Stuck in the red? Try a plunger: simply placing a plunger in each apartment home can lead to great profits--just do the math.

Preventative maintenance is a key to the success of any apartment community. But, many apartment owners don't realize just how much a true preventative maintenance plan can affect a property financially, as well as from an occupancy standpoint.

During a visit last year with a maintenance engineer at a 600-apartment home community, we discussed the biggest challenges he faced in running the community. As, expected, he said he was overworked and understaffed, and because of this, he was having trouble getting to his work orders in a timely manner, and resident satisfaction was being compromised.

Of about 20 tickets, or work orders, per day, the most common call was for plumbing repair, i.e. unclogging toilets. About 60 percent of the 20 calls were to unclog toilets, he said. That equates to 12 calls per day. He explained that it took about 15 minutes for a member of his staff to leave the shop, or whatever else he or she was doing, go to the apartment, unclog the toilet and return to the original task. So, 15 minutes times 12 calls per day equals three man hours per day, 21 man hours per week or 81 man hours per month.

He paid his staff around $12 per hour, he said. Let's do the math: 81 man hours per month times $12 per hour equals $972 per month or $11,664 per year that he was paying staff to unclog toilets. A solution to this problem would have a huge impact on his ability to run his property--from a time and money standpoint--but there was still more positive effect to be had.

Decreasing Turn Time

The conversation then switched to "turns." He had approximately six turns per week, allotting four days per turn because he was understaffed, the maintenance engineer said. If he had the 81 man hours per month as discussed previously, he felt he could turn those units in two days as opposed to four.

The rent on his property was $1,100 per month on average. That is $37 per day, and if he could turn a unit in two days as opposed to four, his property could collect an additional $74 in rental revenue per apartment that they were not collecting today. Well, let's do more math: $74 times six turns per week is $444 per week in additional rental revenue for the property or $1,776 per month or $21,312 per year.

Unclogging the Work Load

So with the $11,664 per year he was spending to unclog toilets plus the additional $21,312 per year in lost rental revenue because of the two additional days needed to complete make-readies, the maintenance engineer had a $32,976 problem on his hands and he needed a solution fast. We recommended placing a $4.50 plunger in each apartment and tying $10 of the resident's security deposit to the plunger. If the plunger was taken, it also became a profit center for the community because the community would make $5.50 for each plunger taken.

After talking with the apartment manager, the maintenance engineer ordered 300 plungers to start. Ninety days later, because of the drastic reduction in work orders, he placed another order for 300 plungers. Two weeks later, the management company ordered all of its properties to place plungers in every apartment.

This would be a huge windfall for the property--saving $11,664 in labor costs and adding $21,312 in top-line rental revenue.

Increasing Occupancy

But the story doesn't end there. He said the community was about 90 percent occupied and he was sure that was the number. However, of the 12-month leases, approximately 20 percent did not renew their lease, he said. To review, he had 90 percent of his 600 apartment homes occupied or 540 units. But, 20 percent of those, or 108 of those units, would come vacant during the year. So in reality, he had assurance of 432 units being occupied during the year, meaning he was 72 percent occupied on an annual trend.

The community was running a standard rental incentive promotion of first month's rent free. So at $1,100 average rent times 168 vacant units, they would be giving away $184,800 to attract new customers to the community. The average turn cost him around 8600, he said. So, yes, more math: $600 times 168 apartments equals $100,800 he would spend to turn those apartments. All total, his property would spend $285,600 to attract new residents or 81,700 per apartment, and that doesn't include advertising costs and leasing agent's compensation.

When asked why 20 percent of the residents did not renew their leases, he said most were buying houses. In sharing with him a survey published in UNITS stating that most residents leave because of office staff personality, maintenance staff personality, maintenance staff competence, security and parking, he was shocked. However, unwittingly he had addressed most of these issues just by placing plungers in each apartment.

"How did I do that?" he asked. Well, it is simple. First, because his staff was constantly unclogging resident's toilets, the perception was that his staff was not as good as they really were. If a resident continually sees maintenance personnel, it seems they don't know what they are doing. Perception becomes reality. By reducing the amount of in-unit service calls, customer satisfaction increases with the quality of work.

Furthermore, by reducing the number of tickets his maintenance staff pulled per day, their attitudes would be much better in front of the residents because they would no longer be overworked and stressed to fill all the work orders for the day. Also the office staff would be friendlier because they would have fewer resident complaints to deal with.

And finally, if more residents are satisfied with their living experience at a community, they are more apt to renew their leases. The more residents that stay, the more familiar they become with their neighbors, thus the more secure they will feel because they know everybody rather than seeing new faces all the time. By increasing the retention of residents, the amount of rental incentive dollars given away are reduced, as well as saving the turn dollars. It is far more economical to keep a resident than to find a new one. He agreed.

So after placing the plungers in each apartment, a strategy was devised to monitor the effect they would have on renewals. If the renewal rate could be affected by 5 percentage points that would be five apartment homes that would renew that wouldn't have previously, thus having ma $8,500 positive impact to the community's bottom line. So the math looks like this: five apartments times $1,700 per apartment in turn and rental incentive costs, plus those five units at $1,100 average monthly rent would give his community $5,500 in guaranteed rental revenue per month or $66,000 in rental revenue over the year.

Six months after the maintenance engineer took the step of placing a plunger in each apartment home, he realized an 8 percent increase in residents who renewed at his community or eight units at $1,700 per unit in turn and rental incentive costs, equaling a cost savings of $13,600. In addition, eight apartments times $1,100 per month in average rent totaled $8,800 per month or $105,600 annually in guaranteed rental dollars. Obviously, his preventative maintenance program paid off in a huge way.

The Sum Total: Raising the Bottom Line

The total affect the plungers had on the community:

[check] $11,664 saved in labor costs spent unclogging toilets

[check] $21,312 saved in rental revenue by turning apartments in two days instead of four

[check] $13,600 saved in turn costs and rental incentive give-a-ways

[check] $105,600 annual rental guarantee for retention of residents

Total of cost savings plus revenue increase = $152,176

Less the cost of 600 plungers = $2,700

Total positive impact to the property = $149,476

Think about it: If someone gave a property a check for $149,476, where would it be reinvested it to make residents happy and staff happier?

Shawn Handrahan is Director of Sales, Southeast/South Central, for The Home Depot Supply (Formerly Maintenance Warehouse).