By Operations Team.
Revenue shrinkage is an unfortunate subject but a real one and something Ownership should think about. The fact is most if not all apartment properties experience some loss of revenue due to questionable on-site activities. Properties experience negative pressure on NOI from anything from not getting a fair return on labor to actual theft that goes unaddressed.
In our discussions with people in the business, we find most people are honest and upstanding but a few just cannot help taking advantage. Here are some examples of how someone may try to benefit themselves to the detriment of the property:
- Collects the pro-rata portion of a tenant’s first-month rent in cash, pockets it, and reports the unit occupied at the beginning of the following month.
- Conducts off-site personal business while on the clock. This is a ongoing significant issue that is hard to curb, it begins with having the HR capacity to hire the right people.
- Makes personal purchases on property accounts.
- Hires friends and family to conduct site work at elevated pricing.
We make an effort to minimize revenue shrinkage by making regular site visits to walk vacant units, utilizing a purchase order system where regionals must approve purchases for materials, maintaining supply inventory records, implementing a timekeeping system that requires staff to be on-site to clock in or out, utilizing a compliance service to qualify vendors, and in some cases where Ownership approves we install cameras in the administrative office that can be monitored remotely via a PC or smartphone.
Red Flags to Watch For
- High number of manual rent adjustments or unusual refunds.
- Frequent cash transactions without supporting documentation.
- Inconsistencies between physical occupancy and system-reported occupancy.
- Vendors with vague invoices, missing business info, or repeated use despite complaints.
- Staff who resist audits or financial oversight.
- Lease violations related to subleasing or short-term rentals that go unpenalized.
Contact us if you would like to discuss this or other concerns you may have and we can share any of our best practice solutions.
