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 are ideas on finding $10,000 this year on 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 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.
1. Answer every phone call. Every phone call is a potential lease. Large Real Estate Investment Trust (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 $10-20,000 a year.
2. 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.
3. Thinking time. Get ideas from those that know the property best. Have a brain-storming session with site personnel; management, leasing and maintenance. Make it fun. Have food! Really. No one knows the property better.
4. 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.
5. Charge monthly pet fees. It’s common practice to charge a one-time pet fee at 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. This could be as little as $10 per month per pet. Size the fee based partly on the average length of tenancy. This will provide guidance on the total pet fees earned per pet per lease. On a 200 units property with 20 units having pets a $10 monthly fee converts t o$200 a month or $2,400 a year.
6. 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.
7. 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 real lenders and see what is possible.
8. Utility Audit/Sub-metering. Submetering saves money. A review of all utility expenditures is just good business. Here is one place to start: http://www.powerhour.com/propertymanagement/utilitybillaudit.html
9. 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 lights bulbs… everywhere. And while we are all switching to CLF, check out the next generation in light bulbs: LED.
10. 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 mowing’s in the summer months. Preferably evenly spaced. This equates to one mowing about every ten days.
Can you think of other ideas to add to this list? Please comment.
Mr. Wilhoit is the author of two books: How To Read A Rent Roll: A Guide to Understanding Rental Income and Multifamily Insight Vol 1 – How to Acquire Wealth Through Buying the Right Multifamily Assets in the Right Markets.
For information on property management audio courses, books and our live weekly leadership academy, visit PowerHour Books and Courses page at http://powerhour.com/propertymanagement/booksandcourses
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About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. We discuss best practices in multifamily management and methods related to how to buy apartment complexes. Our focus is sharing strategies and tactics that can be implemented and measured. For more information, visit: http://www.MultifamilyInsight.com