Value Engineering

The value of a multifamily property is primarily determined by Net Operating Income. NOI can be increased in two distinct ways – by lowering expenses or increasing rents.  Our hands on experience with past clients and personal investments have given us keen insight to specific ways to do both. Once we are retained to assist either a buyer or seller, we overtake a complete viewing of the financials of the subject property to determine ways to increase multifamily value.

On the operating expense side, we compare the list of services and expenses the property is currently incurring and compare that to our standards. If the expenses look too high in a particular area, we have various strategies to lower cost including rebidding contracts to our vendor network, increasing utility efficiency, and exploring methods to pass through common expenses to tenants such as sub-metering water and sewer utilities. This allows us to increase Net Operating Income by lowering expenses.

On the income side, the first step is do a personal tour of the units and then compare the rents to the market. If the rents are not maximized for the current unit condition then the obvious answer is to raise rents upon releasing or renewal.  Additionally, if the building is located in an area that demands a higher quality of fit and finish, we will come up with a repositioning strategy and  suggest a construction package as well as obtain bids for renovations. One example of this strategy was successfully implemented with student housing where smaller units were combined to create more bedrooms resulting in higher revenues overall. In some cases, revenues can also be increased through simply improving exterior appearance and interior common areas without the need to rehab actual units. By understanding your target market, we can help you determine the highest and best use for your property.

Once we have established a renovation budget, we will create a cost benefit analysis and review this with the client to determine if the timing is right for the renovation. By ensuring that the cost of the renovation will result in a higher return on investment than the baseline, NOI will successfully increase.

Read about how we successfully helped increase NOI with some of our past clients.