Speed the Turn
Publication date: June 1, 2007
By Chris Wood
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.
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 prewalks 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 prewalks 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.
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 Atlantabased 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.”
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.”
Associated Estates Realty Corp. and Equity Residential were among the apartment companies hip to Robertson's value-added sell, and by year's end he was leveraging 35 men and 10 trucks into approximately $500,000 in business. Most of Robertson's clients aim for a five-day turn, but he can sometimes turn a unit in as little as 24 hours, including punch-out maintenance, carpet cleaning, repainting, and basic janitorial. “I also stay in my niche,” he says. “I don't clean common areas, I don't paint club houses, just give me your vacants.”
Finally, if your company opts to use outside subcontractors instead of in-house unit turners, save time by fostering strong relationships with select service providers who understand everything from your quality expectations to your floor plans.
“Having close relationships with key vendors is a must,” says Lynd. “You need vendors who respond quickly, do excellent work and have capacity to do volume if necessary. You can never lose a lease over a make-ready. That is a cardinal sin in management.”
Resident Files: Uncommon Sense Take care of new, renewing, and departing residents alike.
The best strategy for speeding your turns? Work to retain as many residents as you can, from the very day they move in.
It may sound counterintuitive, but think it through: Maintaining high levels of customer satisfaction during a resident's first few weeks at your property can go a long way towards retaining renters when lease renewals roll around.
“We have found out through satisfaction surveys that the decision to renew or not happens when a tenant first moves in, and we subscribe to that,” says Jim Collins, who covers Georgia and Tennessee as a regional vice president for Atlanta-based Lane Management Co. “We talk to the residents 120 days out, but the whole process starts with them getting a perfect unit. If we catch them at 120 days, we still have a chance to make a good recovery if we have fumbled the ball when they moved in.”
Jeff Adler, executive vice president of operations at Denver-based AIMCO, agrees. “Most tenants already have an idea if they are going to stay or leave at the 120-day mark,” he says. “By communicating with them at that time, you can remediate any service issues that might be driving them away and also begin the process of preparing the unit to be turned.”
In addition to the typical 120-day communiqué, property managers for San Antonio, Texas-based Lynd Co. make near-weekly contact with residents until lease expiration. “Lower turnover creates fewer new leases to obtain,” says COO A. David Lynd. “It also means lower advertising costs and lower makeready costs.” ”