NOI Growth: Building NOI with Ancillary Income
The real estate industry has undergone one of the most significant shifts in years, with rents hitting new highs and inventory as scarce as ever. Despite above-average rents, build-to-rent (BTR) operators must look to the future and develop strategies to build their net operating income (NOI) over time to increase the overall value of each asset and portfolio.
In a nutshell, NOI is the return or return for investors to take development risk by planning and constructing a development. Essentially, the goal is to increase the value of the asset so that operating income is balanced against operating costs. Fortunately for operators, there are multiple ways to achieve this, one of which is by developing ancillary revenue streams.
How does ancillary income improve NOI?
Ancillary income is non-rental income, that is, additional income generated from sources other than traditional rental income. These additional income streams will add to the overall value of the asset and annual income through means other than charging monthly rent. It ensures that operators never leave money on the table and take advantage of services that generate revenue and increase resident satisfaction.
To build these streams, build lease operators need to include the right services that they can charge for, and that residents are willing to pay for. These can be extra fees, smart home "tech fees", or other services like bundled cables, community WiFi, pest control, or even something as simple as a vending machine in a community area. The trick here is to understand your resident demographics and find one or more services that will add value to their lives so that they are willing to pay extra for more convenience within the community.
With the right strategy and a little creativity, operators have the opportunity to grow asset revenue in ways that are not traditional.
Identify the Best Path to Ancillary Income and Get Started
Before developing a strategy, operators must take a step back and understand their current residential base and demographics. Where is the property located? What is the median household income? Can residents spend any of their disposable income? Have any residents expressed interest? These issues should prompt operators to adopt the right strategy, as no two attributes are 100% alike.
In addition to answering these questions, a good starting point for developing this strategy is technology. For example, millennial residents are very interested in smart home technology. As the tech-first generation, they grew up with technology and appreciate the convenience it can bring to their lives, so they are willing to pay more for a smart home.
Additionally, many tenants are very interested in community-wide WiFi throughout the community. This means the WiFi connection from their home to the gym to the community center has no downtime and a solid connection. This service is a clear technology-based idea to increase ancillary revenue while increasing resident satisfaction.
Finding a strong partner to help you with these services is critical to the success of this program. Ensuring a partner understands your goals, properties, and residents makes a big difference to developing lasting relationships and a robust plan to achieve the income goals you set.
Growing ancillary revenue with airEkey
At airEkey, we believe in relationship building to ensure our clients attain success with our solutions. From installation and beyond, our team is always available to help build-to-rent operators and their residents make the most of their new solutions and truly understand the benefits of each. In addition, we offer services and solutions that help build-to-rent operators generate ancillary revenue that can, in turn, grow their NOI.
Aligning with current market trends, our Managed WiFi solution offers build-to-rent operators the ability to leverage community-wide WiFi as a stream of ancillary revenue while appealing to residents. This instant-on, private connection lets residents immediately access WiFi the minute they move in, never experiencing any downtime. Offering a reliable connection throughout the community, our Managed WiFi solution allows operators to generate additional revenue by offering this service to residents at an extra fee.
Next up is Alloy Parking. This solution allows operators to monetize their underutilized parking spaces for those build-to-rent communities with unused parking spaces. The solution lets guests pay for visitor spaces by quickly scanning a QR code from parking signage. Operators can quickly gain revenue through a solution that also grants them complete visibility into their property's parking health.
So, is ancillary income your next big strategy? Let our experts guide you through the process. Set up a personalized demo to get a peek into how a airEkey partnership can grow your ancillary revenue and help build your NOI.