For syndicators, acquiring a real estate syndication deal is generally a long and taxing process that involves many steps. Even before the day you sign the closing papers that officially make you the property owner, a long list of things need to happen. From making an offer to buy to getting the keys to your new property and now executing your business plan, the to-do list will just get longer. To make the process less overwhelming and help you cross off items on your list with efficiency, it is crucial to set up structures in your business.
This topic takes me back to one of my conversations with Danny Randazzo, real estate investor, author, speaker, and managing partner at PassiveInvesting.com. We talked about how his company had streamlined systems in the workplace to ensure that their investments and assets are managed efficiently and profitably. I’d like to share some of their practices here that you can adopt so you can create efficiencies in your business. Click here to listen to the full interview.
In real estate management firms, managers are often divided into their specialty areas where they have gained experience and expertise that make them good leaders of their turf and their team. Hence, as managers of your business, it is important to identify your skills and talents so you can define areas of your business that play to your strengths.
For example, Danny’s company has identified three areas of focus that were delineated according to the managing partners’ areas of strength and real estate expertise. These are as follows:
- Property or Asset Due DIligence and Borrower Relations
This area includes front-end processes in acquiring an asset, such as meeting with brokers and nurturing broker relations, developing deal flow, networking to find the right deals, and conducting inspections of properties to evaluate physical conditions and to get an overview of the potential investment value.
“One of our managing partners runs this area. With his background, it’s perfect because he is very familiar with construction materials, quality of a build, the integrity of a build. He inspects properties with a drone, and it measures roof schematics, inspects shingles, checks for the squareness of the roof to make sure that there is no foundation issue or any sort of structural support issue with the buildings,” cites Danny.
- Fund and Asset Management, Financials
This role is one that Danny himself fulfills. The fund or asset manager oversees the overall financial strategy for the investment properties. He’s in charge of the financial side of the business with a key focus on analyzing deals to project their profit potential during the due diligence phase. “It’s all about the numbers so anything from analyzing a new opportunity, I’ll do the underwriting then we’ll review it with the team,” he says.
Once a deal is closed, Danny also plays a key role in asset management from a financial perspective. So, he’s on top of matters such as how the assets are performing against the business plan, the budget side of fulfilling repair requirements, value-add renovations, and executing lease-up, renewal, or rent-increase plans.
He also works with a network of support teams including attorneys, lenders, managers, property managers, regional managers, insurance agents, brokers, and other key persons that figure into the operation of the asset.
- Investor Relations, Marketing, & Strategy
“The third piece is focused on raising money, investor relations, and marketing which falls to our third managing partner and completes our three focus areas,” says Danny.
This area includes developing strategies to acquire new investors, working with investors to raise funds, and maintaining relationships after the deal has closed. Communication is key, reveals Danny. “It’s crucial to set up the process of managing your investors effectively, efficiently, and consistently so that you will earn their trust and loyalty to only want to invest with you,” he adds
The three areas mentioned above do not delimit you to set up the exact same structure. What these illustrate is that whether you’re just two partners or you have ten members in your general partnership team, each of the roles and tasks need to be assumed by members of your team. “You need to have someone wearing the hat or doing each of the roles that I talked about,” advises Danny.
“It works out really well because we’re playing to each other’s strengths. While one of us could do the other person’s role if they needed to, they may not do it the best. Or, more importantly, they may not be fulfilled at what they do. So, by us playing to our strengths, it allows us to really be passionate and inspired by what we do day in and day out.”
Danny also emphasizes that work starts on the day you close. However, he advises that as early as the due diligence phase, your asset management workstream must also be prepared, to ensure you’ll be ready for the takeover. So, having a property manager and a team that you trust and who knows the market well will set you up for success. It is also crucial to set up your communication system when you close.
“Make sure everyone is bought into the business plan so you can execute that plan as smoothly as possible. If the first month when we close we’re going to do five renovations, well, we better have contractors on-site on day one,“ suggests Danny.
“The biggest hurdle to get over on that initial first week or first month on the job as an asset manager is communication amongst the team,” Danny says.
At the take-over phase, Danny’s team typically sets up a daily call for the first couple of weeks to make sure that every item on the take-over checklist is covered. He cautions that the following concerns may come up from an asset management side and will need quick resolutions: what to do with bad debt, what to do with previous write-offs, and what allocation of income and expense goes to the seller vs. the buyer.
After the takeover comes the value-add phase, where you start pursuing your plan to make improvements in the property. “Get communications going and talk about how renovations are going to work while maintaining your occupancy,” says Danny. He suggests having at least a weekly meeting with the managing partners, the regional manager, and the on-site property manager. “Make sure that the right team members are included in the meeting. So, if you have a lot of design questions coming up, make sure the head of the design team is there.”
Documenting Meetings or Calls
Prior to the weekly call, as a meeting lead you would want to be apprised of the latest report about your property, so you may require your regional manager or the property manager to send these items: (1) a financial update: basic financial information such as current occupancy, occupancy trend, lease leads, residents’ feedback (2) occupancy update: storage unit occupancy, garage occupancy, campaign promotion.
During meetings, the asset manager leads discussions on everyone’s accountabilities and follow-ups. Danny suggests using Asana, a work management platform designed to help teams organize, track, and manage tasks. “This has been an efficient way to keep track of all of the topics we talk about in our meeting. That allows us to have one place where we keep all our notes, tasks, and the persons responsible for each task. If I went away tomorrow for any particular reason, all of my knowledge for the properties is listed in there, and someone could pick up and would know who to follow up or things that need to get done and be effective on it,” says Danny.
Technology is a key component in asset management that real estate companies must embrace. Tech advancements in property management services help create efficiency in customer service, internal team collaboration, and lead management. “If you’ve closed and you’re doing a deep dive into the property and how things are operating, you would absolutely look at any sort of software that the third-party management company contracts with,” advises Danny.
Some areas in communication tech that you should evaluate and plan for include: How are phone calls handled? Is there a phone system? Is a third-party after-hours-phone-calls service being utilized? Is there a phone call tree routing? How are maintenance requests handled? Is there a website that customers access? Who maintains the website? Assess if systems in place are still cost-effective, as there might be other newer systems available at a lower cost that will save you money over the long run.
Another crucial aspect of property management that has advanced technologically is the security system. To address safety concerns, your building will need a network of security solutions along the areas of access control, security gates, surveillance cameras, door and window sensors, and smoke and carbon monoxide detectors.
Regardless of size or scope, many real estate companies have managed to flourish using different structures and approaches. With the right combination of people, a good investment strategy, and the right market, companies have successfully turned over profits. However, with advancements in technology and alternative models of operation, you also have to constantly evaluate and evolve, frequently asking yourself: do the system and approach still provide me, my business, and my clients the highest value and service?
Have you thought about passively building your wealth via real estate investing? Life Bridge Capital is here to guide you. Send an email to [email protected].