savings by bringing a maintenance technician in house," says a third-party property manager. "But justifying taking on a
fixed expense to the property owners has
been difficult. We have done cost studies showing the savings benefit, but due
to economic uncertainty, the partners
have not wanted to add additional fixed
overhead."
In most cases, owners and managers refer
to the last three to fve years of maintenance
expenses. "We take previous years' expenses,
estimate what work we want to do on the
property the next year, adjust for expected
infation on uncontrollable costs, and set a
budget for the next year. We typically try
to keep annual increases capped at 5 percent if possible," says the owner/manager of
14-building portfolio.
Some have reserves set aside for unexpected expenses, but with longer hold periods and better scheduled maintenance,
unexpected expenses are less of a problem.
Also, more careful acquisition strategies
play into better maintenance, particularly
for those investors who are building a longterm portfolio of properties.
Time on Your Side
While many owners and property managers are time-challenged on a daily basis
with all the details of managing buildings,
small-property owners' clear preference for
long-term holds puts time on their side in
terms of investment. Most consider valueadd as part of a buy-and-hold strategy. "By
the time I fnd and buy a property, fnance it,
take care of the management, maintenance,
and repairs it needs so it's operating well,
I've done most of the work — why sell it?"
asks an owner who admits to buying more
properties than he has sold.
Others figure investing in the known
is better than the unknown. "As a familyowned business there is an aversion to the
risk required to buy transient properties and
invest in the unknown," says the manager of
a large mixed portfolio.
Most owners cite a 10-year to 20-year
hold period, although clearly the rewards
of property ownership and management go
beyond investment dollars. Many respondents indicate a pride of ownership as well
as an immense satisfaction that they are able
to master the challenges of property management. "When I bought my frst property with
two mortgages and all my cash down, I was
quite discouraged to fnd that I had a leaking
roof and no money," says the owner of several
multifamily properties. "But then I found a
roofer willing to do the job for payments of
$200 a month. It was then that I realized
there were no problems — only solutions to
improve situations."
Sara Drummond is executive editor of Commercial Investment Real Estate magazine. Thanks
to the CCIM members who participated in the
property management survey.
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