Last modified on June 21st, 2022
By Megan Eales Monroe
As we prepare to launch season three of The Top Floor podcast, we decided to revisit a few of our favorite conversations from season two.
In our first discussion, we spoke with Paula Munger, AVP of Industry Research and Analysis, and Leah Cuffy, Research Analyst at the National Apartment Association, about today’s hiring and retention challenges in property management.
This talk came off the back of a National Apartment Association (NAA) report, sponsored by AppFolio, which surveyed property managers about the biggest challenges they face. The report revealed that 74% said that human resources, staffing and recruitment were their top three challenges. Though much has changed since we first released this episode at the end of 2021, hiring and retention remains a top priority for our industry.
Following this, we share our talk with Stephanie Anderson, Senior Director of Content Strategy at Grace Hill, about property maintenance and its effect on your bottom line. For many of our listeners, increasing operational efficiency has become an even higher priority in recent months.
As costs continue to grow, many property managers could be leaving money on the table due to inefficient maintenance processes. Stephanie outlines some ways to fine-tune your processes and boost NOI.
Meet Our Guests:
Paula Munger is the AVP of Industry Research and Analysis for the National Apartment Association and is responsible for leading research efforts on topics of importance to the industry. She gathers, analyzes and synthesizes data and information to arrive at the most meaningful and relevant insights. Paula’s research aids NAA members in their business initiatives, as well as NAA advocacy and public relations efforts. Her background includes positions at the Federal Reserve System, Cushman & Wakefield, and the University of New Orleans Real Estate Research Center. Paula is a member of the National Association for Business Economics and The Counselors of Real Estate®.
Leah Cuffy is the Senior Research Analyst at the National Apartment Association (NAA). In her position, Leah provides members with data-intensive research, including a monthly report highlighting labor force trends in the apartment industry, quarterly updates on the state of the national apartment and an annual rental housing income and expenses survey.
Before joining NAA, Leah was the Senior Research Assistant at the Diana Davis Spencer Foundation, a family foundation that supported entrepreneurship, self-reliance, global understanding, and free enterprise. She also has previous experience in commercial real estate research and analytics with Costar Group. Leah began her career in the multifamily sector through various roles in property management at both Equity Residential and UDR.
She has been able to leverage her experience and fulfill her passion for providing valuable market research for members allowing them to make informed and sound business decisions. Leah holds a Bachelor of Science in Business Administration with a concentration in Marketing from Washington Adventist University.
Stephanie Anderson is the Senior Director of Content Strategy at Grace Hill. With 15 years of property management experience, Anderson brings a wealth of knowledge specializing in revenue management, creative marketing and employee development. She was NAAEI’s 2015 Designate of the Year and CAM of the Year in 2013. She is a powerhouse speaker that shares her industry knowledge, motivates professionals to greater success and disrupts status quo with out of the box ideas and trends. She is a graduate of Virginia Commonwealth University where she majored in English Literature and Women’s Studies. She holds a Virginia Real Estate License and is certified as a National Instructor for NAAEI.
Megan: Welcome to The Top Floor, a monthly podcast from AppFolio. I’m your host Megan Eales Monroe. Season three of The Top Floor will be kicking off soon. In the meantime, we wanted to bring you an encore presentation of two of our favorite conversations from season two.
The first conversation you’ll hear today features Paula Munger and Leah Cuffy from the National Apartment Association. Their conversations take a hard look at the most pressing issue facing property management today – attracting and retaining great team members in the midst of a challenging hiring market. They also dive into the industry’s pain points and reveal how staffing challenges are being solved on the ground.
The second conversation you’ll hear features Stephanie Anderson from Grace Hill. Together, we investigate the relationship between maintenance costs and NOI, why so many organizations are missing opportunities to reduce expenses, and what solutions are out there today.
We hope you enjoy, and we’ll see you soon on season three of The Top Floor.
Megan: We’re diving into what appears to be the most pressing issue facing property managers, human resources, staffing, recruitment and employee retention. A staggering 74% of folks in the industry identified HR, staffing and recruitment as one of their top three challenges, with 50% noting it as their primary challenge, according to a new report from the National Apartment Association, sponsored by AppFolio.
And that’s not entirely new. Staffing and high-volume employee turnover have long been ongoing pain points for property managers across the country. In fact, there was a 32.7% turnover rate even before the COVID-19 pandemic, according to data from CEL & Associates, Inc., that’s much higher than the average rate across any other industry. The pandemic has only made matters worse with continued labor shortages and an exodus of workers creating hiring challenges for companies, with millions of jobs unfilled in what’s now being called “The Great Resignation.”
For property managers specifically, attracting and retaining talented employees has become a major challenge. These staffing issues inevitably impact bottom lines. For this and many other reasons, such as growing costs and supply chain issues, nearly half of property managers identified maximizing revenue and profits as one of their other top challenges industry-wide, regardless of the type or location of rental properties.
Today’s conversation discusses pain points the rental housing market is up against, and how the industry as a whole is tackling these challenges from the ground up as we collectively rethink the future of work. We’ll also uncover strategies property managers can adopt to overcome them through solutions like cross-training, leveraging tech for virtual tours and leasing, and sharing work-life balance techniques with employees to help them combat burnout, along with offering competitive benefits and training programs.
Here to start off the conversation is Paula Munger.
Paula: Thanks Megan. I’m happy to be here. I am the Assistant Vice President for Research for the National Apartment Association, and we research topics that are important to the industry. So, that could be anything that’s happening currently. It could be policy issues. And then, we also do some reports on the Labor Market for the Apartment Industry and regular quarterly reports looking at market trends.
Megan: Effects of the pandemic slowed down the hiring process and made it more challenging to retain workers in property management. Here, Paula references data and insights from an AppFolio-sponsored report by the National Apartment Association (NAA), which surveyed property managers about their biggest challenges.
Paula: The challenges that we saw in the survey existed before the pandemic. HR, staffing, recruiting, trying to maximize your revenue, trying to be more operationally efficient, that was all in place, but like everything with COVID, the trends were just totally amped up.
So while they existed before, the sheer magnitude and depth of the challenges did surprise me. If you’re a company that has more than 20,000 units (that was the largest company we surveyed), 83% of the respondents said they were having challenges with HR recruiting and staffing. That’s just a phenomenal number that totally blew me out of the water.
Leah: HR, staffing and recruitment have always played a large role in property management. However, the pandemic created new roadblocks in this area.
Megan: Leah Cuffy is a Research Analyst at the National Apartment Association.
Leah: This was evident in the survey results. When the respondents were asked to select the three topics that were most challenging for them in terms of importance, 50% selected HR, staffing and recruitment as their number one challenge, and 74% selected it as one of their top three challenges. These staffing issues have been rated the other top challenges, including operational efficiencies and maximizing revenue, which were the second and third most common challenges with nearly 63% and 48%, respectively.
So challenge number one, HR and recruiting. After selecting the top three challenges, respondents were asked to rate the set of activities within each of these topics. Each activity was rated on a scale of one to five, with five being the most challenging. So within the topic of HR staffing and recruitment, attracting new team members, training new hires quickly, and reducing turnover were rated as the most challenging tasks. Turnover has always been a challenge, but COVID has only made that worse by placing headwinds on both sides of the equation. More associates are resigning, and the hiring pool of replacements is smaller than usual.
Paula: Yes, so it really is fascinating because it’s an employee’s market. They’re demanding a better benefits package, better pay, they want more flexibility. They want a better work-life balance more than ever.
With the pandemic, so many people lost family members and friends. And so, there’s nothing like, unfortunately, a tragedy to really make a person step back, evaluate their life, evaluate their career and say, ‘Hey, this is maybe not where I want to be. And oh, look, there’s this new opportunity that just popped up. So I’m going to quit my job.’
We also have a record number of quits. The BLS has been tracking that data for decades, and we’ve never seen this many people quitting their jobs. That’s obviously also impacting the property management business.
Megan: The hiring environment looks differently for human resource managers in the apartment market with the uptick in employees leaving their jobs. And companies must grow and change to adapt.
Leah: Companies are definitely evolving their hiring process. Doing virtual interviews, just having to adapt to the current environment. That’s definitely what the environment is looking like. Also, the power right now, if you think of it like the housing market and the buyer’s power. The power has shifted from workers to employees, there is a shortage of talent. And so right now, employees have the upper hand.
Like I mentioned, there’s a shortage of qualified candidates. So everyone is trying to entice and have their company be front and center on online job boards. They want their company to be seen the most because there is such a shortage of qualified candidates. Candidates also have an increased salary expectation. They know that they’re in high demand and they want to be compensated.
Paula: We had an Affordable Housing Provider say they’re in the business of affordable housing. So they only get so much rent revenue. That’s capped. They know what that is going into a year and that they have lost maintenance technicians over $2 an hour more in pay. So I think when you hear a story like that, it’s pretty astounding. Again, with so many jobs open right now, and particularly in the service industry, you can maybe find something that’s closer to where you live. People having all those choices or thinking about opening their own businesses, makes it particularly challenging to find those people now. So trying to get those people to come to your job when there are all those other jobs out there in the industry, I think it’s going to get worse before it gets better.
Megan: Training is more vital than ever as property managers seek out entry-level employees who may not have as much experience as a result of continued worker shortages. Still, hiring managers must find a balance to avoid employee burnout as work piles up with new hire training.
Paula: Some of the things I’ve already mentioned, like flexibility, having a work-life balance. Being able to, when necessary, focus on their family if they need to. But in terms of training, we’re seeing something interesting with training. Because it’s so hard to hire right now, a lot of our owners and operators are having to hire people who aren’t as experienced, which means more training.
It leads to a vicious cycle where you have people who are doing the training being taken away from their work, and those people get burned out because they’re doing so much training while their own work is piling up.
When you think about that, if you invest all this time and resources in training, and the employee goes elsewhere after six months, you have to start that process all over again. So I think it’s just really important to keep your team members engaged and communicate with them so that they know that hopefully, there’s this light at the end of the tunnel, and they’ll be able to get their team fully staffed soon.
Staff are having to do more training than they used to, even in the past. We did see outside of the HR challenges that with certain technologies, training employees on how to use those has been a little challenging and they need to do more of it. So to bring their employees up to speed again, when I mentioned giving them resources and tools, they need to know how to use those resources and tools. So as we see more and more tech proliferating the apartment industry, it’s really important to make sure your employees know how to use that tech.
Megan: But simply incentivizing employees with training for new skill sets isn’t enough in today’s competitive job market. Hiring managers must compete with salaries and benefits to stand out.
Paula: You have to be creative and really put your money where your mouth is. We’re seeing that sign-on bonuses are common for all levels of positions, as well as higher pay, better benefits, and more flexibility.
Not all jobs are suited to remote work, but certainly, you could provide some sort of flexibility and use recruiters more. We have some people saying they’re advertising a lot more than they did in the past. And then finally, if you just can’t find somebody to do your maintenance work, you’re going to have to hire a contractor to fill in those gaps until you can and find the talent and recruit that talent.
Megan: Getting an overall pulse of team wellbeing and how employees are responding to the current culture is vital to boost retention. This can all be done through a digital engagement survey to get a sense of how team members are responding to things like increased workloads. To keep morale and engagement up, don’t forget about the incredible value of mentorship programs — and remember to constantly acknowledge employees for their efforts.
Paula: The engagement factor is huge. If companies haven’t done an employee engagement survey by now, they really should because that can be very telling.
I think everyone’s just running so fast right now. We have a lot of demand from residents. The combination of being short-staffed, more and more demands, and also people still remote working, so they’re in their apartments 24/7, means more stress on the property management team and more stress on the maintenance professional.
So certainly make sure you have a competitive package. You’re going to have to bring the pay. You’re going to have to bring the benefits. You have to give them flexibility and a sense of ownership. We hear a lot about teams. We have leader boards, so we’re making it a little competitive and starting to have mentorship programs. I think those are the things that keep people feeling like they belong to a team, a community and it keeps them engaged.
Megan: There’s definitely some new and different expectations from people when it comes to where and how they work. More employees are looking for a greater sense of purpose and flexibility. Leah has more on this.
Leah: Employees are now expecting that their jobs bring a significant sense of purpose into their lives. McKinsey & Company conducted a survey of employees and they found that nearly two-thirds of U.S.-based employees said that the COVID pandemic has caused them to reflect on their purpose in life. And nearly half said that they were considering the kind of work that they do because of the pandemic.
In addition to the sense of purpose, we’ve heard this over and over again, but employees are looking for flexibility and they’re looking to choose a work schedule and also work environment that works best for them.
Paula: We have seen jobs that we didn’t really think were well suited to remote work are now using remote work, but you’re always going to have those jobs where if you’re operating a piece of equipment, fixing a faucet like a maintenance tech, obviously you need to be there in person. But I do think that we’ll see more and more job seekers looking again for that flexibility and that balance. I want to work when I want to work and if I can get the work done, what should it matter where I am or what time I’m working?
Megan: In many ways, the lasting effects of the pandemic have changed expectations for employees in property management who may now have an increased workload since more residents are working from home. Leah explains how some roles in the industry, like maintenance technicians, are impacted more than others.
Leah: So that would be the frontline roles, particularly maintenance technicians. They’ve always been difficult to retain and also to recruit, but now more than ever. And that’s mainly because of salary. Over the years, there’s always been a battle for minimum wage hikes and also the lack of benefits for frontline workers, and all of a sudden, they have the choice of who they want to work for and what they expect in return.
Paula: We always hear that maintenance technicians are hard to find, and now that’s even more the case because what’s also happening, and we really dug into the open ended comments in the survey and saw a few that said, “well, we’re losing them to the construction industry or we’re losing them to government jobs.” So they tend to be lower paying jobs and there’s plenty of lower paying jobs available right now. We had a small operator that said, “I can’t possibly compete with the benefits package that a government job would offer someone.” So it’s rough out there.
Leah: Well, times are busy for property management teams. They’re doing more with less, which makes things hectic and everyone’s just trying to play catch up right now. People are also resistant to change and would rather do things the way that they’ve always been done as opposed to looking for innovative solutions. Like we just learned in the poll results, the backlog of maintenance requests and repairs due to a lack of supplies and quality vendors has really been an issue.
Megan: So, are we seeing these changes as temporary, or are we expecting this new state of affairs to become more permanent?
Leah: Well, I think that will honestly depend on how a company is willing to evolve. So if a company is seeing that they’re having issues with the backlog of maintenance requests, or they’re taking more paperwork for leasing consultants, and they don’t have as much time to actually meet with residents and meet with prospects, if companies are facing those kinds of challenges, but don’t take a step back and analyze how these can be improved, then it will be permanent. But if they do make changes, then I think that it’ll be temporary.
Megan: With the many challenges related to hiring and attracting talent in property management in the age of the Great Resignation, it’s important for property managers to be open-minded when recruiting and retaining new talent. That means considering candidates from other industries, who may be entry-level and less experienced, but who are open to learning new skill sets.
Paula expands on this, explaining how important it is for leaders in real estate to build inroads at trade schools to attract new workers to jobs in the industry, especially maintenance. Additionally, showing younger workers that property management is a desirable career path should be a top priority for the industry.
Paula: NAA has an Education Institute, and they actually partner with some colleges and universities who have programs, and Property Management programs, but we need to go further than that so that it’s actually getting the word out in high schools, in trade schools. And we hear a lot from our members that maintenance tech is their toughest nut to crack. And it’s because, and it’s really hard to get around this, but younger people right now don’t necessarily want to work with their hands. That’s something they don’t find attractive. We see similar things in the construction industry. It’s hard to get people to realize that this is a good job. You can make decent pay, you can have a stable income. And so, we need to get the word out that this could be a career path for people and you really don’t need, for some of these positions, an advanced degree. I think to get to that high school level or trade school level and get people working in the trades and working with their hands is super important.
Megan: Property management roles are indeed multifaceted, especially since so many wear multiple hats due to job shortages and high turnover. Navigating operating efficiencies, managing resident expectations and making the most out of technology tools to see the data to streamline processes — these are just some solutions to these pain points in the human resources department. The pandemic has proven to be a major challenge when it comes to recruiting and retaining top talent in the property management space, especially with such high demand as many residents continue to work from home.
Our guests sum up what’s next for the industry in terms of human resources and recruitment.
Leah: I think it’s so important that just to recognize that today’s environment has changed. And if you are wanting to recruit and retain your employees, you have to adapt and realize that what they’re looking for is far past salary. They’re looking to have a sense of purpose. They’re looking for a strong sense of company culture. And so, have this conversation with your current employees, do a check in with them and see what’s working and what’s not. That’ll help with retaining current employees, but also with recruiting.
Megan: So much has changed about the way we live and work, and for property managers, the impact is being felt especially when it comes to recruiting, hiring and retaining top talent.
As the Great Resignation has resulted in thousands of employees leaving their job posts, it’s no wonder that 50% of property managers surveyed said HR staffing and recruitment was their number one challenge.
Employee burnout is on the rise, but property management companies can mitigate this and retain more workers by making incremental changes. Remember to prioritize employee wellbeing, by making sure your team is well equipped with the resources they need to be successful in their roles — whether that means technology that is easier to use, or resources for mental health and wellness.
Above all, our guests agreed that creating an environment where employees feel seen, heard and supported is not only the right thing to do, it is key to attracting and retaining a strong team.
Megan: When’s the last time you audited your property management company’s maintenance request process, including inspections and procurement processes? For many, outside of a list of preferred contractors, there may not even be a process, which can have real consequences on a company’s Net Operating Income (NOI), as maintenance costs can be some of the most difficult to control.
Proper maintenance means regularly incurring hard costs, including people, time and materials. But it can be difficult for growing teams to accurately anticipate these costs and take the steps needed to streamline where possible. Without a process or thoughtful planning, how would your team know if they’re overpaying on parts and labor to replace a leaky faucet? Or how well they’re satisfying service requests?
Today on The Top Floor, we’re investigating the relationship between maintenance costs and NOI.
So let’s start with what might be an obvious question. What exactly is the relationship between maintenance and net operating income?
Stephanie: That’s a great question. In fact, I think many people don’t think of the two as going hand in hand as much as they probably should.
Megan: Speaking is Stephanie Anderson, the Senior Director of Content Strategy over at Grace Hill. Additionally, she was the Industry Operations Manager at the National Apartment Association.
Stephanie: When we think of NOI, it’s a calculation used to analyze the profitability of income-generating real estate investments. So to calculate NOI, we’re going to subtract the operating expenses from the revenue generated by any property. So operating expenses include all of the costs associated with operating the property, which of course, maintenance is a large part of. Maintenance expenses can prove to be the most difficult to control hard costs. While property managers and other leadership individuals are trained on financials, maintenance is often left out, leaving a lack of knowledge on how it affects the bottom line.
Megan: Maintenance technicians often don’t understand how the small choices they make on a day-to-day basis add up and affect the company’s bottom line. But do C-suite leaders understand the impact of maintenance costs?
Stephanie: So this is a good question. I think from a financial perspective, C-suite leaders understand how maintenance costs affect the bottom line. They’re looking at it on a statement. They obviously can do the math, and I think that they have a good understanding of that. Where I think it gets to be a little bit of a gray area is when there’s concerns over a company, let’s say their bonus structure that they have in place, and it’s specifically based on NOI numbers. This is where corners seem to be cut in the maintenance department when numbers need to be decreased for expenses. And that then leads to deferred maintenance and a lack of asset preservation.
So yes, I think they have an understanding of it, but sometimes it’s hard when you’re not physically in those shoes doing that position day in and day out to fully understand how cutting a corner or reducing an expense can really affect the bigger picture of things.
Megan: Clearly, maintenance can be one of the most challenging costs to control. But why is that?
Stephanie: I always like to say you can plan for everything and still miss something. Repairs are going to be estimated. Cost of supplies change, emergencies come up that could require additional contractors. I always think about emergencies that happen in the middle of the night or on the weekends and there’s additional costs like on-call fees for late nights and things like that we don’t necessarily budget into.
Megan: Outside of unforeseen costs is another factor that makes maintenance difficult to tamp down. This one’s a bit more big-picture and abstract, so we will let Stephanie do the explaining.
Stephanie: There’s also a really big lack of proper training in the industry. Qualified technical ability is not necessarily paid how it should be in our industry when you compare it to other industries.
So when you think about those that are in the mechanical field, plumbing, and so forth, they then come into our industry. We expect them to either have those certifications already or basic understanding of training. When they go to these other companies, they’re paid a higher rate for that. So I think the training goes along with it, with paying higher and the whole conversation of staff versus contractors. That’s always a big one too, which is really hard to determine.
If your teams are trained properly, can they then make informed decisions on whether a staff member should complete a contractor and what are the implications for cost for both of those? So you can see that there are a lot of variables that happen based on each little decision that’s made that could then add up to a higher cost.
Megan: All right, so by now we can see how missed opportunities to control maintenance costs are missed opportunities to improve net operating income. So what are the solutions? How can property managers rein in their maintenance processes?
Here are Stephanie’s top three. Number one.
Stephanie: Obviously, I think training’s a big thing. I kind of mentioned it earlier. In order to complete repairs, you have to have the right training in place for your staff. And not just the right initial training, but continuous ongoing training because if employees switch properties or you get new systems in places like appliances or HVAC systems, you have to be able to continue that ongoing knowledge for your team so that they understand the difference in services for each product that they have.
So having well-trained staff will not only help the maintenance teams to diagnose repairs easier, but it saves money when we can know to replace a part instead of an entire item. Or again, when I mentioned earlier, if you can fix things in-house versus calling a contractor, those things are definitely going to save money.
Megan: Number two.
Stephanie: I would say the second thing would probably be turnover expenses. Turnover is something that is really expensive in general, which is why we always focus on resident satisfaction because if we can keep a resident there, we’re really not having that extra expense of turnover. But when I say turnover expenses, let’s just kind of focus on carpet and paint, for example.
So determine what could be done in-house versus a contractor. Do you have a painter on staff, or do you have a contractor that comes in to paint? And who supplies the paint? Can we supply it at a national level and get a discount on that or are we paying the painter, who may be a smaller company, to then purchase the paint at a higher rate and then bring it in?
Megan: Here’s an expert tip. Don’t wait until the last minute to discover what needs to be fixed. Once you’ve got a move-out date, start planning.
Stephanie: Inspecting apartments prior to a resident moving out is a big thing, knowing in advance what needs to be done in the apartment for the pending turnover before it’s actually in the turnover stages. That’s really big with vacancy costs because why would you not want to fix something when a resident is currently living there versus when you’re no longer collecting rent on the apartment because it’s now vacant?
So there are all these different pending questions you have with turnover, but ultimately I think when you start to look at your turnover expenses and the hard costs, you’ll also then think about expenses like replacement costs in the future, vacancy costs, and future resident turnover. So it’s important to really dig into that a little bit more.
Megan: And number three.
Stephanie: And then I would probably say the final thing would be energy-efficient appliances. This is kind of a tricky one because oftentimes, we will hear companies or owners be extremely hesitant about reviewing the cost of energy-efficient upgrades because they’re looking solely at the initial capital required to make that investment, but you have to think about it as an investment. So while it can feel counterintuitive to spend more to decrease your costs in the long run, it’s exactly what you’re doing when you’re going forward with energy-efficient appliances or even any of the smart home technology that’s out there.
Megan: One area we haven’t covered yet is the value of more frequent, proactive inspections. Generally speaking, maintenance teams tend to be stretched thin, so aligning workers and residents behind more inspections, which, let’s face it, requires a ton more coordination, feels like a hard sell. But cracking the code and getting a handle on maintenance costs requires greater visibility into a property’s material needs. And that’s a challenge for any team.
Traditionally, it’s up to residents to submit a work order when something needs fixing. But a majority of residents don’t have expertise in things like electrical work, plumbing and so on — and might fail to report issues, which aren’t discovered until they move out, which means it can take more time to turn the unit for the next resident — not to mention, unnoticed issues may become worse over time, and more expensive to fix than if they had been caught early.
So reining in unwieldy maintenance costs also requires that teams become more hands-on with their properties, empowering them to anticipate upcoming expenses and provide preventive maintenance. Here’s Stephanie.
Stephanie: It’s really about planning for time, planning for resources, and planning for expenses. So, for instance, I mentioned earlier pre-move out inspections. You’re getting a first-hand opportunity to go into an apartment with a resident present, let them know upfront what items are going to be charged for anything that’s self-induced outside of minor wear and tear, and it’s really impactful that you are able to start planning the process before the resident ever moves out.
So if cabinets need to be replaced, if carpet, countertops, a lot of things that take more money and take more time in the turnover process, you can really start to plan that. Then you can notify your teams to have a more accurate representation of when someone could actually move into that apartment. That way, you’re losing less in vacancy costs. And maintenance inspections in general, not just pre-move out, but if you’re doing quarterly inspections, it’s an opportunity to make additional revenue for your company. Are you seeing pets or additional occupants in the home that shouldn’t be?
And then I think that it just helps you to preserve the asset long term. So when you go into budget season for your next year, you really want to come forward with notable expenses that you feel are really going to impact your budget so that you can plan accordingly for that. And of course, you’re never going to prevent everything. When you think about your bottom line for NOI, it is difficult to predict it, but the more prepared you are with your planning through things like inspections, the more likely you’re going to set yourself up for success.
Megan: These benefits affect the bottom line of your business — but in order to realize them, your whole team, including on-site technicians, needs to understand and embrace these changes. Here’s how to align your whole organization behind proactive inspections.
Stephanie: Oftentimes, I think we get into a culture of: we do a task to say we’ve completed it and to check a box. And while that is important from the compliance side, it’s not realistic in the grand scheme of things when we talk about financials and NOI. It’s really important to explain to them that if they’re not doing these things, this is what the repercussions are. And those repercussions later lead to issues with deferred maintenance, issues with the assets not being preserved, issues that mean we can’t lease the apartment because there are too many problems or we’ve deferred maintenance too long where we don’t have enough capital in the bank to pay for these repairs. When you start to really dig in and explain it to the teams, I think it does help them to understand the importance.
And I think that you need to set deadlines too for the teams. So instead of just leaving it open-ended as to what type of inspections they do and when, it’s important to say, okay, we’re going to do an exterior building inspection. It needs to be done by the 30th of every month.
When you set clear expectations for the team, they know that they have X amount of time to do the task at hand. So if you don’t say, okay, you have to just do it on this specific day, you don’t overwhelm the teams with the, “Oh, no, I had an emergency leak and a fire and all these other things going on. There’s no way I could get to it.”
Instead, you’re saying, “Okay, plan accordingly. You work your schedule out to make sure that you can get these inspections done in this period of time.” And then make sure you’re documenting those results so that others can go back and look not just at the compliance side, but when they start thinking about that data we spoke about earlier and how we look at that data to make informed decisions moving forward.
Megan: Sounds like a ton of coordination, right? But stay with us. We can’t stress enough that better managing maintenance costs begins by gaining greater visibility into a property’s needs, which stems from teams becoming more hands-on. But workers can’t be everywhere at once, and growing headcount costs doesn’t help if your goal is to drive NOI.
To accomplish more with the people you already have in place, teams can enhance their communication and how information travels from one party to another, closing gaps between properties and maintenance workers. We’re speaking, of course, of digitizing the maintenance process. Here, Stephanie highlights a few of the benefits from your residents’ perspective.
Stephanie: I think that when you digitize service requests in general, there’s an opportunity to also allow a sort of resident portal so that residents can enter it on their own without having to wait and call the office during office hours. So if at 11:30 at night, I noticed that there’s an issue in my apartment, I don’t have to email a staff member or leave a message for their office. I can actually just enter it on a resident portal. So that is a great way when we think about technology.
I think when we talk about follow-up, it’s so important for residents to know if I’m at work all day and I’m not in the apartment, it’s great for me to be able to get some sort of notification, in whatever capacity that looks like for your technology, to let me know that someone actually came and addressed the issue in my apartment or someone did come, but there’s a part on order, or even following up with a survey, so to speak, of was this done to your satisfaction?
To me, that technology allows residents the inside look at what’s happening, and communication is truly what they really want for resident satisfaction. So it just makes sense.
Megan: Clearly, online systems offer benefits for residents, but it goes beyond that — companies who aren’t taking advantage of technology platforms to digitize their work order process are actually leaving money on the table.
Stephanie: Believe it or not, there are still owners and management companies out there that are not using a technology platform for their service request. It’s really important when updating your service request process to include technology as a partner on that and to make that a standard in place. It’s important when we think about not just putting in the service request and thinking about how it gets to the team member to then go and repair or fix an issue.
So that means that if we find out more information about Ms. Smith’s apartment issue, you can go back in and add that into the system at any time versus searching for a piece of paper to add it to it. That means that your office staff can gain as much information as possible to then be able to share it with the maintenance team so that they can efficiently go to an apartment with the tools they need or the information at hand to be able to make the most of their time while they’re in there.
Now, outside of that, there is really important data that we can analyze when using a technology platform. We can think about how many service requests we’re doing on a given day. How long are they staying open? Are there any critical issues in terms of resource and maintenance team members? How much they have on their plates, and how much we’re contracting items out. Again, it all goes back to we need to look at our teams, our staff, how much we’re putting on them, and see where we can make changes moving forward.
I think the first step to doing that is really to set up your standard policy as a company to what is classified as an emergency. So if your toilet is clogged and you have a three bathroom apartment, then no, that’s not an emergency, right? Because you have two other working toilets. If your air conditioning goes out but it’s 30 degrees that night, no, that wouldn’t be an emergency.
Have a set list, and that way there’s no gray area. When the maintenance technician receives a phone call from a resident saying that there’s an emergency, it’s very easy for them to say yes or no. It’s not, “oh, let me check with my manager. Oh, well, it’s midnight. Let me see if I can get out there.” Instead, it’s “yes, there’s a flood in the apartment that’s required for me to go out. I’ll be there within 30 minutes,” or no, you have an issue, again, with a toilet that’s not working, but you do have another toilet that you can use, and we’ll be by during regular business hours the following day.
So I think that standardized list really just takes out any questionable areas and allows everyone to be on the same page, mostly to where you can notify residents when they first move in as part of their leasing process to give them a copy of what’s classified as an emergency and so that they have an understanding going into it what that expectation is, and then they can make plans accordingly.
Megan: At so many companies, there isn’t a robust conversation about the relationship between maintenance expenses and NOI. With so much work needed to keep properties running day-to-day, it’s easy to overlook opportunities to improve communication between teams, training and hiring practices, and procurement strategies that can lead to big savings. These changes will require a shift to long-term thinking, starting from the top down.
For example, let’s think back to that leaky faucet we brought up in the beginning – to understand the true cost of not fixing it, it’s important to keep in mind long-term expenses – such as those stemming from resident turnover because tenants were dissatisfied from a troublesome work order process.
By using some of the strategies we’ve covered today, such as shifting your team’s mindset to start thinking about the big picture when it comes to maintenance, and thoughtfully introducing technology to support this vision, you can begin to affect your company’s bottom line — and your residents’ experiences.
Thank you for joining us today. If you enjoyed this podcast, let us know by leaving a review on Spotify, Apple Podcasts, Stitcher, Google Podcasts, or anywhere else you listen. We’d love to hear your feedback. We’ll see you here again next month as we continue our narrative journey with today’s real estate leaders, decision-makers, and changemakers on The Top Floor.