Bonus Operations is a weekly series hosted by apartment owner/operator and Best Ever Show host, Slocomb Reed. In each five- to ten-minute episode, Slocomb provides his top takes for executing your business plan and maintaining cash flow.
In this episode, Slocomb shares his top four tips for launching your value-add business plan.
1. Craft a message to your tenant base.
Slocomb’s message always includes two points: 1) how he is going to make the property a better place to live, and 2) how/when he will be increasing rent. “Respect and fairness are very highly valued by my tenant base, so across the board, I always make those announcements [about rent increases] universally,” Slocomb says. “Even if the rent increase won’t impact them for three, six, or nine months … I let them know that it’s coming.”
2. Prepare for maintenance requests.
Be ready to receive a high number of maintenance requests if you are taking over a property that has been mismanaged. There may be leaks or other significant issues that need your immediate attention. “I make sure that my maintenance team is ready, that I can schedule them to be at a newly acquired, newly-under-management property for more time than normal,” Slocomb says. “Just to make sure we’re getting things taken care of.”
3. Clean up the exteriors and common areas.
Because conducting work on the exteriors doesn’t require coordination with tenants, it’s something you can address early on. Make sure to clear out any overgrowth, clean, trim, and add or replace mulch beds. Upgrade or replace your monument sign. It’s also important to make sure dumpsters are well-positioned and able to accommodate your tenant’s trash.
4. Take time to get to know your tenants.
Take one full month to see how rent collection goes with each of your tenants and observe how they communicate with you. “Take some time to figure out exactly what you've inherited in your tenant base,” Slocomb says, “so that you can get to the point of being repositioned and having quality tenants in every single apartment in your property as fast as possible.”
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Slocomb Reed: Best Ever listeners, welcome to a bonus operations episode. I'm Slocomb Reed, and in these bonus episodes I'll be giving you my top tips for executing on your business plans and maintaining cash flow in 5 to 10 minutes. For our first bonus episode, I want to talk about top tips for launching your value-add business plan. I've got four things here for you.
The first is that my value-add and reposition business plans always begin with my messaging to the tenants, the moment I take over management. Again, I'm an apartment owner-operator in Cincinnati, Ohio; I've completed a handful of BRRRR style deals, I've gone full cycle a couple of times, so I am very comfortable now and very familiar with taking over management of properties that have been mismanaged, that have seen distress, physical/financial, getting into tricky inherited tenant situations. So listeners, I hope there's a lot of value that I can add here.
The first thing I do when I am launching my value-add and reposition business plan is I craft my message to my inherited tenant base. And it basically has two points. The first point is we are going to make this a better place to live. My company is called TLP Property Management. We say "Dear resident, we're TLP Property Management and we have recently taken over the property. This is how you contact us to pay rent. This is how you contact us for maintenance work orders. We are going to make your home a nicer place to live. Here are some of our plans. We're going to do this with the exteriors, and this with the common areas, and we'll be upgrading some of the apartments, and let us know if you want an upgraded apartment. With our upgrades will come an increase in rent over time."
I go ahead and tell tenants that up front. I've learned especially in my workforce housing neighborhoods that respect and fairness are very highly valued by my tenant base. So across the board, I always make those announcements universally, and I announce to every resident when there will be a rent increase, even if the rent increase won't impact them for three, six or nine months, because they're in a fixed term lease. Still, I go ahead and let them know that it's coming. I let them know at the same time I tell everybody else, because the tenant base cares about fairness so much, frankly, they all want to hear it at the same time.
So the message is day one, "We're the new management company. Here's how you contact us. We will make your home a nicer place to live, and then we will increase the rent." I find a nice way to say that all up front, so they know what's coming.
The second point here is maintenance. I prepare for a glut of maintenance requests the moment I take over a building, especially a building that has been mismanaged, under-managed, or frankly just not managed recently, because I know that there are going to be tenants who have a lot of concerns. There may frankly be leaks, and it may not just be a faucet drip; there might be significant leaks in the building like that, that I want to be able to tackle immediately.
So I make sure that my maintenance team is ready, that I can schedule them to be at a newly acquired, newly under management property for more time than normal, just to make sure we're getting things taken care of. And again, this plays into that message that I just gave the tenants, that we are going to make this a nicer place to live. We want you to contact us about maintenance requests, and we want the opportunity to fix the things that are broken. So we get in there very aggressively and take care of as many maintenance requests as we possibly can.
I'll even pull my rehabbers to do the drywall repair, the carpentry stuff... As soon as we get the leak fixed, typically you still have a wall or a ceiling or maybe a floor that's been damaged, and I'll pull my rehabbers off of apartment turns to get in there and make sure I get those things taken care of as quickly as possible, again, to demonstrate to the tenants that I am going to make this a nicer place to live, along with my message.
Break: [00:06:29.07] to [00:08:19.16]
Slocomb Reed: My third point of focus after the message and maintenance work orders is exteriors and common areas. There are a few things here that I want to hone in on. Of course, the grass is probably too tall, there might be vines growing up the building, a dead tree that needs to be taken down - go ahead and get that stuff taken care of immediately. Also, because it's all exterior, it's much easier to schedule, because you're not actually having to coordinate with tenants about access to their apartment, or their home, or their building. You can just go ahead and get it taken care of if you guys want to start early in the morning, so long as they're not using any loud equipment; if they want to work late into the evening, that's not a problem with exterior and landscaping.
So cutting back all of the stuff that needs to be gone, the overgrowth, but also clean, trim, new mulch in the mulch beds... And I'll tell you, one of the things that I've done for curb appeal, not because it's the most aesthetically pleasing thing, but because it hits you as you drive by and you can't not notice it - often with my repositions I use red mulch. It's kind of got that dark, ashy, brick look to it; it's not obnoxiously red, but when you take out old shrubs, you take out old things that are green, and you're moving from a brown mulch, if it even has mulch, in the mulch beds to red - it really pops. Your tenants have to notice; the people who drive by your property have to notice.
I am finishing the reposition of a building on a main [unintelligible 00:09:43.20] in my own neighborhood. Thousands of people drive by this property every day. And I'm not personally a fan of the aesthetics of red mulch, but when I ripped out a bunch of old bushes and overgrowth, and there wasn't any mulch in my front mulch beds, I went straight to red, so that everyone driving down that street had to notice something was happening at my property. And I want them to know that I'm excited, and I want them to see that there are exciting things coming to this property that I'm now repositioning.
Another point with exteriors and common areas, that is not the funnest thing to talk about, but dumpsters. Oftentimes, especially at mismanaged properties, the dumpster is just in the wrong place. It may be too close to the street and it's attracting attention from neighbors, you have people who aren't your residents dumping, throwing their mattresses in, leaving it over-full, or even just leaving their trash bags with their furniture behind or beside the dumpster, and leaving it in a position that your trash collection company isn't willing to collect. One of the places where I've had success at multiple repositions of apartment buildings is just moving the dumpster. Moving the dumpster does a couple of things for you. The first thing it does is if you're getting the dumpster away from the street and putting it towards the back of your parking lot, or somewhere like that, or moving your dumpsters into positions where they're not as readily seen from outside of the property, or they're harder to get to from the street for non-residents, you should see dumping and other issues like that go down.
Also, when you move the dumpster, it requires a mental shift from your residence to get them out of bad habits or rituals when taking out the trash. Oftentimes at mismanaged properties the trash collection is not frequent enough, and the dumpster gets full, and you'll find that some of your inherited tenants have just gotten into the habit of leaving the trash next to the dumpster, or behind it when it's too full. If you want to change the way that your tenants handle the dumpster, move the dumpster, and it'll help create that mental shift that habit and ritual shift for them. I know I'm spending a lot of time talking about dumpsters, but it really has made a huge impact on my property. So just get the dumpsters put in the right place to create the correct behavior from inherited tenants and to prevent neighbors from dumping.
One more thing about exterior and landscaping before I go to my final point - you may want to go ahead and improve your signage up front. If you don't have a monument sign, go ahead and get one, or upgrade your monument sign. Definitely, of course, change out the phone numbers on the monument sign, to make sure that anyone who wants to be calling the management of your property is calling you.
My final point here about launching your business plan is actually about patience. The first three are about how quickly you can start the transition, how quickly you can send a new message and deliver on it with your tenant base and with your neighborhood... But this fourth point is really more about slowing down while understanding your inherited tenant base.
Even if you've read all of the leases, even if you've spent some time on-site observing, you will learn a lot by taking a full month to collect rent or not collect rent; see how that rent collection goes with each of your tenants. See how they communicate with you whether or not they communicate with you. Which tenants are happy to see you, which tenants avoid you when you're on site... You can learn a lot in that first month. Just because there's a new property manager, there's a new sheriff in town, that doesn't mean most of the time that tenants are going to alter bad habits that they've gotten into.
If you have someone who's been for example, dumping, or leaving their trash next to the dumpster instead of putting it inside, just because they got a note saying there's a new property manager and maybe they heard from you on the phone - that's not going to change their habits. Go ahead and take a month or maybe two months, go through your rent collection process, go through your maintenance process, spend some time getting to know the property and especially the tenants, so that you know exactly what you've inherited in your inherited tenant base, and you know how you need to adapt your plan and adapt your strategy for each individual apartment; which apartments need to be vacated, how many apartment turns you really need to do in that first quarter or first two quarters of your operations, and really pull the slingshot back. Take some time to figure out exactly what you've inherited in your tenant base, so that you can get to the point of being repositioned and having quality tenants in every single apartment in your property as fast as possible.
Best Ever listeners, thank you for tuning in to this bonus operations episode. I told you five to 10 minutes and I may have run a little bit long. I appreciate your listening. If you liked this bonus episode and you want to hear more of them, please let us know. Leave us a five star review, subscribe to our show and share this episode with a friend who you know is going to be starting a value-add or reposition business plans soon and can gain value from these tips. Thank you, and have a best ever day!
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