Time to Get in Shape

Time to Get in Shape
Dan Lieberman, President, BPOA

Like many people, one of my goals is to get in better shape this year. Over the past few years, I have developed some poor habits when it comes to exercise and eating. No longer working in an office has kept
me a bit too close to the refrigerator every day and, inevitably, that has led to weight gain over time.
And, although studies have shown that over 64% of Americans abandon their New Year’s resolutions by
February, I intend to keep working on this.

Over the past decade or so, many housing providers have gotten fat in a different way. They got used
to artificially high demand for rentals. Rents increased rapidly due to the tech boom with the Bay Area
being the center of it all. I have heard many owners talk about waiting for the market ‘to come back’ to
some semblance of what it was. I know people who are shocked they have vacancies. But frankly, what
we experienced the last decade is not normal, and it isn’t coming back.

Owning and managing rental properties has always required resourcefulness, but today’s housing
providers face mounting challenges. Rising insurance rates, increasing utility costs, higher maintenance
costs and stricter rent controls are making it harder than ever to remain profitable.

With remote work now being entrenched in society, with many people relocating to more affordable
states and cities, and with lots of new construction hitting the market (at a rate we haven’t seen for
nearly 50 years), supply and demand alone dictate that things have changed.

You need to look at yourself in the mirror and consider changing the way you operate your properties.
Now it’s time to do the reps and trim some of the fat. Below are a few suggestions for reducing expenses
and staying ahead in a competitive market.

Leverage Technology for Smarter Management
There are a number of technology options now that help property owners manage rentals, offering tools
that save time and reduce costs. Even small-scale property owners can benefit from these advancements:

• Automated Platforms: These software platforms automate rent payments, keep you flagged for uncompleted maintenance requests, and help ensure that tasks needed to meet compliance are not dropped.
• Smart Thermostats: If you are responsible for the heating or cooling expenses in your apartments, installing
  smart thermostats can optimize energy use and reduce utility costs.
• Monitoring Systems: Everything from real-time water use, to leak detection, to when hot water is used, to energy consumption can be monitored and devices programmed for optimal utility savings.

Prioritize Preventive Maintenance
Schedule regular inspections and repairs to address small issues before they escalate. Even simple items like replacing filters in heating units; checking for signs of leaks under sinks or around toilets; or installing vent fans in bathrooms — even those with windows (many tenants keep their bathroom windows shut in the winter) to hinder potential mold growth will prevent bigger problems and reduce your operating costs in the long run.

Install energy efficient upgrades. Replace your exterior and common area lighting with LED fixtures. Install high efficiency water fixtures. The quality of these items has improved significantly in recent years. Many low-flow shower heads provide the feel of a strong flow. Install higher quality low-flow toilets. Most water wasted is by toilets needlessly running. Check weatherstripping and caulking to prevent drafts and improve energy efficiency.

Other Ways to Control Rising Operating Costs
Focus on Insurance-related Improvements. Insurance remains the largest cost increase for most property operators. Improving specific property conditions to qualify for lower premiums should be a high priority in your capital improvement budget. Focus on updating electrical panels and sub panels, checking for trip hazards, and keeping your roof maintenance up to date (when’s the last time you had it inspected?). Speak with your insurance agent about what things you can do to make your property more attractive to insurers.

Review Vendor Contracts. Regularly review and re-bid contracts for services like landscaping, pest control, and cleaning to ensure you are getting the best rates. With our income limited by rent control, we need to focus on getting the best value on the expense side. Financing and Tax review. Work with a tax professional
to ensure you’re claiming all allowable deductions. Look at accelerated depreciation schedules. Research local and state programs offering funding for energy-efficient upgrades or seismic retrofits.

Build Relationships with Tenants
Strong tenant relationships can indirectly reduce costs by fostering longer term tenancies and minimizing turnover. Satisfied residents are less likely to leave, reducing costs associated with turnover. For most properties, the cost of turnover (maintenance, vacancy, etc.) is the largest cost they incur. In addition, many owners underestimate the cost of poor resident relations — including calls to the rent board or code compliance rather than to you to deal with any issues that arise.

Pre-Covid, many Berkeley and Bay Area property owners became accustomed to always having high demand for their units. But all that has changed. Many people have moved to other areas now that they no longer need to go into the office every day. New construction now competes with you for residents. Even the university is now building long-overdue student housing! So, the days of easy rent increases are gone. It’s time to get your building operations in shape. I encourage you to review all aspects of your operations to improve your return on investment.

Wishing you much success in 2025.