$25,000,000 in rebates available in Ontario See page 5 The game changers Living made easy, Vertica Resident Services

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1 C A N A D A S O N L Y N A T I O N A L P U B L I C A T I O N F O R A P A R T M E N T O W N E R S A N D M A N A G E R S VOLUME 7 / NUMBER 4 / September/october $25,000,000 in rebates available in Ontario See page 5 The game changers Living made easy, Vertica Resident Services

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3 Increase the value of your property Strategies from 10 industry experts By Peter Cook and Robert Fleet The most successful building owners that do business with us at First National have a strong focus on driving revenue, reducing costs and making money. Like many other landlords their profit margins are under attack from rent controls, higher utility costs and now the Harmonized Sales Tax (HST). Many are also facing intense competition from the condo market. Their counterattack is to exploit opportunities to extract profit from every possible layer of their property. They understand the fact that it s not just about maximizing rental income. They are constantly looking for new ways to increase their net operating income to build net worth. In doing so they are able to leverage the maximum allowable mortgages on their properties to fund future growth plans. In previous issues our advice focused primarily on financing. This issue we bring you a variety of brass tacks, black and white, real strategies from respected industry experts. Take them, use them, and profit. Get a website that pays dividends One important factor that determines the value of your property is the net operating income it generates. In large part this comes down to your ability to attract and retain tenants. A powerful, strategically built website can accomplish both goals for you. Tenant retention. Tenants who feel they are part of a community stay in your building longer and are less likely to move. How can a website build community? By providing a social network for your tenant. Building a tenant s only section in your website will increase your tenant s ability to interact with each other and will help encourage stronger interpersonal relationships to form. This means lowering your turnover, which ultimately creates a more stable income flow for your building. Resident attraction. If you have vacancies, then attracting new residents is your top priority in maintaining the income of your building. A website that ranks well within the search engines will provide you with free advertising and will also be your on duty sales representative 24/7. The building webpage or individual building website is a great place to give prospective residents a behind the scenes view of your building. The more they can imagine themselves living there, the more your odds increase of converting a lead into a tenant. Contributor: Jason Leonard, President, Landlord Web Solutions, jason@landlordwebsolutions.com Managing your building for the highest ROI Here are the top three ways to keep your building running at the highest rate of return: 1) Keep your building at two per cent vacancy - It may seem obvious but the primary source of income for any landlord is from the rents they receive. Therefore it s imperative to keep your property at a two per cent vacancy rate -- no higher, no lower. It s always a delicate balance as you want to ensure your building is full yet you also want to obtain the highest market rents possible which will mean having some vacancy. Having a healthy vacancy rate of two per cent ensures that you will be achieving market rents. Having no vacancy and thus no turnover means your rents are probably too low. 2) Keep the suites available for rent in rent ready condition. Time and time again we see well meaning landlords with tight budgets put the money into the corridors, hallways and lobbies in order to make their property more appealing to prospective tenants. However, tenants don t live in the hallways and corridors so if budgets are tight opt for making sure the suites are in great condition before considering the common areas. 3) Curb appeal - Keep your building looking fresh and inviting with some professional landscaping especially planting brightly coloured flowers in the spring and summer. Landscaping and picking up garbage frequently from your property are the two most efficient and cost effective ways to interest prospective tenants. Anne J. Meinschenk - Director, New Business Development MetCap Living Management Inc. anne.meinschenk@metcap.com September/October

4 Payback from kitchens and bathrooms If you re going to invest money in your buildings, invest it where tenants spend the majority of their time -- in the suite. The best areas in the suite to invest your money are kitchens and bathrooms. It s no secret these are the two main features that attract tenants. Most apartment buildings in the Ontario market are in excess of 40 years old. Many of the interior finishes such as kitchen and bathroom cabinets are well beyond their life expectancy. Kitchen and bathroom cabinet replacement is generally not considered when turning over a suite because property owners feel it is too expensive. However, in our experience we have seen landlords benefit from substantial rent increases ranging from 10 to 20 per cent at the time of turnover. You can increase the value of your property through increased rental income by allocating a portion of your annual budget to refurbish kitchens and bathrooms. Many of our clients commit to annually upgrading a percentage of their units as they turn over. New tenants will see the value of the upgrades, pay a higher rent and stay longer, all contributing to your net operating income. Contributor: Charlsey Brunne, Director Business Development, The Byng Group, charlsey.brunne@thebynggroup.com Treat laundry as a profit centre Landlords and property managers are always searching for new solutions to increase revenue and save money. Laundry is often overlooked. Savings can be greatly improved with new technologies and energy-efficient systems. For example, in the laundry room if the dryers are electric and you convert to gas, the savings can be as high as 35 per cent per cycle. Over time, this will result in significant savings. Another way to reduce expenses in this area is to replace all top load washers with front loading washers. The water consumption can be reduced by as much as 55 per cent. Front loading washers are not only more efficient than standard washers but they also have a larger capacity. Many cities offer cash rebates to switch to energy efficient washers. These are two simple ways to lower costs and improve your net operating income. Contributor: Randy Kamula, Vice President Sales, Sparkle Solutions, randy@sparklesolutions.ca Boost your property value before you sell If you are thinking about selling your property there are a few important items to consider before putting up the for sale sign. The value of your property is largely based on the income it produces. Take these steps to get your property producing more income. If your vacancy rate is lower then the current CMHC average then raise the rents by $50 to $100 per month on turnover at least 12 months prior to listing. Get informed about any issues you may not be aware of by hiring a structural engineer to provide you with a building condition report. Look after as many of the deficiencies as possible to facilitate a faster and easier sale. Enhance your curb appeal and overall first impression of your building. This can be accomplished with professional landscaping, a good cleaning and a fresh coat of paint. Pay particular attention to the lobby, hallways and common areas. Be sure to clean and organize the boiler room and storage areas. If you can avoid it, don t place new debt on the property just before you sell it. Contributor: Drew Koivu, Director, BMO Capital Markets Real Estate Inc., Drew.koivu@bmo.com Profit from parking (even with the new by law) The parking area of any property represents valuable real estate. The parking area also forms part of the overall first impression of your property. The cost can be substantial to maintain it in a standard worthy of a positive impression. The by law in which landlords must provide visitor parking in residential buildings has changed. Take control of your parking area and manage it to maximize profits. Here are three simple and inexpensive ways to make a positive impact on your bottom line. Visitor parking Landlords with buildings zoned Residential/Commercial can use Pay and Display Parking Solutions to manage the visitor parking area. Solar powered Pay and Display units are a green solution to parking in your visitor area and they will ensure that parking spaces are generating revenue. Landlords with buildings zoned residential only can introduce equal distribution of visitor parking use. (For example: Six free uses per unit per month). With an ordinary Pay and Display unit, visitors can use the tenants free use to park in visitor parking. Tenant parking Install or utilize dependable access controls. This doesn t always mean you have to gate it to control it. Gateless solutions are readily available with many options to control tenant parking access with thorough audit ability. Payments for monthly parking are streamlined, and provide the advantage of segregating parking revenue from the tenants rent. Outsource your parking Outsource your parking management to a parking professional. This way tenants, security personnel and superintendents will answer to a third party. Let professionals manage any disputes that may arise and remove money handling from the site wherever possible. This makes for better on-site management and isolates you from any parking related issues. By implementing these recommendations you ll turn an ordinary parking lot into a profit centre. Contributor: Mary Sheridan, Account Executive, Precise ParkLink, msheridan@precisebi.com Streamline your operation with property management software New best practices developed by property management software providers allow multi-family property managers to administer their entire operation on a centralized platform. These systems enable real-time reporting with full drill-down. They make property management, accounting, websites, and resident and prospect portals fully integrated without interfaces. 16

5 Additional products built into the centralized system help apartment managers increase their properties value by attracting and retaining residents. By automating multiple processes in the same database, these solutions produce efficiency in many forms, including: Dynamic online property and availability marketing containing real-time unit and pricing information Applications -- including screening -- completed online rather than manually in the leasing office Online resident services, including rent payment, lease renewals, and work order submissions Reduces purchasing costs with streamlined online supply and service procurement Improved cash flow from automated meter reading and utility billing Live call center support New solutions such as these improve operational efficiency and allow apartment managers to focus their time and resources on activities that create value for owners and investors. Contributor: Peter Altobelli, Vice President and General Manager, Canadian Operations, Yardi Systems, Inc., Photo tips that attract tenants Prospective tenants may come across your rental properties through advertising sources. They would like to know what it may be like to live there. This is where you can use a picture to speak a thousand words about your buildings. In our experience a few photographs, when taken correctly, can create the impression of much greater value in the minds of potential tenants. Every photo taken must be level, with the subject centered. Before you snap the shot be sure the location is as clean and tidy as possible. When taking exterior shots choose an angle that excludes items that detract from the appearance of your property. Be sure your pictures don t include garbage at the side of the road or the construction that may be occurring nearby. Avoid the reflection of the photographer in doors and windows. When taking interior shots, take pictures of the areas that occupants use consistently; eating area, bedrooms, bathrooms and the TV or computer room. Be sure you clean the bathroom so that it sparkles and remember to put the toilet seat down. If necessary, take the pictures from about 4 feet from the floor so you are not seeing the stained toilet bowl, sink and bathtub drains. Create the right impression with uncluttered rooms, bright hallways and tidy bathrooms and kitchens. Use a flash and, if necessary, add additional lights to help brighten up each room. A potential occupant wants to experience what it may be like to live in your building even before they visit. Your photos when done correctly can attract tenants or potential buyers. Contributor Darren Henry, Director, Gottarent, dhenry@ metroland.com Lighting: Reduce operating costs and increase profits The City of Toronto has initiated a program whereby they are auditing each high-rise apartment building in the GTA. The focus of this program is to provide a detailed list to each building owner that outlines all the infractions within the building with regard to the Building Code. The reality is that the majority of apartment buildings do not currently meet the minimum lighting requirements for hallways and common areas. In many cases a properly designed lighting retrofit program can not only substantially decrease energy use but can also bring your building s hallway and common areas up to code. Contributor: Steve Herzog Vice President, CERTIFIED Greener Solutions, sherzog@cgoc.ca Reap the benefits of your local apartment association If you are not yet a member, you should consider joining your local apartment association. There are 17 apartment associations across Canada that make up the Canadian Federation of Apartment Associations. We have joined 11 of them and have found benefits on many different levels. These associations often hold meetings with government staff and politicians. This includes all forms of legislation that affect our industry such as building and fire codes, municipal property standards, maintenance bylaws, zoning issues, rent controls, landlord and tenant legislation and taxation issues. Other benefits to landlords: Education -- Learn ways to reduce expenses and increase revenues Association discounts Energy conservation/rebate programs One united voice, advocating the interests of the industry to appropriate levels of government Network -- meet developers, lawyers, accountants and public sector representatives, industry service providers. Conferences and meetings offer education and best practices on every issue relating to the profitable management of apartment buildings. The knowledge you will gain from active participation in your association is sure to give you many tools to increase the value of your properties. Our objective in this issue was to expose the layers of untapped revenue. Consider adopting the strategies from these industry professionals in your day to day business. When you re making an acquisition or refinancing, be sure to allow for additional funding to invest in these strategies to increase your net operating income and ultimately your personal net worth. CAM Peter Cook & Robert Fleet, Apartment Financing Specialists, First National LP 18