Operating expenses are part of any business. The nice thing about owning an apartment building? You have MUCH more control over common expenditures, profit potential, and annual projections than most business owners.
Assuming you’ve done a decent job marketing your complex and it’s near-full capacity, you will likely be able to increase annual profits with just a few small tweaks. Undoubtedly, one of the easiest ways to get started is to begin looking at common operational expenses.
The reality—in business and life—is that we often pay extraneous amounts of money for routine services that just aren’t necessary. It happens to the best of us; we simply get busy and forget to ask ourselves, “Is there a better way of doing this?”
In this article, we’ll review the most important operational expenses you should be cutting and some creative ways to begin taking back your profits. Let’s get started.
Reduce Utility Bills
Assuming utility bills are one of those fixed expenditures that “is what it is?” Think again. All water (and energy) bills can be substantially reduced with the right efficiency measures in place. As national bills have gone through the roof in recent years, conservation has quickly become a hot-button issue for more than environmental rights advocates.
The Water Scrooge helped the Nelson Management Group in NYC save over $800 per unit per year. Read that case study here.
According to Circle of Blue’s 2015 water pricing survey, the price of residential water services in 30 major U.S. cities rose faster than the cost of nearly every other household staple in 2014. The reason? Deterioration of infrastructure.
In the decades following WWII, the U.S. heavily invested in the installation and expansion of the water supply networks we still enjoy today. Unfortunately, those thousands of miles of distribution pipes are beginning to crack, necessitating a hefty repair bill nationwide.
Andrew Ward, the U.S. director of Public Finances has been quoted as saying, “We expect water rates to continue to grow above inflation for some time. We don’t see an end in sight.” Yikes. Here’s what you can begin doing to lower those utility bills:
- Install high-quality shower and faucet regulators
- Complete full inspections of pipe leaks, water drips, and broken fixtures
- Calibrate water flow to ensure a specified number of gallons lost per toilet flush
Streamline Administrative Costs
An apartment building is only as efficient as it’s main office. On-boarding of new tenants, balancing the books, and the “day to day” operations of running a business all require many systems in place. And those systems undoubtedly require tools (i.g. office supplies, electronic devices, and manpower).
Though administrative costs may seem relatively low when compared to larger office spaces, there are often many unrealized opportunities for savings. Here are some things to consider.
Thanks to recent advances in technology, many documents can now be stored on electronic hard-drives and/or in cloud encrypted programs online. Though it may seem cheap, the cost of paper can add up substantially. Sending information on paper can cost up to 31 times the original cost of sending information electronically (printing, copying, postage, storage, filing, recycling, etc.) according to reduce.org.
Consider offering tenants the opportunity to opt-out of paper notices in favor of email. And, while you may still need such storage for current lease agreements and other important documents, evaluate how far back you reallyneed to keep all records on paper. Filing cabinets are so 1990!
Do More “In-House” Marketing
Though you may be tempted to spend your entire budget on expensive newspaper, magazine, and radio ads; consider diverting some of your funds to “in-house” marketing methods.
One of the BEST things you can do for your apartment complex is to develop a favorable and easily accessible online presence. That means maintaining an attractive and informative website; regularly blogging about topics that matter to current and prospective tenants; listing your business with online search directories; maintaining active social media presences; and routinely participating in comment discussions on apartment review sites. The latter may feel challenging as people often stop to complain more than give praise, but honestly addressing any negative feedback head-on is important.
Evaluate Office Efficiency
How many employees do you have on staff? Can any responsibilities be consolidated? Are they working efficiently?
Since office salaries are a large operational expense, job descriptions are often worth evaluating for efficiency. Spend a few days at your complex and observe staff. You may be surprised to find several routines could be improved upon with better communication, new organizational tools, and streamlined job descriptions.
Evaluate Maintenance Expenses
One of the easiest ways to save money in the long-haul? Commit to not cutting corners from the beginning. Though quick fixes may be tempting, they often end up costing more in the long-run. Here are some areas to look at:
- Secure cleaning and repair supplies in bulk from specialty warehouses
- Replace light bulbs with energy efficient CFLs and LEDs
- Choose climate appropriate plants that require minimal upkeep
- Consider xeriscaping large sections of property to reduce the need for irrigation
Assess Property Taxes
Property taxes are undoubtedly one of the largest operational expenses apartment building owners face. If you secured your building for substantially below market value, you may be paying too much property tax.
If you suspect this may be the case, make an appeal for an assessment. Should the government agree with your claim (it really is a matter of looking at the black and white numbers), you could save thousands of dollars a year! Since each city has its own unique protocol, check your local government website for more information.
Lowering Operating Expenses
As you can see, there are many ways to cut down on operational expenses. The key is to evaluate one area at a time and to follow through. Follow these steps and you’ll be making more and spending less.
You can use our Water Savings Calculator to see how much The Water Scrooge can help you save.
The Water Scrooge™ offers water conservation ways and products to multi-family landlords and homeowners, including: shower flow controllers, Leak Detection Systems, Toilet Leak Prevention Devices (The Toilet Scrooge™), water flow management devices (SMART Valve™), toilet calibration and DIY products.
Also featuring The Water Scrooge™ App. Our app empowers your team to carry out the installation of our kits. With it, you can also record and track data points about the units (other than water usage).