5 Maintenance Areas to Boost Your NOI

January 17, 2021

Building maintenance and utility services are among the most significant and challenging hard costs at your assets. They can have a significant impact on your revenue if they are managed using outmoded and ineffective procedures. Read on to learn more about the widely recognized maintenance problems and how they can help you optimize your goal boards, enhance resident interactions, and increase your NOI.

Why Does Maintenance Has Implications on Your NOI?

Net operating income (NOI) is a metric used to assess the viability of income-producing property investments. This will tell a property owner whether renting a property is worth the cost of owning and managing it. How much of a difference does maintenance make in terms of NOI? There are numerous examples of which businesses should be aware.
  • A shortfall of culture, initiatives, and processes, which can lead to disgruntled employees and occupational injuries;
  • More consider moving as a result of poor service and dissatisfied residents, implying lengthy turnover times due to a lack of examinations; 
  • More cases of emergencies calls and maintenance requests, which can be very costly and place a strain on on-site staff and residents; and
  • Employee turnover is high given the lack of mentoring, resources, and a high workloads.

Why Is It So Important to Examine How Maintenance Influences NOI?

Maintenance is the soul of any community, and maintenance teams have a real chance of influencing change. Property managers are strongly recommended to speak with their service technicians and help clarify that everything they do on a regular basis has an adverse affect not only on the community, but also on the bottom line. The primary objective is not just to safeguard the property, but also to continue to assist your team in understanding what is allotted versus what is not, or what qualifies an urgent situation, so that you do not go over budget and they are not overworked.

1. Capital Improvements

Owners will want to cover the expense of capital improvements because the vast majority will benefit tenants directly. For example, new lighting, parking upgrades, and improved security systems would all be capital improvements that would benefit tenants. This can also be accomplished by installing a vending machine, a washer and dryer, or even tracking individual water consumption. It is ultimately up to you how you want to do this.

2. Taxes on Property

This is the most significant fixed cost associated with any type of commercial property. When property taxes are paid by the landlord and redeemed by the tenant, lease language should permit for the pass-through of reasonable charges associated with tax protest. This encourages owners to take the initiative and will directly benefit tenants if taxes are reduced as a result of these efforts.

3. Maintain Adequate Insurance Policies

This helps to safeguard the property’s revenue stream. It is critical that landlords entail tenants to have this policy not only to facilitate prompt rental payments, but also to keep the tenant out of financial difficulties. A good way to enforce this would be to include an endorsement requiring a 30-day notice to the landlord in the event of a termination.

4. CAM Charges

Recovering administrative and operational charges is an effective tool for improving the property’s bottom line. Leases could perhaps allow for the pass-through of sensible admin and maintenance costs when the property is sold and the new owner has a completely opposite fee structure in order to maximize value.

5. HVAC Systems

Tenants should be expected to sign service agreements for the units that serve their space. This will guarantee that appropriate prevention strategies are performed, prolonging the system lifetime and avoiding expensive repairs. If the tenant leaves and fails to properly manage the HVAC system, the landlord may be on the hook for a large repair or replacement bill in order to re-tenant the space. Theoretically, the tenant would be directly responsible for all HVAC-related fees. If you must agree to a limit, it is critical that the tenant keep a service contract with your preferred provider. In the event that maintenance is not kept up to date and the HVAC system fails, you can require the tenant to bear any costs related to the failure.

Leave a Comment