How Efficient is your Residential Rental Property?
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No matter what size property you own or manage, the key to success is efficiency. In practical terms, that means keeping occupancy rates high and rents competitive while at the same time controlling and reducing expenses that affect your bottom line. Unfortunately, there isn’t a magic button called “efficiency” that will automatically make your property as profitable as possible. But the good news is that it doesn’t have to be an unreachable goal. But it all starts by understanding what efficiency really is – and then creating operational processes that create efficiency at every opportunity.
When it comes to efficiency, occupancy rates are critical. For rental properties, high occupancy rates can be a sign of efficiency. If a property is consistently occupied at market rate prices, it suggests that it is desirable and well-managed. Furthermore, there is usually a correlation between high occupancy rates and the ability to charge higher rent. In addition, reviewing financial metrics such as return on investment (ROI) and net operating income (NOI) can help property owners assess the overall efficiency of their properties.
But when it comes to day-to-day operations, costs such as maintenance, repairs, and utilities can help property owners understand how efficiently their property is being managed because lower operational costs, while maintaining renewal rates and rent increases, often indicate higher efficiency.
So, what does this look like in the real world? And how can property owners and managers truly understand how efficient - or inefficient - their properties really are?
Even if we exclude preventative maintenance and inspections, there are four key areas that affect efficiency:
Repairs and Replacements: Tracking the frequency and cost of repairs and replacements, including number of visits to a unit, can provide insights into the efficiency of property management. Emerging repairs can often cause a domino effect, as one problem leads to another, catapulting costs sky high.
Labour Costs: The cost of hiring maintenance staff (or contractors) can vary depending on the complexity of the tasks and the location of the property. High repair costs and repeated visits to units may indicate that systems are outdated or not well-maintained or that maintenance management systems to eliminate duplicate work orders or schedule efficiently are needed. Efficient management of labor costs can help control overall maintenance expenses.
Material Costs: The cost of materials needed for repairs and maintenance can also impact overall costs. Using high-quality materials can reduce the frequency of repairs and improve the longevity of property components. Property owners can also leverage warranties to save or recoup costs on materials that fail within the specified terms, as well. Likewise, creating preferred pricing models can harmonize and reduce the costs of basic items such as cleaning supplies, sheet rock, tools, and other common purchases
Emergency Repairs: Unexpected issues can arise, leading to emergency repairs. These are typically far more expensive than regular maintenance and repairs, and can dramatically reduce the overall efficiency of a property. Having a contingency plan and budget for such situations can help manage these costs effectively.
Completion timeframes: Understand how long it takes to complete different types of repairs in various regions, and identify outliers.
Chargeback recommendations: Leverage AI to ensure you’re accurately charging residents for repairs.
By closely monitoring and managing these factors, property owners can optimize maintenance costs and improve the overall efficiency of their properties.
For more information on figuring out how efficient your property is, please contact bchandler@facilgo.com.
About The Author
Brad Chandler
Brad was the Industry Principal responsible for driving sales and development of Yardi’s Procure to Pay solution. Prior to Yardi, Brad was VP of Product Management at SiteStuff until the acquisition by Yardi in 2007. Brad brings over 25 years of seasoned leadership in the SFR and MF property technology market. He has a degree in Mechanical Engineering from the Virginia Military Institute, a Masters in Engineering Management from St. Martins’ College, and a Masters in Business Administration from the University of Texas at Austin. Brad also served as an officer in the United States Air Force.
