BY LANCE EDWARDS— Increasing the revenue of your multifamily property does not always mean that you have to add an amenity or a service. Finding additional revenue can be as simple as increasing the rent or the increasing collections.
If you are looking at raising revenues on your multifamily property, there is a very simple formula that you can utilize to help you catalog your different methods of raising revenue.
Your formula for revenues is:
Rent rate x occupancy percentage x collection percentage + other income
This formula gives you your actual revenue. In order to determine your rent rate, you need to take the rent you charge and multiply it by the number of units in the building.
This is also known as your scheduled rent or your theoretical rent.
If you had 100 percent occupancy and all of your tenants were paying as scheduled, then that is your gross scheduled rent. You need to take this into consideration when you are looking at raising actual revenues.
In raising the revenues, you can raise the rent just as they are by sometimes government subsidized rent programs.
There are many government subsidized rent programs such as Section 8 housing. Other programs include housing for battered women, people with HIV and the homeless. Some programs pay more than others but it is a way to raise your rents.
You can also raise your rents through repositioning. When you buy a property and make improvements and repairs, you are repositioning. If you convert a Class D property into a Class C property, you are repositioning. This is a way to get more rent as well as increase the occupancy.
If you opt not to raise rent, then you can increase the collections on your existing tenants. Many people overlook this option and go straight to eviction of non-paying tenants. Try to work out a payment plan with the tenant. It is much better to have a payment plan than to evict them and have to go through the process of finding another tenant.
Eviction is a drawn out process. You can always start an eviction process and then stop it whenever you want to. Starting the eviction process can let a tenant know that you are serious about collecting payment. If you are able to come to terms on a payment plan, you can then terminate the eviction process.
So when you are evaluating your revenues and considering various ways to increase revenues with your multifamily property, be sure that you do not overlook the basics of raising rent or increasing collections. These are two simple yet cost-effective ways you can generate more revenue with your multifamily property.