August 1, 2019

JF1793: How to Asset Manage A Newly Acquired Apartment Syndication Deal Part 3 of 8 | Syndication School with Theo Hicks

Time for more syndication school! We’ve covered a lot of the apartment syndication process so far, if you’ve been following along, you’re no longer a newbie to the strategy. Theo covers more asset management duties today, numbers 7-10. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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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, or to learn more about the Apartment Syndication School, go to, 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 am your host, Theo Hicks. Each week we air two podcast episodes; now we are transitioning into also releasing them in video form, so if you’re listening to this on the podcast – great; if you would like to watch on YouTube, make sure you check out Joe Fairless’ YouTube channel; we post these Syndication School episodes on there as well.

But regardless of the way you consume the content, each week we post two podcast and video episodes that are part of a larger podcast or video series that’s focused on a specific aspect of the apartment syndication investment strategy.

And for the majority of these series we offer some sort of document, spreadsheet, template, some sort of resource for you to download for free. All of these free documents, as well as the Syndication School series episodes can be found at

This episode is going to be a continuation of a series we started last week, or if you’re listening to this in the future, the podcast episodes that were six and seven previous to this one. This is going to be part three of the series entitled “How to asset-manage a newly-acquired apartment syndication deal.”

As a reminder, if you haven’t done so already, I recommend listening to parts one and two, because this is a continuation, so the content in this episode will be based on the content in those first two episodes; so check out parts one and two. In part one we went over the first five asset management duties (of ten). Just as a reminder, those duties are to 1) implement the business plan, 2) do the weekly performance reviews with the property management company, 3) send out the investor distributions, 4) manage the renovations, and 5) maintain the economic occupancy.

And just taking a quick step back, the asset manager is the person who is responsible for managing the deal, and managing the property management company after the deal has been acquired. So after closing, this is the person who’s in frequent contact with the property management company, and these are the ten duties that the asset manager should be doing, at absolute minimum.

So those were the first five, and then in that part one episode we gave away a free weekly performance review tracker, which has all of the key performance indicators that you should be tracking. You can send that to your management company, or you can customize it yourself and then send it to your management company, but the goal is to send that to them and have them fill it out on a weekly basis. And then the purpose of the actual call – the weekly performance review call – is to go over that content, go over those key performance indicators, and anything that is off, brainstorming 1) what’s the cause of the KPI being odd, and 2) what’s a solution you can put in place.

And then in part two we focused specifically on duty number six, which is the ongoing investor communication, so we talked about all of the different times, and then what you should include in those communications with your investors.

In this episode we’re going to finish off the ten duties, so we’re gonna talk about duties seven through ten, and then in the next episode (part four) – if you’re listening to this now, then tomorrow’s episode; if you’re listening to this in the future, the episode after this one, which will be part four – we’re going to dive deeper into duty number five, which is maintaining economic occupancy. We’re gonna go over some strategies on how you as the asset manager can make sure that you are hitting your economic occupancy goals.

So let’s just jump right into these next duties, seven through ten. The seventh duty of the asset manager is to plan trips to the property. Obviously, this could be easy if you’re investing in your own market. It might be a little bit difficult if, say, you live in Florida and investing in Ohio. It might be difficult to get out there. But ideally, you are visiting the property at least once per month… Because at the end of the day – sure, you can see the weekly performance review, you can get updates on renovations, but you really don’t know what’s going on at the property unless you see it with your own eyes.

So if things aren’t going as planned, if things are off and you aren’t visiting the property – let’s say you visited once a year – well, then you’re not going to catch that. It might be — not necessarily too late, but in order to resolve some issue that you would have seen if you visit the property more often, it might cost you a lot more money, either investing it into the deal, or money that was actually lost.

Now, when you go to the property it’s good to sometimes let your property management company know “Hey, I plan on coming to the property on July 30th. Here’s some of the things I wanna look at. Here’s my agenda for what I would like to do.” That way they can prepare, they can make sure everything’s lined up so that if you wanna meet with a certain contractor, or if you wanna see a certain unit, or you wanna see a certain amenity, they can make sure that that is all lined up for you.

But it’s also good to make unannounced trips to the property, because at the same time the benefits of your property management company knowing you’re coming could also be a potential drawback, because you might not necessarily get a true representation of the actual day-to-day operations at the property. Because if you tell them you’re coming, then they’re going to maybe clean up a little bit more than they usually would, maybe they’re gonna do things that they wouldn’t have done otherwise. So you want to see how the property management company is acting on a day-to-day basis, if they’re just acting naturally and not over-preparing because they know that their boss is coming into the town.

So overall, you want  to visit the property at a minimum once a month. Again, that might be difficult if you have to travel, but you just wanna build that travel expense into your budget and know that “Hey, I’m gonna be spending a couple hundred bucks every month to actually go and visit the property in person.” It could be something as simple as flying in in the morning and flying out at night. Or you drive in in the morning and you drive out at night, so you don’t have to get a hotel.

Again, sometimes you want to announce your trips, so that your property management company can prepare, but the best way to get a true representation of how the property is actually being managed on a typical day-to-day basis is to make those trips unannounced. Just show up and see how things are going at the property. So that’s number seven, plan trips to the property.

One more note on number seven, planning frequent trips to the property – a good way to approach this is if you’re looking at other deals in that market, try to plan a trip to the property, but also try to do other things while you’re there. Maybe there’s a broker contact you wanna meet with, maybe there’s a couple of deals you wanna go tour… So try to address as many things as possible on that trip. Sometimes you might just visit the property, other times you might be able to do other things as well without having to then go back at a different time and do those duties. That’s number seven.

Number eight is to frequently analyze the competition. You’re gonna want to set up some sort of process with either yourself or with your management company for doing rent surveys on the surrounding competition, on the other apartments that are similar to yours in the area. The goal of this rent survey is to compare the rental rates at your property to the rental rates at the competitors. That way you can know if you’re able to increase your rental rates, or if you need to ultimately decrease your rental rates.

This is something that you wanna do on a frequent basis, but you also wanna do it on a case-by-case basis. Let’s say for example for some reason your economic occupancy is low, you have a lot of vacancies, and you’re having trouble finding leases as well. If you do a rent survey and you realize that your rents are the leader in the market, so every single competitor has rents lower than yours, then that’s an issue. Whereas you might discover that “Okay, you’ve got a really high occupancy, so let’s do a rent survey. Oh, okay, we’re significantly below the market leader, so let’s go ahead and push our rents up in order to increase our income.” Because 100% occupancy is great, but you could be 100% occupied but have a 10% loss to lease, which is the same thing as having a 0% loss to lease and being 90% occupied.

Ideally, this is something your management company does. They’ll either call around, or they’ll have access to software where they can see what the going rental rates are. Then they just send you the results and then advice on any rental rate increases. So this is something that you want your management company to do on a frequent basis. And just like all the other duties I’ve discussed so far that involve your property management company, make sure that you’re setting expectations with them upfront. So don’t close on the deal and say “Hey, here’s all the things that I want you to do” after you initially meet them, and once you actually get close to putting a deal under contract, that’s when you want to start having that conversation of “Okay, I know we talked about me wanting to do weekly performance reviews, and analyzing the competition, but here’s specifically what I would like to have done once we close on this deal.” That’s number eight, frequently analyze the competition.

Number nine, on a similar note, is to frequently analyze the market. This is a little bit different than looking at rents. In this case you’re actually looking at values of properties that are being sold. Once you’ve actually completed all of your renovations for your value-add business plan — let’s say for example your plan is to sell the property after five years, and the projected value-add business plan will be completed after two years. Well, between years two and years five you’re not just gonna want to do nothing, and then once year five comes around just sell the property without even considering it selling it earlier or selling it later.

Instead, what you’re going to do is you’re gonna pay close attention to the market, so whenever an apartment sells, what was the price? What was the cap rate? What was the dollar per unit and what was the cap rate of that sale? Then based on that you can determine, “Okay, so I know the cap rate, I’ve got my current NOI as of today. If I were to sell the property right now, or if I were to refinance the property right now, how much money would I get? How much equity would I be able to return to my investors if I refinanced? What would be the IRR or the cash-on-cash return to my investors if I sold at year 2,5 or at year 3?”

In order to do this, you can reach out to the broker – if this was an off market deal, then whatever brokers you’ve been working with  that you wanna build a strong relationship with; if it was an on market deal, then just use the broker that represented you when you bought the deal, and ask them for a broker’s opinion of value, or BOV.

What they’ll do is based on recent sales they’ll come to you and say “Hey, if  I were to list this property, here’s the lowest I think we would get, here’s the highest I think we could get, and here’s a median price.” So they’ll give you a low, medium  and high, so that you can determine “Okay, so if I were to sell this property now…” Let’s say you projected to sell the property for 18 million dollars at year five, but the broker’s opinion of value medium is 18.5 million dollars at year three – well, not only are you gonna get an extra $500,000, but you’re gonna get that money at an earlier date, which is  a better IRR, since the IRR is based on the time value of money.

So again, even if your business plan is to sell after five, seven, ten years etc. don’t wait until then to look at the market, look at prices, look at cap rates… Because as I mentioned, you might be able to provide your investors with a larger return by selling earlier than selling later… And you’ll never know that if you didn’t analyze the market.

So this is something you should do at least a few times a year, so maybe on a quarterly basis; you should do this with your property management company, and reach out to your broker and get those BOVs. It’s not something that’s super-detailed that the broker will do, so it won’t take them a lot of time, and they shouldn’t have an issue sending that to you, especially if we’re talking about multi-million-dollar deals; they want to give you a BOV, because they want to sell the property so they can make money again. So that’s number nine.

Lastly is number ten, and this kind of attempts to cover anything that’s not listen in duties numbers one through nine, and that’s to expect the unexpected. So you can do as much research as you possibly can, you can plan or have the best underwritten deal, perform all the due diligence in the world on the deal, and your team, on the market, and then you buy that property and something crazy happens. A boiler unexpectedly breaks down, and you have to determine whether you’re going to replace it or you’re gonna repair/refurbish it. Always expect things to come up that are unexpected. That’s why it’s super-important to visit the property frequently, it’s super-important to have conversations with your management company every week, because once these unexpected things come up, the longer it takes to resolve them, the more money you’re losing, and you’re putting your investors’ money at risk by not addressing these things sooner.

So duties one through are what you should be doing consistently, but at the end of the day things are going to come up, there are grey areas; we can only talk about so many things on Syndication School, we can only talk about so many things in blog posts and books, things will come  up that you do not plan on coming up, and you need to make sure that you are able to get on top of those issues right away and resolve those as quickly as possible.

And again, I gave the boiler example, but it could be something as extreme as you get a call from the management company and the entire property is burnt down; what are you going to do? A good exercise to do is think of just all the worst-case scenarios possible. We’ve talked about a lot of those on Syndication School, in particular when we were talking about how to do that new investment offering call to your investors, all the different questions they’re going to ask… And one of those questions was “What’s the worst-case scenario?” And the worst-case scenario would be the property burns down, or floods, or something happens where the property is destroyed, and then you go to your insurance company and for some reason the insurance company won’t pay out your claim. So what are you gonna do in that situation?

If you know that unexpected things are gonna come up, you need to have a general process in place for how to address those. That’s gonna vary from person to person, investor to investor, and that boiler example would just kind of be a simple ROI; that’s why it’s also really important that you have that operating account fund upfront… Because if you don’t and something were to come up during the first few months of the deal and you don’t have any money to the side to address anything that comes up that’s unexpected, you really don’t have a choice but to do either a capital call from your investors, which is bad, or to take money out of your own pocket, or to take money from somewhere else and maybe not upgrade the clubhouse because you had to fix a bunch of boilers.

So yes, you can do all the due diligence in the world, but there’s certain things that are gonna come up that are outside of your control, but it is still your responsibility as the asset manager to fix that problem, to solve that problem, so that you’re still able to hit those return goals.

So this is a little shorter episode. I wanted to just wrap up those last duties that I wasn’t able to wrap up in the previous episode, because we talked about investor communications for quite some time… So just as a summary, the last four duties of ten are 7) plan frequent trips to the property, 8) frequently analyze the competition, 9) frequently analyze the market, and 10) expect the unexpected. And then one through six were input the business plan, implement weekly performance reviews with your management company, distribute your investors’ money on time and the correct amounts, manage the renovations, maintain economic occupancy and continue to provide your investors with ongoing updates at the property.

Tomorrow (or in the next episode) we’re going to finish off these ten duties by going into more specifics on the occupancy rate, and how to maintain the economic occupancy rate. As I mentioned in part one when we discussed that, the majority of that is going to fall on your management company, because they’re the ones that are on a day-to-day basis trying to reach out and find high-quality residents to live at your property. But again, this is your property; ultimately, everything is your responsibility. So if the property management company is having trouble finding tenants, or if they aren’t’ implementing the best practices – well, one option is to fire them, which is something that we’re gonna talk about later on in this series, but another option is to present them with particular strategies for maintaining economic occupancy… So we’re gonna go over that tomorrow in part four.

Until then, to listen to the other Syndication School series, as well as parts one and two of this series, about the how-to’s of apartment syndications, and to download the free document for this series, which is that weekly performance review tracker, as well as the free documents for previous Syndication School series – all that can be found at

Thank you for listening, and I will talk to you tomorrow.

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