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Big Ideas for Small Owners: Avoiding Maintenance Pitfalls

Avoiding Maintenance Pitfalls
February 2018

In our "Big Ideas for Owners with Small Portfolios" series, we share how successful IROs, such as Hains, Bryson and Ridgway, operate their properties. This is the second article in the series. Links to the rest of the series articles can be found below.

Whether an IRO handles maintenance or uses contractors, not addressing issues can cost money and can dip resident satisfaction.

For most IROs, starting out in the business often means purchasing older apartments or rental properties. Those assets require maintenance. Figuring how to handle repairs and the necessary upkeep is one of the biggest decisions IROs face as they look to build cash flow.

It may be tempting to save money and perform the maintenance at first, but Gary Wilson, Owner, A.R. Wilson Realtors in Springfield, Mo., cautions against it.

“[When starting out] most IROs have a job outside of the apartment industry,” Wilson says. “If you are at work, you will get calls to fix things, and you probably cannot drop everything to tend to your residents. This leads to unhappy renters. In the long run, because of improved resident retention rates, you will make more money by hiring a professional [to handle maintenance and onsite management].”

When Joe and Stephanie Bryson started Stellar Equity Management in 2012 in Houston, they hired two part-time employees to cover 52 units,  a leasing agent and a maintenance tech.

“We shared the maintenance technician with a friend who [also] had a 36-unit property on the same street,” Stephanie says. “When your business is too small to hire full-time maintenance coverage, you need to be creative.”

As companies grow, maintenance becomes no less of a challenge. For some, it makes sense to keep it in house. Atlanta-based Legacy Community Housing Corp.’s Brent Sobol, for example, has 39 staff members working for his company, which has 345 units and an 82-student educational daycare.

“As a general rule, I like to keep maintenance in-house so we can control the timing of service and the quality and consistency of the work,” Sobol says. “But you need enough units to justify the cost of the ongoing overhead. I think our approach pays for itself because our residents stay with us longer. Most IROs lack maintenance systems and it kills them financially in the long run; most are overly focused on rent growth rather than good maintenance.”

But in today’s tight labor market, handling maintenance in-house can be pricey for IROs.

“Maintenance expense is a nightmare for us because larger firms can pay their hired hands more,” says Lisa Pelloni, CAM, CEO of AdaLease Property Management in Summerville, S.C., which manages communities with 30 to 300 apartments.

Over time, Pelloni has learned that if some management companies are paying their maintenance technicians $30 an hour, she will need to match that.

“I find that, in order to be successful, we have to pay our people well,” Pelloni says. “I’d say to go ahead and pay the higher wage because resident turnover is costly. Recently, we decided to pay sign-on bonuses. It is an expense that is hard to swallow when you are small, but it is 100 percent worth it to pay your employees more. [And these bonuses] help me maintain folks.”

For IROs who wish to outsource maintenance work, Wilson advises to choose a company with property management experience. Wilson negotiated a price with the firm he uses and it saves him overall. He says had he needed to buy vehicles, hire his own people and pay for their insurance, his costs would be much higher.

“[This company] knows the industry and the maintenance it requires,” Wilson says. “This way, I’m only paying for what I’m getting, which translates to only paying for what I need.”

If you are an independent rental owner with a solution or story to share, please contact Les Shaver, Senior Content Editor. For Big Ideas for Owners with Small Portfolios Series: There are Many Routes to Success for Small Portfolio OwnersSmall Companies Can Offer Big Service & Vendors Can Provide More Than Just Products and Services.