As with all facets of operating an income-producing entity, it pays to have a strategy in place that helps reduce expenses.
For example, instead of simply budgeting for maintenance and repairs, it would be better to implement a preventative maintenance program for the property. This approach not only helps reduce operating expenses, it helps to prolong the life of the property - especially when it comes to major mechanical systems.
- Strategy #2 In-House Maintenance Team
Bringing a good portion of those repair and maintenance services in-house is a smart way to cut expenses.
The cost of some types of equipment, such as a pressure washer, for example, would help to eliminate an outside service that is used by most apartment complexes. Since you have personnel available anyway, your overall expenses for that one item will go down to zero. It’s the same for many other areas of repair and maintenance as well.
- Strategy #3 Technology Driven Services
Another strategy being employed is a shift wo web-based property management.
Tenants simply go online to put in a service request, receive an acknowledgement via text or email, and then sequence the repair to be completed. This eliminates significant wait times, which tend to alienate tenants and increase tenant turnover.
All repairs and maintenance requests can be tracked by software. This can help owners monitor whether their property is being managed efficiently or not. The software can also monitor whether the repair needs to be billed to the tenant, in the case of damage or other tenant-induced problem.
- Strategy #4 Fight the Property Tax Bill
According to CCIM Institute, an additional strategy to consider relates to the biggest expense category: taxes.
Just because a property has been assessed taxes based on its valuation doesn’t mean you don’t have any recourse. Many properties are starting to appeal their tax bills, using companies that do the appeal process and work on a percentage basis or a fixed fee.
Let’s say a property is over assessed by one million dollars, an appeal could result in a savings of $25,000 or more in taxes. The tax appeal analyst would receive 20% to 30% of that amount.
Tactics to Cut Expenses
There are so many ways to reduce expenses it often just takes a walk around the complex to note where savings can be realized.
Just replacing outdoor lighting with LED bulbs can add up to a significant amount over the year, while changing plants to ones less dependent on water can help reduce your water utility bill.
Landscaping is another area that can help boost savings. Switching to artificial grass in some areas can reduce the monthly landscaping costs while also helping to reduce water bills. Do competitive price comparisons with area landscape companies in order to find a more competitive bid.
One area where you can really reduce expenses is by going green. Many Millennials are now becoming a significant portion of the renter market, and the National Real Estate Investor reports that they prefer and are willing to pay more for a green lifestyle. Green features help to attract this key demographic and help retain them as tenants.
- Tactic # 2: Save on Water Bills
Expense reduction can be achieved by implementing water reduction measures.
You can start by installing tamper-proof shower regulators. It’s widely known that tenants like to switch out low-flow shower heads with their own. This could mean that the older 4-gallon per minute shower heads are being used, and your water bill is escalating. The solution is to put on tamper-proof regulators that are hidden from the tenant and use a special locking device.
Since bathrooms and sink faucets use about 16% of the water, making sure that efficient faucets are installed can save a considerable amount of money. Just install tamper-resistant aerators and the faucets will meet the Federal Plumbing Standards of 2.5 gallons per minute in the kitchen and 2.2 gallons per minute in the bath faucet.
Monitor for leaks - wirelessly. One statistic is that 1 in 5 toilets leak at any given time, which can waste up to 250 gallons of water each day. That adds up to 108,000 gallons per year, or $24,00 per year for a 100-punit building. That’s a significant amount of money. The new “toilet scrooge” is a wireless electronic monitoring device that lets landlords monitor toilets for leaks. It’s unobtrusive and mounts at the toilet base.
- Tactic # 3: Use Energy Efficient Technology
There’s no question that energy efficient appliances save money. For example, it costs $200 a year to run a 10-year old refrigerator, compared to an Energy Star one that costs only $40 a year.
The savings can be an enticement to prospective tenants when they learn about the potential savings, not to mention helping to retain tenants over the long term.
Another option is to install new technology to help tenants save money (or the property owners if they’re the ones paying the utility bills). The Nest digital thermostat is an excellent example of how you can reduce heating and cooling costs, which can be substantial regardless of the climate the property is located in.
Summary
There are myriads of ways to reduce expenses at a multifamily property, and it all starts by looking at expense reports that show where the biggest amount of money is being spent.
Whichever tactics you use, be sure you take a hard look at the work you outsource, and make sure you get competitive bids on from all vendors you use, regardless of category. It may cost a few dollars in the short term to make required upgrades or changes, but you’ll capture extensive savings in the long term if you do
About Ellie Perlman
Ellie Perlman is the founder and CEO of Blue Lake Capital, a woman owned multifamily real estate investment firm focused on partnering with family offices and accredited investors to build and preserve generational wealth. Since its founding in 2017, Blue Lake has successfully acquired and operated multifamily assets across high-growth U.S. markets, completing $1B+ in transactions.
At Blue Lake Capital, Ellie and her team work exclusively with family offices and accredited investors, offering carefully curated investment opportunities that emphasize long-term wealth creation, stability, and risk-adjusted returns. A defining aspect of Blue Lake’s investment strategy is its integration of advanced AI-driven analytics and data science into the entire lifecycle of acquisitions and asset management. By leveraging cutting-edge technology, the firm executes data-driven forecasting on market trends, asset performance, and tenant behavior, ensuring strategic decision-making and optimized returns.
In addition to leading Blue Lake Capital, Ellie is the original founder and host of "REady2Scale - Real Estate Investing" podcast, which provides insights into multifamily real estate, alternative investments, and finance.
Ellie began her career as a commercial real estate attorney, structuring and negotiating complex transactions for one of Israel’s leading development firms. She later transitioned into property management, overseeing over $100M in assets for Israel’s largest energy company.
Ellie holds a Master’s in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can learn more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.
*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.
