It's lease renewal time, and if the departure of Brad the Broker in Unit 134 is taking your leasing agent and property manager by surprise, your company is already losing money.
Worried? You should be. With multifamily firms shooting for one- to five-day unit turns, the renewal and lease-up race is on. “We think we can make $1 million a year for every day we save” in unit turns, says Jeff Adler, executive vice president of operations at Denver-based AIMCO. “So we are very focused on it. There are so many other things where you have to ask for the money, [but] with effective unit turn management, you just get it.” If Brad got away this time, fret not: Better communication and organization will decrease the headaches, vacant days, and lost rents associated with ineffective turn management.
WALKING TOUR To turn units more quickly and efficiently, you need to know your make-ready costs. Once a resident has given notice to vacate, a property manger should schedule a pre-walk of the unit as soon as possible. “Residents can do some peculiar things where you end up with a really tough or expensive turn that you would not expect,” says Martha Carlin, executive vice president and director of property operations for United Dominion Realty Trust, a Richmond, Va.-based apartment REIT.
Carlin and her team also use the pre-walk as part of a larger kitchen and bath rehab initiative across United Dominion's portfolio. The renovations cost between $7,000 and $10,000 per unit, and pre-walks are used in conjunction with a larger ROI analysis to determine which units and properties get the updates.
At AIMCO, property managers are armed with pre-walk checklists to prevent any oversights. Even in small one-bedroom apartments, a full unit diagnostic evaluation can include hundreds of inspection line items, so it's easy to miss a spot. A. David Lynd, COO of the Lynd Co. in San Antonio, says pre-walks should always include a review of exterior areas such as balconies and patios. Finally, don't forget to inspect line item No. 1: the unit's front door. After all, renters care about curb appeal, too.
CRUNCH TIME If properly and promptly executed, the pre-walk should provide the two things a property manager needs to turn a unit quickly: the lease expiration date and an itemized list of repairs.
But paradoxically, punch-out, painting, and maintenance crews traditionally hook their production schedules to leasing office activity, while leasing agents often wait for production to complete unit rehabs before initiating a lease-up. In reality, no one should be waiting on the condition of the unit or the presence of a signed lease to take action on prepping and leasing the apartment. “We begin scheduling maintenance and subcontractors up to two months out,” says Carlin. “The resident moves out, and you want to be there that day or at the latest the next day. From there the clock is ticking.”
If you've got some slow movers on site, offer a financial incentive to speed the process. “I had a property once where we were turning 15 units a month at a rent of $35 a day and taking 22 days to do it, and that is a hell of a lot of money,” says Jim Collins, now regional vice president for Atlanta-based Lane Management Co., recalling a memory from his pre-Lane days. “So we made a pact with the staff that for every day they could reduce the turn, we would split the money with them. Within four months the turns were down to 9 days, and the staff refined their own on-site processes rather than the regional [executive] coming in from the ivory tower and telling them what to do and how to do it.”
OUTSOURCING OPTIONS Some multifamily firms have decided the best way to turn units efficiently is to hire someone else to do the job. “We've been beta-testing single source providers in four markets, including Southern California, Texas, Florida, and Washington, D.C.,” says United Dominion's Carlin. “I expect that things are going to go fairly well with those programs and we will roll it out [across other properties] rapidly.”
One such company is Apartment Turnovers, founded last year in Monrovia, Md., by Rob Robertson. Working as a pool and spa maintenance professional, Robertson developed deep contacts among multifamily property managers in the Washington, D.C., and Baltimore metro markets, and he was always astonished by the frenzy of his clients regarding unit turns. “I'd go into the leasing office and see white boards with all of these dates, action items, times to call all of these vendors, et cetera,” says Robertson. “I started the company on the belief that you can take the unit turn process and consolidate it into a one-stop shop of paint, punch, carpet, and clean to get the unit back on the market quickly.”