Multifamily Investment Blog: JG² Companies

WHAT TO DO BEFORE YOU MOVE!

Mon, 30 Jan 2023 21:25:04 GMT

Moving to an apartment soon? We are here to help guide the way!

You found your apartment! How exciting it that?

Whether it is your first apartment or it has been 20 years since you moved into one, the excitement and realization of everything that needs to be done can be overwhelming. Your thoughts are probably going in all different directions. We have compiled a list of basic things to know before you move to help you stress less.

Change of address - You will want to change your address with the United States Postal Service. You can fill out a paper copy in person at your local post office. Your mail carrier can also provide you with a copy. The easiest way to change your address is to create an account online and update your information. Your account will allow you to stop your mail if you are going on vacation. What we feel is helpful as your account will show you what mail is being delivered each day and if you will be receiving any packages. Don't forget to notify your employer, bank and credit card companies of your new address.
Utilities – Contact the utility companies that you will be required to pay. Most of JG2 communities include some utilities in the rent price. There are some utilities that you may need to contact before your move. Those companies might be electric, gas and/or water, depending on your community. Your leasing professional will provide you with the necessary information to contact them. They will ask for your confirmation or account number. Make sure that you write that down, so you are able to provide that information at the time of move in. You will also use that information online if you want to set up an account for easy online payments. Many companies offer budget friendly payments. If you are required to make a deposit, be sure to ask if they can split that payment up into smaller payments. If you already have utilities in your name at your current home call those companies to provide them with your moving date and forwarding address.
Gather boxes several weeks before you plan on moving. The number of boxes you need will depend on how many items you have. Try to get free boxes from your local grocery stores and other stores in your area. Ask your family and friends if they would save some for you. You can use social media, such as Facebook to ask your friends. That would be an easy way and most affordable. Check with your property management company, they receive boxes all the time from orders that have been delivered. Your local Walmart store also has boxes. Don’t forget to purchase packing tape and write what items are included in the boxes. This will make your move in process so much easier as you will know exactly where everything belongs. You will not have to open every box to find that one thing you need because they are all labeled.

JG2 companies owns and operates several beautiful apartment communities across Indiana. Check out our communities page for more information.

Key Property Management Metrics To Know Before You Invest

Mon, 01 Jun 2020 19:27:39 GMT

What To Look For Before You Invest In Multifamily Real Estate

Every investor knows performing due diligence is critical before investing in an existing multifamily real estate property to reduce risk and attain goals. However, knowing the questions to ask and essential metrics to evaluate the property management team can be challenging if you haven't rolled up your sleeves and managed a property management team daily.

Over the last 25 years, I can tell you I've learned a lot in my role as CEO of many property management teams and as an investor in multifamily real estate. And yes, I've made some mistakes!

I thought I would share some of the critical information and metrics you should research before you invest in a multifamily property. Once you've attained the data points below, you can feel confident that you've done your due diligence and better determine if an investment that may look great on paper will genuinely be profitable and meet your long-term goals.

Key Metrics

Here are several critical metrics, their definition, importance, and how you can calculate.

Occupancy Rates

The occupancy rate is one of the most critical indicators of a property's current success.

It's the ratio of rented or used space to the total amount of available space. It is calculated by dividing the total number of units occupied by the total number of units available times 100.

A low occupancy rate may be a sign of challenges the property management team needs to overcome. When investing in a property with low occupancy rates, you'll want to make sure you understand the current challenges and what the property management team is going to do to improve occupancy. You should also make sure that occupancy rates needed to hit your pro forma NOI are realistic and attainable.

Vacancy Rates

A vacant property means lost revenue, and although it's unavoidable in multifamily apartments, the objective is to keep the vacancy rate as low as possible.

So what should you look for concerning vacancy stats? It's essential to know the definition of the different kinds of vacancy rates. Here's an overview so you know what to ask and what the data means.

Unoccupied Vacancy Rate : this is an average that reflects the amount of time the rental unit(s) stay unoccupied.
Current Vacancy Rate: this is the current number of units not rented at this time. It's usually calculated on an annual basis and shown as a percentage.
Economic Vacancy Rate : this is the total amount of rental income lost due to the property being vacant as it relates to the total gross potential income. It's a useful data point since it's based on income, not time vacant. This number also takes into consideration rents lost due to specials, concessions, etc.
Physical Vacancy Rate : this is the time the unit(s) were vacant over the past year, and includes the number of units currently vacant.
Market Vacancy Rate : this is the average vacancy rate by property type. It takes into account the asset class helping gauge how the property is performing compared to others in its class.

If you are considering investing in a property and identify poor management or vacancy rates, know that by implementing property management best-practices with a seasoned team, you can improve your metrics and increase profitability.

Turnover

In the same way that vacancies will occur, so will turnover. According to the National Apartment Association in a Breaking Down Turnover Costs post, move-outs translate to the loss of rent and additional maintenance costs. A single turn, including rent loss, can cost your bottom line $1,000 to $2,000 and up. Thus, knowing the turnover rate and the average cost of each turn is critical. You'll want to make sure those costs are managed and reduced as much as possible by the property management team. Gauging supply and demand in your market, understanding your product, and pricing it accordingly will keep turnover at a minimum.

Evictions

Evictions are also costly and why being diligent and using proven tenant-screening methods are critical. Here again, an experienced team with a proven legal process must be in place. The last thing you want is unqualified tenants that will create hardship for your organization and potentially for your good tenants. The average eviction can cost you as much as three months of lost rent. You'll want to request the current eviction rate as well as any evictions in progress or anticipated. Here again, less is more!

Maintenance Costs & Maintenance Team

Understanding the maintenance costs for a multifamily property and how they can be streamlined and made more efficient is vital to the bottom line. It’s important to have a maintenance supervisor that stays on budget and a team with a resident portal for maintenance ticket submission and tracking. A seasoned maintenance team that is efficient and knowledgeable will make a tremendous difference. These experts will provide cost savings, and tenants will be much happier with a team that gets into their apartment and fixes the issue quickly and correctly.

Property Management Team

Now that I've outlined some of the key metrics, you can see how critical the property management team is in influencing the success or failure of an apartment rental investment.

It's crucial to hire managers, leasing agents, and maintenance staff that know the business and work as one team - all for one, and one for all is the concept most needed so that all runs like a well-oiled machine. They need to have systems of operation that prioritize, monitor, and measure tasks for efficiency.

At James Management Group, we hire for character and put a lot of time into training our staff and holding them accountable for the success of a property. I'm a firm believer in the saying 'there's no 'I' in TEAM,' and I remind my staff of the importance of working as a team to achieve our defined common goals, and we reward great work done by the team.

In addition to the above metrics, we focus on renewal percentage rates and ensuring rent is collected on time via our resident portal or in person via check or money order. We carefully track our renewals and 120 days out we begin marketing to our tenants to make sure they are happy and, in turn, keep turnover down.

Here are a few good questions to ask when researching a property management team:

What renovations will be put in place, and how will the team attain the demographics and rent prices the property seeks?

What kind of advertising will be implemented, where and with what frequency? How will the advertising spend be tracked and measured for success? What are the key performance indicators (KPIs)?

What's the monthly marketing budget? Annual marketing budget?

Leadership Team

Finally, having an experienced leadership team that is monitoring the property managers, the property metrics, and the bottom line is a must. A seasoned leadership team that understands the business and puts proven operational efficiencies in place will drive more profit from the investment. Also, leadership that values its employees supports training and hires experienced staff will also contribute to return.

Recap

Rule of thumb, keep the units rented, know your metrics, and make sure you have a seasoned property management and maintenance team to drive the business. In the end, they'll be the face of your property and make or break the tenants signing leases, renewing them, and helping the properties rent through word of mouth.

All of this adds up to why a professional property management team that's seasoned and experienced makes a big difference in your ultimate return on investment.

Questions? Want to know more about James Management Investor Services ? I or someone on my team is always available to share our knowledge. Just Contact Us .

Questions to Answer Before You Invest in Multifamily Real Estate

Wed, 20 May 2020 20:56:10 GMT

Align Your Goals With A Syndicator That Will Deliver

There are many types of real estate investment opportunities available today, and let’s be honest; they all look great when you see the first presentation. However, once you start digging deeper, things can change.

Let’s start by defining a syndicator, also referred to as a sponsor or operator. S/he is the person or group that manages a real estate investment opportunity. The syndicator is responsible for bringing together multiple investors and pools their capital to invest in a single real estate opportunity they’ve found. I should note that the syndicator may also be an investor in the property, but more on that later. The main advantage of syndication is that an opportunity that would be too expensive for an individual investor is now a possibility. Once funds are exchanged, the investor becomes a limited partner and shares in the profit accordingly.

So how do you determine if a syndicator is right for you? How do you find a group that will make the most profitable investment with the lowest risk and aligns with your goals? Of course, you’ll start with what type of returns they achieved in the past when investing in other similar properties, but there’s more than just numbers that can help you vet a syndicator.

If you answer these questions and look for these qualities, you will ensure that your investment achieves the return you seek.

Property Grade Expertise: Is the Syndicator an Expert in the Property grade?

One of the most important things to look for is a syndicator that is an expert in the type of real estate you are investing in. You’ll want to ask what their previous experience is and what returns they achieved investing in that particular housing type or property grade. Experience is essential because each property grade will yield different syndicator requirements once the purchase is complete.

Renovation

The grade of property you’re purchasing will drive the amount of renovation needed for a property. An A grade property may require no improvement while a B grade in good condition may require minimal. However, a B- or C value add investment will require more renovation. You’ll want to make sure the syndicator has a team experienced with the type and severity of repairs needed and that they can complete the improvements in an efficient, timely manner.

Property Management: Maintenance, Management, Leasing, Marketing

If the syndicator has experience maintaining and managing a property similar to what you’re investing in, you can feel more confident they will be able to address issues quickly and keep residents happy. This is important because an older or lower grade property will bring different challenges than a newer one.

Do they have property management experience for this property grade?
Do they have experience building a strong team that will market the property in the right channels for this building type and demographic?
Do they have an efficient leasing process?
Do they put marketing dollars behind their property for advertising, collateral, signage, other?
Do they fill vacancies quickly?

Service

Positive customer experience is critical to the success of a business. It’s no different when managing a property. You’ll want to get a feel for the standards the syndicator maintains for their staff and learn if they match your expectations.

Once the property is purchased and under their management, you’ll want current residents to be happy and renew their leases annually. This will enable a steady stream of cash flow that will facilitate the buy-down of the mortgage. Some good questions to ask include:

Do they know how to provide an exceptional customer experience for the residents they’ll be supporting?
Have they created events and activities enjoyed by the demographic of the property?
How do residents rate their other properties?
What do their resident surveys say about maintenance and property management support?

Location Expertise: Do They Know How to Serve the Area and Demographics?

You’ll want to ensure your syndicator is an authority on the location you’re investing in. It’s likely that you may not be from the area, and that’s fine because it’s the syndicator that will be hands-on and needs the expertise in the following to enable them to generate the returns you anticipate.

So how do you determine if the syndicator is an expert in an area? Here are key questions to ask.

What are the trends in this area?
Are rents going up or down? What’s the average rent for this building now and once renovated?
What are the occupancy trends?
Workforce Trends: What are the needs of the people that live and work in the area? What companies are hiring and growing? Who’s shrinking or firing?

Are they trending to suburbs, urban core development, and why?
What are the demographics of the residents and prospective residents of this property?
What attracts residents to this type of property? Is it easy to commute to town, weather patterns, livability, cost of living?
What is the school situation, and how does it work for the demographic of this property?
Are colleges nearby, and what are their housing needs? What are the needs of the students when they graduate?
Are they active in the chamber of commerce and aware of what the state is doing to attract companies for future growth in the location?
What infrastructure is planned or being built that could impact occupancy?

Relationships: Do they have solid relationships with brokers and others in the area?

Finding out if the syndicator you’re considering partnering with is well-respected and trusted by those s/he works with can be a great sign of what they’ll be like to work with once you’re invested with them.

You’ll want to ask or attain:

Broker References:

Do they have contacts with brokers in areas you’re looking to invest in that they can share with you?
How long has the broker worked with them, and what has their experience been?

Do they close on time?
Do they have a good reputation?
Are they trustworthy?

Get names and numbers, and do your due diligence.

A good relationship with a broker is worth its weight in gold. They will often provide leads to a syndicator they like and trust in advance of the property hitting the market because they know that property type is their specialty.

So investor beware. If you work with an average syndicator, they won’t find out about deals as early as those with established relationships and a good reputation. Instead, they’ll only be aware of the properties going on the market to the masses. As a result, they’ll compete with others, and the result is you’ll get an average property, for an average price that yields an average return. Who wants to be average?

It’s OK To Say ‘No’

What it comes down to is that you need to be able to say no to the wrong investment. One bad investment that is not profitable has the potential to take up the same time as three properties running well.

As an investor, if the deal doesn’t sound or feel right, say no and move on to another opportunity. Seek a syndicator that isn’t driven by fees, but instead is driven by excellent investment properties.

Will the Syndicator Also Be An Investor?

Finally, it’s essential to ask if the syndicator or members of the group will also be personally investing in the property? This is not a have to have; however, if they will be investing, they too will have a vested interest in the property’s success.

So to recap, if a syndicator you’re looking at has not invested in that property type or grade before, is investing in many different property types, and can’t answer the questions above, bells should go off. You want to make sure you’re dealing with a syndicator with experience. Investing in multifamily real estate is not a time you want to be tied to a group experimenting with your money in an area for the first time.

You want a syndicator who has successfully delivered ROI in the past. We're always happy to answer questions. Feel free to contact us or learn more about us and our investor services .

4 Key Benefits Of Investing In Multifamily Real Estate

Sat, 16 May 2020 01:37:56 GMT

Growing Long-Term Wealth

Investing in real estate as a passive investor is a great way to diversify a portfolio and profit as investors seek to grow long-term wealth. One can choose to invest in retail, industrial, single-family homes, or my area of expertise, multifamily real estate. As with any investment, your risk tolerance and goals should be defined first.

Below I share why investing in multifamily housing, also known as investing in apartment communities or apartment complexes, is an excellent investment. So we're on the same page, I define multifamily housing as a building or group of buildings with more than one unit for rent.

Like any investment, risk is involved, however, after investing in multifamily real estate for over 25 years, I've learned that when done correctly, there are four key benefits investors attain:

1. Apartments Provide Steady Cash Flow

Rental properties provide steady cash flow as rents are collected every month, and leases generally are for a year. Unlike the unpredictable stock market that only pays cash when the stock provides dividends, an apartment complex can provide consistent cash flow to an investor. That said, this is not an investment for a quick windfall. An investor should plan on having money invested in the multifamily real estate for an average of five to seven years and expect to see an IRR of 15 to 20 percent on average.

2. Huge Tax Benefits

Investing in real estate is unique from a tax perspective. When you can claim real estate investor status as defined by the IRS, there are several ways you will benefit. For example, investors have access to no limit mortgage interest deductions and depreciation accelerations that can counter a portion of the cash flow profit. Investing in multifamily properties provides for the benefit of bonus depreciation when used in conjunction with cost segregation. We recognize this is not an easy concept to understand and we are always available to answer questions as we are very well-versed in this topic. Finally, the IRS allows investors a 1031 exchange provision on gains when selling the investment property. In this case, investors can move into another investment property and defer all taxable gains into the future.

3. Get A Portfolio In A Day

By buying into a multifamily real estate investment you can jump from owning nothing to many homes in a day. Many rents can be collected and provide steady cash flow quickly. Also, you attain a cost-benefit in labor and per-unit cost savings with your units in one location. They are managed more efficiently by a small experienced on-site team, and in certain instances, team members can perform multiple roles.

Buying individual properties requires at least three times the staff to manage because they are dispersed and thus more time-consuming. It adds up to a considerable amount of extra expenses.

A multifamily investment does require a property management team to market the property and ensure vacancies remain low, while rents are kept at a premium. After all, you want tenants in place as they're paying down the mortgage. It may also require a team to renovate the property in a quick, efficient manner, and then staff to maintain the grounds and apartments to standards. Because of those mentioned above, aligning yourself with an experienced team that has the same standards and goals that you do is critical to successful investing in apartments. Vetting your syndicator or sponsor is vital.

4. Physical Asset

An apartment complex is an investment that is a hard asset. You can see it, touch it, and oversee that it is maintained and improved. Unlike a paper investment, the value of the building will never go to zero. There will also always be a demand for apartments. Not everyone can afford to buy or wants to buy. When managed, marketed, and maintained, your investment will usually go up.

Those are my top four benefits and of course, there are many more. If you have any questions about multifamily investing or are interested in our offerings, please feel free to contact us .