Cardwell: “I think of benchmarking as a patriotic duty.”

SAN DIEGO—Ignoring benchmarking data is one of the biggest mistakes property managers and owners can make, but it is also the most common, Island Investment Interests principal Craig Cardwell, CPM, tells GlobeSt.com. Cardwell is an expert in using benchmarking data to forecast, plan and make operating decisions. We spoke exclusively with Cardwell about how he uses benchmarking data, the most common mistakes property managers make regarding this data and how it is becoming more efficient and accurate than ever before.

GlobeSt.com: How do you use benchmarking data to forecast, plan and make operating decisions?

Cardwell: On a macro basis, I do a lot of work with apartments, multifamily, student housing, high-end off-campus apartments, condo associations and co-ops. There are 175 million people who live in those kinds of accommodations nationwide; everyone else lives in a trailer park or house. There are 110 million people living in apartments in this country—that's 37% of the population. Obviously, in the world today when wages aren't rising rapidly and everybody is competing for jobs, the cost of rent, association dues and fees and assessments are all extremely important to the owner/operator, manager and also the end user. Not having a good handle on costs affects half of America if you don't do it right, so this is kind of like a big thing.

In years past, Americans were used to getting a 3% to 4% raise, and their rent would go up 2% to 3%, and all was good. But we're not in that world right now. It's hard to get a raise, but apartment rent is going up possibly at a rate that is more than many can afford, and association fees are also going up. So, benchmarking is critically important because you're seeing a plan for how well a place will be managed and owned, its curb appeal, its standards, etc., and how people will be treated where they'll be living.

The benchmarking background from IREM or NMHC that you use historically for your own properties helps push in and refine and force the manager to make better decisions. It's important to be able to compare costs within markets and across markets; it helps the owner/manager go back to bidders and make them justify their prices and make sure they're getting the right quality for right price. If costs go up, rents will go up or services will go down, and that affects the quality of life of the end user.

I use benchmarking for forecasting on a most minor level line by line, and I use it for planning and to basically speak with not just managers, but in a community meeting with renters who may not be happy about a rent increase—you can show them you're doing it because you want to keep the place in good condition and provide the services they've come to expect living with you. You can show them costs are consistent with other comparable properties across the board in their region or area and represent that you're not doing anything out of form here—you're not just trying to ding them or trying to get rich. You can show them that costs are truly going up, say 2.5% for water or 4% for staffing or benefits or healthcare costs for employees that work for this community and do all the work for you while you're at your job. It's their home, where their heart, family, love and social life are, and how much it costs to live there and the quality of service are important to renters. I think of benchmarking as a patriotic duty.

GlobeSt.com: What are the most common mistakes property managers make in executing these tasks?

Cardwell: People either don't use the benchmarks or don't do the research and make comps. Everybody is stressed and feels they have to do more in less time. It's easy to go out and get two or three bids and pick one, but how does it compare to what the costs truly are in your region? You have to be tuned in, and you can do this if you look at comparable, vettable data. What's important about benchmarking is vettable data that's been scrubbed, relied upon and contributed by property managers who want to contribute good data to make good decisions. Vettable data is really important.

That's the biggest mistake people make—they don't benchmark. It's a big mistake, and it crosses all sectors of the industry. REITs use data, but smaller owners might not, and this could have a bad effect on an appraisal. If an owner wants to refi, the bank will use vettable data whether a management company uses it or not, and it may mean the owner won't be able to refi. All those little decisions add up, and saving $50,000 could create $1-million decisions that can harm a community.

They benchmark less in co-ops and condos than in apartments. Co-ops and condos are usually run by boards, and everyone is concerned about costs, so they hire the person who will find the cheapest job, but they're not assuring the best quality of life. If a property is not well managed, it won't get a good return on investment. It's extremely common that boards of associations and common-interest communities and management companies don't use benchmarking data.

GlobeSt.com: What strategies or tools are coming down the pike to make these tasks more efficient and accurate?

Cardwell: The most typical thing you see is that everything is computer or data driven. The more you get the info in your iPad, the better you can be. If you're working with an owner, a discussion about cost on a property comes up, and you can pull it up on your iPad, it is extremely helpful to the manager and asset manager. It also helps auditors if a cost is X-2 rather than X—it could build higher vetting and higher underwriting by the bank. You can also pull in IE reports and call upon it them any time you are in a region. People don't want data from another market; they want data from that market. The technology is necessary, but it's also how you use it; it can make a really big difference. It can help the manager manage better, help the owner or rep make better decisions and make a better push with a bank or appraiser. You don't get another shot at the dartboard when you're in the meetings.

GlobeSt.com: What else should our readers know about benchmarking data?

Cardwell: These same things apply to office buildings and big office REITs are using data. Sometimes regional companies are not using it as much, but they can use it; it can be aggregated through the Income/Expense Analysis reports that IREM or NMHC has. All that stuff is available to help the mid-size manager run a property in same way a REIT might do because they already have the data. They can be run well and the most focused when the data is right, correct and vettable.

GlobeSt.com: How do you use benchmarking data to forecast, plan and make operating decisions?

GlobeSt.com: What are the most common mistakes property managers make in executing these tasks?

GlobeSt.com: What strategies or tools are coming down the pike to make these tasks more efficient and accurate?

GlobeSt.com: What else should our readers know about benchmarking data?

Instant Insights /

Benchmarking Data is Crucial to Property Management

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