Increasing Net Operating Income (NOI) in Today's Economy

Dec 22

Written by: THE CABOT GROUP
12/22/2011 11:46 AM  RssIcon

Submitted by S. Laraby
Increasing and maintaining net operating income  (NOI) has always been a high priority to property owners and managers alike.    Over the last several years, property owners have been forced to find non-conventional solutions to conventional problems to maintain their competitive advantage in the marketplace.  One of the increasingly popular solutions to dwindling NOI is to employ the expertise of a 3rd party property management company. 
In a recent article featured on multifamilyexecutive.com, Pierce Ledbetter spoke about the increasing trend of utilizing 3rd party property management.  “Part of the trend away from third-party management was that a good economy hid the faults of bad management.  Now that it’s a bad economy, it’s much easier to see the positive results that a large fee management company can deliver to any owner’s bottom line."  Christy Freeland, CEO of Riverstone Residential indicates that “The emphasis on performance is much higher” when property owners are confronted with economic challenges.  

Delivering superior management services while increasing NOI sounds counter-intuitive.   Such companies can offer exceptional results, often at a lower cost than traditional property managers through economies of scale.  They can offer a team of experts to evaluate and address issues and concerns of all types.  Curb appeal to occupancy, resident retention to market projections, all of which have an effect on NOI... a team of property management specialists can quickly evaluate and remediate any situation that may arise and allow property owners to focus on the business.  
The tools and experience available to a 3rd party property management company can make all the difference.   Some multifamily management companies have realized a 50%+ increase in Net Operating Income in as little as 36 months.  It is a growing trend among cost savvy property owners looking to attain a competitive advantage in their markets and doesn't seem to be going away.   According to a survey of regional, national, and international property managers conducted by the  Institute of Real Estate Management (IREM); "Approximately 68 percent of respondents saw an increase in demand for third-party professional management services over the last year ...A slightly higher number (70 percent), expect this demand to continue to grow over the next 12 months..."

This trend is a reminder that as property management continually evolves, property owners must be cognizant and responsive of these changes to make the best decisions for their investments.

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