Final modified on October twenty fifth, 2022
By Megan Eales Monroe
What are the highest challenges going through property administration corporations at this time?
In 2021, AppFolio labored with the Nationwide Residence Affiliation (NAA) to study concerning the high challenges going through property administration corporations. Now, in 2022, a brand new set of challenges have emerged for property managers, together with report inflation charges, rising wages, and rising prices attributable to international provide chain distribution points. So it’s no shock that within the second version of the Property Administration Business Pulse, we discovered that lowering and controlling prices is among the high challenges going through property administration corporations.
On this episode of The Prime Flooring, we sit down with Stacy Holden, Senior Director and Business Principal at AppFolio, to see how property managers can dial up their operational effectivity by lowering and controlling prices. We additionally discover how they’ll lay the groundwork for more practical budgeting and spending sooner or later.
Meet Our Visitor:
Stacy Holden has over 20 years of expertise in multifamily property administration and at present serves as an Business Principal and Senior Director at AppFolio. A former controller at one of many largest property administration corporations within the Northwest, Stacy has first-hand expertise in property administration and is an skilled on how organizations can leverage expertise to resolve pressing enterprise challenges. Earlier than AppFolio, Stacy spent a number of years in the true property expertise group at Intuit.
Megan: In 2021, AppFolio partnered with the Nationwide Residence Affiliation to survey property managers from throughout the US. The aim of that survey was to raised perceive the highest challenges property managers confronted, particularly after the unprecedented shutdown of the worldwide financial system in 2020.
At the moment, in 2021, probably the most urgent problem for property managers was HR, Staffing, and Recruitment. We even took a deep dive into these points with Paula Munger and Leah Cuffy from the Nationwide Residence Affiliation on season 2 of The Prime Flooring.
However, in fact, the challenges property administration corporations face change from 12 months to 12 months. So, we determined to survey property managers as soon as once more in 2022.
Whereas HR, Staffing, and Recruitment are nonetheless among the many business’s high three challenges, it seems that operational effectivity is now the primary problem for property administration companies in 2022. Extra particularly, survey members mentioned they struggled most with operational effectivity duties that included “discovering high-quality distributors,” rising materials prices,” and “lowering prices.”
To assist pave a path ahead and discover options amid report inflation, international provide chain disruption, and international battle inflicting rising commodity costs, I sat down with Stacy Holden to have a dialogue on what property administration organizations can do proper now to fight and management rising prices.
Megan: All proper, Stacy. Properly, to kick us off, are you able to introduce your self? We’re accustomed to you, you’ve been one among our most frequent company on The Prime Flooring. So hopefully our listeners know who you’re, however we might love to listen to it from you yet another time.
Stacy Holden: Properly, thanks Megan, for having me again once more. My title is Stacy Holden, I’m the senior director and business principal with AppFolio. I’ve had the consideration of being with AppFolio 10 years this 12 months, however previous to that I was a controller of a full-service brokerage home, which included property administration, acquisition, disposition, and leasing. So actually excited to be right here and once more, thanks for the invite.
What the 2022 Property Administration Business Pulse revealed
Megan: Yeah, we’re excited to have you ever. So we’re right here to talk somewhat bit at this time about our 2022 analysis, the Property Administration Business Pulse. We’re excited to have a extra common cadence of analysis to carry to our viewers. That is our second 12 months doing it. So to start out us off, are you able to speak somewhat bit about what the Property Administration Business Pulse analysis is?
Stacy Holden: For certain. We initially wished to grasp the challenges of our property administration business following mainly the shutdown of the worldwide financial system because of the pandemic. So what we did is we ended up partnering with the Nationwide Residence Affiliation and ended up serving over a thousand totally different administration corporations to seek out out what sort of impacts such an unprecedented occasion delivered to our business.
Megan: So one 12 months later, quick ahead, why did AppFolio wish to revisit this analysis?
Stacy Holden: Properly, Megan, as you and the entire viewers is aware of, issues are altering now sooner than ever, and sure issues we’re normalizing however we wished to see what and if something had modified within the eyes of the property administration business, and that’s why we went again to refresh the info based mostly on the identical questions.
Why “operational effectivity” is among the high challenges
Megan: And it actually did appear like so much has modified. So we noticed in 2021, the highest challenges had been throughout HR, staffing and recruitment, actually lots of that “nice resignation” theme was high of thoughts. However in 2022, we noticed the highest problem was operational effectivity. So earlier than we get into the variations between the 2, first off, can we attempt to outline and dive right into a bit what operational effectivity refers to?
Stacy Holden: Positive. So in the case of operational effectivity, take into consideration what you utilize and what you do to get by way of daily from the alarm clock to grocery buying, to discovering the mechanic when your automotive breaks down. All of us use varied objects and take varied actions. And as folks, we’re at all times seeking to be extra environment friendly in how we get by way of the day. So consider these duties coming from a property administration perspective, issues just like the variety of emergency responses that you simply make in a day, or monitoring initiatives over varied distributors. These are simply a few examples of operational duties that fall below that class that we referred to as operational effectivity within the survey.
Megan: So inside that operational effectivity class, we requested survey members to rank probably the most difficult actions that they had been going through. And one factor popped out. So are you able to speak a bit about a few of the findings round lowering and controlling prices that got here from the report?
Stacy Holden: Completely. So each in 2021 and 2022, discovering top quality distributors took the highest spot. Now, I believe we are able to all agree that there’s a scarcity of expert trades folks within the US at this time. And it’s tough to not solely discover these expert distributors, however if you do discover them, getting the response and the time that you simply want is tremendous difficult. So that is by far the highest problem in each years.
Megan: So why do you suppose it’s turn out to be so tough to seek out these folks? Are there any elements which have made this scarcity worsen over the previous 12 months or two?
Stacy Holden: I believe it’s folks actually getting off the hamster wheel throughout the pandemic. Once more, unprecedented the place every little thing, just about every little thing has shut down. And I believe lots of people took a take a look at what they had been doing after which possibly attempting to do one thing totally different. I believe that’s one factor. The opposite is there have been varied help applications that got here by way of each federal state and native governments that allowed folks to take pause and actually take a look at their careers and say, “Do I wish to do one thing totally different?”
And so I believe particularly across the trades, there was lots of shift, primary. And quantity two, there’s much more demand. And what I imply by demand is, take into consideration everyone who’s staying at dwelling throughout the pandemic. Properly, what did they wish to do? They wished to get issues mounted. They couldn’t get something mounted as a result of commerce folks had been additionally staying at dwelling. So as soon as every little thing began to loosen up, now we’ve got this large demand for expert trades folks and never sufficient to fill that demand.
Why controlling prices is so tough in 2022
Megan: So true. So it looks as if it could be honest to say that lowering and controlling prices is at all times a priority for property administration corporations. So what’s so totally different about it in 2022? What’s making it the highest problem proper now?
Stacy Holden: Properly, to coin a phrase of one of many films on the market, it’s form of the proper storm. So what I imply by the proper storm is that one, all of us have provide chain points each one among us, then there’s the inflation and the rising prices. Then we even have wage calls for from workers. So to be sure that we’ve got the correct sort of workers, typically in lots of industries, as a result of we’ve got extra jobs than folks, the rising value of these salaries have additionally been a part of that storm.
Megan: Yeah. So it’s actually a number of elements form of coming collectively and making this emerge as the highest problem. So to dig in somewhat bit extra particularly, in what particular methods are lowering and controlling prices a high problem at property administration corporations proper now?
Stacy Holden: Properly, I believe primary, every little thing simply prices extra. I believe it’s merely as put as that. And to get the correct degree of output or the correct degree of high quality, you must pay extra and since these assets are scarce, they’ll demand extra prices. So I believe it’s all of that proper now, from a property administration perspective, that’s tremendous difficult. The opposite factor that provides a problem is the versatile work, if you’ll. So everybody is targeted on this hybrid sort of do business from home versus work from the workplace. Properly, property administration folks, specifically upkeep folks, there’s not lots of possibility. You must make things better and you must be on website to do this. So once more, that causes the upper demand for wages and the upper demand for folks to truly wish to be on a bodily website, which is once more, that good storm that leads into these challenges that our business’s going through at this time.
Megan: What are another value stressors at this time along with these and the way are they affecting the underside line at properties?
Stacy Holden: Properly, I believe in case you check out the fundamentals of what, for a scarcity of a greater phrase, makes the world go round, it’s vitality. And our vitality costs are in a wild swing of fluctuations. Take into consideration how a lot gasoline costs have modified over the course of this 12 months alone is wild swings backwards and forwards. And so, the truth is, I consider it was in June of this 12 months, the Bureau of Labor Statistics, the Power index, if you’ll, it rose over 41% in 12 months. With gasoline alone rising nearly 60%, I believe it was like 59.9 over throughout the identical time span. Properly, that impacts every little thing. That impacts what’s made, that impacts what’s transferred or transported, if you’ll, from one place to the opposite, and the way issues are consumed. So when you might have the fluctuation of simply the vitality costs, not to mention the proper storm of every little thing else, that’s impactful in the case of challenges.
Megan: Yeah. They’re actually compounding. And it’s what you had been saying additionally jogged my memory too of supplies prices and home equipment and components being backordered and that’s driving up costs even additional. So it actually is an ideal storm such as you had been saying.
Stacy Holden: Appropriate.
Megan: So with this so high of thoughts proper now, I believe it may be simple to get tunnel imaginative and prescient and assume that that is how issues will stay, however do you see this deal with lowering and controlling prices remaining one of many high challenges for property administration corporations into the approaching years?
Stacy Holden: I’d say for not less than the subsequent 18 to 24 months, for certain. There’s nonetheless lots of unknowns and lots of issues we are able to’t management. What’s taking place over in Britain proper now, simply the arrogance of the Queen died and the arrogance of their financial system is in flux. You have got a possible enhance within the Fed charge, as soon as once more, that may also have an effect. Plus there are conditions such because the warfare inside Ukraine and sanctions. If there’s gas sanctions which might be truly put into place, that may also affect gas prices to rise once more. So I believe not less than for the close to future, it’s one thing that must be high of thoughts.
How residents are affected by lowering prices
Megan: I believe this query of specializing in lowering prices is usually framed as being an opposition to the resident expertise. For those who scale back spending, you’re attempting to carry down prices and that routinely implies that you’re slicing corners on the resident expertise, however that doesn’t should be the case. So to start out out this dialog, how does this deal with lowering or controlling prices are inclined to have an effect on the resident expertise?
Stacy Holden: Oh, I believe the resident is certainly affected each in an extended and short-term perspective. So take into consideration this, if a resident is liable for any form of restore value, simply the rise in labor and the rise in provide prices, these are going to be immediately handed on to the resident. In order that’s going to have an effect on them within the quick time period. In the long run, that’s going to affect them when it comes time to renewal. We’ve seen throughout the nation, lease will increase proceed to rise. And so somebody seeing a lease enhance is nearly a certain factor. And particularly that case in current articles which have come up relating to the secondary markets, they’re going to see these lease will increase for some time. So I believe each short-term and long-term, the residents are positively impacted.
Megan: Yeah. I’d like to dig in there somewhat bit extra. What about day-to-day interactions with property administration employees? Are there different cascading results that this will have by way of the service degree that they count on to obtain?
Stacy Holden: Properly, I believe from a service degree perspective, if… As a result of some property administration corporations are taking a look at consolidating their companies. And what I imply by that’s that relying on the kind of dwelling that you simply stay in, there might have been some local people presence that’s now not there as a result of one value financial savings may very well be that they’re consolidating their capabilities. For instance, you can have been in a group that had an onsite property supervisor the place you can be speaking to them and strolling into the workplace and making a upkeep request. Now with consolidation of capabilities, you don’t have that onsite particular person. So that would positively affect what was once a very good resident expertise as a result of they’d somebody proper there that they might look within the eyeball and speak to, and now they don’t have that out there.
How property administration corporations can hold prices low
Megan: Yeah, I believe that’s powerful too as a result of as a lot as I do know, everybody would love to have the ability to present that prime degree of service always. We’ve been speaking about how the prices simply make that unattainable to maintain. So do you might have any considering there, possibly suggestions or recommendation for administration corporations on how they’ll stability this? How they’ll hold prices low with out having such drastic results on the resident’s expertise, get the very best of each worlds?
Stacy Holden: So I’m going to reply this query somewhat bit in a different way than folks is likely to be considering. And I’m going to say, it’s actually specializing in worker retention. So when you concentrate on it, the frontline employees of property administration, just like the leasing brokers, the property managers, the upkeep people, they had been actually the primary responders when it got here to the pandemic. They had been counted on to maintain issues operating in a local weather the place everybody was staying at dwelling, apart from them. So worker turnover has been an enormous problem due to that. And I believe lots of instances, we don’t acknowledge the monetary affect of what worker turnover will be. And it’s very pricey, each within the quick and the long-term.
So ensure you as companies are speaking to your employees, meet them the place they’re, and deal with their retention. Issues that profit retention don’t essentially should value cash. So I believe that’s an instantaneous place that enterprise homeowners and leaders can deal with that really will assist scale back prices.
Megan: Yeah, that’s so true, Stacy. That really actually jogs my memory of the analysis report that we did on the worker expertise, somewhat bit earlier this 12 months. And naturally, we noticed that individuals did wish to be paid extra, however additionally they wished different issues that don’t value any cash to offer like higher mentorship, extra engagement, tougher work. These are all issues that don’t have a price ticket.
Stacy Holden: That’s proper.
Areas property managers ought to NOT scale back spending on
Megan: So shifting on, what different areas can property managers… What ought to they not scale back spending on, particularly in the event that they’re seeking to management prices, are there any areas that you’d actually avoid and proceed to put money into?
Stacy Holden: So I’m going to repeat my reply and I’m going so as to add yet another. And what I imply by that’s positively, I wouldn’t be lowering prices when it comes round workers and worker retention, however I’m going so as to add a brand new one and that’s expertise. We’ve already talked concerning the worker retention so we’ll set that apart. However expertise funding has a number of advantages. Typically, expertise investments can’t solely produce a speedy return on funding, however in a current survey the place AppFolio, once more, partnered with the Nationwide Residence Affiliation, we discovered that 84% agree that expertise makes their job simpler.
On the retention facet, 64% of these respondents choose to work for a corporation that adopts the most recent expertise. And worker satisfaction was 31% larger amongst workers which might be happy with the expertise they use. So it was once the place expertise was a shiny, shiny object or an excellent good factor to have. Think about if all of us had been invited to go to work for the very best firm that we might probably consider, however we needed to begin utilizing a typewriter. Would you truly go to work for that firm? And in at this time’s day and age and the generations which might be up and coming within the property administration business, the reply isn’t any.
How one can use expertise to regulate prices
Megan: So the place ought to property managers and administration corporations look first when attempting to get a greater management on value? Particularly, how ought to they give thought to implementing expertise to attain that aim?
Stacy Holden: Yup. That is positively the place expertise can, and as soon as once more, be a serious contributing issue. There are such a lot of totally different angles that expertise can assist beginning on the very starting of the cycle in budgeting. If in case you have expertise that retains you accountable, and what I imply by that’s that you may take a look at your precise value versus your price range. Not solely take a look at it, say, on the finish of each month, however have some automation within the system. In order you’re about to spend cash that you simply get a warning that claims, “You’re over price range.” So for instance, a procurement system the place you’re trying right into a catalog and also you order the subsequent dozen mild bulbs and it provides you a warning that you simply’re over price range, “Do you continue to wish to try this? Sure or no.” That form of visibility and reporting is that proactive piece of expertise that permits folks at this time to actually management their prices and make considerate choices on the place to spend cash.
Megan: That’s nice. A few of the current subjects that we’ve lined right here on The Prime Flooring are actually round that. Our final episode on inspections, we had been speaking about how uncovering these alternatives for preventive upkeep can actually get monetary savings. Do you might have some other examples? I’m desirous about upkeep, but in addition even leasing like unit turns, what are another ways in which expertise can assist to scale back pointless spending?
Stacy Holden: Properly, positively round turning a unit, you probably have, that’s a really pricey factor for anybody to undergo is popping a unit from one tenant to the subsequent. And so you probably have that expertise piece in play that the minute that the discover is given, that each one the persons are given what’s liable for them to do when a unit turns, the extra time and the extra leeway you must both take into consideration changing an equipment, or changing carpet, or we’re simply going to color simply that additional time period will can help you management prices versus the final minute, “Oh, hurry up. We’ve got to rent someone to shortly are available and clear the carpets.” You’re going to should pay a premium as a result of proper now, with discovering these high-quality distributors nonetheless being a problem, time positively is cash in that scenario. So having visibility into your items and the way they flip is totally large.
I’ll additionally return to workers. So in case you had been giving workers the advantage of expertise, let’s simply say, we’re speaking about that flip unit an instance. So we do floor their to-dos, for the shortage of a greater phrase, they usually can proactively schedule their days. Doesn’t one really feel so much higher after they’re being proactive versus reactive? And having that degree of predictability makes happier workers, makes workers that keep longer, and due to this fact, it’s additionally a value saving since you’re not coping with the turnover that you simply is likely to be coping with when you might have somebody that’s simply overwhelmed with all types of last-minute requests.
Megan: I like that. Bringing it again to worker engagement. It’s all interconnected, isn’t it?
Stacy Holden: It’s.
Methods property managers can management spending long run
Megan: So I believe these are some nice examples of considerably extra short-term options and the way expertise can assist carry down prices. However seeking to the long run in planning, how can property administration corporations at this time begin laying a basis for extra managed spending sooner or later?
Stacy Holden: I believe all of it has to do with predictability and there isn’t a greater accomplice for predictability than expertise. So in case you are forecasting the efficiency of your properties and what you want from a cashflow foundation, and you’ve got a system in place that’s proactively working for you, and what I imply by that’s serving you up communication that claims, “You’re doubtlessly over price range.”, or “You have got this a lot to spend that you simply haven’t spent.” And taking away what I’d think about the plain and automating it. So think about your accounting employees they usually’re not having to enter the payments anymore as a result of that’s all being performed by way of expertise and machine studying, however they’re spending extra time on truly doing monetary evaluation or being served up these predictable warnings of being over price range. You are actually fully in a proactive seat.
And so when you’re in that proactive seat and also you’re not simply enjoying catch up from simply easy knowledge entry or trying right into a file, now you actually have your price range below management. And now you can begin planning for future enhancements with the period of time that you simply want so to be spending your cash correctly as an alternative of being reactive. So in case you’re a third-party price supervisor and also you’re spending extra time analyzing the way forward for your homeowners as a result of the present state of your homeowners and properties are all below management, that’s the place you add worth to actual property and that’s the place homeowners wish to pay third occasion, be managers to truly do their enterprise.
Megan: And this too looks as if it may need some connection to worker engagement, entering into that proactive mindset, that strategic form of considering. Does that affect folks’s satisfaction with their jobs, with the ability to suppose that method as an alternative?
Stacy Holden: I believe most individuals. I can’t say that everybody doesn’t like knowledge entry as a result of some folks do. I can’t say that each… I was an accountant, so I can say this. I can’t say that everyone doesn’t like placing a stamp on an bill, however had been you employed to do this or had been you employed to handle the precise expenditures of a property? And I believe with the ability to launch folks from the mundane, which is one thing that expertise can do at this time, and provides them skill to do issues which might be extra impactful and actually carry extra which means to the enterprise, I believe is big on all fronts.
The perfect state of property administration in 2022
Megan: So trying ahead to a super state, what ought to issues appear like when every little thing is accurately, when a property supervisor or firm has management over their price range? Set that scene for us.
Stacy Holden: I believe the perfect state is, keep in mind I used to be speaking about earlier about not having onsite employees? I believe the employees is again on website. So whether or not it’s a Class A condominium or any sort of asset that we’re taking a look at, folks wish to have every little thing. And what I imply by every little thing is that in the event that they don’t wish to speak to someone, they wish to have the expertise that they’ll get their issues performed, i.e. upkeep request. However folks additionally just like the sense of group and searching somebody within the eyeball and expertise permits for that. So the perfect state is that we’ve got our property administration employees doing what’s most impactful. And lots of instances that’s actually speaking to their group members, creating a greater sense of group. As a result of keep in mind, let’s return to that hybrid, we’ve got extra folks staying at dwelling 24 hours a day than ever earlier than.
And so the expertise that residents, not simply need, fairly frankly want at this time is a lot extra totally different. So think about that you simply don’t should be behind the display screen, that you may truly get on the opposite facet of the pc and have interaction along with your group. That’s a part of the perfect state. One other a part of the perfect state, is that for these which might be price managers, you’re proactively partaking your homeowners to be desirous about the long run. For those who’ve received management of your spend, sometimes that may imply you additionally then possibly have a greater return on funding, which could imply that you’ve got the flexibility to speculate extra. And in case you’ve received a price supervisor that’s truly consulting you thru that journey, wouldn’t you wish to pay that price supervisor extra as a result of the extra profitable you’re, the extra profitable they’re. And so I believe that best state can actually carry pleasure to your complete group set, residents, property managers, proprietor operators.
How to decide on which duties needs to be automated
Megan: Yeah, that’s a very engaging image. I really feel like that’s what so many people need actually is to have the ability to do the issues that solely we are able to do, the distinctive worth. So how will we inform the distinction, between what sorts of duties are greatest dealt with by expertise or by automation, and what duties needs to be dealt with by a human being, such as you mentioned, with the ability to take a look at someone within the eyeballs? Are there any guidelines of thumb between the 2?
Stacy Holden: I’d say, consider it by way of repeatable. So for instance, in case you continuously are replying to emails of how a lot your pet coverage prices, in all probability one thing that may be automated. In case you are continuously taking a look at calendars to schedule` a displaying again and again throughout a day, that may very well be automated. We had been simply speaking about invoices. For those who’re taking a stack of invoices and hitting the ten key again and again, that may very well be automated.
So if you concentrate on these repetitive duties, typically folks consult with them as busy work. We present in a current survey that individuals in property administration gauge that they spend 40% of their time with busy work. 40. Think about in case you simply minimize that in half. So these issues which might be continuously being repeated, the identical responses to emails, the identical responses to textual content messages, the identical responses to voicemails, these issues being automated. Now we’re speaking about doing issues which might be extra significant if all of these forms of issues are automated.
Megan: Yeah. After which to carry this all the way in which again round, that’s received to have a helpful impact on the resident expertise too, proper?
Stacy Holden: Yeah. So if I’m getting extra personalized time, if you’ll, if the property supervisor is engaged with me as a resident, extra what’s taking place within the second or being proactive or rising my group as a result of I’m now dwelling there 24 hours a day, that’s a better worth to me. I nonetheless want my upkeep request answered, but when I’ve automation behind that, that’s getting me the identical consequence. That’s referred to as a win-win all the way in which round.
Megan: Yeah. Properly, that’s superior. I believe you’ve actually given us some nice meals for thought right here. Is there something, Stacy that you simply wish to revisit or some other ideas that you’ve got that you simply really feel could be value including right here that we didn’t cowl?
Stacy Holden: I’d say one of many issues that I’d love so as to add is that we’re all going by way of an extremely difficult time from the inventory market going by way of a difficult time to on a regular basis workers. Take a minute, someone that’s in your circle that doesn’t make lots of noise that works actually laborious, ship them a textual content message. For those who see them in particular person, look them within the eye and simply say thanks and present them some gratitude. I believe it’s actually vital at this time that we acknowledge that each one of us have needed to dig deep in a technique or one other and let’s simply acknowledge that and recognize it.
Megan: Yeah, that’s fantastic. Properly, that lined every little thing that we had. Stacy, thanks so, a lot for this. I can inform lots of thought and prep went into it and we love when that’s the case. So thanks to your time.
Stacy Holden: I recognize it, Megan. I at all times love being on the podcast and the extra we are able to make variations in everyone’s lives, the higher.
Megan: It’s clear that, though we’ve moved previous the preliminary challenges of COVID-19, the pandemic has continued to create a ripple impact, bringing brand-new challenges the property administration business has by no means skilled earlier than.
And whereas rental housing’s high challenges have shifted from 2021 to 2022, some options for working by way of property administration’s high challenges stay the identical:
- First, proceed to put money into high expertise and frontline employees. Hiring prices and wages have elevated, however, ultimately, your groups are important for short- and long-term success.
- Second, don’t minimize prices simply to chop prices. The important thing to controlling budgets is first to mitigate sudden prices with preventative upkeep and in addition price range higher by planning for the brand new, larger prices of doing enterprise.
- And, lastly, third: Make investments in the correct expertise that can provide you higher insights into what you are promoting, budgeting, and spending. Monitoring your portfolio’s spending in real-time and with the ability to forecast budgets extra precisely for the long run with expertise is significant for controlling prices in the long term.
For extra info on the highest challenges mentioned on this episode, and to dive even deeper into options, obtain the 2022 Property Administration Business Pulse at https://data.appfolio.com/