Hey there, real estate enthusiasts! Tired of the same old “Value Add” pitches in the Multifamily sector? Well, buckle up because I’m about to introduce you to five lesser-known yet incredibly potent benefits of Impact Investing. These aren’t just tips; they’re game-changers for boosting your Net Operating Income (NOI). Ready to dive in?
1. Putting Residents First: More Than Just a Feel-Good Strategy
Think about it: When was the last time you stayed at a hotel that felt like home? That’s the kind of experience we’re talking about creating for residents. It’s not just about a roof over their heads but offering an environment where they thrive. Higher retention rates mean less turnover, fewer costs, and guess what? A steady stream of rent payments. And the best part? This strategy is more about thoughtful engagement than heavy spending.
Some of our favorite things to do are…
- Resources like credit building; health & wellness, after school programs in partnership with non-profit organizations help our residents thrive.
- Higher retention rates reduce turnovers and associated costs
- Valued and happy residents pay their rent, reducing delinquencies
The Multifamily Impact Council is paving a strong path and following (we are a proud member) with their Impact Framework that is pioneering the way to focusing impact effects efficiently and effectively within multifamily properties. In addition, their framework provides metrics for measuring. which is a ciore component of progress.
2. Smart Upgrades: Not Just Fancy, But Financially Savvy
Ever noticed how a simple LED bulb change can transform a room? Now, imagine that kind of upgrade on a property scale. Strategic energy-efficient improvements like savvy lighting choices and high-efficiency HVAC systems are your secret weapons. They’re not just about reducing bills; they’re about preparing for the future. Here are our favorite examples…
- High efficiency lighting: start here, this is the cheapest, easiest and highest ROI. PRO TIP: pay attention to color temperature. Warm colored lights are best for evening use, while cool bright white colored lights work best in production areas like offices.
- Building Envelope: Focus on air tightness (if a bug can get in so can cold or hot air from outside), high performing windows & doors (single pane glass, that as bad as using your stove to heat your house, come on now) and lastly insulation (we like to couple this with other work such as roof / wall repairs/replacements)
- High efficiency HVAC: Doing this last allows you to benefit from the previous improvements and buy the right size equipment.
PRO TIP: We really like mini split heat pump systems.
For maximum impact, sequencing upgrades provides the best results. It’s like a well-orchestrated symphony where each element plays its part in harmony.
Read our blog, Creating Equity with Energy Efficiency: Empowering Communities and Promoting Sustainability for more detail.
BONUS: This works at your house or office too. 🤗
3. Your Property as a Power Hub: Too Good to Be True?
Picture this: Your property generating its own power, becoming a mini power station of sorts. Sounds futuristic, right? But with renewable energy solutions like solar panels, this is not just a dream. It’s a reality that can turn a regular expense line into an income-generating asset. Plus, in an age where utility rates are as unpredictable as the weather, having your own power source means stability and an irresistible selling point for potential tenants. In Oklahoma, rates escalated almost 20% year over year in 2022 when the average syndication projects 3% cost escalations year per year. That’s a problem.
With the cost of solar panels continually dropping and tax credits covering 30% or more of the cost, they are a no-brainer.
Read our blog: Maximize tax credits, save the plant and increase cash flow, for a high level example of how this works.
4. Mastering the Art of Facilities Management
Remember the last time a minor repair took ages to fix at your place? Frustrating, isn’t it? That’s exactly what we aim to avoid with robust facility management. Effective asset management is about being proactive rather than reactive. It’s about understanding the nuts and bolts of your property to optimize operational costs. A well-maintained property not only saves money but also becomes a place people love to call home. Consider these information tidbits:
- The income (rents) a property can achieve is capped by the market. The fees (pets, parking, trash, etc.) that a property can get are capped by the market.
- Expenses are not limited by a market, the asset manager limits them. Understanding buildings, building infrastructure, how they work, how they should work and optimizing them is a key to reduced costs. There is an optimal and correct way to sequence energy efficiency upgrades.
A study from Multifamily Executive in 2023 indicated that the #1 reason tenants leave a property is due to poor maintenance. So next time you are looking at an investment, try asking the syndication operator this…
Q: “What is the frequency for air conditioning unit filter clean/change”
A: 1-3 mo. (varies with air quality)
If your asset manager does not know the answer to this question, I would look elsewhere.
PRO TIP: Energy audits are cheap and effective at understanding your building or home’s current state and deciding what actions can provide the best value and returns. Many utility company’s offer rebates or this service for free.
5. Free Money? Yes, please!
Now, who doesn’t like freebies? The Inflation Reduction Act of 2022 is like a treasure trove for property owners. With a variety of tax credits and incentives on offer, it’s almost like the government is paying you to upgrade your property. Imagine getting financial aid for making your property more energy-efficient and resilient. It’s like hitting two birds with one stone – enhancing your property’s value and saving on expenses.
A few examples of what is included…
- 30%+ in credits for onsite solar
- Up to $80,000 per unit for affordable housing upgrades
- For more information on the program specifics, visit here
What are you waiting for?
So there you have it. Five simple, little known benefits of Impact Investing that can significantly increase your Multifamily Net Operating Income. And the best part? You are now part of the elite group who knows these secrets. So go out there and make your investments count! Now, excuse us while we go invest in some solar panels and enjoy a reduced tax bill. Happy investing!
