July 25, 2019

JF1787: How to Asset Manage A Newly Acquired Apartment Syndication Deal Part 2 of 8 | Syndication School with Theo Hicks

Theo continues the long series on asset management. Today he covers more of the top 10 asset management duties. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

“The majority of the information is included in the free weekly review document”

Free Document:


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


Joe Fairless: There needed to be a resource on apartment syndication that not only talked about each aspect of the syndication process, but how to actually do each of the things, and go into it in detail… And we thought “Hey, why not make it free, too?” That’s why we launched Syndication School.

Theo Hicks will go through a particular aspect of apartment syndication on today’s episode, and get into the details of how to do that particular thing. Enjoy this episode, and for more on apartment syndication and how to do things, go to apartmentsyndication.com, or to learn more about the Apartment Syndication School, go to syndicationschool.com, so you can listen to all the previous episodes.

Theo Hicks: Hi, Best Ever listeners. Welcome back to another episode of the Syndication School series, a free resource focused on the how-to’s of apartment syndication. As always, I’m your host, Theo Hicks.

As you know, each week we air two podcast episodes that are part of  a larger podcast series that’s focused on a specific aspect of the apartment syndication investment strategy. For nearly all of the series we offer some sort of document, spreadsheet, template for you to download for free. All of these free documents for the past Syndication School series, as well as the actual Syndication School series episodes – all that can be found at SyndicationSchool.com.

This is going to be part two of a series we started yesterday – or if you are listening to this in the future, the podcast episode before this one – entitled “How to asset-manage a newly-acquired apartment syndication deal.”

At this point in the process you’ve gone from being a complete newb to actually closing on your first deal, and now we are going to go over exactly what you need to do in order to make sure you’re able to successfully implement and execute your business plan.

As I mentioned yesterday, this is going to be the longest timeframe of the entire process, most likely, because this is when you buy the deal to when you sell the deal, which could be five years, ten years, or maybe even longer. So these are the things that you need to do in order to ensure that the deal is successful during those 5 to 10+ years.

We began by giving a general overview of the top ten duties of the person who’s responsible for asset-managing the deal. We went through the first five yesterday, or the podcast episode before this one, in part one, and we’re gonna go over the next five today.

Just to review what we went over in part one – the first five duties we went over was 1) to implement the business plan, which involves reviewing the financials on a weekly and monthly basis, and then comparing that to your budget to determine any discrepancies. 2) Have weekly performance reviews with your property management company, and we offered a free weekly performance review template that you can send to your management company so they can fill it out, so you can track all of the KPIs (key performance indicators). 3) Making sure you’re sending out the correct investor distributions on tie. 4) Manage the renovations, manage the interior and the exterior renovations. 5) Maintaining the economic occupancy rate.

Make sure you check out part one, so you know specifically what the best practices are for those first five asset management duties, and today we’re gonna finish out the top ten with duties six through ten.

Duty number six is going to be the investor communications. As I mentioned in part one, these asset management duties aren’t going to be solely the responsibility of just the asset manager. Every single aspect of these duties are not performed by the asset manager; most of them are in tandem with the management company, and then others are in tandem with the person who’s responsible for raising capital – if that person is different from the asset manager – and investor communications is one of those. This is going to be a team effort on these investor communications.

Obviously, just like you notified your investors of the new deal, you presented information in the conference call, you notified investors of the close, you’re also gonna want to notify your investors of updates on an ongoing basis.

For Joe’s business, what he does is he provides a recap email to his investors each month, that recaps the activities of the previous months. We’ve just sent out our June recap emails in July. When June ends we gather all the information during the first few weeks of July, we put it together in a nice, organized email, and then we send that out to investors by the middle of the month. I’ll go over specifically what goes in those emails in a second, but we also send out financials on a quarterly basis. So each quarter we also send out an up-to-date T12 with the income and the expenses, as well as a current rent roll.

And then on an annual basis the recap email includes the K1. That is the tax documentation that you provide to the investors, so they can file their taxes properly. For that you wanna make sure you talk to your CPA, so you can determine exactly when they are gonna prepare and complete these K1’s, so you let your investors know starting with that update that goes out in January when they can expect to receive these K1s.

More specifically, here are the things that we include, and that you should probably also include, in your monthly email. And before I go into that, the process for obtaining this information is to have the asset manager – or whoever is the interface between you, the syndicators, and the management company – reach out and say ” Hey, each month can you please send me this information?”, obviously letting them know before you close that this is what you’re going to do. So you set expectations, so that when you close you don’t say “Hey, by the way, on a monthly basis can you send me this and this?”

The majority of the information is actually going to be included in the weekly performance review document that we talked about in part one, and that is the free download, so technically, you could just use that… But it’s still nice to make sure that you’re getting the most up-to-date information, so when you click Send you know that you’ve got the best and most current data for your investors.

So the asset manager will get that from the management company, and then the asset manager will forward that on to the persons responsible for raising capital… Because you want the person who raised the capital from that person to be the person that’s responsible for the ongoing communication to them, just because it’d be weird if for the first six months, year, or however long it was you were talking to Joe, and then all of a sudden once the deal closes they’re talking to some random Billy Bob Joe, and they don’t really know who that is.

So keep the communication consistent with your investors. Then obviously the person who is responsible for  writing these emails will obviously send these emails out as well.

Now that we got that out of the way, what actually goes into these emails? Here’s a checklist that you can use in order to make sure you’re including all of the relevant information in the email.

Number one, what you wanna lead off with is any information about them getting paid. If you’re doing monthly distributions, then in that first recap email you want to explain to them – or remind them, because the information should already be in the investor guide – how they’re gonna get paid, how much money they’re gonna get paid, and when they’re gonna get paid.

It’s something as simple “Welcome to your first recap email. As a reminder, download the investor guide for information on the timing of distributions, tax timing etc. Expect to receive your first distribution by this date. Since we closed on this date, it’s gonna cover…” For example, let’s say you closed on June 15th, 2019; you’ll say “You’ll receive your first distribution by the end of August. It will cover the time we owned the property from June 15th to July 31st.” Then after that what’s it gonna be? Well, after that it’ll  be whatever your preferred return is, on whatever your frequency is. If you’re doing it monthly, you can say it will be a prorated 8% preferred return each month.

Then you’ll also wanna explain that – again, this is only if you’re doing this – “Every 12 months we’re gonna evaluate the performance of the property to determine if we can distribute money above that preferred return.” If you remember, you’ve got your preferred return most likely, and then a profit split most likely. So you distribute that 8% preferred return… At the end of the year let’s say you’ve made 9% — or let’s say you projected 9% and you made 10%. Then you can tell your investors at that 12-month point “We’ve owned the property for 12 months; we’ve evaluated our performance. I know  we’ve projected a 9% return to you, but we were actually able to hit a 10% return, so in your next distribution, in addition to your normal 8% prorated return, you’re also going to receive an extra 2%.” And then say “For example, if you invested $100,000, it’ll be this much money.”

So really you wanna lead off the email each month with any information with them getting paid. That’ll change each month, obviously. Then for the months where it’s just a regular 8% prorated return (or whatever your preferred return is), you don’t need to say that every single month. Just set expectations in that first email, and whenever it changes is when you want to actually disclose the information.

Next, if it’s on a quarterly basis, you’ll wanna include a link to the actual financials. What we do is we have a Dropbox folder for each property, and any relevant information – pictures, links etc. – goes into that folder. Then in our emails we’ll copy that Dropbox link and hyperlink it in the email so they can click on it. It’ll open up their web browser and they’ll be presented with the financials, or with a picture.

From there, you want to also make sure you’re including occupancy information. You want to explain what’s the current occupancy, and then what’s the pre-lease occupancy. If you want to go above and beyond, something else you can do is track each month to see if your occupancy is going up, so that if it does go up, you can mention that in bold.

You can say “Our occupancy rate has increased to 95%, up from 94% last month.” Or even better, “Our occupancy rate has increased for the third straight month, from this to this.”

Then you also want to mention what the pre-lease occupancy is, so that 1) your investors know what the expected occupancy is going to be  from the end of the month, just because a current snapshot is great, but what are we trending at? Is it trending upwards, is it trending downwards, is it remaining the same? Plus, in the beginning, when the occupancy level is a little bit low, they’ll be able to see that “Okay, well it may be below 90% right now, but by the end of the month we expect it to be at 90+ percent.”

Next you wanna provide an update on the interior renovations. You want to say how many units have been renovated since you’ve bought the property, and then how many units were renovated the previous months, and then you’ll want to provide information on what rental premium you’re demanding. Ideally, at the very least you say that “We are achieving our projected rents.” Even better is if you’re achieving a number which is higher than your projections.

If you remember back in the episode about the investment summary, when you’re presenting the deal to investors, you wanna make sure you’re conservative with your rental premium numbers, so that you can say “We are projecting a $100 increase in rents based on our renovations program. Properties in the area that have undergone similar renovations programs have seen an increase of $150.” That way if the deal still makes sense at $100, and you’re able to get $150, that’s just more money for you and your investors, and more positive information you can include in the email.

Then in the beginning once your model unit is done, or if you don’t have a model unit, just one of your first units that are renovated, send your investors some pictures. You don’t want it to just be a bunch of words; investors are gonna want to see exactly what you’re doing to those units. So provide them a picture of the kitchen, the bathroom, the living room, things like that.

Next you’re gonna want to talk about the other improvements, the other cap-ex projects that are going on at the property. For example, you can say that “We’ve installed all the carports, and we plan on leasing them at $25/space, which will increase our net operating income by whatever dollars per month.” Or “We’ve just rebranded our property to ABC Apartments, and are in the process of designing a new monument sign.” Then in three months, when that monument sign is done, you can say “Our monument sign is installed. Click here for HD pictures.”

So not only do you wanna provide updates and make sure that these are consistent each month… So during the first month you talk about ten different things – you want to make sure you continue to bring those ten things up until they’re done. Then once they’re done, you wanna provide pictures of the completed project.

Something else you wanna include are any type of events you’re hosting for your residents… We’ll go over this in a lot more detail in a later episode, but a very strong lead generation and retention strategy is to host resident appreciation parties, in  a sense. We’ll go over specifically what those are, but if you’re hosting any sort of party or event for your residents, you’ll wanna include that in the email.

And then lastly, and news item that’s relevant to the market that the deal is located in. If a new company has moved to the area, you can say “Amazon just opened up a new distribution center. They’re investing 100 million dollars. It’s planning on generating 1,000 new jobs, and hey, it’s actually a short ten-minute drive from the property. This reinforces our thoughts on the continued strength of the market.”

That’s really an exhaustive list of things you can include in your email. You can include all of that, you can brainstorm more things to include in the email, you can include less things… It’s really up to you. That’s what we include in our updates each month, so you can use that as a guide to creating your own emails.

A few extra things to think about for these emails… Number one is the timing. Make sure you set expectations with your investors about the timing of these updates. Whatever you tell them in the beginning in that investor guide or in your closing email in regard to the frequency of these updates, make sure you’re actually doing that. If you say “We’re gonna send updates each month by the 14th”, then make sure you send updates each month by the 14th. If you say the updates are gonna include X, Y and Z, make sure the updates include X, Y, Z. If you say that you’re going to send these emails out by a certain date, make sure you’re not waiting until the day before to write the emails, especially starting out.

Eventually, you can get to the point where you’ll probably write them with a few days’ notice, but at first, the second the month ends you wanna get that data from the management company within the first few days – or whenever they have the data inputted – and then you wanna instantly start working on those emails, so that you can send them out on time. Sending them out earlier is even better.

Then a few other things – and I’ve mentioned some of these already, but I’m just gonna reiterate… These are some important milestones, things that aren’t something that you’ll include in every single month; it’ll be something that changes in your email throughout the year.

As I mentioned, at the end of each quarter you’re gonna want to send your investors the financials; you’re gonna send them a rent roll on the profit and loss statement. Make sure you’re not including any personal investor information in those financials. Sometimes the property management company will put the money that got distributed to investors at the bottom of the rent roll, at the bottom of the T-12… So take that out of there, so that your other investors don’t know who invested what.

And then also, it’s better to put those in PDF form as well, just because people can look at PDF on their phone pretty easily, whereas Excel might be a little tough; the formatting might not work on the phone. And then if you have a monthly pay out, so if you plan on paying investors each month, in the first recap email or the recap email before that first distribution goes out, let them know when they’re gonna receive it, and provide an example of how much money they will receive based on a $100,000, or a $200,000, or a million dollar investment, depending on how big your deals are.

If it’s a quarterly payout, in the first recap email and then in the email before they get their first quarterly payment make sure you let them know “Hey, this is when you’re gonna receive your payment, and here’s how much to expect to make, based on an example.” And then the same thing for an annual distribution. The first recap email and then the month before that annual distribution goes out – when they’re gonna receive that payment and how much money are they actually going to make.

And then lastly is that tax documentation. Once you’ve had your conversation with your CPA and they say “Hey, we will have those K1’s to you by the end of February, or by mid-March, and here’s the process for sending them out”, starting that first recap email of the new year, let them know the process and then each month let them know “Hey, as a reminder, here’s the process”, so that you’re not getting an influx of emails in February, March, April timeframe asking “Where is the K1s? When am I getting the K1s? How does the K1 process work?” They’re already prepared, they already know what the process is, and the only way you’re gonna be getting a bunch of emails is if you don’t hit that date you communicated to them.

And then a few other best practices – one, how do you actually make these emails? Sure, you can use your Outlook or whatever email service you use, and make one email template and then copy and paste that into individual emails, copy-paste the emails in there, and then send those out individually. You probably don’t wanna do that, because it’s gonna be pretty time-consuming, but technically you can. What’s a better method – and we’ve already discussed this service – is MailChimp. There’s other things you can use too, like Active Campaign, Constant Contact or Aweber, or whatever other email service that you want to use… But use some sort of email service that allows you to automate these things; you type in a template and then it’ll automatically send out that email to your imported list of investors, it’ll put their name in the subject line, and things like that. You’re not gonna want to make these emails individually; that’s just gonna take too much time.

And then I kind of already mentioned this, but when you’re sending out any images, any financial documents, create a Dropbox account – if you have to, buy the upgraded storage amount – and just make an individual folder for each property, and then each month upload any documents, any  pictures to that file, and then copy and paste those into your email. The reason why is because let’s say you’ve completed the monument sign, and you’ve got really nice HD pictures that are 200, 300, 400 MB in size, and you insert that into your email… And then let’s say you’ve got ten more of those pictures in the email – the email is never gonna load for your investors. If it does load, it’s gonna eat up a ton of their data… Whereas if you just do the link, they can click on the link, go to the browser, and they’ll easily be able to see “Okay, here’s the pictures that he’s talking about.” Plus, the email might not even go through, the email might take forever to go through, a lot of emails might fail to send, the investors folder might be so big that your investors’ email can’t even handle it… So to avoid all these issues, just use Dropbox. It’s pretty simple.

And then I also mentioned the thing about converting the financials to a PDF as well.

That was just one duty that I went over, the investor communication. We’re going to stop there for today and we will wrap up the remaining asset management duties next week, and then we will move into more specifics on some of the top ten asset management duties that we’ve discussed. Again, I wanted to do first a general overview of what your responsibilities are, and then kind of not necessarily go through each one in more detail, but just provide overall “Hey, here are some more things to be thinking about when you are asset-managing your property.”

Until next week, I recommend listening to part one for sure, to learn about those first five asset management duties, and we talked about number six today, and we’ll do seven through ten next week. Listen to the other Syndication School series we’ve done so far. This is series number 20, so you’ve got 19 other Syndication School series to listen to to get all caught up… As well as download the free document that we gave away in part one, which is that weekly performance review… And then also download the other free documents we’ve given away. We’ve given away at least 20-25 documents for free at SyndicationSchool.com that will help you start, launch and grow and scale your apartment syndication business.

Thank you for listening, and I will talk to you next week.

    Get More CRE Investing Tips Right to Your Inbox

    Get exclusive commercial real estate investing tips from industry experts, tailored for you CRE news, the latest videos, and more - right to your inbox weekly.