By Laura Schlereth
Every property manager seeks to increase his or her bottom line by cutting extraneous costs and increasing the value of their properties. The means to achieve this are rarely simple and easily accessible. By evaluating the state of the property management industry, your company budget and your tenants’ needs, you can identify ways to trim fat and improve your bottom line.
David Matarasso, director of Real Estate Services for Bentall Kennedy (Canada) LP, a full service Etobicoke, Ont.–based real estate company, says it is wiser for property managers to buy smarter. "Rather than cutting back on services, it is more effective to find ways to control costs while at the same time not reducing services," he says. However, he cautions against cutting down on services that are part of lease commitments.
"Never cut costs at the expense of the quality of service the tenant should rightfully expect," he says.
As a property manager, you will have to balance how a decision to change services or amenities benefits you and your tenants. For example, Harry Popiluk, FIHM, secretary/treasurer of the Institute of Housing Management (IHM) in Hamilton, Ont., is also a residential property manager. At his property, Popiluk recently made the decision to charge visitors for parking. He says it’s become a fairly standard practice for other buildings in his area as it protects from neighbors taking up reserved spots, and residents end up benefitting in the long run.
"The income we get from the parking goes directly into the operating budget, which will eventually keep the cost of rent down," he says.
Plus, Popiluk adds that charging for visitor parking increases availability of spots for visitors because some people choose to find free parking instead.
Here are three major ways to maximize your property’s value:
With inflation and the rising cost of services, Matarasso says it is more effective to spend smarter than spend less. One way to do this is by leveraging bulk tendering, which is easier for property managers with sizeable portfolios. For example, if you manage several buildings and a few of them need roofing work, Matarasso says it’s much more efficient to do a group bid for all the buildings, rather than bid them independently. Bulk tendering can also work well for repeat services such as snow removal and landscaping. You will benefit from the economies of scale afforded by bulk tendering, says Matarasso. Vendors may be able to give a lower volume price for larger projects, especially if doing so guarantees consistent work over a longer period.
Part of being a property manager is designing and planning the future of your property, Matarasso says, and the future is in sustainable buildings and energy efficient technologies. Matarasso warns that you must balance your ability to fund enough capital projects in order to make the initial investment in energy efficient equipment updates such as a converting one’s lighting system to compact fluorescent lighting (CFL) or switching plumbing fixtures, such as toilets and showerheads, to low-flow substitutes.
One will experience payback through lower energy bills but it depends on many factors how long that payback will take. You’ll have to research the energy savings of the equipment you’re buying, compare that with its usage frequency and then budget how long it will take for the energy bill savings to make up for the initial investment. However, some owners, regardless of the fact that they may find the payback period is longer than desirable, will go ahead with the project because of the social and sustainability benefits, Matarasso adds. "There are tenants who attach a value to properties that are greening themselves."
Another way to improve your bottom line is to outsource in certain property services. Rather than purchase washer and dryer units to have at his property’s laundry rooms, Popiluk chooses to outsource the service to a third party vendor. The vendor supplies the washer and dryers, deals with any maintenance issues and gives Popiluk a commission. Popiluk found he saved more money this way than if he supplied the laundry service himself; plus he doesn’t have to deal with the hassle of the machines breaking down—his tenants have the third-party company’s number to call if issues come up.
Popiluk also outsources his cleaning services. Although he supervises the crew, he doesn’t worry about paying full-time salaries, employee insurance and benefits. However, Popiluk has found that outsourcing isn’t ideal in all areas; if he uses a certain service a great deal, outsourcing will end up costing more than hiring someone full-time. For example, he employs a full-time painter and is looking into employing a plumber and electrician full-time. You must do your own personal budgeting and research to find out what would be ideal for your properties, but it’s very possible that some services would be more cost-effective to outsource.
There are always ways to make your properties run more efficiently so that you can see an increase in your bottom line. How to maximize your property’s value depends on many factors, but you should evaluate your processes to ensure you’re on top of the latest industry trends that will increase your profits.