Owning a piece of rental property – whether it’s residential, commercial, industrial, or somewhere in between – comes with its own costs and fees. We call these property management costs. And while there are plenty of ways to strengthen ROI in different areas of your business, getting property management costs under control is a big one.
The Driving Factors in Property Management Costs
As a property owner, there are several “buckets” of costs that you have to account for. And the more you understand what these categories are, the more you can effectively tackle them to ensure costs are low.
- Tenant acquisition. There are obviously costs associated with finding and onboarding new tenants. This may include marketing costs, advertising expenses, costs associated with preparing the property for a new tenant, etc.
- Property maintenance. Any property, whether it’s an apartment building, office space, or retail space, has costs associated with maintenance and upkeep. This can range from several hundred dollars per year to thousands of dollars per month, depending on the property.
- Holding costs. There are a lot of different line items that go into the holding costs category, including: mortgage, interest, property insurance, taxes, utilities, property management fees, employees, etc.
Now, this isn’t to say these are the only categories – just that they’re the big ones. If you can keep costs low in these areas, your numbers will almost always work out. With that being said, this is where we want to focus our time and energy.
Tips for Reducing Your Costs
With so many different angles to attack your property management costs from, knowing where to start may be one of the most important pieces of knowledge. We won’t pretend to know everything about your specific property or properties, but here are some helpful tips that tend to apply across the board.
- Hire a Good Property Manager
Most people think of a property manager as an added expense. However, if you run the numbers, having a good property manager on your team can actually have a significantly positive impact on your cost-cutting efforts.
You’ll want to find a property management company in your area, but just for context, Los Angeles Property Management Group has been able to:
- Save a new client $5,000 within the first week of working together by getting them out of a roof replacement agreement that was overcharging them.
- Lean on a contact within the industry to re-pipe a building for 30 percent less cost than the owner’s plumber was going to charge.
- Get a client an $11,000 check from the City by disputing an excessive water bill.
It’s hard to know where you’re overpaying until you get someone from the “outside” to explore your business and offer new ideas and alternatives.
- Embrace Automation and Technology
Technology has the ability to streamline processes that are currently costing you hours of time. By focusing on the correct technologies, you can make a big difference in your day-to-day operations and expense sheet.
For example, implementing automated systems for rent collection can enhance efficiency and decrease late payments. Automated reminders for rent due dates and online payment options work by encouraging timely payments and reducing the need for manual follow-ups.
- Be Proactive With Maintenance
Proactive maintenance is key to preventing costly repairs down the line. Conduct regular inspections of the property to identify minor issues before they escalate into significant problems. Addressing maintenance needs promptly helps preserve the property’s condition and prevents larger and more expensive repairs down the line.
Consider establishing a maintenance schedule for essential systems like HVAC, plumbing, and electrical systems. Performing routine checks and addressing maintenance issues early on will extend the lifespan of these systems and minimize unexpected expenses.
- Optimize for Energy Efficiency
Reducing utility expenses is another way to cut property management costs. It’s a good idea to implement energy-efficient practices such as installing LED lighting, programmable thermostats, and low-flow fixtures. These upgrades not only reduce utility bills but also contribute to environmental sustainability.
Take things one step further by educating tenants on energy-saving practices and encouraging their participation in energy conservation efforts. Simple measures like turning off lights when not in use or using energy-efficient appliances can collectively lead to noticeable savings on utility costs.
Enjoy Higher ROI
Reducing property management costs basically has a 1:1 relationship with improved cash flow. In other words, if you can lower your costs by $1,000 per month, that’s an extra $1,000 per month in your pocket (give or take a few dollars). Thus, this isn’t something you want to drag your feet on. It’s important that you act quickly and get your costs in line sooner rather than later.
