Apartment Budgeting: Storage Income

One in Ten Americans Has a Self-Storage Unit

“Human laziness has always been a big friend of self-storage operators,” Derek Naylor, president of the consultant group Storage Marketing Solutions – New York Times article. I would say to my apartment friends – we/you need to get a piece of that action. Build garages not for parking cars but rather storing junk. Do some dual marketing – call it storage and or garage. It’s a place to put stuff and things.

Storage is such an epidemic that we now have Storage Wars (reality TV show) aimed at celebrating the agonies and lamenting the defeats of would be bidders. It also doubles as a back door way of marketing the self-storage business – a post for another day.

Storage Income Defined

Simply put – this is income that comes from those dusty old basement storage spaces that everyone tends to forget about.

Storage Income is a way to drive revenue to your bottom line. If your property has the space (basements are great for this) – consider the option of building out some simple caged space that people can use to store stuff. Or, if you already have it, just remember to market it. Price it to sell, create scarcity and urgency. Heck, give it away (for short stints) just to get people hooked on having it. Trust me, once they move their stuff in – as suggested above – they will be too lazy to move it out. Boom – you chance to get an extra $5 or so a month.

Budgeting Strategy

No real strategy here. Look at your trend lines over the trailing 24 months and get yourself an average. Use that average to straight line your storage income account and think about adding some inflation for the coming 12 months.

Any Other Thoughts On Storage Income?

Your having an amazing and over the top day multifamily maniac,


Apartment Budgeting: Lease/Short Term Premium

Back for another week of budget talk. Hope this past week has been over the top and amazing for all of you. If  not, you have a whole life of potential in front of you so don’t fret too much. Last week we talked about Month to Month Premiums and this week are moving on to Apartment Budgeting: Lease/Short Term Premium.

Lease/Short Term Premium Defined

Lease/Short Term Premium is a fee that is added to any lease that is less than the desired six, nine or twelve month lease that most of us non-revenue management practitioners desire. Call is a fee of convenience if you will. It allows a resident to have flexibility in the way of getting out of the lease contract without any lease break penalties. It is a simple month to month premium that you tack on at the initiation of the lease term.

I have seen this fee applied in the way of a flat fee ranging from $50 to $100/mo. And, I have seen it applied as a percentage of the lease rate ranging from 5% to 10%/mo.

Lease/Short Term Premium Budgeting StrategyPremium for short term apartment lease

I typically consult a twelve month trailing report to determine what my forward-looking twelve month budget number should be. This is again one of those fees that is very hard to budget for given the fact that is simply random in nature. Unless you are located in a somewhat urban area with a propensity to attract corporate type clientele, you will rarely book income to this line item.

Marketing Short Term Leases

Don’t forget that everything is marketing. And, this line item should prompt you to look for marketing opportunities. Use Short Term Leases as a bullet point on your website. But, don’t get too crazy as you don’t want to create unwanted exposure. But, it would not be a bad idea to let two to three percent of your unit count produce some extra revenue.

Your looking for opportunity in every line item multifamily maniac,



Insufficient Notice Fee

What is an insufficient notice fee? Simply put, it’s an acceleration of rent due for giving a notice that does not meet the necessary lease protocol.

What is an insufficient notice-fee? Simply put, it’s an acceleration of rent due to giving a notice that does not meet the necessary lease protocol.

I am back for the weekly (save last week – vacation) budget installment. I took some time off last week and ultimately (save a pic post here and there) unplugged. All I can say is – DO THIS. Give yourself three to five days off every quarter and get away from everything. It’s good therapy. So – this week, we are talking about the Insufficient Notice Fee.

Insufficient Notice Fee Defined

What is an insufficient notice-fee? Simply put, it’s an acceleration of rent due to giving a notice that does not meet the necessary lease protocol. For example, Mills Properties requires a 60-day notice before move-out.

Budget Strategy

The Insufficient Notice Fee is a line item that you can budget based on T-12 (Trailing 12 months) information. The frequency is random, so there is a real chance that you could estimate for four based on your trailing information and end up with two or six. You will likely never be precise with this number. In the same respect, you will probably never be too far off.

It’s short and sweet this week. And it’s hot in #STL.

Your trying to keep cool in the 100+ temps multifamily manic,


Apartment Lease Termination Fees

What are lease termination fees? The fee is applied if a current resident decides to break their existing lease contract prior to the lease end date.

Apartment Lease termination feesIt’s time for another installment of our series on apartment budgeting. Today we are tackling the top of apartment lease termination fees.

Lease Termination Fees Defined

What are lease termination fees? The fee is applied if a current resident decides to break their existing lease contract prior to the lease end date. I have seen the fee vary in amounts – some as low as one months rent and others as high and two and one half times the amount of the monthly rent.

Budget Strategy

The apartment lease termination fee is a line item that you can simply use history to forecast forward. If you collected three of these fees last year, it is fair to say that you might do the same in the coming year. Or, if you have more history to pull from then do so. If you have three to five years of history, go back and consider the number of fees you collected over that time and simply average it out.

Once you have determined the number you have collected, space them out over the course of the year. Feel free to pick your months at random as there is no absolute way to predict when someone might need to break their lease.

Charge and Beware

This is likely the second most contested apartment related fee standing close behind late fees. A quick search yielded more than a few Q&A sites that advised everything from – pay it to challenge it.

The fee is perfect legal and it is agreed to at the time of the lease signing so feel compelled to stand your ground.

Your lovin’ other income multifamily manic,


Simple Timeline

In the absence of a simple timeline you get chaos. You get the finger-pointing. You get he said and she said and they said and we all said – time-sucks. It’s exhausting and it usually involves the highest of pay grades to solve.

Project Management for Apartment ProjectsLay it out – 

I heard a story this week (it was really a rant) about a broken system. The system existed between a project management team and an accounting team. As I listened (from a third-party removed perspective), it became clear to me that there was a fair amount of pre-work to include simple timelines did not exist.


Simple maps that memorialize the steps between inception and conclusion. Simple steps put down on paper that capture the essence of letting out a contract for work to be done and the follow through to completion and payment for that work.

In the absence of a simple timeline you get chaos. You get the finger-pointing. You get he said and she said and they said and we all said – time-sucks. It’s exhausting and it usually involves the highest of pay grades to solve.

Creating an Apartment Project Timeline

1. Budget

2. Bid work (even though you have a budget, do the bid work)

3. Make sure the money is there (remember your apartment community budget was written months ago – in some cases many months ago). If the property is not performing to budget – the project may need to be put on a shelf.

*Item of note – don’t skip #3, it is where 99% of the problems can be traced back to

4. Put together a simple vendor list – who is working on the job, telephone number, lead (accounting contact), roughly what they are to be paid and when

5. Host a project launch meeting (in person if possible, by phone if not). Invite the property manager, maintenance supervisor, every vendor involved and your accountant

6. Give a weekly check-in update (via email or by phone whereby the above team calls in)

7. Wrap it up – tie up the loose ends and deliver the product

8. Host a post-mortem for every project no matter the scope. This is where you create excellence. Set the stage for an unadulterated conversation and tear apart the good the bad and the ugly of the project. Have your simple timeline laying in front of everyone and up on a computer screen for all to see. Have it set in an edit mode and change it (for the good) right there on the spot.

No system is perfect but every system should be evolving at all times.

Your counting on simple timelines all the time multifamily manic,


Apartment Budgeting: Forfeited Security Deposit

Hope your Tuesday is off to a good start. I am still in the vein of Other Income as I venture through these budget installments.

Forfeited Security Deposit 

Defined: A fee taken when an applicant fails to follow through with physically moving into your community after they have been fully qualified to do so.

***As a note of clarity: the security deposit in the refundable portion of the deposit collected at the time you collect a signed application.

The justification for charging and collecting this fee is that you and your team have spent time and resource getting an application processed. That is to include completing the application, running credit and criminal background checks and calling the applicant to let them know that they are qualified.

If you do all of that only to have the applicant call you at the last-minute to cancel, you should be paid for your time. That is what the forfeiture of security deposit covers.

How much?

This various by market and sub-market and in some cases is governed by state and local laws so be sure to do your research.

For reference fees in the St. Louis Apartment Market range anywhere from $150 to $500 with extremes on either side.

Lease Application

Make absolutely certain that you clearly define this practice and the amounts you charge for it in your lease contract. Void of the language, you will have a tough time collecting on it. Make sure the language is in concert with the laws that govern such things in your respective markets. And, don’t be shy about collecting it. No matter how customer-centric you are – you don’t work for free.

That is it for this week – I have left some nuggets out of the conversation on the outside chance that we get some comments. So, let us know what you think if you have a free moment today.

Your lovin’ the budget series multifamily maniac,


Rent Write Off

We are nearing the end of the first section of our property management budget discussions. Up to now we have been penning about rental income and the various losses that are booked against it. They come in the way of; loss to lease, vacancy and various marketing related concessions. To round it out we are going to discuss the Rent Write Off line item.

Rent Write OffBad Debt Rent Write Off

Rent Write Off can be summed up simply – it is monies that are not collected as a result of residents not paying rent. Most likely for multiply months as it takes some bit of time to evict a resident for non-payment. In some cases 90 days or more.

Rent that is written off should be booked in the month that they it is incurred. That is to suggest that if a resident moves out and the account is reconciled (for some of you – that means that a SODA is completed) and an amount is left outstanding, it is written off as debt that has a slightly better than slim chance of being collected.

One item of note on this point; you will likely be writing off an amount that includes late fees, NSF fees, charges for damages, etc.. With that in mind, the only monies that get booked to Rent Write Off are in fact rent monies. The fees and damages are booked to a line item we will discuss in the coming weeks.

In the mean time, I am interested in knowing if your company practice is to book the write off in the month your accounts are reconciled or do you apply a lag time?

Your – always curious – multifamily manic,


Pic props: Urbandigs.com


Resident Referral Money

Before we continue with our budget discussion on the topic of resident referrals, I want to back up and remark on a comment that I saw this last week. The comment was posted on Facebook and whether it related to our post or not, I found it a bit amiss. It was along the lines that discounts for specific groups be it students, seniors, city service workers are dumb.

Now I would not debate the merit of the remark in the sense that there are more creative ways to give money away. I would/will take the position that if it works – do it. It’s kind of like print media. Despite our need/want/desire to get away from our reliance on print media and ILS’s – if they work – we should use them. That is until they run their respective courses.

Resident Referrals

Apartment Marketing Resident ReferralsI am fairly certain that resident referrals or giving money or gifts away in exchange for move-ins is employed by every multifamily operator out there in some form or fashion. On that note – are they dumb? If I apply the same logic as our Facebook commenter then I posit – yes. It’s a concession given to a specific group. And, there are more creative ways to give money, influence or incentive to that group. That said, I am both a fan and an advocate of using them be it in the form of a concession, gift card or otherwise. After all they are much cheaper that most print media and or ILSs.

Resident referrals are used to reward your best in place marketing machine. The people who live with you currently. Every single one of them are a marketing opportunity waiting to happen. And, giving them reward can/is a good thing. And, that reward can come in any number of means.

They are monies given in the way of a concession, gift card and or hard tangible item (think flat screen, iPod, iPad, etc..). Now, we could debate the amounts given or the merit of a gift in lieu of money. We can suggest that money is not remembered after it is given. In my mind, we could suggest the same for a gift.

It doesn’t matter where you book it (Read: which line item it hits in your budget) it all shakes out in the bottom line.

Make it SmashingEnthusiasm Energy Authenticity Multifamily

No matter how you give it away, I would suggest you make it an experience. If you give them a concession – couple it with an impromptu in-home celebration. If you give them an iPod – record an uber-cool celebration message and load it in. Have a party centered around resident referrals and introduce the idea of making a commitment to share 10% (matched by your company) of the fee. Invite the charity in to share in the experience. Get creative and make it worth remarking about.

Your – believing that if it works – use it – multifamily manic,

M Continue reading “Resident Referral Money”

Apartment Budgets: Loss to Lease

Welcome back for another installment of the Apartment Budget series. Today we are going to talk about Loss to Lease. Interesting side note, I did a piece on this a number of years ago and to this day it remains the number one read article on this blog.

Before we get started, I wanted to post a note of clarity as it relates to my last entry – Apartment Budgets: Rental Income. Where I refer to Rental Income in that post – I am really talking about Gross Potential Rent as being the top line. You may also hear it referred to as GPR. In any event, I wanted to head off any confusion.


Now unless you have a brand new community in lease up, you will have in place leases that are very likely below the GPR. The primary reason being rent increases. Any time you increase rents you create a margin between the in place leases and the new increased GPR. This can occur in reverse and the impact to the LTL can go in reverse. That is to suggest that you can decrease the GPR and the margin or LTL becomes positive. Not a scenario you see to often as rents generally rise over time in lieu of decline over time.

Loss to Lease – New Move In

To put it simply; if you lease an apartment below the GPR, the discount is captured in a Loss to Lease – New Move In line item. To put some math to it; if your apartment’s GPR is $500 and you lease it for $450, the $50 reduction in rent is capture in the Loss to Lease – New Move In line item as a -$50 charge. And, it will exist for the life of the lease.

Loss to Lease – Renewals 

When leases come up for renewal and they are under the GPR number – the margin is by default in the current Loss to Lease line item. When the lease renews, if it is still under the GPR that new number gets captured in the Loss to Lease – Renewal line item. Putting some math to it. Suppose your apartment’s GPR is $500 and the current in place lease is $450 – you renew it at $475. The $25 margin is captured in Loss to Lease – Renewals.

Total Effective Rent

Once you have accounted for your losses related to in place, new and renewed leases under the current Gross Rent Potential – you come up with a Total Effective Rent. That is where we will pick up next week.

We have purposefully left out the analysis piece this week because I think it will fuel some crazy cool discussion. Hope to see you in the comment section below.

Your – lovin’ budgets – multifamily maniac,