After enjoying more than a decade of prosperity, the COVID-19 health crisis prompted multifamily practitioners to adopt new strategies for budgeting, planning and reducing operating costs.
According to the National Apartment Association’s 2020 Survey of Operating Income & Expenses, many operators said they planned to build in decreased rents and income, freezes on capital expenditures and increased delinquency, vacancy and operating expenses into their 2021 budgets.
Knowing how to deploy the latest technology, including virtual property management and leasing, has played a major role in reducing operating costs, but there are other steps the savviest operators can take to reduce expenses for owners while keeping their residents happy.
At Atlas Real Estate, operating expenses have increased 3 percent across our portfolio since the beginning of the pandemic. What were some of our biggest expenses? In short, costs related to showings and marketing.
Mandates by the Centers for Disease Control and Prevention (CDC) shifted our operations to primarily off site over the past year or more. As a result, we moved into the realm of virtual property management as digital showings, digital staging, and virtual walkthroughs significantly increased. These digital leasing and management services required new monthly subscription services that weren’t needed prior to the pandemic.
The worldwide crisis also prompted the need for a new position — a resident resource manager — to assist residents struggling financially, to identify ways to improve their situations and to keep them grounded.
The resident resource manager is plugged into more than 100 public and private resources to help our residents remain in their homes and to ensure our property owner base continues to receive monthly rental income.
Craft new solutions
To start reducing operating expenses, we implemented a cost-control program focused heavily on leveraging the proper technology for the proper function, while closely scrutinizing our existing tech solutions.
Since many of the multifamily platforms now offer similar products/services, which wasn’t the case a year ago, we consolidated some platforms and therefore reduced costs.
However, we are utilizing the most advanced version of the AppFolio software, which includes more robust features and requires less overhead in the form of personnel. This upgrade came with a consultant who has assisted in improving our property-management strategy.
We paired this solution with other plugins to boost our output, response time and lead generation, thus assisting our property managers in maximizing their time, resulting in the need for fewer employees. Additionally, some administrative tasks have been sent offshore and synchronized with Monday.com, resulting in seamless property management assistance at a discount.
Tech subscriptions should grow as companies grow
Implementing the latest, subscription-based property management software isn’t the only way to reduce operating expenses. When a multifamily operator can successfully scale its operations, it will save money.
Subscription services rarely take into account the economy of scale achieved by a company as it grows. As a company grows in size, there may be some flexibility to push fees down, so don’t be afraid to pursue a customized tech solution.
While a number of tech firms or software companies have a set price or prices for their services, they should always be willing to work within a budget to earn new business. The pandemic likely placed upward pressure on their operating expenses, giving operators more room to negotiate.
Don’t sacrifice resident happiness
Balancing reduced operating costs with efficient resident service remains challenging for some multifamily operators in the current economic environment. But residents should always come first.
Focusing on resident retention/lease extensions is one way we have kept both our owners and residents smiling. Some property management companies forget that while the owner may be their client, the resident is their customer.
Since we make resident retention our highest priority, our expenses have slightly increased, but our collections, vacancy and retention numbers have outperformed most other property managers in our market.
During the pandemic-induced economic downturn, we kept our income higher than most property management companies because we only receive payment when our owner receives payment (and not if they have outstanding collections or vacancies). Even though our expenses were a bit higher, our net income did not suffer.
Resident relations should not be a direct function of operating costs. Instead, they should be an intrinsic part of high-touch customer service, a caring company and a team committed to excellence, their resident’s needs, and a respectful workplace.
Establish goals to control operating expenditure
Initial goal-setting is one of the best practices for controlling operating expenses, while still maintaining the property and keeping residents happy. For instance, if keeping residents happy is your goal, you need to take a hard look at how your residents are being treated.
Email surveys or questionnaires are a great way to uncover this information. Measuring how quickly their repair and maintenance requests are completed is another effective tool for gauging customer happiness. Another way to ensure resident happiness is to provide them with resources to pay their rent when they don’t have a job.
A multifamily operator solely focused on reducing operating expenses using the latest technology may struggle to keep high-occupancy levels and retain residents in the current economy.
Providing white-glove customer service and making residents happy should always be part of the operating expenditure-reduction equation, which is ostensibly a fine balancing act.
However, resident happiness does not need to come at an accelerated cost. It should come from a deliberate intention — or choice — at the highest corporate level. Operators should choose to honor their residents and believe that they are the lifeblood of their community.
Treating people with respect and dignity and helping them when they need it is what keeps occupancy high and residents happy. The apartment is only one half of the equation — customer service is the other half. Resident happiness and long-term retention occur when owners and operators are good to their residents.