Expense Management Tips for Property Managers
Whether you rent out a single house or manage multiple buildings with hundreds of tenants, it's always important to keep your property management costs to a minimum to ensure profitability. Here are several ways to reduce your costs for both commercial and residential properties.
Reducing Utility Waste
If you are responsible for utilities like water, electricity or gas, every dollar wasted is a dollar lost from your bottom line. A single faucet leaking 10 drips each minute wastes 526 gallons of water, for an approximate annual cost of over $10. The EPA estimates that 10 percent of water bills in the U.S. represent leaks that are costing owners money.
"There are all kinds of ways to conserve water," explains Dan Tenenbaum, founding principal of Pacific Crest Realty in Los Angeles. "Oftentimes, local utilities provide rebates for certain types of conservation efforts, like installing low-flow toilets, replacing shower heads to a lower flow model or installing aerators." Other energy-saving tips he suggests include:
- Insulating hot water pipes
- Comparing gas to electric water heaters
- Installing LED lighting
- Signing a maintenance contract with a water heater company
Charging for Utilities
In some areas, you have the right to charge tenants for utilities in addition to the cost of the lease. Tenenbaum says charging for utilities can save you a lot of money over the course of a year if it's legal in your municipality. "You can take the total monthly or bimonthly water or trash bill and divide it between the tenants," he says. "Not only does it effectively decrease your utility costs, it encourages residents to conserve because they're paying a portion."
"You can bill residents on a monthly basis for lighting and water for pools, bathrooms and general use areas based on their square footage or the number of bedrooms each tenant has," advises Tenenbaum. It's best to know the law in your local area before charging those costs to tenants, he added. In Massachusetts, for example, you can charge tenants for water only if their water use is measured with a separate water meter installed by a licensed plumber, and the charge must be included in the lease.
Outsourcing Maintenance Work
Rather than hiring full-time employees, it's often more cost-effective to hire contractors for painting, cleaning and maintenance work, notes Tenenbaum. If you go that route, he adds, you should make a point of evaluating your contractors every two to three years.
"As prices begin to go up," he says, "you need to make sure you're getting the best bang for your buck, especially in areas like lawn care or pest control. Even if you have a good relationship with your existing contractors, you can usually negotiate better terms if they know you're shopping around."
When you use software like Quicken Rental Property Manager, you can track vendors and contractor agreements just as you track tenant agreements. You can also set reminders for when bills are due and when contracts should be renegotiated.
During a hectic week, it's easy to misplace receipts and lose track of expenses. Good thing Quicken Rental Property Manager helps you track both personal and business expenses while keeping them in separate categories — a real time-saver when tax season rolls around. For example, when you get a paper receipt at the hardware store or gas station, take a photo of it right away using the camera on your smartphone to ensure you don’t forget it. Or, use the Quicken Mobile App to capture the receipt and the app will add it automatically to your list of expenses. The receipt will also be added to your desktop software the next time you sync your smartphone.
Using All of Your Eligible Deductions
For many landlords and property managers, tax deductions aren't just limited to the cost of maintenance and repairs. For example, you may be able to deduct a portion of your vehicle and fuel costs as travel expenses when traveling from one property to another. Traveling from home to your workplace is considered a commute, but traveling from a home office on business can be deductible as a travel expense, including going to the bank or to your lawyer's office.
Quicken Rental Property Manager not only tracks your deductible expenses, it prompts you for deductions you may have missed before preparing your Schedule E and Schedule C reports.