essential don’t necessarily have to
happen all at once. Regular maintenance can help put off the need for
major capital improvements, Ahearn
said. It’s better to pay to fix a leak
than wait and allow water to damage
the roof. If a property owner doesn’t
seem inclined to share this view, he
said, “you lay out the cost of repair
versus the cost of replacement. That
usually gets their attention.”
Knowing the owner’s intentions
for a property is critical for managers
trying to decide the order in which
to tackle capital improvements, said
Sue Lewis, CPM. Do the owners
intend to keep the property for the
indefinite future? Or are they looking to sell? If it’s the latter, it’s better
to spend limited capital improvement dollars boosting the property’s
curb appeal by power-washing sidewalks or planting new shrubbery,
rather than on replacing the roof.
Lewis warned property managers to
be careful about putting off repairs,
however, even if the owners plan to
sell the building.
“Deferred maintenance will drastically affect the price you’re going to
get,” Lewis said.
Completing a project in phases
is another useful tactic to help control cash flow. Karen Hodge, CPM,
said her company, ICORR Properties
International in Canada, took this
approach when upgrading the façade
of a building in downtown London,
The Selby Building is four stories,
with retail on the first floor and
offices above. Over time, the commercial tenants had taken it upon
themselves to display their own signs,
creating a visual mishmash of advertisements. ICORR wanted to replace
During economically challenging
times, it pays for managers to Do
their homework to investigate a
company’s financial sounDness
before hiring them to Do work.
—sue le Wis, Cpm®
the chaos with uniform signage and install weatherproof
stucco that would both improve the building’s appearance
and protect it from deterioration. The total price tag was
$360,000, but instead of trying to do all four sides at once,
ICORR took the exterior walls one at a time, each costing
$90,000. The company started in late 2007 and will finish
the project this year.
CreAtIve FIxes wIthout the FundIng
Ideally, property managers can pay for capital improvements out of a fund they’ve been feeding regularly for
years. In addition to the annual budget, property managers should budget to pay for improvements that will
be needed in the next five to 10 years, Lewis said. That
money is more important than ever since the credit
markets have dried up, and managers say financing is no
longer an option.
“Nobody’s borrowing at this point,” Holland said.
But sometimes there isn’t enough money set aside to
cover all the work that needs to be done. That’s when
managers need to find creative ways to squeeze money
out of their properties, Lewis said. She ticked off a list of
suggestions without pausing. Consider charging residents
for parking, if possible. If the property is located next to a
mixed-used area, try renting out residents’ parking spots
during the daytime. Investigate charging residents for
their utility use. Install storage lockers and rent them out,
or rent out a common area to community groups.
A variation on that last strategy proved fruitful for Lewis
in 2002 during the last economic downturn. She was managing Country Walk Apartments in Lynnwood, Wash. She
allowed a Korean church to use the building’s cabana free of
charge each week for worship services. They even did baptisms in the room’s Jacuzzi. Churchgoers would come for
services and meet people already living in the community.