September 21, 2020

Real Estate Focus: Building Bridges

By Susan Belknapp, California Business Journal.

In the rental industry, turnover is costly. According to the National Apartment Association, citing industry expert, Lori Hammond, “The cost of a single turn including rent loss generally starts in the range of $1,000 and can easily grow to a range of $2,500 to $5,000 depending on the capital replacements.”

Extrapolated out, “a 225-unit apartment community with a 40 percent turnover rate (7.5 moves a month), an average rent of $650 per unit and an average per-unit turnover expense of $1,800 is spending $162,000 annually on turnover, or about 9 percent of the gross rent potential.”

Anyone who lives in California knows that $650 a month rent is virtually unheard of today for an apartment, so those numbers are likely much higher here. President and CEO of Turlock, California-based New Bridge Management (NBM) Adrian Harrell recognizes this core reality and has structured her company to address that in an effort to minimize the risk for everyone.

“We are the connection between needs, wants and opportunities for our residents and by extension, our clients,” she says. “By providing that bridge, we are able to take a look at what somebody needs in terms of housing and connect them to the opportunities we have available so we can maximize our clients’ portfolio performance.”

This keeps reliable tenants in NBM properties even when their housing needs change. For instance, if they need to upsize or downsize, the company has the solution within its portfolio of properties.

Property managers have multipart roles that can make them the “peacemakers” in a what has long been considered a codependent but also conflicting relationship: that of tenant and landlord.

President and CEO of Turlock, California-based New Bridge Management (NBM) Adrian Harrell

President and CEO of Turlock, California-based New Bridge Management (NBM) Adrian Harrell

Having entered into a contractual agreement, both have a responsibility to keep up their end of a bargain. The resident pays their rent on time and the landlord maintains the property as set forth in the contract. Ideally, the tenants will also do everything in their power to not inflict damage and help maintain the property as a comfortable living space. But even when well cared for properties can have costly needs, such as a burst pipe or a broken water heater and that is when the landlord must act.

Enter management companies. These agents serve as the “go between” can optimize profitability for property owners by handling the day-to-day needs of a rental. The owner, or investor, hires a company to act on his or her behalf, relieving the client of any direct contact with tenants and all maintenance, new-tenant screening and leasing is overseen by the management company.

NBM – which was founded in 2009 and has since garnered multiple awards, landing on “best of” lists for its Northern California regions – has taken this concept even further. By providing superior service to its residents, it helps manage the real estate portfolios of its investors. With a staff of highly educated, certified property managers, its services extend to residential homes, apartment complexes, townhomes, and duplexes in Stanislaus, San Joaquin, Merced, Alameda and Santa Clara counties.

Profits are maximized because residents are happy in their living environments, which keeps turnover low. In addition to managing the properties, NBM keeps its communities desirable and well-maintained so the individual property values remain high. This maximizes return on investment for the owners. Additionally, nurturing competitive vendor relationships allows NBM to get the best service at the lowest price for their clients.

“If residents have their needs taken care of, the better the chances they will care for the property for a longer period of time and minimize turnover. This ensures that the investment will continue to perform for our clients as we keep expenses low while the property value appreciates.”

Harrell and her team are always fostering relationships with clients and vendors while making an unconventional business decision to not have an in-house maintenance department.  “I realize many would say that if I were a ‘savvy entrepreneur,’ I would have a maintenance division because it could be very profitable,” she says. “But by building relationships with trusted vendors, we can provide transparency and peace of mind for our clients.”

Harrell, who is passionate about policy and remaining “absolutely on top of the legal environment,” sits on multiple boards and has been on the government affairs committee of the National Association of Residential Property Managers (NARPM) for at least four years.

“So much can affect the residential relationship,” she says. “When COVID-19 hit, the governor declared a state of emergency so rents cannot be raised during this time. If you aren’t aware of what is happening and the legal implications, you can end up out of compliance just that fast.”

Residents – such as those in the service industry – found themselves unemployed with no warning were severely impacted by the coronavirus. “We educated residents on the executive order, and we wanted to make absolutely sure we had the most-accurate information as there were a lot of rumors flying around,” she says. “If residents show us how they were impacted, we can make arrangements so they won’t worry they’re going to be evicted.”

In the same vein, clients often need help navigating their legal rights. For instance, because of the state of emergency, and the current speed of the court system, it could be as long as January before a nonpaying resident could be removed. NBM recommends clients be “proactive about contacting lenders and asking about forbearance before they find themselves in a bind.”

Copyright © 2020 California Business Journal. All Rights Reserved.

 

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