Uncertain times? ResMan’s Founder and President Elizabeth Francisco has been here before. It was during the Great Recession of 2007-2011 when she was Vice President of Operations at Sequoia 1031 Companies and Real Estate Management in Dallas, TX. Mrs. Francisco joined Sequoia in 2006, where she was responsible for asset management, investor relations, and day-to-day operations. At the time, Sequoia was reliant on its in-house proprietary software, which provided only basic accounting capabilities.
To meet its fiduciary responsibilities to its 1031 investors, the company needed to find a better way to measure all aspects of financial and operational performance. Elizabeth led the management company from 2006-2015 while simultaneously leading the charge for innovation and working with a team of engineers to develop the software we know today as ResMan.
“In 2007, the looming recession became a reality,” she says. “We needed insight into all aspects of performance as well as finding efficiencies to compensate for downsized staff. At first, all we had was a crazy amount of excel workbooks that tracked everything from traffic to service requests to managing purchase orders and beyond. As market conditions worsened, new challenges came to light weekly, challenges that we had to solve in realtime to secure the assets, the staff, and our company. ResMan was built in response to the extreme pressures of the recession, with a deep understanding of what it would take for real estate managers to survive that downturn.”
Learning from the Ups and Downs of Multifamily
Out of that experience, Elizabeth learned not only about surviving, but also thriving in the multifamily market through the economy’s ups and downs. It grew a resilience that serves her today, as the multifamily industry is staring down another impending recession as a result of COVID-19.
In a NMHC webcast discussing the release of May 2020 data for rent collections, Elizabeth stated that April 2020 revenue per unit was down by about $100 per unit due to partial payments, reduced fees and, in part, the lack of ancillary revenues. “Collections overall have been better than expected for April and thus far in May; but are the numbers too good to be true? I fear the impact of COVID-19 on multifamily operators is still lingering offshore. The bipartisan Cares Act was meant to help Americans meet their basic need for food and shelter, which I believe it is doing. “
“With that said, the $600 per week unemployment stimulus will be ending in July,” she continues. “With over 36 million people on unemployment, the real question is whether these people will have jobs to go back to or salaries to equal their financial obligations, such as rent. Q3 will be very telling for the industry. Industry reports are already showing that rent growth has flatlined, ancillary revenue is being waived and we are heading into the time of year where a larger percentage of leases are expiring. At the very least, I would expect operators are going to take a hit to their effective gross income and cash flow through the end of the year.”
She is optimistic, however. “COVID-19 has slowed completion of new units expected this year and potentially into 2021. In addition, getting new development projects off the ground when market conditions are changing is a tall order. Both of these will have a negative impact on the overall supply needed to meet the growing demand for rental housing, continuing an imbalance that will benefit multifamily as we start to come out of the recession.” Depending on the length of the impending recession, Elizabeth believes we could see another long-lasting growth cycle for the multifamily industry.
She points out that another positive for multifamily operators is that as companies adopt a more flexible work-from-home policy, renters will prioritize and put even more value on their home/workspace and potentially allocate more of their income for rent.
“In the meantime, owners and operators will be put to the test,” she cautions. “I have always heard that the true test of a management company is how they manage in the bad times, not just the good times. So many investors and management companies have entered the space after the recession and have never been through a downturn in the market.”
4 Tips for Weathering the Storm
To successfully ride out the upheaval, Elizabeth says we all must adapt. “Crisis reveals our shortcomings,” she says, “so this situation provides an opportunity to improve in these crucial areas”:
1. React Appropriately
With cracks beginning to show in markets across the country, there is a growing sense of anxiety among operators, leaving them to ask questions about how far off-budget will they be by year-end. If you are new to multifamily and have never experienced a market downturn, this situation could be very daunting. How you react to the changing conditions in the short term will have a long-lasting impact on your asset(s) and your company. Elizabeth’s advice: Do not overreact.
If you have to give up income in the short term to maintain occupancy in the way of concessions, make sure you are securing longer lease terms. “During the previous recession, our management company moved to 12+ month lease terms which stabilized the property for the next 12-18 months. While upfront and prorated concessions reduced income in the short term, we were able to have more confidence with our forecasting over the long term, which gave us options in expense management and timing of expenses.”
2. Operators: Back to Basics
What are the things that make the biggest difference in business? “Employee engagement, attention to detail, customer service, the environment of your properties, and consistency,” she says.
“One of my favorite people, Anne Sodovsky, has a great saying that she beat into my head years ago: The devil is in the details. When times are as good as they have been, the focus tends to be more forward-looking, to seize the opportunity while it lasts. It is easy to become complacent or take things for granted. At the end of the day, this is pretty simple: The industry provides homes to millions of Americans who want a welcoming and quality place to live. Focus your efforts on ensuring these two things and you will weather this storm.”
3. Flexibility for Staff
COVID-19’s shelter-in-place experience will change the tide on work dynamics. Operators will have to reevaluate offices, productivity, and working from home. “If we don’t provide flexible work environments and practices, we’ll have trouble attracting and retaining talent,” Elizabeth says.
“Property management has two sides of the house to account for, the back office and site staff, which have very different needs and challenges. Implementing a flexible remote working policy should be fairly easy for the corporate office. With the technology available today in the market, including our own ResMan solutions, you can remotely manage all aspects of accounting, operational oversight, lease procurement, and resident engagement.
“I do admit that the onsite staff is going to be more challenging since you still need to maintain the physical condition of the asset and engage with residents to some degree. I know from personal experience that personal interaction goes a long way. When renters are emotionally attached to their apartment community and the site staff, they are more inclined to renew even when presented with a rental increase.
“Consider offering a remote working day or partial day for frontline staff members. The extra time to share a meal with their families or just to sleep goes a long way with team members. Those managers who can allow a full time or even partial remote working policy will have a competitive advantage.”
4. Engaging with Renters Through Consumer-centric Technology
Over the last decade, property managers looked to adopt technology to provide internal efficiencies, albeit more slowly than other industries. They’ve needed technology to manage every aspect of the business by streamlining administration, staff onboarding, accounting, reporting, and more. But now, they must also be able to engage with prospects and renters virtually, as retention will be impacted by the visibility you establish (or don’t) with renters.
Today, consumers/renters are driving the need to adopt new technologies. “Your property management technology can no longer simply serve YOU,” Elizabeth says. “Renters seek convenience in every aspect of their rental experience, and their tech expectations are at an all-time high.”
How ResMan is Adapting
“I have full confidence that ResMan can make a difference during this crisis because it was created during a crisis,” Elizabeth says.
ResMan users have been taking advantage of our SaaS solutions for years in their offices and now in their homes.
With our new Virtual Leasing Office, we’re keeping up with consumer demands for:
- Streamlined online forms
- Modern online payment options
- Virtual tours
- Interactive floor plans
Elizabeth is confident in this: “Reluctance to adopt efficient technology and ultimately means you won’t be able to compete.”
Check out ResMan’s Virtual Leasing Office
Discover for yourself how a virtual leasing office can help you adapt and thrive.