Landlords have two ways of increasing profits from their properties. Either they must raise rental rates or decrease their operating expenses. Raising rental rates is pretty straightforward. If you can convince tenants to pay more, your profits go up – simple as that. But often times, raising rental rates is a slow process that is somewhat restricted by market forces. A more immediate way of increasing profits is through cutting expenses.
Below are a few examples of cost savings strategies that I’ve seen work well for my clients in the in the past.
Upgrade your building’s lighting to LED.
According to Lime Energy, a regional Energy Efficiency Group, upgrading to LED lighting can reduce energy consumption by up to 80%. Lime Energy introduced me to Duke Energy’s Small Business Energy Saver program, which helps property owners upgrade their lighting to LED. The best part about this Small Business program: Duke Energy pays the lion’s share of the upgrade cost. A client of mine recently took part in this program- not only did their 10,000sf building get a lighting upgrade (paid for mostly by Duke Energy), they also saw a substantial drop in their monthly utility expenses, which ultimately was a considerable and lasting boost to the bottom line.
Take Control of the Thermostat.
Landlords offering Full Service leases at their office buildings know how tenants can be reckless with the thermostat. In summer months, the thermostat can be left at 68 degrees all night long, when no one is in the building. This is an all too common, costly, and maddening scenario for a Landlord! Technology is the solution for this problem. Today, smart thermostats can override settings during nonbusiness hours. In other words, the thermostat might be set to 68 degrees, but at night, that setting is overridden to bring the building to a more reasonable temperature while the building is empty. Again, this can mean huge decreases in your monthly expenses, which means increased profits for you!
Negotiate!
Possibly the most overlooked way to reduce expenses is by learning the art of negotiation. A client of mine recently told me that he calls his service providers every year and tells them he’s price shopping, saying to them: ”Ok, so what’s the best rate you can give me?” He negotiates everything: trash removal, janitorial services, HVAC contracts, and repairs. In his mind, no price is set in stone, which means that everything can be negotiated. And as he often says: “The worst they can say is no!” His initiative results in cost savings, which leads to greater profits on his property.
Landlords who work to reduce expenses at their properties are able to realize a greater return on their investment. It might take a little extra effort and creative thinking, but a penny saved really is a penny earned!