How Do We Make the Property Management Industry More Attractive to Millennials?

I have been in the property management industry for 25 years and for the last several years I have noticed how it has become a very tired industry but what I hadn’t realized is how bad it actually is. I recently read an article stating that 60% of everyone in commercial real estate services will be at retirement age in the next five years. Now that’s alarming!

Much of what I have read about millennials is that they are almost equally concerned about their wages as well as the impact their job has. If this is true, doesn’t it seem like property management would be the ideal industry as it allows for them to impact their community at the most basic level? Housing!

I am a firm believer that it’s not that difficult to transition into an industry that can be more attractive to the younger generations. Here are a few approaches:

1. Offer generous job compensation to acquire the most talented employees and to reduce turnover.

The first step we need to look at is how you are paying your staff, if you choose to be at the bottom end of the pay scale you will get just that kind of work and have high turnover. I believe that if you do some fact checking you will find that most employees that are paid near the top of the pay scale tend to bring you more value, longevity in their position and in the end give you a better return on your investment.

2. Offer extensive training programs

The second step is training, the millennials want to be informed so let them learn the business from the bottom up by tagging along with the entire staff all while they are training for the position you hired them for. They want to know what and how the maintenance person performs their daily task to the Regional manager. They will take it all in and have a complete picture of how they can perform their job at its peak level. Try to create an open and collaborative environment so that the millennial feels a part of the team, not just the newbie.

3. Implement the right tools & latest technologies

The property management industry overall is in need of an image remake, it is a crotchety old industry that seems to be stuck in the past. Technology upgrades are becoming more and more available and that will give us a boost, hiring individuals that are excited to help us bring some life to the industry is key.

Giving a millennial the right tools to do their job is vital to their performance. The property management industry historically has been behind the times with implementing the proper technologies. The millennials have grown up with a smart phone in their hand so they are ready to handle most technological tasks you give them.

4. Create an environment that allows them to flourish & be creative

The work environment is key, not just for millennials but for all employees. When I started in the industry, our office had multiple couches with some of the ugliest flower print imaginable and it made it feel like our owner simply found the cheapest furniture they could to fill the space. These days it’s much simpler to find better looking furniture and fixtures at a good price that can help you create an environment that your team will enjoy working around.

5. Show how their work will impact peoples’ lives in the community, in a positive way

The property management industry allows millennials and others that want to make a difference in communities a platform to get involved and really change the way any community operates. By being in this industry, we can implement programs to help children, elderly or other groups in need. Doing so will enhance your community. This can also be a win-win, in that a millennial will surely bring in fresh ideas and potential efficiencies that will help your business run even better.

We just need to start!

Expert Insights with Joe Killinger: Companies Should Look towards Transparency

For our latest entry in our Expert Insights series, we had the pleasure of sitting down with Joe Killinger, experienced broker and partner at Commercial Brokers International. With over 25 years of experience in both residential and commercial real estate, Joe was directly involved in selling and marketing over 5,900 assets, closing transactions amounting to over $900 million across the United States.

We asked Joe to tell us more about where he got his passion for real estate, what he thinks the state of the industry is at this moment and where he thinks it will go next. Read on to find out more about his journey to being a successful real estate professional.

Q: Tell us a little bit about your background and why you chose a career in real estate.

I grew up on a small farm in central Nebraska and my father saw that the farming industry was going to go through a significant change and quite honestly he wanted to have a better life for his family so he trained and became a licensed Auctioneer and Real Estate Broker. Killinger Auction and Real Estate launched and I immediately got the real estate bug.

When I graduated high school I immediately began taking courses to get my Nebraska real estate license and when I went off to college I got my license and was lucky enough to be introduced to Pace Woods that was the CEO of Woods Bro’s Realty in Lincoln, Nebraska. I am not sure why he gave this 18 year old with no experience a start but he gave me a phone book and said there’s your potential clients…good luck!

I chose to go after selling and leasing farm land as I thought there may be less competition and I was correct but at my first meeting of a potential client he immediately asked me how old I was, (I look back at some old pictures and I see why he asked as I looked like I was about 13 years old) I started parting my hair to the side and found some very cheap designer glasses that had simple plastic lenses with no prescription and I felt it made me look a bit older and maybe a bit smarter. I was not the greatest at selling farms but had some luck, and it truly sealed the business as my career and I am thankful.

Q: How have you seen the industry evolve in the past 25 years you’ve been involved in it?

Tech has been such a game changer for our industry, it used to be you focused more on a specific area so you knew everything there was to know about the market, properties, potential sellers or leases coming up and anything that could affect that market. With the technology we have at our disposal today you can handle a broader market place as well as multiple asset classes as most of the information is just a click away. These systems create incredible efficiencies that allow Agents to make more money and Investors/landlords to be better informed in their market place.

Q: Where do you see it going in the future?

On the brokerage side I feel there will be more consolidations as many of the current platforms are struggling to keep up with the changes in the industry. For many companies when a slowdown does happen they won’t be able to survive without some significant reworking of their platform or will need to sell to a competitor. Real Estate investors in general will be able to better find potential assets to invest in due to the new platforms that are coming out that will allow them to find more investment opportunities as the up and coming generations are more likely to use these technologies. Companies will need to adapt and be able to show the value they bring to the table to maintain these client relationships. The office market is already seeing a significant change due to office sharing companies like WeWork and Knotel and I can see how these will cause change to the office market even more significantly over the coming years.

Q: What is your general assessment the real estate market so far in 2019? Have you spotted some interesting market trends?

The market has been strong to this point in 2019 and really hasn’t shown a lot of signs of slowing, I have seen some investors moving into less risk adverse investments such as Triple Net Investments. Many of the investors are also going to the fundamentals of real estate investing; location, location, location, buying assets with less returns in prime areas in lieu of tertiary markets but for the most part it has been staying strong. I am a little concerned with the amount of development in some areas as we are starting to see absorption slow and there is still a good amount of development coming on line.

Q: What do you think is the “next big thing” – or what should we all keep an eye out for?

I mentioned companies like WeWork and Knotel earlier, I believe they will change the way a good amount of office properties are marketed and leased out, there are even more office sharing companies coming on line and they have some interesting ideas so I do believe we need to watch how this evolves. Retail over the last few years has been pushing towards more experiential retail and getting away from the traditional retail shop. This trend should continue as retailers look to attract the spending dollars of millennials.

Q: Is there anything that you believe everyone in this industry should be working towards?

This one could get me into trouble; I believe companies should look towards transparency. I believe it’s outdated for CRE companies to not put their listings on the open market (unless the seller/landlord requests it to be that way). A company that tries to do everything in house is in the end doing damage to their client, how do you know if another Agent/Company might have a client that would be willing to pay more. I am an investor in, and an Advisor for, Commercial Brokers International in Los Angeles and our CEO (George Pino) asks our Agents that if they know of a property that would work for another Agent in the office or even another company to be sure they know about it. I know this sounds a little “New Age-y” but we have found that it works for our Agents and in the end creates more deals for everyone. I think if we try to work together a bit more we will see our industry be positively affected. I also like the fact that we are finally starting to see more women coming into the industry and finding great success, in what has traditionally been a male centric industry, I hope to see this trend continuing.

Q: Any other insights you’d like to share?

Overall, the industry, like everything else needs to evolve and adapt. The companies that are best positioned to do so will be the ones that not only survive but thrive. With the new technologies, we still must not lose sight that this industry is and always will be based upon service, and by providing the best service out there, you will be able to set yourself apart from the rest and create a career, not just a job.

Are You Losing Your Money On Your CRE?

I was having a conversation with a real estate investor a couple of weeks ago and during this conversation he was telling me about a property that he had in escrow and how he was having second thoughts about his purchase, he told me he feels he over paid and he is concerned that he will have to self-manage as he doesn’t feel he can afford a professional management company.

The property he is purchasing it turns out is a retail building in a nice area and has recently had some upgrades, the property is 100% occupied by strong clients and a couple of the leases can be renegotiated to increase his income.

The best thing that he has going for him is the fact that all of the leases are NNN. I recommended him to a property management company that I knew of and trusted so they could discuss the best ways for him to increase his return.

Another  term for the NNN lease is a Triple Net Lease, net-net-net lease, or a hell or high water lease. The true definition of a NNN lease: A lease agreement that designates the lessee (the tenant) as being solely responsible for all of the costs relating to the asset being leased in addition to the rent fee applied under the lease.

The structure of this type of lease requires the lessee to pay for net real estate taxes on the leased asset, net building insurance and net common area maintenance. The lessee has to pay the net amount of three types of costs, which how this term got its name.

After addressing his concerns with the management company, he learned that the management fees are considered a reimbursable expense, and if he hired a property management company, then the tenants would be the ones paying for the professional management not him. 

Additionally, he found out that the previous owner had not been charging back many of the fees that the tenants were responsible for.  By hiring a professional, he was able to save thousands of dollars a year in expenses.

#Although a NNN lease can give you considerable savings, there are many other types of commercial leases that have language in them whereby some expenses can be, and should be, passed through to the tenants. 

If you own commercial property and you aren’t already doing this, you may be losing thousands of dollars a year, and it may be time to get advice from your local real estate professional, whether it be a commercial agent or a property management company.

Tips On Handling Your Inherited Tenant

As a new Investor you will find that most of the time you will inherit a tenant from the previous owner and you think this is a great thing; you won’t have to pay for advertising and you have a built in rental stream already coming in.

This could be true however it is your responsibility to make sure this tenant is someone that you want to keep or legally have to keep.  Like everything else in a new acquisition, DO YOUR DUE DILIGENCE.

Estoppel Certificate

Make sure that you receive an estoppel certificate signed by the tenant.  An estoppel certificate is a document that outlines that everything is the way you were informed.  The certificate refers to the current lease and the terms of the existing lease (if there were any changes). The tenant signs off that they agree everything in the lease is as it seems and there are no additional terms agreed upon, nothing else is owed by either the landlord or the tenant. It should at the very minimum include the below:

1)      The lease dates (commencement and expiration)

2)      The date when rent is due

3)      The amount of rent

4)      Any deposit amounts

5)      If any modifications have been made to the lease

6)      If additional agreements have been made, a list of what those agreements are

7)      That no party to the lease is currently in default

Follow the Lease Conditions

Read the lease thoroughly, you may not love the terms of the current lease, but you are bound legally to abide by the lease until the date of expiration. At this point, you will have the chance to either renew and sign a new lease with existing tenants or give the proper legal notice that you will be ending their tenancy with you. If you decide to start over with a new tenant at the end of their lease, you will want to give yourself plenty of time to market the property.

Set up your own criteria for picking out a new tenant. Complete a rental survey for the area so you can determine what rent amount you will be requiring going forward.

Raising Rents

If you find that your rents are below market, there are several items to consider.

1)      Will you lose tenants if you raise too much?

2)      How much can you legally raise them

3)      Should you offer some sort of concession ie: accent wall or an upgraded appliance?

4)      How long will it take to release if you do lose your tenant

5)      How much will it cost to make the unit ready to relet if you lose the tenant

Lastly, keep in mind that not all of these tips will apply to everyone, be aware of any local ordinances that may affect what you can do when inheriting a tenant, and don’t forget, to introduce yourself!