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4 Strategies for Increasing NOI and Boosting Returns

For real estate investors, increasing cash flow from properties through higher net operating income (NOI) should constantly be a priority. Higher NOI means greater returns on investments, the potential for larger profits, and improved stability if market conditions became unfavorable at some point. There are four key strategies you can employ to boost NOI and increase returns from your real estate portfolio.

Increase Rental Rates. Raising rent prices for tenants is one of the most direct ways to boost NOI, as long as rental rates remain below local market rates for comparable properties. When deciding if a rent increase is reasonable, evaluate current rental rates in the local market for similar properties based on location, size, condition, amenities and recent rent increases. Increase rents gradually, typically around 3-5% per year. Give advance notice in line with local laws regarding rent increases. Higher rents will immediately increase NOI if occupancy remains steady or increases as a result of the more competitive rates.

Reduce Expenses. Saving money on regular expenses for operating, maintaining and managing a rental property directly improves NOI. Look for ways to cut costs on utilities, insurance premiums, property taxes, marketing fees, maintenance services, landscaping and any property management fees incurred. Things like using smart thermostats or lighting sensors, bundling policies, hiring freelance managers or learning to self-manage can all help reduce expenses without sacrificing property condition or quality of service. Lower expenses means a greater percentage of revenue translates directly to profit.

Increase Occupancy. Having a higher percentage of units occupied and collecting rent means more NOI. Work on continually marketing available units, improving curb appeal and condition to win more high-quality tenants, building a strong online presence and review profile, increasing social media marketing, improving signage, offering incentives like one month of free rent for referring a new tenant, and providing excellent service to retain quality tenants for longer periods. Even small increases in occupancy, along with higher rents and lower expenses, can significantly boost NOI and returns.

Analyze unit mix. The types of units rented at a property impact both revenues and costs, requiring an optimized mix for maximum returns. Larger units typically command higher rents but also require higher operating costs to maintain properly based on square footage differences. Short-term or furnished rents often bring higher rates but with additional costs. Adding or removing units may impact rents, expenses, marketing requirements and more. Model different scenarios to determine the ideal mix of unit sizes, lengths and amenities to generate the strongest revenue margins and NOI possible based on local market conditions.

In summary, as a real estate investor focused on portfolio performance, constantly evaluating ways to increase NOI is essential. Increasing rental rates when possible and reasonable, reducing regular operating expenses, improving occupancy through better marketing and operations, and analyzing unit mixes to optimize returns are four key strategies you can employ. By employing these strategies thoughtfully and balancing risks versus rewards, NOI and overall returns can be substantially improved over time. With hard work and discipline, boosting NOI is achievable and sets the stage for greater wealth creation through real estate investing.

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