There are many major reasons for apartment investment disasters such as constructing a bad deal, investing in a deteriorating location, having too much debt, and suffering lawsuits, but the number one reason is, by far, poor property management. This pertains to apartments being managed by its owners or by certified management companies.
Here are a few of the common errors that poor property managers make. Here’s some worthy guidance to being prosperous in the apartment business: don’t make these same errors!
Little or no property management skills. I chose the word “skills” and not “experience” because some property managers have ages of experience but are deprived of the skills needed to run their property to its greatest benefits. The skills I am discussing can be found by training and education. Meager skills result in poor decision making which leads to poor consequences. Failure is the unavoidable result.
Shortage of market familiarity. Not understanding rent prices for the area and occupancy rates will guarantee subpar consequences for your apartment investment. Not making an aggressive marketing plan or not aiming for your model tenant profile is a very common error. You can’t just hang a sign outside and assume your 50-unit apartment building will be at 100% occupancy with a wait list – it’s not going to happen. Know your market and its demographics very well.
Not inspecting the flow of money carefully. Human nature says to the property manager, “money is accessible and I can confidently spend it, so I will”. Unfortunate cash control is a property assassin. It’s like handing your seven year-old her college funds now and expecting her to take care of it. Human nature will take over and she will most likely spend it rashly and/or thoughtlessly. Know the cash situation of the property on at minimum a weekly basis. Put in the effort to know monthly financial information on the property. How can you make smart business choices regarding the course of the property if you don’t know how much cash is in the bank or is due to come in?
Now knowing the property from inside out, literally. If you don’t recognize the assets and flaws of your property, how do you go up against your competition? You must know the rents and square footages of your one and two bedrooms, what causes them to be alluring, what facilities (pools, laundry, club house, internet, etc.) are on the grounds, places of interest of neighborhood, and so on. You should similarly have an understanding of the property’s inbound rent amounts on a monthly basis and a deeper understanding of its operating expenses. The more you know, the easier it will be to make smart decisions.