Increasing NOI to add value

As you know from earlier blog posts, the value of a multifamily asset is directly proportional to Net Operating Income (NOI) because of it's relationship to the capitalization rate.  Very simply, by increasing operating income and/or decreasing operating expenses, we increase NOI and force appreciation.

So here's a list of ideas to consider implementing on any asset post-acquisition.  There is not one best way, as each asset and market scenario are different. Some are certainly more common, but the more tools we have in our toolbox, the better.

Increase income via:

  • Increase rents (with or without unit improvements)

  • Built-in renewal increases to rent rate

  • reduce/eliminate rent concessions

  • Add units (e.g. convert model units to rental space)

  • Install laundry

  • Add cellular repeaters or tower for one or more carriers

  • Bill back utilities via Ration Utility Billing (RUBS)

  • charge pet fees

  • charge late fees

  • charge application fees

  • provide and charge for storage units

  • provide and charge for renter's insurance

  • charge for covered or reserved parking

  • rent a visible billboard

 

Decrease expenses via:

  • Implement energy savings programs

    • LED bulbs

    • Thermostat timers for heating/cooling

    • low flow water toilets and faucets

  • Renegotiate utilities or change providers

  • Negotiate cable provider exclusivity

  • Cost segregation study

  • Annual vendor re-bidding

  • Challenge property tax assessment