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Multifamily French Fries (A Fragmented Marketplace)

Mon, 14 May 2012 19:09:11 GMT

Multifamily assets are like French fries; everyone thinks theirs are the best. But with so many to choose from how do you know? The multifamily marketplace is a fragmented industry. No one entity or person owns a controlling interest.

Everyone has a opinion about who makes the best French fries. But McDonald's buys more potatoes and sells more French fries than anyone. However, knowing who makes and sells the most French fries (or beer, or boots) has not deterred hundreds of new eateries (or breweries, or cobblers) in the last few years either. And there is always room for one more.

Biggest is represented by a single number. Best in class is more subjective. Multifamily is a fragmented industry as the biggest firms in the industry control less than one percent of assets.

The 50 biggest multifamily owners in the United States own and control approximately 2,700,000 housing units. That's a big number. However, it represents only two percent (2%) of the total housing market. That's right- just two percent.

Who owns the most multifamily units in the United States? As of 2011 it's Boston Capital with 158,000 units. In second place is Centerline Capital Group with 152,000 units. These are big, well capitalized companies. Yet if these two companies doubled in size tomorrow they would not own one tenth of one percent of the housing market.

We've all met people that own a single rental house or duplex that can talk for an hour about their view on property management. Hey, they are part of the industry too. They represent the hot dog stand that turns into a pop up restaurant that turns into a corner shop that turns into a chain.

And who knows, five years from now this person may own ten or twenty rentals. They are part of our fragmented industry. Want to know where the next Centerline Capital comes from? There's a good chance the founder will be the hardest working property manager you know right now.

About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. For more information, visit: www.MultifamilyInsight.com

Property Management and The Rule of Law

Tue, 08 May 2012 16:34:04 GMT

There are people in every community that believe the rule of law applies to everyone except them. Many of us are de-sensitized to violence and intimidation based on how often we are exposed to these behaviors.

Property managers work diligently on retaining paying customers. However, there are some customers that must be removed from the property irrespective of their payment history- those that do not respect the rule of law.

Who wants to remove a tenant with a good payment record? For the greater good this is sometimes necessary. Once revealed, criminal activity of any kind cannot be allowed to continue. Disclaimer: for the finer points in your municipality seek local counsel.

Too many people live in fear, real fear, afraid to ask for help. And not just the elderly. Although we cannot control the world around us we can and should, to the best of our abilities, help those than cannot help themselves.

Must do phone calls are to places like child protective services, elderly care and for threats to the public from those with mental health issues.

People do change over time. A long-time tenant may have recently had involvement in criminal or drug related activity that changes their demeanor and the way they interact with neighbors. There is no living in the past if there is danger to other people or property based on these changes in behavior.

The threat of lawsuits make many people tolerate actions that might be considered threatening. This is where inaction is an even more costly alternative; the blind eye mentality whereas known violent individuals are allowed to remain after their history is revealed.

As one level of protection, consider performing a national background check on potential tenants. Yes, this is more expensive than state only background checks, but people (and their problems) do cross state lines.

Suggest telling people that are confronted in some way, if at all possible, to first remove themselves from the area and immediately call authorities. Like with smoke, a potential gas leak or fire - do not hesitate to call 911. This is everyone's right in our society and the first line of defense against personal attacks.

It is difficult to have a blanket policy on "intimidation" or related actions. Municipalities have various moving parts on how to address this. Just know that ignoring this or similar acts is the worst possible solution. Be proactive, with counsel, in protecting the people and assets within your control.

21 Questions: On Real Estate Site Data

Tue, 01 May 2012 19:51:22 GMT

Answering these twenty-one questions about a site will provide an excellent "snapshot" of a specific location. Every appraiser in the country would "love" to have this site data prior to beginning an assignment. As a buyer of real estate, these questions are imperative to understanding the "place" and its surroundings.

1. Name of the site. What is the common and "street name" of the address. Many commercial assets have a name, a street address and aka (also known as). Some have a well established name, others do not. The Metropolitan Museum of Art in New York is also know as "The Met".

2. Address including zip code. The address and zip are imperative for accomplishing further layers of research, like obtaining traffic pattern data, census and block group numbers and crime statistics.

3. Site Contact Information. Who is your contact person for the transaction? They may not be on site.

4. Location. A short description of how to find the place. We have the address, but what are the cross streets?

5. Legal Description including lot and block number. Some refer to this as the description of boundaries.

6. Lot size with dimensions. This includes length and width, preferably with a rough drawing that reflects proximity to streets.

7. Gross acreage. This is a simple number extracted from the lot size dimensions and converted to square feet. For example, a lot size of 150 X 400 = 60,000 square feet, or 1.377 acres.

8. Zoning. What is the existing zoning? Are there zoning changes in process? Is current zoning aligned with current usage? What about zoning of appurtenant land?

9. Improvements. A paragraph describing existing structures and landscaping. Total square feet, year built, current usage. A short narrative on condition.

10. Site Characteristics. Write down what you see. What is the contour of the ground, height of the building. Give the reader a "sense of place" in a few short sentences.

11. Fire District. What is the official name of the governmental agency charged with fire response? Where is the closest fire hydrant and fire station.

12. Water/Sewer provider. Name and telephone number of who to call to turn on/off basic services. Sounds simple, but with so many overlapping jurisdictions it can take more than a minute.

13. Electrical service provider. Name and telephone number of who to call to turn on/off basic services. See #12.

14. Gas/natural gas provider. Name and telephone number of who to call to turn on/off basic services. See #12. Newer properties may be all electric.

15. Floodplain information. Is the property in a floodplain? If yes is it a 100 year floodplain or something else? Placement in a floodplain impacts insurance rates, so this is "must know" information.

16. Taxing Authority. Who does the real estate tax bill come from? What is the mil rate? When was the last assessment? When was the last increase?

17. Police and 911. Telephone number of local police responder. Depending on location, this could be local police, Sheriff, State Troopers. Find out. And get their phone number. Also, is 911 operational and what are average response times to calls?

18. School District. What is the name of the school district. Name of High School attended by people residing at the site address (if any). Name of middle school and elementary.

19. Distance to nearest Grocery anchored shopping. People are creatures of habit. Aside from work and school, gathering food is a regular occurrence. The travel time to obtain milk, eggs and bread is important.

20. Distance to nearest emergency medical services. Medical service providers congregate near medical facilities. What is the distance to these facilities and service providers?

21. Mini-SWOT. In a few lines, write down the strengths, weakness, opportunities and threats that come to mind from being on site.

-- John Wilhoit, Jr. Releases Multifamily Insight Book on Amazon --

Increasing Recycling Participation in Your Community

Mon, 30 Apr 2012 12:41:15 GMT

According to the EPA, there are 13.2 million multifamily housing units in the United States and approximately 52 percent of them are served by a recycling program. If recycling was made available to all multi-family units at least 847,000 additional tons of materials could be diverted from the waste stream.

Although there is no single model for a successful recycling program due to variations in building size, layout, resident characteristics, and trash disposal systems, there are numerous methods to establish a successful recycling program. The benefits of implementing a waste reduction program allow properties to decrease waste disposal costs, bring buildings into compliance with applicable regulations, help achieve local and state recycling goals, as well as make recycling accessible to more community members.

One of the most effective ways to ensure success is a city or state mandated program. The EPA estimates that 62 percent of multifamily housing recycling programs are already mandated. Mandates can include state or city requirements that offer waste reduction opportunities to residents; requirements that haulers provide waste reduction services; or requirements that all residents participate. Financial incentives for property managers and owners are usually available. Many cities and states have seen an increase in recyclables due to mandates; however, if your area is not mandated, here are several ways to implement a successful recycling program:

1) Outreach and Education:

Residents rely on the property manager to distribute educational materials. Distributing move-in flyers/pamphlets as well as biannual, annual, or quarterly instructional flyers greatly increases diversion rates. Be sure communal recycling containers are clearly labeled. Flyers with photos of what to recycle and what not to recycle are extremely helpful, especially if there are multi-lingual residents.

High performing communities educate their employees and maintenance staff on the do’s and don’ts of recycling. Manager commitment, in terms of motivation and direct interest, directly correlates with resident participation.

2) Streamlined and Convenient Collection:

Renters want to live in a building that streamlines the recycling process to make it as easy as possible. This can be accomplished with multiple communal recycling bins placed near busy areas, such as near the pool, mailing room, leasing office, etc. User friendliness of the collection containers (e.g., visibility, attractiveness, prominence) and the location of the containers (proximity to the trash containers) are other things to consider that will increase participation. Buildings with 90-gallon carts generally provide enough room to store recyclables and allow for pick-up. According to the EPA, providing at least 3 containers per set-out allows for adequate sorting while decreasing contamination.

Single-stream or commingled collection means all recyclables can be mixed together and they don’t have to be separated. The more types of materials collected means the higher your potential recycling rate, so be sure to check with your hauler to see if commingled collection is an option.

Additionally, doorstep valet recycling programs are available. Valet programs virtually eliminate contamination and increase participation since everyone can participate at the convenience of their doorstep.

3) Monitoring Success:

The more a community recycles, the more cost-efficient recycling programs become. The EPA estimates that the average net cost per ton of multifamily recyclables is $177, dropping to $113 for communities with diversion rates over 20 percent. Keep track of the performance of a program (e.g., set-outs, number of containers, how often containers are emptied, quantity of materials collected, etc.). Communities that know this information are able to better target education efforts/outreach, which encourages participation.

The key thing to remember is that multifamily recycling is possible and can be effective.

Selling Multifamily: Five Hard Exit Strategies

Tue, 24 Apr 2012 14:38:14 GMT

In today's environment exiting from an owned multifamily asset can be a tough nut to crack. Why? It would be easy to say 'its the times we live in". Well, yes, but that is not actionable or of any value. Selling multifamily today is difficult, primarily, because people fail to recognize the time and complexity of the process. Buyers are there, assets are available... the timeline is the thing.

Exits are hard because even the easy one's require serious expertise and a serious time commitment. Selling is as common as buying, of course, just recognize the timeline. Market time to a sale in primary markets is six to twelve months, longer in secondary and tertiary markets. Following are five reasons why it can be hard to sell a multifamily asset.

Limited 1031 Exchange Activity. Gone are the days you can wait on a hungry 1031 buyer that must invest NOW, NOW, NOW! They are few and far apart. When volume slows so does 1031 money. There are traders, but at what price glory? The only difference between a 1031 buyer and anyone else is that they have a definitive timeline to meet. Otherwise, they are the same as any other buyer.

Brokers are still the center of attention in buyer identification, but they have serious competition for product; LinkedIN, Loopnet and a myriad of other on-line resources that will provide multifamily assets with exposure. For those with limited experience in the asset class a broker is still your best bet. There are just too many landmines to guess on matters related to selling a commercial multifamily asset.

Cash Buyers. Cash buyers, fine. But cash at a punishing discount, is this viable? The offer is from a cash buyer with a proof of fund letter in hand; so what. If the price and terms offered is out of bounds for you the seller, then pass. If the offer is within your strike zone, proceed.

CMBS lock-outs. The quantity of CMBS loans with extended lock out periods is huge. These lock-out periods were installed to protect mortgage investors by preserving yield for an extended period. That makes sense. And, borrowers/owners signed up willingly. Now comes the the pain as deal after deal has egregious defeasance that drops a property into years of purgatory, of un-sellable stasis.

Loan Underwriting. The has pendulum swung hard the opposite way... The stack of paper is thicker than ever at loan closings. And there are more attorneys than iPhones at the table. There is no way out. If you want the loan the required documentation is, required... As a seller, this means being amiable to assisting the buying in filling in their loan package with lender required documentation and updates all along with way.

Time, Patience and Exposure. These are your best friends in the selling process. All are equally important. Patience is the most difficult of all. Patience is hard... Having all three of these in combination will assist any seller in navigating items 1 through 4 above. There is not replacement for time in a transaction. Each has its own cadence.

If you are stuck on an issue, send me a email. If I can help with an idea or resources, I will.

-- John Wilhoit, Jr. Releases Multifamily Insight Book on Amazon --

Multifamily Insight Volume 1 delivers hard hitting facts about how to buy and operate multifamily apartment assets. Multifamily Insight Volume 1 teaches its readers how to apply techniques to increase revenue and control expenses in today’s volatile market. It is a reference guide delivering educational content about how to implement real world strategies in professional property management and execute multifamily operations at their highest level of efficiency

Multifamily Construction Starts & Household Formation

Wed, 18 Apr 2012 08:54:42 GMT

Is the great recession over? Are we there yet? These questions will remain unanswered, but I can tell you with a high degree of certainty that as household formation picks up steam multifamily construction is well below future demand.

Household formation drives demand in multifamily construction. As we see household formation accumulate to measurable numbers we will also see increasing construction starts. And this time, with a much sharper pencil with limited tertiary construction with a hope and prayer that "they will come".

As job creation returns more adults will choose to leave living arrangements with family members caused by recessionary pressures. This increase in household formation will place added pressure on multifamily demand. As the rate of household formation increases, concurrent with years of low multifamily construction starts, vacancy will decrease and rent growth will escalate.

An on-going misnomer is that "shadow inventory" is dampening demand for apartment rentals- not true. Of the potential ten million single-family homes representing this supposed shadow inventory- six million are in various stages of foreclosure. Translation; un-available for rental.

These foreclosures will eventually clear. Regardless, housing construction starts (single-family and multifamily) remain well below future demand that will occur from:

Continued increases in population
In-migration into the United States,
Decreases in average family size
The reversal of families doubling-up (new household formation)

Here is a reasonable definition from a report issued by www.housingamerica.org entitled "What Happens to Household Formation in a Recession?" by Gary Painter of USC.

"New households can be formed either when children move out of their parents’ homes, when couples separate or when unrelated individuals choose to live singly after previously sharing a residence"

U.S. Census Bureau staff released a paper in early 2011 entitled "The Effects of Recession on Household Composition: “Doubling Up” and Economic Well-Being by Laryssa Mykyta and Suzanne Macartney, U.S. Census Bureau. They reference Mr. Painters definition and add Census statistics. From the article:

"One way people may cope with challenging economic circumstances is to combine households and household resources with other families or individuals"

The abstract states, in part, that those most likely to double-up were adults not in the workforce. Conclusion: as availability of jobs increases doubling-up reverses.

Population keeps popping, albeit at a drip pace, but still increasing. And with recent job creation ticking up "Junior" and his bride-to-be are finding opportunities to move from the nest and form their own household. Mom is happy. Junior is happy.

We will see more infill construction, close in suburbs, new single-family and multifamily housing attached at the fencepost to rail, light rail and rapid transit systems. As Professor Shiller is apt to say "x-urbs" may well be behind us.

Jobs are key and jobs are first created in urban areas where synergies exists. Waiters and welders both work in cities- in urban environments, and expand from these dense places to suburbs, x-urbs and beyond. Our densly populated cities will become more dense with people tepedly leaving the "safety in numbers" for suburban environs.

If you wonder about how the gainfully employed feel about leaving a finally found job, ask anyone unemployed for twelve or more consecutive months. I submit that their commute is shorter than ever before as they identify housing within a stone's throw of their job. Yes, increases in household formation will create demand for multifamily- but close to job centers first and foremost.

-- John Wilhoit, Jr. Releases Multifamily Insight Book on Amazon --

San Antonio's Pathway to Zero Waste

Tue, 17 Apr 2012 14:03:24 GMT

San Antonio is creating a perception change for how residents view zero waste. The change started with how businesses create products, how people use them, and how solid waste is managed. The City’s underlying goal has been that all discarded materials be reused or recycled back into nature or into the production cycle, reaching a 60% recycling rate by 2020. Thus, the 10 Year Recycling Resource Recovery Plan was born in 2010, allowing more than 150,000 multi-family residents to finally have access to recycling.

As part of the ordinance, it is required that owners or property managers of multifamily properties supply recycling containers, place containers in convenient locations, provide clear and visible signage, and distribute recycling information and instructions to residents. Properties with valet collection service are required to have a minimum of one recycling container on the premises. Prior to initiating recycling collection service, a “recycling plan” must be developed and approved by the Department. If the recycling plan is denied, the owner or property manager has 30 days from notification of the denial to submit a revised plan for approval. Owners or managers must also resubmit a recycling plan for review when the multifamily property has a change in ownership or management, a change in recycling collection services, or when the method of collection has changed (i.e., container type).

On July 1 2011, the first phase of the multifamily ordinance came into effect for 300 units or more. As of Oct. 1 2011, the ordinance came into effect for 200-299 units. As of January 1 2012, the ordinance came into effect for 100-199 units. And finally, as of April 1st 2012, the final phase of the ordinance came into effect for 3-99 units.

The City’s Plan provides a roadmap for partnering with property owners and waste haulers to ensure that all multifamily residents have access to recycling. This goal will be met through improved recycling education, outreach, expanded collection programs that would collect multiple types of recyclable materials, the creation of waste reduction and recycling incentives, and the implementation of policies that would improve commercial recycling. Failure to comply with the ordinance may result in possible fines. Owners or managers should take advantage of these beneficial offerings by the city:

- On-site recycling training and design services for property managers and employees.

- Development of cost-effective recycling programs that target revenue-generating commodities.

- Development of policies that ensure that all residents living in multifamily complexes have access to convenient recycling programs.

-Educational materials including guidebooks, step-by-step instructions for how to set-up and maintain a recycling program, and community posters for how to comply with the ordinance.

The City of San Antonio’s website hosts a plethora of information on multifamily recycling to ensure you are compliant.

Consider this: San Antonio is just one of many cities that has mandated multifamily recycling. Be sure you’re prepared if it hits your city or that you are in compliance if a mandate is already in place.

*This article was originally published on APTly Spoken.

Top Ten Reasons to Own Multifamily

Mon, 09 Apr 2012 09:30:46 GMT

Why own apartments? Following are ten reasons to own multifamily. While real estate investing is a contact sport with numerous pitfalls the rewards can be enormous. Positive outcomes require patience, expertise, access to capital and time with equal emphasis on all of these.

Immediate Income. With use of reasonable leverage immediate cash flow to investors is the draw to being in this sector. Over-leverage decreases cash flow, sometimes to the point of bringing it to zero. Price, leverage (debt levels), occupancy and rent growth are the big determinants of immediate income.

Eventual (significant) Passive Income. While no investment is really passive, over time as cash flow increases there is more cash. Thus, cap ex reserves are fully funded with NOI now reflecting true un-obstructed free cash flow.

Pending Limited Supply. The construction pipeline in Multifamily practically came to a halt in 2008. Re-booting that pipeline has a very long glide path measured in years- not months. As population continues to tick upward, any significant move in GDP, or in-migration, will placed extended pressure on supply.

Capturing Rent Growth. As more people become long-time renters, and as a result of less multifamily supply, the apartment industry should begin to see acceleration in rent growth. Some 24-hour cities are seeing near double-digit rent growth now.

Appreciation. Too many people believe appreciation is a function of inflation. While inflation is a component of appreciation the greatest factor increasing value is growth in NOI (Net Operating Income). Grow net operating income and see appreciation in value (no inflation required).

Depreciation. Tax benefits should be an ancillary reason for investing in the asset class. Yes, depreciation offsets current income, but it comes back around at time of sale (1031 notwithstanding).

Trade Value. While real estate requires time to trade, within the real estate asset class, multifamily has a very high level of interest and deep buyer pool. When it's time to sell multifamily has trade value with market times ranging from 6-12 months. That's a short porch in the commercial real estate world.

Investment Diversification. Allocation theory suggests that a portfolio should have between 5% and 15% of assets in real estate (excluding your personal residence). Thus, investors should have $50,000 to $150,000 in real estate for every one million dollars in net worth. Granted, multifamily is only one type of "real estate", but given its trade value and other attributes this asset class has merit.

Safety of Capital. Real estate prices dip, go sideways and rise over time, but less so with multifamily. Preservation of capital is a cornerstone of sound investment decisions. I believe multifamily is a solid place for long-term investing.

Inflation Protector. Predicting inflation is like betting on who will win the World Series before the season starts- there are just too many factors to consider. But when inflation does kick in, multifamily keeps pace.

Please add to the list with your comments and I will include them here...

-- John Wilhoit, Jr. Releases Multifamily Insight Book on Amazon --

Living In Your Property Management Marketing Niche!

Sun, 01 Apr 2012 22:03:07 GMT

The idea of living in your niche is a concept we developed in 1995 when we launched our business coaching service. As a result of using this strategy, we have worked with more than 600 property management executives and their companies in North America. In addition, we found this concept to be so successful for our coaching business that we began to teach our property management clients how to do the same for/with their own companies and organizations.

To understand the principles of living in your niche for your property management company you first need to answer these questions:

Who are your best residents/future residents? Will it be fun to have more of these residents/future residents?

Can you easily find/locate more of these residents/future residents?

Will these residents/future residents pay full rent at the apartment communities you own/manage?

Can you identify any painful shifts or changes with these residents/future residents?

Can you identify any profitable trends, developments or opportunities with these residents/future residents?

How well are these residents/future residents served by your market competitors?

Can you build powerful strategic alliances?

Once you have answered the above questions, the principles for living in your property management marketing niche are carefully explained below. Is living in your marketing niche easy? Yes! Just stay focused, follow the principles as explained and watch your leases soar!

Writing industry/professional articles: A key element and the foundation for living in your property management marketing niche is to write a free monthly article. This article is designed to position you and your property management company as experts within the profession/industry of your residents/future residents. This monthly article should be 700-1000 words long and once you getting rolling, a new article will only take an hour or two to complete. This article can now be sent to your residents/future residents by E-mail, posted on Facebook or a blog, inserted into a multi-formatted newsletter, sent to targeted industry/professional publications, placed at specific industry/professional websites, used as a foundation for training, placed into a workbook when making a speech, etc. You see…once you begin writing a new article each month, you can use and re-use this intellectual capital, over and over again.

Tip From The Coach: Have several people within your property management company proofread each new article. This proofing-reading step will ensure your articles are accurate, timely and communicate a concise message. A word of caution…this article is not designed to be a commercial about you and your property management company. By sharing industry knowledge, insight, trends and tips your residents/future residents will remember the expertise you provide.

Placing free articles: The next step for living in your niche is to have these free articles placed where your residents/future residents will see and read them. Here are some examples of where you would want to have your articles placed:

In the magazines/publications where your residents/future residents will read it

At four or five of the most popular websites within the industry/profession of your residents/future residents

As part of an industry/professional newsletter or mentioned within an industry blog

When your articles are placed with this kind of industry visibility, the reader {think—“your residents/future residents”} will read what you have to share on two levels. On the first level they are going to read your articles, be impressed with what you have to share and will contact you and your property management company for more information {think—“qualified prospects and leases!”}. On a second and deeper level, the people reading your articles will perceive that you and your company must be experts within your field, which is why your article was selected over other authors and companies {think—“more leases!”}. Part two of this article will include the steps for: joining industry/professional committees/organizations, hosting free teleconference calls and speaking at industry events.

Want to learn more about how to live in your niche or to hear what others are doing around the world? Send an E-mail to ernest@powerhour.com and The Coach will E-mail you a free PowerHour invitation. During this call we will discuss how to implement the steps in this article.

Ernest F. Oriente, a business coach since 1995 [28,660 hours], a property management industry professional since 1988, the author of SmartMatch Alliances, and founder of PowerHour, PowerHour SEO and P irmg.com , has a passion for coaching his clients on executive leadership, hiring and motivating property management SuperStars, traditional and Internet SEO/SEM marketing, competitive sales strategies, and high leverage alliances for property management teams and their leaders. He provides private and group coaching for property management companies around North America, executive recruiting, investment banking, national utility bill auditing national real estate and apartment building insurance, SEO/SEM web strategies, national WiFi solutions, and powerful tools for hiring property management SuperStars and building dynamic teams. Ernest worked for Motorola, Primedia and is certified in the Xerox sales methodologies. Recent interviews and articles have appeared more than 6500 times in business and trade publications and in a wide variety of leading magazines and newspapers, including Smart Money, Inc., Business 2.0, The New York Times, Fast Company, The LA Times, Fortune, Business Week, Self Employed America and The Financial Times. Since 1995, Ernest has written 193 articles for the property management industry and created 350+ property management forms, business and marketing checklists, sales letters and presentation tools. To subscribe to his free property management newsletter go to: www.powerhour.com. PowerHour® is based in Olympic-town…Park City, Utah, at 435-615-8486, by E-mail ernest@powerhour.com or visit their website: www.powerhour.com

The Elements of Fire, Ice and Water

Wed, 21 Mar 2012 07:19:53 GMT

Weather affects every property differently. I've seen buildings side-by-side where wind completely removed one roof while leaving the building next door intact. The elements like heat (fire), snow, water and ice take a terrible toll on property assets. They are a constant, never ending source of pressure that can only be deflected, but never full addressed.

Fire (heat), ice and water are the three constant weather elements affecting your real estate. Each asset standing today that is still standing in 30 years will have survived almost 11,000 days of weather.

Here is something we can all agree on; 30 years from now every property in operation will be 30 years older. Such a simple statement, yes? Unfortunately it is untrue. Some assets will be no longer having been demolished.

Other assets will be younger than their actual years because of redevelopment or substantial rehabilitation.
One major reason for the variance in useful life is the affect of weather and the quality of the building materials (weather appropriate) used for construction.

Consider a brand new roof; with picture perfect maintenance. Still, the life of this particular major capital expenditure is 20-25 years. This precludes damage from wind, hail or manmade gaffs.

Like death and taxes there is no way to avoid fire, ice and water

FIRE: Heat from the sun (Fire) naturally breaks down every chemical known to man over time. This includes roofing, any sealant in use (around windows, caulking in baths and kitchens), rubberized water line en-casements, flooring.

ICE: Ice, as they say, is a law suit waiting to happen. Like certain family members, you can't stop them from showing up and hope they only stays for a short while.

WATER: The worst of the lot as it can boil in the heat (causing damage), melt in the sun (finding it's way into the smallest of cracks) and yet freeze again (expanding those small cracks). Worst of all... it never goes away. There is seldom a seasonal break from H2O.

In an attempt to direct water to flow where we choose, we build storm drains, washout's, breaker walls, waterways, culverts. And yet water still takes a toll as even this infrastructure requires maintenance to assure that water goes where we direct. In some instances, once water finds its path it can be near impossible to divert.

Like death and taxes, it seems there is little we can do about the elements. The best thing to do is be pro-active in affected areas (interior and exterior) in an effort to stay one step ahead. Sometimes this is simple, like having working gutters. Other times hard, like when the snow budget is blown to pieces by a hard winter.

No matter the season, we cannot ignore weather's affect or pretend as if there is little or no costs to address the elements. They will be here long after we have moved on to our next act.

-- John Wilhoit, Jr. Releases Multifamily Insight Book on Amazon --
Multifamily Insight Volume 1 delivers hard hitting facts about how to buy and operate multifamily apartment assets. Multifamily Insight Volume 1 teaches its readers how to apply techniques to increase revenue and control expenses in today’s volatile market. It is a reference guide delivering educational content about how to implement real world strategies in professional property management and execute multifamily operations at their highest level of efficiency

Multifamily Acquisitions and $4 Gasoline

Tue, 13 Mar 2012 23:39:55 GMT

The price of gasoline impacts every part of our lives from the food we eat to the cars we drive and our selection of a place to live. Include real estate investing in this grouping.

In my self-imposed naivete I believe oil prices should be $35-75 per barrel. What keeps prices above these levels are things un-related to actual oil production; like presumed un-rest, the 24-hour news cycle, three guys in Luxembourg hoarding contracts in an attempt to keep pressure on supply (when supply is excessive).

I remember Christmas 2008. This is a few short months after Lehman failed and the Troubled Asset Recovery Program (TARP- how many acronyms does it take to spend a billion dollars?) was all the rage in Washington DC.

Momentarily, the national average for a gallon of gasoline was $1.72 a gallon. It was an economic "dark hour' and oil was $40 a barrel.

When fixed costs rise, people "circle the wagons"
Food, fuel, shelter are three unavoidable costs related to the "carbon footprint" of our existence. Sometimes "food inflation" is attributed exclusively to the costs of transport.

Increases in food, fuel or shelter means having to cut back in some other area. The most volatile of these expenditures is fuel. When fuel rises, renters look for ways to decrease their housing expenditures.

Here is the trade off: rent a newer/bigger place for less money further away from my job and pay the difference in fuel consumption or live closer to my job in a smaller place, for more money, and pay less for fuel consumption. What most renters fail to realize is that rent growth is more likely at the close-in location.

Multifamily owners in tertiary markets become imperiled as individuals and family's previously willing to live the rural life and take on the commute can no longer justify this lifestyle as fuel prices increase.

Properties closer to job centers thrive, properties further from job centers suffer. Since oil prices are somewhat "sticky" on the way down, once this trend begins it reverses ever so slowly.

From a European perspective we American's are wimps when it comes to our low tolerance for pain at the pump. Consider fuel today in London and Paris is approaching $10 U.S. per gallon. Consider also, that both of these cities have tremendous infrastructure in mass transit.

For "people transport" in many major U.S. cities we continue to utilize older "technology" called roads rather than a spoke and hub train system.

When reviewing potential acquisition candidates always consider proximity to jobs and rapid transit. Also check on the municipalities budget to maintain existing rapid transit systems. You don't want to be the last one to know that bus service that is now in front of your development is soon to be re-routed with the next closest stop a mile away.

-- John Wilhoit, Jr. Releases Multifamily Insight Book on Amazon --

Multifamily Acquisitions: Finding the Perfect Purchase

Mon, 05 Mar 2012 22:15:27 GMT

In real estate investing, finding the perfect multifamily asset to purchase has little to do with the actual real estate. Blink blink. What? No, really. Why? This is because any particular piece of real estate is only as important (read; as valuable) as the content of its surroundings. Finding the perfect asset begins with quality market research.

Meaning: a specific real property asset is defined by the market dynamics represented in surrounding economic activity.

Saying a particular piece of property is perfect is like saying you have seen the perfect fastball. Even if this were true, how do you repeat it, again and again? By identifying markets with similar attributes to those surrounding your original premise (or perfect asset) adjusting, and making incremental improvement to the model.

For income property purchases the market and submarket defines the asset- other than trophy properties. This is never the other way around.

The primary service providers of multifamily market data are similar to the well known rating agencies of S&P and Moody's whereas they tend to swing in the same direction in the broader scope of trends. REIS , MPF and Axiomatics are all quality service providers. Their forecast will vary on market specifics (sometimes significantly) but they all get it right on matters of national scope. All three say multifamily will maintain it's pricing power in 2012.

Finding the perfect asset begins with quality market research. The three service provides noted above represent a really good place to start.

– John Wilhoit, Jr. Releases Multifamily Insight Book on Amazon –

Multifamily Insight Volume 1 delivers hard-hitting facts about how to buy and operate multifamily apartment assets. Multifamily Insight Volume 1 teaches its readers how to apply techniques to increase revenue and control expenses in today’s volatile market. It is a reference guide delivering educational content about how to implement real world strategies in professional property management and execute multifamily operations at their highest level of efficiency. Get the book here>>

About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. For more information, visit: www.MultifamilyInsight.com

Four Pillars of a Quality Mortgage

Wed, 29 Feb 2012 08:34:40 GMT

In the evolution of mortgage financing, lenders have expanded the boundaries to include a rainbow of options. The recent recession has decreased the colors in this rainbow, but we still have five hundred more options today than our grandparents. Ok, may that's a bit of a stretch, but only a little

If we were building our very own mortgage loan what would that look like? In the real world, no zero interest, self-liquidating options. Here are the four things I would want in every mortgage. The "wish list" items are all beneficial to the borrower.

Reasonable leverage. A lenders willingness to provide a 75-80% loan-to-value mortgage is separate and distinct from the borrower’s decision to leverage to that level. What is the appropriate leverage given the goals and objectives of the property owner?

Wish list item: 1.50 (DSC) debt service coverage. (where annual Net Operating Income equals 150% of mortgage annual mortgage payments)

Leverage is often a function of risk appetite. Yes, yields can increase substantially with increased leverage, but so does potential loss of equity. There are a multitude of variables that impact getting to a 1.50 DSC; purchase price, cash in, etc. Big variables. Just note that obtaining "peaceful sleep" is much easier with greater DSC.

Fixed Rate Financing. Variable rate mortgages are used predominantly to allow deals to work in varying interest rate environments. Rates that float invariably increase. It's a timing game.

Wish list item: A fixed rate that is actually "fixed" for the entire amortized term of the mortgage.

Long-term Amortization. A 30-year commercial mortgage is hard to come by these days. Granted, the amortization rate may be 30 years, but the term of the loan is invariably shorter. This is one reason why loans from GSE's (Government Sponsored Entities) have become so popular as they continue to offer an actual 30 year term.

Wish list item: No pre-payment penalties allowed under any circumstances.

The longer the term of the mortgage, the greater the flexibility. We can shorten the amortization by increasing monthly payments towards principal (although this is seldom done). However, many CMBS loans forbid principal reductions.

Wish list: A long-term mortgage with no restrictions to principal reduction payments (mortgage pay down)

Accurate Assessment of Cap Ex. Projecting capital expenditures pre-acquisition is of great use and comfort to long-term owners. While we cannot plan for every contingency, it is imperative (and progressive) to plan for known capital expenditures.

Wish list item: A capital assessment that is absolutely real, accomplished by an un-biased professional, one who owns no rose colored glasses. An assessment by an honest actor

Our Dreams…Your Dreams!

Sun, 26 Feb 2012 20:14:36 GMT

On February 9, 1996 I was fired for personal reasons from an executive position with a large sales organization within the multifamily industry. For some, this day would be considered the day a large door was slammed shut. Instead, I will always remember this date as the day 1000 windows were opened! On this day in 1996 my wife and I climbed a small hilltop near our home in Southern California…and we planned our future for many hours. Using the principles of mind mapping, we created our written plan as we envisioned a new life for ourselves and for our family:

1. Spend more time together as a family.
2. Live in a world-class ski resort. [And this is our 14th year living in Park City, Utah…at the base of three world-class ski resorts.]
3. Travel/vacation every month, during the months when we couldn’t ski.
4. Never travel for business.
5. Build a coaching business/service, with property management clients and with vendors to the multifamily industry.
6. Live in a new country each year, for four to six months, once our three children are all in college. Our oldest son is attending Wharton/UPenn as a junior, our daughter is a freshman at UPenn…and they are both loving their time in Philadelphia. Our youngest is in 11th grade, is 6'9" and has big dreams about playing basketball in college.

As a result of planning our future in 1996, we have accomplished the first five goals listed above. As for our sixth goal, we have traveled to the Austria, Canada [four times], Croatia, Denmark, Estonia, Finland, France [twice], Germany, Greece, Ireland [twice], Italy [three times], Mexico, Poland, Russia, Sweden, Switzerland, Turkey, and the United Kingdom [three times] as part of our ongoing scouting/research trips. Each trip is an opportunity to meet wonderful new people [and our clients!], share a meal, and experience their culture--as we continue the process of deciding which cities/countries we want to live in for extended periods of time. Yes---we are truly blessed as a family and each day is a celebration of these gifts.

But this article is not about our goals/dreams…it’s about yours! Listed below are the questions I would like you to consider about your goals/dreams as a property management professional:

1. Are you clear what your goals/dreams are? How will you know when you get there?
2. Do you have a written plan for your goals/dreams? Can you E-mail them to me, within five minutes of reading this article? Do your goals/dreams have a date of completion/achievement?
3. Do you have written goals/dreams both professionally and personally? Do you read/review your goals/dreams daily?
4. Have you shared your professional goals/dreams with your property management team? Have you seen/read theirs?
5. Have you shared your personal goals/dreams with your family? How do your goals/dreams align with those of your family?
6. What action steps have you taken this day/week/month to move you closer to your goals/dreams?
7. What is your genius work? {Send an E-mail to ernest@powerhour.com requesting article #37} Are you honoring these principles on a daily basis?
8. What kind of learning/education investments are you making in yourself, so you can do something that will tap your talents, passions and values?
9. What will you be earning, five and ten years from today?
10. If you could live/work/play anywhere in the world, where would this be?
11. What kind of personal/professional legacy do you want others to remember you for?
12. Do you have a Personal Board Of Directors and/or a coach to help you reach your goals/dreams? {Send an E-mail to ernest@powerhour.com requesting article #14}
13. If you only had 30 days to live, what would you want to do that you have never made the time for?

Tip From The Coach: Remember, success is not a matter of luck, an accident of birth or a reward of chance. Success is a matter of decision, commitment, planning, preparation and execution. Success doesn’t come to you; you go to it!

Want to learn more about how to build written goals/dreams or to hear what others are doing around the country? Send an E-mail to ernest@powerhour.com and The Coach will E-mail you a free PowerHour invitation. During this call we will discuss how to implement the steps in this article.

Ernest F. Oriente, a business coach since 1995 [28,500 hours], a property management industry professional since 1988--the author of SmartMatch Alliances and the founder of PowerHour, PowerHour SEO and www.pirmg.com, has a passion for coaching his clients on executive leadership, hiring and motivating property management SuperStars, traditional and Internet SEO/SEM marketing, competitive sales strategies, and high leverage alliances for property management teams and their leaders. He provides private and group coaching for property management companies around North America, executive recruiting, investment banking, national utility bill auditing, national real estate and apartment building insurance, SEO/SEM web strategies, national WiFi solutions, and powerful tools for hiring property management SuperStars and building dynamic teams. Ernest worked for Motorola, Primedia and is certified in the Xerox sales methodologies. Recent interviews and articles have appeared more than 6500 times in business and trade publications and in a wide variety of leading magazines and newspapers, including Smart Money, Inc., Business 2.0, The New York Times, Fast Company, The LA Times, Fortune, Business Week, Self Employed America and The Financial Times. Since 1995, Ernest has written 191 articles for the property management industry and created 350+ property management forms, business and marketing checklists, sales letters and presentation tools. To subscribe to his free property management newsletter go to: www.powerhour.com. PowerHour® is based in Olympic-town…Park City, Utah, at 435-615-8486, by E-mail ernest@powerhour.com or visit their website: www.powerhour.com

Real Estate Investing With a Sense of Purpose

Wed, 22 Feb 2012 14:29:48 GMT

What does real estate equity and jet fuel have in common? Both can evaporate before your very eyes! Equity is the rocket fuel of real estate investing. In the last five years we have experienced an entire real estate cycle.

Simplified the real estate cycle is equilibrium, growth, over-built (bubble), bust, recovery. Except for the recovery part we have seen each part of the cycle in the last five years.

A rocket scientist never uses rocket fuel just for fun. Even in experimentation fuel usage is purposeful. Like a Sunday drive, without a known destination- you're just driv'in. Likewise, the energy and resources required to start and finish a commercial real estate transaction is significant. It is a serious endeavor with large financial ramifications.

The primary "sense of purpose" in any real estate investment should be, first, preservation of capital. Second is providing a return on investment (or targeted return) given the yield profile of the invested dollars.

The equity number should include all soft costs from pre-acquisition expenditures. All in equity is the number that requires yield- a return on invested capital. The only sure way to determine yield is by accurately determining costs basis.

Just like rocket launching, commercial real estate investing is no place for guess work or on-the-job learning. From the very first day resources are at risk to acquire real estate assets every effort should be made to deploy these resources as efficiently as possible. This includes prudent utilization of equity. This includes folding in all soft costs into basis.

If equity is the rocket fuel of real estate investing, prudent use with a high level of expertise is paramount. Always.

What Google & Intel Know About Real Estate Investing

Tue, 14 Feb 2012 23:50:15 GMT

What Google and Intel Know about real estate investing is that a certain cross section of skills is necessary to optimally run a business. Using a fine point pen, these two global, multi-billion dollar companies have identified the necessary core competencies they desire and they know exactly the type of people they wish to hire. I believe that property management companies hiring people with these same skills could see exponential increases in productivity.

Google and Intel have scholarship competitions to encourage young people in science, engineering and computer science. Do you know a burgeoning scientist? Google and Intel are searching the globe for talented young minds to change the world.

Yet while ideals are important, the people they seek must have certain cognitive and social skills to fit into their respective organizations. Hermits need not apply.

In recent years the applicants at Intel's Science Research Fair attained a balance of 50/50 men and women. For the first time ever this year's competition had three women finalist.

What does this have to do with real estate investing? There are specific attributes these companies look for in new hires. Both companies hire people from around the world representing every time zone and dozens of countries.

What are the knowledge, skills and abilities Google and Intel are seeking in their future scientists and engineers that we can apply to property management? They are:

Extraction - taking a problem and presenting it in a way that allows people to work towards a solution.

Working with Data - skill in collecting relevant information from the ocean of information noise around us.

Social interaction- teamwork. Skill a and b (above) has value only when shared, thus, having the ability to work with others is essential. Teamwork - worldwide, is a necessary component for working on projects and problems when team members are spread across the globe.

These same skills; extraction, working with data and teamwork, are necessary for operating a successful property management business.

The connection between the talents sought by Google and Intel and property management is that being a successful real estate investor requires the successful implementation of sound property management that includes certain cognitive abilities and teamwork.

Hiring property management talent with abilities in extraction, working with data and teamwork is a solid footing for growing a great organization.

Top 10 Worst Property Management Mistakes

Wed, 01 Feb 2012 12:13:47 GMT

The question that will come to mind as you read this is "who does that?". The unfortunate answer is too many people. We are in an industry full of talented people. Mostly.

If these mistakes are occurring with your assets it is probably time to look for new management, first to stop the damage and second to remedy the potential of on-going issues and the exposure they present. Suffice to say these are all ..... bad.

1. Allowing a danger to public safety to persist. Suspect electrical, known illegal drug use, endangerment of children, domestic abuse, violent behavior. No good choices here. All or any similar issues must be addressed in real time once known.

2. Creating, encouraging or allowing fraudulent acts. No one should be skimming off the top. PM is a business. If you can not do the business without a very high level of integrity then get out of the business, please.

3. Keeping a bad hire. Other than fire or natural disasters keeping a bad hire is one of the costliest mistakes. It is one thing to make the mistake, quite another to allow it to persist and potentially cause more damage.

4. Bad tenant screening (or no tenant screening). Anymore, the expense of obtaining a background screening is really, really cheap insurance. Having this tool available and failing to implement is trouble waiting to happen.

5. Letting water run. In doors. Out doors. Running water is seldom a positive. Find the pliers. Call the plumber, the roofer, the candle stick maker- who ever has the answer Get that water stopped. Same day.

6. Allowing insurance to lapse. 'nough said. Murphy's Law lives here.

7. Ignoring maintenance calls. News flash... they do not go away. Good will is hard to earn, easy to lose. If management doesn't care about your customers who will?

8. Ignoring renewals. The number one objective to retaining a stable income stream is making sure your customers are staying with a proactive renewal policy. No renewals policy, no stable income.

9. Lack of record keeping. Uncle Sam eventually catches up and when he does it's like an ocean wave hitting a single piece of sand. Keep good records. File tax documents on time using quality service providers.

10. Avoiding the telephone. There are varying policies regarding telephone etiquette and responsiveness. Implement a policy and stick with it Your customers and potential customers want consistency. Having the attitude of "they'll call back" is self-deception. "They" (potential tenants) do not. They talk to the next person that picks up the phone.

Property Management: Mowing the Grass

Tue, 24 Jan 2012 22:43:01 GMT

Landscaping is important. In the property management business spring is when we set up for the summer pool season. Winter is the time to think about the spring growing season and how to best address grounds maintenance. Addressing landscaping, ground cover, plantings and soils seems like such a simple question. At the very least it takes pre-planning to assure fixed price contracts in advance of service.

If a plant scientist were to survey the grounds of your income property assets their report would say some like: there are 55 "species" of plants and three invasive varietals that are negatively impacting sustainability. And your comment would be; "I only want my property to look good- neat and clean with green grass and pretty flowers. What's all this talk about invasive species!".

Like farmers, property management requires having a well rounded skill set. Alas, we must rely on our subject matter experts to get us through the necessary gory details. For example, using the wrong seed in shady areas can be a flat out waste of money. The use of plants that require high maintenance should be avoided when a suitable substitute with lower carry costs is appropriate. Factor in water conservation. Some plants truly drink like elephants.

The importance of ground cover in landscaping really comes into play when the conversation includes any word similar to soils erosion or basement leaks. When it comes to soil conservation, preservation and removing or re-directing run off we want ground cover to be our friend. This requires planning.

My point is that too many people think of grounds as exclusively a cost center versus an asset to preserve. For grounds work the two options available to most income property owners are self-service or contract. For commercial assets there is nothing wrong with having dedicated staff for grounds if this fits within the larger budget.

I caution you to make sure the landscaping line item never becomes a jobs program whereas staff is mowing three times a week to look busy. Like Professor Drucker taught us with just-in-time inventory management, sometimes contract providers can be far and away the best and most costs effective solution.

Multifamily and Crime

Wed, 18 Jan 2012 08:10:04 GMT

There is no way to avoid it. If you are in any way involved with income property management then sometime during your career path you and the assets under your management will be impacted by crime. Sometimes, violent crime.

I am not exactly sure why crime is such a big seller on television. There are more Cops and Robber shows than ever. Perhaps it is because even a single act of crime impacts so many lives. When crime comes to your doorstep it is usually unexpected and seldom perpetrated by in-place residents. People forget that criminals have cars too. They are mobile.

From Perry Mason to Colombo, we now have CSI (Los Angeles, New York and Miami- what a franchise) and Law & Order. As a society we are intrigued by violence while concurrently trying to avoid it in our own lives. The issue is that crime does not always happen to someone else. It can impact you, your family, your tenants, your assets.

On LinkedIN, Ernest Oriente has a group, "Property Management Professionals". One of the threads is specific to all matters related to property management and crime. It is called Crime and Security. It is a place where you will learn more than one new thing about the subject. You must be signed in to LinkedIN to access Property Management Professionals group and the Crime and Security thread.

I know what I am about to say may seem like an over-simplification, but I am going to say it anyway. To the best of your ability try to avoid turning a blind eye to criminal activity. We all have a 'self-preservation" instinct that says "DON'T GET INVOLVED". I'm not suggesting throwing yourself in the middle of a gun fight. But call the authorities- even anonymously. Leaving it to someone else means it doesn't get done. Who knows how many lives a single phone call may save.

Six Ways to Buy a Kitchen Appliance

Wed, 11 Jan 2012 21:42:47 GMT

For stabilized multifamily everyday appliances include stoves, dishwashers, refrigerators and microwaves (built in). Unlike disposals and locks, unless there is secure storage on site, keeping reserve appliances on hand is seldom a good idea. It's amazing how often a refrigerator can "grow legs" if left un-attended for several months. Here are a few options for just-in-time appliance buying.

Buying Used. For stoves, electric and gas, used stoves can be a good buy assuming they look good. There are few moving parts and replacement parts are easy to come by. For all other appliances going the used route is much more difficult. Microwaves and dishwashers are just too inexpensive brand new to consider a used appliance considering the labor involved for install.

Refurbished. Great for stoves, no so good for refrigerators. Stoves have just a few moving parts so if the item is structurally sound, and tested, then refurbished stoves can be a great buy. For refrigerators, like buying used, having to replace even one delivered item can be a major inconvenience for everyone including your tenant.

Home Depot vs. Lowes. When prices are similar it is the people that make the difference. My suggestions is to stick with those that provide you with the best service, selection and price- in that order. Great prices without good people backing it up has a higher costs in the end.

Bulk Purchase From Manufacturer. With appropriate credit accounts established, GE will deliver right to your door. Most manufacturers have specific credit and volume requirements to assure their major retail outlets remain competitive. In other words, selling direct to you has to make business sense without under-cutting their bread and butter re-sale customers.

Local Appliance Supplier. They have great buying power on the local front. In most circumstances they can procure a better pricing from the OEM (Original Equipment Manufacturer) than you can. Give them a chance. Sometimes the best deal is right under our nose.

Mail Order/Drop Shipper/Direct From Manufacturer. Using distant product providers requires strong operators and strong relationships. The issue is returns and shipping; the hassle factor for returns and the costs of shipping. Best used for parts rather than full, free standing appliances.

Auction Houses. All sales final. Buy at your own risks. Kind of like "Storage Wars" your purchase is of unknown quality. Even "new in the box" purchases can have damage.

Three Important Steps For Conducting Exit Interviews

Sun, 08 Jan 2012 21:17:19 GMT

Research has shown that a person who resigns from your property management company is leaving for one of three possible reasons: a new career opportunity, an unsolicited job offer or for a grievance that has not been handled correctly. Whenever a person resigns from your property management company for voluntary reasons it’s normally a surprise and it can be expensive to replace a valuable team member. This article will outline three important steps for conducting exit interviews, a process which will reduce employee turnover and improve profitability at the same time.

Implementing exit interviews: Start by explaining to your property management team that an exit interview will be conducted for any person who is voluntarily leaving your company. When done respectfully, exit interviews send a strong message to your team because it says that you and your company want to know why they are leaving. An exit interview process will also help you and your property management company clearly understand why people are leaving and may give you valuable clues as to where some improvement needs to be made from within your company. An exit interview process will also give each former employee a chance to tell you why he or she is leaving and this form of closure is both healthy and productive prior to their departure.

Tip From The Coach: As you begin to review your exit interview forms, look for trends that might point to deeper problems or might help you see new opportunities. Here are some trends to look for: the average length of time a person works for your property management company before they voluntarily resign, the top three reasons why a person leaves your company, the top three positions with the most turnover, what internal changes might prevent team members from leaving, do you see any turnover patterns within a specific department or group, and what are you doing on a personal level to prevent future resignations.

Conducting exit interviews: The next step is to determine how exit interviews are going to be done in your property management company. Here are some typical ways to conduct an exit interview: give an exit interview form to the person who is leaving and ask them to complete it before their last day, give an exit interview form to the person who is leaving and ask them to mail it back in a confidential envelope, meet with the departing person on their last day to conduct a verbal exit interview or schedule a time to have this person call your human resource department for a telephone exit interview.

Tip From The Coach: With many of our property management clients, we have been asked to conduct exit interviews with some of their departing employees, as a neutral third party. We use a custom exit interview form for each property management company and then create a summary of our findings. From this summary, we then begin to address the internal areas that will either reduce employee turnover or make for a more productive and profitable organization.

Questions to ask during an exit interview: It has been our experience that each of our property management clients want to create their own custom exit interview form. Here are some sample questions to get you started with yours: What did you enjoy the most about working for our property management company? What did you enjoy the least and why? What suggestions or feedback can you share that would make our company stronger and more successful? Did we handle your complaint/grievance in an appropriate and timely way? Were you clear about your career path and future within our property management company? What would it take for you to stay, if that were possible? Is there anything else you would like to share as your final comment?

Tip From The Coach: Remember, if exit interviews are handled respectfully, you and your company will gain a wealth of knowledge to help grow, refine, polish and solidify the success of your property management organization. In addition, a departing employee will more than likely offer honest commentary about what is and what is not working in your company. Are you ready to really listen to what they have to say? More importantly, are you ready to take the action steps to resolve, fix, and improve whatever is necessary?

Want to hear more about this important topic or ask some additional questions about how to build a custom exit interview form? Send an E-mail to ernest@powerhour.com and The Coach will E-mail you a free PowerHour invitation.

Ernest F. Oriente, a business coach since 1995 [28,260 hours], a property management industry professional since 1988--the author of SmartMatch Alliances--and the founder of PowerHour, has a passion for coaching his clients on executive leadership, hiring and motivating property management SuperStars, traditional and Internet SEO/SEM marketing, competitive sales strategies, and high leverage alliances for property management teams and their leaders. He provides private and group coaching for property management companies around North America, executive recruiting, investment banking, national utility bill auditing. national real estate and apartment building insurance, SEO/SEM web strategies, national WiFi solutions, and powerful tools for hiring property management SuperStars and building dynamic teams. Ernest worked for Motorola, Primedia and is certified in the Xerox sales methodologies. Recent interviews and articles have appeared more than 6500 times in business and trade publications and in a wide variety of leading magazines and newspapers, including Smart Money, Inc., Business 2.0, The New York Times, Fast Company, The LA Times, Fortune, Business Week, Self Employed America and The Financial Times. Since 1995, Ernest has written 190 articles for the property management industry and created 350+ property management forms, business and marketing checklists, sales letters and presentation tools. To subscribe to his free property management newsletter go to: www.powerhour.com. PowerHour® is based in Olympic-town…Park City, Utah, at 435-615-8486, by E-mail ernest@powerhour.com or visit their website: www.powerhour.com

Multifamily And The World Around Us

Wed, 04 Jan 2012 14:22:40 GMT

From a birds-eye view the multifamily market is poised to have a strong 2012 with at least modest rent growth gains and good absorption of new product. Rent growth is pressured by limited increases in payrolls and paychecks, however, with limited new construction in the pipeline (as compared to historic norms) vacancy should tick down.

If you are like me its difficult to watch the nightly news regularly. First of all, we have so many other options; smart phones and pads being front and center. The noise level, all the same, can be distracting. Nationally, multifamily should have a fine year. Following are my thoughts on what will be the biggest offenders next year in terms of creating noise.

Presidential Election. With election spending poised to create another record, probably with the word "billion dollars" in the mix, the most powerful job in the world will be in play for the next four years. Democracy, as we use the term loosely, certainly has some interesting twists. I am only sorry our "real" economic problems will takes a back seat to the show.

U.S. unemployment rate. Congress will have limited effectiveness in an election year to implement anything that will have a material impact on US unemployment. Like the Fed, part of their calling is to support private sector strides in keeping a sound economy and full employment. Historically, full employment makes for a lot fewer recessions, revolts and revolutions. Note to Congress: so its kind of important for national stability.

This action should be paramount, but in an election year lip service will be the norm leaving the issue to the next administration. Even with U-6 unemployment at 16% it seems politicians have other objectives to pursue. This matter more than any other will dampen multifamily prospects going forward as people without income cannot "un-pack" from doubling up in apartments.

Deficit Reduction. See my blog entitled "Super Committee Blues". This cycle the words decisions and Congress seem to have a hard time finding their way into the same sentence.

QE3. Major noise producer. Will receive more print than it takes to print the actual currency. European Recession. We all know it is coming. nothing we can about it. Will only nominally impact US global exports. Second only to QE3 in terms of press coverage.

Arab Spring. From Egypt to Libya full nations have removed national leaders in a quest for change. Whether for democracy or some other form of government these transitions will takes years, or generations, to settle. This is part of the continuing saga of oil price instability.

Keep focus on running your assets. Devoting hours to the daily news can be draining and unproductive. Make sure to vote in local and national elections- your participation is imperative. Maintain control in areas you can control and place the rest in perspective with a healthy dose of realism.

How to Select a Lock

Wed, 21 Dec 2011 08:24:32 GMT

This is a discussion on selecting door locks for apartment communities. Having this conversation ten years ago our consensus was that early in the 21st century we will all have paperless offices and key-less locks. Guess what; didn't happen. Is your office paperless? Are your communities key-less? The likelihood is low.

Electronic locks are the future. They provide a myriad of benefits to commercial multifamily property owners. New developments with on-site management must consider the benefits of electronic locks. Then there is everyone else; those with assets new and old that have 100 year-old technology (older really)- the lock and key.

Locks represent the ultimate "weakest link" theory, whereas, the weakest link is always the first to break down. As property manager, it is your job to strengthen any and all weak systems. The beginning point for selecting locks is to perform an assessment of the in-place lock and safety systems. Are they appropriate, are they functional considering the multifamily assets and the placement of the asset within the community?

The first order of business is to know without question the whereabouts of every master key. One lost master key can mean thousands of dollars in re-keying expenses.

• Is there a schedule for checking the whereabouts of master keys?
• Are they accounted for when there is personnel turnover?
• Are master keys stamped with "do not duplicate"?

Do they work? Locks are like the heat shield system on the Space Shuttle- they either work or they don't. There is no second chance when put to the test. Granted, locks are not designed to withstand an assault on the entire entryway. But they should function as a deterrent to easy entry by unknown parties.

When selecting locks aim for uniformity in quality and brand. Larger properties, or property management companies, will have equipment for re-keying on-site or at a central maintenance facility so it just makes sense to utilize a single make and model. This is also a step towards controlling expenses when implemented.

Locks and keys is one operational area where the low cost bid could be a negative. Consider buying a third-party opinion from a locksmith; having a locksmith perform an assessment for a flat fee. You may be surprised at the findings.

Multifamily & Educational Attainment

Wed, 14 Dec 2011 08:11:01 GMT

It is well documented that third-grade reading levels tell us much about adult achievement. There is a direct correlation between personal income and educational attainment. Over-stating the obvious, people with a college degree make more money that those dropping out of high school.

Can we select multifamily assets to acquire based on local school achievement test? How about buying multifamily based on educational attainment of the individuals residing in submarkets? The latter offers a better correlation of future value.

Three cities in the United States with some of the lowest high school graduations rates are; Detroit, Las Vegas and Miami. Does that mean these cities are unattractive markets for investment? The answer cannot be established based exclusively on high school graduation rates. The reason being that a high percentage of people residing in these cities migrated there from somewhere else. Why? Jobs. People follow jobs.

While it's important to factor in reading level, educational attainment and high school graduation rates in the local soup (I mean in the demographic review of a place) it is more important to identify the educational attainment of current residents.

Picking on my home state for a moment, the school districts for the two largest cities in the state are both on the verge of being "unaccredited". This slows potential investment. A manufacturing concern will have a very high interest in the reading/writing skill levels generated from local schools.

Multifamily assets are seldom viewed like manufacturing plants. A multifamily property manager is looking for tenants with the ability to pay market rents and the desire to sign a one-year lease. A manufacturer is seeking tax abatement and a place to grow roots for multiple years.

One significant key to determining the future value of a multifamily asset is the willingness of businesses to invest in the community. Once this dissipates there is seldom anything a multifamily owner/manager can do.

Changes in investment can be identified via the local chamber of commerce, through the Bureau of Labor Statistics and various paid services providing real time changes and patterns in job growth, income growth, household formation and retail sales. It is important to review these numbers for the Metro area, surrounding submarkets and the submarket in question. Include a review of traffic counts, current and historic.

Reading levels delivered to the community by a local school district is a single touchstone in the review process of a market and its asset. But as you can see it can turn into the eye of the storm when it comes to a review of overall business investment in a place. Discount this metric at your own risk. Reading levels and educational attainment are necessary components in your review funnel of demographic analysis when performing acquisitions due diligence.

For Your Residents, What Is Best Service?

Sat, 10 Dec 2011 19:31:18 GMT

Best service, especially in the property management industry, can be deceiving because the needs and expectations of your residents are changing and evolving rapidly. In addition, your residents are comparing your apartment communities to both your competition and to best service with every company, product or service they experience. By reading this article, you will learn the steps for developing a system so your residents can tell you exactly what best service means to them!

Developing resident surveys: Start by gathering the leasing teams at the properties you manage and discuss the current level of resident service being given. Also, ask for any feedback or suggestions they have heard or received from their residents. Next, prepare a resident survey that might include some of the following questions: Tell us about the best service you have ever received while living in any apartment community. Tell us about the best service you have ever received from any company or individual and why this was the best. Tell us how we can improve your living experience with our apartment community. Lastly, ask your leasing teams for suggestions on how these surveys might best be presented to their residents. Many of our property management clients ask their leasing teams to hand deliver these surveys to their residents on Saturday morning for a personalized touch while others give out small prizes to the first 25 survey responses.

Tip From The Coach: Do you want to experience best service? Take a few hours and visit a high-end retail location like Nordstrom, a Ritz-Carlton hotel or Tiffany’s. When visiting these world-class locations, observe how they greet you, the words they select when assisting you, the types and variety of products or services they provide, the colors and fabrics they use and the quality of their brochures and printed materials. As a side note, any employee of a Ritz-Carlton can fix a guest service problem instantly, for up to $2,000!

Implementing resident surveys: Once you and your leasing teams have received the responses to these resident surveys you can now set your service standards at or above the level of your resident’ expectations. As a next step, summarize the results from these resident surveys and look for any repeated suggestions or recommendations. Then, design an action-plan with your leasing teams based on the suggestions they are going to implement over the next 30-60 days. Lastly, have your leasing teams share with their residents a written summary of exactly what they will be doing as a result of these resident surveys. Remember, surveys are a great way to get feedback, but these residents will want to know what your leasing teams are going to do with their responses.

Tip From The Coach: Once this first resident survey has been completed, ask your leasing teams to schedule additional surveys every 90 to 120 days for the next 36 months. These future surveys will allow you and your leasing teams to stay current with the ever-changing needs and requests of your residents. In addition, by having your leasing teams ask for this ongoing feedback their residents will know that service at their apartment communities will continue to evolve as a reflection of their expectations.

Learning from your residents:   An additional benefit to implementing surveys will be the great new ideas or services you and your leasing team will learn from your residents’ feedback. Many of the responses to these surveys will include requests to receive something faster, something easier to use, something easier to read/understand or something that is causing a problem or frustration. Take each of these requests and look for ways to easily and inexpensively implement all of them. In addition, look at each of these survey ideas and see if your property management company can earn new income from any of these suggestions. A great example of this concept is the way many apartment communities are adding a fee-based business center where their work-at-home residents can access computers, fax/copy machines and Internet services.

Tip From The Coach: Remember, make it easy to listen and learn from the residents of the properties you manage because their suggestions and recommendations will uncover great new ideas and a variety of ways to set your apartment communities well ahead of the rest. Are you ready to raise service to a world-class level?

Want to hear more about this important topic or ask some additional questions about how to build powerful resident surveys? Send an E-mail to ernest@powerhour.com and The Coach will E-mail you a free PowerHour invitation.

Ernest F. Oriente, a business coach since 1995 [28,130 hours], a property management industry professional since 1988--the author of SmartMatch Alliances--and the founder of PowerHour and PowerHour SEO has a passion for coaching his clients on executive leadership, hiring and motivating property management SuperStars, traditional and Internet SEO/SEM marketing, competitive sales strategies, and high leverage alliances for property management teams and their leaders.

He provides private and group coaching for property management companies around North America, executive recruiting, investment banking, national utility bill auditing , national real estate and apartment building insurance, SEO/SEM web strategies, national WiFi solutions, and powerful tools for hiring property management SuperStars and building dynamic teams. Ernest worked for Motorola, Primedia and is certified in the Xerox sales methodologies. Recent interviews and articles have appeared more than 6500 times in business and trade publications and in a wide variety of leading magazines and newspapers, including Smart Money, Inc., Business 2.0, The New York Times, Fast Company, The LA Times, Fortune, Business Week, Self Employed America and The Financial Times.

Since 1995, Ernest has written 185 articles for the property management industry and created 350+ property management forms, business and marketing checklists, sales letters and presentation tools. To subscribe to his free property management newsletter go to: www.powerhour.com. PowerHour® is based in Olympic-town…Park City, Utah, at 435-615-8486, by E-mail ernest@powerhour.com or visit their website: www.powerhour.com