For managers of residential properties, both single-family and multi-unit, figuring out how to maximize net operating income is always a challenge. COVID-19 has added additional layers to that challenge.
If you are a property manager, you may find yourself faced with trying to retain reliable tenants who may be struggling financially themselves while keeping costs down in an environment where costs are being driven higher. However, there are still ways to increase NOI despite economic uncertainty.
When times are good economically, you can look at ways to increase current income streams, such as raising rent and fees.
However, the slowdown caused by the pandemic means that while rent increases are not impossible, maximizing NOI may have more to do with finding ways to keep tenants, minimize vacancies and keeps costs down.
Effective property management also means managing good relationships with tenants and vendors. This does not mean that you should not push for rent increases on lease renewals where possible or stay with a vendor who is overcharging, but it might be necessary to look for ways to be flexible and try to meet the needs of existing tenants.
Dealing With Lease Renewals
It is almost always in the interest of a property manager to keep reliable tenants over the long term. The more good long-term tenants you have, the less you have to spend on turnover costs and the less money you lose on vacant units.
The pandemic means that many people have put plans on hold, and there might be less turnover in general. However, some tenants may be considering a move because they are tightening their budgets, or they might be looking for a more favorable environment that allows space for both working at home and home schooling of children.
In the former situation, you may want to consider offering rent reductions for longer leases. The loss from not increasing the rent may be offset over the long run by saving money on vacancies and turnovers, particularly in markets where the rental market has slowed significantly. In the latter situation, if there are other units available, you might want to see if you have any that can better accommodate the tenants. One California company allowed a tenant who needed more daytime light in her apartment so she could work from home to move to a new unit that better suited her needs.
Dealing With Vacancies
Vacancies are inevitable even in good times, but property managers may face an additional pandemic-related challenge. Industry insiders report an increase in application fraud, in which applicants provide false information and then move in without paying rent. You may need to be particularly vigilant in using the most up-to-the minute technology to ensure that background checks are done correctly.
If there is not already a turnover system in place to make the process as efficient as possible, you might want to create one. This is particularly important since units may need extra cleaning as an additional COVID precaution, which can cost more in time and money.
Dealing With Vendors and Expenses
The pandemic means that cleaning expenses have increased, and you might want to see if you can get a volume discount from vendor since you will be spending more overall. Some strategies from pre-pandemic days still work.
- While loyalty to vendors is important, you should periodically get new quotes and bids for insurance and services such as plumbing, HVAC and more.
- You may want to switch to other vendors, or you might want to use the quoted bids to negotiate lower prices with existing vendors.
- You may also want to review property tax assessments and challenge them. It is not uncommon for them to be inaccurate.
Creative Revenue Sources
There are many ways in which more revenue can be generated even when people are counting their pennies more carefully. It’s probably not the best time to remodel units in hopes of getting higher rents or to start charging for laundry facilities or having pets if they are currently free, but you can look at what your tenants might want or need. For example, if there are model units or a few furnished units, you may want to consider renting them on a short-term basis to family and friends of existing tenants. This eliminates much of the usual risk of short-term rentals since they have a connection to current tenants. There are other potentially easy ways to increase income including
- looking into cell tower leases or a billboard
- offering onsite storage units to residents for a fee
- allowing a vending machine company to pay a fee to install machines
A Dedicated Answering Service
As part of building and maintaining a relationship with tenants as well as for their safety and the maintenance of the building, it is particularly important that someone is available if there are emergencies. However, you cannot be available at all times, and it is usually too costly to employ staff to remain on call. An answering service with an industry-trained staff who knows when a call needs immediate further action can be the solution. This support can allow you to better focus on more routine issues, including generating NOI, while feeling confident that any urgent incidents will get the immediate attention they need.