While most owners focus on creating income growth through rent increases and unit turnover, top-performing owners intensely focus on expense reduction and management of controllable items. Simply put, in today’s market a simple reduction of overall expenses by $4,000 per year = $100,000 of increased property value.
I always suggest that clients inspect their books and buildings at least twice a year looking for cost-cutting opportunities. Here are some good places to start:
Utilities
Water
Overcrowding is a common reason for high utility bills. Make sure the number of tenants in the unit is equal to the number of people on the lease.
Check all units for leaky showers, tubs, faucets, and running toilets.
Replace toilets to dual-flush or low-flush systems, minimizing the amount of water used - you can get significant rebates or even free toilets from the LADWP.
Install low-flow shower heads & faucet aerators.
Electric
Replace all common area lights with LED.
If your building is master metered, incorporate added fees for the use of wall/window air- conditioning units.
Gas
- Switch to high-efficiency dryers. Rebates available.
- Check your water heater yearly for sediment build-up to ensure proper heating and reduce gas bills.
- Replace aging water heaters with on-demand systems.
Landscaping
“Go Green” with your landscaping and use sustainable plants to limit water usage.
- Drip irrigation systems and rotating sprinkler nozzles are 30-50% more efficient than traditional sprinklers.
- Replace grass with synthetic grass or other ground covering such as dwarf myrtle, mondo grass, bark, or decomposed granite.
- Install a smart sprinkler controller that automatically adjusts watering time and frequency based on weather.
Insurance & Trash
Top-performing owners shop their insurance yearly looking for the best rate possible. They combine multiple properties onto policies, and enure that their coverages match their needs. One client recently told me how he reduced his insurance from $4,800 to $2,600 on a $1.2 million property just by making a few calls to his insurance agents.
Trash removal is another source of potential savings. Last year’s financial review, I suggested a client shop his rubbish removal service. This suggestion lead to a 50% reduction in costs, from $1,400 per month to $750 per month, on a 24-unit building. It pays to shop around. A few minutes could save you hundreds and earn you thousands.
Maintenance & Repairs
Most landlords don’t realize labor costs typically exceed material costs. The best way to reduce ongoing maintenance and repair costs is to use higher quality and more durable materials. Top performers will spend a little extra for the shower valves with solid brass fittings, kitchen faucets with metal spouts, durable porcelain tile or thicker 12mm laminate flooring. Spending a little more on materials up front could save you big in the long run. Here are afewmoresuggestions:
Roofs
Take preventative measures to avoid roof leaks and issues by having a qualified roofer inspect your roof yearly and make minor repairs. This is especially important in this “El Niño” year.
Plumbing
Jet your sewer lines every 6-12 months to prevent messy back-ups and clogs. The jetting process removes built-up debris in the pipes and will greatly reduce your plumbing bills. Top-performing landlords also remove garbage disposals and add strainers to showers to help prevent clogs.
Water Pressure Regulator
Regularly ensure that your water pressure regulator is at the correct PSI. If pressure is too high it can cause water heater and other leaks, lead to dripping faucets, and erode pipes. Using correct water pressure will also reduce your sewer bills as less water is passing through the system.