The challenge that a lot of our clients are facing right now is quite simply inflation. And while inflation is incredible when it brings rising rents with it, which seems like such a huge plus, it also has the downside of bringing up the cost of everything else.
Those costs are going to happen to you as a real estate owner: fixed costs like real estate taxes and insurance we have little power over. But there are some weapons in the arsenal, to fight back against inflation.
There are several ways to counteract these costs:
1. Smart Rents
The only way for you to stay on top of those costs is to make sure that your rents are proactively being updated every time you have a turn and taking advantage of that as much as you can. How do you go about addressing the need to make sure your rents are keeping in mind with that increase in inflation and your overall costs? Well, quite a few of our clients are addressing this with putting in revenue management software, to make sure that you’re using intelligent pricing in order to gauge what the market is doing. It also insures you’re following where other landlords and other owners are pricing their properties and keeping pace where the market rents actually are.
2. Locking in Variable costs.
Stockpiling items that you’re always replacing like appliances, putting in hard surface flooring to reduce the constant turnover of carpet in your units are several ideas.
Where possible, signing longer term agreements with providers to fix your costs for contracts like HVAC maintenance and property manager flat fees.
3. Reducing Utility costs
Using smart thermostats where Landlord pays heat, metering for tenant bill back, or instituting a RUBS program, are all ways to live smarter. Where they appropriate, installing solar panels may be a good way to reduce utility costs, and fix in that cost now before it rises in the future. There are tax credits for energy efficient fit outs.
Addressing those Three items:
- Keeping rent increases highly current
- Locking in supply costs right now to save in the future
- Smart Utility Usage
These are the largest defenses you have against the degradation of inflation. If you don’t do these things, the value of your building will not be keeping step in comparison to all the other properties in the market. So it is absolutely crucial that you make sure your rents are keeping pace in order to protect the value of your building, and to keep a close watch on all your expenses. That is how other owners are able to stay ahead of inflation, and protect and even increase the value of their properties for the long term.
If you would like a free portfolio inflation audit, contact us for a meeting. We can review and make suggestions where other owners have saved on expenses and built up income to increase the value of your building long term.
