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How do landlords calculate the amount of monthly rent they charge tenants? NYC property management experts might advise you to set your rental rates somewhere between 0.8% and 1.1%. The actual rate depends on location, type of home, amenities, and the current rental market.
Adhering to general guidelines, however, might end up costing you money. To get a real understanding of the true value of your property, conducting a lease audit is a must.
How can a lease audit and cost recovery maximize revenue for NYC property owners? Keep reading as we unveil effective strategies and best practices to optimize owners' revenue streams.
Understanding Commercial Lease Audits
A lease audit is a process that takes a good look at a landlord's books and records to examine the operating expense charges. The purpose is to make sure that the expenses that are passed through to the tenant are fair and accurate.
The big question is, "Do they meet the terms outlined in the lease agreement?" The audit sheds light on lease compliance.
With New York losing more residents than any other state as of July 2023, NYC property owners are working to keep tenants. Lease audits help ensure compliance with lease terms, thereby keeping tenants content.
Key Areas to Focus on During Lease Audits
A good list of real estate revenue tips includes focusing on some key areas when conducting a lease audit:
- Operating expenses
- Common area maintenance (CAM) charges
- Utility costs
- Property tax pass-throughs
Operating expenses include recurring costs necessary to keep the rental property in good order. Also included are marketing and advertising expenses, property management, repairs and maintenance, insurance, and property taxes.
Cost Recovery Strategies
Property cost recovery includes three important strategies. Implementing these strategies will give you an accurate picture and help boost your revenue:
- Identifying overcharges
- Negotiating with tenants
- Implementing corrective measures
If you can recoup costs related to upkeep, renovations, and improvements through cost recovery, your bottom line improves. You also enjoy the financial sustainability of your real estate investments.
Best Practices for Conducting Lease Audits
Establish a regular audit schedule. Don't let it be something you get around to from time to time.
Maintain detailed records that a professional auditor can look at and analyze. Use lease management software and data analytics tools.
Legal Considerations
Get a lease clause review. When a lawyer reviews your lease agreement, the goal is to ensure the terms are in your best interest. Poorly worded leases may put you in a high-risk position.
Another legal consideration has to do with compliance with NYC regulations. To stay legally compliant, you have to meet city requirements.
Lease Audit and Cost Recovery: Maximize Revenue
Now that you've learned lease audit and cost recovery tips, you'll be able to maximize your revenue through these critical checks. Because every cent counts, you don't want to miss out on recoverable costs.
The professionals at PMI New York City know that cost recovery is crucial for landlords in recouping expenses. We can help you with lease audit and cost recovery services. Contact us today through our website or by calling 212-739.0780.
