Last modified on August 23rd, 2023
By Brittany Benz
When it comes to finance management, multifamily property management companies already face significant challenges, largely thanks to the size and scale of multifamily operations. However, today’s stubbornly high inflation rates, softening rents, and increased operating costs have made controlling costs and maximizing revenue more difficult than ever. As relief from these and other persistent economic stressors isn’t expected anytime soon, it’s time to take control with a brand-new approach: Eliminate financial inefficiencies, especially in ways that can maximize revenue.
While reducing costs is common practice, there’s only so much budget a multifamily property management business can afford to cut before long-term success is jeopardized and the owner, employee, and resident experiences are negatively impacted.
Eliminating financial inefficiencies is about recognizing the hidden costs of disorganization — stalled projects, poor vendor relationships, and increased operational costs — and optimizing for efficiency. Below, we outline the top three places multifamily property management businesses should address first to maximize budgets, improve spending efficiency, and boost revenue.
Focus on strategic procurement processes and inventory management
Although procurement is a regular part of day-to-day multifamily operations, multifamily operators rarely have an official procurement process in place. Instead, most purchase parts as needed or when someone decides it’s time to place an order.
While team members may appreciate the freedom to purchase what they need when they need it, not having procurement guardrails in place can drain budgets and decrease your purchasing power. Common procurement spending inefficiencies include ordering too many of one part, not ordering enough of the right parts, repeatedly making one-off purchases at higher prices, not working with preferred vendors, or under-leveraging negotiated rates.
To reduce financial inefficiencies in your procurement process immediately, start by taking inventory of all the different parts in each unit today, from faucets to sinks, nuts, and bolts. Then, create a centralized and standardized list of which parts and supplies the team can order — including item numbers, pictures, and names — to help ensure consistent purchasing in the future.
For multifamily properties that store inventory on site, use the standardized list to see which items are on hand and what’s needed soon. This will help maximize budgets by taking advantage of bulk ordering and eliminating more costly one-off orders.
For multifamily properties that don’t store inventory onsite, work with suppliers that allow teams to quickly and easily order the standardized parts they need to prevent maintenance delays. For example, AppFolio Stack™ partners, Lowe’s and Lowe’s Pro Supply, offer online ordering, savable shopping lists, and same- and next-day delivery for added convenience.
Partner with preferred vendors
Even if in-house maintenance teams can “do it all,” some situations and tasks are best handled by vendors. For example:
- When short-term costs lead to long-term benefits: Instead of pulling multifamily maintenance teams away from conducting critical preventative maintenance that can mitigate expensive emergency repairs — such as inspecting AC units before summer temperatures start to rise — hiring a vendor to paint empty units can be well worth the time and initial investment in the long run.
- For preventing maintenance team member burnout: For urgent, late-night maintenance needs, having a vendor available for after-hours repairs can help prevent the need for team members to be on call and lower the risk of burnout. As a bonus, using technology solutions that can automate emergency request processes, like prioritizing work orders based on urgency and dispatching pre-approved vendors immediately, can also help ensure your front office team isn’t on 24/7 and at risk of burnout.
However, when it comes to working with vendors, the procurement economy of scale rule also applies: By consistently working with one trusted vendor and documenting their rates and information, everyone on your team knows who to contact. Working consistently with one vendor also means you can negotiate volume discounts and better control the maintenance experience for residents, since vendors will automatically be seen as an extension of your team and business.
Tap into maintenance to generate additional revenue
Sometimes it makes sense to work with vendors instead of having your maintenance teams take care of everything onsite all the time. However, there may also be instances in which your multifamily maintenance teams can generate additional revenue for your business by taking on services that multifamily property owners ordinarily contract out.
For example, rather than hiring vendors for services that go beyond basic property maintenance — including landscaping and pest control — owners could hire your multifamily property management company to perform value-add services instead. In addition, you may even take value-add maintenance offerings a step further by making them available to other multifamily operators that don’t have the bandwidth themselves.
However, to maximize the revenue generated from offering additional, value-add maintenance services, make sure the services being offered are within your team’s skill sets and are part of or can fit into their routine workflows. The goal is to maximize existing resources, not add completely new or highly specialized services such as roof repairs and carpentry.
Explore more ways to optimize multifamily financial efficiencies
Instead of immediately slashing budgets when economic pressures are squeezing your multifamily business, look first at solving for financial inefficiencies. By optimizing your business spending, you’ll be able to streamline critical operations areas, improve your overall purchasing power, and potentially add money back to your budget instead of just taking away from it.
Looking for more ways to optimize your multifamily property management finances and take control in uncertain economic times? Download our free guide below.