How are your collections going? Maybe the answer is not found within your real estate experience.
Often when people switch professions, they will at some point say, “I never thought the knowledge from my previous profession would be transferrable to my current one.” In February 2020, I found myself in that exact situation. COVID-19 was starting to rear its ugly head and I was probably one of only a few real estate investors nationwide who had any idea of how to prepare for its impact. Ultimately, the measures that we put in place has led to an average month-over-month billed verses collected rate of 99.52%! Before I detail what we did to get such a high collection rate, let me first highlight some history.
Prior to becoming a full-time real estate investor, I worked for several pharmaceutical companies: Sanofi-Aventis, Wyeth (now Pfizer), and GlaxoSmithKline (GSK). At each company I worked in the Clinical Research and Development Department. In short, our department was responsible for running the clinical trials prior to regulatory approval (for example in the US, the FDA). While Sanofi-Aventis and Wyeth provided me valuable professional skills, GSK granted me knowledge and insight that guided me to effectively mitigate COVID-19’s potentially damaging effects on my investments. How did they do that? For starters, I worked in the Global Vaccine Development Department.
Looking back at my time at GSK, there are two critical moments that directly impacted my preparation for what we are facing today. First, I worked for a short period with Seasonal and Pandemic Flu. During that time, we met with the FDA and the WHO to forecast the next seasonal and pandemic strains. Second, during my career at GSK the US faced the H1N1 (Swine Flu) Pandemic, in which GSK was one of only two companies in the entire country manufacturing a vaccine. While I did not work directly on the H1N1 vaccine, our entire department was deemed essential personal by the WHO, and a dedicated team was created to work solely on the vaccine, while the rest of us absorbed all of their workload. It was a very stressful time. We worked early mornings, evenings and weekends…all of us! Little did I know that approximately 10 years later, I would use that knowledge to guide my real estate business.
One major business element influenced by my time within pharmaceuticals was my operational management of my apartments. I followed very closely the research on virus transmission, and I came to the conclusion that major MSAs, with dense population, were going to be impacted the fastest and the hardest. Alternatively, I believed secondary and tertiary markets would have a delayed impact. To this point, I specifically remember a call I had with my partners and property management team in the first week of March, where I said, “We are at an advantage. We have more time to prepare for COVID than many other markets, so we need to prepare now!” And, we did.
What Did We Do
Have you ever gone swimming in a wave pool, and figured out the timing of when the big wave was coming? It is always after a few smaller teaser waves, but without fail it comes. If you are not ready for it, it can really knock you over! By watching case counts in other markets, I noticed an obvious trend; once the virus starts circulating within a market, the gap between the case count and recovery rate is pretty steady. When the gap begins to widen, it is closely tied to the approach of the apex within the given market. Some may even argue the surge stresses the hospital systems, which compounds the situation and broadens the differential. Since the first week in March, I have watched the case, death and recovery count on a weekly basis for every market in which I hold an investment. For my investments in secondary markets, the numbers over the past several months have been very slow and steady, and not displaying a huge gap (approximately 50-100 cases). Recently the gap has increased to the tune of 500+. Unfortunately, the death count has also drastically increased. By watching these trends, and not relaxing our protective operational actions while the case count was low, I believe we are as prepared as we physically can be for the increase we are seeing today.
It's 2020 ya'll! No other single moment in history has spotlighted the advantages technology offers than COVID. With respect to the management of apartments, there are a tremendous amount of face-to-face operations that can and are being replaced by technology. The most obvious one is touring and leasing an apartment. Several companies offer virtual touring, staging, and leasing that remove the need for someone to even leave the comfort of their current home to go on a tour. Even the entire leasing process can be done without physically being face-to-face using programs like DocuSign and HelloSign. Maintenance requests, rent collection, and even social events are now being handled mostly online.
As an owner, your number one responsibility is the safety of your residents and your team. Putting cleaning processes in place and protecting your team when interactions are needed is not only the right thing to do, but it also limits your liability. Another way in which you can protect your liability, while ensuring these processes are being completed, is to document them in a log. Whether you realize it or not, your actions (inclusive of your site team), set a precedent within your community that will be respected and maintained by your residents. This ultimately reduces the risk of the virus spreading throughout your complex.
Since March, our teams have called the residents on a weekly basis. Why? First, as a welfare check. While we are not allowed to directly ask if someone has COVID, we check to make sure they are ok during this unprecedented time. Second, if we find out during the call they have been laid-off, or are going to have trouble paying rent, we can help them file for unemployment and/or set-up a payment plan. Going this extra mile and checking-in with residents not only shows you care, but can help both your investment and them out during a very difficult time.
COVID has challenged people and businesses like no other single event in our life has done previously. The single common thread within all of those challenges is prioritization. What was deemed essential yesterday has become optional, and what was optional yesterday has become essential. Make sure you are listening to your team and you redefine your essential verses optional business operations. Ironically, making these adjustments is essential to the survival of your business and your investment.
As I preach all of the time, Multifamily operations have always been important, but in tough times operations are the most important. This statement could not be truer than it is today. We are all adjusting to the new normal, and leveraging past experiences to help guide us to the processes we are implementing currently. Sometimes going through dark situations can bring to light inefficiencies in our lives and businesses that we should have been doing all along.