Douglass Benson's Blog

I like to look back on what are some of the symptoms of trouble that appear in my business.  Once I figure them out, I try to refine my approach, be it advertising or lease language to help to reduce my exposure to these bad things.  Any bad costs money.  My goal here is to make money as well as to provide clean, safe and affordable housing. 

I am a big fan of determining and eliminating the root cause of problems.  The part I don't like is I am the biggest injector of the problems in my apartment business.  Sure some if it can be blamed elsewhere, but the largest majority of poor management practices come from me.  If we learn by our mistakes, then that makes me the smartest man on the planet!  So, based on that you should either run, or pull up a chair!  Here is my latest adventure...

Most recently, while studying a portion of my historical business metrics, I ran across some disturbing statistics in my apartment life.

I LOVE the idea of being full.  It makes me feel like I know what I am doing, like I am a master marketer, and clearly that I must be a dream landlord/owner or these guys would all be living elsewhere.  I mean I get it that I only own 32 units, but I am the man...right?

...right.

Let's take a look at what 100% really means.  Well for one, it means I wasn't at 100% before.  Oops.  And why is that you might ask?  I have never in my entire life turned so many units over from so many less than excellent tenants.  75% of the vacancies that I had to fill I caused myself by "inviting", "asking", "telling" and in two instances "forcing" the tenants to leave thus creating the vacancy.

I have posed a question on my FB page (www.facebook.com/adventuresinmichiganrealestate) that is meant for the universe but should be asked here as well.  It hasn't gone viral but a lot of people have thrown in their opinions.  A lot of this diatribe is tongue-in-cheek until I tell apartment people about it...and then everyone says "Hey!  that happens with my units as well!"

Here is the story - This whole day starting with me pondering the fact that the addition of new tenants to an existing lease is a standard part of my day as an apartment owner. There is something socially fascinating and economically relevant here that I wanted to better understand.  Here is the first mystery - In my apartments and in my experience as an owner and as a landlord it is ALWAYS that a girl rents first and her boyfriend moves in later.  For me, it has never happened that the guy rents first and his girlfriend moves in later.   And I mean N-E-V-E-R!

I will also add, NOT ONE SINGLE TIME has this benefited the tenant (or me).  I am going to write another blog on this entire phenomenon at a later date because this wasn't the problem that ground my day to a halt. 

I admit, I use to LOVE doing my taxes.  (Now I have a CPA...<sigh>)I am a little bit of numbers freak and I enjoyed the balance of a tax return in the same way as I enjoyed the balance in my books.  Rental depreciation was another reason that I was juiced about doing the taxes as well!  Another thing I always enjoyed was that every single transaction that impacted my properties and therefore my business and therefore my wallet was scrutinized, analyzed and ultimately rationalized.

Of course I was a fool for doing that only once a year, but it seemed that was the only time I ever had a gun to my head to dive so deeply into my books.  The rest of the time was spent meetings tenants, meeting contractors, meeting inspectors, meeting investors, meeting bankers, meeting lawyers and writing checks.  Oh, also from time to time I would collect rents as well!  I realize now that this engine that I own and operate needs maintenance more than once a year.  I clearly recognize trends over the course of a year that tell me I have symptoms going on.  Symptoms of a poor HVAC system, symptoms of inefficient lawn or snow maintenance, symptoms of plumbing failures attributable to old fixtures. 

Regardless, I know in a heart beat what tenant tends to be late, or has racked up the highest amount of late fee penalties.  I trend that monthly.  I know in a heart beat what tenants are causing the most complaints or phone calls. I trend that monthly. Are my expenses any less important!?!  Should I review each line item once a year!?! 

Lately, I have been getting comments from several prospective tenants that the reason they want to move in to one of my buildings is because "It isn't one of those big complexes."  I thought those were the guys I was losing tentants to and competing against? Those were the places I wanted to one day be.   The 100+ unit complex with all the huge out door areas, enormous parking lots, warehouse size laundry areas, etc., etc.

Well, I will accept that.  My wife and I are small time.  Heck, we only own 32 units (of course we are looking for more) but we don't offer the pool, the weight room, or any amenities other than safe, clean affordable places to live.  Maybe that is the key amenity.

So how did I, all the sudden, become the destination place!?!

Here we are again.  Faced with viewing all the "gifts" that had to this point in time, been covered up by a beautiful white sheet of snow.  As the temperature warms, we get to discover all that has been given to us throughout the winter.  Sounds nice doesn't it?

Let me ask you this...at your place, do you let junk and trash and litter drift quietly around where you live?  Do you decide it is ok to let your kids dump their french fry boxes and pop cups on the ground as they get out of the car?  Do you randomly toss pens, jewelry, debris and detritus all around you?  I am a small time operator (32 units and growing) and admit that I possibly haven't seen it all, but...regardless of which of my three sites I am at, I am ALWAYS finding trash to pick up.  Have I become the "picky" "neat freak" owner or do I have tenants not pleased enough or proud enough to do it themselves?  I always get thanked by folks that are going out to their cars.  I hear from the neighbors in fact about how happy they are that I am here to "clean up the place".  Geez, is that all there was to making the neighbors happy?  You mean I didn't have to get rid of the bad guys, just the hamburger wrappers!?!

I recognize in our Multi-Family world we should be talking about ROI, Cap Rates, Best Use and the latest Federal Occupancy statutes, but not today.  Besides, I just dropped off my tax doco to my CPA so lets not even think about stuff like that...today.

At least my assumptions is that someone is reading this.  I thought the real estate market was DEAD?  I thought only dudes on infomercials were getting anything out of this game?  While that may be true, I can tell you that Deb and I seem to be doing fairly well and we live smack dab in the middle of (wait for it) Michigan!  I guess there are worse fates, but possibly not when the topic of conversations is real estate, real estate investing and even worse still - MULTIFAMILY REAL ESTATE INVESTING!

Well, don't sweat it.  We all have our cross to bear and since my parents moved to Michigan prior to my being born, I have to endure this.  My sin is I did the same thing to my children as well.  ALL my girls LOVE it here!  They are worse than me.  The point I am trying to make is why do anything if you can't have fun doing it, why run any business if you can't make money at it and why put yourself at a foundational disadvantage right out of the gate by doing this in Michigan!?!  WHY?

Because someone needs to.  Today that someone is me and several thousands of other Michiganians.  I can't wait to be the guy that watches us live up to our own promise and the promise of our forefathers.  Work hard, keep quiet and great things will happen.  The fact that I am out here should show you that I am already failed at the "keep quiet" part.   But I believe we can work hard and I believe that great things will come of it.