28 Ideas to Increase Apartment Revenue
Making money with an apartment building is all about creating value. Simply, the property can generate a lot more cash flow and the market value can be significantly enhanced by doing any number of moves mentioned below. Increasing the Net Operating Income (NOI) by increasing revenues or reducing expenses or ideally doing both can make an almost exponential increase in the fair market value (FMV) of the property since the FMV is simple the NOI divided by the cap rate. If a property generates $1M in NOI and the cap rate is 6 , then the FMV of the property is $16,666,666 ($1M / .06). If we can increase the NOI just 10% or $100,000 by doing any number of things below and the cap rate stays the same, then we increased the FMV to $18,333,333 ($1.1M / .06). That’s an increase in FMV of $1,666,667. No wonder apartments are so darn attractive as investments. You have control to increase the value with some ingenuity around revenue enhancing or expense reduction activities and that’s what owners love. This article will focus on revenue generating ideas and the next blog will focus on reducing expenses. Thanks to Joseph Gozlan (BP) a syndicator from Dallas who collaborated with me on this one. (https://www.biggerpockets.com/users/DFWjoe
- Renovations - Value add operators typically zero in on upgrading the interior and exterior of the units to get back in line with renovations of similar properties in the immediate area. This enables rent expansion as more desirable living entices current residents to move into newer units as they are updated. Focus is on modernizing kitchens, baths, flooring and plumbing fixtures. Freshen up landscaping, exterior painting, new signage, awnings, etc can make a huge difference. Obvious one.
- High Occupancy - Push rents closer to market especially if you are consistently close to full occupancy and the leasing office gets tons of calls when there is a vacancy.
- Fees and deposits - Compare common fees and deposits with the competition and ensure you are not falling behind. Ensure current property management team is enforcing and collecting.
- Onsite Laundry – review pricing and ensuring its keeping up to cover equipment and maintenance. See if outsourcing and revenue share might make sense.
- Add amenities - Is there an opportunity to add amenities and get residents to pay for them? You may want to tour competing properties for some creative ideas.
- Review opportunities to install washer / dryers in each unit which are in demand and charge more rent.
- Utility reimburse – make sure you are taking advantage of the RUBS (Ratio Utility Billing System) so that residents are paying their fair share of water and sewer costs. This reduces owner costs and further provides incentives for residents to conserve.
- Pet rent – often common to take a pet deposit but you could explore just adding an extra cost to the rent for having a pet since they do a lot of wear and tear.
- Parking – you could simply charge for reserve spots or add covered parking and charge a monthly additional cost. Premium locations close to resident door could command higher prices as well. We have a property in Dallas that we added covered parking, charged $25 on 200 units (320 unit apt) and added $60K/year in revenue and $1M in FMV.
- Storage is becoming a premium as millennials and boomers find it hard to throw things away and become more permanent long term renters. Consider adding storage units onsite or converting laundry rooms into storage if you can put washer/dryers in the apartment units. (see my blog on why self-storage in an attractive investment niche).
- Bike rack rental – depending if high density location, lots of students, if you add a secure covered bike storage that might even include a bike wash and maintenance area.
- Furnished units - You may want to convert a few units to furnished and charge a premium depending on demand in the area.
- Club house rental – often free for residents consider charging a fee for renting out for special occasions, monthly meetup groups, etc.
- Appliance rentals - for things residents use often such as vacuums and carpet cleaners you can earn income while residents are keeping the place clean.
- Install vending machines - the nice looking modern ones that use credit cards not money. Residents will pay a premium for conveniences rather than walking to the local convenience market.
- Billboards / sign lease – great for high density / traffic areas where third parties manage it. Probably more appropriate for class C properties and near freeways
- Cell tower / antennae lease – if you are in the right location, it can produce a passive income.
- Add a daycare, afterschool or summer programs for kids onsite and charge a fee if you have extra space on the property that is underutilized. The convenience of an onsite facility versus parent having to go to another location is very attractive.
- Add a coffee shop / convenience mart, especially if you have a spacious common main office area. Similar to how a hotel operates a snack / drink area near their front desk.
- Re-positioning the property in some way to take advantage of a changing market like creating more senior living housing or low income to middle income can dramatically increase revenues.
- Improve website and marketing activities to increase occupancy and reduce turn times. We often take over apartments where either one or both can easily use more attention.
- Ensure your property manager is using the latest software and intelligence to optimize daily rental rates to stay competitive with current market changes rather than a fixed increase for all units during the year. This adds up quickly in a growing market.
- Offer to pay electricity for the tenants and charge X dollars (e.g. $150/mo). Tenant has to pay difference if they exceed. This will give the tenants the value of using the house commercial rates and the house gets any difference between the actual consumption and the X dollars set.
- Create Private back yards for ground units. Tenants will pay premiums for those. We did this in one of our Dallas properties and ground floor residents paid an additional $50/month for privacy fence w/gate (10 x 10) which made the unit off the kitchen look significantly larger. At 110 ground floor units, that's a nice $5,500/month or $66K/year. These units were in high demand once residents saw the extra space.
- Offer personal security systems – you can install wireless systems such as sold on SimpliSafe and charge for it. These can also be set up as monitored.
- Offer short term leases - These offer higher rates but might be more attention. If your property is located in an attractive area, consider using site AirBNB or VRBO to keep these leased year-round.
- Appliances upgrade package – Offer the tenants the opportunity to get an upgraded appliances package (white to black or black to stainless) and charge a monthly premium for that.
- Create another unit - Many communities use a unit as the leasing office or storage space. If you have room on the parking lot or on property grounds, place a tiny house to serve as a leasing office and/or a storage shed and make sure you take advantage of every leasable SF!
These are just some ways you can think about generating more revenue for your property. Some simple, some would certainly take more market research, planning, a budget and professional help but hopefully these are some ideas that get you thinking how to optimize revenue for your apartment investment. Let me know if you have some additional ideas.