Relationships Between Builders & Property ManagementSep 06, 2021
In the build-to-rent space, involving a property manager early is crucial. How much are you going to build? Where? Why? What kind of floor plans work?
Get them to know the builder, there has to be a rapport there. The builder is going to turn this unit over to the property manager who now gets to walk tenants through it and explain how everything works... field maintenance calls...
Do you think that the property manager and the builder are going to have to interface and are gonna have to get along? Absolutely. Do they always get along? Not always.
In fact, they rarely do. One thing as a property manager that popped in my mind is that would be tough. It's a little bit of a juggling act when you're leasing up new development or a new property because you have investors that want to get as much for their unit...and they're expecting a certain amount that was projected in a proforma.
But they also want to get leased up as fast as possible. And we know if you lower the rents, or maybe offer some discounts or incentives that could help with that.
So going back to understanding property management, there's a little bit of a juggling act if you're a property manager, in trying to not give it away too much, but also maximize the rents when you're trying to lease up or stabilize. And I think I'm not a property manager. Obviously, I don't I don't want that job, but I think that would get a little bit tricky.
Set that expectation. Look for somebody who's going to shoot you straight, and it may not be what you want to hear, but if they're going to tell you something that's going to take a little more time--I feel a lot more comfortable with someone like that than someone that says, "Oh, yeah, I'm gonna get this lease job. Give me a month and I'll have this whole fourplex leased up."
Going back to your question with the builder, property manager, do they get along? No, not always? Rarely.
It's a tricky situation, the fact that there are certain things when they build a new property that maybe they need to fix or certain things that the property manager doesn't agree with? And so a lot of times there could be some head-butting there. And it's good to have someone involved to help that conversation.
The temptation is there. Where these two worlds meet. You're talking about two different businesses, yes, you're the build for rent owner, you hired a builder slash contractor to build a house, an apartment building, whatever.
Now, at some point, that is not going to be the builder's responsibility anymore. It's the property manager's responsibility. And it is very, very tempting for them to throw each other under the bus. That's what we say around here.
Let the scenario be, for all those of you that are thinking of doing this, this won't be the last time this comes up for you. And you've got a really short circuit this with your builder and your property manager ahead of time, and talk about how this will come up. And when it does, here's what I need you to not do. Right.
So for the builder, it's, you know, when there's a concern that property managers are too stringent, they don't get building code. They're not a builder. They're just crazy. They do.
That's them getting out of what could be a legitimate problem. Or maybe it's not. Right now, the property manager really easy for them. If lease-ups going a little tougher, maybe they're having a harder time hitting those numbers. Well, how easy is it to blame the builder? The builder really didn't do this right. And that's why I'm not performing.
Now that's maybe true. But that's what's so frustrating about it is it's this middle ground where you don't necessarily know they're, they're sacrificing one another to look better to you, the client, so be prepared that can and does happen. And you've got to address it. That's why it's good to involve the property manager at the beginning.
So what kind of the scope of work? What finished level? What floor plan are we doing here? So when later down the line, they're squawking about, hey, you are okay with this, right? You've got to, you've got to be able to have that kind of a productive conversation because share it, I mentioned something that's, it's a hard balance to walk, we want somebody who's going to be aggressive, who's going to go out there and get high rents, and do the best they can.
But also, that property manager needs to impress you, they need to fill units. And so you don't want to get to the point where they're, they're lowballing just so that they can keep the heat off of themselves. Right, there's a line that you walk between, let's get little units leased. leasing velocity is what they call it, versus Are we leaving money on the table? Right? I don't have a great answer, but you need to watch for that. Because it can, it can definitely be an issue.
Like how you brought up, bring in a property manager early. Because if you have a good property manager that understands the market, bring him in early with the builder with the team and understand that it's a team working together to make it happen all the way from start to finish. And by bringing them in early, maybe you can fix a couple of things within the floorplan, tweak a couple of things that might help a little bit to get higher rents, or whatever the case is. So yeah, I liked how you brought that up.