Navigating the Challenges: A Outlook for Small to Midsize Apartment Owners and Property Managers

As we reflect on the financial complexities that 2022 brought to the rental housing industry, it’s clear that the landscape for small to midsize apartment owners and property management companies has been one of significant challenge and adaptation. The comprehensive 2022 Income/Expense IQ report has shed light on various factors that have reshaped the operational and financial strategies within the industry.

Rising Operating Costs and Insurance Premiums

One of the standout issues facing the industry is the sharp increase in operating expenses. Insurance premiums, in particular, have surged, with some regions like Florida and California experiencing hikes up to 79.1% in areas like Orange County. This spike in insurance costs demands a strategic review of risk management practices and insurance providers.

Utilities and maintenance have also seen notable increases. Energy costs, including natural gas and heating fuel, lead the charge with some of the most significant year-over-year increases. For small to midsize operators, where margins can be thinner, these rising costs are not just line items but major financial considerations that can dictate pricing strategies and tenant engagement practices.

Labor Challenges

The labor market has remained tight, with the real estate sector experiencing a high quit rate compared to other industries. For property managers, this translates into an urgent need to innovate in recruitment, retention, and motivation strategies. Offering enhanced compensation packages and fostering a positive workplace culture are more crucial than ever to maintain a stable, effective team.

Tactical Revenue Management

Despite the increase in overall operating expenses, there has been some positive news on the revenue front, with net operating income seeing growth in certain markets. This is a critical reminder of the importance of revenue management strategies that not only optimize rental pricing but also enhance other income streams such as parking fees and service charges.

Strategic Investment in Technology: Harnessing Income/Expense IQ

Investing in technology can provide a significant advantage. Here’s how you can utilize the Income/Expense IQ platform, offered through the National Apartment Association, to enhance your operational efficiency and strategic decision-making:

• In-platform Comparisons: Configure your property’s T12s (trailing twelve months of financial data) in monthly, quarterly, annual, or custom-defined periods and compare them to a benchmark in real-time. This will help you spot trends, identify anomalies, and benchmark your performance against peers.
• Filtering: Tailor your filters on the platform to ensure the benchmark, and its results, accurately reflect your property’s attributes. This customization allows for more accurate comparisons and targeted insights.
• Collaboration: Invite your team members to the platform to collaborate. Sharing data insights among team members fosters a unified approach to tackling operational challenges and optimizing strategies.
• Live Benchmarks: The Income/Expense IQ technology recalculates benchmarks monthly to capture newly added property data, allowing for more granular and up-to-date benchmark configurations.
• Automated Submission: Automate the submission of your property’s data to the platform. This not only saves time but also increases the accuracy of your data inputs. Schedule reports from your property management software (PMS) to upload automatically, ensuring continuous and hassle-free data integration.

Valuable Resources: Buy It Rent It PROFIT Education™️ and National Apartment Association

To further empower your property management journey, consider engaging with the Buy It Rent It PROFIT Education™️ platform. This membership platform offers tailored educational resources, industry insights, and networking opportunities that are specifically designed to enhance the skills and knowledge of rental property professionals. Coupled with the resources from the National Apartment Association, these platforms provide a comprehensive support system to help you navigate the complexities of the rental housing market.

Glossary of Key Terms

Understanding the terminology used in property management and financial reporting can significantly enhance your operational effectiveness. Here’s a glossary of key terms used in our industry:

• Repairs and Maintenance: Costs related to maintaining property conditions, including:
  • Appliances
  • Carpet
  • Cleaning Supplies
  • Elevator Repair and Maintenance
  • General Building Exterior
  • Grounds Maintenance
  • Janitorial
  • Landscape
  • Painting/Decorating
  • Recreational/Amenities
  • Security
  • Snow Removal
  • Other Repairs & Maintenance

These expenses encompass general maintenance, maintenance supplies, and uniforms, and exclude payroll-related expenses and non-recurring capital expenses. Contract services are reported separately.

• Other Revenue/Income: Monies received from various sources, including:
  • Amenity fees
  • Parking fees
  • Laundry
  • Pet fees
  • Storage
  • Other (including vending, deposit forfeitures, furniture, late fees, termination fees, application fees, etc.)

This category excludes interest income and utility reimbursements, which are subtracted from gross utility costs.