Home developers and HOA’s are bulking up on NOI growth.

Imagine this scenario. Families are excited to get into your community. Your HOA can offer in-demand fiber internet as an amenity for everyone. And these buyers are willing to pay a little more for their homes. Property values look good and the figures on both your income statement and balance sheet show improvement. And, not coincidentally, so does your net operating income (NOI).

An opportunity for a community-wide internet agreement may have been pitched to you (and your competition), but not everyone has the eye to see it through the NOI lens. Dan O’Connell, vice president, consumer sales for Quantum Fiber cuts right to the chase on to key financial strategies.

O’Connell level-sets by saying “the market recognizes and values the inclusion of a fiber-based internet service as an amenity for which they are willing to pay. That can drive revenue growth and contribute to NOI gains. This crystallized for a lot of folks that high-speed broadband is a foundational necessity when suddenly everyone was working, living, playing, shopping, learning, and gaming from home. If you work with the right service provider partner, you can position it as an important amenity that you offer your homeowners in a way that distinguishes your community. It boils down to securing a long-term bulk fiber internet agreement with a Tier 1 service provider like Quantum Fiber.”

Dan O’Connell, Quantum Fiber

A bulk deal for fiber internet can raise revenues—and NOI.

A bulk internet agreement is between an internet service provider ISP and a developer or HOA. The ISP offers a multi-year bundle of internet services at a monthly rate—enough to service communities for years. And like anything purchased in bulk, there are advantages to the buyer (developer or HOA), primarily, an exceedingly competitive price.

HOAs and developers can consider several financial models, including these:

1. Pass along the internet savings to homeowners. 
2. Offer fiber as a value-added amenity, packaging it in the fee for internet connectivity to your homeowners at a profit, compared to what you pay (at or below market level rates so this is appealing to renters).

The math is straightforward when it comes to figuring out what you can earn if you enter a bulk agreement with a reputable internet service provider.

$ monthly rate you charge all residents/units – $ property bulk monthly rate = $ incremental revenue. Now multiply by 12 (months).

If you’ve locked in a bulk rate for years, your total incremental revenue doubles by year two, triples by year three, and so on. The longer your bulk contract, the further ahead you can project revenue, as locking in a long-term contract gives you an advantageous rate well into the future. What’s more, over the years, the difference between the bulk rate you secured and the current fair market value—i.e., what your residents would pay on their own—would probably widen significantly. That means you can increase the monthly rate you charge over time. Factoring in such rate increases, you can see how revenue—and thus NOI—can jump significantly.

Pay attention to the details when negotiating a bulk contract, O’Connell warns by saying, “although a fixed-rate bulk agreement is standard for Quantum Fiber, it is not true of the industry at large. In fact, we consider it a very important aspect of our value proposition to residential communities.  Maybe some companies start with what seems like a nice introductory rate—perhaps one that’s $5 less per unit than what others are charging. But within a couple of years, that $5 advantage disappears, and you’ve got a lot of operating expense pain for the next six, seven, or eight years,” O’Connell explains.

Need more NOI-building calories? 

Fiber also impacts the other half of the NOI equation—reducing operating costs, dodging capital investment expenses, and planning for the long-term.

Typically no capital investment cost

“It’s all upside from a capital investment perspective for the community because the installation cost is all on us,” O’Connell says, “You don’t need to invest a penny in the installation—just sign the bulk agreement with Quantum Fiber, and you’re set. We’ll handle the construction work, install equipment to each living unit and activate the service.”

Gratis services model home and common areas

Leading providers will include internet lines to on-site model homes or common areas as part of bulk agreements. Builders appreciate getting a no-fee, hardwired line that can support WiFi to their model home, pool, gym or other common areas. And easily add a nominal fee digital phone line plan if needed for office use.

Eco-friendly and sustainable

Fiber infrastructure is environmentally-friendly and energy-efficient, which can save homeowners money and your community’s conscience. What’s more, homeowners get instant activation and an always-on service.

Global cybersecurity

For Tier 1 providers, their global fiber network is a key layer to help protect against real-time threats and block malicious traffic before it reaches employees, residents, or devices at the property level.

“In Quantum Fiber’s case, as a Lumen Technologies brand, we have advanced cybersecurity capabilities because we can block or quarantine malicious content in real time,” said O’Connell. “Also at Quantum Fiber, we have safeguards at our equipment layer. Modems connect to a cloud-based system that uses machine learning to scan messages, files, and applications instantly.”

Win-win agreement

And as critical as NOI is, it’s important for developer or HOA’s to not chase it at the expense of the resident experience. According to O’Connell, “you might get fiber at a lower rate from someone, but you must ensure that the commitment and quality is there as part of a true partnership. Pay attention to the details when negotiating a bulk contract. The right agreement terms with the right internet provider are critical components to your bottom line.”

Engaged partnership

Finally, you don’t want a “set and forget” type of relationship with your partner. You should require a dedicated bulk program manager who regularly checks in and makes sure everything is going smoothly. “We do network health monitoring of our communities on a regular basis, and also provide complimentary services called gratis accounts,” said O’Connell.

Quantum Fiber delivers the whole connected world with ease.

For apartments, townhomes, garden homes, and single-family home communities, Quantum Fiber provides future-ready fiber internet and excellent service to all residents, which can give multifamily properties an edge over their competition and give families a place they want to call home.

Check out these related resources:

• Residential fiber is now table stakes for boosting NOI (Part 1)
• How multifamily properties can secure favorable bulk fiber contracts to boost NOI (Part 2)
• Master planned communities can dream bigger with Fiber Multigigabit capabilities.