Maximizing the net operating income of communities is always one of an apartment operator’s highest priorities.
But while operators are understandably focused on keeping expenses as low as possible, they frequently overlook the opportunities to capture more ancillary revenue and don’t realize how powerful this revenue can be in boosting NOI.
That was one of the major takeaways of the “Top 20 Marketing and Operations Ideas to Improve NOI in Today's Challenging Market” session at the recent InterFace Multifamily Southeast conference, held in early December in Atlanta.
I was honored to be one of the panelists, along with Sharon Hatfield, chief operating officer at CF Real Estate Services; Lisa Taylor, senior managing director, client services, at Greystar; and Marcie Williams, president of RKW Residential.
Here are four of my other main takeaways from the thought-provoking discussion:
1. New sources of ancillary revenue continue to emerge. From lease insurance and concierge services to short-term rentals and pet fees, today’s operators have no shortage of ways to bring in ancillary revenue.
Williams recommended capturing what she called “invisible dollars” by having all pricing end in a “9.” For example, when her company takes over a community and the application fee is $75, they will increase the fee to $79 to bring in additional revenue. If someone is willing to pay $75, then they will readily pay $79, she noted.
Hatfield recommended monetizing dead space and empty onsite retail space by, for example, creating storage areas that residents can rent. She also said communities could make such spaces available to local vendors, who could pay to host a pop-up event.
2. Double-digit rent growth won’t last forever. The multifamily industry has had an unbelievable run over the past decade, but the era of historic rent increases won’t last forever. The session emphasized the need for operators to be realistic about rent growth going forward and to look for ways to make up the gap.
Panelists discussed how, in a time of more modest rent increases, focusing on ancillary revenue and managing expenses will be critically important to meeting the aggressive pro formas in place at many of today’s multifamily properties.
3. The rise of self-guided tours. This emerging technology can benefit NOI in multiple ways. To start, as Taylor noted, it can allow prospects to tour a property outside of a leasing office’s hours. Giving prospects more opportunities to tour at their convenience helps increase conversions. And on the expense side of the equation, after-hours self-guided tours don’t require staffing, Taylor pointed out.
4. There are many ways to reduce expenses. Yes, a good portion of the session focused on boosting ancillary revenue, but the panelists also detailed a number of ways operators can efficiently manage and reduce expenses.
For example, smart home technology can keep utility expenses in check, especially when a unit is vacant. Energy and telecom audits and shopping around for more affordable property insurance were other recommendations from panelists.
Optimizing NOI will always be a key driver for apartment managers. This recent InterFace Multifamily Southeast session showed that operators and supplier partners are making sure there are many ways to accomplish that goal.