Manage Your Property Management Costs
Rising costs are a growing concern for landlords and property managers this year as inflation eats more of their profit margin.
If you haven’t managed the cost side of your balance sheet, then this short term pressure is actually a blessing. Now you’ll finally be making efforts to streamline, reduce unnecessary waste and losses, and perhaps adopt a virtual property management system.
While cutting costs fast now is likely your goal, it can come with longer term issues, strained relations, and lost tenants. Planning for sustained, long term cost reduction is a matter of carefully weighing macro changes that involve fundamental changes in your business.
24 Key Ways to Lower Your Property Costs Now
If your cost/revenue situation is looking serious, here’s a few areas to explore:
- reduce hours for staff and redeploy so no new hires are necessary.
- cut outsourced work and bring leasing, turnover management, unit showing, and accounting in-house perhaps by adopting a property management platform yourself (a modern system such as ManageCasa could help you make this transition successful).
- go completely virtual (if you can use your home as a operations headquarters) to reduce office expenses and use ManageCasa to run everything online.
- focus on tenant retention with good service and consider some incentives to reduce churn losses and turnover costs.
- cut back on advertising and use only your top renter lead channels.
- use digital payments to receive rent
- renegotiate service contracts with property management firms, contractors and vendors and look for them to contribute to reducing unnecessary expenses.
- reduce maintenance frequency for the next year and ask tenants to self-report issues with appliances and unit issues.
- reduce your service vehicle fleet by one vehicle and optimize the scheduling of their travel routes to reduce fuel consumption.
- use your platform’s expense reporting feature – identify units/buildings with the highest cost per unit vs lowest revenue and identify specifically what expenses/costs are creating work and costs
- identify and forecast all of your expenses most likely to rise with coming inflationary pressure – plumbing, HVAC, electricity, natural gas, payroll, marketing, tenant acquisition, leasing, property management fees, etc.
- automate your maintenance using property management software – ensure you don’t have to manage things with spreadsheets and paper tickler files.
- inspect properties thoroughly soon so they’re less frequently required.
- encourage landlord to drop high cost/maintenance properties – old, dilapidated buildings or units spell trouble if you don’t have a reliable contractor to handle constant repairs and do proper maintenance schedules. These properties represent your top current risk and you have to take action.
- buy higher quality water heaters – a bad thermocouple or thermostat are the usual culprits when water heaters break down. Take a good look at gas-fired, tankless water heaters. These save energy, make tenants happier (and lucky) and if there are breakdowns, they’re easier to fix.
- buy high-quality HVAC units – they breakdown much less, which means fewer costly repairs and time spent. Shop for reliable equipment.
- hire a property manager — the cost of a property management company might be a good idea since they may be able to do the work more cheaply. Find out more about good property managers.
- screen your tenants more carefully – the best tenants are low cost tenants who don’t create costly events. See how to screen tenants effectively.
- screen contractors more cautiously with a view on to their ability/willingness to fix/maintain time efficiently
- keep on top of your expenses, repairs, contractors, and maintenance – significant losses occur between the lines so to speak (unneeded repairs, poor repair service, overcharging)
- simplify your accounting – subscribe to a modern SaaS-based property management accounting software to help ensure finances are leaking out and the worst losses are identified and dealt with.
- outsource maintenance to tenants —
- use property management software’s tenant portal to keep tenants connected, able to pay easily, and ask you questions. This allows you to cut tenant service time. Tenant self service via the portal is a feature tenants love and you’ll have fewer phone calls and less need for them to physically visit you.
- Review your rental property tax management strategy to ensure you don’t over pay tax. Increasing taxes and fees will erode everyone’s financial results.
What is the Typical Cost Profile?
Rental operating expenses are typically 35% to 80% of the gross operating income (GOI) depending on the type of rental property — Zillow report.
NAR’s most recent exploration of rental property costs didn’t take property management company’s fees into account. Yet the total then was over $12,000 per year per unit. In 2023, these costs are part of the picture.
Property Management Software Helps
ManageCasa helps you identify which management activities are not generating good services nor good ROI.
Of course, your property management software is central to your capacity for avoiding costly errors and reducing expenses intelligently. Your real awareness of your tenants and assets will be put to the test in 2024.
ManageCasa provides plenty of professional level accounting and reporting capabilities so you can see the real numbers affecting your budget.
Where to Reduce Your Budget Expense Items
Improved budget management is simply another reminder of your value proposition and how lucky your clients are to have you. On a practical basis, you have your own unique list of items you’re spending too much on.
Your overspend might arise via:
- staffing (your biggest expense is solved only through layoffs)
- inspections (anything in the field is costly now)
- appliance repairs (using repair contractors can leak out significant funds)
- servicing too many unit turnovers (hands on cleaning/maintenance costs with a time window)
- paying repair/maintenance contractors too much (not having in-house staff with the right certifications)
- office costs (going virtual never looked so good)
- service fleets and insurance (vehicle maintenance, leasing, fuel, and insurance premiums)
- fuel/heating bills (high and predicted to rise this year)
- taxes (certain to rise for most property management firms)
- new equipment (avoiding having to buy anything new)
NAR Rental Property Costs Report
In 2017, the average annual operating expenses per unit was $ 5,270. The average annual capital expenditure was $3,856, or a total of $9,126 per unit per year, or $760/month. If that is inflation to 3% inflation cost per year, that is equivalent to $830 in 2020 dollars. — from NAR landlord expenses report.
Even if your costs fit the national average, you can still find ways to reduce. If you were using ManageCasa, you could identify cost problems faster, and go virtual and automated to save a lot more money. At this point, property management software never looked so good.
Good luck in your emergency cost reduction action plan. Look at this as a necessary transition to more cost effective management.
Review all of ManageCasa’s powerful features and know it will make your high priced staff much more productive.
Try ManageCasa and discover how effective it is in reducing property management costs.
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