A quality management team is essential to the success of any real estate deal. While some companies prefer to outsource their property management, Sterling has recognized the value of managing in-house. With a strong track record to prove it, we’ll share our top four reasons why we believe in-house management provides immense value to our organization.
Complete Control Over Operations
As a real estate investment company, our goal is to maximize revenue and minimize expenses at the assets we purchase, and it all comes back to how the property is being operated. In order to make the most of an investment, the operating team must be at the top of their game. Lea Ann Scofield, Sterling’s Senior Vice President of Operations notes, “When you keep property management in-house, you eliminate the middleman and allow for clear and concise communication with team members and contractors. The business plan is shared with the entire team, and everyone works towards one common goal. Not only does it provide a more direct path to obtaining our objectives, but it allows our team members to grow and learn more about the business during the process.” In 2019, Sterling took over Villas de Azul Apartments at 65% occupancy. At the time, it was being operated by a third party management company. Within one year of takeover, Sterling’s in-house management company was able to take the property to over 90% occupancy while simultaneously revitalizing the amenities on site.
Operational Expertise Aids Acquisition Decisions
The underwriting process is critical for generating new business. For an underwriter to successfully value an asset, they must understand how a property operates. With Sterling’s management team and acquisitions team working together, the acquisition decisions are significantly more calculated. This allows us to make better investments and more accurately achieve our investor’s goals.
The costs associated with operating a property play a large role in determining how lucrative an investment is. Third party managers typically take a 3% fee (or higher) to manage an asset. This is where Sterling is able to outperform the competition. The costs required to operate the in-house management company are lower because many of the costs are shared with the corporate side – allowing for economies of scale. Since the property management is handled in-house, Sterling is able to generate more profit from the properties we acquire. Ultimately, this allows us to generate larger returns for our investors.
Incentive to Succeed
Incentive is incredibly important in the business world. People tend to work harder when they have a personal stake in the outcome of an event. “Our team members are incentivized in ways that most third-party managers would never dream of. It starts with the simple things like more competitive salaries, a fully paid benefits package, and allowing team members to personally invest in our assets. And it’s not just the corporate staff; we even allow our Property Managers to invest in the property that they are managing. This creates an environment where all parties are working towards a common goal and are incentivized on multiple levels to make that asset successful,” says Lea Ann Scofield. We’ve undoubtedly seen that more incentive translates to a more effective management team.
At Sterling, we believe in the value of the owner-operator business model. If you’re interested in learning more about our in-house management company, visit our website at sterlingpropertymgt.com.