• Additional Services. Offer additional services or amenities to tenants for a fee. This could include services like Wi-Fi or cable television, and concierge service packages (attach a couple of options for this type of service).
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We as rental housing providers all share a common concern - the rising cost of housing operations and its impact on our lives. This month, I want to cover what has been at the center of the conversation in the past few years – the massive reduction of net operating income, or better known as “NOI.” It is a topic that affects landlords, tenants, and apartment communities together.
If you are in the City of Los Angeles covered under the rent stabilization ordinance (RSO), your ability to increase rent was taken away in March 2020 when the COVID pandemic reared its ugly head. You will not be able to increase your rent until starting on February 1, 2024. And, despite the “freeze” in Los Angeles, under normal circumstances in similarly situated jurisdiction under an RSO, there are strict limitations placed on rent increases.
So, given the circumstances what can you do? You likely will have to attack this issue in several ways by finding ways to create additional income and at the same time, reduce your expenses. Let’s talk about how you can do this:
New Income Stream Possibilities to Supplement Your Rental Income
Some of the ways you can increase “top-line” revenue at your properties are:
• Additional Services. Offer additional services or amenities to tenants for a fee. This could include services like Wi-Fi or cable television, and concierge service packages (attach a couple of options for this type of service).
• Charge for Parking. On new leases, charge for parking spaces using a commercial parking lease. If the property has additional space or separate commercial units, consider leasing them out for commercial purposes, such as offices, storefronts, or small businesses.
• Lease Storage. Create storage spaces that can be separately rented out.
• Add Pet Rent to New Leases. Implement a pet-friendly policy and charge a pet rent to new tenants who have pets in their rental units. Adding some inexpensive “pet-friendly amenities” such as a “doggy” area for pets to play and relieve themselves, is an attractive feature to pet owners.
• Fee-operated Laundry. Install card reader laundry machines in communal areas to generate revenue from tenants who utilize the service. If you already have coin laundry, there are systems you can install on your laundry machines to make it so that they can take credit and debit cards as well. If you are in a laundry lease, see when it expires and if there is an option for buying the existing machines. This will mean all your laundry money going to you, instead of a percentage being shared with a laundry company.
• Vending Machines. Place vending machines in common areas, such as laundry rooms or community spaces, offering snacks, beverages, or other items for purchase. Mini convenience store-type vending machines packed full of needed essentials are also immensely popular.
• Consider Adding ADUs. If the property has an unused area that can be converted to rentable space, you should explore it. Due to shortages in affordable housing, the requirements are not as restrictive as they once were. New state laws have streamlined and eased the process of adding density and units to properties of all kinds.
• Utility Reimbursement. At properties where utilities are included in the rent because they are not separately metered, consider implementing a utility reimbursement program (a Ratio Utility Billing System or “RUBS”) for all new tenancies making tenants responsible for a portion of the utility costs. If you offer this from the standpoint of going green and conservation, many tenants tend to react more positively to it.New Paragraph
• Advertising Opportunities. Explore opportunities for advertising within the rental property, such as allowing local businesses to display advertisements or offering advertising space on bulletin boards or community newsletters. Check into leasing your rooftop to local cable or telecommunication companies for their communication towers.
• Subletting and Short-Term Rentals. If permitted by local regulations and lease agreements, consider subletting individual rooms or units or utilizing platforms for short-term rentals like AirBNB and VRBO. Again, be sure to check the local requirements before trying this.
• Party Space. Do you have a tenant recreation room or lounge or empty storage space? Dress it up and charge a fee to rent it for private tenant meetings or parties.
• Lease Renewals. Lock in good tenants and negotiate a new lease at a higher rate in exchange for some affordable upgrades.
• Furnished Units. Consider renting units furnished and charge a premium. Focus on Reducing Expenses to Improve Your Bottom Line
• Energy Efficiency Measures. Implement energy-efficient practices and technologies such as LED lighting, smart thermostats, and energy-efficient appliances. This can lead to lower utility bills and long-term cost savings. There are sometimes incentives like rebates offered by the utility companies.
• Water Conservation. Install low-flow fixtures, repair leaks promptly, and consider landscaping designs that minimize water usage and install a rain gauge to shut off irrigation when not needed. Get rid of your lawn wherever possible! Conserving water can help reduce water bills and promote sustainable practices among your residents. Look for free programs from the water utility
• Preventive Maintenance is Key. Develop a proactive maintenance plan to address potential issues before they escalate into costly repairs. Regular inspections, maintenance schedules, and prompt repairs will minimize expenses overall. I bad water heater is a problem but a water heater that has gone bad in the middle of the night can flood several units and cause more problems.
• Bulk or Group Purchasing. Explore opportunities for bulk purchasing of common supplies and materials used in the multifamily building. Buying in bulk can often result in volume discounts and reduced expenses. Join a rental property owner’s association like the Apartment Association of Greater Los Angeles for discount opportunities for insurance, supplies, and services.
• Monitor Usage Carefully. Track supplies usage to avoid purchasing more than you need and make sure you are well stocked on basic supplies. This can help avoid a simple repair becoming a hunt for a needed part. For instance, you do not want your maintenance man going to Home Depot for $3.00 parts when you are paying him $55 an hour.
• Expense Tracking and Budgeting. Maintain detailed records of expenses and track them against a budget. This allows landlords to identify areas of overspending, make informed decisions, and adjust financial plans accordingly. A budget simply makes it easy to see where you are overspending or under spending which can also be a problem.
• Insurance Review. Regularly review insurance policies to ensure appropriate coverage and competitive premiums. Shop around for insurance providers to find the best rates and coverage options.
• Technology Implementation. Utilize property management software or applications to streamline administrative tasks, track expenses, and manage tenant communications more efficiently. Technology can help optimize operations and reduce administrative costs. The use of automation and online systems will help drive rent collection, track maintenance requests, and reduce time and paper waste. Property management software can often automate many tasks, making your operations more efficient.
• Outsourcing Non-Core Functions. Consider outsourcing non-core functions such as accounting, legal services, or property maintenance to specialized professionals or companies. This can save time and potentially reduce costs associated with managing these tasks in-house.
• Competitive Bidding. Seek multiple bids for major repairs, renovations, or contracted services to ensure competitive pricing. Comparing different bids can help landlords find cost-effective solutions without compromising on quality.
• Vendor Negotiations. Negotiate with vendors and suppliers for better pricing and discounts. Building strong relationships with vendors can lead to cost savings on supplies, maintenance services, and repairs. This is also a terrific opportunity to get input from your vendors on ways to lower costs and even streamline services.New Paragraph
• Invest in Security. Upfront investments in security measures like cameras, better lighting, secure doors and windows can potentially save money in the long run by preventing theft or damage. This is one that I do not think you should skip – invest in this technology for a better future.
• Property Tax Assessment. If you believe your property’s assessed value is too high, you could try to appeal the assessment and potentially reduce your property taxes.
• D.I.Y. Management. Trying to “Do It Yourself” may actually cost you more money in the long run. If you are going to manage property you need to know the pitfalls before you dive in.
• Effective Tenant Screening. Implementing a robust tenant screening process can help prevent potential problems down the line, such as non-payment of rent or property damage, that could lead to costly eviction processes or repair work. This is the best and most important advice I can give you. Rent to good people by screening them properly and fairly. Remember, while cutting costs is important, maintaining the quality and safety of your property is paramount. Cutting corners on important services or maintenance can lead to larger costs down the road and affect tenant satisfaction.
This blog is from an original article by Kari Negri, published in the Apartment Age magazine from AAGLA https://aptnewsinc.com/aagla/2023aa07/#p=46
Kari Negri is the Chief Executive Officer of Sky Properties, Inc. and is a member of the Board of Directors of the Apartment Association of Greater Los Angeles. Do you have a question for Kari? Please send your questions and comments to Kari@SKYprop.LA.
SKY Properties Inc., is a licensed property management company in Los Angeles and abides by Equal Housing Opportunity laws.
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