Fixing Property Problems – 5 Ways to Turn a Property Investment Around
We’ve all seen them… property investments that have gone bad and properties that have taken a turn for the worse. The properties are worn down and have seen better days. They need a little (or a lot) love and they can have bad reputations. Buying and turning around one of these problem properties can be can be a little like turning around an aircraft carrier. You can do fix the property’s problems and even it’s reputation, but it can be slow and tedious. However, it is very exciting and even financially rewarding if you do it successfully. Fixing property problems can improve a community, your tenants’ lives, and put above average returns in your pocket. If you are good at fixing property problems, it should be a real estate investing strategy you consider. But, before you do, make sure you have what it takes to be successful.
Turning around a property with problems (or repositioning a property as it’s commonly called) can take a great deal of time, money, and energy to accomplish. It can be too risky for a beginning investor if you don’t know what you are doing, lack experience or resources, or a solid plan. Once you start fixing property problems, you need to be able to see it through. Fixing property problems and improving a property’s reputation is not easy. Often times costs can escalate and you can lose tenants during the transformation process. You need to be able to withstand the dip in cash flow that cost overruns and lower occupancy can create.
Fixing Property Problems – 5 Ways to Turn a Property Investment Around:
- Change the Property Management Company – Every property investment turn around starts with a solid commitment from the ownership and property management. Often times when you take over a tired property, it got that way by ownership taking all the money out of the property and not reinvesting in it properly. It also happens when you have poor property management on site. When fixing property problems and committing to turn around a property investment, you must review and analyze current management to see if they have what it takes for this type of project. Many times we change property management because the current management can only see the property for what it was, not what it can be. You need to make sure you improve the physical property, but it’s just as important to improve the attitudes of those managing and living in it. Often times a new Property Management Company will bring fresh perspective and a new attitude.
- Clean-up the property, take care of eye-soars, and fix deferred maintenance. Immediately upon taking over the new property, current tenants need to see that something has changed besides who they give their rent checks to. When taking over a troubled property, take care of very visual eye-sores and deferred maintenance immediately. Paint, replace broken windows or doors, and clean up trash or debris as soon as possible. Once residents see you care about the property, they will start to as well.
- Impose strict rules, regulations, and follow through with them. Most physically troubled assets are also troubled financially. Often times they have poor quality tenants that have learned bad habits, stopped paying rent all together, or pay rent very late. Make sure the tenants know your rules right away and stick with them without exception. Now is the time to train the tenants for how you are going to operate the property. Be prepared as you will have tenants leave, but that is a good thing. When you impose strict rules the good tenants will respect them and stay and you will weed out bad tenants faster. The quicker you get rid of problems, the faster you’ll turn around the property.
- Partner with local government and/or police department. Whenever we consider taking on a troubled property, we always talk to the local police department and local government about the property first. We want to find out what has been happening on the property and what type of problems we’re going to walk into. Find the officers that are in charge of the area in which your property is located and set up a meeting with them. Let them know you are going to take over the property and that you plan on cleaning it up and want to improve the city and need their help. Most police departments and local governments are thrilled that a new owner is coming in that is going to be responsive. They can be your biggest partner in getting rid of bad tenants, tenant problems, and even fill it once you’ve made the improvements.
- Change the name and re-brand the property. Last but not least, sometimes the property’s brand and reputation is too much to overcome. No matter what you do, when people hear that name, they think of what might have happened there in the past. One of the best ways you can combat this is by changing the name, signage, appearance, and rebranding the property. By changing the name and brand of the property, it can help you overcome the past reputation much faster. We change the name of the property on almost every reposition opportunity. It is fun and can be extremely effective in combating a past bad reputation.
Fixing property problems and turning a property investment around can be very rewarding and profitable. However, it is not for the beginner or the faint of heart. You must be prepared, have a plan to execute, experienced management, and the money it is going to take to do it successfully. If done correctly, it is a great way to improve your community, improve your tenant’s lives, and make a pretty penny along the way.