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For institutional investors and asset managers that own multifamily properties, hiring the right property manager is crucial. An experienced property manager not only should maintain and increase the value of your real estate asset, but also they should achieve high occupancy rates and tenant satisfaction. With advancements in technology, especially in AI and machine learning, the property management landscape is evolving. That’s why it’s critical for commercial real estate owners to ensure they have the right property managers who combine human capital with technology to drive investment value.
The Role of a Property Manager
Property managers run the day-to-day operations of a real estate property on behalf of the owner. For multifamily properties, for example, property managers oversee:
· Maintenance and Repairs:Coordinate regular maintenance and repairs, including proactive maintenance and ongoing servicing.
· Financial Management: Collect rent, provide a budget, and create financial reports.
· Tenant Relations: Respond promptly to tenant inquiries and complaints, and focus on tenant satisfaction.
· Compliance: Ensure that the property complies with local, state, and federal regulations.
For institutional investors, in particular, the scale and complexity of managing multifamily properties require a property manager who is not only competent but also understands the unique aspects of managing properties and how they fit into a larger portfolio.
What to Look for in a Property Manager
There are multiple qualities that are essential for a property manager, including:
1. Significant experience in managing multifamily properties
Managing a multifamily property is different than managing a retail space or a single-family home. An experienced multifamily property manager should have a proven track record with multifamily properties, preferably with assets that are similar in size to those in your portfolio.
2. Ability to understand the needs of institutional investors
Managing multifamily properties for institutional investors is different than mom and pop owners. For example, institutional investors have specific reporting and compliance requirements as well as relatively higher expectations for professional excellence.
3. Knowledge of the specific geography and neighborhood
A property manager should be well-versed in the local geography in which you operate. Ideally, the property management company operates in the specific geography, and more specifically, in the neighborhood where your asset is located. If your asset is located in Dallas, you want the property manager to understand the tenant base, economic environment, weather issues, job growth, lease terms, amenities and other factors that drive profitability for the property. Tools like KeyComps help property managers and asset managers understand local dynamics to make more informed decisions about rental pricing, for example. A property manager with expertise in the Sunbelt also will be well-versed in the regulatory environment, including issues such as local landlord-tenant laws, zoning regulations, and housing codes. This knowledge ensures local, state, and federal compliance while also reducing legal issues.
4. Use of AI and machine learning in property management
One of the first questions to ask a prospective property manager is: What is their expertise with AI, and how do they integrate AI into their property management process? There are multiple ways for property managers to integrate AI. For example:
· Predictive Maintenance: AI can predict when equipment or maintenance systems might fail.This enables property managers to engage in proactive maintenance, save costs, and reduce downtime.
· Tenant Screening: Machine learning is an excellent tool to analyze data from prospective tenants. With machine learning, property managers can identify strong applicants, predict tenant turnover, and achieve high occupancy rates.
· Dynamic Pricing: AI can monitor real-time rental prices within a specific geography or a neighborhood. AI can then analyze competitor properties, rent fluctuations, supply and demand, economic indicators, and other factors that allow property managers to adjust rent prices regularly. This strategy not only is fair to tenants, but it also can maximize revenue for property owners.
· Communication: Property managers should be familiar with AI-powered chatbots to manage tenant communication and announcements. The goal is to streamline maintenance response times, communicate seamlessly for property announcements, and improve tenant satisfaction.
5. Setting performance metrics
A property manager isn’t simply executing on maintenance tasks and rental agreements. Property managers need specific performance metrics that are focused on propelling your asset toward higher occupancy and profitability. For example, establishing key performance indicators (KPIs) is essential for measuring the property manager’s effectiveness. Common KPIs include the occupancy rate, which shows the property’s ability to attract and retain tenants; NOI, which is a proxy for operational performance; tenant turnover, which can affect the property’s stability and recurring cash flow; and maintenance response times, which are an indicator of tenant satisfaction. There are other KPIs, but these are a starting ground to measure performance and align the property owner’s and property manager’s goals.
Conclusion
Hiring the right property manager for a multifamily asset can play a fundamental role in the property’s success and your investment returns. Property managers with a proven track record, with local expertise, an understanding of managing institutional quality assets, and who integrate AI into the property management process are more likely to outperform their peers. A deep commitment to tenant satisfaction, and a focus on KPIs, can help property managers raise their performance, increase cash flow, and raise the valuation of the underlying property.
