How Many Property Managers Does it Take to Change a Light Bulb? Three Ways to Increase the ROI of Commercial Real Estate by Aggressively Managing Costs
By: Daniel Kasten, CPA, Chief Financial Officer, Madison Commercial Real Estate Services
In reviewing the line items for a commercial property, costs are divided into two categories: non-controllable and controllable. Non-controllable costs are those items which usually remain fixed, such as, taxes, insurances or utilities. Short of an appeal, real estate taxes remain at a fixed percentage. If you shop around, you can try to lower your insurance rates, while utilities are billed by the standard fees.
Most controllable costs can be adjusted to some degree. One category of controllable costs which is sometimes overlooked is payroll. Labor is the one category with the highest costs and the highest benefits. Whether the owner manages the property himself or uses a property management company, there are a number of variables which can affect the bottom line within the category of payroll and HR.
The greatest deterrent to saving money in property management is passivity. Hands-off managers who are satisfied with the status quo will not investigate their current methods and systems to look for ways to trim costs.
It is worthwhile to conduct a comprehensive review of the controllable costs of salaries and benefits. A savvy property owner should analyze the expenses accumulated under payroll, in order discover ways to cut costs or gain value from the money invested in HR. A knowledgeable property owner or manager who wants to trim payroll expenses can try a few of these tips.