Our overall business strategy is to purchase Class B multifamily properties and do value-add upgrades and renovations to the units and, if needed, to the property as well. By doing these value-add renovations we are able to increase rents, often at 20% and above. This increase adds significant income to our bottom line. At times we also push rent increases without renovations in order to offer rents that are competitive in the marketplace.
The problem with increasing rents, however, is that not every property is positioned to deal with rent increases successfully. It happens when a property is located in a low-income area, or when management is not strong enough to bring in the right tenants who can pay for the higher rents. My experience owning and managing multifamily properties across the U.S. has taught me that there are other ways to boost income without increasing rents. I’ve found some unique ways to boost our NOI (Net Operating Income) in addition to pushing rents. It required some out-of-the-box thinking and implementing some unique strategies, but those strategies have been successful.
There are 3 unique strategies in particular that have proven to be successful and I’d like to share them in detail with you. Certainly, these aren’t the only ways to boost your NOI, but they are working for us. Hopefully, they’ll work for you as well.
Strategy #1: Renegotiate Service Contracts
When you first put out services for bid to service providers, such as valet trash, landscaping, or roofing, they are often willing to do whatever is necessary to earn your business. This may include adding on additional services at no additional cost, or offering you a very competitive price. Over time, the “honeymoon” is over, and service may start to deteriorate, the additional services that were offered at the beginning are either stopped or you’re asked to start paying for them.
One example is renegotiating with landscape companies. Some of them are great, but others begin to cut corners, that initial love and attention provided to the property is gone and they are less motivated to provide better service. This is the ideal time to sit down and review all of your ongoing service contracts and renegotiate your service contractors.
Our property management team calls several commercial landscape companies and have them provide bids for work that is similar to our existing contract. We were able to receive better or additional services at a better price. However, we don’t stop with the landscape company, as this is something we do with every ongoing service provider on a regular basis. That includes painters, plumbers, HVAC repair services, electricians – any and all service providers that are used on an ongoing basis.
You may be surprised at how much money can be saved each month by renegotiating contracts with existing providers or changing providers completely. Cutting expenses is one-way people increase the NOI, so don’t be shy when it comes to asking a provider for discounts on their ongoing services.
Strategy #2: Increase Fees