Working with Others; Delegation, Value, and Safety.
Investment Formula for Success
Now that you have set up your business, we need something else, a formula for success, something we can use again and again to generate money. Ready for it?
The formula is simple! If you can reduce turnover by maintaining 100% tenancy rates, increase cash-flow and keep the venture running at peak performance, you will have a high yield cash-flow generating system.
Ok, so the idea is simple, the practice is a little more challenging and why property managers earn the big bucks when they do things correctly.
Operational expenses vary depending on the investment size and number of doors you are polishing. However, according to CMHC comprise up to 66% of annual expenses of multi-unit residential buildings; that’s a big chunk of change. Unlike other expenses, this is something that the property manager has some impact on and it is estimated that up to 25% of these costs could be reduced by shrewd operators.
In this book, I will provide you with ways to reduce your operating cost, improve overheads while maintaining the building stock. By following the processes provided, you should be operating long term financial assets and not rathole liabilities. The processes in this book to do this are as follows;
- Creation and adoption of an Operation and Energy Management Plan. Property specific documentation to guide staffing, resource assignment, task analysis and planning, contracting, safety, budgeting and tenant management.
- Making resource decisions regarding internal and contracted work assignment.
- Creating a coherent documentation system.
Outsourcing policy
Management is all about getting things done correctly at the correct time and utilizing resources efficiently. It will be up to you to figure out if you need to use internal staff or outsource to contractors to get a job done to the quality and cost that you require. In an ideal world, you would think that using internal staff for everything is a great idea. However, this is simply not the case. For one you may need to pull existing staff that are fully loaded off one body or work and put them on your pet project.
This means that you have a hole in how effective you as a service is. If it is a few minutes, it might not be too bad if it is not mission critical activities, however a few hours or days may not be a great idea. Furthermore, every individual has different skill sets. For instance, if the member of staff is useless at painting, you wouldn’t expect the Sistine chapel at day’s end. You might be lucky to get trade value brilliant white on the ceiling. This idea works for plastering, plumbing, welding, and the list goes on. If you have to get the job done twice in total, you may have wasted 6x the resources of just getting it quickly done to a high quality the first time around.
If the job is foolproof, or you have someone with experience that can handle what needs to be done with confidence and they are not overly loaded for the estimated time it will take, then you might get a cheaper deal. When hiring staff, always lookout for experiences and skills that may come in handy at some point.
Site Staff
For multifamily building rental ventures, it is the on-site staff that are mission critical in getting everything right. They represent your brand and presence. They can reduce damages and accidents if good, and cause unnecessary challenges when not. Property managers and property owners must be able to assess exactly how many staff on-site are required in the building for it to work effectively and ensure the weekly resource loading is balanced. Furthermore, if contractors are needed, on-site staff can manage them, keep an eye out for issues with them and report back to you. Always hire hungry eager workers that are trainable to your way of working so that any software or automation systems can be rolled out and people upskilled without negativity to change.
Contractors
Building managers are required to hire trade workers due to certification requirements. Of all the different types of contractor plumbers are by far the biggest bill. As you can imagine, all different things can go wrong from toilets, washers, pipe joints failing through Thermo-mechanical fatigue and the like.
Defining the Standards
Everyone works to their own standards unless there is an explicit system in place. Staff will have documented processes and internal training to help them maintain the standard required by you and the property owner however, contractors may not have anything at all; at least to begin with. You will need to provide every service expectation in the form of a legal contract before engaging their services. If it isn’t written down, there is ambiguity and legal contention. The good thing is that as you will be using similar services, no matter what contractors you keep or leave by the roadside, the documentation initially created will only require minor changes as you go.
While it would be great to use quantitative values in contracts, it is more likely that you will have to give qualitative descriptions to comply to; which could breed ambiguity. If you need to use the latter, try creating a matrix with descriptive boundaries on what is required.
For a basic example;
- Premium Cleaning or Grounds Keeping
The standard provides unsolicited praise from tenants or visitors.
- Adequate Cleaning or Grounds Keeping
The standard provides no feedback.
- Minimal Cleaning or Grounds Keeping
The standard provides criticism by tenants or visitors.
The first two are normal however, periodic onetime special cleanups are required to stop tenants leaving for the last description. This pushes up cleaning cost and higher tenant turnover cuts into profitability. Ensure that weekly meetings and reviews report feedback raised during the week and action additional work quickly if the building manager in larger properties has not already. Ensure the contractor is warned or praised regularly so that they know you are actively engaging with them. If they fail repeatedly out of expectable requirements, successively replace them.
There are many standards and assessment methods you can use during your monitoring activities. For example, you could decide to make a complex matrix with weighting values on multiple factors or sections of the building. If the lobby is premium each week but the stairwells are not, then this points to the location of concern with the weighting value reflecting the severity of the issue. If the stairwell is never used due to everyone using lifts, the weighted value would be low for the total score of the cleaning service, while the weighting for the lobby would be high due to the regular throughput. So in this two location system, you could use the 1,2,3 values for each section and then times them each by 0.2 and 0.8 for the stairwell and the lobby, respectively. If you then add that value together, if it meets a threshold value, the weekly inspection passes with comments, or fails with the team during remedial work in that location to get paid. Obviously, your list could be much larger and detailed to reduce ambiguity between parties.
Workplace Hazardous materials information system (WHMIS)
WHMIS is a Canada-wide system designed to allow anyone who wishes to know what they are working with in terms of chemicals and hazardous materials. This ‘right to know’ means that material safety data sheets need to be available to all along with risk assessment and procedural methods of how to use these materials safely, disposal procedures and emergency procedures to follow if an accident occurs. This usually means keeping these documents with the materials in storage and operation for quick consultation, along with copies in your document system. This includes materials such as paints, varnishes, brush cleaner, lubricants, lead roofing materials.
As you can see from WHMIS requirements, compliance is vital for ensuring you are not liable for any hazardous material incidents. Again, if your documentation is up to date, not only will it reduce risk to the health of workers and incidents, it will also inflate your legal life raft.
So, now we know more about operational management and wastes that come from ineffective resourcing, poorly defined standards and WHMIS requiring consideration during resource usage.