Driving the Dollars: Successful Property Management Requires Mix of Key Elements and Traits

8 min read

Build it – a low-income housing tax credit property – and the tenants will come.

Manage it well, and the residents will stay and the rental income and tax credits will flow.

This means performing a variety of tasks: collecting rents; paying vendors; taking and vetting applications; staying in compliance with LIHTC program rules; marketing; managing work order requests; and overseeing maintenance.

“The best management companies are those that do the best job of retaining their existing residents and a good job of ensuring that their screening procedures are in place so that they make sure they’re getting good residents,” says LIHTC expert A. J. Johnson, President of Williamsburg, Va.-based A. J. Johnson Consulting Services, Inc. and a former tax credit developer, owner, and manager.

According to Johnson, effective property management is critical in an industry in which 20% to 30% annual unit turnover for a property is not unusual. By reducing tenant churn, at $3,000 or so a pop, solid management can definitely fatten the bottom line.

Excellent property management also enhances the value of a LIHTC development when an appraisal is done, according to appraiser Cash Gill, MAI, Vice President of Gill Group, Dexter, Mo. An appraisal might be done prior in conjunction with the sale of the entire property or the sale of the general partner or limited partner interests.

“The main things I look for from a valuation standpoint are occupancy and contract expenses,” says Gill. He says good management will retain tenants and keep a property at or near full occupancy, thereby generating higher net operating income. In addition, the company will keep expenses down for the things it can control, such as contracts for landscaping, while also maintaining the property’s curb appeal.

“From my viewpoint,” says Gill, “a successful management company equals a high income stream which translates into maximum overall value for the property.”

Johnson says the basic objectives of LIHTC property management are to maximize profitability to the owner and to assure continuous compliance with all applicable government program rules (e.g., tax credit, HUD) so that the projected tax benefits to the investor are delivered fully and on time.

Key Elements for Success

So what are the elements that create effective property management at a LIHTC development?

“In large measure, the keys to successful management of affordable properties are the same as for managing market-rate communities,” says Chuck Durnin, Senior Vice President of Marlboro, N.J-based Interstate Realty Management Company (IRM). “You want to have good resident selection and good tenant retention; provide the services needed to have that good resident retention and to attract quality residents; and to make sure you have the cash flow needed to sustain curb appeal so that there’s no deferred maintenance.”

IRM, a part of The Michaels Organization, manages 34,000 units nationwide in 351 mostly affordable properties (LIHTC, Section 8, mixed-finance). These include both properties developed and owned by The Michaels Organization and those of other owners.

According to industry officials, effective management of LIHTC properties requires:

  • Site employees with “people skills.” Community managers need to have business acumen but also care about their residents and be able to communicate and interact effectively with them and with others (e.g., owner, supervisors, vendors, contractors, state agencies, investor representatives). Johnson favors site managers with professional certifications, but indicates the best new manager hires don’t necessarily come from the housing industry. “Some of the best managers I’ve had at my properties have come from the retail and food service industries because they have great skills with people. The rest is technical. They can be taught the tax credit program rules.”
  • Good policies and procedures that are evenly applied. “Consistency is something we’re really big on,” says Terry Callahan, Vice President of Operations at Miller-Valentine Group, a Dayton, Ohio-based developer/owner/manager that operates 120 affordable and market-rate apartment communities in 15 states. “We have to be consistent with our policies and procedures to our residents and our associates, and we have to send the same message, a respectful message at that. If we run our properties the same in Ohio as we do in Michigan and Texas there’s no confusion. The people on the ground can make decisions because they know what the consistent message is.” According to Johnson, every property should have a written management plan that spells out details about how the management company will operate the property on a day-to-day basis. “A good management plan will run to 30, 40, 50 pages,” he says.
  • Initial and ongoing training. This means educating and training new site staff in the company’s policies, procedures, and culture as well as regular ongoing training to update employees on changes and revised tax credit compliance rules, among other areas. “We have internal training from the day that people are hired,” says Durnin. “And there’s Web-based training that continues as they grow with our organization. We have mandatory quarterly meetings and then monthly meetings where district property managers get their people to talk about what works and what doesn’t.”
  • Strong corporate oversight and support. This is especially important for the tax credit compliance function, which different management companies handle in different ways. At Signature Management Corporation, which manages eight LIHTC properties with 3,500 units in the Atlanta area, a long-time employee in the corporate office oversees tax credit compliance for all of the sites, reviews every applicant file before giving approval for move-in, and keeps the site staff abreast of rule changes, says President Mike Smith.
  • Smart marketing. “I’d say 70% of our residents come to us through Craigslist,” says Smith, referring to the popular online classified ad site. Another effective tool is Facebook pages for properties. At the same time, Smith’s company also relies on tried-and-true methods, such as taking flyers to the human resources department of a new factory being built. Durnin indicated that word-of-mouth referrals by current tenants – of friends or other family members – is how his company gets most new inquiries.

Technological Tools

Property management makes heavy use of technology that is constantly changing.

A central tool at many properties is computer- or Web-based software (e.g., Yardi, RealPage) that enables managers to track rent collections, vendor payments and bills, as well as a variety of other functions. In LIHTC properties, good recordkeeping is critically important to assure continual compliance with the program’s rules to prevent the loss or disruption of tax benefits to investors.

Technology is changing the way LIHTC properties are marketed and maintained. Companies typically set up Web pages – if not a separate Web site – to provide information about individual properties and solicit expressions of interest from potential applicants.

Social media is also becoming increasingly important in marketing and resident communications, such as Facebook pages for properties to interact with both tenants and prospective applicants. “Social media has become a big part of finding qualified residents,” says Smith. He notes that at some of the properties that Signature manages, site staff update the Facebook page three times a week, posting such items as announcements or news about the property or residents and maintenance tips.

At many affordable properties, it’s now common for residents to be able to submit electronic work order requests – via the property’s Web site, by email, or text – and for maintenance staff to use smartphones or other mobile devices to receive these requests and to record when they have been completed. At Miller-Valentine Group’s properties, residents can pay their rent online as well as call a central call center 24/7 and get a live person.

Still, there is room to grow. While the use of electronic signatures has become common in the conventional apartment world for different agreements and documents, the same isn’t true yet in the tax credit industry.

Always a People Business

Management of LIHTC properties will continue to feature the performance of longstanding traditional tasks made a bit easier and more effective through evolving new technologies. But at day’s end, it will always be a people business.

“Our focus is to take care of families,” says Durnin, “and our responsibility is to take care of the communities where our properties are located. We’ve never deviated from that. We’ve never lost focus on what our primary goal is: to take care of the families.”

“It’s a great business,” says Callahan. “It’s a people business and a business that brings new challenges every day. It keeps you on your toes.”