2024 Property Management Outlook with Jeff Hacker

 We’re talking to one of our long-time clients, Jeff Hacker, who runs Bayside Management and Leasing. He was on The Property Management Show three years ago, and we love talking with him because he’s been in the property management industry for 20 years.  He was with Bayside during the great financial meltdown between 2007 and 2009, and we asked him to come back and share with us some of what he learned as that crisis unfolded. We also wanted to know what he’s doing to prepare for another potential crisis in the industry.  Learning from the Past: How the Crisis Unfolded in 2007 Jeff recalls the crisis building slowly the last time.  Interest rates were going up and the news grew more negative over time as he tracked real estate industry trends. People were not able to make their mortgage payments. The default rates were rising. Most people had an inkling that something was going on, but no one expected it to be as severe as it was. People generally try to be optimistic. Everyone remembered the savings and loan debacle, and there was a general sense that whatever crisis was looming, it would pass and not be too significant.  But, as 2007 and 2008 and 2009 wore on, it became clear that this was something truly catastrophic. The significance of this economic event was pretty widespread.  From a property management point of view, the industry was lucky in some respects. While there is no industry that’s truly recession-proof, property management in general can weather a financial storm better than other industries because people always need a place to live. Even if they’re not owning homes, they need a place to rent. So, while not completely insulated from the effects of a huge recession, property management usually does not go to pieces.  Jeff said that what he noticed early is that as the crisis was unfolding, applications were coming in for vacancies from people who had owned homes. They defaulted on their mortgages or their mortgage companies foreclosed on them.  Some of these homeowners purchased a home with an income-only loan. They put five percent down or in some cases, they put zero percent down. So, there was not a lot of skin in the game. They borrowed up to 100 percent of the mortgage, so when the house was suddenly worth less than the mortgage, people walked away.  One of the things that Jeff learned was to be significantly more proactive with landlords and investor clients at Bayside.  A surprise during the last recession was the number of layoffs that came from the financial meltdown. Jeff would have liked to have been more prepared for the number of job losses that impacted the industry. This led to more vacancies.  When a tenant loses a job, they may be okay for a month or two. But then, they’ll vacate because they’ll need to move in with someone else to save money on housing. Or, they’ll move for a new job.  Homes sometimes have to be rented out for less than an owner would like in a business environment such as this. Jeff learned the importance of being proactive with owners; to explain this situation and to let them know what to expect. There may be less rent. There may be multiple vacancies.  Jeff said another thing he would have liked to have done better is to suggest that owners lower their rent in order to keep tenants who were struggling. While no one wants less rent coming in, it’s better than a vacancy during a recession.  Current Layoffs and Recession Fears In the San Francisco Bay area, where Bayside Management is located, there have recently been mass layoffs in the tech in...