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Weekly Updatesdespite the dearth of fortuitous news and statistics regarding the U.S. economy--especially the real estate sector--property managers are uniquely poised to take advantage of opportunities in this difficult economic environment. The fact is, property cannot run itself, no matter who owns it. And when times get tough, people often turn to professionals. Today, property managers are in high demand, and they are utilizing their professional skills to grow their businesses by exploring niche markets and services that will boost their bottom lines.
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"Property managers have to do everything on a budget; you are always trying to do more with less," said Marjean Pountain, CPM[R], president of Pountain Partners in Elkhart Lake, Wis.
The multifaceted abilities these property managers develop are all the more important in troubled times: "All of those talents go well with today's economy. You have to scale back," Pountain said. "The fact that property managers had these skills in better times makes them hotter commodities in today's economy and today's time.''
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WHAT'S HAPPENING?
Investors and property owners are increasingly realizing that talented property managers can help insure their investments survive and thrive.
''For the most part, property managers are being affected positively," said Lori Burger, CPM, PCAM, CCAM, CAM, senior vice president/director of marketing for Eugene Burger Management Corporation, AMO[R], in Rohnert Park, Calif. "When times are good, small owners and investors of real estate property tend to think they don't need management companies. But, when things start to go sideways, investors say, 'Wait a minute, my big-box owners are moving out. I better get someone who knows what he/she is doing to come in here and salvage the tenant, bring in new tenants or market my building.' So, right now we're in growth mode."
Most notably, there has been a steady rise in outsourcing property management duties. For instance, Eugene Burger Management Corporation recently had a large management proposal come in from a company with five million square feet of commercial property spread across the West Coast.
"They're looking for professionals to come in from the ground up to optimize the bottom line, to bring profit to their bottom line," Burger said.
However, property management is hardly immune from the recession.
"There is economic stress in everything we touch," said Jesse Holland, CPM, president of Sunrise Management and Consulting, AMO, in Latham, N.Y. "[We're] seeing higher vacancies and more lease cancellations. [We're] seeing more people trying to renegotiate things in the middle of leases, [as well as] bankruptcies and layoffs. All of those issues impact the property manager because he/she is the person who has to deal with the fallout."
As a result, property owners, managers and investors are all watching their receivables closely and setting the bar higher.
"The world is a very nervous place right now," Holland said. "That is translating into a lot less patience in general ... there is a lot more negotiating going on. The expectations are much higher."
CONSULTING SERVICES
With property investors' and owners' needs ranging from marketing to lease renegotiations to cutting operating costs, property managers' specialized skills and resources can lead to lucrative consulting business.
"There are investors needing to sell, but they still have to hold onto the properties because there aren't great buyers out there," Pountain said. Consulting is particularly useful for properties that had previously required little effort to rent.
"Projects that ran themselves don't run themselves anymore," said Pountain. "Properties that always stayed full didn't [require] marketing because of their nature or location. They rented themselves. Now, all of a sudden, when traffic drops, [owners] don't have the budget to hire a full-time person [or additional staff] on the property as they have done in the past."
Many find that networking is the best way to gain consulting work. Pountain, for example, has also found opportunities through her large list of developer contacts.
"In a couple of cases, new developments are coming online in the metro Milwaukee area in 2009 and developers are looking for strong people to creatively and quickly rent those units," Pountain said. "So I help with their marketing exercises."
RECRUITING TALENT
In the tight-knit property management community, networking has also long been one of the best recruitment methods for management companies. Today, many property managers are tapping into their networks to include staff recruitment in their consulting services.
Recently, a group of investors hired Pountain to help them set up their own property management company. With her years of property management experience, she offered valuable insight and instruction about what the group needed to launch a successful management business. She also helped them hire a knowledgeable staff of professional property managers.
'I am very well connected through IREM and other real estate organizations, and I have always done matchmaking as a hobby ... why shouldn't I get paid to do that now?" Pountain said. "When people put a position on a job Web site, they can get buried in 50 to 75 resumes of mostly unqualified people, especially with all the people out of work today. [And] that opens opportunities for me. Companies would rather hire someone who is a known entity. Through my connections, I can tell them who I know."
ADDING ASSOCIATIONS
Many niche markets that typically require little property management are turning to professionals to help them weather the economic fallout. For instance, the foreclosure crisis has created a number of new opportunities in homeowners associations. Eugene Burger Management has taken on dozens of contracts with homeowners associations since the first of the year due to increasing foreclosures. One of these associations had 25 percent of its units in foreclosure and desperately needed professional management to keep the property afloat.
"Boards of directors who are managing homeowners associations are facing foreclosures in their associations," Burger said. "They need to get someone in there who can understand how to budget effectively, how to deal with assessments not coming in and how they are going to make it."
Homeowners associations are a tough breed of property to manage by nature because the boards of directors change on an annual basis. But these contracts can be long-term opportunities if the management company continues providing top-notch service and maintains open lines of communication with the boards.
FAMILY TRUSTS
As families watch their savings and investments dwindle, they recognize the need for professional management. Consequently, many family trusts need good property managers today.
"A family may own seven or eight apartment buildings or less, and look to professionals to maximize the bottom lines," Burger said. "These have been very good relationships, and we expect that they will be some long-term holds [for us]."
STUDENT AND CAMPUS HOUSING
Niche markets, like student housing, can offer more security during troubled economic times.
"Student housing is not recession-proof, but there are more safeguards than in other multifamily and residential management because when the economy goes down, generally enrollment in higher education increases," said Eric Luskin, CPM, senior vice president of the Scion Group in Chicago. "Schools are looking for different opportunities to partner with managers and developers."
As student housing management experts, the Scion Group owns and manages student housing across the country and offers consulting services for campuses looking to improve their campus housing.
"We are retained to help schools develop master housing plans," Luskin said. "We do a very thorough market and demand analysis. If there is a demand for more housing or to reposition existing housing, we provide a business plan to help them move forward."
The consulting services can then lead to longer term arrangements for the Scion Group if the campus decides to implement the plan and keep the Scion Group on to establish management and transition teams and to market the housing.
This work also benefits the Scion Group in its own student housing properties.
"[Consulting with campuses] has led to a better understanding and appreciation of the business of student housing and various markets where we think we can make a difference and where we have decided to invest our own resources in terms of ownership and operations," Luskin said.
Campus housing spaces are typically rented per person rather than per apartment. In traditional multifamily housing, if one roommate moves out, the remaining roommate(s) are responsible for the entire amount of the rent. In campus housing, however, leases are typically drawn up per person, making each resident responsible only for his/her portion of the rent.
"This reduces the risk for the students. Investors, owners and operators have the potential of a higher revenue stream because the total rent--the gross rent potential--for each occupant in this scenario is higher than for the same apartment if you were renting by the apartment," explained Luskin.
TROUBLED PROPERTIES
With foreclosures making news every day, there are plenty of troubled properties in need of good management. RealtyTrac has about 1.5 million bank-owned properties on its site, which is actually good news for property managers.
"There is a lot of property that is going into foreclosure and a lot of banks that need assistance," Pountain said. "They are suddenly in the property management business, and they don't belong there because they don't understand it. There are niches of property management opportunities with the growing troubled assets."
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