Posts Tagged ‘apartment value’

An easy way to add instant value to apartment properties? You may be surprised!

March 15, 2010

The recession has had a devastating effect on property prices – both residential and commercial. Estimates of price declines in some coastal markets are as much as 50% or more. And considering that many individual apartment investors are counting on selling these properties to fund retirement accounts some day, suddenly the erosion of the value of these buildings has many investors more than just a little worried. Corporate owners and managers are just as beat up. Rent reductions to attract (and even retain!) tenants have resulted in lower gross rental income, which means smaller or no raises for the staff, and possibly layoffs. Capital improvements are at a virtual standstill.

While the worst seems to be behind us, it’s still going to be an uphill battle to prop up prices to where they were in the mid-2000s. Operating expenses have already been cut to the bone. Or have they?? One expense that every apartment incurs, but that always seems to be overlooked, is trash and recyclable removal. Paring this expense while maintaining, if not improving, the efficiency of the current waste and recyclable hauler can instantly add value to an apartment portfolio while improving net operating income.

As an example, let’s say a 58-unit aprtment building is valued at $1.7 million, has a cap rate of 10%, and net operating income of $170,000. Assuming the building is 66% occupied (it’s been a rough economy!), the 38 units will each produce about 1.5 cubic yards of trash and recyclables per month. Let’s say that those 57 cubic yards are being collected by a reputable hauler in two 8-cubic-yard Dumpsters once a week at a rate of $550 per month, which is not an outlandish price, but certainly not where it should be!

Let’s assume that a reputable solid waste management consulting company (such as Waste Auduting Consultants!) is hired to help increase efficiencies, thereby lowering costs. And let’s assume that the costs can be lowered by 40% to $330 for the exact same service (WAC usually reduces costs to clients by about 30 to 50% without having to change waste haulers). What is the net effect? NOI has been increased by $220 per month ($2640 annually). The value of the property has gone up a little more than 1.55%, or $26,400, instantly (the price of an apartment equals the NOI divided by the cap rate).

What does this cost the owner? We simply share the savings generated by our work. So really, the value of the property went up about 0.775%, or $13,200. Still not bad for not having to lay out any cash at all, and for not having to make any capital improvements. And if this is just one building in a portfolio, the same results can be accomplished simultaneously at all locations – both here in the Greater Cincinnati area, and throughout North America!

If you’d like to see if we can accomplish the same, or even better results, with your properties, feel free to contact Waste Auditing Consultants. We would be happy to speak with you and answer any questions you may have about how our services can help you reach your goals.

Trip Topken is the president of Waste Auditing Consultants, the premiere solid waste management consultants in the Greater Cincinnati area. An affiliate of Environmental Waste Solutions, WAC can help any company spending $400 to $375,000 per month on waste and recycling. Savings of 30 to 50 percent are normal, but not guaranteed. WAC, in collaberation with EWS, can simultaneously produce results at all locations across North America. No up-front fees are ever due, and WAC simply shares the savings its work generates. Learn more about Waste Auditing Consultants here. You can contact Trip at 513-398-2117 or email trip@wasteac.com.