Maximizing Your Asset Value 



One of Ryan Cooley’s tenants left a lit cigarette on his windowsill, where it slowly burned a hole through both the frame and the sill before extinguishing itself. Two or three years ago, he says, he probably would have bought a new window and hired a contractor to do the job.

“But with things the way they are, we decided to fix it ourselves. A new window would have been around $900; we did the job for around $30 and time spent.”

Cooley, owner of O’Connor Real Estate and Development in Detroit, Mich. and manager of several of his residential developments, isn’t the only one cutting costs. With the economy still in a downturn and no end in sight, property managers everywhere are looking for ways to help their bottom lines.

Minimize vacancies

Move-in specials are one way to attract new customers, but Tony Drost, president of First Rate Property Management in Boise, Idaho and treasurer of the National Association of Residential Property Managers, says that in a down economy it’s essential to, “come out with your best foot forward on price.”

For example, he says, a $1,500 unit that sits vacant for three months is far worse for the bottom line than a $1,200 unit that rents within weeks. A shorter vacancy period also protects from vandalism, and helps reduce upkeep, utility and advertising costs.

Reduce turnover

Equally important is retaining current tenants. Less turnover also means less prepping or renovating, advertising and re-renting, so savvy property managers will do just about anything to keep a good tenant.  

Drost says renewal incentives such as a rent rebate or free carpet cleaning are proven ways to keep tenants, but in uncertain times some property managers might have to take more drastic steps—such as freezing or lowering rents to keep a paying tenant from moving.

Matt Greenberg, president and owner of JAM Properties in Chicago, Ill., says that when times are tough, the worst thing you can do is nickel and dime a reliable renter.

Decrease Operating Costs

In any economy property managers can save money by buying bulk or wholesale, or installing gently used fixtures and appliances. But in a down economy, both material and labor costs are low, making this a great time for small and large repairs that can maximize asset value in the current market and yield greater profits in the long term.

Greenberg says now is the time to get the roof, tuck pointing, foundation, plumbing and electrical in order, because when you’re ready to sell, that’s what experienced buyers will look for.  

But that isn’t to say superficial repairs or updates won’t increase value now. Drost says that with very little money you can set your property apart from nearby REOs and short sales that often times fall into disrepair.

“Green yards and fresh paint go a long way,” he says.

Property managers may also want to rethink how they advertise as a way of decreasing operating costs. Craigslist.com, for instance, can be cheaper than a newspaper classified ad, or even free, as they are for Greenberg because he’s not a “giant corporation.” Because of the site’s popularity, he suggests replacing ads every three days so listings stay at the top.

Increase cash flow

Flat-lining rents have many property managers scrambling for other ways to generate revenue in a bad economy. Property managers with smaller multi-family properties may consider installing individually metered utilities. Those at larger, higher-density units may make bulk deals with local cable providers and then distribute the service to tenants at a profit.  

High-rise buildings are often sought out by cellular phone providers for towers, which increases cash flow at virtually no cost. Media buyers looking to place larger billboard-type ads may be sought out by property managers who have buildings located near a highway or busy intersection. In addition, coin operated laundry and parking fees, are always a surefire way to increase revenue.  

Drost also suggests being a little stricter on late fees, NSF fees, lease violation notice fees and roommate-change fees, which has a two-tiered effect of generating revenue and keeping tenants in line.

According to Greenberg, when it comes to increasing cash flow and maximizing asset value in a down economy, knowing your competition and your market are important, but it’s the relationships that are most crucial. “If tenants think you care, they’ll stay,” he says.