Your Net Operating Income (NOI) helps you keep an eye on how your multi-family property is performing. It takes into account revenue minus any operating expenses incurred from managing and upgrading your property.
A traditional NOI calculation does not take into account the costs and payoffs of upgrading your property. That’s why we created an adjusted NOI calculator that factors in additional operating expenses as well as potential rent increases that can result from upgrades.
Energy Efficiency Increases NOI
It’s no secret that energy-efficient properties save money – but did you know that when your multi-family property conserves energy, it actually increases your NOI? The results are likely better than you might expect.
Keith Denner, President of Professional Property Management (PPM) Inc., seized an opportunity to differentiate his business and attract quality renters by investing in energy efficiency.
“The value of your property is in your NOI,” explained Denner. “To stay ahead of the competition, we worked hard to improve our NOI. We found that small investments resulted in a big payoff. When you invest, you increase your capitalization and the value of your property.”
PPM Inc. properties typically include utilities within rental fees, so carving out a niche in extreme energy efficiency in the Des Moines, Iowa market made fiscal sense for the company.
Five Upgrades That Increase Energy Efficiency
Whether you’re exploring a new construction project or want to make upgrades to properties you currently manage, moving forward with energy efficiency as a top priority is a surefire way to increase your NOI and your property value.
The first step in increasing energy efficiency is regulating air. When heated or cooled air escapes through the walls, you’re effectively bleeding money. You’re not paying to heat the whole neighborhood, right? Proper insulation within your walls makes all the difference – it’s key to maintaining the temperature of your units.
When you’re building a new property, focusing on energy-efficient insulation is critical. Be sure to insulate around areas where leaks can be common, like electrical outlets, baseboards, window frames, etc.
Windows and Doors
While properly insulated walls make a big difference in energy efficiency, do not overlook just how much treated air can escape through windows and doors. It’s essential to keep up on maintenance, and replace damaged frames, cracked glass or ineffective seals.
If you’re replacing windows and doors in your units, consider energy-efficient options. Solid, wood doors insulate better than their hollow counterparts. Multi-paned, energy-efficient windows will dramatically decrease heating and cooling bills because of their capacity to keep treated air inside.
Did you know that window treatments can impact energy efficiency, too? The material, color and the method of opening/closing can all help conserve energy in your units.
Lighting is another critical component that has a large impact on energy usage. Using LEDs instead of incandescent lights is an easy switch that can result in big savings. While LEDs include a larger up-front investment, they’ll last up to 10 times longer than incandescent lights in many cases. LEDs use less energy and provide bright, usable light.
Want to take it up a notch? Smart lights, which can be connected to smart home devices (like Google Home, Amazon Echo, etc.) and can be programmed to turn on and off at any time. No more leaving the light on all day so you don’t come home to a dark apartment.
The way air moves through your properties has a large impact on heating and cooling efficiency. To prevent leaks, it important to make sure all ducts are properly sealed. There’s no sense in sending treated air anywhere you don’t need it to go. In addition, you can avoid adding extra vent runs by investing in ventless laundry solutions.
Every year, appliances are made to be more energy-efficient. Energy Star™ ratings make it easy to determine which appliances will help cut costs while remaining in your budget. Between kitchen appliances, heating and cooling, laundry and more, investing in energy-efficient appliances decreases energy bills dramatically while providing sleek, new appliances your residents will love.
PPM Inc. Finds Success With Ventless Laundry Solutions
Extreme energy efficiency won’t be the solution for every multi-family property, but it certainly has been a smart investment for Keith Denner and PPM Inc. By making strategic choices in building design, Denner increased the NOI in his properties dramatically.
But when he began working with FJS Distributors, he took PPM Inc.’s property value to a whole new level.