Considering vertical integration for an apartment company? Here’s some insight:
When done right, the benefits are substantial, but it’s essential to approach it with the right intentions. Over the years, many apartment owners have created their own property management and construction divisions for the wrong reasons—often to impress investors or to chase additional revenue streams. Unfortunately, this approach frequently leads to mistakes.
However, when owners focus on building in-house teams with the necessary expertise to optimize their portfolio, the rewards can be significant.
In-House Property Management: An internal team is more motivated to maximize property performance and can make quick, efficient decisions when market conditions change. While many third-party managers deliver great results, they may not have the same drive to push for top performance as an owner’s own team would.
In-House Construction: This approach can save significant money by cutting out general contractor fees and allowing for bulk material purchases. It also streamlines the renovation process, ensuring projects are completed more efficiently.
There are higher costs and liabilities to consider, but with careful planning, vertical integration can greatly benefit an owner’s portfolio and their investors.
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