The $90k Printer - Are You Paying Attention to Your Expenses?

“The Devil is in the details”, is a saying I always assumed meant that one found answers in the details. One day, I wanted to use this saying in a presentation and my curiosity got the best of me so I looked up the origin of this saying. I quickly learned my assumption all of these years was wrong. “The Devil is in the details”, actually means that while something may seem simple, the details may prove to be more complicated. Finding the answer in the details is actually the meaning of “God is in the details”. Applying that saying to multifamily, the “details” are the operations. To that end, I will share one example of how focusing on every aspect of your operations can be a game changer to an investment.

Like most properties, our properties had printers. The printers are used for lease applications, tenant notices, and a lot of other miscellaneous communications. The cost to rent each printer is approximately $200/month with a $300 quarterly allowance for paper and ink, totaling a $3,600 annualized expense. While $3,600/year does not seem like a huge expense, what if I told you it was actually costing $90,000 + $3,600/year? Well it is, let me explain.

The most common way to evaluate multifamily properties is through the NOI approach. The NOI approach takes the annualized total Profits-Expenses and divides that by the trading cap rate. A $3,600 reduction in expenses in a 4 cap market translates to $90,000 in evaluation! That’s a pretty expensive printer!

On a multimillion dollar property, $90,000 might not seem like a lot of money. However, this is just one example of many that we focus on when looking to maximize value for our investments. I have said it over the last few years, and I believe it to be true now more than ever, “Multifamily operations have always been important, but in tough times operations are the MOST important!” Because when those tough times do come, the last thing you would want is that Devil in those details.