A key motivation for any property investor is obviously to maximize returns. What’s not always so obvious is exactly how to go about doing that in an effective and sustainable way. This is where focusing on NOI, or net operating income, becomes important.
For real estate investment properties that are intended to generate cash flow, an important metric of success is NOI, which is calculated by taking gross income generated by the property minus any expenses. You should always be looking for ways to improve it, and one key area where you can make strides in reducing expenses is in the maintenance category.
How Optimizing Maintenance Impacts NOI
Maintenance expenses consume the largest category of spend for any property investor. That should come as no surprise, especially if you track your data diligently. The good news is that it also offers one of the greatest areas of opportunity in terms of how you can optimize your spending to boost NOI.
Because NOI is a measure of income minus expenses, you can either:
- Increase your revenue, and/or
- Decrease your expenses
Below are a few ways you can decrease your maintenance expenses and thus increase your investment property’s NOI.
- Reduce 2 a.m. emergency calls – Property owners should expect that approximately 1 in 4 tenants peryear will call them with a middle-of-the-night emergency. Emergencies are often quite serious, so it’s imperative to address them. Additionally, they can also be expensive. Whenever possible, you want to do everything you can to prevent them. You do this by focusing on preventative maintenance issues so you can minimize expensive breakdowns.
- Play the long-game with your investments – We know that certain repairs are going to cost more than others, so why not extend the life of those items that will really benefit from being a quality product, like water heaters and HVAC units? Purchasing better quality items generally means fewer breakdowns and repair expenses during the item’s lifespan, plus there will likely be savings on energy expenses. Although the item may be more expensive upfront, you should end up saving money over the long haul.
- Partner with a property management company – Labor is often the most expensive part of any maintenance visit. Sometimes the part itself amounts to mere pocket change. If you’re spending a couple hundred dollars here and there for one-off maintenance calls that could be handled by a property management company’s in-house maintenance staff, you’re losing out on a huge savings opportunity. Here are 7 other ways a property management company can increase your NOI and save you money.
At RL Property Management, our priority is to help investors maximize their earnings and minimize their spending by taking a strategic approach to property management. To learn more about how we can help you be successful with your investment in Columbus, Ohio, contact us today.