Editor’s note: How to Take on Multifamily is a video series featuring Tony LeBlanc, multifamily expert and owner of Ground Floor Property Management. This series aims to cover exactly what property managers need to master the multifamily side of their property management business. Below is an abridged transcript of Episode #1: The Multifamily Mindset.
Tony M: Tony from Buildium here, the platform that activates property managers to own their everyday operations, make their residents feel at home and take on more doors. Welcome to How to Take on Multifamily, a 3-part video series featuring multifamily expert Tony LeBlanc of Ground Floor Property Management in New Brunswick. He’s also the recent author of The Doorpreneur. I’m really, really excited today because we’ll be talking all about multifamily property management and, specifically, the 3-part video series that we’re doing has to do with taking on multifamily property management. And since you’re an expert in that, it’s great to have you here.
What do we mean when we talk about multifamily property management for the small business?
Tony LeBlanc: Typically the properties we see in multifamily, even in the startup phases, are B/B-plus type properties—and that’s just about in every other city in North America starting from as small as a 2-plex, all the way up to a 12, 24, and 32, generally for working class people.
Tony M: And so what’s interesting is that although we might not be talking about luxury, it’s still a very lucrative way, a new side of your business, that many property managers could get into—even if they’re just doing single family or maybe they’re just doing a little bit of multifamily. So it’s great to talk to you about how to get into it here.
What’s some of the different terminology you usually hear in multifamily?
Tony LeBlanc: Some of the standard ones—so typically even the one that we just kind of threw out there—a class B. That may be unfamiliar to a lot of people that run single families. So typically I know in our area, we run things from A class—let’s say a C, B, to an A. So an A is usually a brand new, higher-end property and B’s kind of like your working class building. C would be on the lower end of the spectrum.
Then we got terms like duplexes, which represent two units within a property. Triplex, you’re going to have three units, quads. And then you typically from there will just go into the number of unit counts (so a six unit, 12 unit, 24 unit and all the way up).
Tony M: And I know that there’s a lot more to learn there. So another big part of multifamily, like I said before, it’s a very different beast whether it’s completely new or already a growing part of your portfolio.
How do you know that multifamily is right for you and your business?
Tony LeBlanc: Luckily, the way that I grew up in the property management industry is I was surrounded by larger properties or multifamilies. But throughout my career of running my own company, we’ve had the pleasure of managing everything from a single-family all the way up to the biggest that we had, which was a 124-unit, huge multi-res. And some of the big distinctions that I found between running the smaller stuff versus the bigger stuff is (really one of the key characteristics became in terms of) the infrastructure.
I find that starting out in property management, if it’s just a sole entrepreneur getting into the industry, managing single family or even duplexes is actually very doable. It’s very attainable and achievable for just about anybody who wants to get started in the business.
Tony M: Sure. Low barriers to entry.
Tony LeBlanc: Yeah. You don’t need a lot of staff. You don’t need to be overly techie, although, it always helps. It’s just pretty easy to do. Once you start looking at multifamily (depending on how big you get) then you’re going to start running into different types of infrastructure issues in terms of staffing and office and, all that type of stuff, that you need to start prepping for in order to be able to handle these bigger buildings.
Because at the end of the day, you have one roof with many people living under it instead of just one. As well, you’re now being faced with having to take care of common areas. So buildings have common areas to clean—they have electrical rooms, they have maybe HVAC systems, maybe they have elevators—all these different things.
Tony M: It’s way more complex operationally as many property managers already know.
Tony LeBlanc: It is. Absolutely. And it takes a lot more to be able to kind of sit back and say, “Okay, am I ready to handle and take on some of these responsibilities versus just managing Mr. or Mrs. three bedroom house.” Right? It’s a bit different.
How does your team need to change to meet the demands of multifamily?
Tony LeBlanc: I know for us, in terms of the residential space, again, you can get away with, I find, fewer team members to have to take care of a portfolio of single family properties, because you don’t have to be there as often. On the multi-res, again, depending on how big you get, there’s going to be a need generally for cleaning crews. So whether that’s outsourced or if it’s part of your own staff, the hallways, the entrances, those all need to get cleaned on a regular basis.
Then you have stuff like leasing. Leasing can get to be a pretty big job depending on the size of the building. Residential world, your turnovers are typically a lot less than I would say in a multifamily. So if you’re managing a 24-unit building, you’re probably going to have maybe a 10, 15, 25% turnover rate each year. So that means continuously going in there to be able to do the turnovers and leasing out these new units.
Tony M: And I imagine if you don’t do that right, then operationally and profit wise, you could actually take some pretty big hits very quickly.
Tony LeBlanc: Absolutely. And it can be a real time gouge in terms of, if you’re not ready for it, you can find yourself at that building quite often—taking care and playing all these different roles. I know when we first started, we had to do that. It was just part of getting into the industry and into the business at that time. We were willing to do everything (and anything) just to be able to be able to get stuff done.
Tony M: Right. You had to do anything to cut your teeth on that new side of your business.
How does profitability change on a per unit basis?
Tony LeBlanc: A lot. Typically, again, I’m going to be doing that quite a bit in terms of comparing kind of the single family world versus a typical multi-res. So on a single family, typically, you’re charging a percentage or a flat fee based on the income that’s generated from that unit. Now there are situations where a single-family house typically, and in a lot of markets, the rent for that single unit is going to be considerably higher than the rent that you’re going to get in an apartment. So if I use my backyard as an example, for me, I can typically get anywhere from $1,500 to 2,000 a month on a nice three-bedroom home, one and a half bath, nice-neighborhood kind of small bungalow, versus a two-bedroom apartment, I’m only going to get maybe $1,000 out of it.
So if our fees are based off of a percentage of the income that’s generated from the property, then you can quickly see that the math, the income generated (on a per-unit basis) from the multifamily is going to be low…lower than a single family. But, then, you have the beauties of economies of scale. So on a multifamily, I no longer just have one rent coming in: I have 20, 30, 40, 50 rents coming in. So that’s what kind of makes up the per-unit economics of that.
Tony M: That’s just the tip of the iceberg I imagine. And there’s a lot of research that somebody has to do before they go, they go into it.
Tony LeBlanc: Absolutely.
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