 PUMP UP THE BOTTOM LINE
Want to boost the value of your building? Lowering expenses increases net operating income, which translates into a higher value. Cutting costs can also put more rental income in your pocket.
The best way to better your investment's bottom line is to start with the big ticket items: utilities, property taxes and cleaning costs.
Rein in Utility Costs
Updating lighting in common areas is a no-brainer for lower expenses. This may mean something as small as switching from incandescent bulbs to energy efficient fluorescent bulbs. Not only will you save on your electric bill, but fluorescent bulbs need to be changed less often.
Automatic motion sensors on lights are a small thing, but they can add up to big savings without affecting the quality of the tenant experience. You can purchase motion sensors, depending on the use, for as little as $45.00.
Consider using motion sensors in hallways, stairwells, garages, garbage areas and laundry rooms.
Another way to cut utility costs is to cut water usage.
This can be accomplished in several ways.
The SFPUC Water Conservation Section offers all San Francisco residents and property owners free water-saving devices. For multi-family buildings, this includes one of each device (showerhead, bathroom aerator, kitchen faucet aerator, and flapper) per unit. For more information, visit SFPUC's Free Water-Saving Devices for Residents.
For more savings, when toilets and clothes washers need to be replaced, replace them with High-Efficiency models. Rebates are available through the San Francisco Public Utility Commission and PG&E. For more information visit Rebates page.
The SFPUC also provides a free Water-Wise inspection for all San Francisco building owners. Owners will receive Water-Wise Tenant
Kits for their tenants. The kits include:
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Educational materials on water wise practices for the kitchen, bathroom and property grounds.
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Information on how to identify and report wasteful plumbing and landscape leaks.
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Household water-saving tools such as the plumbing handbook, dye tablets, reusable canvas bag and sponge printed with useful conservation message.
Have you reevaluated your garbage needs since San Francisco enacted mandatory composting and recycling last year?
Perhaps now that your tenants are utilizing these services (which are free to residential customers), or perhaps a unit that was once rented by a family of four, is now being rented by a couple, and you can cut down on the number of garbage cans or pick up days. Be sure to monitor the tenants garbage usage before deciding to cut out a day or a can. There is nothing worse than piles of garbage and Recology will not pick up overflowing cans.
If your tenants' garbage output has not decreased with the new program, perhaps they aren't utilizing the recycling or composting bins as much as they can. Be sure each of your units has a countertop composter to encourage composting. Educate your tenants about which items can be composted and recycled.
CHALLENGE TAX VALUATIONS
Another big budget item that deserves regular scrutiny is property taxes. If you purchased your property in the last couple years, or have seen a significant decrease in rents, visit the assessor and ask for a reduction. Understand the tax appraiser's methodology-what cap rate is used and how the building is classified. CONTROL CLEANING COSTS
Lowering janitorial costs can also increase your bottom line, so long as you don't try to save at the expense of building quality and tenant satisfaction. A key first step is to rebid cleaning contracts or apply pressure on current vendors to lower costs.
Another way to cut cleaning costs, is to monitor the state of the building. Perhaps the tenants wouldn't notice if you switched to cleaning every three weeks as opposed to every two weeks. Again, be careful not to sacrifice tenant satisfaction.
FIND OTHER PLACES TO CUT
Insurance costs aren't as much as energy expenses but if you pay attention you can save on premiums.
For example, as much as 30 percent of the value of a property may be land, which doesn't need coverage against certain property and casualty perils, like fire.
Insuring for full replacement cost may also add to premium expenses, especially if the replacement figure is based on insurance industry construction-cost underwriting manuals instead of local contractor estimates.
Be sure to make sure you don't cut your coverage so much that you aren't fully covered in the event of a disaster. |
