How do I get my property manager to improve our noi

How do we get our off-site contracted manager to run our 38 unit community more proficient in order to increase our noi. Should we come up with a sliding fee scale that mirrors our noi return. So if they help increase our noi we can increase their fee percentage as an incentive. It would be to their best interest not to slack and sustain a great noi in order to keep recieving a better piece of the pie....right? We are seeking suggestions.

In response to your question, to increase your NOI, you should start by decreasing, rather than increasing. Sit down with your manager and look at your budget. Where can you cut expenses? I would do the following:
Make sure they are buying maintenance supplies from the lowest-priced vendor.
How much are you paying for new carpet and vinyl? Get at least 3-4 bids if you are looking for the best price. Make them shop and show you all bids.
Painting contractors? Get bids. If they are using their in-house maintenance staff, compare what they are charging you to what an outside vendor would charge. Example: If they are using their maintenance staff to paint and charging you $600, compare that to another outside vendor who would do it for $400.

I took over a 50-unit community from an off-site management company. They were installing carpet and pad for $1,000. I changed vendors and got it for $800. I also found many over-priced vendors. I didn't feel they were looking out for the best interest of the client.
Look where you can save money first, then consider offering NOI incentives. I used to get a $50 bonus if I made NOI. Make NOI higher by cutting the budget, before you decide on incentives. Make them really work for it and re-bid everything you can.

If you have time, call other properties in the same area and ask which vendors they are using and how much they pay them.

Thank you Sandy. As for reducing exenses and shopping vendor price and materials we have that down from flipping 32 properties a few years ago and kept alot of the vendors who worked with us. We appreciate this.
Hmmn, I'm the worst person to convey in writing what I'm trying to say. Let me give this another shot. How do we motivate / entice our property manager to do the things you suggested on reducing expenses and all the duties involved to increase our noi? You did touch on something that caught my interest where you mentioned you got a $50 bonus if you made noi- that's where I wanted to go with this. This idea is a good start. We believe our property manager is an extension of our administrative team versus looking at them as holding them accountable to steer the entire ship alone and expect our net pretax net check. We like to reward our staff on the momentum of prosperity. More ideas would be great!

A lot of managers get caught up in the processes of running the property and (in all positions) many people are not constantly focused on ways to do better.

Before you incentivize, just be sure that when you say, "Increase NOI" to your Manager, make sure that he/she knows exactly what you're talking about. Managers have most control over income, taking the small steps to slowly increase rents over time will net you, as owner, a ton of upside. But there has to be a stratey co-designed, communicated, supported, and monitored by you. Set up a 2-year plan of where you would like the asset to be, strategize the ten (or 50) ways you are going to get there, put them in writing, then have a monthly sit-down to go over benchmarks. Do not "meet" over e-mail, etc. - meet face to face and walk the property together.

You'll definitely get the momentum you're looking for by having someone there is constantly working toward the expectations you've set together.

Of course, EVERY account on the chart of accounts can be managed - but increasing NOI is not all about cutting every expense. You have to spend smart. You also have to make sure your manager is very well-trained, aware of expectations, and focused on small rent increases over time, an excellent level of customer service, and has extreme ownership over the property (treats it like it's hers/his).

I believe the first step is to make sure that she understand what drives her NOI and Her GNRP. There are several ways to improve in your market and one is to stay on top of what your area is doing with Rent Structure, Specials, and Market Trends and Changes. I have our managers do the Market Survey Monthly and I check them every quarter. We do not always have the same communities as that can change. We always ask the prospects are we competing with anyone and where are they moving from. We then will shop that property to see what they offer and there rents if they are local. In addition, the community that is involved tin the area business is a great selling feature, we involve ourselves in the local schools, librarys, recreation Centers, local business events as well as hosting every quarter a small resident activity for example: Breakfast on the go: Staff hands out goody bags to the residents leaving for work, Pumpkin painting, Easter egg hunt, this gives back to the residents and gives the warm fuzzies. Following up on maintience request making sure the residents are satisfied. We took over a property in July of 2010 at 76% occupancy and now are running at a full house, collected the rents for the past 6-7 months at 100% and have raised market rent a total of 8% in the past 6 mn as well as have no concessions and incresed renewals by 4% so far in 2011.

Life is good!
:cheer: We give no incentive to the managers... they get thier salary

You've gotten good advice and I don't have much to add on the specific idea side, but did want to pose a question. Is this the only property she runs for you? Is this a career for her or just a job to help make ends meet?

I ask because from my perspective it would be very difficult to take ownership and get motivated about a job with little or no room for advancement unless the culture was strong and I really felt like I contributed to something bigger.

You said you see her as an extension of your administrative team versus holding her accountable. I think perhaps if you did hold her a little bit accountable and then added a program that gave incentive for hitting goals over budget you may see some change. I would hold brainstorming meetings with her and let her ideas/voice be heard. If she improves then include her in bigger projects, like helping you with due diligence on new deals. You need her to want her job for more than a paycheck and most people want to feel needed. Good luck.

John,

Great question! I think you have gotten some very interesting opinions on the matter. First let me congratulate you on running a property in this tough economy. I hope that the personal sacrifices that you are tmaking, yield you double success.

Moreover, have you looked into increasing OE on your property in conjunction with controlling spending. I as a leasing professional, I always sell the property as a package. For example, if you have covered parking, then have the management team sell it as such. They could say something like, "With your new apartment we will also add a covered parking spot to your package. You also many need a access gate remote to make it more convenient for you. Is this fine?" On a smaller property maybe you want to sell the traditional," Up-charge for a first floor." The renter want mind giving this to you if you sell it as a package. Packaged deals are cool, and most people believe that they are hassle free.

Likewise, of course you know to control you cost, as aforementioned by previous post. Try assisting your PM in seeing this as their property, and they must preform. I don't agree with not providing an incentive. My favorite speaker Jim Rohn says, " Always reward good behavior. It then will be repeated." Also, make sure that he or she is educating themselves. Get them involved in the multifamily education process. As Zig Ziglar stated, " A formal education will make you a living, but a self education will make you a fortune."

See you on the Lease-Up Side,

The Lease-Up Guy

Great information! I knew I had a good hunch about joining this site and asking for suggestions!

by Steve Matre -
"there has to be a stratey co-designed, communicated, supported, and monitored by you. Set up a 2-year plan of where you would like the asset to be, strategize the ten (or 50) ways you are going to get there, put them in writing, then have a monthly sit-down to go over benchmarks. Do not "meet" over e-mail, etc. - meet face to face and walk the property together." I LIKE IT!!

by Tracy Zaccarelli-
"There are several ways to improve in your market and one is to stay on top of what your area is doing with Rent Structure, Specials, and Market Trends and Changes. I have our managers do the Market Survey Monthly and I check them every quarter."

[b]Nice Tracy, and this will tie-in with what Steve has suggested a "2 year plan" and add this survey reporting task to be done. I will interject this into our Management contract. [/b]

by Sondrah Laden-
" Is this the only property she runs for you? Is this a career for her or just a job to help make ends meet?"
Yes, it's the only one. Its a 38 unit community. She runs other communities from several other owners. But I feel she just treats us like a front desk secretary who just does a "9 to 5" with nothing more to add to us owners. I guess this is part of being a small community owner that you dont get the same treatment vs a 100 unit plus community where you solely have a full time staff. But I feel I should have a right to place a "strategy plan" as Steve suggested in order to cater to us. I know she may want to charge us a bit more to this this extra activity but shouldnt this be part of the a management package anyway?

by Jordan Sneed-
" I don't agree with not providing an incentive. My favorite speaker Jim Rohn says, " Always reward good behavior. It then will be repeated."
Thank you Jordan, this is why I ask how can I reward them to get them out of their circle of comfort to do these extra's...conducting a marekting survey, share their evaluation with me in order to execute adjustment. I really like Steve's idea because I now will have a written expectation. And if met I can bonus them. Hmmnn.... I like this.

Great stuff you guys!

It's more than my pleasure!

I am an onsite manager who is obsessed with increasing NOI. By reducing resident turnover (we only had 14% in 2010), reducing vacancy loss, and increasing rents we had a 21% increase in NOI last year. In my oppinion resident retention and reducing maintenance cost are the most effective ways to do this. My boss and I joke because I worry more about the money at my property than I worry about my own money!
I think if NOI is your goal you need a manager who's strength is on the financial side. We each have our strengths and weaknesses. I am better at financials than marketing so I do well on an established site that needs a revenue boost. I would not do as well in a lease-up situation. Also it's helpful to find out what motivates the individual. Some people are very money motivated so a bonus structure would be benificial to them. I am motivated by recognition so having my commuity at the top and being recognized for it is what gets me going. Not that would I ever turn down a bonus though Maybe if you can find your managers hot button, you can help her to be more motivated to reach your goals.

Reduce Expenses
Money Back into Your Wallet

Let’s take a look at how we can put money back from your property and into your wallet. If you don’t have a property these tips will provide you with value plays. Remember just like increasing the income will create equity so will reducing expenses. Lowering the expenses $10,000 will create $100,000 in equity. (Saving Realized x 10=Equity Created.

We will focus on 4 areas of savings where we will reduce expenses and increase cash flow. When we can cut costs or increase cash flow we will be increasing the value of the property. The areas are;
Energy/Utility Savings
Tax Savings
Reduce Tenant Turnover
General Savings
Energy Savings
This is probably one of the strongest areas to reduce expenses. Remember even if the tenants pay all utilities you will save on common areas and have happier tenants.
• Utility companies provide free energy audits, take advantage of them, they will also have rebates and incentives to do improvements in lighting for example.
• Buy only low-energy, high efficiency appliances, take advantage of tax savings and rebate programs.
• Insulation is combined with moisture control you may be entitled to a large tax credit or rebate. Certainly if you limit moisture you avoid problems with mold. Insulation will also lower cooling costs in the summer.
• You can take pictures of your property with infrared film and see where the greatest heat loss occurs. Develop an action plan to address the heat loss areas.
• Heating and Air conditioning systems, look at the total system, dirty filters or leaking ducts reduce efficiency. Have them tuned up before the season starts for maximum efficiency.
• Repair faucets. A dripping faucet can waste 15 gallons of hot water a day.
• Install an aerator on your kitchen and bathroom sink faucets to save on hot water.
• Save hot water by installing a low-flow showerhead.
• Use low flow toilets or limit the water flow in toilets placing a brick inside the tank.
• A bath uses 15-25 gallons of water a 5 minute shower less than 10 gallons. Make sure you have showers that are in good shape.
• Track water consumption monthly and year to year its amazing how much is lost! Watch for a spike which could indicate a leak.
• Service hot water tanks-remove a quart of water every 3 months to clear sediment. Remember a hot water tank becomes inefficient long before it fails.
• Make sure exterior lights are off during the day, use sensors rather than timers.
• Correct landscape can reduce energy by shading and blocking wind.
• Explore changing from a Master Metered system to individually metered apartments.

Tax Savings
• Energy tax credit, for making energy efficiency improvements to home.
• Deduct the cost of training, seminars, books, classes, etc.
• Real estate taxes should be examined for possible appeal every year. If rebated maybe you could get previous years.
• Use “forced appreciation” when you improve a property rehab or improved systems you increase its value.
• Consult with your CPA develop reduction strategies for the coming year.

Learn an Accelerated method getting your money 50% faster. What two deductions can you take for the same remodel job.

Reduce Tenant Turnover
The greatest expense you have is tenant turnover. How can you lower the tenant turnover? Renew rather than getting a unit ready.
• Create a sense of community, have your property the one people want to stay and live in.
• Add features such as Alarm Systems for each apartment-residents like them.
• Explore phone services, audit.
• High Speed Internet, Satellite TV and Cable try to purchase in bulk offer to the tenants at a reduced rate than they would pay on their own. You make money and they save money.
• Offer a higher incentive to the property manager to renew rather than a new tenant.

General Savings
• Is your Property Management staff utilized to their fullest? Is it better to outsource at busier times?
• Embrace new technology to manage electrical consumption. See if you can choose an alternative electric source at a greatly reduced rate.
• Capital improvements can reduce expenses. Adopt a Preventive Maintenance Program
• Consider longer-term service contracts. Better terms for longer periods.
• Re-evaluate the Property Management Company are their costs in line, are they maximizing occupancy.
• Watch vacancies try doing an exit interviews, to understand reasons why people move.
• Collect rebates and freebies: check with city about rebates on water savings and energy saving landscaping, heat reducing items, solar power panels.
• Trash Removal-consider using larger containers less pickups.
• Always be in the market for new contractors. They may present further savings on jobs.
• Review your Insurance policies are you getting the best rate and terms.
• If you permit pets, start a monthly pet fee.
• Check contracts for details. The low bid contractor may have extra charges or conditions that the others do not. These extra costs can add up. This will obviously be a problem for you despite saving a few bucks!
• Offer a Maid service for tenants, at their cost.
• See if you can arrange a discount for paying your bills quickly.
• Is your rooftop an attractive location for a cell company? If so they will pay you to mount a cell tower on your roof.
• Have maintenance fee clause in rental agreement tenants pay $50 less each month in return for taking care of minor maintenance (this way management will not have to worry about minor things).

Consider adopting a no smoking policy in your properties, this will keep the costs down and will make your property smell fresher.

You must Download “Energy Savers US Dept of Energy Guide” to get the most current energy saving information. You stand to save 10-40% of your energy bill!
www1.eere.energy.gov/consumer/tips/pdfs/energy_savers.pdf

A good resource for finding articles
National Apartment Association Blog
www.naahq.org/blog/default.aspx

Happy Hunting
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