey, I have a building I need managed. So-and-so thought you would be a good fit. Free rent, utilities included!” I thought I had won the golden ticket. I moved into my Beverly Hills “adjacent” studio in a 24-unit building that was under-market and under a pile of deadly construction on the roof! It was beautiful.
I’ve always loved buildings. I earned my first real estate license in Indiana when I was 21 and now some years later, I could not believe my luck. Then I got my first assignment: delinquency (or rather the non-payment by the prostitute that the former owner was having an affair with). I had to kick her out. They gave me a week. I had her out in two days.
The next week, the owners said that I had to post notices with rental increases, as the building was not rent-controlled. Notices went up, and I was at 50% occupancy within 60 days. Management was concerned. Well, more panicked and loud –really loud. I held open houses for two hours on one Saturday and filled up the building within two weeks. The units were turned with a swiftness of a spring Tornado in Oklahoma, filled now with doctors, business owners, and actors who actually made money.
The building was painted, I added a lovely cover and a gorgeous gazebo to the non-working jacuzzi and what they were hoping was going to be a penthouse, was demolished as it was not permitted. With all that I had achieved since that delinquency, I had brought the building up to market rent and they were shocked. Then, I was really tested – given more buildings, more prostitutes; throw in some drug dealers for good measure – and after six months, the demographics of those buildings had changed into high-rent paying residents.
Apparently, I had the “Secret Sauce” of managers; I could turn a building. Of course, those small buildings were ages ago, and I went on to several management companies to sprinkle my magic mojo: change up demographics, raising revenue, and value-adding like the She-rah of L.A. I’ve overseen 400-unit garden apartments to midrise 15-story complexes in Irvine with a total of 2,827 units and 83 buildings in under 20 years. And when I’ve taken over, what I’ve found is one underlying story to these units: the managers had failed – failed to turn them, failed to captivate their team, failed their owners. But why?
It’s time to share that secret. It’s huge and no one has ever tried it. Ok, the secret is there is no secret! No, not one! Normally, I’ll break down my property drill down into seven steps. You get the Cliff-Notes version here with The Main 3.
1) Staffing – The manager must be “all in” on the building, no matter what time – day or night. The manager sets the tone, being the major player in everyone’s sand box. There is a reason behind it. The presence of a manager around a building displays that someone is at the helm. A manager who is stuck behind a desk, tied to an office locked away doesn’t set a precedence to the staff, residents, or vendors. I also believe that staff is not given enough credit. If they lease, they are closing at above 40% consistently. If they are in service, recognize when work orders are fixed or the property is spotless. They all can take ownership for the property. When one person on the team tries to undermine the whole operation, it can sink a community faster than 20 notices on the same day. Leasing can sink service and service can sink leasing. What ways? Here are just a couple: someone who has their phone out all day long on social media, someone who teaches the staff how to clock out and back in without being on property, or even a vendor that uses your pool as his private party when the office is closed. A good manager/staff will catch all of that and nip it in the bud. Any of these things can lead to a complex disaster if not remedied swiftly. The only way a manager can catch these things is for him or her to be where they are not expected. That said, I am not a proponent for a manager living on a large complex site. Not only are you setting yourself up for someone that spends extra time at their unit, but they might be unable to functionally take care of delinquency and resident issues without worrying about retaliation. If you need someone to live on site, give that to a maintenance manager or service tech. They are better equipped to handle the emergencies and have no effect on delinquency. With this technique, when the manager shows up outside of normal business hours, it’s always effective.
2) Delinquency – High delinquency means residents are running the property and re-setting your lease, the late fee is not high enough, or payment processing procedures are not being followed. Each of these can be easily fixed and can generate not only a stronger NOI resident experience, but it also eases the first-of-the-month headaches. Let’s face it: when residents run the property, the property is out of control. Residents will set not only the payment terms, but how the property will be upkept. Some owners are okay with this if the review social media platforms are positive. However, you will always have a lower ROI/NOI on these properties because the threat will always be there.
At some point, owners take the bad review with a positive response to the bad review and move on. The lease is the lease, and if you give the power back to your staff to uphold that rather than living in fear, the short fall will not outweigh the revenue growth for the owner. Late fees are the best NOI builder. Often, they are overlooked because owners are afraid to take a stand on late payments. Prior to raising late fees, please check with your legal team. While I am not a lawyer, I have always been able to raise a late fee to 10%. Yes, it’s steep. Yes, the late-payers have a fit. And yes, they pay on time if you stick to the lease. How can you do that? Upon new leases, and at time of renewal.
Now, I am not one to sugar coat it. I put it on the renewal lease offer, it’s noted several times in the lease, and it’s brought up in every conversation with the resident so it’s not a surprise. I repeat: it’s NOT a surprise. Surprises are when resident relations are ruined. I also believe in a one-time forgiveness for the life of the lease, not each lease term. When the first month rolls around and they are late, you can send the 3-day notice with the rental amount, the day after the due date and I attach a slip of bright colored paper that shows the late fee. Keep in mind that only rent can be posted on a “3 Day Pay or Quit”. I also post the “3 Day Pay or Quit” notice with four pieces of tape and face out. Nope, I don’t sugar coat it. Do residents get upset? The first time, yes. They will be mad, but this is a great way to stop delinquency.
Now you’ve taken care of delinquency and – BONUS – the mortgage is paid on time. For larger buildings, it takes about one year to clear out the consistent delinquent residents, but after that, maintaining zero delinquency is a breeze. If delinquency spikes again, and it’s not a one-off eviction, it means you’re sending out your notices a day or two after your cutoff date. I’ve seen delinquency held for four years at zero delinquency with this method.
All properties need policies and procedures. The larger property management companies will think they have this covered because they have a check off box on their company portal that says the team member has read them and will follow them. Now, when is the last time you read the fine print? No one takes the time to read it. A strong manager will be told by their team that no other teams must do what they must do. My teams have been known to wear the bracelets “WWJD” as in “What would Janet do?” They all think I have these wild ideas and polices no one else has to follow. Biggest secret to my sauce, remember there’s no secret! I hate to give this one away: I read. Every company I have worked for I sat down and read every policy and procedure. I read changes. I called lawyers when I was concerned it would not pertain to my state. National chains roll our programs all the time that may go against state law. Managers need to know if something doesn’t seem right and the company rolls it out. Support your managers to take the lead. When an owner or property management company takes a stance on backing up their managers and teams, the property will see a shift in strength. Each shift to the positive, equals positive revenue.
3) Occupancy – This is where the trust factor must be instilled for the manager and the team. When a property receives a notice and the Regional or Asset Manager panics, that spins the property into panic mode. Nothing good ever comes out for a panicked property, especially when there is no need to panic. Transparency is key. All notices received go into your system the day the notice is given.
The normal turn time on a unit is five business days. If your turn time is longer, look at your efficiency standards. Also, push the residents to do the second final walk-throughs upon giving notice. My standard is that my maintenance supervisor walks the unit with the resident within one week of giving notice. He can then give the resident the worst-case scenario on move out charges, and make the turn schedule based on the move-out date. By always letting the residents know the worst-case scenario, you are building an expectation upon which you should be able to over deliver.
Keep the property in immaculate cleanliness standards that your team understands. Then work with the leasing team. How do they describe the property? If they can’t sell the WOW factors over the phone, the team needs more training. I spend around 10-15 minutes on each phone call. IF and only IF the leasing portal is down and the lease cannot be converted over the phone, the tour appointment can be considered a formality. There is a stigma against pre-leasing, that you must show the unit. This means your leasing team hasn’t been trained on the beauty of what they should be offering, or worse – don’t believe it.
This is where the magic happens in leasing: setting the scene for the property and the neighborhood and how your property stands out from the others in quality and community. Have you made a community? Do you know how? What if you own only one house? Can you still set community? YES! I get so excited about this! As an owner, push for this! It’s not only the occupancy key but the renewal key. This is what has gained me between 6-10% renewal increases. Even during the last recession, when buildings tanked, mine was ranked 3rd in my company, with increased revenue on renewals between 3-5%. I value-added! I gave the residents more than what they expected. The adage of “Under-promise and over-deliver” is the key! Then get out into your community. Be the change you want to be in the world. Yes, service can change demographics, change a stigma about a property and change the spirit of a team. Prospects want to connect with those making a difference.
To review: Staffing, Delinquency and Occupancy are just three ingredients in the “special sauce” that can vastly change a property’s demographics, revenue, and branding. The great customer experience involves team involvement, policy and procedures that are followed, and owners and managers being able to service your community.
Janet Sprissler has been property managing units with close to 20 years of experience. Janet has launched her own company Janet Sprissler LLC to help property management companies, owners and teams get to the next level and get control over their property. Offerings include online courses, one on one coaching, webinars, team training and speaking engagements. Janet is serving her purpose by helping others serve their communities. You can find out more at Janet Sprissler.com or subscribe to her podcast: Property Management Mayhem with Janet Sprissler available on ITunes.