Want to maximize your NOI? It can be done in just a few simple steps, according to Lee Harris, president and CEO of Overland Park, Kan.–based Cohen-Esrey Real Estate Services. Harris, along with a panel of industry experts speaking at the annual Apartment Finance Today Conference this week in Las Vegas, suggested a number of ways to start maximizing.
Step one, Harris said, is simply raising rents 3 percent to 5 percent, or $30 a month for 95 percent occupancy. That alone can lead to a 5 percent value increase. But how can you go about increasing rent without alienating residents?
“Don’t despair if you don’t have $10,000 to spend renovating per unit; there are other things you can do to get that $30 increase,” says Matt Lester, founder and president of Bloomfield Hills, Mich.–based Princeton Enterprises. “The universe for enhancing product is limitless, so focus on things that fit your areas of expertise. Historically, it’s been kitchens and baths that get the greatest return, but updating things like roofs and exteriors can distinguish you from the guy across the street.”
According to Stephanie Brock , Dallas-based Riverstone Residential Group’s Central division president , the key is getting residents to recognize the value of your property from day one. “The most important thing to do to sell an increase is for a resident to foresee value from the time they move in,” she says. “That starts the day they come to tour the property.”
Once that value recognition is established, says Cindy Clare, president of McLean, Va. – based Kettler Management, premiums can be established. “Price units individually,” she recommends. “If you have an apartment that overlooks the pool, you could put a premium on that. Using base rent plus premiums, you can raise one-bedrooms $10 and twos $20, but look at individual units and demand.”
Harris and the panel also recommended these additional yield opportunities:
- Improve occupancy. If you could raise occupancy just 1 percent, from 95 percent to 96 percent, that’s worth $100,000 in value.
- Maximize the use of inexpensive technology, like Craigslist, for which the cost is minimal and the audience is extremely targeted.
- Focus on current residents, providing a strategic social media plan and establish a resident referral option.
- Send out resident surveys 30 days after move-in and 120 days out from renewal.
- Minimize apartment turnover.
- Deal with dissatisfied residents immediately.