Rental Management Secrets from a Luxury Property Manager
Even if you’re
new to real estate investing, you might already know the basics of rental property management: lease apartments, collect rent, address maintenance issues, renew leases, repeat. But to be a successful rental owner in a competitive market, you need to know much more than the basics.
So today, we’re sharing rental management secrets from a luxury property manager (that’s me!).
Hi, I’m Michelle, Your Luxury Property Manager
Long before I started writing articles on real estate investment and finance, I was a luxury property manager and real estate investor. I professionally managed hundreds of luxury units throughout Los Angeles and San Diego for years before building and managing my own small portfolio of luxury single-family homes.
And let me tell you, I’ve learned a thing or two about what it takes to successfully manage rental properties, especially in the luxury market!
Disclaimer: property management rules and regulations vary from one market to the next. Make sure you understand your local laws.
With that said, let’s dive into my rental management secrets with a look at the development process.
Secrets for Designing and Building Successful Developments
Developing spaces that appeal to today’s rental market is step one in finding rental management success. Get in on these industry secrets before they go mainstream.
Layouts that Serve as “Family Living” or “Shared-Living” Spaces are in High Demand
Renter needs have changed as the cost of housing has increased substantially in recent years. While one and two-bedroom units have been popular for decades, demand is shifting to larger units with more bedrooms.
These larger units are serving two specific demographic groups:
- Growing families who have been priced out of the housing market. This group is driving the increase in build-to-rent homes, which are characterized by larger units that feel like a home and can comfortably accommodate at least one or two children.
- Young adults practicing shared living (aka co-living) with multiple roommates. To make rent more affordable, many renters are looking to split the rent between multiple roommates. But they need a comfortable layout to make this arrangement work well. Three to five bedrooms, all similarly sized, and all with a private bathroom make for an ideal shared living layout.
Proptech Upgrades are a Competitive Advantage
Today’s renters are tech natives who grew up in the age of technology and are far more comfortable with it than without it.
Residential proptech can be a good investment if it serves your demographic, particularly when it helps protect your property. Consider adding smart home features like locks, lights, doorbells, and temperature control to make your units safer, more comfortable, and more energy efficient.
Low-Maintenance Luxury Amenities Will Save Money and Your Sanity
Many developers and investors mistakenly believe they need to offer common area amenities like pools, spas, and fully equipped fitness centers to attract renters. In reality, these amenities require constant maintenance and repairs. Not only does this cost you money, but every time an “out of order” sign is placed somewhere on your property, it invites criticism.
Instead, focus on low-maintenance amenities that feel luxurious, like rooftop decks, for example. Or a “wellness” center with yoga balls, pilates mats, and free weights rather than complicated cardio equipment and weight machines.
Also, don’t underestimate the value of convenience amenities, like parking spaces, on-site storage units, and facilities for accepting package deliveries.
Secrets for Successfully Leasing Units
As Operations Manager for a 298-unit new construction project in Marina del Rey, I worked with a stellar team of leasing specialists to take the property from vacant to fully occupied.
Here are some of the secrets of our success.
Pre-Leasing Builds Buzz
Most cities allow property owners to begin leasing units before the units are ready for occupancy. Pre-leasing allows you to speed up your cash flows to help you recover your investment sooner. Just as importantly, pre-leases work as a marketing tool. You can promote the fact that multiple units have already been claimed to create a sense of urgency for other prospective renters.
Staging (Whether Physical or Virtual) Helps Prospects See the Potential
Renting empty units can be difficult because there’s nothing to help the renters feel at home in the space. Luckily, there are a few ways to use staging to address this problem.
If you have a large apartment building, consider setting aside a unit (or two) to serve as a model. This unit will be professionally staged to show prospects what their unit could feel like. You’ll take all prospects through this unit on the community tour, possibly showing them a vacant unit as well once they see what can be done with the space. Yes, you’ll have vacancy losses for this unit, but the increased conversion rate of prospects to tenants can offset this loss.
If a model unit doesn’t make sense for your property, you have two staging tools to employ:
- Virtual staging. Have a photo editor enhance your listing photos with digital furnishings and art to make the space come to life.
- Vacant staging. Add a few strategic pieces to warm up a vacant unit. For example, coffee service on this kitchen counter and fresh towels in the bathrooms instantly give these key rooms a homey touch. You can also make bedrooms feel brighter by adding a plant with uplights in one corner.
If you have vacant units to lease, you might want to combine virtual staging with vacant staging, so the unit shows well in the marketing materials and in person.
Managers Add Life to Big Empty New-Construction Buildings
Big empty buildings give off a creepy vibe, no matter how well designed. So if you have a new-construction multi-family development to lease up, you need to find ways to inject life into the property for your tours. Here’s how:
- Stage a few balconies and patios. Set up bistro sets, outdoor chaises, and plants on some of the vacant unit’s outdoor spaces.
- Bring in some noise. To prevent the eerie quiet, pipe some music into common areas and/or birdsong into outdoor courtyards.
- Invite people to hang out at the property. To really bring your building to life, invite your friends to hang out at the property during peak leasing hours. They can enjoy the amenities, read a book on a balcony, or enjoy a cup of tea and a chat with their friends on a patio.
Strategic Concessions Incentivize Prospects
If you have lots of units to lease, a concession can help you bring occupancy up quickly. Concessions are often better than rent reductions from a property management point of view. If you offer lower rental rates, it will be harder to convince residents to pay the higher market rates at renewal time. But, if you offer two weeks free, or even one month free, residents will be accustomed to paying market rate rents through the rest of their lease term, so they won’t have such a shock if rates increase at renewal time.
Secrets for Resident Retention
It’s not enough to fill your units with renters; you also have to keep them. Reducing resident turnover lowers turn costs and vacancy losses between tenants.
Building a Community within the Development Leads to Less Turnover
If your residents become friends, they will be more inclined to stay in the building longer. They won’t want to risk giving up their social group by moving out. So you might want to invest in events that bring everyone together. And there are lots of options, depending on your demographics:
- Wine tasting in the clubhouse or courtyard
- Community game nights
- Ice cream socials
- Movie screenings
- Family cookout at the community grill
The goal is to introduce people and let them get to know each other. The more opportunities they have to meet, the more likely they are to establish relationships outside the community events.
Surprising and Delighting Residents Build Loyalty
There are many ways to make your renters feel valued without spending too much money. I love to delight residents with small surprises throughout the year, such as:
- A “Welcome Home” gift basket on move-in day,
- Coffee gift cards on International Coffee Day (October 1st),
- Poinsettias during the holidays,
- Easter or May Day baskets with candy, and
- Beach towels during the summer.
Offering Flexible Lease Renewals Increases Retention
Instead of only offering one-year lease renewals, give your residents more options so they can choose a term that works for them. You might offer six-month, three-month, or even month-to-month lease terms in addition to the one-year option.
Of course, the longer they stay, the more stable your cash flows. So you should incentivize them to take the longer lease options by making those more affordable. Depending on your local market conditions, you might offer a one-year lease at 5% below market value, a 6-month lease at market, a 3-month lease at 5% above market, and a month-to-month lease at 10% above market.
You Can Always Opt to Leave the Rental Management to the Experts
If you don’t have the time or desire to master rental property management yourself, you can always leave the management to professionals.
One option is to hire a property management company to manage the properties you own. A good property manager will know which strategies work best for your properties.
Real estate syndication is an investment model in which multiple investors pool their capital to fund a real estate project. The project is managed from start to finish by industry experts (called
real estate sponsors).
The syndication sponsor:
- Vets potential deals,
- Acquires properties with the greatest potential,
- Opens an ownership LLC for the investors so they have a clear stake in the underlying real estate,
- Oversees the renovation, using existing connections to hire reliable development professionals,
- Manages the lease-up (if the property is held as a rental) as well as ongoing rental operations,
- Coordinates the sale of the property upon completion of the project, and
- Facilitates disbursements to investors.
This allows you to
build a real estate portfolio with zero industry knowledge or experience. The constant involvement of an experienced sponsor also helps minimize investor risk and maximize return potential.
Gatsby Investment, for example, has provided investors with average annualized returns of 23% since 2017! And, because funds are pooled from multiple investors, you can buy into a deal for as little as $10k-$20k.
