Published June 2001

Beef up bottom line with rooftop revenue, other tips

At the recent Washington State Commercial Broker’s Association annual convention in Seattle, I had the opportunity to speak to a number of attendees in a workshop titled “Top 10 Ways to Increase Value in Your Real Estate Investment.”

With utility rate increases putting pressure on bottom lines for income property owners, attendance was strong among those looking for creative ways to offset — or off-load — operating costs and find ways to develop new revenue sources above the rents to keep returns healthy.

I’ve picked a few from the bunch to share with Herald Business Journal readers:

New revenue sources — Rooftops can be a meaningful source of revenue for the right buildings in the right locations. Cellular and other communications industries often prefer to locate transmitters or relay equipment on rooftops rather than setting up more expensive towers of their own. Permits to place stations or antennae on already existing structures save time, too, as permits to develop a free-standing tower are more expensive and time consuming. Rooftops can become the most productive floor of the building if marketed and managed properly.

Utility submetering — This is becoming more popular in multifamily properties with today’s high energy costs. Private firms now sell metering devices that mount on the supply lines to hot-water tanks and have a wireless system to measure a tenant’s water use. A ratio of hot-water tank water consumption to usage in the entire unit is developed to bill the tenant for the proper water/sewer amount.

The payback period for the roughly $300-per-unit up-front costs for the meters is often as short as a year in most areas. For multifamily properties in which the landlord traditionally has paid the water/sewer bill for the tenant, the new submeters have become an instant cash-flow boost — one that is more accepted by tenants than an equivalent rent increase because they have control over the usage and, therefore, their direct costs.

Reduce tenant turnover — A 10 percent reduction in turnover can have a significant positive effect on cost control — particularly for multifamily properties.

Turnover reduction can be achieved through lease structures that reward tenants for renewing or by establishing quality tenant screening criterion. Higher-touch management and maintenance attention is another way to earn tenants’ affections and retain multifamily or commercial long term.

Preventative maintenance — A well thought-out preventative maintenance plan can save big dollars by preventing a major breakdown at some point. Keeping scuppers clear of debris is a simple but effective way to keep water flowing where it should. HVAC units must be maintained and filters changed to prevent a big-ticket item like this from breaking down prematurely. Checking for moisture problems and pest problems periodically almost always pays off by catching something small before it gets to be a big problem.

There are more ways to maximize returns, but these five may have the most practical application today.

Tom Hoban is CEO of Coast Management Co., a property management company with offices in Everett, Bellevue, and Boise, Idaho. He can be reached at 425-339-3638 or by e-mail to tomhoban@coastmgt.com.

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