“Ask Kari” is a monthly, Question & Answer feature from Kari Negri. Kari has two decades of property management experience, is a featured speaker at many industry trade shows, such as AAGLA’s annual trade show, and is the CEO of SKY Properties, Inc. in Los Angeles.
As 2015 comes to a close, it’s a good time to review your building’s operations and performance. Take a few minutes to analyze the following points:
Your Building’s Year in Review
- Rental market survey
Perform thorough market surveys and see where rent increases should occur. I always say, the best way to see the market is to put on a pair of sneakers and walk your building’s neighborhood. Look at other vacancies that are within a block or so. If you are not at market, and rent control allows it, serve rent increases. Make sure to stagger the rent increases over a number of months to avoid a mass exodus or rebellion at your building. Start with late paying tenants, or tenants that don’t follow their lease, and then go forward each month – have a plan. Keep in mind that different rent control cities limit the amount and frequency of any increase. Always know when you can raise, and be cautious not to raise above market rent without a really good reason, no matter what the limitations are. Market surveys should be done approximately every 90 days. Remember to add rent for every amenity you have that your competitors don’t have, and vice versa.
- Budget, general ledger and vendor service
Check to see if there is room for last minute items to fit into your 2015 budget. Are there any items you’d like to include as a 2015 expense? Review and revise your 2015 budget for 2016 – fine-tune. Consider bidding out all services to new vendors in order to compare to current vendor pricing and services. It’s always good to get a fresh pair of eyes and new perspective. That gardener, pool man, or other vendor you’ve had for years may no longer be giving you competitive pricing and services. Consider bulk contract for several properties for even better pricing. As always, only hire legitimate vendors who have a proper license, insurance, workers’ comp if needed, and be sure to fill out a W-9 for tax purposes so you can write off the expense. I know a lot of owners who try to save money by hiring vendors off the street who don’t have insurance. These vendors might be great people who work really hard but when something goes wrong and they don’t have insurance, all the money you’ve saved will cost you more in the end. I have heard many horror stories. Don’t let this happen to you. Start the New Year off right with legitimate, fairly priced vendors.
- Reevaluate areas of improvement
As an extension to item 2 above, consider where your money went this year and where could it have gone instead? Review 2015 financial hits and consider which may have been possible to avoid. Did you have an avoidable emergency, such as a plumbing, flood, or roof issue? If so, you might consider what improvements you could have made to avoid the same issues in the future, this could also serve as an opportunity to better plan out preventative maintenance in the year to come. For example, that water heater that leaked in your tenant’s unit could have been prevented if it had been inspected and its life expectancy had been 0. It’s cheaper to replace before they cause all kinds of damage.
- Capital improvements fund
Review any capital improvement plans. If there are no plans in place, consider which improvements might benefit the building or might be completely necessary at some point during the time you intend to own the building. Start a reserve fund to begin saving for capital improvements. For example, I always know how long each of my roofs will last, and I have at least 1 bid on hand to replace them. I then start a fund where I set aside money each month to accomplish what I know will need to be done at some point. I recommend a capital improvement fund if you have bad pipes or any major improvement that will need to be done within 10 years. Have a financial plan – this is the year to get started and be organized about what you want or need to do. Start now.
- Earthquake and disaster preparedness
Is your building community prepared for a disaster? Now is a great time to encourage your tenants to research preparedness, make a plan and gather supplies. It is important to be sure your staff is aware of all emergency shut offs and property emergency plans. One of the biggest issues after a large quake is fire – be ready. A great, free resource you can customize for each property is an app available through ServPro (emergency cleanup and restoration vendor). This app allows you to create a full plan for all types of emergencies and have it easily accessible on a mobile device if needed. Here are some other great resources for preparedness: www.fema.gov www.earthquakecountry.org Be sure to go to www.GetSky.net and simply search “Earthquake Preparation”.
Enjoy your Holiday celebrations! As always, stay in touch at www.GetSky.net
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