For most of the past decade, rent growth covered a lot of operational sins in multifamily. When rents climbed every year, a manager could leave costs loosely watched and still show an owner a rising bottom line. With rent growth now stalled across much of the Sunbelt, that cover is gone, and the difference between operators is showing up in places that rarely make it onto an asset-management dashboard.
Ron Kutas, Chief Executive Officer of OneWall Communities, built the firm around owning and operating its own workforce housing before managing it for others. He argues that the habit most of the industry has quietly gotten backwards is treating operations as a spreadsheet exercise viewed from an asset-management seat, rather than a set of decisions made at the property.
Reading the P&L like an owner
Asked what changes when an owner-operator reads a profit-and-loss statement, Kutas’s answer is short: he is a lot more detail-oriented. Money spent on a building he owns is money that does not come back, which tends to focus attention on line items that a manager paid on collected revenue has little reason to scrutinize.
The conventional wisdom he would most like to retire is that rent growth fixes everything. In a year when rents are flat, that assumption leaves an operator with no plan for the half of the equation that keeps rising regardless: expenses.
Repair, don’t replace
The operating philosophy Kutas describes is unglamorous by design. Net operating income in a flat year comes from keeping paying residents in place, so the property is not swallowing turnover and marketing costs, and from managing expenses line by line: scrutinizing vendor contracts and repairing equipment rather than replacing it wherever that is the sound call.
None of this is visible from a distance. It is the kind of work that only happens when someone treats the building’s costs as their own.
The pool problem
A concrete example of an expense a revenue-focused manager would be unlikely to touch: pools. OneWall does a great deal of work in the Sunbelt, where nearly every property has one, and third-party pool maintenance is a recurring cost. Where state rules allow, the firm has certified its own maintenance technicians to treat the pools in-house, removing a vendor line entirely.
It is a small decision on any single property. Across a Sunbelt portfolio, it is the kind of accumulated expense discipline that a manager whose fee tracks revenue has no particular reason to pursue.
The small line that tells the story
Kutas says the smallest expense line he ever cut that told him everything about a prior manager was the phone bill. A single overlooked recurring charge is often a reliable signal of how carefully, or carelessly, everything else was being run.
The same read applies on the physical side. When he walks a distressed property in the first week, the one thing that tells him how the last operator ran the place is curb appeal. Both are proxies for attention, and attention is the scarce resource in a flat market.
Why the spreadsheet misses it
Class B assets are currently outperforming Class A on occupancy and concessions, which puts owners of workforce housing in a stronger position than the headlines about stalled rent growth might suggest. Kutas’s highest-leverage move for an owner sitting on a Class B asset in a soft submarket is also the least technical one: keep residents happy. Retention is cheaper than turnover, and it is earned through maintenance and service rather than through a rent roll.
The reason so much of this gets missed, in Kutas’s telling, is that the industry too often manages properties from an asset-management standpoint, looking at numbers on a spreadsheet rather than at the decisions that produce them. In a market where rent growth is no longer available to paper over the difference, the operators who read the P&L like owners, down to the phone bill, are the ones most likely to hold their returns while others watch them slip.
About the Expert: Ron Kutas is Chief Executive Officer of OneWall Communities, a vertically integrated multifamily owner-operator that provides third-party management services. He works in workforce housing and Class B multifamily operations across the Northeast and Sunbelt.