The one thing I love about multifamily properties is that you have more opportunities to increase the NOI (net operating income) without sacrificing a lot of capital.
Raising rents would be the obvious answer but that also comes with its own side-effects, especially when your tenants can’t justify why their rent is going up.
Doing these 5 things will allow you to increase the value of your property which will make your current tenants happy and will attract higher-class tenants that will stay in your properties long term.
1. Offer short-term leases for a premium price.
There are many costs that goes into preparing a unit for occupancy. Short-term leases adds more risk to your bottom line, however, with the proper tenant class and pricing structure this will increase your NOI.
Consider people who travel for work and may only stay somewhere for a short amount of time (less than 12 months). There is a strong demand for short-term rentals and these individuals will gladly pay a premium for this convenience, I myself included.
These tenants may be travel nurses, truckers, or even someone between homes due to domestic issues.
For example if you had a unit that was renting for $2,000 a month for a 12 month lease, you can easily charge up to $2,500 a month for a month-to-month lease.
That’s a 25% increase in NOI for that unit alone without spending ANY money.
2. Ratio Utility Billing
This is often used for water usage, and it's a great way to share the cost among tenants fairly. Instead of absorbing the entire utility expense yourself, you can split it based on each tenant's usage or share of the property. This helps you manage costs and encourages tenants to be more mindful of their water consumption.
This can also be done with trash, electric, and other utilities as well. These costs may seem small but they do add up overtime and be used to cover unexpected expenses that comes up.
3. Late fees
Most landlords are charging late fees but if you’re not, we’ll that’s just silly.
You deserve to get paid on time just like your tenants. Charging 8% of your rent in late fees is high enough to discourage the behavior while also allowing renters to pay at a later time without being delinquent on their rent.
I’d rather do this than run a potentially lengthy eviction process.
This is also another “no money required” solution.
4. Provide storage solutions
Everyone may not have this option but it’s one to consider if you do. Think about this, many tenants complain about space. They are mostly complaining about available space to store their stuff that they may not need in their unit. For example, bikes, exercise equipment, fishing gear ..etc. You can change $30-100 a month just for storage access depending on the property type, location and tenant base.
Im not saying to have to turn into Public Storage, but having any sort of sizable storage for your tenants will only increase your property’s value.
As people get more space, they buy more thing which will make them require these facilities even more.
Consider this as well, if you are the only apartment in the area that offers storage, many tenants would rather pay an xtra $30-100 a month to live on your property vs paying $400-1500 to rent from somewhere else just to get another 1-2 bedrooms. You remain competitive by doing this too.
5. Parking
Parking is a premium. When I was looking to rent a high-rise in Downtown Detroit a few years back, I remember seeing the prices of parking passes for tenants who lived in these types of properties. Parking was charged monthly with the rent for about $150+ a month. Tenants living in the urban area can expect to pay these fees and it will be in their best interest if they did so.
I would absolutely hate to walk 5 blocks to get to my unit.
What I would hate even more is getting parking tickets because I’m parking in places I’m not suppose to.
Your tenants will love you if you provided this.
Even if you’re in a less urban area. You can charge for covered or dedicated parking spots so your tenants wont have to walk a 10th of a mile with 40 lbs of groceries in their hands.
Can’t you tell I hate parking problems?
6. Pet Fees
Many apartments don’t allow pets and I don’t blame them. In fact, if I wasn’t able to charge fees I wouldn’t either. However, charging fees will allow you to make extra money while making your tenants happy.
Pets are extension of people’s families and I feel everyone should have the option to rent and keep their furry friends.
No allowing pets does limit your audience base. Unfortunately, some tenants will sneak in animals anyways. You can protect your bottom line by making your apartment pet friendly for a fee. It can be something like a single deposit and lab test for $100-250 and $25-50 a month during their duration of their lease.
Any damage caused by their pets will be covered by the fees anyway. You’re making money and everyone’s happy.
Final Thoughts
That was 5 ways you can increase your NOI and property value which some requiring no money out of your pocket. Not only are you increasing cashflow, and providing stronger returns to your investors, you will have more leverage when selling the property during your exit.
Written by
Christopher C
At
Sat Aug 03 2024