Specialized Multifamily Agencies vs. Property Management Companies

In the not-so-distant past, property management (PM) teams were the go-to solution for developers and owners looking to handle everything from marketing to leasing.

It worked, at least for a while.

PM teams evolved into quasi-marketing entities, taking on basic marketing tasks. They rolled marketing and marketing-adjacent services into their fee structures, and most developers and owners didn't think twice.

However, over the last decade, a significant shift has occurred in how properties are marketed, especially in most metro areas' (highly competitive) multifamily verticals. Gone are the days when marketing meant relying just on foot traffic, A-frame signs, and a nice building.

The multifamily market is now more dynamic than ever, demanding that we engage and meet with potential renters where they are – online.

The priority has shifted away from simply differentiating a project at a high level to running robust digital marketing campaigns that fuel a modern lease-up process. In many cases, the capabilities required for these tasks have surpassed what a typical PM team can handle.

Enter the specialized multifamily marketing firm – experts in creating brand experiences and executing powerful digital campaigns specifically for the real estate industry.

While some PM teams attempt to bring marketing in-house, the results, respectfully, are often subpar. Other PM teams hire external agencies, but the associated mark-ups can make this approach expensive and counterintuitive to the cost-saving mindset of working with an all-inclusive PM partner.

Either way, for developers and property owners, the net result can be suboptimal work or, in some cases, a partner attempting to turn the marketing package into a profit center—revenue over results.

The question arises: How should you choose between a specialized multifamily marketing firm and a property management company?

Let's jump into a few considerations:

Market Dynamics

• In a market with minimal competition, where the philosophy is "if you build it, they will come," a traditional PM team might suffice. These markets are few and far between in 2024, but that's not to say they don't exist!
• If cost-cutting is the primary concern, and differentiation is not a priority, a PM team may fit the bill. Be aware that sub-optimal marketing can lead to a sub-optimal lease-up. But, when costs are non-negotiable, this may be a way forward.
• Most markets provide the renter with a plethora of choices. How your building is positioned against that competition can mean the difference between a quick lease-up or a long, drawn-out process to fill units.

Property Type

• A specialized marketing firm becomes essential for Class A new build in competitive markets, where standing out is crucial. Slashing budget and relying on an ill-equipped team often yields poor results.
• In the high-demand affordable housing sector, properties often lease themselves, making extensive marketing less critical. A strong, strong brand and online presence are still important, but it's not uncommon to see quicker lease-ups simply by the nature of the product.
• Class B and C properties (sometimes lumped into the "value-add" bucket from an investment perspective) don't necessarily need heavy investment on the marketing side. Often, there is little marketing consideration for buildings that are typically stabilized with long-term renters. Relying on a PM partner could be the most cost-effective approach in that case.

Investment into Marketing and ROI

• Investing in marketing can lead to leasing your building faster, immediately increasing NOI and a seamless leasing experience.
• Well-executed multifamily marketing creates opportunities to reduce concessions, potentially leading to rent increases and further increasing the value of the property at a high level.

When all else fails, consider the math. Here's an example:

A 150-unit building with $2K average monthly rents nets $300K each month. Suppose you work to stabilize over six months instead of twelve, meaning just under $2M in stabilized cash flow in half the time. 

If you invested $200K into your marketing budget, that's an 8-10X ROI.

Wrapping Up

In a landscape where the multifamily market is evolving rapidly, choosing the right partner for marketing is a strategic decision.

While some scenarios may still favor traditional PM teams, the trend suggests that the capabilities offered by specialized multifamily marketing firms are increasingly becoming a necessity for developers and property owners looking to thrive in the competitive and dynamic multifamily space.

As the saying goes, in today's market, it's not just about building it; it's about ensuring they come – and then stay.