How to Optimize Your NOI - Five Ways to Boost NOI (Without Raising Rents)
I’m a landlord, let’s start there. Like most people who entered the world of investment real estate, my wife and I did so for a few key reasons. We wanted something that would generate positive cash flow, we wanted that cash flow to beat what we’d get if our money was in the bank or a CD, and we wanted an asset that would appreciate. No matter how thorough your due diligence, you don’t really see behind the curtain until after closing. Sometimes the news is good, sometimes it’s not. Regardless, we are always trying to maximize the performance of our buildings. Here are FIVE things to help optimize your building.
1. Implement or Update Utility Billbacks (RUBS)
This is something I wish I’d known much earlier in my investment career. Did you know that in most parts of the State of Washington landlords are able to implement a Ratio Utility Billing System (RUBS) into their buildings for water/sewer.
This allows landlords to bill tenants for water/sewer using a formula based on number of occupants, square footage, etc. Check with your local municipality for specifics, especially if you own a building in the City of Seattle, but even there it’s allowed provided you have transparent accounting.
You can also use similar methods for garbage collection, gas, and electricity.
2. Consolidate and Negotiate With Vendors
Costs are rising everywhere, for everybody. Vendors are no exception to this and are likely increasing their fees. It’s easy as a busy landlord to overlook how much the pest control or landscaping bill has gone up over the last 24 months, but take a look and you might be surprised.
It’s worthwhile to go back to your vendors with monthly or quarterly contracts and try to negotiate a better rate. There’s also value in consolidating services. If you can find a vendor who will handle landscaping and general maintenance, you’ll likely get a better price on both.
3. Make Your Units Look and Feel Nicer Without Big Expenses
It sounds simple, but so few of us landlords actually do it. Here’s a quick list of things you can update to provide a refresh to tired units:
Cabinet Hardware (not cabinets, those are spendy)
Drawer Pulls in kitchens and bathrooms
Light Switch Covers (still less than $1 at many hardware stores)
Outlet Covers
LED Lightbulbs
Refreshing a unit with these items can make it feel like new, and either help command a bit more rent at turnover time, or keep tenants in place for longer, which brings us to number 4…
4. Consider Longer Term Leases AND Auto-Pay Incentives
Outside a major disaster, vacant is the worst condition for any unit to be in. Oftentimes landlords will forgo a rent increase, or will minimize it, to keep tenants in place.
Finding new tenants comes with a very tangible cost of time and money. Look for ways to keep your tenants in place longer, and minimize turnover. Offering a one-time gift card for tenants who enroll in Auto-Pay is worth never needing to worry about chasing timely rent payments.
Of course, there are legal considerations around longer leases and you should consult your legal counsel to make sure long leases are a good fit for your building. That said, anything that minimizes turnover and time spent securing new tenants must be considered.
5. Challenge Property Tax Assessments Annually
Did you know you can challenge your assessed value? A lot of people have no idea it’s even possible. How long you have to do so may vary but you should receive an annual statement of assessed value and that statement should have the appeal period. Take advantage of this to keep your expenses as low as possible. Unlike utilities, there’s no system in place to pass on property tax expense to residential tenants (unlike commercial real estate, where you can absolutely pass the property taxes on to your tenants), but you can do your own research, or hire a broker, to ensure that the comps used to determine your assessed value are actually valid.
I hope these tips help your building shine as we move towards the end of 2025!
