Five Tips on How to Reduce Operating Expenses
We’ll cover five simple tips on how to reduce operating expenses in your commercial real estate management operations. Operating costs are part of buying and managing real estate properties. Maintenance, cleaning, parking lots, and other factors are all necessary, but often expensive, aspects of property management.
While some expenses cannot be reduced, and it can feel difficult to improve your budget, there are several concrete steps to lower costs. Read on to learn about some of the tactics you use to manage some of your real estate operating expenses.
How To Calculate Total Operating Expenses
To calculate total operating expenses for a year, simply add your expenses for each month together. An accurate total requires keeping careful track of all costs throughout the year.
After finding the total operating expenses, you can subtract any depreciation for the year and then divide by your gross revenue. The result is your operating expense ratio. The operating expense ratio shows owners, property managers, and investors the property’s potential for profit compared to the costs required to maintain it. In other words, it is one way to measure if a property is a strong investment, or if it has any large, concerning expenses.
Small but Mighty Changes Reduce Costs
Even though some may be small, the changes below are a great step in the right direction to help you lower expenses. For best results, hire an experienced property manager. A professional can focus on effective, economical management for you, helping make the best operating choices for your business.
1. Maintain the Property
Perform preventative maintenance on any equipment to avoid costly problems down the road. Checking on your equipment regularly helps you catch an issue early if it arises. This way, you save money and time when you need a repair. An in-house maintenance team also cuts down on repair costs compared to hiring an outside company to fix the problem.
When you recognize and repair problems efficiently and quickly, your tenants appreciate your actions. It demonstrates your dedication to providing working equipment for them and builds a strong relationship. Tenants are more likely to stay when they feel that you hear their needs.
Using a property management software like STRATAFOLIO can help you stay on top of maintenance by tracking work orders, monitoring task status, and making it easy to review your upkeep budget.
2. Use Green Alternatives
Water and electricity are expensive in older properties, but there are ways to bring the cost of utilities down. One simple solution to lower utility costs are switching regular light bulbs for LED bulbs. LED bulbs last longer and use less energy than other lighting options.
Another way to decrease your utility expense is by installing low-flow toilets and shower heads. Using these sustainable alternatives reduces your utility bill and is an attractive feature for potential tenants. If your water bill is more expensive than usual, check for any water leaks on the property.
Depending on your property, water usage could be high due to landscaping maintenance. Using equipment and watering systems with sensors significantly reduces water usage.
Look for additional ways to improve sustainability in commercial real estate, through renewable energy, smart systems and other options.
3. Shop Around for Quotes
It is normal to look at different companies for insurance, internet, and other personal services. Why not do so for commercial properties? Shop around for better prices, service upgrades, and new technology regularly to figure out where and how to reduce expenses for these products. Different companies outside your usual provider may offer better deals on internet and insurance plans than you currently have.
4. Appeal Your Property Taxes
Property taxes are a costly expense for property managers to pay every year. You can appeal to reassess your property’s taxes. If the taxes on your property have increased significantly, you should try to appeal the taxes.
Hire an experienced tax appeal expert to help you with the appeal process. Tax appeal experts make sure you are not paying more than the bare minimum for your property.
5. Use Smart Lockers
Delivering tenant’s mail causes time to be wasted where it isn’t needed. Holidays, birthdays, and other events make sorting or delivering mail takes more time than usual.
Smart lockers cut down on needing extra staff to work in the mailroom. Tenants receive a text or email when they receive something and have a barcode in the message to unlock the locker. This helps tenants feel safer when receiving packages.
Achieve Reduced Costs with STRATAFOLIO
Managing property costs is challenging and time-consuming, but STRATAFOLIO is here to help. By making it easy to track and understand all your transactions, STRATAFOLIO helps you figure out how to reduce operating expenses without sacrificing high business standards. Schedule a 1:1 demo to see how we help you manage your properties.
