Financial Freedom with Real Estate Investing MB 254: A Hands-On Approach to Asset Management – With Daniel Simpson
In real estate school, they teach you that the money is made when you buy. But that just isn’t true for apartment buildings. Yes, you have to buy right. But in the multifamily space, the money is made in the execution of your plan to increase revenue and reduce expenses. And the asset manager is responsible for making sure that happens.
Daniel Simpson serves as Asset Manager at Nighthawk Equity, the investing arm of The Michael Blank organization. He has nearly 30 years of experience in multifamily, residential and commercial property management, developing an expertise in strategic business forecasting, budget allocation, complex data analysis and property financials. Daniel has an impressive track record of acquiring, renovating and repositioning C-class value-add properties in as little as 18 months.
On this episode of Apartment Building Investing, Daniel joins me to share his hands-on approach to asset management, describing what he does on his monthly site visits and how he helps property managers optimize revenue and reduce expenses. He walks us through the metrics he uses to identify property management issues and explains why all problems come down to people. Listen in for Daniel’s insight on the limited role property managers should play in construction projects and learn when you should consider hiring a full-time asset manager!
Key TakeawaysDaniel’s insight on the fundamentals of asset management
- Ensure investors’ goals met, returns on target
- Provide guidance to property managers
How often Daniel meets with property managers
- Speak with regional manager once/week minimum
- Unannounced visit to site managers once/month
When to take a hands-on approach with property managers
- High turnover rate
- Higher than normal vacancy rate
- Lack of success in leasing units
- Collection issues
- Move-outs not entered timely
Daniel’s take on why all problems come down to people
- Tenants rent from STAFF vs. apartment itself
- Asset manager’s job = find breakdown in system
What metrics Daniel watches closely as an asset manager
- Consistency in NOI
- Occupancy (physical and economic)
- Delinquency
- Live PNL
- Closing ratio
How to identify problems with property management
- Look at comps and communicate that with staff
- Secret shops to evaluate leasing staff’s performance
Daniel’s process for optimizing a multifamily business
- Start with maximizing revenue (add $5 to $10/unit)
- Minimize expenses next, reevaluate contracts
How Daniel thinks about managing expenses
- Ask questions about potential overspending
- Audit line items to keep property managers honest
What Daniel does on his monthly site visits to a property
- Walk vacant units, talk with property manager
- Visit with leasing agents and maintenance staff
- Verify that move-in files match what’s in system
Why property managers should not handle construction
- Distraction from filling units and collecting rent
- Better to hire GC or specialist (local or in-house)
The role a property manager should play in construction
- Go to early meetings, input on scope and timeline
- Hand GC keys needed to carry out project
What an average syndicator can do if they can’t afford a GC
- Use construction manager (part of management co)
- Build 5% in budget for specialist to oversee project
When it’s time to hire an asset manager for your business
- Depends on skill set of investors in joint venture
- As soon as you can afford it
Connect with Daniel Simpson
Email daniel@nighthawkequity.com
ResourcesLearn More About Michael’s Mentoring Program