Successfully managing a multifamily property requires a lot of knowledge and experience. It’s critical to keep things running smoothly, since if problems are not resolved, it can lead to tenant dissatisfaction and ultimately move outs. This can be devastating to your operating income and cash flow, so whatever can be done to alleviate the problems should be done as rapidly as possible.
While some problems require outside help, like roof repairs or HVAC maintenance or replacement, many problems can be resolved with an easy fix on your own. The less you have to spend on outside contractors, the more income you get to keep. So, let’s look at some of the top problems that you can resolve on your own.
Problem #1: Not Enough Parking
One of the most common tenant complaints is that there isn’t enough parking available. While reserved parking can help tenants, their guests are often left to their own resources, driving around in circles and looking for parking on the street.
There is a solution used by many property managers at multifamily properties that actually helps increase revenues while reducing costs. It’s done through a new, luxury amenity that streamlines the booking and management of both resident and guest parking — and is easily handled by using available smartphone apps.
You are able to offer your tenants this amenity that makes parking easier, by assigning parking spaces and monitoring the lot, remotely being able to see violators who are parking where they shouldn’t be.
If you want to start a new revenue stream for your property, you can use this type of amenity to offer reserved parking close to their unit for an additional $20 or $30 per month.
Problem #2: Solving Rent Collection Problems
One of the biggest problems that property managers and property owners face is tenants who constantly pay their rent late, or at times, not at all. If this is an ongoing issue, and there are many tenants involved, it can impact the property’s cash flow and Net Operating Income (NOI). It that occurs, there may not be enough funds on hand at times to take care of needed repairs, pay salaries or handle other expenses.
In addition, it can be costly to evict a tenant who doesn’t pay their rent. Current estimates are that it costs anywhere from $3,500 to $10,000 for eviction. That amount includes legal fees, court costs, lost rent, locksmith fees, property turnover costs and many other costs involved.
There are 3 key screening reports that can help with the screening process to proactively avoid non-paying tenants. They include credit checks, criminal reports and eviction reports. If a person has prior evictions, there is evidence that shows that they will have additional evictions in the future.
Income requirements are usually 2-times the rental amount, but many property owners and managers are now requiring 3-times the income to rent to avoid non-paying tenants. For example, if the apartment rents for $2,000 per month, the prospective tenant’s monthly income should be $6,000, not $4,000. That cushion will help to ensure timely rental payments.
Following better screening practices, many of late rent payment or non-payment problems should be handled at the lease signing stage. The verbiage on the lease should specify when rent is due and what consequences will happen if the rent payment is late. Additionally, the lease should outline the eviction process f the rent is not paid. An attorney can provide the appropriate wording for the lease, which is affected by the location of the property, as different states have different rules and regulations regarding eviction.
Another tactic used by many property managers and owners is to report rent payment histories to credit reporting agencies. Letting tenants know in advance that their rental payment history will be reported to credit bureaus is a strong incentive for tenants to pay their rents on time, as nobody wants an adverse report in their credit history.
Finally, consider instituting online rent payments to make it easier for tenants to pay their rents on time. There are many third-party companies who offer online rent payments to tenants and rent portals that can include the property’s own branding if desired.
Problem #3: Managing High Tenant Turnover Rates
Having high tenant turnover can drastically impact your profits, so having strategies in place to prevent and reduce tenant turnover is critical. It all starts with the tenant screening process. If you find qualified tenants, offer incentives to get them to sign a longer lease. That’s because it’s a lot easier to retain tenants you already have than to go through the process from the beginning.
One of the keys to keeping tenants is communication, and responding to their concerns, complaints or questions quickly is one way to foster a positive relationship. If a tenant feels that you’re responsive, they’re much more likely to stay in place rather than face the alternative of moving. While being responsive is key, it’s also important to be proactive — reach out to tenants with surveys or other means to gauge their satisfaction with the property.
If they’ve requested a repair or needed a maintenance problem addressed, send a post-repair survey to see if they’re satisfied. Find other ways to communicate with tenants in order to build a relationship, as it will go a long way in keeping them in place.
Keeping the property in pristine condition is another way to retain tenants. Tenants are willing to pay higher rents for properties that are perceived to be in top shape. By putting money into your property’s appearance you’re helping to retain quality tenants. Things like lighting, landscaping and overall building appearance are keys to having a property that is perceived as one that is well kept.
If you don’t allow pets, consider allowing them. Many tenants will stay put if you allow pets, because many properties don’t allow them. Another way to retain tenants is to offer tenant improvements, like “smart” entry systems, modern appliances, new flooring or additional cable and power outlets. All of these upgrades give the impression that you want to add value to their living space.
There are some key problems many multifamily property owners face that can be easily fixed on their own. Parking is one problem area that cannot only be fixed, but if done properly can actually add a new revenue stream to the property. Implementing proper tenant screening protocols can help to avoid late paying or non-paying tenants. Also, having processes in place along with strong communication practices with tenants can help reduce tenant turnover, which is a key to ongoing profitability. By undertaking these problems on your own you’ll not only save money, you’ll have happier tenants.
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About the Author
Ellie is the founder of Blue Lake Capital, a real estate company specializes is multifamily investing throughout the United States. At Blue Lake Capital, Ellie helps investors grow their wealth and achieve double-digit returns by investing alongside her in exclusive multifamily deals they usually don’t have access to.
Ellie is the host of Unbelievable Real Estate Stories, a podcast that shares true stories from within the industry, and the critical lessons learned, from the most successful real estate investors, innovators, developers, and more from around the globe!
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.