Multifamily property investing continues to be a hot trend. However, while an incredibly profitable real estate sector, with a bright outlook, realizing the potential returns and rewards multifamily has to offer frequently comes down to management and execution.

Many investors, including the best funded, too often underestimate the importance of property management and some of the potential risks which lurk for those attempting a lack luster DIY approach to maintenance.

So how can multifamily real estate investors reduce risk and increase profit, and what are the best practices which can make all the difference?

Multifamily Property Buzz

Multifamily housing continues to be hot. Urbanization seems to be all the rage today. Whether this is really what consumers want, or density is being sold to Millennials and Boomers by municipal government and developers seeking to maximize tax revenues and profits could be debated. However, the fact that multifamily will continue to be the cornerstone of many portfolios and an in demand product for many years isn’t in question.

Local authorities across the country are increasingly bending rules and allowing re-zoning for multifamily and mixed use properties. Funding for these projects has become plentiful. Rising rents and single family home prices and interest rates, the need for affordable housing, and generations of captive renters are sure to keep up property performance.

Via Bloomberg News, Billionaire Sam Zell even recently proclaimed he expects homeownership in America to drop another 10% to a low of just over 50%. Even if the market turns dramatically in favor of homeownership. Multifamily properties can be repurposed and transitioned with condo conversions (and vice-versa).

Multifamily property investment has many advantages. Savvy real estate investors love it for achieving a lower ‘cost per door’ and consolidated property management, among other reasons. One of the best benefits of this commercial property sector is also the high ROI available on making improvements, as well as being able to value-add during any stage of the property cycle.

The Unforeseen Dangers of Daily Multifamily Property Management

Popular industry media outlet, Inman News recently ran a series on the dangers of property management. According to an April 2014 report covering data from the Bureau of Labor Statistics “real estate workplace deaths (are) again on the rise”.

Most have heard of the recent spate of Craigslist killers and assaults at real estate open houses. However, the data shows some trends which some might find quite disturbing.

Real estate workplace deaths actually rose 19% year over year to the most recent information published by the BLS. Of course there were the usually transportation incidents and slips, falls and trips. Fires and explosions and exposure to substances and dangerous environments also made the list of fatality causing factors. More startling may be the number one cause of deaths being assaults and violent acts (both by humans and animals). According to the hard data landlords and property managers are the most at risk, ahead of brokers and real estate agents.

Best Practices for Multifamily Property Management in 2014

Between the above personal dangers, liabilities and potential health care cost increases of setting up a personal in-house team, and the fact even the largest private equity and hedge funds have appeared to back down from their buying spree due to management and repair challenges the following should be considered best practices for today’s investors, landlords and property owners…

  1. Use a third party professional property management company
  2. Do repairs right the first time and tackle them early
  3. Ensure regular inspections
  4. Carefully calculate the personal and investment liability of DIY and direct employees