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Grow Your Business with Additional Revenue Streams

Keep More Revenue in House By Joseph D’Urso All of us in the industry could use more revenue per transaction and many have already began pursuing that goal. A trend in the lending and real estate space over the past few years has been how do we obtain ancillary revenues to our core business and “keep more revenue in house.” Adding new revenue streams is a way to grow your business in a difficult environment where transaction volume is down significantly, and margins and ROI have followed downward. One great way to increase ROI and/or margin is to introduce a tangential but closely related vertical business line. There are some terrific offerings out there that can help industry participants do just that. The post-COVID real estate and mortgage boom of 2020 & 2021 was spectacular with record transaction volumes and margins per transaction. During those boom times, many industry participants held off from adding ancillary business lines and revenue streams and did so with some justification. Specifically, they would ask themselves, “how can I justify taking my eye (and resources) off of the ball and risk execution on the current revenue opportunities I have in front of me today in order to add future revenue opportunities?” However, some of our peers in the industry did both — execute on all the current volume while also adding on additional ancillary services and revenue streams — and they are beginning to reap the benefits today. Prepare for an Improved Third Quarter While we are coming off a difficult 2022, today is a perfect time to reimagine our businesses and consider those future ancillary revenue streams. For those that have the capacity, the resources, and the wherewithal to focus and capitalize on these opportunities, the rewards can be substantial. While we are not yet in a fully stable and well-functioning environment, the signs exist that we may be well on our way there. We can debate the inflation outlook, interest rates and the health of the overall economy, but what most economists and industry participants believe is that we should be in a much better environment by the third or fourth quarter of 2023. Are you ready to take advantage and hit the ground running? Are you adding as much ancillary revenue capability today to boost the profitability of each of your deals while being prepared to benefit in an even bigger way when the markets regain balance and stability? Especially if those ancillary revenues/services also serve to give your customers a better overall experience and make for a more efficient overall transaction? Here are just a few examples: If you are a property investor, some of the most significant fees that you pay in your business are real estate brokerage and title fees. They are part of every real estate purchase. Wouldn’t it make the business a more robust business with better ROI per deal if you were able to recapture at least some of those fees? Wouldn’t it also potentially make the transaction faster or more efficient if you could have better control over those aspects of the transaction? And finally, wouldn’t these ancillary revenues make even more sense to pursue if it were not too difficult to obtain them in a legal and compliant manner? If you are a private capital lender, you are familiar with the cost of valuations and title policies. And while you may pass these costs through to your borrower, they are not insignificant to them. And, if you were able to capture some of these fees, you could be more profitable per loan and have some flexibility in what gets passed through to your borrower and thus be more competitive. You could also potentially shave some time off the lending timeline by having direct insight and input into the valuation and title process. If you could accomplish all those things, why wouldn’t you take some time to evaluate these potential ancillary revenues? In 2019, a Harris Poll commissioned by the National Association of Realtors questioned consumers regarding homebuyer preferences. That poll found several positive, pertinent items in relation to the “One Stop Shopping” model (OSS). Overall, a vast majority of homebuyers would consider an OSS model, and of those that did use an OSS model, homebuyer satisfaction was higher. Also, 79% said that it makes the process more efficient and manageable. While I am not advocating either way regarding the OSS model for real estate, what I do believe is that simplifying the process for ourselves and our customers has some of the very same and clear benefits that the Harris Poll highlighted. It just makes business sense to streamline your business and your customers’ experience by offering some of the ancillary services discussed earlier. A better and more efficient customer experience inevitably leads to better customer retention and a more efficient process also leads to better margins and ROI for your core business. A New Way of Looking at Alternative Investments While we normally think about “alternative investments” in the context of hedge fund and private equity fund investing, shouldn’t we also consider alternative investments in the context of our own businesses? If investing in alternative but closely related revenue streams can enhance our existing businesses in some of the ways articulated above, then don’t we have a fiduciary responsibility to ourselves, our employees, our investors, and our companies to evaluate and consider those? At TitleEase, we have seen our partners and franchisees use this opportunity to increase their revenue and margin per transaction and better control their customer experience while also adding enterprise value to their existing business all with one easy transaction. We believe that the environment we find ourselves in today is an excellent opportunity to re-assess, stabilize, and expand our existing businesses in some relatively easy ways and thus make them better both for today and for the better days to come. Have you considered some “alternative investments” into your business? We think you should. You will be better

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National Private Lenders Association

Pushing Boundaries, Protecting Investors and Representing the Industry By Carole VanSickle Ellis One of the earliest documented examples of private lending dates back to roughly 2,000 B.C., when a Mesopotamian farmer borrowed money against the seeds he had planted and promised to pay back the loan with seeds yielded when his new crop bore fruit. The enterprise must have been successful for the farmer and his unnamed lender because there are many examples of this type of transaction documented from that point forward. As the fledgling lending industry evolved, livestock loans became a popular product as well, with the loan being repaid upon the birth of the first viable baby animal. From the beginning, private lending has hinged upon the ability of a borrower and a lender to agree upon a collateral and repayment system that meets the needs of both. Over the centuries, however, private lenders have developed something of a cutthroat reputation that has damaged their ability to support and enhance the businesses and investments of their borrowers. To Jeff Tennyson, president and CEO of private lender Lima One Capital and chairman of the National Private Lenders Association (NPLA) Advisory Council, the industry stood in clear need of strong, positive representation and guidance when NPLA entered the scene in 2019. “We had reached the point where people looked at private lending as aggressive, and the use of the term ‘hard money’ just demonstrates that idea,” Tennyson said. “As a private lender with Lima One, I’m proud of our industry because we improve neighborhoods so that families can live the American dream. It’s a noble purpose because there is no other type of loan in the industry that can improve the living experience of so many families and communities.” Tennyson and the roughly two dozen other founding members of the association believe that the best way to create positive outcomes for private lenders and their borrowers is to have a set of standards to which the industry is held. This means, Tennyson explained, that private lending needed a trade organization similar to that of any other industry in order to “become more of a professional mortgage origination” sector with professional standards, best practices, and ethical standards. “It is important that we move away from what the industry has known as ‘hard money’ lenders and become more the professional mortgage originators that help real estate investors be more efficient in their real estate projects and successful in their businesses,” he said. Jon Hornik, partner and chair at Private Lender Law Group, LHRG, LLP, and also a founding member, executive director, and general counsel for NPLA, elaborated. “Before the inception of NPLA, there was a void in the private lending world,” he said. “Before NPLA, private lenders’ interests were not appropriately represented at a state or federal level in terms of having our voices heard.” For example, Hornik explained many laws that appear to solve a real estate-related problem such as rising foreclosures or housing affordability actually exacerbate both the initial problem and the ability of the industry to resolve it. NPLA, he said, both educates lenders on creative and groundbreaking ways to work with borrowers and investors in order to avoid pitfalls and uses best practices and ensures that the “voice” of the private lending sector is heard at both state and federal levels. “What we have done,” he said, “is create an environment where lenders, big and small, in this space are sharing information with each other in a close, confidential way. That is making everybody who is listening smarter and better at their business.” NPLA hosts bi-weekly Zoom calls for members during which a vast array of topics are covered ranging from relevant training and education to real-time reactions and analysis of world events. During the COVID-19 pandemic, for example, the group dealt with how investors were coping with state-specific and national shutdowns and regulations, the legal perspectives affecting the lending industry, and how the pandemic was affecting the “natural life” of private loans. “COVID and the associated regulatory actions were very disruptive to the industry,” Hornik recalled. “We were discussing what investors could and could not do, how PPP funds were being made available, what people were doing with tax credits, etc. Information was exchanged on those calls that helped companies survive.” “Contributing in a Meaningful Way to Make Lending Better” One of the things both Tennyson and Hornik emphasize about NPLA membership is that it is not an easy association to join. The difficulty is deliberate, because NPLA members have the common belief that every member has the ability and responsibility to directly improve the industry. “You don’t just sign up for NPLA,” Hornik explained. “You have to be sponsored by an existing member, reviewed by a committee, then invited to join. That process exists because we all believe that members should be able to contribute in a meaningful way to the collective group and make us better.” “Our organization harnesses the expertise and knowledge of the best and brightest in the lending space and those who have had a long history in the private lending and mortgage industries,” added Amy Kame, NPLA’s managing director. “For us, it is important that NPLA is at the forefront of continuing to set standards for our industry. That is a big piece of what we do in our Best Practices and Ethics Committees.” The NPLA considers those two committees to be “essential” to the function of the association and constantly monitors, reviews, and updates both the NPLA Code of Ethics and its best practices. The Best Practices Committee focuses on the processes, ideas, and procedures associated with private lending in the real estate space. “We want to make sure that we are interacting with our lenders in the most efficient ways and that they are learning from us,” Tennyson said. “We, as industry participants, are always looking for ways to create a more professional environment for professional private money lenders.” Along with the Best Practices Committee, the Ethics

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Alternate Investments as a Wealth Building Strategy

Why Multifamily Assets Should be a Major Contender By Jennifer Stoops With our current economy being ever changing and uncertain, people have been looking now more than ever at diversifying their retirement, personal and wealth building investment portfolios. The days of relying on a 401K, Roth IRA, stocks and bonds as your retirement portfolio are no more. While these conventional options for building wealth are still beneficial, market trends are creating an environment that is causing more people to look into alternative investments to broaden their investment and wealth building strategies. So, what are alternative investments and why are they becoming more and more prevalent as a part of a wealth building strategy? Alternative investments are financial assets that do not fall into conventional asset categories like stocks, bonds and cash. These types of investments can create compelling opportunities for investors to diversify their portfolio, dampen the impact of market volatility and help to achieve long term financial objectives, even during times of market uncertainty. The Benefits of Alternatives There are some significant benefits to investing in alternatives because they behave differently than traditional equity and bond investments. Adding alternatives to an investment portfolio can help in three major aspects: they can lower volatility, broaden diversification, and enhance returns. Alternative investing can lower volatility because they rely less on broad market trends and more on the strength of each specific investment. Therefore, adding alternatives can reduce the overall risk of the portfolio. With low correlation to traditional asset classes, alternatives can be a beneficial way to also broaden and diversify your portfolio. Alternatives can improve the risk and return of a portfolio and enhance total return through access to a broader macrocosm of investments and strategies. Some examples of alternative investments are private equity, hedge funds, venture capital and real estate, just to name a few. Single family residential assets (SFR) have historically been the “go-to” for real estate investments as a part of portfolio diversification. However, multi-family investing has quickly become a major contender. Why Invest in Multifamily Properties There are plenty of reasons to invest in multifamily properties, which are often apartment complexes of four units or more. Some of the primary benefits of investing in multifamily assets include a reliable cash flow, less risk than other real estate assets, easier access to financing, growing your portfolio takes a lot less time, better cash flows allows for a greater opportunity to hire a professional management company, the creation of passive income, higher potential for appreciation and a higher demand. Investing in multifamily properties can result in a reliable monthly cash flow that an investor can rely on from rental payments. Even as a unit becomes vacant, an investor can still rely on cash flow from other tenants. A vacancy in multifamily is less risky because it continues to generate cash from other occupied units. Financing for multifamily assets is also easier to obtain. Despite multifamily assets being more expensive than its single-family counterpart, securing a loan for multifamily real estate is surprisingly easier than it is for securing financing for single family assets. You’ll also be securing a single loan for multiple units which is more cost effective. Lenders are prone to considering the properties ability to make money rather than a decision based on one buyer’s credit. Because multifamily properties generate strong, steady cash flow, most lenders consider these a lower risk investment. Acquiring multifamily assets is a much faster strategy to build your investment portfolio. By procuring multifamily properties, you will save time, energy, and money, not to mention you will build a significant, income generating real estate portfolio. For many investors, buying multifamily assets is a launchpad to building their own real estate empire. Multifamily investing makes scaling relatively easy. Scalability, shared services and features, multiple units in one location, all add up to reduced expenses. With the extra cash flow, multifamily properties are ideal for hiring professional property management to maintain and protect your assets. And who isn’t interested in creating passive income? Investing in multifamily properties is a great way to create and generate passive income and with the extra cash flow, this would allow for some cash to be put towards your next multifamily asset on the journey to building wealth through a real estate portfolio. There is a much higher ability to create forced appreciation. Forced appreciation occurs when an investor proactively increases cash flow and property value with property improvements such as common area improvements and updates, curb appeal improvements, updating individual units, adding and improving amenities and adding security features. Lastly, demand is high. Multifamily properties are in high demand and this sector is forecasted to grow. What is driving demand? Baby Boomers preparing for or having already retired and looking to be closer to family and with less hassle of maintaining a property, people relocating for jobs, empty nesters looking to downsize and millennials not quite ready to buya home. These trends will likely continue, therefore continuing to create demand for multifamily properties. Hot Multifamily Markets Yardi Matrix recently released its 2023 winter outlook which projects rent growth in 2023 will hit 3.1% at the national level. That is a more than 50% drop from the 6.4% reported in 2022. This year will be one that is considerably more normal, but that still means a great year for the industry.  The factors driving multifamily rent growth in 2023 include a strong economy, low unemployment, and a growing population. Further, the availability of financing options such as fixed-rate loans can help investors take advantage of the current market conditions. Everybody has their own positions and speculations on which markets will be the hottest for multifamily in 2023. Based on the rent growth projections provided by Yardi Matrix, here are three markets every real estate investor should be conducting their own due diligence on. I am not including the usual suspects like New York City and Dallas. San Jose, CA According to Yardi, San Jose’s projected rent growth in

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Bellingham, Washington

The “City of Subdued Excitement” Could Turn a Corner in 2023 By Carole VanSickle Ellis Although Washington state remains the third-most expensive state in the country in which to buy a home, many analysts believe prices in the Bellingham, Washington, area might ease in 2023. Bellingham, known to locals as the restrained “City of Subdued Excitement,” has been anything but subdued when it comes to home values in recent years. With a growing population that has skyrocketed by more than 30% in the last two decades and a median home sales price that rose nearly 13% between January 2022 and January 2023, Bellingham has made headlines thanks to struggles with housing affordability rather than weakness in the market. However, although year-over-year values are still firmly situated in positive territory, monthly home sales prices have eased off since last fall. At that time, CoreLogic listed Bellingham as the market third-most-likely to face price declines, and the company reiterated that stance in its December 2022 “US. Home Price Insights” report. “The CoreLogic Market Risk Indicator (MRI)…predicts that Bellingham, Washington, is at a very high risk (70%-plus probability) of a decline in home prices over the next 12 months,” the CoreLogic economy team wrote at that time. They credited “low inventory due to seller preferences to keep affordable mortgage rates that they already have locked in, homebuyer loss of purchase power, and economic uncertainty” for slowing appreciation in Bellingham and elsewhere. Three of the top five markets in that report are located in Washington. Selma Hepp, CoreLogic’s deputy chief economist, said consumer confidence and mortgage-rate increases tend to have an outsized effect on the Pacific Census region, of which Washington state is a part. On a more positive note, she added, “Regions in the Pacific Northwest are…less [sensitive] to overvaluation of the local housing markets,” which could be good news for Bellingham. Hepp explained, “In other words, low consumer confidence and a surge in interest rates have historically been more important to the [Pacific Census] region in determining potential of home price decline.” Local Derek Buse, founding broker at Compass Bellingham, is not particularly concerned about predicted declines. He noted that although there are certain factors that have historically driven prices down in the area, such as when prices fell 18% between 2008 and 2012 in the aftermath of the 2008 housing crash, it only took the area three years to fully recover. Furthermore, those factors that were present in 2008 — rampant speculation, unqualified buyers and homeowners, and weakly collateralized mortgage loans — are not present in today’s market. “Whatcom County [where Bellingham is located] rebounded much faster than almost all the other counties in the state,” Buse observed. He added, “Our real estate market has been historically resilient when it comes to the ebbs and flows of the ever-changing U.S. economy,” citing the recession-resistant mix of “refineries, universities, [and] medical corporations that show…insulation to recession forces.” For now, as in many markets around the country, the Bellingham market is more likely to remain steady, even if appreciation rates slow or even reverse slightly, rather than experiencing a sudden drop in values. Although homes may remain on market longer and may no longer sell at peak pandemic-era values, inventory is still at a premium. In Bellingham in particular, homeowners appear reluctant to sell and, by extension, expand available inventory. At the end of Q4 2022, ATTOM Data reported that Bellingham homeowners are the longest-tenured in the country, opting to remain in their homes for nearly 10 years compared to the national average of 5.85. “Historic Insulation” Across Industry Sectors Whatcom County made its first foray into industry in the 1850s, when European settlers began mining for coal and cutting and processing lumber in the area. Toward the end of the decade, a short-lived gold rush created a population boom that did not make very many people rich but did cement the community since many would-be claim-stakers remained in the area even if they did not strike gold. By the end of the century, three railroad lines would arrive in the area, connecting the city to the national construction market. Two decades later, the Port of Bellingham was established to increase shipping at the Bellingham waterfront and create economic opportunities for the area. Although the first docks in the area had been built in the 1880s, the port brought in new shipping-related opportunities as well as tourism and, during World War II, war-related industries. The local airport grew in size and importance during this time as well. Today, the Port of Bellingham plays an integral part in the city’s Comprehensive Economic Development Strategy (CEDS) and is credited with generating $1.4 billion in annual business revenue and directly sustaining more than 8,700 jobs. In fact, 11% of the local economy’s jobs are directly or indirectly linked to the Port of Bellingham. Port leadership plays an active, forward-looking role with local economic development and has, over the past two decades, been involved in economic development projects including a waterfront office- and retail-space development and improvements and expansions to the Bellingham International Airport (BLI). Bellingham industries run the gamut from public education via the Western Washington University and two local colleges, manufacturing, including the BP Cherry Point Refinery, the first and currently only refinery in the Pacific Northwest capable of manufacturing diesel from biomass-based feedstocks, and information technology (IT), which accounts for roughly 1,200 jobs in Whatcom County according to the Bellingham Chamber of Commerce. Faithlife, a leading publisher of Bible study software, is one of the area’s largest employers, and BP announced in late 2021 that it would invest $269 million in three projects at Cherry Point intended to improve the refinery’s efficiency, reduce carbon dioxide emissions, and increase production capability. That investment is expected to create an additional 300 direct, local jobs by the end of 2023 as well as more than 200 construction jobs and several dozen engineering and “support role” jobs. Bellingham also continues to attract visitors to the area with

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How to Maximize the Value of Single-Family Rental Properties

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From Simple Fixes to Longer-Term Strategies, These Ideas Will Help You Make Sure You AreNot Leaving Money on the Table When you’re seeking to maximize the value of your single-family rental (SFR) investment, you’re strategically thinking about the property’s entire lifecycle. And ensuring a successful future for your SFR properties means having comprehensive investment property services in place now. Those services should span remodels, repairs, ongoing maintenance, tenant turns and everything in between. Do you have a strategic plan that helps you save money over the long term? Andrew Nolan, President of Commercial & Residential Rental Services at MCS, a national property services company, offers his insights on the essential elements that can help you get there, whether you own 10 properties or a portfolio of 10,000 homes. What is one thing investors often overlook that could help them maximize the value of their single-family rentals? Many SFR investors are lacking a simple tool to help them manage their properties effectively—a database that catalogs the fixed assets within each home they own. For example, how old is the HVAC unit? When was the water heater last serviced? Have there been roof repairs? An asset database is key to staying on top of property maintenance, and that’s critical because missing key maintenance checks can lead to expensive capital investment repairs and replacements later.  But having a detailed record of your assets, as well as which services have been performed and when, can help you properly maintain the properties. This work ultimately helps prevent unnecessary costs and headaches. Plus, this data can enable predictive analytics so you can perform preventive, versus reactive, maintenance. From a cost-saving standpoint, what are some of the most important preventive maintenance items? Number one is to perform regular air filter changes. Dirty, clogged filters can damage your HVAC system, leading to costly repairs or even replacement. Don’t rely on tenants for this task — studies show that only 18% of Americans change their air filters in their homes once a month as recommended, and nearly 30% don’t change them at all. Regular air filter changes can also help lower monthly electric bills by as much as 15%, because clogged filters significantly reduce a system’s efficiency. Other key items are plumbing, roofs and gutters. Don’t wait for an emergency call from your tenants. Regular plumbing maintenance, like cleaning drains to prevent backups, can help avoid costly repairs and the fees associated with emergency calls. And don’t overlook exterior maintenance—avoid standing water, leaf and debris clogging, and other problems that could lead to expensive repairs by scheduling regular gutter and roof maintenance. It can be easy to overlook exterior maintenance. What are some other ways to reduce those costs? Watch your landscaping water usage. Keep water use (and related expenses) down by performing regular inspections of your sprinklers and/or irrigation systems. If needed, you may also want to consider monitoring water use via smart water systems that can provide remote monitoring and control Winterization of sprinkler systems and outdoor faucets is also essential. If you wait too long to winterize outdoor plumbing, you could end up with costly damage to the home’s water lines. Preventive maintenance is one of the most time-consuming aspects of property management. Are there ways to be more efficient about it? Definitely. With your asset database in place, you are able to build proactive preventive maintenance plans. Having an established maintenance plan in place can help reduce or prevent potential repairs and extend the lifespan of everything from HVAC units to plumbing fixtures. Plus, you can use the information to make decisions regarding capital-investment replacement and preventive maintenance schedules. We recommend at least biannual maintenance checks that include:  »HVAC systems (following ASHRAE standards)  »Roofing  »Water heaters  »Filter changes  »Plumbing  »Winterization of sprinkler systems and other yard maintenance (especially important for HOAs) This is where a trustworthy property services partner can really make a difference when it comes to overseeing critical investment property maintenance and management tasks. A good partner can help you build and maintain your fixed asset database, keep preventive maintenance schedules and serve as a maintenance expert for your entire SFR portfolio. Beyond handling these critical needs, your property services partner also can help you understand and consider the bigger picture of your entire portfolio, so you can confidently decide when and where to make capital investments strategically.  What about when a property is unoccupied? How can owners use that time to their benefit? Unoccupied rentals cost you money, so this is when you need to really focus on efficiency. Your properties need to be brought up to code, made livable for occupancy, maintained along the way and refreshed between tenants. But this is also a good time to make any updates that could increase your ROI—up the home’s curb appeal, swap out any dated fixtures and flooring, upgrade old appliances. These are things that can be tackled quickly and will help you get maximum value for your rental property. Beyond the hard costs of maintenance, renovations and updates, are there other things that SFR owners can do to save money? Something that property owners tend to ignore is the value of their own time. No matter the size of your portfolio, if you have to dedicate your time to calling vendors for every asset, it will be hard to find time to continue growing your portfolio and building your business. This is where a centralized SFR property services partner can make a big impact by keeping your assets in good quality condition, giving you a one-stop shop for everything from landscaping to plumbing and electrical repairs to utility activation/deactivation and eviction support services. This means shorter vacancies, greater local code compliance and potential financial savings realized from regular maintenance. What should owners look for when vetting a property services provider? Whether it’s occupied maintenance, tenant turns, inspections, seasonal maintenance, or renovation work, look for a single partner that can manage it all with an experienced team of service technicians, project managers

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Back to the Basics of Asset Management in a Challenging Market

Three Phases of the Multifamily Investment Life Cycle By Sean Thomson Asset managing multifamily projects is difficult enough in the best of times, but when things go wrong it can become challenging.  There are three major phases of a multifamily investment life cycle: acquisitions, operations, and dispositions. Each phase has its own processes, strategies, and challenges. Within each phase are also a variety of roles that make it all possible. Before diving too far into it, let’s set a foundation. WHAT IS ASSET MANAGEMENT? Asset management is a systematic approach to acquiring, maintaining, and trading real estate for optimum growth potential to maximize the value of the asset while maintaining an acceptable level of risk. It is the middle ground between property management and ownership and the bridge between the investment model and the physical asset. It is also the checks and balances between all the roles and is the pivot point between maximum success and failure.  How is asset management different from ownership or property management? In a typical multifamily syndication the ownership is responsible for deal sourcing, team building and management, and all capital related items. Property management is the daily oversight of the property through onsite operations, repairs, maintenance, security, and upkeep. Each of these roles has a clear focus: ownership is the long term outcomes, asset management is mid-term impact, and property management is short term damage. Phase 1 // ACQUISITIONS This phase is all about discovery and creation. Commonly, this phase is just seen as only the ownership role sourcing deals. While that is a large aspect to this phase, it is so much more. Underwriting This part of the process is solely focused on discovering a deal that meets investment criteria, discovering the opportunity in its acquisition, discovering the risks, and discovering the most effective strategy. In this phase, asset management is trying to find all the possible risks and all the possible opportunities. Where it can get tricky is deciphering which is which. It is far too common for owners to see the risk but not understand how to eliminate, reduce, or manage that risk to create opportunity or on the other hand, seeing the opportunity but not how it could be a problem. The assessment of these risks begins by asking questions:  »         Are these assumptions realistic to the demographics, location, and current operations of this asset?  »         Will the demographics and locations of the asset support the expectations of the investment model?  »         Are these expectations truly feasible?  »         Are the rental comparables accurate and effective?  »         Does this model allow for pivots, setbacks, or pitfalls? Due Diligence Due diligence still heavily relies on discovery, but this part of the process is also where creation begins. The discoveries now can no longer be put in the deal killer category of risks. It is all about planning and strategizing how to mitigate and manage the risks. This discovery includes:  »         Financial audits  »         Rent roll & lease audits  »         Building inspections  »         Market analysis  »         Legal audit  »         Marketing audit As the discovery process happens, creation will start to take form: creation of the mission, vision, and plan for the asset. Each asset needs to have its own mission, vision, and plan that guides the investment model and operations to ultimately reach the targeted goalor exit strategy. Phase 2 // OPERATIONS The money has been wired, the documents have been signed, and the key is in hand. This is where experience takes the lead. Operations is all about mitigation and optimization. In uncertain times and without the proper asset management foundation, this phase can be overwhelming and complex. When markets tighten up and competition for residents intensifies, it is important to focus on lead generating efforts and resident experience. Here are a couple of suggestions: Customer Service Standing out against the competition is a key strategy when times are tough. Why would a prospective resident rent this asset versus all the other options in the market? Customer service could be as simple as ensuring the on-site team is always available and answering the phones or ensuring the website is up to date. A well-thought-out customer service plan could be the difference between a cash-flowing asset and one that struggles to cover expenses. Marketing Analysis Rental revenue is the largest contributor of income in multifamily properties. It is crucial to understand the asset’s resident market and where those people are coming from. The answer to all this is in the marketing strategy. What marketing efforts are driving demand most and which ones are not? Key performance indicators for marketing are the conversion rate and monthly expense amount. Finding the right targets for each of these will keep the asset’s occupancy high and resources needed low. Everyone Needs to be on Board Even if one member of the team is not 100% invested in the project’s goals, big problems are more likely to occur. Everyone from the ownership, all the way down to the subcontractors and onsite property management team, needs to be working toward the same goal. It’s the asset manager’s role to set the tone and be a great leader. Set high expectations using the mission, vision, and plan created during due diligence and monitor progress every week, month, quarter and year. The asset manager is the lynchpin that holds everyone together. The more engaged everyone is, the more optimization potential the property could have and the more willing the team members will be to give input and feedback. Data Driven Numbers do not lie but knowing what to look for and how to read them is critical. Our top four KPI’s (key performance indicators) are:  »         Occupancy/vacancy — This number in combination with unit availability speed can be full of information and optimization possibilities.  »         Delinquencies/collections — The market and tenant circumstances will change so this is a critical metric to watch. Keeping good lease records on the asset’s residents and where they are employed will aid in predicting how

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