3 Ways to Budget for the Smart Access Control Security Your Property Needs

When budgeting for access controls, like a smart video intercom to improve security, property owners and managers can use the asset as an investment to increase income and decrease operating expenses throughout the year. Here’s how.

Budget Planning Tracks Projected Income and Expenses for the Coming Year

During the third quarter of the fiscal year, multifamily owners and managers focus on preparing a property management budget for the upcoming year. It doesn’t matter if you’re new to the property management industry or if you’re an experienced pro, budget planning is crucial to your property’s success. That’s because it will help you operate efficiently and improve the property year-over-year.

3 Things to Focus on in Your Multifamily Property Operating Budget

When you’re developing your property’s operating budget, keep it simple and focus on these three things.

1. Project income and expenses: As a property owner/manager, your budget should project expected income and expenses. Use last year’s budget as a starting point, then consider market factors such as interest rates, taxes, insurance costs, job growth, and migration to your part of the world.
2. Set yourself up for success: A review of your operating budget throughout the year will show if you have met expectations, exceeded them, or are underperforming. You’ll know where you stand so you can be proactive, heading off income shortfalls or other issues before they become big problems.
3. Plan for property improvements: The budget season is the right time to consider new investments to improve the property. In particular, focus on investments that will either increase efficiency or reduce operating expenses. For example, smart video intercoms or mobile credentials connected to an access control cloud platform give residents the ability to use their smartphone as a key. For example, 61% of Gen Y renters are more likely to rent a unit because of electronic access such as keyless entry. Also, one in four residents said they would pay over $30.00 a month more to get the hi-tech apartment they want.

What’s the Difference Between CAPEX and OPEX?

CAPEX, or capital expenditures are one-time investments in fixed assets that you purchase for running and improving the property. Here are some examples;

• The real estate property itself
• Large equipment like a heating and air conditioning unit (HVAC) system

OPEX, or operating expenses are the day-to-day costs that a company incurs to run and maintain an income-producing property. OPEX includes costs like:

• Accounting expenses
• Maintenance and repairs, such as snow removal, trash removal, janitorial service, pest control, and lawn care
• Advertising
• Office expenses
• Supplies
• Attorney fees and legal fees
• Utilities, such as telephone and internet
• Insurance
• Property management employees
• Property taxes
• Travel and vehicle expenses

While CAPEX purchases are long-term investments in your property, the U.S. government incentivizes property owners and management companies to invest in and improve their properties, maintaining safe and secure rental housing for its citizens. Let’s take a closer look.

Section 179 of the IRS Tax Code

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.

Cost Segregation and Bonus Depreciation

As a multifamily rental property owner, you may want to think about performing a cost segregation analysis. Cost segregation studies are in-depth analyses of the cost of components and fixtures inside of buildings. They are typically performed by a qualified individual such as a CPA, appraiser, engineer, or contractor. Here’s the important bit. With cost segregation, you can claim bonus depreciation on the individual components of the property. That’s because the cost segregation has assigned each fixed asset into a specific class, including its useful asset life.

Here’s one more acronym and why you care. Modified accelerated cost recovery system (MACRS) is a depreciation method for most capital expenditure assets. MACRS enables accelerated depreciation over longer periods of time. And this is a big benefit as it allows businesses to deduct higher amounts during the first few years after purchase to offset the cost of investment in the property.

Budget for CAPEX Assets that Will Increase Your Net Operating Income (NOI)

You can do three things to increase NOI.

1. Reduce operating costs
2. Increase the rent you charge
3. Reduce resident churn by attracting and keeping residents with amenities they value

The ability to decrease operating costs always comes down to improving efficiency. And when your budget includes a LiftMaster smart access control solution powered by myQ Community you’ll experience time-saving, cost-reduction benefits like these.

• Eliminate the cost of rekeying locks, take back time without managing physical keys or recovering old keys during changeovers
• Save time for service staff who no longer need to travel back and forth from the leasing office to collect physical keys for maintenance trips
• Work more efficiently without driving to and from the property to manage building access
• Save money, minimizing theft and damage by controlling access to common areas

And you can operate a safer and more secure property with the ability to:

• Monitor a property, or multiple properties, remotely from anywhere with your laptop or tablet
• Watch the video log captures of all access entry events to see what’s happening at entrances 24/7
• Receive real-time customized notifications: door ajar, permission denied, and many more

 Offer the Security and Smart Home Tech Gen Y and Gen Z Renters Want and Charge More

Security is a key concern for Gen Y and Gen Z renters. And if you want to attract and keep long-term tenants, you need to budget for the security and convenience that today’s renters expect.

1 in 5 Gen Y residents reports feeling unsafe around their community property.

55% of Gen-Yers are likely to pay more for high-tech door locks.

61% of Gen Y respondents indicated they are more likely to rent a unit because of electronic access and keyless entry.

91% of apartment residents say high-speed internet is an important factor when considering an apartment.

The demand for smart access control technology that makes residents feel safe and makes their lives more convenient is real. When you budget for property improvements like a smart video intercom or mobile credentials, it’s an opportunity to increase your ROI by increasing rent for the amenities this demographic wants and will pay more to get.

A survey from Entrata that asked apartment renters what they valued most revealed this.

1 in 4 residents would pay over $30.00 a month more for rent to get the hi-tech apartment they want.​

Source: What Apartment Renters Value | Source: Schlage’s Industry Insight Survey

OPEX Budget Planning for Incremental Improvements

Operating expenses are the costs that keep your business running. This includes things like salaries, accounting services, office supplies, and software subscriptions like LiftMaster’s myQ Community cloud access control platform.

During this time of high-interest rates and increasing property taxes, money is tight. And your budget might be extra skinny in the coming year. So consider budgeting for incremental improvements that pay off from the get-go. Here’s an example.

LiftMaster’s mobile credentials experience uses our myQ Community app to enable a unique, secure credential within a person’s smartphone. The hardware, either a smart reader or a smart video intercom, can communicate directly with a person’s smartphone, using Bluetooth low energy (BLE) that works for both iOS and Android. Here’s the best part. Mobile credentials enable keyless entry for property owners and managers and deliver the keyless entry experience that residents want – and will pay more to get.

Budget planning takes time and thought. We can help you understand how budgeting for incremental improvements to your property’s security will pay off big time, especially when you consider the legitimate tax write-offs that do a slash-and-burn on your out-of-pocket investment.

Go here to schedule a site walk and get a quote to include in the budget you’re working on right now.

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