As a crucial metric for property managers, your NOI should be earning more of your attention. On the latest episode of the PropTea Podcast, our host and marketing genius, Erica Patterson, takes us through what exactly NOI is, and the best ways to reach your NOI goals in property management. She’ll examine the importance of maintaining quality and how you can stay ethical while increasing profitability. And as always, we’ll share a wellness tip to get you through the month and improve your work-life balance!
What is NOI?
Erica: “NOI, or net operating income, is the profit of a real estate property after subtracting necessary operating expenses. For most real estate properties, an operating margin higher than 15% is considered good. If your property’s NOI falls under that, then we have some tactics to help you really increase your profitability without compromising your residents’ living experience.”
How Can I Increase Profitability?
Erica: “You can invest in core asset properties. You might be asking: what is a core asset property? …These are defined as high-quality, low-risk assets that offer the most stable cash flow.
Another tactic is investing in core plus properties…A core plus investment is a 20-year-old apartment building that is mostly occupied but may need some light upgrades here and there for the property will produce ample and sustainable cash flow. However, you might have to reinvest some of the cash back into the property for future maintenance such as roof repairs, your parking lot–little things around the building.
The last tactic will be to invest in a value-added property where you increase the income of the property while the total value of the property appreciates. Some examples of what this might include are raising rents to market levels, initiating or enforcing fee income policies such as pet fees and late fees, and reducing expenses.”
How to Maintain Quality
Erica: “NOI is related to the quality of your building, so you really want to keep up the quality of your building if you want to have a positive net operating income. One way you can maintain the quality is by keeping up with all maintenance around the building, which should be a given.
Secondly, regularly check engagement comments. What are people saying about your building? What are your residents saying in their community chats? …Send an email newsletter encouraging residents to share feedback on their experience with the updates that you provided in their building. Are they liking the new roofing? Are they liking the new HVAC system? Has the parking lot been easier for them to navigate? Really take account of this feedback.
Some other tips that can enhance any property are adding things that generate income such as laundry machines, rentable common areas, and amenity spaces offering Wi-Fi. Also, finding less expensive ways to maintain the property without sacrificing quality, such as sustainable technology to lower utility bills. Switching to all-electric LED lights only using solar panels and a more efficient HVAC system or tankless water heaters. These are just some small things that you can definitely try to do to make things a lot easier for you.”
Listen to the full episode above and be sure to stay tuned every month for the ultimate lowdown on all the latest trends happening now in the real estate industry–from industry leader advice to wellness tips for better work/life balance!
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