How to properly staff an apartment complex?

Question

I am just starting my venture into real estate and I am currently thinking about where I want my plan to lead me to.

I want to start with triplexes and fourplexes, but eventually I want to start buying 40+ unit properties.

Is there a rule of thumb for staffing?

How do you handle apartment complexes without onsite staff?

At how many units would you have onsite handymen and office staff?

Any input would be greatly appreciated.

Craig Haskell · Answer

Hi David:

Good management of an apartment business is critical to your success. Your goal is to drive as much NOI growth as you can over your holding period, and management is huge part of that.

If you are not an expert at running an apartment business, I would engage a great third party management company.

Regarding onsite personnel, the general rule of thumb is one office and one maintenance person per 100 units. So, in your 40-unit case, you would need 1/2 office person and 1/2 maintenance person. How you allocate these resources is another discussion.

I've been doing this for over 30-years. On the smaller properties, I have tried operating properties with and without onsite people. Hands down, it's much easier and more profitable to have onsite personnel.

Onsite personnel will:

-Handle unit maintenance work orders quicker and more inexpensively

-Turn units more inexpensively vs. having to hire contractors at higher rates

-Provide better customer service

-Fix problems before they get too big

-Baby sit the property so that it's cleaner and safer

-Rent units at higher rental rates

-Provide much better leasing results

-Handle a lot of various office and maintenance tasks more inexpensively

-And A LOT more

In the end, you are running a business that is very hands on and needs property oversight. Without onsite oversight you could experience these types of problems:

-Dirty property with trash all over and hallways loaded with spilled liquids and tenant trash

-Common area repair problems that don't get fixed for weeks or months

-Higher vacancy and lower rents because no one is around to market and show the vacant units

-Increased chance of bad tenants bring in more bad apples

-Paying more for outside contractors to repair simple and complex tasks

-No pride of ownership

-And, A LOT more

With a good management team both offsite and onsite personnel are critical to running a smooth rental operation that generates more cash to the bottom line. The more cash you have, the value you create.

Good Luck,

Craig Haskell

Chibuzor Nnaji · Answer

@David A Perez It would depend solely on the numbers. For a larger property you would want a third party property mgmt company on it because if its a large propety you probably have investors involved so you want to hire the experts to manage the property the right way. As far as self managing goes, in my own opinion I think there is too much that goes on in that as if you outsourced it would free you up and allow the experts to do their job, and then allow you to focus on what you do best / run your business. So overall I think no matter the size unless you're living on the propety and its a quadplex, I think your property management company should be outsourced.

David A Perez · Answer

Thank you all for your input! This has given me a better understanding of how staffing on larger complexes works. @Craig Haskell @Andrew Campbell @Mike Abramowitz

Andrew Campbell · Answer

Until you get complexes that are 60-75 units, it doesn't make sense to have an onsite manager.  For offsite, expect to pay 8-10%.  There isn't a real magic number though.  If you are doing a heavy value add and reposition, it can make sense to have an onsite manager there for smaller properties during the first year or so while renovations are happening.

Once you have onsite staff (leasing & maintenance), the property P&L will cover payroll expense for the team, and you'll have an additional 3-5% paid to the Property Management company.  Sometimes that staff lives on site at a discounted rate, and sometimes not.

Barry Green · Answer

Who does preventative maintenance?

Brian Briscoe · Answer

@David A Perez we have a 40-unit with a PM that has an office within a mile. We have off site management there for 8% of collected rents. For this size with the current rents, this is the most efficient way to manage. Total annual rents are around $400k... we couldn’t put someone on site for $32k and it wouldn’t be managed much better if we did.

As others say, break point for onsite management is somewhere around 75 units, but it depends on rents, condition, cost of living, etc.

One example... we’re under contract on an 80-unit with average rents of $525. Each full time on-site person will cost us about $45k in this particular are. We also will pay the management company a fee (some do percentage, some do flat fees).  So, two part-time employees plus paying the management company will cost us about $75k on a complex that grosses $475k. In this case, the rents are too low for this to be incredibly efficient, but we’ll have higher occupancy and a much cleaner and well maintained property....

At higher rent points or more units, you start seeing more benefit to onsite management. If rents were double, we’d still need two part time employees, but pay a smaller percentage of gross rents making it more efficient (of course, if rents are double, prevailing wages would also be higher, but not a 1-1 correlation).

Barry Green · Answer

First off do your due diligence and take a maintenance tech with a lot of experience with you.

too many management companies make the mistake of short staffing their property. Typically a 300 unit property would need a maintenance supervisor at least one assistant maintenance I make ready tech and a groundskeeper.

if the property has a large number of work orders coming in constantly you'll definitely need another assistant maintenance. Or another Make ready tech that can help with  work orders when needed.

also preventive maintenance is vital and needs to be administered on a very tight program. This includes looking through the apartment four issues that have not been called in to the office. Sometimes residents will unknowingly sandbag on work orders for whatever reason and then at rent payment time you get hit with tons of work requests. Having a housekeeper on staff would really be nice they take a load off of maintenance cleaning the office emptying trash cans and splitting with the porter duties.

Ken P. · Answer

For a hypothetical complex of 150 units, what are some ranges for personnel costs in the Midwest for the onsite office manager and maintenance person or people?  That is, when I'm penciling in personnel costs in a spreadsheet when underwriting a potential apartment complex deal of that size, what are some reasonable numbers to use?  I don't want to use the numbers that the seller has currently because we don't want to manage the complex as they have, as we don't want to get the same resident complaints about poor office hours and delayed maintenance.  As far as we can tell they only have one person that does everything, with offsite help brought in when needed (when the customers are screaming!).

How to properly staff an apartment complex?

Most Popular Reply