It’s all about cash flow in apartment & multifamily investment. From the valuation of the property with cash flow analysis to the determination of the mortgage amount with cash flow and DSCR (Debt Service Coverage Ratio), it’s the cash flow that determines the value of the deal.

Since property management costs, and the costs of other items on the expense side are controlled by management, it’s crucial to have a good management staff and plan. Without that, it’s easy to see where a commercial foreclosure may become a reality.

Legal and Accounting

Good legal counsel should always be available, whether on retainer or just on-call. From planning and selection of forms for applications and tenant interviews to careful preparation for and performance of the deliveries and documents for eviction, legal help is important. One lawsuit for improper eviction can wipe out a year’s profits.

Accounting isn’t just number-crunching. It’s also tax planning and budgeting to maximize that all-important cash flow. The tax planning can help to subsidize other investments as well. Selection of the right accountant contributes to ongoing management profits throughout the holding period.

Cleaning, Landscaping & General Maintenance

The people hired to clean units between tenants, do landscaping work, as well as general minor maintenance tasks, can set the tone for tenant satisfaction. Arriving home from work to a well-maintained project, with inviting common areas, can contribute to tenant retention, and possibly allow higher rents than competitive properties.

Tenant Relations

Tenant relations encompasses a number of important points of interaction between management and the customer…the tenant. With today’s busy lifestyle, there is little patience on the part of tenants in accepting problems with their home.

From making it easy to reach management with problems, to prompt correction and repairs, tenant satisfaction is critical to profitability. Even if a new one is placed quickly, the loss of a tenant due to management problems increases costs of operation in readying the unit for the new tenant.

Word-of-mouth marketing shouldn’t be undervalued. Happy tenants tell others. They also have friends who will at some point be in the moving mood.

Significant savings in marketing and advertising costs can be attributed to tenants bringing others to the project. Some owners offer a small rent offset as a thank you for a tenant referral. Keeping tenants happy contributes to cash flow.

Apartment & multifamily project management is a significant component on the cost side, but also an important piece of the income side when done properly.

I’ll share more with you soon…

Warm Regards,

Karen Hanover, CCIM Candidate
Apartment Education Institute, President

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