Let’s discuss a smart multifamily NOI principle: relationship. The relationship between each g/l expense and the revenue it protects or produces.
It’s an entirely different mindset to think in margins. And you make different decisions compared to thinking in cost(s).
The cost of a decision and its margin impact are related but distinct analytical frames, and a leader who operates primarily from the cost frame will systematically make different choices than one who operates from the margin frame. The cost frame asks how much does this cost. The margin frame asks what does this cost relative to what it protects or produces.
Let’s think abou this in a multifamily context; the maintenance investment that prevents a notice to vacate (NTV) is not a maintenance cost. Think of it as a revenue protection decision with a return that can be precisely calculated: the cost of the maintenance versus the cost of the vacancy, the make-ready, the leasing commission, and the rent loss during the turn. Seen from the margin frame, the maintenance investment that prevents an NYV is almost always the correct financial decision even when it feels expensive in isolation. If you don’t teach this in your organization, start today!
The multifamily operator and asset management team who internalizes and instituionalizes margin thinking evaluates staffing, training, vendor relationships, capital improvements, and communication investments against what they protect or produce rather than what they cost. As stated above, there is a distinciton between the two disciplines and it’s imporant to understand. You will produce better long-term financial outcomes by wrapping your head around it.
Think in margin and capitalize first. Then think about cost(s).
The operator who thinks in cost will always cut the wrong things.
The one who thinks in margin will always protect the right ones.
Learn the difference.
Discussion prompt: Identify one operational expense you or your team has recently resisted or cut. Calculate the margin impact of that decision, the revenue it was protecting or producing relative to its cost. Does the decision look the same from the margin frame as it did from the cost frame?