In multifamily operations rent growth is the most important component to increasing Net Operating Income (NOI). It is more important than incremental cost controls, more important than increases to Other Income. Rent growth is the line item that keeps on giving- profits. Projecting rent growth is part science, part qualitative. There are many service providers willing to assist property managers in keeping up to date on rents within a circle of competitors.
There is a caveat however; the smaller the market the more you (the property manager) are on your own. It will be a long time until major service providers fill in to markets under 200,000 persons. In these markets the best source of intelligence is your local network of property managers, business associates and vendors. Want to know who is selling the most cheese in the local pizza restaurants wars? Ask the cheese vendor!
First and foremost is keeping current tenants in-place with advanced planning. Renewals, renewals, renewals. Yes, I know saying “advanced planning” is in the same category as the phrase “past experience”. This is one time when the saying sticks. Here are three ways to capture rent growth.
1. Planning ahead. Planning for renewals is a primary methodology of capturing rent growth and maintaining stable occupancy. The more advanced the better. Ninety days is no long an uncommon management planning timeline for contacting tenants about renewing their lease.
2. Non-cash concessions. Utilize non-cash concessions at renewal. From restaurant gift cards to cleaning carpets and updating light fixtures; these are all potential concessions to consider at renewal. The concession offered should be less than the additional rent captured in the rental increase over then next twelve months.
3. Technology and Software. Check out Multifamily Biz www.multifamilybiz.com. This website really has a great focus on technology. YieldStar www.yieldstar.com is one of many software programs that focus their outputs on maximizing income. There are others. These systems are often referred to as revenue enhancement models. Some are scalable, some are not. Choose one that you believe will more than pay for itself in terms of generating increased revenue for your assets.
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Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. For more information, visit: http://www.MultifamilyInsight.com