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Strategies to Increase NOI for Multifamily Properties

In today’s competitive market, property investors are looking beyond the traditional methods of raising rents and fees to boost their Net Operating Income (NOI).

This is where innovative value-add strategies come in. The reality is that it’s actually possible to increase NOI for multifamily properties without increasing rent year after year and pricing yourself out of the local market.

After all, a recent study found that properties that prioritized tenant amenities and technological enhancements saw an average NOI increase of two to four percent—significantly higher than those that focused solely on rent hikes.

Read on for some of the most effective strategies you can put in place to keep your residents happy and increase your bottom line.

WHAT DOES NET OPERATING INCOME MEAN?

Understanding net operating income helps you evaluate a property’s financial health and make informed decisions about improvements and investments. So let’s take a closer look at what NOI is.

Definition of NOI in Real Estate

Net Operating Income (NOI) is a key performance metric in real estate that measures the profitability of an investment property. It is calculated by subtracting operating expenses from the total revenue generated by the property.

Put simply, NOI is the income your property makes once you’ve taken out all the operating expenses but before subtracting any costs for loans or taxes.

 

6 STRATEGIES TO INCREASE NOI FOR MULTIFAMILY APARTMENTS

1. Make Energy-Saving Improvements

According to the U.S. Department of Energy, energy-efficient buildings can save up to 30 percent on energy costs, directly contributing to higher NOI.

As a multifamily apartment building owner or manager, you have numerous opportunities to enhance energy efficiency and significantly reduce operating costs as a result.

Consider upgrading to LED lighting systems and adding motion sensors or dimmers in common areas for lower energy use. Transitioning to high-efficiency HVAC systems, coupled with programmable smart thermostats, can optimize your heating and cooling schedules, while regular maintenance ensures peak performance.

Incorporating renewable energy sources like solar panels and upgrading to Energy Star–rated appliances can further decrease energy consumption throughout a building. Capitalizing on smart technology, such as smart meters and plugs, allows for real-time energy management, making your building more sustainable and attractive to eco-conscious tenants. These improvements not only benefit the environment but also enhance the value and competitiveness of your property.

2. Focus On Amenities

By enhancing existing amenities or adding new ones, you can attract and retain tenants, increase property value, and justify higher rents in the future.

Essential features such as a fully equipped fitness center cater to health-conscious residents, while community gardens promote relaxation and foster a sense of community. Additionally, pet parks address the needs of pet owners, and secure bike storage appeals to environmentally conscious or fitness-oriented individuals.

The quality of amenities alone can make or break a resident’s experience. For example, despite the growing reliance on smart technology devices within building environments, recent surveys show that only one percent of renters are satisfied with their WiFi service.

Think about it—there’s nothing like slow or unreliable WiFi to lose tenants and reduce your bottom line. Conversely, by adding high-quality, high-speed managed WiFi, you’re more likely to attract more tenants while meeting today’s high expectations of property staff and residents.

3. Make Use of Technology

Installing smart home features can enhance tenant convenience and safety, adding value to your property without raising rents. Things as simple as smart locks with keyless entry systems make tenants’ lives easier while increasing security. Adding package lockers is another way to add security and privacy to your property.

The smart home market is expected to grow significantly, with a projected market size of $135.3 billion by 2025. Investing in smart technology can make your property more attractive not just to tech-savvy tenants but to the average person.

4. Find Ways To Save On Costs

Adopting strategic cost-saving measures is one way to boost Net Operating Income without putting extra financial pressure on tenants.

Here are some of our favorites:

  • Negotiate rates with vendors
  • Implement advanced property management software to streamline operations
  • Prevent breakdowns and extend the life of assets with a preventive maintenance program and predictive maintenance tools
  • Switch to energy-saving lighting and HVAC and use smart meters for lower utility costs

These strategies will help reduce expenses as well as enhance the overall efficiency and value of your property (not to mention tenant satisfaction), contributing positively to NOI.

5. Add New Revenue Streams Through Managed Internet Services

Managed WiFi is quickly becoming essential for property managers looking to increase their revenues in the multifamily sector.

There are three options available to apartments and other multifamily buildings when it comes to providing internet to residents:

  • Self-setup: This is when the residents are responsible for setting up their own internet.
  • Cable company partnership: This is when the property partners with a cable company to furnish the entire complex with internet services. The cable company retains ownership of the wiring infrastructure and provides complimentary installation services. Residents who choose to subscribe to the WiFi service will be invoiced directly by the cable company. Additionally, the property owner may benefit from a share of the revenue derived from WiFi subscriptions.
  • Managed Service Provider (MSP): This involves partnering with a managed service provider to handle your property’s internet solutions. This option offers higher revenue potential, as the MSP sells directly to the owner, providing support, service, and equipment at a low monthly cost. For example, the MSP may charge $10 per room, while the owner can make $40 per unit over a five-year contract. Despite assuming liability, owners favor this option due to its potential for significantly higher profits, estimated at $600-$700K, compared to the $150K generated by alternative options.

Ways to Generate Income with Managed Service WiFi

  • Charge residents a monthly fee. This can be included in an amenity fee or as part of the monthly rent.
  • Provide options for upgraded WiFi services, such as greater speeds at an additional cost.
  • Feature advertisements from local businesses on the WiFi sign-in page or within the network’s portal.
  • Collect data about how the WiFi is used and offer these valuable insights to companies or advertisers in exchange for a fee.

To learn more about managed WiFi, read our guide.

6. Capitalize on Tenant Retention Programs

Implementing tenant retention programs can reduce turnover costs and vacancy rates, ultimately boosting NOI by maintaining stable occupancy levels and consistent cash flow.

Consider programs like referral bonuses for current tenants who refer new tenants, loyalty rewards for long-term residents with benefits like discounted rent or free amenities, and renewal incentives offering rent discounts or upgraded amenities for those who renew their leases.

 

INCREASE NOI WITH MANAGED SERVICE WIFI

Increasing NOI for multifamily properties is all about cost-saving measures, value-adding initiatives, and exploring new revenue streams. By taking the time to make energy efficiency upgrades, upgrade amenities and technology, reduce costs, add new revenue streams through managed WiFi services, and focus on tenant retention, you can significantly boost NOI while providing a superior resident experience.

And remember, the key to success lies in understanding your property’s unique needs and opportunities and continually looking for ways to add value without burdening tenants with higher rent.

Ready to elevate your property’s value and increase NOI? Contact MDU Internet Services today and experience the difference that leading-edge WiFi services can make for your tenants as well as your financial performance.

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