Identifying Risks and Opportunities Across Your Residential Portfolio

As an asset manager looking after a portfolio of multifamily properties, you have a full plate. You have to answer to investors and oversee multiple property managers. Your properties may span across different cities or even states. It can be challenging staying on top of precisely what's going on at each of your buildings. You cannot afford to miss out on significant trends and warning signs. Without proper visibility into your communities, small issues can fester into costly problems, or you may miss the boat on lucrative opportunities.

Identifying risks and opportunities

There are many approaches to managing multifamily properties, but most of them are scattered and reactive. If you spend your days waiting for the smoke to appear and then putting out the fire, you risk exposing yourself to oversights that can harm your properties and upset your investors.

Instead, you should gather data and generate insights to identify risks and opportunities proactively. With a holistic view of your entire portfolio, you can prioritize your time to focus on activities that yield the highest returns.

How to identify risks in your residential property portfolio

Most risks in multifamily properties are associated with liability, tenant churn, and leasing inefficiencies. Here's what you should look out for:

Mitigate liability risks in residential properties

Avoid liability risks by making sure you protect your assets from financial risks. Tactics to achieve this include:

• Finding out where issues are emerging at the community level. For example, are multiple tenants complaining about the same problem? Is there a pattern in the complaints or requests?
• Protecting yourself from litigious tenants by having a process for due diligence, keeping up with maintenance, setting clear rules, and keeping good records of all documents and communications.
• Using consistent KPIs and check-ins with your leasing teams and regional managers to watch for potentially litigious matters. Regularly use these checks and other healthy property checks you may have (surprise inspections, reviews by tenants, etc.) to identify where issues may be brewing.  
• Identifying issues that can blow up and embarrass the property owners and investors in the media. These incidences can impact your company's reputation and the building, making the property less attractive to prospective tenants and investors.

Lower tenant churn risks in residential properties

Tenant churn is costly. Not only are you losing rent, but you also incur move-in and move-out costs. You can lower churn by:

• Finding out from tenants what would entice them to renew their leases. Each time you lose a tenant, a unit is left vacant for an average of 1.5 months, which equates to around a $900 annual savings per tenant you retain.  
• Proactively monitoring and improving tenant satisfaction since happy renters are 3.5 times more likely to renew their leases than dissatisfied ones. One way to do this is to stay on top of tenant sentiment about your property management teams. Answer questions such as: Are maintenance issues readily resolved? Do tenants have easy access to lodge complaints and seek resolutions? 
• Improving tenant communications and response times, which is key to increasing tenant satisfaction and retention. Find out where communication bottlenecks are so you can iron out the kinks in your system. Imagine how much better the tenant experience would be if you could bring response times down from 25 hours to 25 minutes!

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How to uncover opportunities in your residential property portfolio  

There are two main ways to boost the income potential of your properties -- increasing market value and finding the right tenants who are willing to pay more rent:

Increase a property's market value

Command higher rents by offering the right services and amenities that align with the region and the neighborhood. Some avenues to success are:

• Research residential properties in the community's area to see what is missing so you can fill in gaps and stand out by meeting unmet market demands.
• Identify opportunities to add value to your property cost-effectively. For example, consider including security measures, smart tech upgrades, or additional amenities that your community values. 
• Find out what attracted your gold-star tenants to your property (e.g., amenities.) Then, improve upon those selling points and have your leasing agents highlight them to prospective tenants and to existing tenants.
• Present your property in the best possible condition. From the street view and throughout the property to the office and common areas – make sure appearances are impeccable. Nice presentation gives prospects and tenants a more favorable perception of the property's value.   

Attract the right tenants

Maximize rental income and, therefore, the value of your portfolio by filling your properties with ideal tenants. Some tips include:

• Fill your property with tenants who are willing to pay top dollar by identifying them and marketing your property to them with the right messaging.  
• Provide your team with the right tools to deliver the best tenant experience that generates outstanding word-of-mouth and allows you to raise rent
• Build rent increase into the lease renewal process to set the right expectations. Not only will you attract tenants who are in for the long-haul but renters are also more likely to stay if you don't hit them with surprises.

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Use the right tools and systems to manage risks and optimize opportunities

With multiple properties and management companies to juggle, you need to support this systematic approach with the right tools and processes. 

Essential tools for multifamily real estate management 

You need tools that can give you the scalability and visibility you need to manage multiple teams and access the right information at the appropriate granularity level for solid decision-making.

Customer Insights Platform

A customer insights platform gives you visibility into your property managers' interactions with each prospect and tenant. You can generate insights to identify tenants at risk of churn and find out what amenities are most in demand. A good platform helps you facilitate good tenant communication, which is the key to improving tenant satisfaction and retention. It also maintains records of all tenant interactions to help mitigate liability issues in the event of a tenant dispute.

You could track all this information using a spreadsheet or through another basic office tool, but it'd be a cumbersome and inefficient method. Instead, invest in a tenant communication system that's designed specifically for asset managers and can be integrated with your existing property management system (PMS.) Such a system enables your property management teams to improve response times and prioritize requests while giving you the visibility to manage your portfolio effectively.

Standardized Reporting

Comparing metrics from all your properties can give you insights into trendlines to identify underperformers. In analyzing such data across your portfolio, you need to be able to "compare apples to apples". To do so effectively, make sure all your management companies use the same templates for reporting and site inspections and gather metrics through a standardized process. 

For example, a weekly report template might include:

• Current occupancy information
• Projected occupancy 8-weeks out
• A recap on leasing goals and actions for the week
• A list of any maintenance or renovation issues
• A list of unit delinquencies and unexpected maintenance expenses

Reporting schedule

To leverage the latest data to generate timely and actionable insights, make sure that everyone downstream follows the same reporting schedule to compare metrics accurately. Set up standard workflows and establish a cadence to ensure that you have all the information you need when you need it.

Your reporting schedule should look something like this:  

• Weekly reports - A summary of rents, vacancy and occupancy rates, rent outstandings, maintenance issues, and specific risks of concern.
• Monthly reports - An update on overall financials, including rents collected and outstanding, a T12-type report highlighting the property’s previous twelve months of operations, and a look at more general things such as current tenant demographics and where prospects are coming from (i.e., Zillow, Craigslist, Facebook)
• Quarterly reports - A highlight of long-term trends to help identify opportunities.

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Effective Workflows and Systems For Multifamily Real Estate Management  

Besides the right software, your team also needs to be doing the right things at the right time. Make these processes part of your overall strategy:

Tenant satisfaction surveys

Tenant satisfaction surveys help you gauge tenant sentiment and find out where you should focus your resources on making improvements. They can reveal issues that your property management companies may not be aware of, or aren't telling you. Also, you can find out how the property managers are performing and understand what renters value so you can invest in making the right improvements with the highest ROI.

Running short and specific surveys is the best way to get responses quickly. Use a survey tool designed specifically for asset managers to streamline the process and secure feedback. You can also send out longer surveys to 1/12 of your tenants every month, allowing you to complete a cycle once a year so you can get continuous feedback and engage with tenants on an ongoing basis.

Online reviews

Tracking online reviews about your properties helps identify issues that can lead to liability or churn risks and ensures that you're maintaining a stellar reputation to attract the right tenants and tap into more revenue opportunities.

Tenant reviews can reveal if your management companies are doing their jobs and potential liability issues. You can also analyze feedback trends and look for opportunities to improve a property's market value. Lastly, look at online competitor reviews to keep tabs on your properties' general neighborhood.

Tenant interviews

While tenant satisfaction surveys allow you to get feedback from many people, your team should strive to go even deeper. To gain these insights, a good practice is quarterly tenant interviews.

Interview a variety of tenants (e.g., people with kids, singles, cooperative ones, the squeaky wheels) to get a good sense of what's happening across the board. Use the opportunity to identify issues and areas for improvements to focus your resources on preventing liability issues, minimizing churn, and creating a tenant experience that renters will pay top dollar. 

Site inspections

On-site inspections are critical so you can learn exactly what is going on at each property. Besides routine checks, you or your regional managers should conduct an inspection when you notice a property performing poorly compared to your other properties. A surprise community visit (e.g., "mystery shopper" style) can give you valuable insights that you can't get from weekly and monthly surveys and reports.

During these inspections, you should check for the property's cleanliness and condition while ensuring that the management office projects a professional image. Inspect units from a renters' perspective and take note of maintenance issues that could lead to liability risks. You should also talk to tenants to determine if they're satisfied with the property management team or have any specific concerns.

Performance reporting

Your property managers should provide monthly, quarterly, and yearly reporting on key performance indicators (KPIs) at the appropriate level of granularity. 

Some KPIs to track include:

• Occupancy/vacancy rates
• Churn rates
• Annual repair and maintenance costs
• Average days-to-lease
• Average renter lifetime value

Lifetime value and churn rate are good indicators of how successful you're at retaining tenants. Low numbers mean you should work on improving tenant satisfaction to get more lease renewals so you can increase profits. 

Meanwhile, a high average days-to-lease may indicate your marketing tactics may need adjusting to attract higher quality prospects. Also, you should check community-level data daily for snapshots of occupancy statistics and trends to get the "true story" of what's going on at each property.

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Bringing it all together: mitigate risks and optimize opportunities across your residential portfolio

Having access to the right data about your properties is vital to proactively managing risks and opportunities so you can prevent costly problems and optimize revenues. Gathering the right information is just the first (but essential) step, requiring you to drill down across all your properties to glean actionable insights.

Since much of the data is influenced by outside economic factors and market impacts, you may find that short-term data points are all over the place. As such, you need to gather and review long-term trends across your portfolio to help you understand general tenant preferences and the rental market so you can make accurate decisions.

Here are some key considerations when reviewing your data and KPIs:

• What are the liability and tenant churn risks, and what can you do about them?
• Where are the opportunities for raising the perceived value of your properties and attracting the right tenants? What can you do to capitalize on them?
• How can you structure your reporting to translate the data into actionable insights meaningful to your property management team?
• What recommendations can you make based on the available data to tap into market opportunities? (E.g., getting funding to make improvements that'd increase the perceived value of the property.)

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