Posted by Mira Malek ● Oct 23, 2020 9:00:00 AM
Ideas for Increasing NOI at Multifamily Properties
People who invest in multifamily properties consider the long-term profitability it offers, including increased NOI (Net Operating Income) and market appreciation.
Today, we are going to focus on NOI. This is what you are left with after subtracting your operating expenses from your real estate revenue. It is one of the key indicators that measure the profitability of a rental property.
Both lenders and investors use NOI to analyze a deal and its expected revenue. Today, we have put together some ideas to increase your NOI. Let’s take a look at these simple yet efficient solutions.
1. Maximizing Current Income Streams
Increase your rents up to market rates.
If the market rates of your property are less (compared to other properties), your property consistently runs below the market vacancy rates. Try bringing up your property rates to match existing market rates. This can be done in several ways, for example, you can go the traditional route and check rental listings on Zillow or Trulia or consult with a local realtor. Alternatively, you can also use rent comparison tools like RentBits or Padmapper to learn about the rental market.
Furthermore, adding features to your property that increase rental value will allow you to raise rent in a justifiable way. Installing smart devices such as security motion sensors and water leak detectors increase the value of the apartment substantially. Schlage and Wakefield Research found that 86% of Millennials would pay 1/5 more for a smart apartment, and 65% of Baby Boomers would also reportedly pay more for apartments with smart technology.
Consider remodeling your property for a premium charge
You can resort to an interior renovation that will surely allow you to charge a premium rate (compared to non-renovated units).
Also consider adding amenities that others do not provide, as occupants are likely to choose properties with smart devices. For instance, you can opt to get smart door locks or motion sensors to make your property a high-value possession. This will lead to an increase in the demand of your units.
2. Reducing Costs
A smart property manager knows how to attract prospective tenants - they employ practical solutions that sell their property as a premium option.
Using smart home devices like real-time water alarms, entry sensors, and motion sensors can reduce insurance premiums and minimize frequent maintenance costs.
Strict tenant screening to control bad debt
As a property owner, you may have seen evictions, sudden move-outs, and damages that have resulted in uncollected debt. Chances are that, in many of these cases, you may never collect your money. So, it’s best to avoid them by implementing a strict tenant screening process. You can do this by creating a very thorough list of questions that are aimed to gain info on their rental history and past relationships with landlords. Here is a list of some key questions to ask to conduct an effective screening.
3. Finding New Income Sources
Resort to utility reimbursement
If you are operating a property where you pay all the bills, you can charge-back on the utilities. Not only will this generate income, but also encourages tenants to conserve. Moreover, it is one of the easiest ways to generate income without getting a lot of push back.
Allow reserved parking
Gain a new source of income in buildings with unmarked parking areas. You can number spaces, implement parking rules, and start charging for parking if there is ample space. You can also rent out available parking garages, in which parking spaces typically go for $100-$150 each, per month (the same goes for storage units).
Short term rentals increase cash flow
You can rent your model unit or other furnished units for daily rents. This approach enables you to charge rent from people who are in the city for a day or a two and looking for accommodation (or even a resident’s friends and family). This short-term rental model is low risk and can significantly impact your net operating income in a positive way.
4. Investing in Smart Technology
Reduce water usage
Cutting wasteful water expenditures will dramatically increase your NOI. Start using smart technology and install leak detectors. These high-performance devices will reduce wasteful consumption while cutting costly damages occurring due to water leaks.
Use of Smart Locks
A futuristic, tech-laden home is an ideal way to attract modern renters who don’t mind paying a little more for state-of-the-art comfort(s).
Homes can be equipped with smart door locks that ensure key-less entry. It’s a first-rate remote access solution that lets you manage your property virtually anytime, anywhere. It also means:
- You do not have to manage a physical set of keys
- You can send access codes to potential renters for self-guided tours
- You can now cut excessive staff maintenance costs
Now that you know the easiest of ways to increase your NOI, pick what suits you, and begin implementing it today.
If you are looking for smart ways to optimize your property, reference this blog on more ways technology helps increase NOI.
Mira Malek is a Business Development Manager in the smart apartment technology industry, at Arize. She works with property managers, owners, and home builders in the multifamily space.
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