Is Internal Maintenance the Answer to Maximizing NOI?
Beyond Maintenance Series: Part 2
We hope you were able to attend part 2 of our Beyond Maintenance webinar and knowledge series on August 23, 2021, about internal maintenance. Unfortunately, we had a video malfunction in the recording of the webinar. It was full of valuable information and insights from industry leaders, which we will share below. Don’t miss our upcoming webinar by registering now.
Is Internal Maintenance the Answer?
In last month’s forum, industry experts, Deb Newell, Danny Harlow, and Ray Hespen, dug deep into the pros and cons of internal maintenance and how it impacts defensibility and profitably in property management.
Danny Harlow, Regional Vice President of HomeRiver Group, opened the discussion by touching on how they used to manually handle property maintenance. Initially, they would receive a work order from a resident and fax it to the vendor. Then contacting the vendor by phone to ensure the request was received and completed. He knew there was a smarter way to coordinate their maintenance process. They wanted control over the speed and quality of the work order and found a dedicated process. Handling maintenance in-house was a game-changer.
“You’re the boots on the ground for your properties. There is a ton of value to provide that type of service (internal maintenance) to your owners,” Harlow said.
Deb Newell, the Executive Consultant of Real-Time Consulting Services, spoke about the opportunity of profit and internal technicians. With internal maintenance, you can charge a percentage markup or a flat fee per work order.
“Because time is being spent on maintenance… how do you quantify and find ways to charge for it? You’re losing money, because you’re doing the maintenance, and essentially not charging for it,” Newell stated.
Profit Opportunities for Internal Maintenance
Webinar attendees were able to ask questions during the virtual forum. One attendee requested more details about charging a percentage mark-up compared to a flat fee for each work order. Question: What makes the most sense for my company size and door count to make an increase in profit?
“We generally use a percentage mark-up. Our work orders range within a dollar amount. We want the ability to handle any maintenance needs that come in. We look at it like we are running a maintenance operation,” spoke Harlow.
“If you’re a smaller outfit. It’s fair to say, until you get a grasp on maintenance or enough work orders coming in, I would say a flat fee is the route to go. I would advise your company to build the fee into your margins,” said Newell.
Tracking and Ensuring Efficiency in Property Maintenance
When it comes to property maintenance, having complete oversight and an efficient process is critical. With an internal team, you can keep technicians accountable; ensuring work orders are being completed, the speed of repair is tracked, and tech utilization rate is spot on.
“Maintenance is one of the areas where you can lose money. If you’re not actively managing it, it can get away from you. Overall, we look at incoming work orders and number of turns very closely, as it helps us with staffing and workflow. We also track tech efficiency ratio (we call it technician utlization rate at Meld!). From there, we add the time on the clock to their bill on the work order. We have targets for our coordinators and vendors working on something that’s billable, not “wind shield time,” said Harlow.
Many firms with internal technicians don’t have an idea of how busy their technicians are. They often have some accounting system that attributes value, but this technician utilization rate shows how much time they are attributing to maintenance requests themselves.
“Usually this is a great indicator of being overstaffed or understaffed, too. Firms should try and manage their staff and have above 80% technician utilization rate before hiring,” Hespen noted.
Should I Hire Internal Maintenance Technicians?
When analyzing your property management company, what elements of your business justify hiring internal technicians? Our industry leaders provided their feedback on what your company can do to determine if internal staff is the right move.
“Door count doesn’t matter. You should focus on how many work orders you have,” Newell said with a smile. “You have to look at your company holistically. What are your biggest pain points to satisfy your owner and residents?”
“Our operation… internal maintenance, that is… started by shifting our approach to maintenance. The value of their time combined with the work you’re putting in matters. Now, we get the requests and pass them on.. there’s no work order fee and coordinating with vendors. It’s all internal with the help of Property Meld, our maintenance solution,” said Harlow.
Our experts shared their insights on how they have successfully executed an in-house maintenance team to increase their net operating income. By the end, attendees received the tools to run an efficient and profitable maintenance operation.
Let us show you how you can utilize internal technicians with our software solution by requesting a demo with one of our maintenance-obsessed representatives.
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