With the current toll on the global economy, a widespread recession seems inevitable at this point. With that comes the immediate need to cut costs.
While a downturn can be worrisome to even the most confident business owner, the best thing you can do is take action by cutting down on expenses strategically.
Here are some ideas for reducing expenses to get your real estate business through the recession.
1. Outsource What You Can to Reduce Costs
There are some tasks you can outsource to reduce in-house costs. For example, you can opt for on-call tenant support by using a virtual assistant. This is much cheaper than having employees being on call at all hours of the day. In many cases, it’s also just as effective. In fact, many teams that use virtual assistants to help with weekend and after-hour calls, eventually start using the service for additional hours as well. Why? Well, for many small teams, you have to wear multiple hats. Keeping focused on the most pressing thing is difficult when calls are coming in. The use of a virtual assistant allows you to maintain your desired service level and brings your team in when necessary. We call that a win-win.
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2. Reduce Certain Services
If business has been down for you, there may be some services that are less needed than they were in the past and an instant place to cut costs. For example, decreased business could mean your dumpsters aren’t filling up as quickly. They don’t need to be emptied as frequently, which means you’re wasting money right now on sanitation services. Try to renegotiate these contracts so you’re getting a better deal and saving more money. You can use this extra money toward more essential needs.
3. Talk to Your Lender
If you are facing a situation where your rents are not coming in, or you anticipate they will slow down, now is the time to talk to your lender. You may be able to defer loan payments or at least make interest-only payments. The solution that’s best for your needs will depend on your specific circumstances. No matter what solution you arrive at, this is definitely one area you should be cutting expenses in. We spoke about this previously in another article.
4. Have a Conversation with Your Insurance Company
There are several conversations to be had here given the recent changes. Occupancy in your space could be different which could make you eligible for a reduction on your insurance premium. If it is renewal time, talking with your insurance contact about delaying the renewal for a period of time and extending the renewal thereby reducing your chances of an increase. In the event your insurance premium is based in any part on revenues, you may also be eligible for a reduction. Check out this webinar by USI to learn more.
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5. Identify Potential Tax Savings
The recently passed the Coronovirus Aid, Relief, and Economic Securities Act (CARES Act) provided changes with the rules around the Net Operating Loss carryback and carryforward provisions. Talk with your accountant but applying these changes you may be eligible for a tax savings in 2019, but in years prior to that as well. Additionally, it may be time to consider a cost segregation study as well. With cost segregation, you work with an experienced team and identify portions of a building or asset where you can speed up the depreciation schedule. These depreciation savings can be applied to your taxes.
6. Utilize Software for Automation
When you’re dealing with a reduced staff, every member on your team has to start wearing different hats. Automation will help you get more done, even if you have fewer people. There are great options for software that is focused on making your life as a real estate owner easier. Whether it is changing from one software to another to cut costs, or simply automating, STRATAFOLIO is one way you can do this. It will streamline your operations during this unprecedented time so you can increase profits and reduce the manual work you’d normally have to pay for.
Not sure if STRATAFOLIO is the best route for your business? Ask for a demo! It’s completely free and is a great way to decide whether STRATAFOLIO is right for you.