Ensuring the costs for your multi-family investment property are as low as possible increases your profit margins. Expenses should be regularly reviewed to determine if your investment is on track.
Overspending when you don't need to be can cost you hundreds of dollars if it goes unnoticed. Therefore, it's crucial to audit your expenses periodically.
Many of the expenses associated with owning a multi-family investment property can't be controlled. You can't regulate how much power each unit is allowed to use. However, you can control who your energy provider is. This is the case with many of your investment property's expenses; you can control your provider and get the lowest rate available.
What are Common Overspending Areas?
Utilities: Like any bill, your utility bills can be inaccurate. There's always the possibility of human error and the instance where numbers were read wrong. Go over your monthly bills with a fine tooth comb and make sure you understand what each charge is for. If you understand your bills, it will help you recognize discrepancies when they occur. Monitor your deliveries and cross reference them with the amount charged to you. You can also decrease your utility bills by checking your plumbing, hot water tank, and boiler for energy waste. Upgrading old systems to energy efficient ones can reduce your spending in the long run as well.
Insurance: Like utilities, insurance is an unavoidable expense for multi-family investment properties. However, just because you have to pay it doesn't mean you have to pay a lot for it. If you don't think your insurance premium is reasonable, take a good hard look at your policy. Is there anything in there you don't need coverage for but are still paying? Make sure your policy covers your needs and doesn't have additional high-priced add-ons. Also, ask your insurance broker if you can qualify for more discounts. If your coverage is perfect but your premium is still high, do your research and shop around for other insurance companies. Get quotes, but make sure the coverage is the same—you want to be comparing apples to apples. If the quotes come back similar to what your current premium is, you know you're paying a reasonable rate.
Return on Investment: Getting the maximum return on investment for your property is your goal. You bought the investment to make money, not spend it. Therefore, you need to ensure it's being running efficiently and properly. You need someone experienced and knowledgeable to keep your vacancy rates low and maintain your investment. Are you overspending on the maintenance of your building? Is there a true need for the number of maintenance men you employ? If not, you need to have a talk with your property manager. If you feel they aren't doing a good job of looking after your investment property, it's time to get a new one. Hiring a professional commercial property management company, like Braden Equities Inc., can decrease your costs and assist you with creating a performance improvement plan.
Real estate investment overspending doesn't have to occur. If you stay on top of things and carefully monitor your bills like utilities and insurance, you'll avoid spending more money than you have to. If your overspending is out of control and you don't know where to begin, start by hiring a professional management company who'll work with you to rectify the situation.