Similar Vintage, Half the Headaches: The Difference is Where

Property management—a cornucopia of late rents, finding pets (and people) not on a lease, neighbor disputes, plumbing backups, and trashed units. It’s also first apartments, summer pool parties, growing families, and incredibly thoughtful long-term neighbors. The emotional swings that onsite property managers navigate on a daily basis are remarkable. It takes a special person to handle all of it while also being a salesperson (leasing), accountant (billing), collections agent (rents), general contractor (vendor management), and psychiatrist. These super-people are difficult to find, yet they’re the ultimate piece in many apartment properties’ success. When you find one, you’ll do just about anything to keep that person or company in-place.

In the Bay Area, though, the property management calculus is different.

A Tale of Two Properties

Let’s start by comparing two properties of the same value. A $30M apartment acquisition in the Bay Area consists of about 85 units ($350k/unit). That’s a 1960s vintage property in a solid location outside of San Francisco. A similarly located 1980s-vintage property in the Southeast at the same valuation would consist of about 200 units ($150k/unit). The Bay Area deal would employ one onsite manager and one maintenance technician. In the Southeast example, there are likely two office employees and two maintenance people.

An 85-unit property can still have its occupancy challenges, but in a place like the Bay Area, where demand routinely outstrips supply, apartment units tend to lease themselves. A higher-quality manager will achieve better rents and lease those units faster. That matters in a rent-controlled environment, where that base rent can affect the property in perpetuity. One Bay Area property we own had zero resident turnover for 12 months. Can you imagine how much time a manager has when they don’t have to lease units? This is the exception, not the rule, but rent-controlled properties rarely follow the ~50% annual turnover rule. It tends to be much lower.

That’s never the case in a region like the Southeast. A good year would see about 60% of tenants renewing and 40% signing new leases. In our example, that’s still 80 units in the 200-unit building. Spread evenly, that’s about 6.5 units per month. You need an entire marketing plan and budget to generate enough leads and tours to hit that goal. And with new leases at a premium today because of historic levels of new supply, every lease is a negotiation. Every renewal is scrutinized to improve the odds of keeping the resident in their unit. Every tour is tracked in a CRM program, with data to predict conversion success.

In short, there are structural advantages to managing properties in California.

Living Onsite

California law requires the property manager to live onsite if the property has 16 or more units. Given the exorbitant housing prices in the Bay Area, the maintenance tech may live onsite too, as part of the compensation package. Even better, there are married couples who can fill both the manager and maintenance roles. These properties have 24/7 coverage, with at least one person who knows what goes on at the property night and day, understands its inherent quirks, screens tenants through the lens of “who will be my neighbor?” (within fair housing guidelines), and is invested in the community.

In the Southeast example, how many property managers actually live at the community where they work? In my experience, it rarely happens. They want space. They’re tired, like all of us at the end of the day, and want a change of scenery. It’s understandable. Is it necessary for the manager to live onsite at a 200-unit property to ensure it runs smoothly? No—but it can boost engagement, foster community, and provide better insight into how to improve or maintain an asset. The knowledge is invaluable, and it’s a missed opportunity that many third-party property management companies rarely capitalize on.

So far, then, vintage California properties offer less leasing work thanks to lower turnover, plus a manager who lives onsite and should know everything happening at the asset in far greater detail.

Maintenance

Work orders are a fact of life at every apartment property. It’s unavoidable. But our 1960s Bay Area deal likely doesn’t have air conditioning, in-unit laundry, an individual water heater, or large furnace. It probably has a gas-fired wall heater, a wall A/C unit (if it has one at all), and centralized hot water. That limits what can go wrong inside a unit. When that central water heater leaks, it happens in a mechanical room, not in someone’s apartment.

Our 1980s apartment example likely has a large individual HVAC unit, furnace, water heater, and in-unit laundry. Those don’t all fail at once—they go in waves over time. But if the water heater breaks, it can cause leaks that require new flooring, drywall, or cabinets. And, those big HVAC units can cost around $5,000 and require specialized installation. The larger repairs and maintenance budget in this type of property reflects this reality.

Less goes wrong in vintage Bay Area apartment units, but plenty still goes wrong maintenance-wise across the board. We had to re-pipe an entire apartment property in Silicon Valley because of constant water issues. Right now, we’re replacing the electrical panels in every unit of a new acquisition and updating the main panel. And because it’s a seismically active area, we have to retrofit the structure for more stability (and insurability) in an earthquake. That’s something few markets have to think about.

Where I Land

So where does this leave me? If forced to hold long-term, I’d rather do that in the Bay Area, because I believe the investment comes down less to day-to-day operational execution and more to the business plan, purchase price, and leverage. In larger vintage properties in other markets, there’s so much day-to-day risk that a longer-term hold feels precarious. All properties, regardless of vintage, are subject to the whims of the market—rents, property insurance increases, inflation, laws and regulations, and so on.

This doesn’t mean markets like the Southeast should be avoided. On the contrary, the fundamentals remain strong despite the recent supply surge. If you have a well-established team that can operate vintage assets, or a significant capital budget, these deals can work. And with AI compressing investment decisions, a short-term hold period pairs well with these markets.

Personally, with a short-term focus regardless of market, I’d rather increase what I can control by removing much of the operational volatility. And for me, that’s done by focusing on markets like the Bay Area.