Have a Long-term Plan
Ask yourself, what is your ultimate desired outcome? Is it a more cost-efficient building, a greener building, more amenities to better compete with the new luxury condos or something else? Or, are you perfectly happy with the current state of your building and the yearly rate increase that you pass on to your residents and neighbors? We know of many buildings that are told by their Managing Agent that no matter what, they should raise maintenance fees every year just so owners will “get used to it going up”! This is unacceptable and the exact opposite of how we review and advise our buildings. And for all the boards who reflexively think that they are running such a great organization that they need no help and just rely 100% on their managing agent: you can stop reading right here.
Create goals and a plan
One of the best ways to keep your Co-op or Condo Association on the right track is to have clear goals and a strong plan. These could be related to budgeting, restoring major building systems or adding new amenities. Setting goals in the beginning of the board-term year is a good practice, as is starting to plan the budget for next year as early as the current mid-year.
Most importantly, have a 5-year plan established for all expected capital improvements of the building’s systems. This capital project plan is necessary in order to set the yearly budget. Determine what the major strategic goals are that you want to meet during a 12-24 month period; it’s too easy to get stuck in the “here and now” and not pay much attention to the future. Also, as the decision maker, the Board wants to make sure that it is in sync with Management, who oversee the day-to-day operations of the building.
Cost reduction examples
Although this is a relatively small expense, we identified that one of our client’s telephone expenses were too high. They had an abundance of phone lines dispersed between a multiple accounts. Some phone numbers they could identify, but there were several numbers which they couldn’t! Their main goal was to reduce their telephone expense. We worked with them on identifying what numbers they needed and what numbers we could eliminate. Then we deciphered and reorganized their situation and renegotiated how much they paid for the remaining lines. The end result was that we effectively reduced their telephone expenses by over 60%. We apply this same approach across multiple platforms.
Another client of ours was replacing their elevators. They had bids that the managing agent had provided via a dedicated elevator consultant according to an industry-standard sealed bidding process through RFPs. The board had a goal to reduce the steep price tag of $750,000, which was the lowest of the Managing Agent’s solicited bids. We worked directly with the consultant and elevator company itself, renegotiating the same scope (with the same vendor), successfully cutting that price by 33%- $250,000!
Additionally, we worked with a building that had been talking for years about wanting a gym. However, they could not come to a decision. They had one lone proposal that the Managing Agent had provided with a $250,000 price tag. We provided an alternative with the same scope and quality equipment for 50% below the original proposal and helped get the board on-board with the installation. Based on our suggested membership fee-structure, the gym paid for itself in less than 5 years, following which all is additional revenue to the building.