Apartment Budget

Are donations really required?

Seeking donations from vendors have become the standard for many of us on the property management side. Is it really the answer to our lack of budget for resident retention programs or corporate meetings?

As much as we talk about the importance of recycling, the United States is the number one trash-producing country in the world.  This means that 5% of the world’s population generates 40% of the world’s waste! With last week being National Recycling Week, I thought it would be fun to show you some ways to conserve waste and save money by repairing, versus replacing, your appliances.  The below infograph, from Part Select, shows the cost to replace some common appliances.  If you click on the buttons, possible symptoms and their fixes are shown.  Have fun playing around with this and maybe next time one of your resident’s dishwasher leaks, you can save some money by repairing it.

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A Simple Way To Conduct A Utility Billing Audit

Here's how to conduct a quick and simple audit:

1. Know the rules of the game.
2. Collect relevant billing data.
3. Build a spreadsheet and graph the data.

1.  Know The Rules Of The Game

Owner loses nearly $200,000.  Find out why and how you can avoid this situation

"How much money do you estimate was lost?"  We put this question to a multifamily owner whose complexes total nearly 500 units.  His answer was shocking.  "Nearly $200,000 over three to four years."  Our next question was obvious…"How?"

"It was very difficult to identify," the owner replied.  "Each year, the amount of money we paid for our master-meter water and sewer bills increased, but the amount we recovered from our resident utility billing program slowly decreased.  We relied on a billing provider to manage the process for us but the losses happened gradually enough that we didn't catch the errors."

When the owner investigated more closely, he discovered that his local water utility had increased the master-meter water/sewer rates several times, but the resident bill calculations had not been updated with those rate changes.  The owner was continually paying more for utilities but collecting less.

By Salvatore Friscia, San Diego Premier Property Management, San Diego, CA

A vital part of reducing cost when managing a rental property is limiting the expenses associated with tenant turnover. Tenant turnover usually requires the rental property to be professionally cleaned, painted or touched up, and carpets cleaned or replaced. In order for you to know what expenses to absorb and what expenses to charge back to the tenant, you should always know the current condition of the property as well as the condition in which the property was given to the tenant.

To accomplish this, each tenant should be provided with a written “Move-In/Move-Out” checklist. The “Move-In/Move-Out” checklist allows both parties to identify in writing the initial “Move-In” condition and the final “Move-out” condition of the property. These checklists will eliminate any misunderstandings regarding which party will pay for non-normal wear and tear repairs throughout the tenancy and upon move out. Prior to giving the keys to the tenant the owner should completely inspect the property and document the existing condition on the “Move-In” side of the checklist. It is necessary to document the condition of the appliances, windows, screens, blinds, doors, walls, lighting, flooring, a/c, heating, toilets, faucets, ceiling fans, and any other necessary interior and exterior areas. During the initial walk-through with the tenants, it is important to review the findings with the tenant and have the tenant sign and date the document.

By Salvatore J. Friscia, San Diego Premier Property Management, San Diego, CA

Every property owner should require tenants to issue a refundable security deposit which is held on file to insure against non-performance of the lease agreement. Non-performance may be, but is not limited to, anything from damages occurring during occupancy to expenses accrued due to the tenants conduct or failure to pay rent.

The confusion begins with the property owner not knowing how much to require the tenant to issue for the security deposit. It is important to understand that security deposits for residential properties are controlled by statute and call for nondiscriminatory  and equal treatment. It is a prohibited discriminatory practice to charge a family a different amount then an applicant without children. It is also prohibited by law to require an excessive amount for the security deposit. In addition to collection of one month’s advanced rent, the maximum security deposit allowed (at least in the state of California) for an unfurnished unit is two months rent and three months rent for furnished properties. [California Civil Code 1950.5(c)] Check your local area laws for similar guidelines in your area.

By Salvatore J. Friscia, San Diego Premier Property Management, San Diego, CA

If you own multi-family rental property in the southwestern United States you should know about RUBS (Ratio Utility Billing System). A large majority of multi-family rental properties in California, Arizona, Nevada, and NewMexico are individually metered for electric but have what’s called a “master” meter for water. The electric usage of the tenant is paid for by the tenant and the water and sewer usage for the entire complex is typically at the owner’s expense. This expense can be rather costly and eats into the NOI (net operating Income) of the property producing a negative effect on the value of the asset. Most industry experts foresee prolonged price increases for water consumption as the areas mentioned above are currently dealing with drought and long-term water conservation concerns. To mitigate this expense savvy investors have typically reduced water consumption by the installation of low flow toilets, low flow shower heads, and landscaping of indigenous plants or desert landscaping in common areas. While this helps reduce cost it doesn’t eliminate it and the owner is still burdened with an expense that continues to outpace reduction methods. Some owners have gone as far as installing sub-metering on each individual unit if the property’s current piping system allows it. This would seem to be the best solution but once again this is only feasible if the properties current piping system will allow you to make these changes. All of these methods are helpful and will curve water consumption and the cost associated with it but unfortunately all of these methods also require an initial capital investment by the owner to implement. Depending on the size of your property, this initial capital expense could be significant — sub-meters can cost anywhere from $200-$400 per unit not including installation fees.

The RUBS (Ratio Utility Billing System) uses an allocation formula that divides a property’s water bill among its residents based on square footage, number of occupants, or some other quantitative measure. It allows the owner to recover a substantial portion of the water and sewer cost by proportionately allocating the costs amongst the tenants. To implement RUBS it is recommended that an owner give monthly notices for at least 6 months to all tenants about the new program. This will give adequate time for the tenants to absorb the changes and understand the new cost associated with the billing. Studies have shown that the loss of tenants will be minimal and the cost associated with the savings from the program will outweigh any short-term vacancy bumps.