[fa icon="calendar"] 05.18.2017 / by Lori Koogler
When investing in multi-family properties, the number one priority is often to increase the Net Operating Income (NOI) and make the investment more profitable. In simple terms, this means reducing overhead costs and increasing the property's value. But the reality is this isn’t something that can be done overnight. Improving your multi-family investment takes time and planning.
Here are five ways you can improve your multi-family investments:
1. Make Repairs
If you have a property that is outdated and in need of cosmetic repair, doing a little bit of remodeling can go a long way in attracting tenants and allowing you to raise the rent. Outdated properties will land rents that are somewhere in the middle of current market rates and rates of the original era. Upgrading units with modern appliances and fixtures, as well as making improvements to the façade, can command rents that are much closer to the current market rates.
2. Increase Rentable Square Footage
You can also increase your property's NOI by increasing the amount of rentable square footage. If your building has large common areas, capturing the value of these spaces in the rent prices can be difficult. So if you have an unused storage area in your building, you can give the keys to a tenant or open the area up directly into a unit to increase the rentable square footage and raise the rental rates for your building. Just be sure the “storage” area is up to residential rental space codes first.
3. Fill Any Vacancies
Once you have renovated the property and increased the rentable square footage, your next priority is going to be filling all your vacancies. For every empty unit you have in your building, that is revenue you are losing on a daily basis. Hiring a real estate broker to market and lease your property can help fill vacancies and prevent any lost revenue in the future.
4. Increase Energy Efficiency
Utilities often make up a large portion of operating expenses at any multi-family property. You can reduce these expenses and make the property more appealing to tenants by improving the energy efficiency of the building. Consider installing energy efficient lighting, water-saving appliances, improving the building’s insulation or even installing solar panels. This won’t just benefit your tenants, it will increase the value of your property and may even make you eligible for “green” tax incentives.
5. Raise Tenant Rates to Market
Once you have made the necessary improvements to your building, you can start increasing the rental rates closer to market value. Raising your rates even just three percent over the next couple years will quickly add up and make your multi-family property a more profitable investment whether or not you choose to sell.
Always Have a Plan
Increasing the NOI of your property and improving your multi-family investment takes vision and strategy. By upgrading the building, filling vacancies and reducing overhead costs such as energy usage, property owners can increase their NOI and raise the overall value of their asset.