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Lessons LearnedMulti-Family Advice

Why I Love Walking Property

By February 27, 2022March 1st, 2022No Comments

Of all the things I personally get to do in helping to build and run Wildhorn Capital, I have two favorite activities.  First, it’s getting to know and spend time with our investors—building true relationships with people and learning about who you are, not just what types of financial returns are most interesting.  The second is being on site and walking assets.  Whether it’s something we currently own, something we are pursuing for acquisition, or simply just shopping and touring a deal for market data I genuinely love walking property and spending time at apartment communities.  

There is something about seeing these apartment buildings in person that invigorates me.  I always learn something new, see something I haven’t seen before or am reminded of a great idea I’d previously seen.  It gets my creative juices flowing, which is something else I love about this business. The fact that we own and invest in hard assets is part of what makes real estate investing so unique and special to me. We’re buying multifamily buildings that you can touch and see.  

We’ve talked in the past about how real estate is both an art and a science.  To me, being onsite is the art part.  Getting a feel for the trees and topography.  The neighborhood.  The traffic.  Seeing a vision for what the property is—or could be.  Talking with team members that work onsite, and residents that live there.  The more time you spend onsite, the further you get removed from the science part of the business and looking at assets as numbers on a spreadsheet.  To be sure, we recognize the financial (science) part of the business and obsess over our underwriting and the numbers in our financials.  But when you spend time onsite–and tap into the art part of the equation—I believe that’s where you unlock real value.  

By nature, the qualitative aspects of an asset and business plan are much harder to plug into a spreadsheet.  It’s tough to peg a number on how much rents will grow, or high much higher resident retention will be after you improve the feel of a property.  Or have a team that is genuinely engaged with residents.  Or implement regular community events.  Or complete your amenity improvements.  Etc.  Etc.  

I do know it counts.  It adds up.  And it’s where the real value can be unlocked. 

When we’re onsite those visits usually fall into one of two camps.  Either we’re touring a new asset as we look for an acquisition.  Or we’re spending time on an asset we already own. Here, we’ll highlight the benefits we get out of both types of visits—and why it’s the activity I enjoy more than almost any other in our business. 

Acquisitions

When we’re touring new potential assets we spend a lot of time out of the office looking at that deal before we ever put in an offer.  We tour the target community multiple times, and we tour all the competitive and nearby properties. 

We’re for sure looking to see and inspect the physical condition of the asset.  Looking at big ticket items like roofs, visible signs of any foundation issues or cracking, the age and materials of the siding and windows, the HVAC and electrical systems.  We’re evaluating the different floor plans and layouts, the various levels of interior finishes.  The resident amenities. 

On these tours we’re building and verifying our business plan.  We want to quantify how many dollars to add to our budget to cure any deferred maintenance.  And to determine how much we’ll need to spend on amenity upgrades and unit improvements.  

But, we’re also taking note of those tough to peg qualitative aspects.  How often is the leasing office closed with a locked door?  How friendly is the staff?  How much trash is lying around?  Are the amenities being used—or are they even open and available?  It’s unbelievable how regularly we’ve seen pools that are closed for “maintenance” or gyms that are unavailable. 

When we see things like that, we know there is some operational upside.  That just by coming in with new energy, new life, and fresh capital to improve things that residents will be happier.  That the overall feel of the apartment community will be improved.  And ultimately that our financial performance will be better because of it. Those things are tough to quantify on a spreadsheet, but you can only find and believe in that “operational upside” by spending time onsite. 

On the flip side, we use these tours as idea generators. Imitation is the best form of flattery after all.  We tour every asset we can.  Whether we’re interested in buying that deal or not we want to tour everything in our market.  It gives us great market data.  But it also lets us see what other operators are doing and have done.  What sort of renovations competitors are doing.  What materials they are using.  How they are converting and enhancing older and under-utilized amenities.  We take note of our favorite ideas, take photos and share them with our teams.  And we’ve certainly stolen a few of our favorites over the years.  Without being onsite walking assets you can’t generate new ideas. 

Asset Management

Once we own an asset, the work begins.  We always say that multifamily is a hand-to-hand combat sport.  One where leases are being signed every day, and our onsite teams are interacting with our residents on a daily basis.  Our business plans usually call on some sort of value-add improvements where we’re doing construction and enhancements. Or trying to roll out some operational changes. 

For all of those reasons, it’s important that we’re onsite regularly.  Checking in and talking with our teams.  Making sure they know we are around, we’re local, and we’re here to support them.  Being able to make design decisions on the fly, change paint colors when the original selection doesn’t look right.  Or tweak an amenity idea in real time. 

We like to be on our assets at least every two weeks.  And generally we’re there on a weekly basis.  Certainly at the beginning of our ownership we are. You just pick up details onsite that you can’t get in reports. And you see things through an owner lens that even the best managers and contractors don’t catch. 

As your business plan unfolds, being onsite also allows you to make real time changes to your best laid plans.  We joke that you can throw away the underwriting the day you close on a deal.  Now you have to operate it.  Maybe you need to change the scope of planned renovations.  Or see residents are using an amenity differently that we thought—can we lean into that and give them what they really want?  Should we take our renovations to a higher level than we planned? Do we need to scrap our plans to roll out a new program? You can’t answer any of those questions with accuracy and conviction unless you are spending time onsite.  You’ve got to see it with your own eyes, sense how things are going and pick up on those intangible wins from your guy—all based on putting your boots on the ground. 

Whether we’ve spent the day on our assets, or have been touring potential new ones I always come home from the day excited about what I’ve seen.  I feel invigorated to have been outside, away from my desk and leaning into the art side of the business.  As our business has grown and my responsibilities increase, it’s easy to get too busy with meetings and emails that justify staying in the office.  But then I remind myself how important it is to get out of the office.  I know whatever it is we’ve seen and learned will be invaluable for us—either immediately onsite or in the future.  And over the years I’ve realized it’s just simply my favorite part of the job. 

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