5 Smart Decisions That Boost NOI

While the rents and occupancy rates are trending upward in most markets, you have to be prepared for fluctuations in rent. You must always be looking for creative ways to lower your costs, control capital expenses, find new income sources, and boost your Net Operating Income (NOI).

What NOI means for your business

 
The Net Operating Income is your total revenue from rents and any additional income sources after all your operating expenses such as insurance, property taxes, and maintenance costs have been deducted. This does not take into consideration loan payments, distributions to owners, or indirect tax benefits like amortization and depreciation.

The NOI is crucial for determining property value and it is also something under your direct control as the owner and property manager. The following five decisions can help you boost your NOI.

Lowering costs

 
When people are not paying for water and sewer costs according to how much they individually use, they tend to be wasteful. Evaluate the costs and benefits of installing low-flow toilets and shower heads. Sink aerators have been shown to reduce water use by more than 30 percent. And with a multifamily property it’s possible to easily introduce a Resident Utility Bill-back System (RUBS) where tenants are billed back for individual utility usage.

Talk to your insurance company about ways you can lower your premiums, like installing a security system. Shop around to ensure you are getting the best price.

Keep fees and rents with the market

 
Low vacancy is good, but it can also mean that your rents are below the market for the area. Make sure you are not paying expenses that most people are passing along to tenants.

Add amenities that renters will pay more for

 
When considering where to live, people are willing to pay more for an updated apartment with a dishwasher and a washer and dryer.

Add storage units

 
Many people renting apartments need additional storage. Many of them are already paying for storage somewhere and would most likely prefer having the storage units nearby and within walking distance. By adding storage units, you can manage and oversee an additional revenue stream with little to no additional expense.

Cable, internet, and phone agreements

 
Practically all of your tenants will want internet and cable. Contact providers and see if they can sell you a wholesale package that you can then offer to your renters. You may be able to save them some money and make some additional profit for yourself at the same time.

Keep all agreements easy to understand and beneficial to your tenants. Increasing your NOI can also benefit your residents.

Related Articles

 
The Importance of Performing a Rent Survey

Creating an Annual Operating Budget for Your Multifamily Property

Reduce Multifamily Operating Costs With Green Strategies

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Theresa Bradley-Banta writes about investing in real estate while avoiding the pitfalls that plague many new investors. She is a 2017 PropTech Top 100 Influencer and winner of 14 American and International real estate awards for her website and real estate investing programs. As featured on: The Equifax Finance Blog, AOL’s Daily Finance, Scotsman Guide, The Best Real Estate Investing Advice Ever Show, Stevie Awards Blog, Rental Housing Journal, and Investors Beat among others.

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