Lance Edwards' Apartment Wealth Info

The ability to improve real estate properties, particularly multifamily properties, boils down to being a good asset manager. Asset management is different from property management. Property management is the day-to-day operation of a multifamily property, involving such matters as keeping the property up, collecting the rent, and maintaining it. Asset management, on the other hand, is adding value to a property.

Whereas property management can feel like drudgery at times because the tasks are usually the same, asset management is the fun part where you get to use your creativity. The purpose of asset management is to increase equity by raising the NOI (net operating income) to cap out the property.

Asset management involves the following four areas:

1. Property management. You may start out as the property manager for your apartment building, but your long-term goal should be to work as asset manager while making sure the property manager you’ve hired is doing his job. The better your property is managed, the greater your NOI will be. Proper property management affects the value of your property because it will affect your collection rate. A good property manager will decrease the vacancy rate and keep the current tenants happy.

2. Repositioning. Repositioning is changing the appearance, reputation, and image of the property. It involves capital if you are rehabilitating properties and changing the tenant mix. It might mean converting an “all bills paid” property to an individually metered property. Many times repositioning has to do with the reputation of the property, and therefore, you may need to change the property’s name. Some property owners put out a sign that says, “under new management,” but a brand new sign including a brand new name is even better.

3. Adding income sources. Apartment owners can add income sources to their properties by installing vending machines or adding Laundromats. Be creative when thinking of ways to add income sources. Perhaps your tenants have a need for storage; add small storage units for rent. Other possible sources for income include an onsite daycare center, cable television, an exercise room, clubhouse rental fees, pay phones, house cleaning services, and Internet access.

4. Reducing expenses. Reducing expenses means looking at every expense as something that can be eliminated or reduced. That said, landlords have a responsibility to their tenants to provide safe and decent housing, but with creativity, you can find ways to cut costs. Perhaps the previous property owner hasn’t shopped around for better deals on insurance, repairs and maintenance, pest control, security, and lawn care. By lowering one or more of these costs, you can increase your NOI, thus adding value to the property.