March 2023

2C — March 2023 — Owners, Developers & Managers — M id A tlantic Real Estate Journal

O wners , D evelopers & M anagers

By Lucern Capital Partners The art of making a great sandwich: A peek behind what it takes to be a good CRE owner-operator

R eal estate investing has an exciting allure. High-flying executives boarding planes to evaluate potential real estate invest - ments, brokering lucrative deals, and then riding off into the sunset. Sounds exciting! What people don’t see is all the hard work and diligence that goes into managing the property before it is sold at a (hopefully) significant profit. At Lucern, we analogize real estate investing to making a sandwich. The two slices of bread represent the acquisition and disposition of the asset.

The meat of the sandwich is the property operations, all the heavy work that goes into mak - ing a successful investment: leasing, maintenance, collec - tions, marketing, property upgrades, unit renovations, etc. In this month’s post, we will walk through all the not-so-glamorous, but es - sential aspects of real estate investing that drive long-term value and create strong risk- adjusted returns. Assemble an A team Multifamily property man - agement is very demanding. Assembling a team of expe -

rienced property managers, contractors, maintenance per - sonnel, and leasing agents is essential for the property’s long-term success. This team will ensure the business plan is executed correctly and will also be the main point of con - tact for potential and current tenants. Having the right team in place from the start is even more important for owners with investments in MSAs dispersed across the country. Capital Improvements A key component in value add projects is the development of design specifications that will

maximize the value of the as - set. Capital improvements can include exterior renovations, common space upgrades, land - scaping, signage, and more. In - terior rehab of units can consist of kitchen and bath upgrades, flooring, painting, etc. Partner - ing with the right contractors and overseeing the execution of the capital plan is an essential part of property operations. Construct a solid property management marketing plan Marketing is one of the most important roles in multifamily property management. Having the right leasing agents on the

team can set an owner-operator up for success. The roles and responsibilities of a leasing agent include marketing the property, providing insight on rental comparables, handling showings, and being available to answer questions. A strong marketing strategy is essen - tial for creating awareness about the property to entice the right tenants. Since most renters search for apartments online, the first step is to cre - ate a beautiful website that gets people excited about liv - ing in one of the apartments. Engaged leasing agents will post updates of tenants using the amenities or property im - provements on social media so people can get a sense of what it would be like to live there. They will also devise market - ing incentives and events to get younger tenants to show up for open houses and get excited about living in the complex. Select the right tenants The leasing agent is doing a great job of attracting poten - tial renters’ interest, but are these renters the right ones for the long-term strategic plan? As a property owner-operator, this is an important question as it will largely determine whether the asset meets the projected return profiles. Al - though no tenant screening method is foolproof, there are certain questions to ask poten - tial renters, such as: • Why are you moving? • What is your monthly income? • Will you agree to a background/credit check? • Can you provide references? Perform ongoing property maintenance It is essential for a prop - erty’s long-term success for the owners to stay actively involved, as a lot of work goes into maintaining the properties and individual units. Ongoing multifamily property manage - ment involves repairing dam - aged structural features, pest control, repairing fixtures, and meeting with tenants to ensure they’re happy. It also includes finding ways to make small but meaningful upgrades to keep tenants happy and to ensure the asset remains competitive with similar local properties. Some strategies for keeping on top of property and unit maintenance include: • Conducting regular inspections • Using preventative property maintenance continued on page 3C

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