Running an apartment community to its full potential requires a properly integrated software platform, strong Human Resource capability, documented policies and procedures, and a willingness to put in the hard work to positively impact a P&L.
Summerfield's protocols, procedures, hiring policies, training, and oversight focus on results in the following areas:
General and Local Submarket: We conduct market studies via our research department for the general and local submarket to assess job drivers, where housing supply is, where it’s moving, and what impact market conditions will have on occupancy and attainable rent.
Rental Income: Where appropriate and effective we encourage our clients to support the use of Yield management software such as Yieldstar or LRO, if not, we do things in a traditional manner on a consistent basis.
Other Income: We make it a point to develop other income such as parking, utility bill back, pet rent, etc. We develop within Yardi Voyager separate unit billing for each category so they can be tracked and quantified separately from rent.
New Properties: When we takeover a building we assess each existing Tenants income level and credit history to determine their ability to pay higher rent and other income. We then take this into consideration along with market data to develop the best operating strategy with Ownership to elevate monthly revenue.
In the case of an underperforming building our goal is to bring income to market levels or close to it depending on the determined strategy. During this process we focus on maintaining cash flow at acceptable levels to Ownership from month-to-month while we work to achieve the goal. We have seen situations where rents are raised aggressively across too many units which causes excessive turnover, prolonged vacancy, and higher monthly turnover costs than budgeted which collectively leads to diminished cash flow and in some cases a need for cash calls. There is nothing wrong with this approach if Ownership is anticipating it.
We think the most significant consideration that is overlooked when developing a strategy is on-site maintenance staff capability and capacity. You need to be sure that all units that vacate in a given month are turned to a high standard and ready to re-rent before the next month begins otherwise things start to compound which leads to prolonged loss of income and in some cases negative staff morale none of which is good for the buildings bottom line. We incorporate steps into our strategy to avoid this situation.
Vendors: We use a qualified service to vet and ensure all our third-party Vendors are properly licensed and insured.
Purchase Order System: Our biggest incorporated practice that we do not see our competitors effectively using is a Purchase Order system. We have a fully integrated PO system that On-site Community staff are required to use for larger ticket items prior to incurring the cost i.e. $500 or greater where they must seek the approval of their Portfolio Manager, Designated Broker, Asset Manager, or in some cases even Ownership. The system is fully integrated with Yardi Voyager, the required approving party receives an email stating that they have a PO to approve, they then log on to the system to review the request along with associated bids either approve or disapprove or direct an alternate plan of action. We have seen overall return on equity invested increase by 1.0%-2.0% annually per building since we put this system in place.
Staffing: The other area of focus where we find that we can make the greatest impact is the hiring of an On-site Community Director. Whether we hire to a lower or higher wage we are always focused on creating value. What do we get out of the hire relative to their cost which is not always the lowest wage. If market conditions dictate, at times you are better off paying more to get a person who can do a better job of maximizing revenue and cost effective expense.
In a strong market high occupancy makes everyone feel good about their building and financial reports generally look good but are they a true reflection of good overall management.
Capital Repair: In most cases we find it very rare that there is a proactive capital plan in place. This puts buildings in a bad position when markets turn since the capital condition has been neglected creating deferred maintenance. This deferred maintenance is expensive and difficult to dig out of when markets soften since there are few dollars to go around to satisfy all those concerned. At Owner direction we develop a Capital plan for each property and incorporate repairs into each annual budget.
Within our organization we see Capital repair and oversight as a Portfolio Manager responsibility not that of On-site staff although they do assist in execution of repair with proper oversight. We work to hire qualified Portfolio Managers who can handle this level of work. Relative to industry standard we have a lower ratio of total units managed per Portfolio Manager and we pay them a little more per unit.
General Maintenance: We find on-site staff are capable of handling on-going maintenance but an area that can suffer due to time pressure is the quality of unit turns which over time if unchecked will lower a property’s overall competitiveness and become a real problem that is not easily fixed. In order to prevent this our Portfolio Managers are required to personally visit each of their properties a minimum of twice per month if not once per week and they are trained to specifically inspect the quality of unit turns to ensure a high standard.
We understand that varying Ownership have different views and strategies on property condition and we will craft a program to whatever Ownership desire.
This is intended to be an introduction to our operating focus, if you have further interest, we would like to sit down and discuss our program in detail.