As a Lehigh Valley rental property investor, you’re always looking for new ways to improve NOI. And while adding revenue streams to your process or improving property value are great methods for seeing returns, you can also be looking to reduce expenses as a way to increase margins. Today, we’ll point out some of the best ways to evaluate your rental property expenses and identify key areas of improvement that will directly impact your bottom line.
1. Sustainability Solutions for Your Rental Property
Because investing in real estate involves a long-game strategy, looking to identify sustainable energy solutions could help reduce expenses over time. Your residents will appreciate the upgrades, as well, since most involve newer technologies and innovations. Smart home thermostats, for example, can be a convenient way to control energy costs. Going solar might be something you’ve also considered, with its rebates and long-term savings proposition. But you don’t necessarily have to start with big projects to see results. Swapping out traditional light bulbs with energy-efficient LEDs can have an impact, too.
2. Bill for Utility Usage
Your Lehigh Valley utilities might align with the national average as the third-largest expense associated with managing a typical, multi-family rental property. Gas, electricity, and water bills have also risen by 26.5%, according to a February 2022 Consumer Price Index report provided by the U.S. Bureau of Labor Statistics. And because of these increases, Forbes advises property investors to reconsider billing residents for their exact usage as a way to reduce expenses.
It's not entirely uncommon for rental property owners to flat bill for utilities or work with an all-inclusive billing model. However, considering the rising energy costs, it could be more cost-effective for you to bill residents for their usage directly. And a Fannie Mae survey discovered that when property owners pay for all the utilities, not the residents, the energy usage was as much as 26% higher. When your residents are responsible for paying their own utilities, they tend to be more responsible about using those utilities.
3. Don’t Just Repair Damages. Look to Prevent Them
Depending upon the relevant age and condition of your Lehigh Valley rental property, you might not be all too concerned about investing in major repairs. But the experts and veteran investors will always tell you that the best way to stay ahead of costly or emergency fixes is to have routine maintenance and servicing before things require replacement.
Many investors will schedule seasonal maintenance calls with HVAC partners, for example, to make sure heating and air conditioning units are running smoothly, filters get changed, and ductwork is clean. These routine visits can help you stay ahead of major component failures and allow you to plan ahead should replacements be imminent. You can also have an annual property inspection to get a report about your rental’s condition from roof to foundation. Any areas of concern caught early will be far less expensive. Fixing a small leaking pipe is much easier to handle than waiting for it to burst and flood a basement.
4. Automations Save Time and Money
How you spend your time managing your property will directly impact your NOI. Automations for rental property management processes can be a significant way to save time and, essentially, money. Look at your current processes for marketing, collecting resident applications, managing rent payments, and processing contractor payments. Identifying innovative web and app solutions, data programs, software dashboards, and multi-platform solutions can improve everything from how you screen candidates to how quickly you receive and process payments. And with all the time you save, you could explore other aspects of your property management portfolio.
5. Renegotiate Your Vendor Partnerships
How many vendors or contractors do you work with on a monthly basis? Quarterly basis? Annually? You’re a great customer for your partners because you offer ongoing work for them. And that gives you an advantage when it comes time to renegotiate those partnerships. Make sure you’re leveraging those opportunities to negotiate reduced rates or payment plans. Additionally, if any of your current partners, you feel, are overcharging you or under-delivering, then it’s time to find new partners. Plumbers, electricians, HVAC technicians, roofing contractors, carpenters, painters, inspectors, lawn care service providers, real estate attorneys, accounting professionals, and house cleaning services can all be negotiated for better rates based on your ongoing need for their offerings.
6. Improve Resident Pre-Screening
One of the most expensive challenges and aspects of your Lehigh Valley rental property business is turnover. You won’t be able to wave any kind of magic wand to prevent it. And You’ll always want to prepare for vacancies. However, if you focus on continuous improvement of your resident pre-screening process, you’ll always be able to reduce the risks of leasing with the wrong residents.
Maybe you could use a better background check service or need to get better about calling references. Those changes will lead to better approval decisions. Hastily rushing to get someone in your property just because you’d prefer someone over the vacancy could prove to be costly in terms of unpaid rent, eviction processes, and legal fees. Improve your NOI by reducing the occurrences of those steps because you got better at selecting and approving quality residents.
7. Routinely Evaluate Your Insurance Coverage
Another potential cost-reduction measure to explore involves the routine review of your insurance policies. These are essential rental expenses designed to protect you from claims of injury or significant property damage. But needs and coverage options change. Check with your insurance representative regularly to identify new products or more cost-effective plans. A great insurance partner will keep you up to date with better offers, too. So, if you’re not getting the attention you need, it might be worth exploring other brokerage options.
8. Get Better at Risk Assessment
Because you’re managing an investment, you have to become comfortable with risks. There will always be some systemic risks you can’t foresee, control, or predict, including economic or legal challenges. However, you can significantly improve your NOI by improving how you handle taking other risks. Risk-taking with your investment can be calculable and, in turn, produce incredible results. Talk with your accounting or investment professional to discuss your options for saving, investing, and growing your portfolio. You can get smart about what risks make sense to take, thus growing your NOI and bottom line.
9. Work with a Reputable Rental Property Management Firm
Some days you just feel like you’re juggling ten balls, spinning plates, and standing on your head. Managing a rental property isn’t always easy. And some of the most costly mistakes occur simply because you inadvertently overlooked something. To combat these potential pitfalls, consider working with a reputable Lehigh Valley rental property management firm, like Axel Property Management. When you can delegate all the tedious tasks to a professional, you can rest assured every detail will be managed. But with Axel Property Management, you will also have an expert investment professional in your corner to help you stay ahead of costly mistakes and help you take advantage of NOI-driving opportunities along the way. From pre-screening residents and collecting rent to managing vendors and buying an additional rental property, the right management partner can ensure you’re taking all the right steps to reduce rental property expenses and increase overall portfolio success.
Don’t waste another penny overspending on rental property expenses. Consider these suggestions to help you improve your cash flow and reduce costs. And let Axel Property Management help!