Every so often I scan through the real estate forum on Wall Street Oasis and I recently came across an interesting thread titled ‘Contrarian Thesis: Acquisitions is the Least Interesting Job in Real Estate’. The post argued that acquisitions is a repetitive job wrought with frustration and best-suited for young analysts who are hungry and proficient with the latest technology. Asset and portfolio management, on the other hand, tend to be the most valuable and interesting roles. The asset managers recognize the value-add upside, know what it cost to renovate, have intimate knowledge of local markets, and are familiar with the state of affairs at every asset within the portfolio.
In my role at Atlas, I work on both acquisitions and asset management, and I tend to find the AM role a bit more interesting. While much of the value is created upfront, asset managers take ownership of an investment performance post-acquisition. To me, asset management is about controlling costs and creatively finding ways to add incremental value over the life of an investment. Here are some of the things I’m working on in my role as an asset manager.
Creatively Adding Value
Adding Free Little Libraries: Many of our communities cater to families. At each of these properties we’re adding custom-branded ‘Free Little Library’ book-sharing boxes where residents are encouraged to exchange books with their fellow residents. It’s a small thing that helps create a sense of community.
Launching Community Gardens: A low-cost addition to any property is a community garden. All you need is a small area, raised beds, and a commitment from a few residents to tend to their garden. All residents benefit from the beautification of the landscaping and it shows residents take pride in their home.
Allowing Residents to Use Flex Pay: We’ve been exploring programs such as Flex and Till which allow residents to pay on a weekly schedule, as opposed to monthly. Resident delinquency is often driven by poor budgeting or the timing of their income payments versus rent payments. It’s a very small fee to the residents and could be the difference between incurring late fees versus staying current on their payments.
Curating Community Events: Every community seems to offer the same events; breakfast-on-the-go, wine-down Wednesday etc. While there’s nothing wrong with these tried and true events, we’re creatively curating events which add value to our residents. For example, at one of our properties which caters to a lower-income demographic, we’re looking into offering resume reviews, interview prep, tax prep, and financial literacy classes. We want to offer events that create a sense of community and help our residents succeed.
Reporting Resident Rent Payments to Credit Bureaus: We want our residents to succeed in all facets of life. By reporting online rent payments to credit bureaus (for free), we can help our residents build and improve their credit score, which is vital to leasing an apartment, buying a home, or getting any sort of loan.
Improve the Quality and Tone of the Property Signage: Each property is required to have various signage; pool rules, hours, amenity rules etc. One challenge we have across all properties is residents not picking up after their dogs. Rather than having signs that read “Please Clean Up After Your Pet”, we’re testing signs that encourage residents to “Keep Their Community Beautiful”.
Each of these are small things, but compound to create an improved experience for our residents and ultimately better performance of the asset.
Controlling Operating Costs
On the expense side, many costs of operating apartment communities are relatively fixed; payroll, management fee, property taxes, insurance etc. However, other costs are variable and can be reduced while also improving the resident experience and property operations.
Implementing Utility Monitoring: 3rd party utility monitoring companies track utility usage enabling us to identify inefficiencies and one-time spikes that may be due to an issue such as a leak. Since utility costs are partly covered by the resident and partly by the landlord, savings lower the overall operating expense as well as the cost to residents. If residents pay less in utilities, renting at your community looks attractive relative to the competition.
Optimizing Marketing Spend: Marketing is one area where sophisticated operators can outperform the mom & pop owners. Through well-designed and mobile-optimized websites, closely monitored paid search strategies, local market outreach, and advanced social media strategies, all backed by analytics and market research, owners can outperform the competition while minimizing spend. We spend a lot of time monitoring our analytics and adjusting our marketing strategy.
Asset management isn’t the sexiest aspect of the business, but it’s becoming increasingly more important, and arguably the most valuable role in the real estate ecosystem.
I love the asset management role because it never ends. There are ongoing challenges, the submarket changes, and there are endless ways to improve the resident experience and add incremental value to an asset.
What do you think is the best role in the real estate business?