Last modified on October 27th, 2022
By Megan Eales Monroe
Rising costs have hit businesses hard, and property management is no different.
In fact, our 2022 Property Management Industry Pulse found boosting “operational efficiency” to be one of the biggest challenges facing property management companies today, with 62% of respondents ranking it as a top challenge. Digging deeper, the root of the problem can be traced to difficulty controlling myriad rising costs.
To shed more light on the topic, Stacy Holden, Senior Director and Industry Principal at AppFolio joined The Top Floor podcast.
Keep reading to learn more or tune in to the full podcast below.
How rising costs are affecting property management companies
In most cases, rising costs are beyond the control of your company. Inflation is causing prices to rise, especially regarding energy, transportation, equipment, and tools. Additionally, companies are still battling for top talent as “The Great Resignation” continues. Having to compete on wages and benefits drives expenses up even further. As Stacy mentioned on The Top Floor:
“To get the right level of output or the right level of quality, you have to pay more and because those resources are scarce, they can demand more.”
Energy and gas prices
The dramatic rise in energy prices eats into the wallets of property management companies that need to maintain physical offices. It also makes transportation much more expensive. This affects maintenance teams who need to travel regularly. As Stacy explains:
“I believe it was in June of this year, the Bureau of Labor Statistics, the Energy index, if you will, it rose over 41% in 12 months. With gasoline alone increasing almost 60%, well, that impacts everything. That impacts what’s made, that impacts what’s transferred or transported from one place to the other, and how things are consumed.”
With more people leaving their jobs in search of better pay, benefits, and flexibility, salaries must rise to retain team members and cover recruitment costs like advertising, paying recruiters, and time spent interviewing or training new hires.
However, it’s also important to note that raising wages to retain a valuable employee is a small price to pay in the long run. Recent data reveals the cost of replacing one employee can total up to 60% of that outgoing employee’s salarywith overall replacement costs totaling up to 200% of the outgoing employee’s salary.
Supply chain issues have impacted the whole world since pandemic lockdowns first halted the transportation of goods. As a result, many industries are still now feeling the effects.
A shortage of available goods inevitably pushes prices up. Combined with general inflation, buying parts for maintenance teams to perform maintenance, repairs, and unit turns will become more costly and difficult.
Read more about rising costs in property management in our blog post, Supply, Interest Rates, and Inflation: What the Current Housing Market Means for Property Management.
Budget for increased costs
Budgeting for these increased costs is step one for property management companies. But keeping on top of a tight budget can be tricky without technology.
A key takeaway from Stacy’s interview is that it pays to invest in technology. Technology has multiple benefits, namely that it makes life easier for your team, thus improving employee retention. But you can also use automation to stay on top of your budget. For example, you can use the reporting tools built into your accounting software to stay under budget. Stacy continues:
“If you have technology that keeps you accountable, and what I mean by that is that you can look at your actual cost versus your budget, not only look at it, say at the end of every month, but you can have some automation in the system. So as you are about to spend money, you get a warning that says you’re over budget.”
The benefits of technology also become apparent when performing unit turns. Make-ready work can be costly, but with the right technology, all stakeholders can receive an alert the moment a resident submits a notice of non-renewal. This provides teams with more time to replace appliances, make needed repairs, and relist the unit for new residents. According to Stacy:
“Time is definitely money in that situation. So having visibility into your units and how they turn is absolutely huge.”
Stay on top of preventive maintenance
Rather than waiting for maintenance requests to start stacking up, property managers can use regular inspections and automated reminders to be more proactive about maintenance.
For example, maintenance teams can preemptively plan for appliances to be replaced or maintained before they break by setting automated reminders for appliances that haven’t been serviced in a while. (We discussed this in more detail with Michael Brand, Mid-Market Account Executive at HappyCo and Kelly Dean, AppFolio’s Senior Product Manager in a previous episode of The Top Floor.)
So while increased costs are beyond your control, making smart investments in your team, technology, and getting ahead on maintenance can all help to protect your bottom line in different ways.
To hear more insights from Stacy, be sure to listen to the full episode of The Top Floor podcast.