Last modified on August 18th, 2021
By Rae Parker
Property maintenance and utilities represent some of the largest, most difficult-to-control hard costs at your properties. When managed with outdated and inefficient processes, they can seriously affect your revenue. In a recent webinar featuring Stephanie Anderson and Mark Vanderhoof of Grace Hill, along with AppFolio’s Kelly Dean and Daniel Waas, our panelists addressed the most common maintenance challenges that can streamline your task boards, improve resident relations, and boost your NOI. Read below for a recap of the webinar, as well as tips from those who attended.
Just how much does maintenance affect NOI?
There’s many reasons why maintenance can affect your NOI. If you compare two properties, where one has all the proper procedures, technology, and employee trainings in place and the other does not, one could argue that the latter is not adequately prepared and its long-term effects could be very costly down the line.
Mark Vanderhoof of Grace Hill explained that it’s hard to put a specific number on it, but there are many examples that businesses should be on a lookout for that can affect your bottom line. Those examples include:
- A lack of culture, policies, and procedures that can increase the chances of disengaged staff and workplace injuries;
- Far more emergency calls and service requests that can become very expensive and burden on-site staff and residents;
- More move-outs do to poor service and unsatisfied residents, which lead to longer turnover times due to lack of inspections; and
- Poor employee retention due to lack of training, resources, and a heavy workload
Why is it critical to look at how maintenance affects NOI now?
There’s no time like the present to look at how you run your business. Everything we knew before has changed dramatically, but the core of what maintenance teams do is still there, it’s just time to rethink how it’s done. Maintenance is the heart and hands of any community, and maintenance teams have a real opportunity to bring change.
Stephanie Anderson of Grace Hill encourages property managers to sit down with their maintenance teams (even at the entry level) and explain that everything they do on a daily basis not only has an effect on the community, but the financial impact. When you explain this to them, they start to realize that their mundane day-to-day tasks have the opportunity to save money.
The goal is not only to protect the property itself, but to also continue to help your team understand what’s budgeted versus what’s not, or what constitutes an emergency, so that you’re not going over budget and they’re not being overworked.
Additionally, having utility management software is a great way to control and understand costs of your property. It can automate your bill processing, resident billing, and collect real-time data. Your team will be able to save time and become more efficient, while the learnings you collect allows you to make data-driven decisions. Utility analytics can detect spikes early on, with weekly updates versus waiting until the end of the month to compare spreadsheets. Having the ability to receive weekly reports allows you to benchmark your buildings against one another or against your peers and can help you quickly determine any room for improvement.
Key maintenance areas to consider
1. How can a procurement strategy control hard costs?
Having a procurement strategy is very important because you need some type of accountability. This strategy can include buying items in bulk, keeping inventory on hand, streamlining your processes, and allowing your team to plan orders ahead of time to help you save on payroll costs. It also helps to manage your spend, ensure compliance, and consolidate your total spend by having a list of approved suppliers and items. Just think of the time your team will save by not having to be away from the property to make one-off purchases — and instead, have these items on-hand to make things like unit turns go by faster.
Here are some of the best tips our webinar participants shared when it comes to creating a procurement strategy:
- Only order what you need — especially major appliances or higher priced items. Only order back stock for items that are on backorder or items you use daily, weekly, etc. (Kali)
- The best way to estimate a budget is to look at historical costs, and add in or take out anticipated changes. (Karen)
- Try comparing the budget with the actual expenses at the end of each month with the team so everyone can see where we went over budget and where we saved money. We then go over the budget for the following month so everyone knows how much is budgeted. (Brittany Clark)
- When doing your annual budgets, look at the monthly actuals of the year prior and consider things like, “Where did we spend less and where can we save?” and “Where did we overspend and may need to ask for more?” (Kali)
2. What are the hidden costs of not conducting inspections at key timeframes?
Sometimes we think of inspections only as pre-move ins and move-outs for residents, but there’s one inspection that gets overlooked ⏤ inspections of your overall property. Routine and annual inspections are very important and allow you the opportunity to catch and prevent serious issues. A good example is erosion on your property due to poor landscaping and weather changes. These two factors combined can lead to significant damage to your property, such as rotted wood, structural integrity issues, and pest problems.
Here are some of the best tips our webinar participants shared for conducting inspections:
- Having inspections can also help with the budgeting process. It allows you to budget ahead for lighting replacements, etc. (Melissa)
- All lot of things can happen when a vacant unit sits empty for a long time and no one is checking in on it. Try doing weekly inspections of units to check for things such as water leaks, organic growth, pests, etc. is important. (Kali)
- Just because you have the money in your maintenance budget doesn’t mean you should spend it. Many monthly and annual budgets are designed to give you more money than you probably need as a buffer. (Kali)
3. Why is turning apartments quickly and efficiently a vital component to boosting NOI?
Unit turns are a sizable operational expense. According to the National Apartment Association (NAA), the cost of a single turn, including rent lost, starts in the range of $1,000 and can quickly grow up to $5,000. AppFolio has developed a digital turn board that helps keep track of all the work necessary to minimize the time a unit is vacant. It’s also clear in showing you where you’re spending your money based on the property level, allowing you to make the best decisions. The convenience of having a software solution can also save your team valuable time, and allow for things to be pre-scheduled with vendors ahead of time. Even if your technicians aren’t yet comfortable with using new technology, by providing the right training and resources, everyone can be successful.
Read below for tips from our webinar participants on why turning apartments quickly and efficiently is a vital component:
- If you find yourself having too many move-outs at the end of the month, try staggering them out to help your team turn units faster and more efficiently. (Moshe)
- It’s important to understand your team’s strengths. Some maintenance personnel are very strong in addressing flooring issues, while some are more seasoned in handling bigger issues. Understanding and recognizing what each team member’s strengths are can result in savings. (Kate)
- The faster the turn, the faster a new resident can move-in. It also reduces the chances of losing additional income and vacancy loss. (Moshe)
- Stay in communication with your vendors on your properties’ turn-key expectations. It’s not wise to spend money on vendors that are overpriced and don’t do quality work, or ones that have to come back time and time again because the scope of work wasn’t made clear. (Kali)
Having the proper procedures and processes in place makes a huge difference in terms of how smooth your daily operations are. Properties that don’t have the resources to invest in a software solution and instead use the traditional route of pen and paper run the risk of spending an astronomical amount of admin time researching work orders, and often spend more time following up with maintenance and residents than actually performing said work. Having outdated processes also affects your NOI from a compliance and staffing standpoint, since you’re not able to have the accountability and data needed to make important decisions. Partnering with the right technology provider is key to a smoother operation, and lets your team work smarter — not harder.
At AppFolio, we know there’s no shortage of work to do, but the challenge really comes with optimizing the skills that your team has, your inventory, and the availability. Customers like Pacific Capital Management saw dramatic results within their company once they automated their maintenance processes. “Now that we have the whole process in AppFolio, we have improved our NOI by billing the utilities back to the tenants, never missing a charge. We’re earning over a thousand dollars a month of additional income, $12,000 per year, which has had a significant impact on our asset value,” says Property Manager Brandi Brophy.
Giving you the tools you need to be efficient and having the right data so that you can make the right decisions is top of mind in the services AppFolio offers.
Do you have any additional tips to share about maintenance and NOI? Comment below!
Comments by Rae Parker