A building performance targets the areas of your apartment that cost you the most money and eat into your profits. It puts each expense under a magnifying glass, looking at it from every angle possible and evaluating it compared to averages. A building performance assessment is a valuable tool that will help you become a more insightful and successful multi-family real estate investor.
Of course, you can just turn a blind eye to your apartment’s issues, but if you want to create more efficiency and profit, you need to be willing and prepared to tackle these pain points head-on. A real estate investor who’s left in the dark won’t be investing for much longer.
That’s because there is no sign that rent rates will improve in our current economy. You can’t wait for them to improve, either. The only way to improve your ROI right now is to control your operating expenses. Building performance assessments are the new normal and the new way to increase your profits. Efficiency in operations will be crucial for the next two to three years.
Benefits of an Assessment
Improve your apartment: Here’s the obvious one. Once you conduct a building performance assessment, you can improve your entire building and increase your ROI by targeting expensive pain point issues like maintenance, utility expenses, vacancy, and turnover.
You get a starting point: Managing an entire apartment complex on your own can be overwhelming and complicated. You may know that it needs some improvements, but it can be difficult to know what should be the highest priority on your to-tackle list. After inputting your numbers, you’ll get a grade on each one, helping you identify where you should focus your efforts. A building performance assessment will give you the starting point you’ve been searching for.
Calculating Your Apartment’s Numbers
Are you unsure how to calculate the numbers we asked for in our building performance assessment? If so, we’ll show you how to get them. Get your calculator ready!
Vacancy Rate: To calculate your vacancy rate, add your monthly vacancy rate numbers together and divide it by 12. Then, multiply that outcome by 100, and divide it by the total number of units in your building.
Utilities/Unit/Year Expenses: For this calculation, divide the annual cost of utilities for your building by the total number of units.
Expenses/Unit/Year: For this last one, divide the annual amount of operation expenses by the total number of units in the building.
At the end of the day, these are the main things that will affect your revenue. They are all expenses you deduct from your income; anytime they increase, your profit decreases. If you have a larger apartment complex, then the effect is bigger; it will multiply. If you have a 10% vacancy rate in a bigger building, that’s huge.
These issues can’t be solved overnight. Improvement takes time. The earlier you start to address these expense areas, the sooner you will be able to realize savings and higher ROI.
There are a lot of aspects of being a multi-family real estate investor that you can’t control. You can’t control your tenants, their jobs, or the economy. The one thing you can impact is your operating costs. Take the first steps to creating a more successful apartment building.