In typical fashion, we ended up covering so much ground with Ray Hespen of Property Meld that we had to split our full conversation into two episodes. In Part 1, we discussed what maintenance analytics is, why it’s important, and what it can do for a property management business.
This is Part 2 of our chat on The Property Management Show, where we’ll talk about the current shortage we’re having on tradespeople, its effect on net operating income (NOI), and what property managers can do about it.
Maintenance Analytics Surprises
Some data around owner and investor retention was surprising, according to Ray.
While looking at landlords and investor/owners who had one to four units, it turned out that owners who renew their property management agreements for a year or two or three had a higher maintenance rate per unit annually. More maintenance was performed. The number of actions were about 20 percent higher than in the cohort of owners who churned and left their property management company.
The actual maintenance spend was lower, but the number of maintenance touches was higher.
This seemed impossible until the team dug a little deeper and realized there were more preventative repairs, on average. So, it ties back into that big correlation we discussed during Part 1. Drive spend per unit down and resident satisfaction up. That behavior is triggered by more preventative programs.
Maintenance is getting more expensive and it’s harder to find people to do repairs. There’s a high demand for tradespeople and vendors, and no one is running out of jobs. It’s supply and demand. Given that, how can property managers invite more maintenance but lower maintenance costs?
Ray doesn’t know.
He points to a report released by Invitation Homes and American Homes for Rent that forecasts an increase in costs that have dropped their NOI from 11 percent to five percent.
It’s an industry-wide challenge.
What’s becoming more important is keeping renters in a unit. Someone Ray recently talked to said that they could get a price increase on a lease renewal, but not by putting that same property on the market for a new tenant. That’s where rents are right now.
Renewals are an important part of revenue generation and they also keep your expenses down by avoiding turnover costs.
On the maintenance side of things, you have to find ways to get work done during the shoulder months. Schedule your inspections, your work, and your preventative services before summer and after summer.
The Case of the Disappearing Tradespeople
The trick in keeping up with the necessary speed of repairs is ensuring vendors WANT to work with you. If vendors are avoiding you, maintenance suffers and so does tenant satisfaction.
Three or four years ago, property managers could set forth a list of demands before agreeing to work with a vendor. Maybe you had legal and insurance requirements that had to be met. Maybe you wanted your vendor to accept your work request within an hour.
All of that has evaporated. The balance of power has shifted, and you have to find a way to make it easier to work with you.
Ray has over 40,000 vendors working within the Property Meld platform. The want some of the requirements taken away before they’ll work with a management company. Scheduling and communication has to be easier on them.
His recommendation to you? Grease the skids so you can attract vendors and tradespeople. They don’t need your work, and they’re going to be selective about who they’ll work with.
Non-monetary incentives are important. Vendors are willing to negotiate better rates with property managers, and you’ll always pay less than an independent consumer. It’s part of relationship building. They’re going to choose the work they want to do. Don’t leave yourself on the retail side of a vendor relationship. Make sure it’s easy to work with you and that there are incentives such as simple systems and processes. Scheduling should be automated. Payment of invoices should be immediate. These things matter.
Most vendors have fewer than 10 employees. These are small operations. People start a plumbing company or electric company because they want flexibility and freedom. Controlling their calendar is more important than driving a profit number.
So, attract vendors by reducing the friction points that often come with scheduling, updating property managers, and invoicing.
Why is it so hard to find vendors and tradespeople?
Ray’s hypothesis is that the pipeline of talent cannot keep up with the demand. A lot of capital was invested into the economy during and after COVID. Home improvement projects became huge. It was easy to borrow money. Build to Rent is now an industry. The tradespeople who are in business are busy.
There’s also still some social pressure around these types of jobs. It’s not cool to be an electrician or a plumber. There’s societal pressure to go into debt getting a degree.
It’s actually a really good idea to become an electrician right now.
The solution that Property Meld is looking at is this: how can maintenance professionals complete more jobs in the same hour with the same resources? Most of the 40,000 vendors in their system work with more than one property management company. So, helping them to serve more clients without sacrificing time, talent, or quality of work is the goal. How can the data they gather help tradespeople maximize their time?
Scheduling maintenance in a way that maximizes time and resources is a great application for A.I. It could be meaningful.
Data and How to Start Using It
Are you interested in doing more with data but unsure of how to get started?
A lot of property managers might not understand how to use good data to make smart decisions.
Ray says that data should always be easy to understand – even if you’re not a data scientist.
Also, don’t be afraid of what you’re seeing. Sometimes, property managers don’t want to know what they’ll find. But, if you’ve read the book Good to Great by Jim Collins, you know that great companies are willing to accept the brutal truth about where their challenges are. So, just take a look at where you are and take some steps towards making your business better. It’s okay to know what you’re good at and what you’re not good at.
We hope you enjoyed our conversation with Ray. If you have any questions, as always, feel free to ask them. We’d also love to hear your feedback, so please don’t hesitate to get in touch with us at Fourandhalf.