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SHOW NOTES FOR EPISODE 044 – VIEW FROM THE TRENCHES – STEALTH TENANT MARKETING UPDATE FROM INDY
Being an out-of-state investor has advantages and disadvantages. Bill Manassero feels that there are definitely more advantages than disadvantages, but this month, he is dealing directly with some of the disadvantages of living away from your properties – what to do when your property needs serious attention. His response: move out there and take care of business! In this episode, Bill shares his “view from the trenches” with an update on week 3 of living in his 22-unit apartment in Indianapolis.
Introduction
For those of you who are regular listeners, you know I hit the road for Indianapolis on Oct 4 to move into my 22-unit apartment (see episode 038). The purpose of the trip was to:
- Better understand tenant dynamics and the local market/community/neighborhood
- Advance/move-along rehab/repositioning efforts
- Aggressively implement “stealth tenant marketing” plan to move occupancy from 68% to 90%. Knowing that Nov – Jan are major slow rental months, I knew it was imperative that I do this in October.
- To stay as long as necessary to accomplish my goals
Background Overview
- In April 2016 bought 22-unit C class property in C neighborhood that is in “the path of progress” in an area of transition – upscale Irvington to the east and advancing in our direction and targeted city-driven redevelopment efforts to the west.
- Established solid business plan: Reposition the property to attarck high-level clientelle. Upgrade exterior (curb appeal), common areas, rehab apartments as they become available, reduce expenses by implementing water conservation efforts, switching from boiler-based heating and gas stoves to electric stoves and individual unit side board electric heating (tenants pay electric – owner pays gas/water), increase rents to market, introduce RUBS program in year two for shared utility expenses.
- To purchase the apartment, did cash-out re-fi of three other properties. Also, re-fi generated additional cash for rehab
- Since first major multifamily deal, did not get best loan rates. Therefore, need to get profit and occupancy numbers up before April 1 (one year loan anniversary) to re-fi into a Fannie Mae loan (currently 3-4 pts lower than current loans) – pay off re-fi loans – one loan for all.
- Planned aggressive major rehab in first 3 months
- Set goal of 90% occupancy after 3 months
- Plans radically changed when property manager (who was overseeing the plan) suffered a major family tragedy. The Results after 3-4 months:
- 7 vacancies (68% occupancy)
- Empty units and common area rehabs not finished
- Little cash left for rehabs
- Need increased cash flow to continue upgrades therefore, need to boost occupancy
- Reduced unit rehab costs and financed through credit cards and lines of credit
When I arrived:
Had to take time to fully-access what was needed to boost occupancy and finanlize plan.
Divided areas of focus into 6 key categories
- Networking
- Tenant Marketing
- Rehab Work
- Tenant Survey
- Prospective Tenant Contact
- Admin
Immediately met with property manager
- Discussed my objectives while in Indy
- Outlined tenant marketing strategy
- Agreed to set-up new systems
Networking
- Connect with other area investors
- Meet with potential tenant referral sources at
- Meet-ups
- Service Clubs
- One-on-one
- Build alliances with local contacts
Tenant Marketing
- Attract more prospective tenants from online marketing. Move away from “walk-ins”
- Apartments.com
- HotPads.com
- Rentberry (not very effective)
- Craigslist.com
- Zillow, Trulia, Realtor.com
- Targeted hand distributed flyers promoting “special employee discounts” to key area employers
Rehab Work
- Kitchen rehab in unit I occupy
- Coordinating contractors to rapidly finish other vacant units
Tenant survey
Better understand tenant mindset by surveying each tenanat
- Through tenant interviews, interface, communication, access, find our:
- Why did they chose the Avoca?
- What do they like/not like once here?
- What needs to change?
- What can be done to make it better?
Prospective Tenant Contact/Follow-up
- Showings
- Phone calling/emailing responders
Admin
- Dig into budget/financials
- Establish systems with PM
Highlights of First 3-weeks
Not so good – Challenges
- Tenants with issues – on disability, alcoholics, tenant in-fighting, couple fighting
- Challenge: Introducing different level of tenant
- Establish new rules
- Loud tenants above me (could be floors) – wearing ear plugs
- Gun shots, party next door– had to call police
- Possible drug dealers next door
- Experiencing tenant dramas
- Ambulances in middle of night
- Battling bed bugs/cockroaches
Good Stuff
- Will have all but one of the empty units upgraded
- Making excellent contacts
- Getting calls from area employees in response to marketing flyers
- Finished kitchen/bathroom rehab in unit I’m staying in
- Found tenants (Jimmy) that are willing to help out
- Two new tenants
Ongoing challenges ahead
- Quickly rehabbing units as they become available
- Tenant mix issues
- Maintaining steady flow of new – higher-grade tenant
- Maintaining 90% minimum occupancy
Still have a week and a half to go…
So, until next time, remember CASH FLOW IS KING AND REAL ESTATE INVESTING THE MEANS. Thanks again for listening and God bless!
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