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IREM Fall Leadership Conference Enhancing noi by tapping new revenue sources

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IREM Fall Leadership Conference Enhancing noi by tapping new revenue sources

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    1. Glen Bachman CPM Aaron Bosshardt CPMGlen Bachman CPM Aaron Bosshardt CPM

    2. Net Operating Income (NOI) NOI basics from the top down because this high up things are smooth and cool!

    3. NOI Defined Good measure of company performance Some believe this figure is less susceptible than other figures to manipulation by management (investopedia)

    4. NOI Components Two main components: Revenue Expenses Do we look at these differently in a boom versus a recession? Boom: focus on revenue growth, thinking it is hard to control costs Recession: focus on cost cutting, as it seems impossible to increase revenues when our customers are broke!

    5. When is NOI? Pro forma Remember time value of money (TVM) Every $1,000 you cut or add is worth $6468.41 over five years assuming 3% inflation

    6. When is NOI? (cont.) Based on pro forma, the annual operating budget is used to forecast annual NOI

    7. When is NOI? (cont.) Based on annual operating budget, cash flow budget forecasts are built

    8. Parting Thoughts from 30,000 Feet IREM advocates management by written plan Your Management Plan is like your auto pilot that can fly the plane while you troubleshoot on a daily basis Time is valuable – because of TVM we must be ahead of the curve to be effective managers of NOI Lets drop down!

    9. Vacancy Hopefully NOT our biggest expense! Time is Money! Property’s time can be measured in units of rent Can collect rent 365 days per year - no more! If rent is $1,000/month or $33.33 per day = $12,000 per unit per year in GPI Vacancy should cost $600 per year or 18 days Ensure staff knows these numbers Communicate with ALL staff

    10. Expenses: Top Three Salary, wages, and benefits If we do our jobs as managers and leaders, this should also be our greatest ROI Insurance Never believe you can’t get cheaper insurance Might have to look harder Always ask to pay less than the final premium Taxes Can negotiate property taxes without filing appeal In most states, commercial properties taxed on NOI

    11. Expenses Advertising In today’s market, you should know to the $ how much each prospect/lead/lease costs in advertising dollars Most properties are different – measure every source Internet: Can be very costly and ineffective – use caution to ensure effectiveness and cost control Landscaping Want the best and cheapest Consider bulk contracts

    12. Before you charge, KNOW YOUR CUSTOMER!

    13. Extra Revenue Defined by Victor Hugo “…..Charge 'em for the lice, extra for the mice Two percent for looking in the mirror twice Here a little slice, there a little cut Three percent for sleeping with the window shut When it comes to fixing prices There are a lot of tricks he knows How it all increases, all them bits and pieces Jesus! It's amazing how it grows!”

    14. Revenue Renewals…renewals…renewals! Do you have a program in place that communicates to your staff and residents how important renewals are to your property? Bundling services (cable-TV, internet, phone) Can make money, but understand pitfalls of long term contracts Stay away from utilities (but in FL can’t have power purchase agreements) Consider opportunities with Green Tech

    15. Revenue (cont.) Furniture Example: negotiating lower lease payments on years three, four, and five so higher markup on these years Fees Should be in lease and disclosed upon first substantive visit to property Check state and local laws (Disclose, Disclose, Disclose!)

    16. Revenue (cont.) Dry cleaning (larger properties) Parking rent in high density areas Pet fees Security deposit claim processing fees Posting fees Administration fees Charge for service rendered and have work studies back you up

    17. Revenue (cont.) Appraiser Bill Emerson “I used to see other income around $0, now it is close to 5% of EGI” Nathan Collier of the Collier Company “I try to put systems in place that allow ordinary people to achieve extra ordinary results”

    18. Considerations Drastic actions Convert to storage Tenant use Community use Public use

    19. Temporary Uses

    20. Parking Lot Uses

    21. Garage Lighting Upgrade

    22. Repair Leaky Water Pipes

    23. Cost Cutters

    24. Q&A

    25. Contact Information Glen Bachman, CPM® / RPA / SCSM VP Director of Retail Operations Kemper Development IREM Chapter 27 President Elect glen@kemperdc.com Aaron Bosshardt, CPM® Chief Operations Officer of Bosshardt Realty Services, LLC IREM Chapter 60 President Elect aaron@bosshardtrealty.com

    26. Session Handouts www.irem.org/iflc/sessions.cfm Enhancing NOI by Tapping New Revenue Sources

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