4 Ways for Owners and Managers to Improve NOI
Want to increase your returns in this low cap rate environment? Here are some simple onsite upgrades that can help.
If the goal is to make money in the apartment business, it won’t be achieved through making new property deals at this point in the real estate cycle. Nonetheless, that doesn’t mean there aren’t ways to increase revenue.
“Investing in your communities, is a great way to get a return,” Mark Hurley, President of Highland Commercial Properties, says.
Hurley and fellow speakers on the “Independent Rental Owners: Six Effective Ways to Maximize Income” panel at the 2017 NAA Education Conference & Exposition shared ways to make money in this low-return environment.
Increasing Energy Efficiency
Energy costs in older apartment communities can run 50 percent higher compared to those in newer ones. By making small tweaks and exploring rebates that local utilities offer, owners can find a lot of savings.
By changing to more energy-efficient lighting and adding motion sensors to doors that trigger temperature control based on whether persons are in the apartment home, owners can enjoy major energy savings. “Even if residents won’t conserve energy, there are ways to improve efficiency,” Julia Emerson, Director of Hillcroft Group, says.
Boosting Ancillary Income
Karla Ross, Owner, At Home Properties, noticed that residents of her single-family rentals don’t move in with their own refrigerators. Ross found a way to capitalize by installing a refurbished, stainless-steel fridge for $550 and charging residents an extra $50 a month to use the appliance. In 11 months, the refrigerator was paid off.
“If something will pay for itself in a year, it is a no-brainier to buy it,” she says.
Ross also discovered that some residents did not want to pay individual monthly bills, such as electrical, water and gas. She began charging those residents an extra $250 a month to have her cover the costs. To date, the highest bill she had to pay was $175.
Covering every bill is not a solution for all communities.
“When paying all the bills, you want to think about how energy-efficient the property is before making that kind of commitment,” Ross says.
Like many apartment owners, Jerry Winograd, President of Judwin Realty Group, managed properties with old boilers that were reliable, but somewhat inefficient. He replaced them energy-efficient models.
However, because the new boilers included aluminum fins, they melted more often, causing him to shut them down for entire days for repair.
To avoid this predicament, Winograd installed six tankless water heaters at an older property. The systems saved money and were more dependable. “They have been running flawlessly for 18 months,” he says.
If an owner can’t replace their boilers, Hurley mentioned that simply removing sediment every six months could help owners extend the life of their boiler system and save on electricity.
When Hurley stays in hotels, he has come to expect free Wi-Fi and he believes that expectation will soon creep into the apartment world.
“People expect fast Wi-Fi,” he says. “If you can install that in your apartment community, you can recover the cost by charging higher rents.”
With more connected devices--such as sprinkler systems for landscape maintenance--Hurley thinks now is the time for owners to think about adding Wi-Fi onsite.
Using that Wi-Fi, leasing agents and maintenance technicians can access tablets and their applications such as Google Forms (which is a free application), to log maintenance requests.
“With this information stored in Google Forms, we can fix things faster and turnaround units in less time,” Hurley says.
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