This expert post is written by Tina Larsson, CEO of The Folson Group, financial consultants and efficiency experts for condos and co-ops.
While we can’t personally control inflation, the fact that costs are rising overall makes it even more important that boards do their utmost to control expenses and consumption. After helping many buildings throughout New York City, the Folson Group has learned that many costs are not necessarily set in stone. Evaluate the following expenses to leave no stone unturned.
1. Run a comprehensive bid process for all vendors
When the building has an electrical issue, who does the board call? What about an elevator upgrade? If the first call is the one to come, without comparison or negotiation, you’re doing it wrong. The best way to save money on vendors and ensure high-quality work is by evaluating multiple bids, negotiating with vendors, and building a relationship. Don’t rush to schedule the first contractor on Yelp or that is suggested by the property management firm; for large projects, reach out to multiple vendors for pricing. Once you narrow it down to 2-3 high-quality, cost-effective contractors, it’s time to negotiate your pricing. And don’t repeat the process next time: if you’re happy with the work, return to the vendor and work on building a relationship. Your building is more likely to get better deals and better work that way.
Getting competitive bids also works for vendors such as insurance providers—we have seen insurance costs slashed by as much as 45%!
2. Consider refinancing
A major expense for co-ops as well as individual owners is their mortgage. Though interest rates are rising, mortgage rates are still near all-time lows compared to previous decades. If inflation stays around, interest rates are likely to rise. This means that if you haven’t already, or if your mortgage comes due in less than ten years, you may want to consider refinancing. We have seen buildings literally cut their mortgage expenses by as much as 70%!
3. Evaluate your taxes
Taxes are a significant fixed expense, especially for cooperative buildings, but did you know that your tax bill isn’t necessarily what you are obligated to pay? A Tax Certiorari can petition the city’s original claim, and often save tens or even hundreds of thousands of dollars. Even better, they only charge a percentage of savings, so there is no risk involved. Buildings with a ground floor commercial space should also evaluate the type of lease — a “triple net” is most common and puts the responsibility of property taxes on the tenant. Why pay more than what you have to?
4. Optimize your staffing schedule
A simple scheduling switch may help save you money in your staffing budget. Doormen, security guards, and site supers who work on hourly schedules earn overtime (1.5x their usual rate) after a certain number of hours worked. To avoid exacerbating your employees’ overtime, be intentional about scheduling shifts. A board committee or point person could be in charge of reviewing schedules and calculating any overtime.
5. Get efficient with energy consumption:
Water and energy consumption can both be managed.
When it comes to water consumption, building’s policies can be amended to require high-efficiency toilets; the superintendent’s office can check all apartments for leaking toilets, inefficient plumbing, etc. and cure these issues. Lastly, your building can install a device that “compresses” the water at the source before it is measured by the city, thus reducing the capacity that is measured. These methods have reduced building’s water consumption by as much as 25%!
With electricity prices likely to rise, you may want to consider swapping out old light bulbs with new energy efficient bulbs; change to more efficient fixtures; install motion sensors. We have buildings that have done this and cut electric consumption by as much as 65%! Keeping HVAC systems in good health, or investing in energy-efficient solutions, can help with costs associated with air conditioning. Some simple tips for HVAC maintenance include changing filters monthly, or at least every 2-3 months; checking insulation and ductwork; upgrading to energy efficient systems such as using timers or smart thermostats.
It can seem inevitable that maintenance fees will go up year-after-year. But even with rising service costs and living expenses, there are several ways you can evaluate and manage costs.
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