Next Steps: What Owners and Operators Should Consider
By Stephanie Anderson
We are all still deep in the trenches of adjusting our operations to the challenges presented by the COVID-19 pandemic. It may seem that day-to-day modifications and on-your-toes thinking is the best one can accomplish given the regular changes happening. However, leaders need to begin thinking about post-COVID-19 life and how the forward-thinking decisions made now will have the greatest impact on operations in the future. The following scenarios suggest a range of possible outcomes as the COVID-19 crisis evolves. It is too soon to tell which of these—if any, or others, or some combination— will emerge, but resilient leaders are preparing now for what the future may hold.
The human and financial impact on a company, its residents and its property operations can be devastating if the recovery process is not included in the overall business continuity plan. Checking-in on your employees should be a vital part of your weekly, if not daily, goals. Additional considerations should be given to human resources policies, transitioning employees back to work if moved to remote work and identifying any need for Employee Assistance Programs or counseling. For those employees still serving on the front lines of your business during this time, it’s an immediate priority to follow updates from the Centers for Disease Control and Prevention (CDC), government and other public health officials to ensure they are protected and supported as much as possible, even after the pandemic hits its peak.
Deferred maintenance will factor significantly as we emerge from shelter-in-place policies. Filter changes, apartment inspections, delayed capital expenditure projects and postponed service requests are just a few items that may have been delayed as many communities are only responding to emergency requests at present. Depending on how long the pandemic lasts, what could the long-term effects of this deferred maintenance have on the asset itself?
Even with a full maintenance staff, it could take months to catch up on the backlog of maintenance, if not longer. Property Meld, a computer software company in South Dakota, has provided data that suggests residents are withholding 22 percent of service requests, while property management firms are prioritizing emergency work resulting in a 32 percent decline of work being completed. As we head into the summer months of HVAC calls, turnover season and potentially re-opening amenities, you will need a plan in place to strategize the maintenance workload once shelter-in-place orders are lifted.
Consideration of resident screening qualifications is another aspect to evaluate. Because of this pandemic, potential residents may suffer financial hardships that can equate to lower credit scores, late payments and possible bankruptcy. To maintain occupancy while also ensuring residents are qualified, should you consider changing your rental criteria to accommodate credit blemishes and poor owner/operator references? If you use a third-party credit screening service, should you consider lowering your scoring model?
If your company executes a credit screening for employment applications, be mindful of any hardships that could have affected a credit report. Top talent is hard to find and even harder to attain; therefore, overcoming the challenge of onboarding talent should be a consideration. It’s also important to make note of the recent changes incorporated into available positions that may require a different skill set or personality. Changes could include increase in technology usage, interpersonal skills that require extra attention for distant connecting, and organizational skills that allow prioritization to be at the forefront.
Of course, the priority concern when thinking ahead is the financial and economic impacts that will directly result from COVID-19. Strategic conversations will need to take place to consider how to offset loss of income and unexpected expenses. Watching and anticipating portfolio delinquency will be a large factor, and plans should be put into place to determine how the property mortgage will be paid in the event of negative cash flow. Speaking with your lender as soon as you are aware of financial challenges for making future payments may assist.
Your company should be familiar with local and federal regulations to include eviction moratoriums for renters. While the easiest areas to cut expenses may turn to resident events, property marketing and employee training, it is advised that your company to be careful on trimming costs that reduce company value. Your employees and residents alike will need more encouragement and motivation in the months to come as they navigate this new normal.
Market rent may change as a result of supply and demand in the economy downturn. Renewal lease offers may need to be evaluated with the intent for reduced or no increase to monthly rent instead of the budgeted increase if occupancy is a concern. This will be market-specific and should be evaluated on an ongoing basis. It’s important to take emotion out of pricing and build a pricing strategy with a balance of science and operational expertise. For properties on revenue management platforms, this can still be a solid strategy for pricing if the 2008 recession is any indication of the systems’ successes.
Thoughts for continued reflection:
- What would you need to do differently to move your company forward post-pandemic?
- What changes can you make in your daily operations?
- What changes have you made in response to this pandemic that may continue to be implemented to have a greater impact in the future?
- What capabilities, partnerships and strategies do you need to learn more about?