July 26, 2019
Class B and C multifamily properties can provide different challenges for their property managers. Kelly Blaskowsky, Senior Vice President of Operations with Roscoe Property Management, shared some insights about value-add property management with Connect Media. Roscoe will be a speaker at the upcoming Connect Texas Multifamily conference on Aug. 15.
Q: What are some of the challenges faced by property managers when it comes to value-add multifamily properties?
A: It is important to understand what improvements and finishes will result in the highest return on investment, while understanding the rent ceiling on each individual submarket. If the rent with the premium reaches the same price point as the newer product, or pushes outside of the income for the demographic served in that area, you could lose the opportunity to recover what was spent on the upgrades. At RPM, we thoroughly evaluate the market prior to completing the upgrades, in order to determine where we want the price point to land. Then we complete a handful of “test” units to determine what the market can bear. This allows us to validate the business plan and fine-tune the finished product.
Q: Can you speak to investor demand for Class B and Class C properties from a geographical standpoint?
A: Multifamily investor demand is strong across all of the major Texas markets. Many assets have already been touched in one way or another, so the key is finding an asset that still has upside, either through renovation and/or improved property management. Each investor is different in terms of their investment criteria, how much they are willing to spend on a “price per pound basis,” and/or their return thresholds.
Q: Do tenant needs differ between Class A and value-add properties?
A: In either scenario, a rent check is necessary; the rental is likely a resident’s largest monthly expense, and resident expectations have never been higher. The demographic for a site is typically driven by the price point and location. If you are in a transitional area with several A-Class sites and value add nearby, the properties could share traffic if the price point is comparable. This would be because the Class A product in an area surrounded by value add could require more marketing effort to pull in prospects with a higher level of income that can afford the price point. A value-add project surrounded by Class A might need to increase curb appeal, community engagement and overall customer service in order to compete.
It’s time to register for this year’s Connect Texas Multifamily Conference on Aug. 15! For information and to register, click here.
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Tags: Apartments & Multifamily