All good budgets are based on solid data, but without a well-structured inspection platform you may be missing key data points…
Along with autumn leaves, pumpkin-spice lattes and cozy clothing, Fall brings with it budget season — a new opportunity to plan how you’ll invest in your communities this coming year. It’s time to take stock of all the data you’ll need to factor into building a budget that meets the needs of owners, management, onsite staff and residents alike. By assessing property and unit conditions, benchmarking asset performance and examining the rental market landscape, you can strategically allocate resources that will reduce expenses and increase revenues. Budget season gives you the opportunity to dream big, but also pinpoint on-the-ground improvements and adjustments that translate into high-level benefits like increased Net Operating Income (NOI).
On that point, you probably have a flock of goals you aspire to shepherd to the promised land. And again this year, you want your Operations to impress — both with old standbys like higher occupancy rates and faster unit turn, and by tapping into new, unrealized sources of income. Maybe you’re targeting a different, more upmarket resident profile with capital improvements and by focusing on reputation management, or perhaps you’re looking to heighten efficiency by installing green features. Or it could be that big-budget projects aren’t in the cards this year and it’s bringing your buildings up to code, leasing and preventative maintenance that most deserve company attention and resources over the next twelve months.
No matter the ambition, favorable asset performance depends on a sound budget strategy forged from the careful review of your property inspection data, documentation and reporting. If you can’t measure it, you can’t manage it, and you can’t expect your onsite staff to accomplish company objectives without putting the right tools in their hands.
To this end, Multifamily leaders are increasingly adopting mobile inspection systems to replace their old manual or paper checklist-based auditing methods, and realizing significant Operational gains in the process — gains that free up annual budget resources. Companies onboarding mobile inspection platforms have witnessed annual labor costs decrease as much as $1.3 million and maintenance costs drop by tens of thousands of dollars. One HappyCo customer witnessed its damage recoveries increase by almost 10% and resident disputes fall by 50%. Another saw a 46% increase in property compliance, critical to ensuring their teams adhere to budgets and achieve company initiatives.
Moving your inspection workflow to mobile enables onsite staff to spend less time buried under administrative tasks and gives them the bandwidth they need to achieve two of your major budgetary aims: one — capturing data essential to developing accurate and effective budgets and two — actualizing the bottom-line results you’ve budgeted for.
Here are a few of the ways you and your teams can leverage mobile inspections, real-time dashboards and automated reporting to do just that.
Identify Items for Maintenance Across Varying Properties
The prevailing rule of thumb advises allocating between 1% and 3% of the property value for annual maintenance. But what if you knew the precise condition of every appliance, countertop, floor covering and plumbing fixture for every single unit in the portfolio? You could create your budgets with extraordinary precision rather than relying on debatable rules of thumb and fragmented property data.
And what if the properties in your portfolio are highly variable by size, age, occupancy, condition and/or location? Your maintenance expenses and untapped income for the distinct assets in your portfolio might be highly variable as well.
A situation like this poses challenges for multifamily operators employing paper-based inspections: You want to get an accurate picture of property and unit conditions so you can make smart budget choices, but your paper inspections get lost, misfiled or return with illegible handwriting. And then there’s inspection photos, which are impossible to correctly collate to the thousands of pages of inspection reports produced over the year. Your teams, as good as they are at what they do, can be inconsistent in the way they document conditions, leaving your head office at a loss when it’s time to discern trends and compare regions during budget season.
To standardize your inspection data for better budgeting while at the same time customizing inspection forms for all of the varying properties in your portfolio, you’ll need to bring on mobile inspection software that allows you to easily adjust form layouts and dispatch your forms instantly and remotely. Your teams can then apply your customized forms to field inspections, using iPhones, iPads or Android devices to collect data on property conditions. That way, no matter your unit or property layouts, you get standardized data to leverage for budgeting. And most critically, on a mobile inspection platform, reporting is automated and available to you in real time; no more waiting for reporting laggards. You can start budget planning as soon as inspections are completed onsite.
For quantifying and comparing performance between properties, you’ll need to take advantage of features like Scoring and the ability to assign per-item Costs for replace and repair. Scoring lets you establish a point scale to quantify and compare property conditions and benchmark performance across locations. Cost attribution enables you to assign per-item costs for repair and replace so you can forecast capital budgets, turn costs and ongoing maintenance in this year’s planning.
With these features in hand, you get clarity in identifying this year’s expenses for both necessary upgrades and nice-to-haves. Leaks due to broken or missing flashing present an urgent problem warranting a presence in your budget, while new outdoor furniture, updated landscaping or electric car charging stations might go on your wish list for now. It all depends on the picture painted by your inspection data. You may find that while certain upgrades come with an upfront cost, they’re well worth including in your budget. For instance, would you believe that if just 5 percent of a space is left uninsulated due to poor insulation, that space is going to lose 50% of its effectiveness and potentially incur a major ongoing expense? It’s true. In fact, properly installed and maintained green improvements consistently register eye-popping savings. Operating budget hacks like these make for happy owners.
For instance, would you believe that if just 5 percent of a space is left uninsulated due to poor insulation, that space is going to lose 50% of its effectiveness and potentially incur a major ongoing expense? It’s true. In fact, properly installed and maintained green improvements consistently register eye-popping savings. Operating budget hacks like these make for happy owners.
Get Portfolio Visibility to Align Upgrades with Strategic Goals
Before anyone can make money, let alone manage it, you have to figure out how to spend it. In a twist to the old personal dress adage, you might find it helpful to think of budgeting this way: budget for the assets you want, not the ones you have. Of course, take this with a grain of salt, but you get the sentiment. Your budgeting should reallocate funds to the most productive solutions. By one measure, “for every $1.00 per square foot that you save in operating expenses, you can increase the net present value by approximately $10.00 per square foot” (source).
Nothing is off the table. Tax savings, lowering insurance premiums, negotiating better deals with your vendors, installing new features, monetizing existing amenities, applying for incentives, improving your resident renewal rate and onboarding new technology — all have a role to play in reaching your desired financial performance.
Multifamily leaders know that providing for expenses relating to achieving brand standards, alignment with government regulations and meeting revenue projections is nearly pointless if property compliance is low. With the right inspection software, you can monitor operations in real time to ensure compliance without onsite visits. Your inspection data creates portfolio visibility that allows you to analyze your budget categories over time or across regions; as well as act on that data to trim expenses globally, from administrative, personnel, marketing, repairs and maintenance to re-decorating, cleaning, contract services, utilities and extraordinary and capital expenses.
Although your onsite staff is speaking to you through your inspection data, you should still sit down with your maintenance staff and possibly even residents to plan for needed capital expenditures.
When there’s a long (looooooong) list of property improvements on your radar, involving relevant parties can help you prioritize fixes and upgrades. Consider the impact of particular upgrades over others. Which do you need to deliver the experience your target renters expect?
Be sure to examine the renting landscape. Many people are willing to pay more for updated units offering a dishwasher, washer and dryer. Millennials are the generation most likely to rent and rate environmentally-conscious features among their top considerations when choosing living space. Take the local market into account and thoroughly review historical financial performance as you identify specific capital, maintenance and leasing plans for your apartment communities.
As you set out to meet budget expectations, there are questions (both routine and off-the-wall) to ask yourself:
- 1. Are your rents on target for your local markets?
- 2. Are resident renewals what they could be?
- 3. Does your current occupancy warrant the number of staff you’re employing?
- 4. What is the competition doing?
- 5. Can you add vending machines or coin-operated washers and dryers?
- 6. Have you surveyed your residents to find out which services they may be willing to pay extra for or rent from you, like sheltered bike racks and premium parking? How about laundry services, food shopping, or even cooking classes?
- 7. What ancillary income can contribute to the full picture of your income effectiveness?
- 8. What will the local community pay for? Event space?
- 9. What will other businesses (even other industries) pay for? Can you lease rooftop space to telecom companies for installing communication towers?
Turnover, of course, is a huge expense, involving cleaning, repainting, maintenance and potentially sacrificing rent income or a security deposit; not to mention marketing the unit and screening tenants including credit checks. In one survey, landlords said finding each new tenant costs them up to $2,500. The real-time operations facilitated by mobile inspection software helps you reduce turn by improving resident relations, enabling you to preserve resident loyalties and premium rents, cut down on resident disputes and achieve faster response times to complaints.
You can’t drive operations to peak efficiency with unhappy residents and poor reputation management burdening you. If your dashboards are showing spikes or drops in move-outs among properties, it’s worth reviewing the insights available through your mobile inspection reporting to determine a course of action and decrease the time your units sit vacant. This is why resident satisfaction is not just a “soft” performance measure. Driving a higher renewal rate keeps your quality renters, eliminating the costs, headaches and time spent finding new residents.
Only by gaining full portfolio visibility can you confidently chart your path forward. And visibility depends on collecting high-quality data, analyzing the real-time intelligence provided by your mobile inspection solution and managing up where performance is lacking. Automated reporting can map your top issues and trends by item or cost and instantly sort by number of issues, charges incurred or type of report so you can drill into inspection-level data and photos instantly from anywhere.
Developing, implementing and executing a good budget is one of the most critical activities all year. By adopting these tools and conducting continuous audits, you can successfully execute and capture the value of your company’s projections.
As inevitable as cool, crisp air and crunching leaves, Autumn promises the perennial pressures (and pleasures!) of developing an operating budget for your Multifamily portfolio that appropriately resources company objectives. As much as budgeting is a year-in-review practice with an eye on the future, doing it well demands real-time solutions to nagging budget “leaks” and lagging problems. Real-time property operations on mobile will help you rise to the occasion for operational excellence afforded by budget season. What you get from your inspection solution should justify the spend. If it doesn’t, bet your “autumn dollar” on eliminating underperforming tools to make room for better solutions.
Looking to make real-time property operations part of your 2018 budget?