The Multifamily Operations Crisis Most Investors Are Not Prepared For

Adrian Danila (00:00)
Some do, some don’t. ⁓ A lot of them that invest that I know personally know, they don’t personally operate, right? They use third party services. They’re just investing, you this is just an investment vehicle for them, but they stay away from managing, which, you know, between you and I and everybody that’s watching, those are two very different set of skills. Just because you’re a good investor, it doesn’t make you a great manager.

managing real estate multifamily in today’s time, it’s extremely difficult. It’s never been harder.

Dylan Silver (02:08)
Hey folks, welcome back to the show. Today’s guest, Adrian Danila has spent more than 20 years in multifamily maintenance, leading teams, solving operational challenges and improving property performance across portfolios as large as 32,000 units. He now advises property management companies and suppliers to multifamily investors while helping the industry build stronger teams, better systems and better results through consulting, training, media and

podcasting. Adrian, thanks for taking the time today.

Adrian Danila (02:39)
Dylan, thank you so much for having me on. Excited to be here.

Dylan Silver (02:43)
What comes to mind when I say some of the biggest challenges that property management companies face today?

Adrian Danila (02:51)
I think ⁓ one of the biggest challenges is the way properties were purchased a few years ago for those that just purchased properties, multifamily, years ago, especially those with flooring rates, right? A lot of people are hurting. ⁓ The pro-formers were made hoping, were like projecting that rates will increase. That wasn’t the case. ⁓ Insurance rates went up for the few.

Last few years in a big way. So that’s that’s another thing regulations are tightening ⁓ Looks like politicians on left and right are beating up on owners, you know, trying to point them out as being like the villains in a story So it’s not a lot of incentive to you know own multifamily properties today, right? I think long term things will change right and

For those that are playing the long game, that’s actually could turn out very well for them. But there’s a lot that goes up against a multifamily investor. From operations standpoint, I’m seeing besides like changes being able to make budget, right? Where the occupancy levels are very low, a significant stuff, shortage issue that we’re having as an industry, which is not getting any better.

Big picture, those are the things that I’m seeing.

Dylan Silver (04:17)
Now, you mentioned the floating rate debt that people took out, and that seems to have been a huge source of distress financially for a lot of syndicators and fund managers and these multifamily properties at large, because it’s not just the floating rate and the increased premiums that people are paying for this debt. It’s a combination of everything, right? You’ve got

more vacancies, you’ve got increased costs, you’ve got potential job loss or areas where people may have their job replaced in many cases, and especially with AI and so much that’s coming in. And you add to that a stress of increased mortgage premiums, it’s potentially a highly distressing situation for a lot of multifamily syndicators.

Adrian Danila (06:01)
It’s true. And I’m learning from investors, multifamily investors, that there’s a lot of dry powder, a lot of money, a lot of cash sitting on a sidelines waiting for deals to break down, right? To literally just not being able to make mortgage. And a lot of properties are in that situation, really. So it’s just a matter of time. I think we’re seeing an increase of those type of properties being foreclosed on or just about to follow foreclosure.

And there’s a lot of money from the investor side ready to buy at cents on a dollar. So that is a, you know, there is a phenomenon and some banks are really looking at the current situation and asking the question, is this going to move in a better direction soon? So our clients will be able to pay the bank notes or should we pull the trigger and have them default on their rates?

and just put properties back on the market, find another buyer.

Dylan Silver (07:02)
That’s happening in real time as we speak. mean, we’re talking at the beginning of May, 2026. So if these are five-year commercial loans that people took out in 2021, or if they took them out in 2020 and got some type of extension, hey, work with us a little bit, and it’s still not working out. Right now, we’re going to be seeing kind of the rubber hit the road. Are these properties gonna get foreclosed on or are banks gonna work with these properties?

Adrian Danila (07:33)
It’s true and there’s another aspect to write some of them are actually trying to sell the assets but obviously the ask the difference between the asking price and making a deal having the ability to make a Deal work right from a numbers perspective that gap is it’s pretty wide still in a few cases, you know that gap starts to narrow right, but we’re not there yet. I have friends of mine that ⁓

are underwriting probably north of 150 deals a year. A friend of mine actually underwrote about 148 I think deals last year. He purchased one. So, and that’s not an isolated situation. There’s a lot of companies like that that just keep underwriting, keep looking for a deal that makes sense. But that gap is still, you know, significant, right, so far.

So now the second thing that you know they’re waiting for is for some for some loans to default so that would be an opportunity to buy the discount.

Dylan Silver (08:41)
When you’re talking with investors who manage or own these properties, do they typically have all the right systems in place in order to operate most efficiently?

Adrian Danila (08:58)
Some do, some don’t. ⁓ A lot of them that invest that I know personally know, they don’t personally operate, right? They use third party services. They’re just investing, you this is just an investment vehicle for them, but they stay away from managing, which, you know, between you and I and everybody that’s watching, those are two very different set of skills. Just because you’re a good investor, it doesn’t make you a great manager.

managing real estate multifamily in today’s time, it’s extremely difficult. It’s never been harder.

Dylan Silver (09:35)
Walk me through that. think a lot of people may be curious as to how those difficulties materialize.

Adrian Danila (09:44)
Well, I think it all starts in underwriting, right? ⁓ A lot of investment groups are, they have looked at the base case scenario and the under road deals based on a best case scenario. And they’re handing them to operation teams that a lot of times I had to say, unfortunately can’t stand the chance

at making this, making those deals work for the, for the reasons that I mentioned at the very beginning, right?

Insurance rates more regulation more vilifying or ownership groups, you know that reflects, you know, you introduce now, you know, even immigration, you know, there are certain properties in various parts of the countries that are being affected by the ice rates I had friends that you know share with me that a certain property of theirs, know went from like 95 % occupied to 80 % almost overnight and There’s no pool of you know, potential renters to feel back to backfill that you know vacancy

So that’s the real situation out there.

Dylan Silver (11:19)
Now, when folks are dealing with acquisitions, especially in the multifamily space, there’s different ways that they can do value add. And I have heard, you you could force appreciate it through something like adding better amenities, right? But at a certain point, there is enough luxury housing in various markets.

and we may be starting to see an overabundance of luxury housing and a lack of truly workforce or affordable housing. At your level, are you seeing a similar trend?

Adrian Danila (11:59)
I’ll say yes to some extent, but I’ll say there’s another aspect that you didn’t, you know, you didn’t mention in this picture is that new properties, new developments, right? Coming into the market. They’re actually offering so much. They’re giving so much money away that they’re actually becoming on a 12 month lease. They’re becoming less expensive than what we call affordable. You know, like war, housing, which is insane, right? But some of them had to go to that extreme to just, you know, get had heads in bed.

Dylan Silver (12:24)
Yeah.

Adrian Danila (12:29)
⁓ cause leaving those apartments vacant for the time being for God knows how long, that’s not an option, right? So they’re giving away months and months and months free. and that becomes like when you factor in that discount, those months free over a 12 month period, some of them are like right there. So when you’re thinking about, I’m a person, I’m a blue collar person, right? And I’m looking for an apartment. Would I, why would I go to like a workforce development where I could go to like a luxury property and get.

For a comparable price get like incredible amenities and you know lifestyle for that for told for the next 12 months

Dylan Silver (13:06)
I’m seeing that as well.

I’m seeing that as well, Adrian. And it’s interesting because even if you go back not that long ago, I remember having to pay lots of fees. It felt like three or four times the rent to get into apartments and they could be very selective with who they brought in. And now I’m seeing places that went from needing three times the rent income to two times the rent to being more strict on credit to less strict. And then

Offering incentives here. Here’s a month free. Here’s two months free. Here’s three months free Here’s a gift card and when I say all these things it’s even shocking to me But all of these incentives are happening right now to your point because what are the options? Hey, we can either keep it vacant and charge top dollar or we can charge less offer incentives and get people in here

Adrian Danila (13:55)
Yeah, it’s a story happening and it becomes very discouraging. Actually, I’m hearing that some investors that were typically looking at multifamily as a very appealing class asset saying that. It’s not a good time for us to like place our money in multifamily. There are other asset classes, you know, other type of investments, they’re significantly more profitable with less headache.

than multifamily and we actually like we change our investment strategy and we’re not investing multifamily anymore.

Dylan Silver (14:32)
Where would you say your greatest strength lies as a consultant? Is it in the underwriting or is it in the ability to manage these properties? Because you mentioned earlier that’s a separate skill set.

Adrian Danila (14:47)
Thank you for the question. Great question, by the way. Operation. So my background has been in operations for 22 years. Work for very large operators, which includes, know, Greystar seven years, which is the largest operator, multifamily operator in the world.

And that’s where my expertise lays. ⁓ It’s multi, especially facilities operations, ⁓ side of the business. So that would be operations. Yes.

Dylan Silver (15:56)
Now, when you’re managing properties at that scale, of course it’s going to change over time. And right now I imagine AI and the way that that’s interfacing with tenants is on the tip of everyone’s tongue. But what are the most important things to get right when you’re managing that many number of doors?

Adrian Danila (16:17)
I think structure is the most important thing, right? Do you have the right foundation when you build a company, when you build any type of management company? And structure means not just like having the right SOPs in place, because honestly, you mentioned AI. You could literally drop a operation manual into a chat GPT and ask it to improve it so many times. Like this is readily available, or you could write it

from scratch for you. So as far as like, you know, having available resources, things in writing manuals, playbooks, this is readily available and it costs almost nothing nowadays. So what it comes down to is that, you know, do you have the right people in place? Do you have the right people that execute the right way? And also giving them the right resources. Cause you could have like extraordinary people if you have a management company that…

Manages distressed assets assets. They can’t even pay mortgage You can’t really pull rabbits out of the hat. You can pull success out of the air You have to have the funds to run the property. So it’s it’s becoming increasingly Increasingly difficult for operators to operate under those circumstances But I will say definitely if you don’t have the right people this will actually make the situation even

worse than what it is with not having funds and all the other challenges that a lot of real estate is facing.

Dylan Silver (17:47)
You mentioned the right people. If an investor, operators are going in and acquiring a pre-existing asset, there’s a property manager, a property management company in place, and they want to make some changes. Is it easier to bring a whole new staff in or is it easier to improve what’s currently going on with the current property managers?

Adrian Danila (18:12)
This is on a case by case situation, but I’ll say probably the first instinct will be that you want to keep the existing stuff in place. We as an industry, we’re not great at passing on legacy knowledge and information about the property is being found in binders, right? We’re still operating from the binders, which are all across the property and typically they’re outdated. If you open the binders, you will find that, you you’re not finding

relevant up-to-date information in most cases, but the most information resides in individual’s heads, right? Your property manager, your service manager, your technicians, your leasing agents. If they’re been there long enough to accumulate that tribal knowledge about the asset. So my first instinct is to ask the questions, ask a lot of questions, see what their knowledge about the asset is.

Secondly, understand what the skill set is, right? Are they capable? Honestly, ⁓ in many states that were replacing an employee, I’ll say it’s easier than others. Probably, I will go back to what I just mentioned earlier. I will give the current staff a chance. Because maybe if you’re buying and you have enough reserves and you have enough resources, you will learn that actually the property would have been

ran a lot better if those resources were available and people are actually capable. They just didn’t have the proper resources to run a good show.

Dylan Silver (19:46)
resources.

We are coming up on time here, Adrian. Any new projects that you’re working on, and then what’s the best way for folks to reach out to you?

Adrian Danila (19:59)
Yes, so I’m currently focusing a lot of my a lot of my ⁓ time in helping Connecting the owner and the operator with the right solutions for them, right? Whether that’s a technology solution whether that’s a service like, know make ready were ⁓ Whatever were trades right Outsourcing that’s what I’m connecting ⁓ the two parties with because I think that there’s a gap out there and we’re trying to

You know, we’re trying to bridge that gap. ⁓ The way I could be found ⁓ is on LinkedIn. I’m Adrian, middle initial C, Danila, or at [email protected], or my cell phone number is 678-469-7708. I make it public. There’s no really a secret, right? ⁓ I’m very good if someone wants to reach out via cell phone.