February 18, 2020
I recently met with an owner of a 216-unit property who is struggling to meet the financial objectives budgeted for the property after 2 ½ years of ownership. He was an out-of-town owner attempting to run the onsite operations of the property from 2,000 miles away. In his opinion, his struggle was “finding good people” who are “competent” to do execute the game plan.
This multifamily owner also owns several healthcare businesses around the country and was accustomed to solving problems—a very highly capable individual. He had a clearly defined marketing plan and a plan to rid the property of about 8% of the slow-paying tenants. He knew his onsite property manager had bypassed the tenant screening criteria in recent months and the property was suffering with 15% delinquency.
This owner wanted to get rid of this onsite manager, but said he feared “jumping into the fire from the frying pan”. The owner had run through three onsite managers--two who kept him up at night and he was confounded about how to motivate class “C” multifamily personnel to do their job well. All of these managers were hired as highly recommended individuals capable of executing the game plan.
Instead of terminating his third onsite manager, the owner decided to sit him down and cleared the air, re-establishing objectives: Create and execute a marketing plan to capture an upgraded pool of prospects
Evict 50% of the 28 slow-paying tenants
Re-establish the prospect credit, criminal, employment, and rental verifications to keep out poor tenant risks.
This owner was paying the onsite manager at the highest end of the pay scale. In addition, the property was arguably overstaffed with a full-time assistant manager and leasing agent, for only 216 units. The owner had spared no personnel expense to meet the revenue targets for the property and he was still falling short of meeting the financial objectives.
What’s wrong with this picture?
Having managed over 5,000 multifamily units in my career, the most important function for executing the ownership game plan in larger multifamily assets is driving owner’s objectives down to the property level personnel. To translate the strategy of ownership to the tactics on the ground requires a “Warrant Officer” on board to execute the game plan.
The Warrant Officer is a military designation for personnel who have come up through the enlisted ranks to officer status. This is a position of authority because of their proven technical expertise, ability to guide, train, and coach subordinates to meet the objectives of the organization. They have a blue collar background with white collar capability. The Warrant Officer is able to communicate effectively with commanding officers as well enlisted personnel to ensure projects are completed well. He is the go-between who solves the problems that commanding officers want solved.
Ownership groups who don’t have a Warrant Officer on their team to solve the problems and execute the game plan at a high level will often underperform the stated financial objectives. Multifamily assets suffer from a high level of entropy—or as Murphy once said “what can go wrong will go wrong.” Even worse, ownership groups may face financial disaster either trusting themselves or 3rd party management companies who don’t have a Warrant Officer in charge of operations. In layman’s terms, someone has to be on the ground in charge with a sense of urgency knowing how to organize team members, oversee processes, hire and terminate according to a Warrant Officer wisdom.
To find out if you have a Warrant Officer on the ground, ask these questions:
Who is responsible for executing the game plan to meet the financial objectives of the budget?
Is this individual directly overseeing the personnel, processes, and productivity of the asset?
Will this individual be directly communicating with ownership the state of progress of the asset on a scheduled accountable basis?
If you can’t answer “yes” to all three questions, ownership is likely to experience sub-optimal performance in meeting it’s financial objectives. It’s time to find a Warrant Officer.
About Lead Equity Group
Lead Equity Group is a multifamily acquisition and property management company with over $80 million of assets under advisement. Headquartered in Dallas, the Company is focusing on the growing areas of Georgia and Northern Florida markets.
Contact: Chris Clark, firstname.lastname@example.org