How the multi-family industry comes to calculate an apartment property's value will play out over time and is one of those basic exercises industry experts have to partake. It's also the key to the entire value equation because the accuracy of the picture you are painting is all about the details.
Of course, we have tools to help us along the way, but it is, nonetheless, vitally important that you understand how those tools work in practical terms. And when you're working with those tools—particularly the “pro forma” document that quite likely will include input from the seller of the property—accuracy is paramount.
One thing to consider in making the call as to the accuracy question is that the sale could be taking place at least in part due to the seller's unhappiness.
With that in mind, a good place to start is by taking a careful look at the assumptions upon which the pro forma numbers were based. What those pro-forma numbers should begin to reveal is the line of thinking that the seller (and a broker representing the seller) used to develop the document. What we want to do, then, is take those numbers and evaluate them against what is more or less likely when (and if) the property becomes ours.
We also care more about future performance than we do about past performance, although understanding the “why” related to expenses and income is obviously important for comparative reasons.
Identifying the gaps in various expense categories is also a useful exercise, because it challenges you to imagine a case scenario where your own management skills and those of your company are likely to affect the value.
It's those resulting numbers, generated as part of your pro-forma exercise, that start to reveal a picture of future performance for the property.
Another key part of the pro-forma process is to accurately understand what the industry standard is for various costs associated with a property. In other words, what “should” a particular category in a pro-forma statement cost and does this property come close to being what you might expect?
And, conversely, if it doesn't, is there a plausible reason why the costs aren't in line?
Find out, and you're starting to make some progress.
When it comes to efficiencies in our key business—which is managing properties for owners around the country—it has become critically important AND extremely desirable that we understand how the delivery and management of our service offerings are organized.
While FOURMIDABLE is based in Michigan, many of the physical properties we manage are many miles away, across state lines, and in communities where the need for excellence in management of properties demands the kind of system we have built up over time.
The first step for us is understanding what specific services can be centralized and what other services require the on-site attention of professionals we bring on our team.
What has made FOURMIDABLE one of the best in the business is our ability to answer that first question.
For example, doing accounting for a specific property isn't something that requires someone in the office of a local property. And neither is the technology that gives residents the ease of paying their rent. Those kinds of services, often called “back office” in some industries, are easily—once the decision has been made to go in that direction—done by team members who support the property manager but who aren't necessarily in the same office.
Because we recruit and value the most competent, experienced and team-oriented individuals, for the kind of services I'm talking about, location isn't nearly as important as it would have been in years past. It's good for our team members who now have greater choice when it comes to where they work.
Connections in the form of technology that we've come to rely on allow members of our team to collaborate in real time, focusing on the needs of the local property manager, who may easily be hundreds of miles away.
Once we've determined that a particular service can be done just about anywhere, the advantages begin to flow, not only from our ability to recruit the best people for the job, but to design and implement a flow of work that makes the most sense.
It also helps us to better manage the costs associated with a property, an important factor that will ultimately find its way back to the people who live in our communities.
Because we are better at what we do and because these levels of excellence have quality and cost as underlying goals, the efficiencies flow very nicely.
Sure, we could work differently, with all manner of property management services duplicated in each property we manage.
But doing so would be missing the entire point of why and how we've built FOURMIDABLE into the kind of property management company that delivers value to property owners and to the people who call the communities we manage home.
FOURMIDABLE finds itself on the winning end of the equation as we find ourselves increasingly in demand by property owners such as municipal housing authorities who count on us to deliver the best quality housing at an affordable price.
We think it makes the most sense to do business this way. And we know those who connect with us agree!
The time required to successfully manage even a single rental property is something many novice investors fail to take into consideration. The new or empty property must be cleaned, repaired, painted, and updated to be marketed at a profitable rental rate. It must be marketed and shown to prospective renters.
And the list of to-do's goes on.
Applications must be filled out and verified, credit scores checked, background checks run, deposits collected, leases signed, and move-in arrangements coordinated. Once a renter is in place, there are maintenance issues on the unit, the common areas, the amenities, and the grounds. Lawns must be mowed, leaves need to be raked, and snow must be plowed in a timely and efficient manner.
Simply put, property management is a 24/7 proposition and the time demands grow exponentially with the number of units under management.
When you ask any successful rental property owner what is the secret to their success, the overwhelming majority are going to tell you that it is having a professional property manager in place. At Fourmidable , we know that a good property manager can handle the countless details that come up with a rental property and allow you, the owner, to free up the most precious asset you have as a real estate investor – your time.
Allow me to give you a real-life example of one of the most active multi-family owners in Michigan. This owner now owns over 4,000 units, but that wasn't always the case.
In 2015, this individual owned a 24-unit complex in Eastpointe, Michigan. He had a desire to grow his business, but the time spent ‘self-managing' the one property he owned had deferred that desire. He decided to take a leap of faith when he purchased a 383-unit senior community in Southfield and entrusted Fourmidable to manage both his current and the new property.
His philosophy was simple: find a professional management company that focuses on customer service in the community. This would lead to income growth of the property and allow him to focus on becoming a profitable, growth-minded landlord in this area.
He needed a company with a proven record of reliable execution, excellent communications, and a shared vision for providing quality, affordable housing. Because his main office is in an international location, trust, communication and clear objectives have been the recipe for our successful business relationship.
Over the past three years, this client has added another 3,500 units to his Michigan portfolio and is slated to grow even more in 2019. Income growth and customer satisfaction has increased at each property. He is now free to spend his time seeking out new investment opportunities and growing his portfolio while his trusted management company handles the day-to-day management of his existing properties.
At Fourmidable, we specialize in managing, marketing, and leasing market rate rental properties, whether they be tax credit, senior and family government-assisted, public housing, middle class apartment communities, high-rise condominiums, or off-campus cooperatives. Our goal is to maximize and protect our clients' assets through effective property management, allowing them to free up all the time they need to meet the rising demand for quality, affordable rental housing.
When opportunity knocks, it's crucial to be able to balance demand and supply, especially in an industry where the need is a healthy one.
That industry—providing multifamily housing throughout America—is what drives FOURMIDABLE and it's clear that opportunities exist for qualified people who want to join a motivated team are available.
In fact, demand for staff in this industry is growing.
According to the April 2018 Units magazine from the National Apartment Association, the total number of apartment management jobs, listed in February 2018, was 4,653, an 18 percent increase over January 2018. And, with the demand for multifamily housing trending upwards over the next several years, finding apartment managers is paramount to FOURMIDABLE's continued success.
What's it like to work at a company like FOURMIDABLE? A few associates offer their perspective.
“Ten years ago, I was hired for what I thought was just a job at FOURMIDABLE. I have realized, because of the on-going training and consistent opportunities for growth, I now have a career. Not only have I have experienced growth in my professional career, but personally as well. Working at FOURMIDABLE has contributed to my maturity and my ability to handle the challenges of work and everyday life.
Gladys Neal, Regional Property Manager
“I began my employment with FOURMIDABLE on February 14, 1994 as a janitor. In 1995, I was able to achieve my level 1 & 2 maintenance certification. Within that same year, I earned an EPA certification and was promoted to service tech.”
“In 2000, I was promoted to maintenance supervisor and in 2003 I successfully obtained the status of Certified Manager of Maintenance. Since then, I've proudly held this position.”
“Each day I come to work I am fortunate to provide quality service and build trusting relationships with the many different residents I encounter. I look forward to conquering daily challenges and working with dedicated co-workers and contractors. These are just some of the things I love about my job.”
“To sum up my job reflection; I have enjoyed all of my many years of employment with my FOURMIDABLE family. This has been a wonderful company for me to be employed with.”
“The most satisfying aspect of being employed with FOURMIDABLE is that it has allowed me to provide a comfortable and stable lifestyle for my family.”
Jeff Suber, Maintenance Supervisor for Solaire Senior Apartments
“Our team at FOURMIDABLE has always made me want to do my best. It's not only a job, it's who we are! I am proud to belong to an organization with a united vision to do the right thing. I am excited to be a part of our growth and progress at FOURMIDABLE.”
Amber Coughlin, Regional Property Supervisor
Interested in being part of FOURMIDABLE's national real estate management team? Visit us at https://www.indeed.com/cmp/Fourmidable/jobs to see what exciting opportunities await you.
On April 12, 2018, Mike Schocker, president of FOURMIDABLE, was interviewed by Kevin Price, host of nationally syndicated radio show, Price of Business. Here is an excerpt of the wide-ranging interview, which you can hear on Sound Cloud at https://soundcloud.com/user-759550640/4-12-18-michael-schocker-expansion-of-company-into-ohio-and-new-multifamily-properties
Kevin Price: Welcome back to The Price of Business. I’m really excited about having Michael Schocker back on the program. He’s been on before. He’s with a cool company called FOURMIDABLE.
And you guys have a huge footprint, not only in the Midwest where you and I are both from—every time we get together, we go down memory lane even though we both lived on different streets, but we were in the same neck of the woods, like you say. And so, Michael, love having you on the program. Kind of give us the story of your company. And man, you’ve got so much expansion going on. It’s phenomenal.
Michael Schocker: Kevin, thanks for having me back on. I really appreciate the time. We are a Michigan-located company just right outside of Detroit. We actually just celebrated our 43 rd year in business. And generally speaking, our business is to operate apartment communities in and around the country. So presently, we have roughly 10,000 units located in 13 different states.
A lot of that expansion has taken place over the last, say, four or five years. We’re really getting a pretty strong presence down south—Tennessee, Mississippi. Interestingly enough, I know you’re a Michigan guy, but we’re expanding into your neck of the woods, and we’ll be right outside of Corpus Christi opening a new property this summer. That’s our first expansion into Texas. We are as far west as Oklahoma and as far east as South Carolina and Maryland.
Kevin Price: Yeah, but you’re going to take over the world.
Michael Schocker: Well, I don’t know about taking over the world, but we are definitely a growth-minded company. And it’s an exciting place to work. And I work with just some wonderful coworkers that allow us to really take on more properties and expand our presence in the different markets.
Kevin Price: Love it. So, Michael, kind of give us a panoramic overview of the types of properties that you have.
Michael Schocker: When we bid on different properties and things like that, Kevin, one of the things I like to talk about is not only our lengthy experience, which I mentioned with the 43 years in business and the tenure of a lot of the employees here, my coworkers, is really, really pretty strong, so we have a lot of experience, but outside of that, we do have a diverse portfolio. So, we don’t specialize just in what we would call market rate or conventional properties. We also specialize in tax credit properties. Senior housing, we have a big footprint in. We actually are a public housing management company as well, and we’re one of the larger providers in the state of Michigan for public housing. We manage communities for Detroit Housing Commission, Pontiac Housing Commission, Romulus Housing Commission. So, besides the experience, we definitely have the diverse portfolio type that we like to push out there as we meet with new groups because you never know exactly where it’s going to go and the types of different properties that are available for us to operate.
Kevin Price: What’s the good news, Mike?
Michael Schocker: Well, the good news has to do with the expansion too. As I mentioned, we are opening a property this summer in Texas. I’m actually going to head down there next week, spend a little time in Austin for a conference. And then I’m going, like I said, to Bishop, Texas, which is just southwest of Corpus Christi. And we’re going to see how that property’s progressing. It’s a new construction, so it’ll be interesting to see how things are moving forward.
Kevin Price: Talk a little—explain the expansion. What do you see happening? And why is this happening? And again, congratulations.
Michael Schocker: Why do I see it happening is just that the rental market, and really all the geography that we operate. is just really that strong. So, investors are really putting their money back into multi-family assets, whether it’s purchases or new constructions. It’s just the safe way for investors to invest money nowadays. And so, from the business side, even though prices have gone up and the purchase price to buy these assets are getting more and more expensive, there’s definitely still a strong demand for it, which helps companies like ours because when they do purchase these things, they look for a professional management company. And that’s where we fit in. So obviously, the economy is pretty strong today. The rental market is just as strong as the economy. So that’s just been a great recipe for companies like ours to kind of continue on our expansion.
Kevin Price: Yeah. No question about it. I really enjoyed our time, always do, Michael. We’ve got just 30 seconds. I want to give you a chance for final thoughts as we wrap it up.
Michael Schocker: Again, I work for an outstanding company. I really enjoy it here. We’re growth-minded. We’re really getting into the new markets, which my favorite part of that is I get to meet new people and come to new areas and learn about the culture and the background and everything else like that. That’s probably my favorite part of the job, the travelling and meeting new people and seeing new things. And along with the business growth, it’s just been a good couple of years for us here at FOURMIDABLE.
Kevin Price: Well, it’s good always to have you on. Love hearing about your progress. I hope you keep us abreast. And when I come out to Michigan, I’m going to have to come check out your facilities up there when I get there. Kevin Price is your host. This is the Price of Business. Really enjoyed my time with Michael Schocker. The website—Fourmidable—that’s a u in there in that four—fourmidable.com. Make sure you check them out. And, by the way, we are nationally syndicated on the Biz Talk Radio Network.
Technology is pervasive in today’s business environment. How well we integrate that technology impacts our time management and productively at work. It can also affect our quality of life at home.
Over the past few years, technology and software used in the property management industry has shown significant improvement. Software offerings have transformed many property management office tasks such as digitized purchase orders, invoice processing, compliance software, resident utility billing, and check scanning. Interactive websites can now feature a property’s current availability, lease rates, online application, electronic leases, and online chat with the leasing agent. Resident portals offer online resident payments, mobile-based service request management and community billboards.
These are some examples of value-added software used in our industry, but they have come at a cost. They are typically not all managed from within one software platform, therefore requiring another user login, another password to remember and another user interface to learn and master, they may not integrate well with the core property management / accounting software and therefore can require duplicate data entry requirements. There is also the challenge of keeping the data up to date.
We have been watching our industry's leading core software companies, such as Entrata, Yardi, MRI and Realpage make moves to stay competitive. Some are acquiring other value-added software companies, others are partnering with them, and some of the known software development leaders are building these value-added services right into their core property management / accounting software suite. The latter option provides the key to our technological future.
We are pleased to announce that after several months reviewing the latest releases of the leading property management / accounting software available, we have selected Entrata to replace AMSI at all of our conventional, tax credit and Section 8 properties. Entrata has designed their software with much more flexible reporting and with the end user and resident's needs at the forefront of their design, while providing a new level of flexible reporting methods. One login, one password, and one user interface are all that is needed to navigate all of the marketing, leasing, resident management, compliance, online payments, check scanning and other features, thereby eliminating the need to use so many different software solutions at our properties.
We will be rolling out Entrata throughout 2018 and are excited about our enhanced technological future!
