Additional Tips to Increase NOI in Your Multifamily Community
- Increase lease rates and lease terms. Negotiate with your tenants or prospective tenants. Maybe you can entice someone to renew or lease for 18 months at a higher rate if you will put in a new laminated floor in place of carpet (an 18-month lease term instead of a 12 month term will save 33% of your turn costs over time). Maybe you do the same for a refrigerator or a new stove (which you probably need to do anyway). If you should be so unfortunate as to suffer fire damage, maybe you upgrade the units a little and charge an extra $100 a month as a result of it being not only new, but upgraded. If your property is running at 97% or better occupancy, maybe you need to make sure that your rents are increasing upon renewal each time like clockwork, so that larger increases are not ever needed.
- Bid out everything you do, and make sure that you get at least three estimates. If you do decide not to go with the lowest bidder, make sure you know exactly why you are doing so. This should include not only insurance, but also everything that you contract for on the property, such as landscaping, snow removal, unit make ready, cleaning services, pool service, pest control, glass replacement, locksmith services, plumbing, electrical, HVAC, elevator services, and anything else that is not taken care of in-house. For landscaping, consider asking for a bid that is paid on a per cutting basis, as compared to a monthly service. It may be that you don’t really need to pay the same to cut the grass in December or January as you do in May, and you should keep this in mind.
- Contest your tax bill every year unless it goes down. There are consultants who will do this for you automatically, for a percentage of the savings. In fact, some owners have the county or city send their tax bill to their tax consultant instead of to the owner every year.
- Consider re-positioning the property in some way. Perhaps you can change the occupancy from a low income community to a middle income community. Or from a family community to a senior community. Or to a student community. Your NOI could be increased dramatically, if one of these courses is taken. One developer we know is now building only senior housing, and has reduced costs related to operations, maintenance, and turnover as a result
These are just a few ideas that could increase your NOI in a difficult time. Hopefully one or more of them can be applied to your community. Good luck.