By Philip Shea, Associate Editor
Perhaps one of the more difficult aspects of managing multifamily properties is dealing with resident turnovers. Managers often have to follow strict guidelines as stipulated in lease agreements and company policy, and many find that the transition process is best done on a step-by-step basis.
Ronald Goss, president of RPM Realty, describes what the first step of the process at his company generally entails. “When we receive notice that someone is leaving, we pull their file and put in the written notice—because it’s required by the lease to give us written notice, usually within 30 to 45 days prior to—and we put them on a vacancy list and start marketing [the unit],” says Goss. “We typically have waiting lists for our properties since multifamily seems to be doing quite well now.”
As current residents prepare to vacate their units, one aspect of marketing to prospective residents is giving them a sense of what their potential apartment will look like. In this step, different management companies adopt different approaches. Lori Reeves, vice president of strategic business services at Forest City Residential Management Inc., states that the standard for showing an apartment to a prospective resident is quite rigid, maximizing consideration for the current occupant.
“We do not show apartment homes until they have been vacated, cleaned and brought to what we call ‘rent ready’ standard,” Reeves says. “We put our residents first and respect that our apartment is their home and would never request they make it available to show prospects while they are still occupying the unit.”
Ronald Goss states that RPM typically has a model apartment that they’re able to show a prospect in order to avoid disturbing current residents, but lays out the protocol for entering an occupied unit if such becomes necessary—for example, if the model unit has been rented out due to high demand.
“First of all you have to give notice, and usually it’s a 24- or 48-hour notice depending upon what the lease indicates,” Goss says. “We never show a unit without somebody else knowing. The resident manager makes sure that everyone on the staff knows she’s taking someone into a particular apartment; that’s for security and safety reasons.”
Once the current resident is ready to move out of the apartment, the process of preparing an opening unit for a turnover begins. Obviously, one of the central components of readying a unit is having it cleaned and inspected for damage. For the most part, the cleaning responsibility falls on the current apartment resident.
“It’s part of their security deposit,” says Goss. “As they leave the apartment and turn their keys in, we do a final inspection with them and we compare the final inspection to the pre-move-in inspection to see what damage was done other than normal wear and tear.”
Julie Manthey, vice president of operations at Western National Property Management (WNPM), reflects upon her company’s similar approach to this issue.
“It is part of our lease agreement that they return the unit to the same state that it was in when they received the apartment,” says Manthey. “We would expect that they clean it, and if they do not clean it, then there are charges that would go along with any of the cleaning that we might experience.”
Leasing and retention
While many turnovers are inevitable and simply part of the business of renting, property managers do have policies and initiatives in place to limit the quantity of such and encourage longer-term leases for the majority of residents.
Ronald Goss states that a 12-month lease is the de facto standard for occupancy at a majority of RPM’s properties with few exceptions.
“Typically every tenant that we have signs a one-year lease,” Goss says. “We have some that will go to a month-to-month lease, but they are very few. Mostly, the minimum we’ll sign in most of our apartment complexes is a six-month lease, and the majority of them are one-year leases.”
WNPM’s Julie Manthey says that a majority of her company’s residents, estimated at around 65 percent, have 12-month leases. However, because of the limited amount of turnovers management can handle or would like to see in a given month, shorter-term leases are available for those who fill the niche.
“We do have flexible lease terms as we manage our lease expirations,” Manthey says. “For example, we may only want 5 percent to expire in a winter month, and therefore, if we need a five-month or six-month lease term and someone comes in and asks for that, we would certainly be willing to accommodate them and generally ask for a small upcharge of anywhere from $100 to $150 for a shorter-term lease.”
In order to keep a resident in a unit beyond 12 months, management companies may offer rewards or incentives to encourage lease renewal. Lori Reeves at Forest City states that maintenance and renovation of a long-term resident’s unit is a good place to focus in order to promote continued satisfaction.
“In some cases, where we are performing unit upgrades at a property for example, we may offer those same upgrades to entice a resident to renew,” Reeves says. “Depending on the length of the residency we may also offer carpet cleaning, carpet replacement, etc. After all, we are in the asset preservation business too and it is in our best interest to keep units up to market expectations.”
Julie Manthey says that while certain incentives for renewal are useful, a basic attitude and culture geared toward resident satisfaction is what ultimately makes a difference.
“We may do an incentive such as, if a resident has lived there for a number of years—anywhere from three to five years—we may replace their carpet as an incentive to renew,” Manthey says. “Most people really don’t prefer to move or incur the expense. You keep them happy when you take care of the apartment that they reside in, so we try to keep the apartments in the best condition.”
Once it is certain that a unit will be turned over from an old to a new resident, repairs and inspection become the central focus. Managers want to be sure that the new resident will have the sense of entering a clean and up-to-date apartment. As such, the days and weeks before a move-in are crucial from both a maintenance and marketing standpoint.
Before any repairs or maintenance can be done, however, property managers must assess what damage has been done by the outgoing resident and whether that person needs to be charged. Ronald Goss says that RPM’s inspection process is very inclusive of the outgoing resident and gives them the opportunity to fix what needs to be fixed, or at the very least understand any potential charges that may be incurred.
“We will inspect the apartment with the individual and give them the opportunity to correct those things that need to be corrected,” says Goss. “We compare what we have on our inspection to what that person had when they first moved into that apartment to see what was beyond normal wear and tear.”
Goss states that any irreversible damage to carpeting, walls and appliances usually results in a withdrawing from the resident’s security deposit, and that any expenses beyond that are subsequently billed to the resident.
Once inspection is complete and expenditures for repair are in order, the process of preparing a unit for move-in begins. The timeframe for this varies, and Ronald Goss explains the factors that may go into determining what will need to be done.
“Depending on the severity of the unit—what it’s going to take to get it ready—we try to get it ready within a week, usually less,” Goss says. “Again, it depends—there are some units that take minimal work to get it redone, and there are some where it may take longer than two weeks because we have to get outside contractors to do the work, even though we try to do it all with our own people.”
Lori Reeves states that contracting out work to a reliable vendor helps expedite the turnover process for Forest City and keeps things running smoothly, regardless of season or turnover traffic.
“In general, we contract unit turns to our janitorial service provider. This way, we can always handle the volume whether it is a slow turnover time or a peak turnover time,” says Reeves. “We have a great process worked out with our vendor and the trades get in and out in a timely manner. In military housing this number can be huge and we couldn’t do it without a great partner.”