Why Property Managers Must Share the Good, Bad, and Ugly in Multifamily Asset Management
In multifamily real estate, the relationship between property managers and owners is crucial to the success of any investment. Property managers serve as the eyes and ears on the ground, directly overseeing the day-to-day operations of assets. Their role is essential not only for keeping properties running smoothly but also for ensuring that owners stay informed about the asset's performance.
However, transparency in communication is a key factor in this relationship, and it’s not just about reporting the good news. Property managers must feel comfortable sharing the full picture of operations—including the bad and the ugly—if they are to maintain the long-term success of the property. When managers hesitate to communicate negative information, it can create a host of operational issues, leaving the property at risk of falling into a deeper hole that’s increasingly difficult to dig out of.
Here’s why it’s essential for property managers to be transparent with owners about all aspects of a property’s performance, and the risks that arise when they aren’t.
1. Addressing Issues Before They Escalate
Every property will face challenges—whether it’s a sudden drop in occupancy, unexpected maintenance issues, or budget overruns. These problems are often a natural part of managing a multifamily asset. The sooner they’re identified and addressed, the easier they are to resolve. But when property managers are hesitant to share negative information, these small problems can escalate into much larger issues.
For example, a minor maintenance issue that goes unreported to the owner due to fear of disappointing them can balloon into a costly repair. Similarly, failing to notify the owner about a dip in occupancy could mean missing out on opportunities to adjust marketing strategies or rental pricing to attract new tenants. Transparency enables both parties to collaborate on solutions early, preventing these issues from spiraling into more significant operational and financial problems.
2. Maintaining Owner Trust and Confidence
One of the biggest risks when a property manager hides bad news from an owner is the erosion of trust. Trust is the foundation of a successful manager-owner relationship, and it’s built on honesty and transparency. If an owner finds out about a significant issue—such as financial shortfalls, deferred maintenance, or operational inefficiencies—after the fact, it can damage the relationship and create an atmosphere of distrust.
When managers withhold information, even with the best of intentions (such as not wanting to worry the owner), it can backfire. Owners may feel blindsided or question the competence and integrity of the property management team. On the other hand, when property managers are forthright and share both the good and the bad, owners are more likely to view them as reliable partners who have the best interests of the property in mind.
3. Collaborative Problem Solving
One of the advantages of maintaining open lines of communication between property managers and owners is the ability to engage in collaborative problem solving. Owners often bring valuable insights and experience to the table that can help address operational challenges. When managers share the full scope of a problem, it opens the door for owners to provide feedback, offer solutions, or even allocate additional resources to resolve the issue.
For instance, if a property is struggling with tenant retention due to outdated amenities, bringing this to the owner’s attention early on can lead to productive discussions about potential upgrades or changes in management strategy. Conversely, if the problem isn’t shared, months of declining occupancy could result in lower revenue and a property that becomes harder to stabilize.
4. The Risks of Delayed or Hidden Information
When property managers are uncomfortable sharing negative information with owners, it creates operational blind spots. Owners rely on accurate data to make informed decisions, and when that data is incomplete or skewed, it affects everything from budgeting to long-term planning. The consequences of withheld information can include:
Financial Mismanagement: Failing to report budget shortfalls, unexpected expenses, or revenue declines can lead to poor financial decision-making and even jeopardize the property's profitability.
Deferred Maintenance Issues: When maintenance problems go unreported or underreported, they can lead to costly repairs, tenant dissatisfaction, and potential liability issues. This can create a dangerous snowball effect, where minor issues turn into major infrastructure problems.
Regulatory Compliance Risks: Multifamily properties must adhere to local laws and regulations. If there are compliance issues that aren’t addressed (such as safety violations or permitting issues), the property could face fines or legal action, further damaging the investment.
Tenant Discontent and Retention Issues: Negative tenant feedback or complaints that aren’t shared with ownership can lead to a poor reputation, increased vacancies, and ultimately, declining rental income.
When property managers withhold negative information, they essentially dig a deeper operational hole that becomes more difficult to get out of. By the time the owner is aware of the problem, it may be too late to fix it without significant cost and effort.
5. Creating a Culture of Accountability
Property managers must cultivate a culture of accountability within their teams and in their communication with owners. This means taking responsibility for both the successes and the challenges at a property. When property managers feel empowered to share negative information without fear of retribution, it fosters a more honest and proactive approach to problem-solving.
For owners, it’s also important to create an environment where property managers feel comfortable reporting bad news. This includes reacting constructively when problems arise, rather than with frustration or blame. When managers know they won’t be penalized for sharing difficult information, they’re more likely to communicate openly and frequently.
6. Taking Control of the Narrative
When property managers are transparent about challenges, they maintain control over the narrative. By proactively sharing both the good and bad news, managers can provide context for the issues and propose potential solutions. This approach positions them as problem-solvers, rather than simply messengers of bad news.
For example, if a property is facing an unusually high number of move-outs, a manager who shares this information early can explain the underlying causes (such as job market changes in the area) and suggest strategies to mitigate the impact, such as targeted marketing or offering tenant incentives. Taking control of the narrative builds confidence with the owner and shows that the manager is actively working to protect the property’s value.
The success of a multifamily asset relies heavily on the transparency between property managers and owners. When property managers are comfortable sharing the good, the bad, and the ugly, it fosters a relationship built on trust, accountability, and collaboration. Hiding or downplaying negative information might seem like a way to protect the owner from worry, but it often leads to bigger operational problems that are harder—and more expensive—to fix.
In multifamily real estate, transparency isn’t just a nice-to-have; it’s a necessity. By fostering open communication, property managers can address issues before they escalate, maintain trust with owners, and ensure the long-term success of the property. Sharing the full picture—whether good or bad—is essential for keeping both managers and owners aligned in their goals and prepared for whatever challenges come their way.
