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[A609]Apartment Buildings For Sale

by Lance Edwards, Lan

The way to create value in apartment buildings is to increase the NOI. The NOI is the Net Operating Income. Very simply, you calculate the NOI by subtracting your expenses from your revenue, on an annual basis. Your expenses include everything for running the property but do not include the mortgage payment, which is otherwise known as your debt service. The expenses you need to include in your calculation are property management, taxes, property insurance, maintenance and repairs, and utilities. Revenue includes rents and any other income you have in the property like vending machines, laundry room, and late fees.

So how can you increase your NOI? There are several ways to do it. Here are a few:

1.Raise the rent. If you raise the rent $10 per door, you have increased your revenue. Depending on how many units you have, a $10 increase could be significant. In a 10-unit building, your revenue has increased $100 per month. In a 100-unit building, your revenue has increased $1,000 per month. Not only do your increase your NOI, but you also increase your equity. This increase in NOI will have an effect when you refinance with the bank.

2.Put in a Laundromat. You can increase your revenue by adding amenities such as a Laundromat. Not only will you get revenue from the Laundromat itself, but you'll also increase the value of the apartment complex, and in doing so, you can raise rents because you have provided convenience for the residents.

3.Add covered parking for an added fee. Some people will pay extra for covered parking. It's a one-time cost for you, but the monthly fees you'll accrue increase your revenue and therefore increase your NOI.

4.Add storage spaces. This is another example of how you can add value by providing convenience to your tenants. Instead of having to drive to a storage unit, they can use one of yours on site. You have again added value, and your NOI increases.

5.Other amenities. The following amenities could be added to your apartment building: exercise room, pay phone, vending machines, security gates, clubhouse rental, a daycare center, trash pickup at doors, house cleaning, Internet access, phone service, cable or satellite service.

Each of these ideas will add value to your apartment building and increase your Net Operating Income. Therefore, your equity will increase, and you'll be better able to leverage your asset into bigger and better investments.

If you are investing in apartment buildings, no doubt you will want to know how to make the most money possible with your investment. You need to understand how to properly manage your property if you are going to increase your profits. It is also critical that you know how to decrease what you spend and increase the value of your apartment buildings as well. If you happen to be a new investor, you may want to look for a mentor that can help you out with your first property, or you may even want to join an investment group in your area as well. So, if you want to increase profits on your apartment buildings, the following are some helpful hints that will be of great use to you.

Managing Your Apartment Buildings

First of all, if you want to increase profits on your apartment buildings, you will need to learn how to properly manage your property. There are two different types of management that you can choose from. You can choose to hire a management company to handle the management end or you can actually manage the properties yourself. Usually if you are a new investor, you'll want to find a property that is not too far from your home or office so you can manage your property on your own. Managing the first properties yourself will help you learn what will work and what won't, so later, if you do hire other managers, you will be able to manage them effectively. However, if the apartments have a very strong NOI and you can afford to hire someone else to manage the property for you, then you will want to set up meetings with them so you can learn and understand the managing process.

Increasing Your Profits

If you want to increase the profits of your apartment buildings, there are usually only going to be three ways to do so. You can increase the amount of rent you charge per unit, you can work to decrease the amount of your expenses, or you can increase or maintain your profits by keeping the level of vacancy between 3-5%. If you have a higher percentage of vacancy, then you'll need to work hard to attract new tenants. On the other hand, if you have a vacancy percentage of less than 3%, then the rents you are charging may not be high enough.

Considerations When Dealing with Rents

When you are dealing with rents, there are several things that you'll want to consider. First of all, when you increase your rent, you will want to be aggressive with the increases. You should work to be within the top 5-10% of the rents in the area. If you are going to increase the rent, then a great time to do so is when you have an empty unit that you want to fill. The yearly anniversary is another great time to increase the rent, since most tenants actually expect this. Usually a small increase of between $15 and $25 is reasonable, and while the tenants may not be overly happy about it, they probably won't move out because of that small increase. When you increase your rents, not only will your increase your cash flow, but you'll also be increasing the value of your property as well.

Control and Decrease Expenses

Controlling and decreasing your expenses is another way to increase your profit on your apartment buildings. Getting several bids for expensive jobs can help you save on maintenance and repairs. Also, it is important that you don't avoid making repairs trying to keep your costs down. This can actually decrease the value of your property or cause your tenants to leave, so always make the needed repairs on the property.

Tips for Reducing Expenses

The following are a few tips that can help you reduce your expenses so you can increase your profit.

Tip #1 – Make tenants pay for maintenance or repairs that are their fault, but make sure the rental agreements state that.

Tip #2 – Get several different insurance bids a couple months before you renew. You may be able to save on your insurance.

Tip #3 – Install incandescent lighting in the hallways and put up motion lights in common areas of the properties.

Tip #4 – You can install showerheads that will help you save water and faucets that are water saving as well.

Tip #5 – If you are paying the heating bill, have a controlled thermostat installed.

Tip #6 – All common lighting on the premises should be on a timer.

Tip #7 – Have a tenant help to watch the place for you and handle small maintenance issues. This will help them treat the place with more respect and they'll be a big help to you.

All of these factors are important to know when trying to increase the profits on your apartment buildings. Following these tips will not only help you maximize your profits, but will help you to increase the overall value of your properties as well.

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Both Lance Edwards & Tony Seruga, Yolanda Seruga And Yolanda Bishop are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Lance Edwards has sinced written about articles on various topics from Finances. Master Real Estate Investor Unlocks The Secrets On How To. Lance Edwards's top article generates over 22200 views. to your Favourites.

Tony Seruga, Yolanda Seruga And Yolanda Bishop has sinced written about articles on various topics from BMW, Real Estate and Real Estate. . Tony Seruga, Yolanda Seruga And Yolanda Bishop's top article generates over 1000000 views. to your Favourites.