How to Manage Maintain Control Lease Expiration
By Operations Team. For more information, contact Robert Parmar
Maintaining tight control over how many leases expire each month limits the range of units that may become vacant. This allows you to manage the degree of turnover work and prevents the on-site maintenance staff from being overwhelmed. Generally, this leads to less than quality work and lengthens the time that units are off the market which hurts both overall unit condition and monthly revenue collection.
The goal is to maintain stable month-to-month cash flow and maximize revenue, in our experience, you will not be as successful if you allow your apartment investment to fall out of the lease expiration balance.
Each individual Ownership has their specific goals. Your typical owner would want to have an equal number of leases expiring each month but some may want to have no tenants vacating units during the holiday season and spread lease expirations over a 10-month period. Those invested in student housing assets may want all leases to expire 30 days before the beginning of a new school year. Owners implementing physical value-add or major capital improvements may want to conduct renovations in the Summer and thus would choose to have a disproportionate number of leases expire during that period.
Our Strategy for Meeting Lease Expiration Goals
There are different means to achieve your desired lease expiration goals. Some utilize what we call a pen and paper method which relies heavily on hiring the right on-site staff. The problem with this approach is that the multifamily industry suffers from high staff turnover at the site level. This creates continuity issues and in our experience, the level of talent varies widely which can interfere with the overall performance of the asset. Our preference is to automate many of the on-site administrative tasks by using Yield Optimization platforms such as LRO or Yieldstar.
These platforms take a large proportion of the site staff’s varying abilities out of the equation since they provide weekly guidance on where to set rents and what lease terms to offer for each vacant unit. In the case of staff turnover, the guidance and training are so simple and straightforward that the property does not miss a beat while new employees come on board. The net result is that we meet your lease expiration goals leading to maximum revenue and optimal unit condition. Each of our Regional Managers plays a very active role in setting rents and lease expirations. They are all required to attend the weekly call for each building in their portfolio to ensure the best possible decisions are being made.
We do not believe in having all leases expire at the end of a given month. Doing so can cause unnecessary operational complications such as many tenants vacating simultaneously, creating a nuisance for existing Tenants, and overwhelming the maintenance staff with a large number of turns at once. We take the allocation of the monthly maximum number of lease expirations and break them down into weekly increments. This has proven to streamline the workload from week to week leading to units being turned and back on the market faster and the overall number of vacant unit days per month is minimized–i.e. maximum revenue.
Summerfield specializes in the management of apartment properties that are approximately 125 units or larger, and is licensed to manage in Washington, Oregon, Idaho, Florida, Georgia, & South Carolina.