One of a landlord’s primary goals is to maintain a positive NOI (Net Operating Income). NOI is the profit sustained after you have taken care of all the operating expenses of managing your property, such as maintenance repairs, marketing, property taxes and the percentage that you allocate to your property manager (if you have one).
However, improving NOI can be tricky for first-time investors. Before you will be able to see any considerable improvement in the value of your investment, you’ll need to get started with a few things first. Here is a list of tried and tested ways of scaling up the NOI of your rental properties.
Cut Back on Expenses
Buying a property is one major expense but managing and maintaining that property is a horse of a different color. Surprise fees can leave you stuck staring at insane last minute repair costs. For example, an article by
Money Crashers
states that a busted water heater due to poor maintenance can amount to more than $1,200 in repairs, replacement, installation and removal fees. Having a property manager who can help by doing regular maintenance checks will reduce the frequency of incidents like this which saves you money in the long run.
Marketing is crucial if you want to reduce the number of vacant properties and can cost quite a bit if you are outsourcing. You can reduce your marketing costs by using social media or real estate platforms like Zillow to promote your empty units instead of paying for advertisements. Additionally, there are tons of free classified sites that you can use to market your homes, such as Craigslist.
You can also try and cut back on your utility costs for the property by installing energy-saving bulbs on the exterior of your property or, if there is a parking lot, you can invest in solar-powered floodlights. Similarly, you could install add-ons that help in minimizing water waste. These simple measures will make a positive impact on your monthly utility bills.
Increase Rent but Minimize Vacancies
Most will tell you that increasing rent is the surest way of improving your property’s NOI. While that is true, it’s actually a double-edged sword. Modern tenants are savvy home-shoppers; they want good value for their money. Don’t be surprised if you see your tenants moving out just because you increased rent. So keep an open line of communication with your tenants and try not to crank rent up too significantly on them. Also, if you have a property manager, they can advise you on the ideal rent you can charge for your property since they are at the forefront of the market and see dozens, if not hundreds, of rentals each month.
Even if you feel like the current rent is too low, you have to be cautious in how you scale it up. There are actually two strategies you can use to increase rent without raising your tenants’ eyebrows. For a start, you can introduce new paid services, such as storage, reserved parking, pet fees for tenants that own dogs and cats and lease washers and dryers to your tenants. All these new services will go a long way towards boosting your NOI.
Lastly, you should consider doing some strategic renovations in your rental units. This helps encourage tenants to continue staying in your property, which, in return, reduces turnover. Keep in mind that most tenants will not tolerate staying in an old apartment when there are other stylish and modern rental units in the same neighborhood. That’s why it’s always a good idea to remodel the bathrooms, kitchens, and the floor.
Since such renovations can give you a run for your money, you should carry them out only after 5 or 10 years. The good thing about such renovations is that they justify your reasons for increasing rent.
Invest in Rent Default Insurance
Research shows that there are millions of tenants that fail to pay their monthly rent every year. Such tenants may have defaulted on their rent for any number of reasons leaving you to deal with the fallout. In some “worst case” scenarios, some tenants vacate their respective rental units without notice, leaving you with a large deficit in your NOI.
What you thought was a great cash flowing investment can all of a sudden become a burden. But there is a solution; you can avoid the trouble of dealing with defiant tenants by getting rent default insurance with
Steady
.
Simply put, rent default insurance is a unique insurance product that’s designed to guarantee the rental income for real estate investors. If a tenant stops paying rent, this insurance will help by compensating you for the missed rent and any incurred arrears. This type of protection helps in ensuring that your NOI is not negatively impacted. Get
rent default insurance coverage
today and enjoy the peace of mind that comes with it!