Build-to-Rent developments are quickly becoming one of real estate's hottest new trends and are certainly piquing the interest of many in the industry. They offer a great alternative to those looking for the space and privacy that a house offers but aren't quite ready or willing to purchase one of their own.
As investors continue to flock to this market, they are thinking about how they can maximize their NOI (Net Operating Income) for the most profitable returns on their investment. With a strong strategy and the right partners, steady NOI growth is possible. However, before getting to the 'how,' let us break down what NOI is.
What is NOI? NOI is defined as the return or reward to the investor for taking the development risk by planning and constructing the development. Typically, the annual Gross Operating Income (GOI) generated by a property, less the costs to operate it (OC - operating costs). Therefore, a strong NOI increases returns and increases the value of a property. This leads us to the 'how.'
Increasing revenue while decreasing operational costs is the trick to a strong NOI annually, but the question is, how exactly can this be done?
Building a Better Product
While there are certainly different ways to increase NOI, one surefire way is to build an overall better product. This means building a community that not only fits the bill of what's needed but meets the standards of what renters are looking for, which translates into building fully integrated smart homes. By doing so, investors not only build homes that are attractive renters but help them manage their assets better.
To build integrated smart homes, you must include the right smart home devices that can work together to create automations. These technologies need to speak to one another; if not, they're simply different devices working in silos.
Renters today are interested in homes that have smart locks, thermostats, and doorbell cameras. Smart locks and doorbell cameras streamline operations for property teams and give residents a sense of security within their homes and rental communities.
They're also interested in devices that genuinely make their homes smart. These come in the form of voice-activated devices like Amazon's Alexa & Google Home. However, simply including these isn't enough. Builders must ensure that these devices all speak to one another so they can build automations that bring convenience to residents' lives; that's really what builds value.
Increased Rent & Increased Revenue
Building homes equipped with the right technology attracts more residents, and leads to higher monthly rents, driving increased revenue over time. These added features are often invaluable, and renters are willing to pay more on rent for homes equipped with these devices.
For instance, millennials, in particular, are looking for homes with keyless locks, interconnected doorbells, and voice-activated assistants. They're even willing to pay an average of 20 percent more on rent per month for homes already equipped with these devices.
Base rental rates can then increase as smart homes are built specifically to meet the demands of today's renters. Over time this leads to increased revenue that helps balance the cost of operation, helping investors build NOI in less time than usual.
While Saving on Utilities Every Month
Increased revenue isn't the only value proptech can provide to investors. Some devices can even lower costs, reduce energy consumption, and protect assets as well.
A recent consumer data report by Parks Associates took a look at energy consumption and uncovered that 44 percent of US internet users are actively working towards reducing their energy consumption at home. However, they also discovered that only 19 percent are aware of energy monitoring and products offered by their energy companies.
To bridge this gap, installing smart thermostats can give residents the autonomy to control temperature settings based on their daily schedule and reduce their energy consumption within their homes. This allows residents to control their energy usage without relying on their energy company. In reducing their energy consumption, they're also reducing their energy bills. These additions can lead to longer retention rates and less turnover.
This also means that operators can easily manage vacant homes in the same way. As a result, they can reduce consumption and costs remotely, leading to lowered operational costs for the community.
Additionally, including specific devices can even protect assets and avoid costly disasters from happening. For instance, leak sensors are small devices that pack a mighty punch of protection by instantly detecting the first sign of a water leak. Doing so can save investors thousands of dollars in unnecessary insurance claims that can lead to increased premiums over the course of years. These can also reduce water waste and usage that can creep up with hidden water leaks.
A Winning Combination
By making these upfront investments, investors set themselves up for a profitable future. Including the right proptech devices creates a combination of increased revenue by also reducing operating costs at the same time. Coupled together leads to positive growth in NOI for communities, leading to greater value should they be sold.
However, investors must build these smart communities with the right partners to enjoy the strongest returns.
Building a Strong Product & Even Stronger Partnership
The right partnership makes a world of difference when equipping homes with proptech devices. At SmartRent, we provide premium hardware solutions and offer a platform that allows each device to work together to create the daily automations that add value to your residents' lives.
Our SmartRent platform lets site teams efficiently manage and control each home remotely while streamlining maintenance and daily tasks. Meanwhile, the SmartRent app gives residents the ability to control each device from the palm of their hand. In addition, powerful integrations with leaders in the industry like Ring and Amazon's Alexa let residents easily integrate the devices they already own into their new homes and control each from our easy-to-use app.
We also provide white-glove installation service and 24/7 customer support to clients and residents alike. We take pride in building the right strategy for each client's individual needs to solve their current pain points.
When it comes to building NOI, we know how to build the right growth strategy. See for yourself by scheduling a quick demo with one of our experts.