Lunch & Learn -Ins and Outs of Multifamily
Hey Ya'll-
Following up on the previous lunch & learn, I figured i'd start a conversation about the asset that apparently everyone on this forum is involved in - Multifamily. A couple talking points to start the conversation, feel free to ramble and discuss anything relevant:
Site Selection, Demographics and Projected Income - Site selection decision making, relevant demographic data, high level income assumptions.
Financing - Typical leverage, deal structure, process to finding partners, etc.
Design & Construction - Why different types of unit styles, amenities, finish selection, parking garages, retail, etc.
Operations & Maintenance - Property management, lease-ups, expected occupancy, rent increase CapX decision making.
Transactions - Boilerplate brokerage process, merchant build transactions, long-term hold analysis and transaction details.
Cheers,
DFY
Thanks for starting this thread. For the investors/developers on the forum, what is your opinion on smart access control/smart apartment management platforms such as Homebase, Stratis, Dwelo? I am a power user on here and I work for Homebase.
To all of you in mom and pop or institutional shops, what is your gameplay on property and asset management aka OPERATIONS...the most important aspect I am told.
Who takes care of the day to day operation of a portolfio of over 500 Units with tenant requests, lease renewals, leasing/lease-up, move in/out, rent increase etc.? Bringing a development to market, setting up Yardi/appfolio etc with hundreds of tenants which gets crazy, responding to all of your tenants for work orders, accounting etc.
What are the pros/cons of getting 3rd party company versus doing it yourself? heard both sides of the arguments and there is never a clear consensus. Some think it is in their best incentive to operate buildings they own because the third party could care less while the flip side is that it takes time and burden off your hands. Thoughts?
Hi, current analyst at a large institutional shop doing AM.
Short answer -- The AM team is at a bird's eye view of operations. Our job is to coordinate with the various asset level and regional property management teams, to ensure that assets are performing to underwriting (which they aren't usually) or at least maintaining reasonable returns to our equity partners. So no, we the AM team are not in charge of day-to-day operations.
At our firm and what I would assume to be the same at most other large shops, there are accounting teams for Yardi, property accounting, development accounting, bookkeeping, etc. In addition to, property management teams that are directly in charge of leasing and handling property level day to day stuff. So in essence, at large shops there are independent teams that handle each of the items on your list.
AM is again, more bird's eye view. We are in charge of valuations, dispositions, financial performance, modeling, etc.
To your second question, I would disclose that I am very new to the game, so I may not have the best response. However, from my perspective I would think it comes down to cost vs. elbow grease... To elaborate, if your job is to deploy capital for a pension fund, the absolute last thing on your mind is being the person responsible for handling property management. In this case, you're going to outsource to a 3rd party.
However, let's say you're a mom and pop shop running a hand full of value add one-offs. You need to be able to squeeze every dollar out of the deal, which means getting hands on and finding value wherever you can. Sometimes that means being the person to respond to a toilet leak rather than calling on a plumber to do so. This is really true for all the shops that have a property management capacity. Like some things in business, if you can in-house it, it is probably cheaper than to outsource...
Hope this helps.
Thanks a lot WACC,
Question - you say that you “ensure that assets are performing to underwriting (which they aren't usually)”
What specific metrics are you looking at and why aren’t they usually performing to underwriting? What factors usually lead to this?
Also your main point of contacts are property managers? I was also under the assumption that AM roles help with Yardi and all of that no?
For sure, glad I'm able to provide some clarity.
From what I can tell thus far, we are mainly focused on valuation and unlevered and levered returns (IRR). Additionally, as an AM within our group, a lot of our deals are in pre-leasing stage. Therefore, another metric we look at is leasing velocity and absorption, AKA how quickly are we leasing.
As far as underwriting is concerned -- the dev. team needs to close deals somehow, and of course this means that the deal has to look attractive to equity. A lot of the times what you will see is, the underwriting on these deals is far too aggressive. Which does sell the deal, but it makes the AM team job harder because the dev. team doesn't actually have to carry out their action plan. The AM team is the team that runs the deal and actually generates the real returns.
Yes and no, we talk with our regional and asset level property mangers a ton, but at the same time we are very involved with most of the other parts of the food chain. Along with PMs we are also always contacting our accounting teams. They do basically all of the Yardi entry. As far as Yardi is concerned, I would say that we do 0 data entry. However, basic knowledge of Yardi is helpful because we still need to know how to dig into the numbers and pull reports.
Hope this answers your questions.
It does. Thank you man. Good luck at your job! Seems like you get it.
to all you acquisition experts out there, I would like to create more activity on this post since it is somewhat dead:
When you get dealt an assignment to look for a property to acquire for your company, what data points and steps do you take in sourcing?
1) what data points do you look for and resources for population and rental comps?
2) how do you know from the tens of deals you see that the property presented to you from the broker is a good deal if you theoretically haven't seen 1000 from them? I.e. if they send an OM and you like the financials, what makes you think that there isn't a better deal to be presented?
3) what makes a good case for an acquisition and how do you present it to your company? How sophisticated is your model? Do you build it from a template? Where are you getting your inputs from like vacancy, bad debt, rent and expenses growth, future property taxes, insurance etc. Do you work hand in hand with accounting?
4) how do you take lead in due diligence? what are typically the most gruesome and difficult process in DD? how are you confirming what the seller represents are real figures?
Dolorum qui sunt maxime distinctio. Labore est deleniti autem dicta incidunt explicabo porro. Quos ipsa corporis amet sit facilis. Ad omnis corporis dolore quia quo. Voluptatem nostrum quis eos et culpa ducimus. Expedita libero qui alias.
Dicta corporis ea ducimus doloremque libero. Rerum eos iste eaque dolores voluptatibus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...