Understanding how to grow your Net Operating Income with rental property
When you set out to purchase a rental property, you likely had a few revenue goals in mind. Whether you intended to create a passive income source or build a portfolio to generate wealth, the money matters. And if there are any property management processes investors of all motivations need to learn, it’s those strategies for generating net operating income or NOI. Here are the NOI-related tips you need to see if improving your bottom line is a top priority.
Reducing Expenses
One of the easiest and probably most convenient ways to improve your NOI ongoing is by reducing overall property management expenses where you can. This can be an ongoing effort in which you review every dime going out to identify savings opportunities. Whether you own one single-family dwelling or ten multi-family complexes, managing your cash flow and operating expenses is key. Here are a few essential areas of expenses to always keep on your radar.
Vendor and Contractor Management
Always be evaluating your vendor and contractor agreements to identify areas for potential renegotiation. Don’t blindly send out work, either, without reviewing those invoices to spot instances of overcharging. Finding the right plumber, handyperson, or inspector to keep on hand will streamline your efficiencies. And with the promise of routine or ongoing work, you could find partners willing to offer discounts that ultimately reduce expenses and improve NOI.
Utilities and Monthly Services
Be mindful of your monthly utility and services expenses. If you feel you’re overpaying for garbage pickup, it might be time to find a new provider. And if your rental property water bill is through the roof, it could be a sign there is a leaking pipe or maintenance problem to address. While you don’t have too much control over what your current utilities might be costing you, there are ways to improve your rental property’s energy efficiency, too, to help keep those expenses lower, including energy-efficient light bulbs, smart thermostats, or insulation.
Taxes
It’s tax time, and rental property owners have an opportunity to maximize any expenses to offset income taxes. Work with a property management-savvy tax professional who can help you itemize and identify claim opportunities. Mortgage interest, utilities, property improvements, repair costs, general operating expenses, and property taxes can all be eligible write-offs to explore. Reducing your tax burdens every year can keep money in your pocket and your NOI healthy.
Refinance Opportunities
Don’t be afraid to consider refinancing as a method for reducing your overall property expenses. It won’t always make sense to do so. However, there are unique opportunities available to investors that can sometimes result in lower monthly mortgage payments and better interest rates.
Improving Property Value
The next big step to maximizing your NOI involves spending a little to make a little. Improvements to your rental property that directly affect the property’s value can work in your favor both immediately and in the long term. Consider your cash flow availability and look to make gradual improvements over time, so you’re not facing a roof replacement, water heater replacement, and HVAC unit replacement at the same time. You can maybe add a privacy fence or have the exterior of the property repainted. Perhaps updating laundry facilities for your multi-family complex is in order. Any property upgrade you invest in now will only result in greater NOI, especially if you can increase the monthly rent amount as a result. Here are a few other property projects that might make sense for your investment:
- New flooring
- Kitchen remodel
- Bathroom renovation
- Professional landscaping
- Asphalt driveways or pavement
- Adding a pool
- New garage doors
Diversifying Your Portfolio
If you really want to grow and take your rental property investing to the next level, you can diversify and grow your portfolio of properties. There are a variety of strategies out there that the experts say net the best results. But ideally, looking for different types of properties in various locations can improve NOI. The idea is to have different properties that complement each other across market conditions. And when one property might be struggling to generate revenue, another property can be experiencing record revenue. These variations might present in the form of single-family versus multi-family, metropolitan areas versus rural areas, and luxury properties versus low-income properties.
Property Management Time Hacks
Often overlooked, time management can be a great force for maximizing NOI. If you’re dedicating too much of your time to operations, marketing, and resident prescreening, you could be wasting time that would be better served elsewhere in preserving your investment. Pay attention to your schedule and daily activities. If you’re spending a majority of your time trying to place ads online, it might be time to consider a software upgrade for omnichannel posting. If you’re chasing down rent payments, maybe it’s best to introduce digital payment and auto-withdrawal channels. Investigate better methods and software upgrades that can give you your day back, so you can focus on improving NOI and not losing time in tedious operations.
Partnering with a Great Property Management Firm
The absolute game-changer for improving and maximizing NOI is the right property management partnership. Working with a local expert, like Axel Property Management, means you can save time, protect cash flow, and improve property value. And you’ll also enjoy the peace of mind that you have an additional layer of management to preserve your investment and leverage every potential opportunity for NOI results.
Whether you’re fresh into your rental property investment journey or a veteran, NOI matters. And Axel Property Management is just a phone call away to help realign your investment in a way that helps you maximize your NOI throughout your investor journey.
