When people find money, it is usually in small increments like a jar of change or that lost $20 in an old pair of jeans. Following below are ideas on finding $10,000 this year on your property. Some of these ideas can produce $10,000 by themselves. Some may reduce costs and drop additional cash to net operating income (NOI). In multifamily properties, there is no magic bullet, however, savings and revenue are sometimes right in front of us. We just have to keep looking.
Professional athletes know this well; it is not any one thing they do that makes for success, it is doing many small things well that culminate in high achievement. The same applies in property management. Presented here are ten suggestions for finding an additional $10,000.
Answer Every Phone Call
Every phone call is a potential lease. Large real estate investment trusts (REITs) have proven that answering every call can directly impact revenue generation to the tune of one or two percentage points per year. For multifamily assets with one million dollars in annual revenue, this equates to $10,000 to $20,000 a year.
Enforce Late Fee Collections
Adhere to the terms of the lease. Both parties, property management and tenant, have agreed to the terms of the lease. The lease has a provision for payment of late fees. Enforce the provision.
Thinking Time
Get ideas from those that know the property best. Have a brain-storming session with site personnel, management and maintenance. Make it fun. Have food! Really. No one knows the property better.
Increase On-Site Coin Operated Washer/Dryer
Fees by 25 Cents per Use
Load factors are pretty easy to figure out. On 1,000 loads (wash/dry) per month, a 25 cent increase generates an additional $250 per month or $3,000 annually.
Charge Monthly Pet Fees
It’s common practice to charge a one-time pet fee at the time of the original lease. An alternative strategy is to lower this fee (not eliminate the entry fee) and charge a monthly fee for each pet.
Early Termination Fees
Make sure each new lease and each lease renewal has a clause for early termination fees (if allowable in your state). This amount can range from one to three months rent for breaking a lease. This provision can add several thousand dollars each year to revenue.
Review Existing Loans for Re-Finance Opportunities
The savings here can be significantly higher than $10,000 all by itself. This is one area where we prefer to stay away from the word “presume.” Talk to lenders and see what is possible.
Utility Audit / Sub-Metering
Sub-metering saves money. A review of all utility expenditures is just good business. Here is one place to start – www.powerhour.com/propertymanagement/utilitybillaudit.
Energy Efficiency Review
What energy upgrades were accomplished at your property recently? Lighting, roofing, windows, insulation? New air filters or weather strips? What can you implement with the least costs and most immediate benefits. Install energy-saving light bulbs everywhere. And while we are all switching to CLF, check out the next generation in light bulbs – LED.
Review all Service Contracts
Few properties are out-sourcing the watering of plants anymore, but there are plenty of other places to look for savings. Example – reduce mowing/landscaping service by 25% if possible without getting over zealous. If the mowing crew is cutting the same two inches of growth from three weeks earlier, consider skipping a week. Or two weeks. If shaving mowing has limited or no negative consequences on property presentation, then skip. Consider contracting for a maximum eight to ten mowings in the summer months. Preferably evenly spaced. This equates to one mowing about every ten days.
John Wilhoit, Jr. is the President of Wilhoit Investment Network in Columbia, Missouri, an owner and asset manager of apartments, condominiums and townhomes and a contributor to Multifamily Insight blog, providing tips on best practices in multifamily property management. Reprinted with permission of WAA, The Wisconsin Apartment Association News.