Keeping Maintenance Costs Down
For building and property management teams, keeping building maintenance costs down is obviously vitally important. Upkeep of buildings can make or break an asset’s revenue goals for the year. So this being said, there are a couple of places to start with managing your costs better. First, set up a realistic maintenance budget. There’s a few ‘Rule of Thumbs’ you can go by…You can use the 50% Rule, which sets aside half the annual property rent to pay for maintenance. Or you can apply the 1% rule, that takes 1% of the property value and applies that dollar amount to your repairs for the year. And finally, the square footage rule. This goes by the standard $1/sf per year. Keep in mind, you do not have to spend all this capital, be diligent on your expenditures. So here are some tactics you can apply to ensure you don’t blow past your budget:
- Occasionally, you need to take on a project that may turn out to be costlier than you have budgeted. A popular idea to get the ball rolling on something like this, is to break the project up into 2-3 phases. Perhaps it’s time to replace a couple of roofs or even some HVAC systems, but you can’t afford to do it all at once. If everything is in working order, split up the project over 2-3 years until everything is completed. We work with a management company who does this for many of their larger capital projects, and it has worked very well over the years. This method keeps you on budget for the year, but at the same time, you continue to service and upgrade your property.
- Maintain a small but dependable network of contractors. (Shameless plug: see connexproperty.com to find new vendors). Quite a few management companies I work with, have a solid core of contractors that they rely on to get their properties serviced. By establishing good relationships with these professionals, you are more likely to get better service at more competitive rates. It’s the idea of volume-based pricing. The more work you can give a vendor the more favorable pricing will be. There’s one caveat here. Every once in a while, you are going to want to go outside your network and get projects priced by other vendors. This way you can ensure your preferred contractors are keeping their pricing in step with the general market.
- Energy Consumption is key. We all know that buildings consume a ton of resources. HVAC systems themselves contribute to over 50% of your building’s usage. With appliances and lighting sucking up the rest. Of course, this is nothing new, and trying to save money by making your buildings more efficient is an on-going process. But if you think about it, the multiplier effect can be huge, especially when dealing with larger buildings. If you have one house and you apply the basic energy saving programs, you may save a hundred bucks or so. But if you blow that up to a large apartment complex or office buildings, you’re looking at potentially thousands of dollars per month in savings. An Energy Research firm estimated the basic energy saving programs can save anywhere between 10-40% per month.
In conclusion, these are some of our thoughts on Keeping Building Maintenance Costs Down. If you have any questions, certainly do not hesitate to reach out. We love helping anyone in commercial construction or property management!
