Final modified on October twenty fifth, 2022
By Megan Eales Monroe
What are the highest challenges going through property administration firms right now?
In 2021, AppFolio labored with the Nationwide House Affiliation (NAA) to study concerning the prime challenges going through property administration firms. 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 world 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 without doubt one of the prime challenges going through property administration firms.
On this episode of The High Ground, 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 will 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 the moment serves as an Business Principal and Senior Director at AppFolio. A former controller at one of many largest property administration companies within the Northwest, Stacy has first-hand expertise in property administration and is an professional on how organizations can leverage know-how to resolve pressing enterprise challenges. Earlier than AppFolio, Stacy spent a number of years in the actual property know-how group at Intuit.
Megan: In 2021, AppFolio partnered with the Nationwide House Affiliation to survey property managers from throughout america. The objective of that survey was to raised perceive the highest challenges property managers confronted, particularly after the unprecedented shutdown of the worldwide economic system in 2020.
At the moment, in 2021, essentially the most urgent challenge 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 House Affiliation on season 2 of The High Ground.
However, after all, the challenges property administration firms 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 trade’s prime three challenges, it seems that operational effectivity is now the primary problem for property administration companies in 2022. Extra particularly, survey members stated 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, world provide chain disruption, and world 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. Nicely, to kick us off, are you able to introduce your self? We’re conversant in you, you’ve been one in all our most frequent company on The High Ground. So hopefully our listeners know who you might be, however we might love to listen to it from you another time.
Stacy Holden: Nicely, thanks Megan, for having me again once more. My identify is Stacy Holden, I’m the senior director and trade principal with AppFolio. I’ve had the honour 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 speak somewhat bit right now about our 2022 analysis, the Property Administration Business Pulse. We’re excited to have a extra common cadence of analysis to convey to our viewers. That is our second 12 months doing it. So to begin us off, are you able to speak somewhat bit about what the Property Administration Business Pulse analysis is?
Stacy Holden: For positive. We initially needed to know the challenges of our property administration trade following principally the shutdown of the worldwide economic system because of the pandemic. So what we did is we ended up partnering with the Nationwide House Affiliation and ended up serving over a thousand completely different administration firms to seek out out what sort of impacts such an unprecedented occasion dropped at our trade.
Megan: So one 12 months later, quick ahead, why did AppFolio need to revisit this analysis?
Stacy Holden: Nicely, 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 needed to see what and if something had modified within the eyes of the property administration trade, and that’s why we went again to refresh the info based mostly on the identical questions.
Why “operational effectivity” is without doubt one of the prime challenges
Megan: And it actually did appear to be rather a lot has modified. So we noticed in 2021, the highest challenges have been throughout HR, staffing and recruitment, actually quite a lot of that “nice resignation” theme was prime 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: Certain. So in terms of operational effectivity, take into consideration what you employ and what you do to get by daily from the alarm clock to grocery purchasing, 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 trying to be extra environment friendly in how we get by 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 tasks over varied distributors. These are simply a few examples of operational duties that fall underneath that class that we known as operational effectivity within the survey.
Megan: So inside that operational effectivity class, we requested survey members to rank essentially the most difficult actions that they have been going through. And one factor popped out. So are you able to speak a bit about among the findings round lowering and controlling prices that got here from the report?
Stacy Holden: Completely. So each in 2021 and 2022, discovering prime quality distributors took the highest spot. Now, I believe we will all agree that there’s a scarcity of expert trades folks within the US right now. And it’s tough to not solely discover these expert distributors, however while 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 change into so tough to seek out these folks? Are there any components 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 in the course of the pandemic. Once more, unprecedented the place all the pieces, just about all the pieces has shut down. And I believe lots of people took a take a look at what they have been doing after which perhaps attempting to do one thing completely different. I believe that’s one factor. The opposite is there have been varied help applications that got here by each federal state and native governments that allowed folks to take pause and actually take a look at their careers and say, “Do I need to do one thing completely different?”
And so I believe particularly across the trades, there was quite a lot of shift, primary. And quantity two, there’s much more demand. And what I imply by demand is, take into consideration all people who’s staying at dwelling in the course of the pandemic. Nicely, what did they need to do? They needed to get issues mounted. They couldn’t get something mounted as a result of commerce folks have been additionally staying at dwelling. So as soon as all the pieces began to loosen up, now we have now this big 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 like it will be truthful to say that lowering and controlling prices is at all times a priority for property administration firms. So what’s so completely different about it in 2022? What’s making it the highest problem proper now?
Stacy Holden: Nicely, 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 in all us, then there’s the inflation and the rising prices. Then we even have wage calls for from workers. So to guarantee that we have now the fitting kind of workers, generally in quite a lot of industries, as a result of we have now 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 components 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 prime problem at property administration firms proper now?
Stacy Holden: Nicely, I believe primary, all the pieces simply prices extra. I believe it’s merely as put as that. And to get the fitting degree of output or the fitting degree of high quality, it’s important to pay extra and since these sources are scarce, they will 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 concentrated on this hybrid kind of do business from home versus work from the workplace. Nicely, property administration folks, particularly upkeep folks, there’s not quite a lot of possibility. It’s a must to make things better and it’s important to be on web site to do this. So once more, that causes the upper demand for wages and the upper demand for folks to really need to be on a bodily web site, which is once more, that excellent storm that leads into these challenges that our trade’s going through right now.
Megan: What are another value stressors right now along with these and the way are they affecting the underside line at properties?
Stacy Holden: Nicely, 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 imagine 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 virtually 60%, I believe it was like 59.9 over throughout the identical time span. Nicely, that impacts all the pieces. 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 could have the fluctuation of simply the vitality costs, not to mention the proper storm of all the pieces else, that’s impactful in terms of challenges.
Megan: Yeah. They’re actually compounding. And it’s what you have 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 have been saying.
Stacy Holden: Right.
Megan: So with this so prime of thoughts proper now, I believe it may be straightforward to get tunnel imaginative and prescient and assume that that is how issues will stay, however do you see this concentrate on lowering and controlling prices remaining one of many prime challenges for property administration firms into the approaching years?
Stacy Holden: I might say for not less than the following 18 to 24 months, for positive. There’s nonetheless quite a lot of unknowns and quite a lot of issues we will’t management. What’s occurring over in Britain proper now, simply the arrogance of the Queen died and the arrogance of their economic system is in flux. You’ve gotten a possible improve within the Fed price, as soon as once more, that may even 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 even impression gas prices to rise once more. So I believe not less than for the close to future, it’s one thing that must be prime 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. In the event you scale back spending, you’re attempting to convey down prices and that mechanically implies that you’re reducing corners on the resident expertise, however that doesn’t need to be the case. So to begin out this dialog, how does this concentrate on 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 answerable for any form of restore value, simply the rise in labor and the rise in provide prices, these are going to be straight handed on to the resident. In order that’s going to have an effect on them within the brief time period. In the long run, that’s going to impression them when it comes time to renewal. We’ve seen throughout the nation, hire will increase proceed to rise. And so somebody seeing a hire improve is sort of a positive factor. And particularly that case in current articles which have come up relating to the secondary markets, they’re going to see these hire 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 workers? Are there different cascading results that this could have when it comes to the service degree that they count on to obtain?
Stacy Holden: Nicely, I believe from a service degree perspective, if… As a result of some property administration firms 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 may have been some area people presence that’s now not there as a result of one value financial savings might be that they’re consolidating their features. For instance, you would have been in a group that had an onsite property supervisor the place you would be speaking to them and strolling into the workplace and making a upkeep request. Now with consolidation of features, you don’t have that onsite particular person. So that would positively impression 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 firms can hold prices low
Megan: Yeah, I believe that’s robust too as a result of as a lot as I do know, everybody would love to have the ability to present that top degree of service always. We’ve been speaking about how the prices simply make that inconceivable to maintain. So do you could have any pondering there, perhaps ideas or recommendation for administration firms on how they will steadiness this? How they will hold prices low with out having such drastic results on the resident’s expertise, get the most effective of each worlds?
Stacy Holden: So I’m going to reply this query somewhat bit in another way than folks is perhaps pondering. And I’m going to say, it’s actually specializing in worker retention. So when you concentrate on it, the frontline staff of property administration, just like the leasing brokers, the property managers, the upkeep people, they have been actually the primary responders when it got here to the pandemic. They have been counted on to maintain issues working 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 quite a lot of occasions, we don’t acknowledge the monetary impression of what worker turnover may be. And it’s very pricey, each within the brief and the long-term.
So ensure you as companies are speaking to your workers, meet them the place they’re, and concentrate on their retention. Issues that profit retention don’t essentially need to value cash. So I believe that’s a direct place that enterprise homeowners and leaders can concentrate on 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 folks did need to be paid extra, however additionally they needed different issues that don’t value any cash to supply like higher mentorship, extra engagement, more difficult 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 transferring on, what different areas can property managers… What ought to they not scale back spending on, particularly in the event that they’re trying to management prices, are there any areas that you’d actually keep away from and proceed to put money into?
Stacy Holden: So I’m going to repeat my reply and I’m going so as to add 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 know-how. We’ve already talked concerning the worker retention so we’ll set that apart. However know-how funding has a number of advantages. Usually, know-how investments can’t solely produce a speedy return on funding, however in a current survey the place AppFolio, once more, partnered with the Nationwide House Affiliation, we discovered that 84% agree that know-how makes their job simpler.
On the retention aspect, 64% of these respondents favor to work for an organization that adopts the newest know-how. And worker satisfaction was 31% increased amongst workers which might be happy with the know-how they use. So it was once the place know-how was a brilliant, shiny object or an excellent good factor to have. Think about if all of us have been invited to go to work for the most effective firm that we may presumably consider, however we needed to begin utilizing a typewriter. Would you truly go to work for that firm? And in right now’s day and age and the generations which might be up and coming within the property administration trade, the reply isn’t any.
Find out how to use know-how to manage prices
Megan: So the place ought to property managers and administration firms look first when attempting to get a greater management on value? Particularly, how ought to they consider implementing know-how to attain that objective?
Stacy Holden: Yup. That is positively the place know-how can, and as soon as once more, be a serious contributing issue. There are such a lot of completely different angles that know-how might help beginning on the very starting of the cycle in budgeting. When you’ve got know-how that retains you accountable, and what I imply by that’s which you can take a look at your precise value versus your finances. Not solely take a look at it, say, on the finish of each month, however have some automation within the system. In order you might be about to spend cash that you simply get a warning that claims, “You’re over finances.” So for instance, a procurement system the place you’re wanting right into a catalog and also you order the following dozen mild bulbs and it offers you a warning that you simply’re over finances, “Do you continue to need to try this? Sure or no.” That form of visibility and reporting is that proactive piece of know-how that enables folks right now to essentially 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 High Ground are actually round that. Our final episode on inspections, we have been speaking about how uncovering these alternatives for preventive upkeep can actually get monetary savings. Do you could have every other examples? I’m fascinated by upkeep, but additionally even leasing like unit turns, what are another ways in which know-how might help to scale back pointless spending?
Stacy Holden: Nicely, positively round turning a unit, when you have, that’s a really pricey factor for anybody to undergo is popping a unit from one tenant to the following. And so when you have that know-how piece in play that the minute that the discover is given, that each one the individuals are given what’s answerable for them to do when a unit turns, the extra time and the extra leeway it’s important to both take into consideration changing an equipment, or changing carpet, or we’re simply going to color simply that additional time period will help you management prices versus the final minute, “Oh, hurry up. We’ve got to rent any individual to shortly are available and clear the carpets.” You’re going to need to 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 models and the way they flip is totally big.
I’ll additionally return to workers. So in case you have been giving workers the good thing about know-how, 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, and so they can proactively schedule their days. Doesn’t one really feel rather a lot higher once 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 perhaps coping with when you could 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 know-how might help convey down prices. However trying to the long run in planning, how can property administration firms right now 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 know-how. 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 probably over finances.”, or “You’ve gotten this a lot to spend that you simply haven’t spent.” And taking away what I might contemplate the apparent and automating it. So think about your accounting workers and so they’re not having to enter the payments anymore as a result of that’s all being achieved by know-how and machine studying, however they’re spending extra time on truly doing monetary evaluation or being served up these predictable warnings of being over finances. You are actually fully in a proactive seat.
And so when you’re in that proactive seat and also you’re not simply taking part in catch up from simply easy knowledge entry or wanting right into a file, now you actually have your finances underneath management. And now you can begin planning for future enhancements with the period of time that you simply want with the intention to be spending your cash correctly as an alternative of being reactive. So in case you’re a third-party payment 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 underneath management, that’s the place you add worth to actual property and that’s the place homeowners need to pay third occasion, be managers to really do their enterprise.
Megan: And this too looks like it may need some connection to worker engagement, stepping into that proactive mindset, that strategic form of pondering. Does that impression folks’s satisfaction with their jobs, with the ability to suppose that approach 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 have been you employed to do this or have 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 know-how can do right now, and provides them capacity to do issues which might be extra impactful and actually convey extra which means to the enterprise, I believe is big on all fronts.
The best state of property administration in 2022
Megan: So wanting ahead to a great state, what ought to issues appear to be when all the pieces is correctly, when a property supervisor or firm has management over their finances? Set that scene for us.
Stacy Holden: I believe the best state is, keep in mind I used to be speaking about earlier about not having onsite workers? I believe the workers is again on web site. So whether or not it’s a Class A residence or any kind of asset that we’re taking a look at, folks prefer to have all the pieces. And what I imply by all the pieces is that in the event that they don’t need to speak to any individual, they need to have the know-how that they will get their issues achieved, i.e. upkeep request. However folks additionally just like the sense of group and searching somebody within the eyeball and know-how permits for that. So the best state is that we have now our property administration workers doing what’s most impactful. And quite a lot of occasions 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 have now 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 right now is a lot extra completely different. So think about that you simply don’t need to be behind the display, which you can truly get on the opposite aspect of the pc and have interaction together with your group. That’s a part of the best state. One other a part of the best state, is that for these which might be payment managers, you might be proactively partaking your homeowners to be fascinated by the long run. In the event you’ve bought management of your spend, sometimes that will imply you additionally then perhaps have a greater return on funding, which could imply that you’ve the flexibility to take a position extra. And in case you’ve bought a payment supervisor that’s truly consulting you thru that journey, wouldn’t you need to pay that payment supervisor extra as a result of the extra profitable you might be, the extra profitable they’re. And so I believe that ideally suited state can actually convey pleasure to your entire 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 will do, the distinctive worth. So how can we inform the distinction, between what sorts of duties are finest dealt with by know-how or by automation, and what duties needs to be dealt with by a human being, such as you stated, with the ability to take a look at any individual within the eyeballs? Are there any guidelines of thumb between the 2?
Stacy Holden: I might say, consider it when it comes to repeatable. So for instance, in case you always are replying to emails of how a lot your pet coverage prices, most likely one thing that may be automated. In case you are always taking a look at calendars to schedule` a displaying again and again throughout a day, that might be automated. We have been simply speaking about invoices. In the event you’re taking a stack of invoices and hitting the ten key again and again, that might be automated.
So if you concentrate on these repetitive duties, generally folks seek advice from them as busy work. We present in a current survey that folks in property administration gauge that they spend 40% of their time with busy work. 40. Think about in case you simply lower that in half. So these issues which might be always 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 convey this all the best way again round, that’s bought to have a useful impact on the resident expertise too, proper?
Stacy Holden: Yeah. So if I’m getting extra custom-made time, if you’ll, if the property supervisor is engaged with me as a resident, extra what’s occurring within the second or being proactive or rising my group as a result of I’m now residing 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 known as a win-win all the best way round.
Megan: Yeah. Nicely, that’s superior. I believe you’ve actually given us some nice meals for thought right here. Is there something, Stacy that you simply need to revisit or every other ideas that you’ve that you simply really feel could be price including right here that we didn’t cowl?
Stacy Holden: I might say one of many issues that I might love so as to add is that we’re all going by an extremely difficult time from the inventory market going by a difficult time to on a regular basis workers. Take a minute, any individual that’s in your circle that doesn’t make quite a lot of noise that works actually laborious, ship them a textual content message. In the event you 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 right now 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 great. Nicely, that lined all the pieces that we had. Stacy, thanks so, a lot for this. I can inform quite a lot of thought and prep went into it and we love when that’s the case. So thanks in your time.
Stacy Holden: I recognize it, Megan. I at all times love being on the podcast and the extra we will make variations in all people’s lives, the higher.
Megan: It’s clear that, despite the fact that 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 trade has by no means skilled earlier than.
And whereas rental housing’s prime challenges have shifted from 2021 to 2022, some options for working by property administration’s prime challenges stay the identical:
- First, proceed to put money into prime expertise and frontline workers. Hiring prices and wages have elevated, however, in the long run, your groups are important for short- and long-term success.
- Second, don’t lower prices simply to chop prices. The important thing to controlling budgets is first to mitigate surprising prices with preventative upkeep and in addition finances higher by planning for the brand new, increased prices of doing enterprise.
- And, lastly, third: Make investments in the fitting know-how that may give you higher insights into your enterprise, 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 know-how 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/