Contrary to popular belief, no matter economic conditions, smart property managers can always realize income growth.
According to the NREI President, the essential value proposition is: “Maximize income and minimize expenses.”
There are a number of techniques to accomplish this beyond the sometimes counter-productive temptation of raising rents.
Downturns offer a prime opportunity for creative property managers to not only reduce the negative bite on net operating incomes (NOI), but to sustain or actually increase income. Property managers are uniquely positioned to prosper in all kinds of conditions. For creative property managers, there’s actually job security in downturns!
“Maximize income and minimize expenses.”
How?
• Review every component of the income/expense statement to make sure you’re getting the biggest bang for your buck.
Example: Review tenant selection criteria to ensure that you’re using the best techniques to select good tenants with a strong credit and business history.
• Increase energy efficiency and control utility expense. Changes here can provide immediate cost-saving opportunities and increase the building’s value.
Examples:
1. Retrofitting lighting fixtures, HVAC systems, control devices and windows. Ask your facility provider about other additional upgrades or repairs they can handle for you that can cut energy/utility costs.
2. Lower energy and operating costs by buying electric, gas and oil in bulk.
• Rehab of a property can lower maintenance expenses.
Example: Inefficient mechanical systems and hard-to-clean flooring are just two items that, if upgraded or replaced, can reduce expenses.
• Rebid contracts for maintenance and get more bang for your buck.
Example: Consider hiring a facility maintenance provider who offers a comprehensive, customized package. Providing most or all facility services allows a provider to become really familiar with your property, which can make service better and more efficient. A team is provided for you, instead of just a service.
• Minimize loss of rental income due to vacancies
Example: Closely monitor tenant turnover and use careful planning to reduce time between tenants.
• Diversification of the properties you handle.
Examples:
1. The trend of single-family home management is a viable alternative, especially in areas of high home foreclosure.
2. Expanding into multifamily or retail, using your experience from other types of properties to bring added value to those assets.
Property managers have it within their grasp to enhance the value of the properties they manage and expand their wealth of knowledge to new assets in need of professional handling.
Chris Mellen, the 2016 president of the Institute of Real Estate Management, has more than 30 years of property management experience. Source: www.nreionline.com.