As a follow up to the interview “Why Measure ?”, I was asked to describe why my company believes in “Capitalism with A Heart” and how we are putting it into actual practice. I have enclosed my comments regarding that discussion.
It is understood that tenant improvements raise the quality of life for a resident, but how does it reward your investors?
We have witnessed the impact on investor returns by improving housing quality. After nine years of successfully managing a series of four Multifamily Income Funds, we see how caring for the property stimulates the residents’ appreciation for their home. When residents are happy with their living environment, they tend to be pleased with their landlord. And when they are equally pleased with their community of neighbors, they tend to pay rent on time and care for their living spaces with a sense of pride. When asked how we have been able to collect over 95% of our rents during this past year of the pandemic, we can only attribute it to our demonstration of care for our residents by being clear in our communication, doing what we say, and giving them a listening ear that is at least 1% more than what they generally expect to receive from a landlord. We respect them, and they return the favor.
Some people say investor return is all-important, but it sounds like you have found a formula for delivering quality of life for the tenant and quality of return for the investor. Can you explain your thinking?
Our core desire is to be objective enough to know when an improvement triggers a resident benefit or not; and if it is a benefit, to quantify what amount of rent that benefit will buy. The goal here is simple, to either retain a resident at the new market rents or increase applicant flow, and the two do not have to be mutually exclusive.
Why is taking care of tenants so important to you?
I have a personal passion toward being free to do what is right, and seeing others experience the same. To me, our residents may be playing the “role” of tenant, but these individuals have lives and stories and circumstances that are compelling if we listen. Their lives, beginning with their home, are “serious business”.
Is there a story that resonates with you about a tenant that exemplifies the correlation between improving housing and improving tenants’ lives?
Indeed, my favorite is an existing resident who was so stunned by the upgrades to the property inside and outside of her unit, and so appreciative of the personal care provided by our construction manager and property management team, that she looked up VisionWise Capital and read our story. She then contacted our office and asked that the information on Fund IV be sent to her for review. This had never happened before. When I learned that we had a resident who wanted to be part of our story it sent a chill of thankfulness through my body. A few days later, she requested a conversation with me. After our telephone visit, she made the decision to be an investor in the Fund…the same Fund that owned her apartment home.
This was the first time a resident had become a VWC Investor, and I hope it will be repeated. There is no greater compliment to the work we do than to have the objective affirmation of a resident who is willing to seek us out and vote with her money as to the effectiveness of our people and processes.
Is there a shocking secret to your process, one that might surprise investors?
Perhaps. We look at property improvements through three different lenses; three predefined upgrade options which are determined by what offers the most with the least amount of capital cost. For example, the ROI on any money we spend on capital costs must directly increase rental income. For example, the cost of improvements must generate a minimum ROI of 15%. This means that if we spend $100,000 to improve a property, we must be able to increase the property’s gross operating income by at least $15,000 per year. Sometimes this increase is from rents, and sometimes by recapturing the utility costs through a Ratio Utility Billing System (RUBS). It is our responsibility to investors to make money on each dollar of capital invested. If that means installing quartz countertops and new appliances to achieve the highest market rental rates, then we will commit the capital for those improvements. However, if our research suggests that reglazing the countertops and cleaning the existing appliances will be more cost effective to obtain the same growth of rental income, then we will clean and polish intensely and we will not install “brand new…” in that unit.
It may not come as a shock to investors, but I am very detail oriented. And as stewards of our clients’ capital, my staff and I take our roles and responsibilities very seriously. It is our objective to not just stay at the forefront of our industry—we are actively engaged in its narrative.
Let us help you reach your investing goals through commercial real estate. Contact us today at sanford@visionwisecapital.com to set up your own informative consultation.
