Turning the pages of a new year!

This year we witnessed an improving apartment market even with the single family and mortgage markets continuing to see issues.  Apartment rents are on the increase, and in some markets rising in double digits.  Single family home values have been hurt after the bubble burst some time around 2006 as experts tell us, and while there was money available by lenders qualification standards and skepticism with all the record foreclosures have lenders a little lets say "cautious." 

Development of new sites has again started back up, with permits for new sites on the increase in many areas of the country.  Cap rates have not changed significantly over the past year, and there are still bargains out there for investors just as with the single family and condo markets.  There have been an increase in affordable communities permitted according to the federal government, and as you would assume some areas of the country are seeing growth were others are not.  Reports show that approximately 90% of the loans by Fannie and Freddie in 2011 were affordable communities.  Most of the new construction is not with REIT's or real estate development corporations but with individuals.  According to the National Apartment Association  and National Multi Housing Council the 2011 statistics show almost 50% of all new communities were built by individuals and not corporations and investment trusts we witnessed as significant contributors to the inventory back in the late 90's and early 2000. 

Legislative issues in multifamily in the coming year will no doubt have a huge impact on the future development, as well as how investors will look at apartments as an investment opportunity.  Tax laws including Dodd-Frank and its 200 regulations as well as what happens regarding Capital Gain Tax laws may play a bigger part than first thought.  Even though apartment foreclosures do not represent a large percentage of defaults, changes in the laws and how they are in-acted will play a significant part to determine if investors will continue to put their assets in multifamily.   

While tax issues will be at the forefront in the coming year other issues include energy efficiency requirements, communications, environmental issues, immigration, insurance, sub-metering, privacy, EPA standards, and a host of other priorities will be at the forefront.  This is not including state and local issues we continue to battle such as rental licensing, life safety, impact fees, special assessments, taxes, and maintenance licensing. 

So what does the crystal ball tell us?  The overall market is looking up, but of course could change if our federal government doesn't get its act together regarding taxes.  Changes in employment nationally impact employment in sub-markets, which can change rapidly if things go downhill.  The investment market will be up and it will be down.  Basically, the more things change the more they stay the same in our business.  I was on a panel discussion for a local apartment association in 2008 with developers and experts in our field.  All but myself said the market would improve in the next 12 to 18 months.  I predicted it would be 24 - 26 months before we saw real improvement, and not to be bragging but I was right.  I also stated that tax changes from the federal government would have a more significant impact on future investments especially if capital gains and investments were changed.  Looking at the new today as we near the so called "fiscal cliff" I can say I appear to be on the money again.  We'll see over the next few days and weeks, and I do have concerns for investors in the coming year.  Let's hope I'm wrong about my next prediction or we're in for some rocky times ahead. 

Good days...bad days, and property management days!

Is it a full moon?  No, but some days you ask that question.  Residents try our patience and I wish I had a nickel for every time one of them said, "Can I have the number to your corporate office?"  Most of the time when we are doing our job we are the least liked.  We deal with emotional issues tied to our residents including their pets, homes, finances, children, vehicles, and even their lifestyle.  We ask residents to be courteous to their neighbors regarding noise, pick up after their pets, and a whole list of things covered in the lease.  We can post all the signs we want, highlight certain provisions in the lease, go over details that we have continual issues with, and even reinforce guidelines in letter and newsletters.  There are also some residents no matter what we do to communicate what we are doing to make our community the best for everyone, they are not happy.  Welcome to property management.

Many managers have also had a regional or corporate person overrule a guideline or lease provision in hopes of avoiding controversy.  Even though the lease says if they are late they must repay concessions, we'll waive the fee because they felt they were treated unfairly.  Of course there are always two sides to the story and the property manager in many cases seems to be the bad person in the event for doing their job.  The person making the decision may not know there are five or six others now we must accommodate in the same fashion if we are to be fair and equatable.   How do we enforce the lease in the coming months, if it is waived before?   The thought process seems to be, satisfy them and maybe the problem will go away.  What they may not understand is the ramifications and precedent it creates for the decisions we must make in the future.  It opens us up to Fair Housing complaints, and throws ethics out the window.  Something many of us take seriously.

So how do we handle situations when something like this happens?  First, remain calm with the resident.  To control the emotions of others, you first have to learn to control your own.  Second, choose your words carefully.  Refrain from using the word "no" and think about saying something like, "I'm sorry but removing the fee is not an option we have."  Third don't take the attack personally.  If you do, these types of incidents will wish you had picked another career.  Forth, others that made overriding decisions have the right to do it.  Does not make it right or correct, however, it transfers responsibility to them...or so you would think.  Last, fight the battles you can win and don't waste you energy or get upset over the ones you cannot. 

If this job was easy, anyone could do it.  Yes, residents that call corporate will do everything in their power to make you look unprofessional and the bad person.  After all, you probably did not give them something they wanted and Lord knows you may have even hurt their feelings.  For some reason we have gone from a society where feelings were a right to have, to something we try to avoid.  Again, welcome to property management.

Why do they need renters insurance?

Those of you that know me or have been to one of my workshops have heard me talk about emergency preparedness.  On occasion we as property managers are faced with the many types of challenges related to the topic. I have instructed companies and associations on how to prepare for them and presented to hundreds of managers all over the country.  This past week the Northeast was dealt an unforgiving hand with Hurricane Sandy, and I personally had to deal with a fire a my community.  These events emphasize the importance of being prepared and expecting the unexpected.

True story!
So I just get off of work and it's 6:19 PM on a Friday.  My cell  phone rings and on the caller ID it's the company that monitors our alarms...not a good sign!  Now we have had issues on occasion with ground faults related to the alarms, but there had been no storms or anything to lead me to believe it could be that.  The person says, we have a fire trouble signal in Building 3.  I ask, is it a trouble alert or fire?  Then I hear that four letter word we never want to hear, "fire."  Ok Larry, take a breath and think...rule number one!

After arriving I did all the things I teach others to do, and wouldn't you know it I even beat the fire department.  Check the apartment with the fire and assess the status, check.  Fire out by the sprinkler system but now water is flooding the apartment.  Wouldn't you  know, it's a third floor apartment and water never travels uphill.  Check surrounding apartments to get residents out, check.  Call the water extraction company, check.  Call the sprinkler company as the system will have to be inspected and tested before residents can re-enter the building, check.  Call the on call service technician, check.  Check the status of the apartments downstairs, check.  Provide comfort to the residents who were involved, check.  Begin efforts to protect the asset and insure cleanup is started, check.

Luckily there was more water damage then fire damage, if that is luck.  Luckily we require our residents to maintain renters insurance.  If you have ever witnessed sixteen families wondering around your office like zombies because they have just lost everything they own, have no where to go, and don't know where to begin the process of recovery you understand what I am talking about.  Unfortunately I have had to experience this type of event far too many times.

The next time one of your residents asks, "Why do I need renters insurance?" ask them the following.  Can you guarantee you or your neighbors will not have an incident that could put you in a financial position where you have to replace all the contents of your apartment?  Accidents can happen and it does not have to be your fault where you are put into a position that everything you own could be lost.  What if you put a pot on the stove and leave it for even a few minutes and it catches fire?  Who will be responsible financially for the damage?

Insurance means peace of mind both mentally and financially.  We resisted when we started charging our residents for water and said they would leave, and they didn't.  We resisted when we started charging for trash and said they would leave, and they didn't.  We resisted when we started requiring renters insurance and said they'll choose somewhere else, but they choose your community.   Renters insurance should not be a choice or an option it should be a requirement at all communities.  Look at what is happening with the Northeast and imagine the thousands of renters impacted by potential loss.  Hopefully all of them have insurance, however, we know many of them do not.

Thinking outside the apartment box

Our industry has changed considerably over the years.  From doing our accounting on ledger cards to lease optimizer programs, nothing is for sure but our industry is changing.  Financial success means thinking outside the box and if you are afraid to look at operations beyond the norm and how we have done them, you will probably get left behind. 

Owners and managers struggle to find ways of increasing revenue and new ways of generating income streams.  The obvious way to improve income is increasing resident retention, which is the highest controllable expense we oversee.  With the average cost of turnover including vacancy loss being well over $3,000 in most markets, keeping ten more residents on a 200 unit community (5%) means $30,000 of improvement to the bottom line.  Other critical points include managing lease expiration's and of course providing excellent customer service (also tied to resident retention). A property I recently took over had 68 expiration's in one month.  Can you say, "who in their right mind would allow this to happen?"  Apparently someone that did not understand the concept of expiration management. 

So where do we go beyond the obvious and what "outside the box" ideas should be looked at?  First, a great leader and manager never is afraid to test the waters and take risks.  We have all heard people say, "If it's not broke, don't fix it," or "We've always done it that way so why change."  Whether it is raising application or administration fees, pet fees versus deposits, or charging for premium parking spaces, you never know if it will work if you don't try it.  Companies are looking at taking prime parking spots in front of buildings and charging "convenience" fees for these spaces, generating thousands of dollars in additional income.  One of the new trends is actually setting up mini-markets in apartment offices where residents can purchase toilet paper, paper towels, toothpaste, dish washing and clothes detergent, and other items they run out of and are willing to pay a little extra for the convenience of walking out their front door and purchasing on the site.  With gas at $4.00 a gallon, this type of out of the box thinking is generating additional revenue.  Putting motion detectors on lighting at tennis courts at a property I oversaw paid for itself in 10 months. 

Expenses are rising related to taxes, utilities, payroll, and other areas.  It is up to us to find ways to offset those expenses and improve the bottom line.  Creativity is the key to success, and owners have expectations on their return on investment.  For years apartments have been called, "the vanilla box."  How about putting a little topping on that vanilla, and take a risk.  We would never have reached the moon or developed a new property in a new market without taking risks.  Think about it and you may come up with the next idea in raising revenue.

Life's Challenges - Making us strong

We face many challenges in life both professionally and personally.  The true character of someone is not what they do when things are going well, but what we do in the face of adversity.  Recently my friends and family know I faced some tests and challenges both personally and professionally.  Having my position in property management eliminated was the beginning, but never giving up on my faith and ability to continue on.  I picked up myself and got on the speaking circuit, and when not traveling and sharing with others through education and training was blessed with the opportunity to work for "the mouse."  Yes, that's Mickey Mouse for those that may not know.  Disney is a fantastic organization and being able to do something I have a passion for in diving and get paid for it was a blessing, not to mention really cool when your dive buddy is Mickey himself.  

Unemployment was not for me, and I found a way to make ends meet without depending on the government.  What is the saying, "what doesn't kill you can make you stronger."  Now don't get me wrong, there were days when you wondered "why?"  Family, friends, co-workers were always there to encourage me, supporting and loving in every way.  After deciding to return to property management I polished up my resume and started taking interviews.  You don't know how many times I heard, "It has come down to you and one other candidate."  I heard that so many times I thought I was running for public office. 

Challenges do not have the big ones, but also the ones that touch our heart.  A little over a week ago I lost one of my best friends, our dog Trevie.  She touched our heart in so many ways, and was loved by family and friends.  The home next to us just happens to be a vacation home, and each year a Canadian family rented the home for several months over the winter.  Trevie for some reason took to Don and Arlene, and when I would let her out she would prance over to the door at the pool enclosure checking to see if they were home.  They had become so fond of her Don would actually come over on occasion and ask, "Can Trevie come over and visit."  We wondered why she was getting so fat and why it took dragging her home because she didn't want to leave, only to discover meatballs and other human treats were better than the dog food she was getting at our house.  There were the times she would sit on the couch with me, sitting up like a human watching television.  Of course her favorite channel was Animal Planet.  God forbid I would stop rubbing her, and can still feel the gentle nudges she would give in saying, "Dad, why did you stop?"  Holding her head as she took her last breath will forever be in my mind, but knowing she is in a better place gave me peace of mind. Trevie, I love you and miss you.

Whether the challenge be what shirt to wear too work or facing life and death situations, it is not about what challenges we face...but how we walk through the rough road of life and making sure we reach the destination with our character and humility in tact.  There is no doubt more challenges are on the horizon for each of us, and it very well may be the most difficult are still to come.  None of us received a guarantee or warranty that life would be walked on a bed of rose petals, with the reality that roses have some pretty sharp thorns that can hurt.  We have all heard when the world give you lemons, make lemonade.  Or if you are over twenty one, Mikes Lemonade.  Face your challenges knowing and learning from them and always remember, without challenging times you have no idea what the good times are.

Upcoming Events

Putting the final touches on my presentations for the Indiana Apartment Association Annual Conference and Trade Show.  I will be speaking on two subjects, both of which I believe are essential to success in property management.

In the morning I present "Financial Management - Your key to success."   Here we will review and present key factors related to our fiscal responsibility as property managers, and look at the key areas that make a difference in maximizing income and minimizing expenses.  We will look at alternatives, changes within our business, and possible ways to improve your bottom line.  Also presented will be the subject of budgeting, a task many managers dread every fall.  Why are budgets so intimidating and what can we do to remove the fear of the process?  What areas of potential income may we be missing and a look at new trends which also bring new revenue.  

The afternoon session is one of my absolute favorites and is entitled, "Peak Performance Management - Leadership versus Management."  There are distinct differences between management and leadership, and while they overlap we need to understand how each plays a role in the positions within our industry and business.  We will identify and discuss fifteen key traits of successful leaders and help you understand the tpye of leader you are and identify with.  Management skills are important, however, not enough to lead to success and excellence.  Excellence demands strong leadership, period end.

Both of these workshops are intended to be fun, educational, and informative.  As a professional magician, we'll also add a few "tricks of the trade" to enlighten the attendees and create a memorable experience.  I look forward to meeting new friends and old, and the conference is lined with some great speakers who I have known and worked with over my years in property management.

I am also taking advance order for my book at the discounted price through my website.  I'll have a coupon code posted by the end of the week.   It is available also for your Kindle on Amazon.com, I'll be bringing some hard copies with me for those who want a hard copy.  Email me at lawrenceberry@comcast.net so we can bring additional copies for anyone interested.

See you in Indianapolis for what is going to be another great conference.

A Writers Vision

Someone recently asked me, "why do you write?"    Writers are never satisfied with the result, and always critical of what they produce.  The best writers I am told are always looking at their work wondering, what could have I said or done to make it better.  So why do we do what we do?  There are many reasons including sharing information, continuing interest in topics I have a passion for, and what I consider personal therapy in keeping the creative juices alive in me.   Developing skills to communicate in a manner where others desire what you provide and can relate to a topic is part of an evolutionary process.  When I wrote my book "Complex - A Guide To Apartment Management," the ink was barely dry and I was already looking at what could have I done to make it even better.  This was after almost a year of writing and editing, and you would have thought in that time it was the best it could be.  Even today when I receive compliments on how this publication inspired others to exceed and excel in property management or introduced them to our industry, I still am second guessing and asking myself, "what if?" 

I write about those things I enjoy, have knowledge and experience in, as well as subjects where I have life interests.  Writing an article for UNITS Magazine may focus on the business side of my brain as an industry professional and property manager, while writing a screenplay about scuba diving or magic brings another form of enjoyment which I find is exciting as I push my creativity.  As an example while our industry is constantly evolving, most of what we do has been wrapped around basic principles and practices.  Coming up with a new marketing concept or resident activity can be measured in income and occupancy, however, innovation in what property management professionals is limited in many aspects by finances and staffing.  On the other hand when I write a novel or screenplay, I am only limited by my imagination.  Both are gratifying as stated in the above rationale, and each allows me to use as a means of communication.

Those of you that know me understand my passion for property management and helping others exceed and excel is exciting to me.  Not all of you know I have another side, and that is writing for personal gratification.  I have written two movie screenplays and started converting one screenplay to book format.  The first screenplay I wrote is called, "Quarry - What lies within?"  It is the story of a rock quarry which in blasting for granite, struck an underground aqua fir and releases what was thought to be extinct...a megalodon shark.  After all, great white sharks are said to be on offspring of the "megy" as they are called, and since we know more about the moon than we do our oceans and water systems who is to say they still could not exist. The story is based on a group of divers and the quarry they dive in on a regular basis.  My diving hobby and knowledge of sharks inspired me, and with some research and creativity developed the screenplay.  Actually had Warner Brothers as one time looking at the script.  Have not received any options yet, but that never held me back from writing other works.  I have just about completed the first draft to put this writing into book format, and who knows what the future may hold.  The second screenplay which I just completed recently also involves something I have knowledge and interest in...magic.  Having worked in the intelligence field and performed as a professional magician for a number of years, the two seemed to merge into "Wizard - Dirty Secrets."  It is the story of a professional magician who just happens to be a spy for a secret government agency called Military Assisted Global Intelligence Command (M.A.G.I.C.).  Using magic, illusion, and a team of specialists they fight terror and threats to our country and the world.  I have already started a sequel to the first, and hope to expand the screenplay into book format as well. 

Writing can be fun, inspiring, and keeps my mind active.  Often wondered if searching on the internet for information about Uranium 235 if the FBI would come knocking on my door wondering what I was doing.  Probably have a file somewhere in the agency archives wondering who this person is that researched how to make dirty bombs.  Hold on, need to answer the door!  Just kidding of course.  None of us knows what the future may bring or what taking a risk may provide in rewards.  Failure is never having made the attempt, not how high the bar may have been set.  Find your vision in whatever you  do and no doubt you will be inspired as I have been.