Swapped managers on a 168-unit and NOI moved 11% with no rent increase

The November timing is doing a lot of work here and you said so, which I appreciate. I've done a manager change on a 40-unit in May and the three-week records rebuild turned into six weeks of nobody answering the leasing line. Cost me four units of vacancy at $1,100. If your transition had hit peak season, does the incentive fee still trigger, or does the budget get reset for the disruption? That's the clause I'd want to know about before I called the 11% a manager result rather than a calendar result.

I run the management side and I'd push back on where you're assigning the credit. The delinquency drop from 4.1% to 1.8% isn't an operating skill, it's a policy decision the old manager wasn't allowed to make. Nine years with one owner and two residents past 90 days still in place tells me somebody upstairs kept overriding the notices. New manager shows up with a clean mandate and the number moves in one quarter.

The payroll cut is the one I'd watch. Pulling a full-time assistant manager off 168 units is defensible if your leasing is centralized or your traffic is low, and it's a slow leak if it isn't. Also, who's your maintenance tech and how long has he been there? Your turn days went 21 to 12 on the back of one person. That number reverses the week he leaves.

Reading this from the other end of the rent scale. My market is $760 to $840 rents, 20 to 40 unit buildings, and at 3% of collected revenue on a 30-unit that's about $700 a month for a manager. Nobody good takes that. Does any of this transfer down, or is the honest floor for this kind of operating discipline something like 100 units where you can afford a body on site?

The part I'd want in front of me is the incentive language, word for word. "NOI above budget" is four different numbers depending on who sets the budget, whether the manager gets a vote on it, and what's excluded. Specifically: are capital items and casualty repairs out of the NOI calc, is the management fee itself deducted before the measurement, and is there a clawback if the following year's NOI falls back?

Also the termination clause. If a manager can produce an 11% NOI lift in three quarters, the version of that contract I want has termination for convenience on 30 days with no fee tail, and the version they want has 90 days plus a payout. Which one did you end up with? @sextant

The $560 per unit expense drop is where I'd slow down. On my side of the business, when I take over a maintenance scope and my costs come in a lot under the prior vendor, about a third of the time I'm just not doing something they were doing. Deferred work doesn't show up on a monthly P&L, it shows up 18 months later as a compressor or a roof.

So: did anybody walk the mechanical rooms and pull the work order aging at month 12? If open work orders older than 14 days went up while expenses went down, you didn't save $560, you borrowed it.

Basic question since I'm on the outside of this looking in. When you say controllable expenses, what's actually in that bucket and what's out? I assume taxes and insurance are out because the manager can't move them. And how did you get a per-unit number you trusted for comparison, did the seller hand it over or did you build it from the general ledger yourself?

Slightly sideways question. On the loan, is the manager named anywhere? I've been reading a lot of paper lately and I thought some agency and bridge documents require the lender to approve a replacement property manager, sometimes with a named-manager covenant. Did you have to get a consent before you swapped, or was it just a notice? I don't know the mechanism well enough to say and it seems like the kind of thing you'd want confirmed in writing with the lender rather than assumed.

47% to 58% renewals is the line I'd steal. I've got 22 units and I moved my renewal offers from 45 days out to 100 days out last year, plus a fixed band so I stop negotiating one tenant at a time, and my renewals went from 9 of 16 to 13 of 17. Cost me nothing except writing the letters earlier. @trellis is right that the delinquency piece is a mandate thing, but the renewal timing is real process and it's the cheapest thing on your list.