There is no doubt, the first and best way to improve NOI is reducing turnover. Fewer residents move out, less vacancy loss and lower turnover expenses. So how do we do this? Excellent customer service, exceptional communication, maintaining the asset and their apartment, and providing services that enhance their lifestyle (of course based on your target market). What most managers and team members do not know is the cost of turnover and the time relationship of turnover. Average turnover varies and is reported anywhere from 40 - 60% as the median. We know turnover varies based on markets, property types, seasons (NMHC reports 46% of renters report they moved in the June - September time period), financial cycles, etc. Recent trends and reports show rents have been on the increase since 2010, construction of new communities on the upswing in 2012 for the first time in four years, and turnover has been declining in most of the major markets. Some of this related to uncertainty within the financial sector, challenges still related to the foreclosure markets, and I also believe property managers continuing to more effectively relate to resident service and services.
Raising rents is the next way to increase NOI. There is a tradeoff between raising rents to where residents continue to find value, and the point where resistance makes them want to look somewhere else. That balance in order to be used effectively must be understood by property managers. Regional Managers and corporate management I believe can do a better job of training in this area, versus dictating changes to the sites. Help them understand the process and the analysis, as they will better "buy in" to raising rents if they understand the "why and how factors." Average turnover costs have dropped in the last year, basically because vacancy has declined and the loss to vacancy has been reduced in most markets. Lenders use 95% as the rate structure for loans, while property managers typically use 95% as the balance point for raising rents. With improving occupancy nationally, this is likely to change...at least for a period of time. One thing is for certain, nothing is permanent in our business but change.
Last but not least, minimizing expenses. Enhancing and doing a better job of inventory control, insuring things are fixed the first time, insuring we are using the most effective marketing mediums, finding energy conservation measures, making wise purchasing decisions, and hiring the right people to get the best team are all ways we can minimize expenses. Ever business and property can find ways to cut costs. Just wish our government would believe that as well.
Finding
From
both an investment and an operations standpoint, 95% occupancy is
considered the optimum level for multifamily properties. Lenders use the
95% occupancy rate to structure loans, while managers consider 95% to
be the balancing point between keeping a property full and focusing on
raising rents. - See more at:
http://www.ccim.com/cire-magazine/articles/maximize-apartment-value-through-strategic-management#sthash.KthAnU4p.dpuf
From
both an investment and an operations standpoint, 95% occupancy is
considered the optimum level for multifamily properties. Lenders use the
95% occupancy rate to structure loans, while managers consider 95% to
be the balancing point between keeping a property full and focusing on
raising rents. - See more at:
http://www.ccim.com/cire-magazine/articles/maximize-apartment-value-through-strategic-management#sthash.KthAnU4p.dpuf
From
both an investment and an operations standpoint, 95% occupancy is
considered the optimum level for multifamily properties. Lenders use the
95% occupancy rate to structure loans, while managers consider 95% to
be the balancing point between keeping a property full and focusing on
raising rents. - See more at:
http://www.ccim.com/cire-magazine/articles/maximize-apartment-value-through-strategic-management#sthash.KthAnU4p.dpuf
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