Multifamily property owners can boost the NOI of their assets either by raising revenue or cutting expenses. This way, they can add value to their property or improve its evaluation.
You can try out various strategies and combine creative implementations with improving each property’s valuation. In this article, we will talk about ten ways of increasing your property’s NOI. Besides, it will help maximize your returns and crush different financial objectives.
Ten ways to add value to multifamily property
Multifamily property owners can improve the NOI at their properties in the following ways:
- Enhance occupancy
One of the best possible ways of adding value to your multifamily property includes filling it up with credible tenants. Then, as your apartment occupancy increases, you will receive a higher rental income.
Thus, it will increase the cash flow and add value to the property. However, finding a reliable tenant is no cakewalk, and you need strong marketing for that. Besides, it would be best to focus on the apartment’s amenities to look appealing to the tenants.
Maximum tenants look for a ready-to-move-in apartment while searching for properties. So, prepare your units and post advertisements on social media to grab potential tenants.
However, it would be best not to settle for low rent to fill your apartment. It will affect the property management industry adversely. Always dive in with the appropriate pricing and application procedure to attract reliable tenants.
- Increase the rent
Another effective way to add value to your property is by increasing the rent. It will help generate more revenue and improve the NOI of your property. However, it would be best to watch out for the rent control regulations before upgrading the rent structure. The regulatory bodies limit rents on multifamily properties to a certain extent.
If your rent is within the limit, grab the chance, and hike the existing rent by a few percent. But on the other hand, many apartments are leased at below-market rentals so tenants can avail themselves at a low price. So, it would help if you focused on certain upgradation that will make your property accepted even at higher rentals.
- Build a community for the tenants
You can focus on creating a common place where the tenants can communicate with each other. It will enhance a homely feeling and strengthen the bond between people.
Human beings are social animals; nothing else can keep them happier than being connected to like-minded souls. So, you can include new amenities like a playground, gym, swimming pool, basketball court, etc., to attract the tenants.
Besides, you can plan community events like pool parties, potluck, movie nights, and more to keep the tenants connected. It will create a healthy environment and keep the residents happy. Consequently, it enhances the chance to rent your property at higher packages without being questioned.
- Focus on building online credibility
Online marketing has been the most viable source for building a trustworthy business profile. So, you can list your property on online platforms and create a page on social media. Facebook Marketplace, Apartments.com, etc., are great places to grab people’s attention.
Besides, you can create an online website with all the amenities and perks featured on the home page. As a result, optimize your website and enhance your business credibility. You can hire a marketing expert to scale your property properly to generate maximum NOI.
- Upgrade the interiors to attract tenants
A chic apartment will positively attract more tenants. So, get to work and upgrade your apartment’s interior with new appliances, furniture, flooring, paint, etc. You can also add luxurious amenities like a dryer and washer. Grooming your apartment will make it amenable to several tenants.
Resultantly, they will agree to pay a higher rent considering the facilities available. So, upgrading your units can be a great way of increasing your property’s rent.
- Install solar power
Besides increasing the rent of your apartments, you should also focus on benefiting your tenants with cost-saving features. So, you can install solar panels to save your expenses, thereby increasing the NOI.
On the other hand, it will provide tax benefits to the tenants and increase their savings. Moreover, it is also a convenient step towards an eco-friendly environment.
- Increase the parking revenue
Another way to increase your NOI is by expanding the parking revenue. The parking area is limited because most multifamily properties are located in congested urban areas. So, tenants will even pay higher rent for parking. Can you imagine earning an extra $5,000 per month from parking? How?
Some apartments offer underground parking spaces for $100 for a single space. So, if you own a 50-unit property, it can earn you a lump sum amount per month.
Besides, you can add EV charging stations for additional revenue generation. As gas prices rise, most people opt for electric vehicles. So, an EV charging station can attract potential tenants.
- On-site storage can generate income
Multifamily owners can also earn from on-site storage closets with locks. In addition, you can add storage solutions to underutilized spaces such as basements, common areas, etc.
Besides, you can add a new auxiliary structure specially designed for storing tenants’ essentials. If you provide individual lockers for tenants, you can rent them at monthly fees charging additional fees.
Moreover, you can also rent out these lockers to the general public. However, the priority should be your tenants. However, you can apply this strategy only when you have built a storage area in an auxiliary building.
- Install cable or Wi-Fi
The Internet is a part of our daily lives these days. So, if you install Wi-Fi or cable for your tenants, it will enhance their convenience. This is because they longer need to set up their own cable and trust you for hassle-free internet management. So, it will generate additional revenue for you without investing much. Isn’t it a smart way of adding value to your property?
- Focus on water-saving tricks
Another way of improving your multifamily property’s value is by finding solutions to save on your water bills. As you cannot charge water bills from tenants, they are not expected to cut down their water consumption level.
So, you can implement some water-saving strategies to save your money. For instance, you can install shower flow control, low-flow toilets, etc., cost-effective methods to reduce your expenses.
The basic idea of Net Operating Income (NOI)
NOI is the Net Operating Income generated on commercial properties. The value of a commercial property is determined based on this NOI.
Gross income includes all sources of income generated from a commercial property, such as rent, parking rent, pet rent, laundry or vending income, storage unit, etc. To calculate an NOI, you must subtract a property’s operating expenses from the generated gross income.
However, the amount of generated NOI varies from one property to other. This is because every apartment’s day-to-day costs to run a property are different. However, the essential items of expenditure remain almost the same. For instance, maintenance, taxes, utilities, property management, admin, insurance, etc., come under this expense.
While evaluating the equation, one must consider net operating income as one of the essential factors. Therefore, income and expense predictions are entered into a financial pro forma for an assumed holding period.
Importance of NOI for multifamily investors
Net Operating Income, or NOI, is crucial for multifamily property owners. A property with a higher NOI is likely to have a higher property value per the cap rate. Investors primarily evaluate properties by analyzing going-in cap rates. Thus, a higher cap rate implies that the property is profitable compared to others.
To be more precise, when investors consider a low-cap rate property, they need to improvise its features. This is because it helps in increasing the NOI of that property in both the short and long term.
As a result, a delta will be generated between the exit cap rate and the going-in cap rate. Now, investors will analyze whether the improvising costs are justified as per the cap rate. Based on that, they will invest in improving the property.
Thus, property owners will work on improving their property’s NOI by implementing various creative strategies. As a result, they will earn extra cash flow on their multifamily properties.
Moreover, owners can distribute the generated revenue between the investors within the holding period. So, all this added, the property value will hike, benefiting investors and owners in terms of property sale and refinancing.
Conclusion
However, generating profit should never be the only goal of a real estate investor. True investors will always focus on improving their business plans to establish themselves in the long run. In the end, quality always talks. If your multifamily property has the right potential, it will attract potential tenants.
