When is on-site management needed?

Multifamily investors do best when they target a niche and specialize in it. They target investments by location, deciding they’re going to stick to one metro area so they can scale property management, or by demographic, for example, distressed low-occupancy properties because they have an efficient crew who will get in, renovate quickly, and have units re-leased in days, not months.

It is easy to accept that having someone on-site at an apartment community is a favorable attribute for most prospective tenants. They like that there’s someone representing management. Maybe even a full-time maintenance person, a familiar face when they have an issue in their unit.

But full-time people on site are expensive, and for a property under a certain size, they won’t stay very busy. A 20 unit apartment may only have a vacancy once every month or two. Hardly worthwhile having a property manager or leasing agent on site all the time.

How about a 50 unit property? Or 70, 80, 100 unit property? The short answer is, it depends on a number of factors like rental income and neighborhood security.

The smaller the property, the harder it is to afford someone on site. Under around 80 units, the costs start to outweigh the benefits. But look closer. Are the average rents $500 or are they $1,000? If you want to attract the tenant who will pay $1,000, they may want the security of a person they can talk to about their home.

I have seen 32 unit apartments with a separate building with an office for a leasing agent. That is a very compelling assurance of safety and security to a tenant. Expensive? Absolutely, if your agent is there 40 hours a week. But could the property manager have them there just two days a week? Or two hours a day every day? And share their time with other properties? Certainly. You get the benefit of on-site management with a fraction of the cost. Alternatively you can convert that office into a rental but if you’re buying the asset to improve it, an on-site agent can provide a huge opportunity to sell the community to tenants.

What about a resident manager? Offer an existing tenant that role? Or find one and offer them a free place to live? Go carefully. That manager builds relationships with tenants, tenants become attached to that manager, and if the manager is not performing their job well, your options may be limited. You can’t end their residency before the lease ends, and if you only terminate their manager role, tenants may be loyal to the manager and resentful to you, their real manager. Gets sticky, but could still work.

For any property with more than 50 units, try to make a limited on-site arrangement work. It is so helpful when turning around a property with problems that you can solve. The on-site presence goes a long way toward attracting and retaining your desirable tenants. It doesn’t need to be full-time and doesn’t need to be permanent, possibly just six to eighteen months. And for maintenance, if you have found a reliable maintenance vendor, ask them to provide just one person for your work consistently. Tenants are okay with someone who is friendly, efficient, and familiar.

Be sure, though, that if you don’t have a full-time on-site manager or maintenance person, your property manager has a nearby office. Not an hour away where they will be highly unmotivated to send someone to the property.