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,

M

Apartment Budgeting: Telephone Income

Telephone income is a great way to add value to your real estate.

I have taken a bit of a pause here at MBG due in large part to Mills Properties budget season. Every year around this time we dive head first into a process that takes the better part of two plus months to complete. We do our best to space it out so that any one VP, RM or AM does not get creamed. And, in the same respect it does take a good deal of focused time to do a budget right. With that in mind, I want to get back to posting to the blog as it provides good therapy for the day-to-day hustle of property management.

Today’s topic is telephone income.

Telephone Income Defined

Telephone Income is derived from a couple of different sources. Roughly twenty years ago plus or minus, it came from the likes of AT&T and or other local providers. Our on site sales teams would offer to transfer existing phone service or they would initiate the call for new service to be set up. For that, the property received a commission. It didn’t amount too much but it was income.

Around the same time, at least according to my aging memory, revenue share models arrived on the scene. Similar to cable and internet shares, in exchange for exclusive marketing rights, the providers gave the property owners a piece of the revenue. The share amount was equal to your ability to negotiate. These amounts started to mean something in the way of overall property value. Not huge but something nevertheless.

Cell phone towers changed all that. Providers would come in, especially in the case of high-rise buildings, and pay huge lump sums with ongoing payments. They would erect cell phone towers on your building and or land, sign mega long contracts (10 years plus) and be on their merry way. Huge deal when it came to adding value to your real estate.

I have likely left out a few income angles so feel free to fill in the blanks. And, thank you ahead of time.

Budgeting Strategy

This line item is a bit different from the prior line items. That is in terms of straight lining the income based on history. Because the income is based on contractual terms and agreements you can plug the income. That is to suggest that sometimes the payments are made annually, quarterly or monthly. And, they are specific in amount. Whatever the case, review your contracts, make note of the payment amounts and months they are to be paid and enter accordingly.

Refreshing

It’s good to be writing again. I really miss this part of my world. In the same respect, it felt good to take a pause.

Your looking forward to rockin’ the world today multifamily maniac,

M

Apartment Budgeting: Internet Income

Internet Income is the topic of our apartment budgeting series this week. Are you sharing in the revenue?

Continuing along with the Apartment Budgeting series today. The topic this week is Internet Income. This provides another opportunity to share in the revenues created by your allowance for exclusive marketing access.

Internet Income Defined

Internet Income can be defined in a very simple way –  it is revenue share from your local Internet Service Provider (ISP). Not unlike revenue share from cable companies – you have to give up some exclusivity. That is to suggest that you have to provide exclusive marketing opportunities to the provider in exchange for the share of revenue. Item of note: Don’t confuse exclusive marketing with exclusive access. In essence, the only thing you want to give up is the ability for one company to market their services exclusively. It will not mean that your resident is limited in their choice. And, choice is a good thing. Good for residents and good for owners.

For apartment owners, internet revenue share comes in a couple of different forms:

1. An upfront per door fee.

2. A percentage of monthly revenues generated from total collections on billable subscriptions. More simply said, collecting a percentage of every dollar that your resident base pays to the internet provider.

3. A combination of both. You may get a lower per door fee and a higher percentage of share. Or, a lower percentage share and a higher per door fee.

4. Bulk – you buy internet for every door in the community for a base rate and then resell it for a profit. For example: you buy it for $15 per door and sell it for $25 and keep the $10 margin for yourself.

When it comes to negotiating a deal – I would recommend consulting with a guy like Mike Whaling. He has the expertise to negotiate the best possible revenue sharing opportunities that first and foremost provide your resident base with the best possible choices in service.

*One item of note – I’ve not lived in a market where internet revenues were shared with property owners. Therefore, I don’t have a lot to share in the way of norms.

**Another item of note – As the internet becomes more ubiquitous sharing opportunities might move to smart phone carries in lieu of cable/internet providers.

Internet Income Budget Strategy

This is a math problem any way you look at it. And, it is all predicated on penetration otherwise known as subscriptions. One thing to consider is the economy as a whole. The reason being that people get behind on the their internet bills just like they get behind on their rent. Except in this case, internet is likely something that is easily sacrificed where a home is not.

My best advice is to call your ISP representative and ask him/her to run a twelve month trailing report for you property and like kind properties. Use that to look forward and consider any stop service percentages that might be included.

 

Your always looking for ancillary income multifamily maniac,

M

 

 

Apartment Budgeting: Washer and Dryer Income

The goal in my head is to get a $10 to $15 per set per month share of the revenue.

It’s Tuesday and we are back with another installment of Apartment Budgeting. Today we are writing about income opportunities as it relates washers and dryer income. Believe it or not this is an area where you can make a little ancillary income with just a little amount of effort.

Washer and Dryer Income DefinedLaundry Room at Countryside Townhomes

This is money your community makes when you help someone lease a washer and dryer for their apartment. We are presupposing you have washer and dryer hook-ups in your apartments. If you do, simply find a local appliance provider that is willing to lease direct to your resident(s) while providing you a share of the revenue. Or, you lease the machines from the provider and re-lease them to your residents for an up charge. I personally like the first option better – less risk. It’s not a ton of money but every dollar counts.

The goal in my head is to make at least $10 to $15 per set per month depending on where you are in the country. Be it through the vendor revenue share option or your up-charging the resident, the aim is $10 to $15 per month.

Budgeting Strategy

If your lease program is already in place, this is a simple exercise of running out your current income based on your trailing information. If you are starting up a program, I would be conservative in the first year. And, use a conservative ramp up schedule for future years. Maybe start with two to five sets of machines depending on the level of interest you think you can generate. And, ramp up at the same pace unless demand allows for a more aggressive schedule.

Marketing Washers and Dryers

This is grass-roots kind of stuff whereby word of mouth is likely your most powerful medium. Get the conversation started by providing information in all of your marketing materials to include any print and all internet. Make sure your leasing team makes it a part of their programming. Give the first set away in lieu of any leasing special you might be offering.

It’s not huge money but again, every dollar counts when budgeting and running a multifamily community.

Your really liking ancillary income opportunities multifamily maniac,

M

Apartment Budgeting: Laundry Income

Laundry Income can otherwise be termed as revenue share.

To continue with our Apartment Budgeting conversations; this week we are penning on the subject of Laundry Income.Apartment Budgets Laundry Income

Laundry Income Defined

Laundry Income can otherwise be termed as revenue share. This comes in the form of upfront concessions given at the time of contract signing. Or, in the way of refurbishment of your laundry facility. In addition to the aforementioned, one can negotiate a long-term share of washer and dryer collections. The payments can be set to arrive monthly or quarterly.

There are an endless number of ways that these contracts can be negotiated ranging from the vendor coming out-of-pocket to completely update your laundry facility to paying for a small share. In lieu of that, you can negotiate for a larger share of the ongoing revenue and forego the upfront incentives. You really have to consider this on a case by case basis. And, if you don’t know which way is best – reach out and ask.

Laundry Income Budgeting Strategy

If you are setting up anew – request a collection analysis from your vendor of choice. Ask them to pull trailing data from a comp that is similar in size and demographic. Consider drivers that could cause differences in your property versus another. Drivers such as; in unit washers and dryer connections, in unit washers and dryers present in select units, usability of room (is it centralized or located in the basements of each building), number of machines in the room, etc.. All things should be considered to give you a fair idea of what to budget.

If you are set and forecasting the new year – consider your most recent twelve to eighteen months trailing. Consider any foreseeable causes for disruption to up or downside. And, consider your timing. Plug the numbers accordingly.

Laundry Income Marketing Strategy

Not to over stress the marketing is everything mantra but it really is and producing Laundry Income is no different. Make sure you rooms are dialed in multiple times throughout the day. Make sure that the floors are swept and mopped. Make sure the folding tables are clean and free of clutter. Make sure the trash cans are emptied regularly. Make sure the machines are clean to include the lent traps. And, make sure the lighting is 100% working 100% of the time.

And, by all means – hand out free tokens or swipe cards from time to time. Host a – do your laundry for free – happy hour every Wednesday night. Call is Duds and Suds – they bring the duds you supply the suds. Make it social. Have T-shirt folding races. Have the neatest fitted sheet folding contest. Blow it all out on Facebook. Share the love of duds and suds. Above all – give people are reason to love the laundry room so that they come back and spend money using your machines.

Your lovin’ laundry income multifamily maniac,

M

Prop pics: Apartment Therapy

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,

M

 

Apartment Budgeting: Month to Month Premium

As for budgeting month to month fees; I would use twelve months of history as a way to forecast the future.

Back on track with our Tuesday Apartment Budgeting series. It seems I hit the publish button a little too soon last week so you got Tuesday on Sunday. My apologies for the disruption. This week we are talking about Month to Month Premiums.

Month to Month Premium Defined

Month to Month premium is also known as Month to Month Fee or simply a MTM fee. In essence, it is a convenience fee charged to a resident when their existing lease  expires without them having renewed it. I have seen the fee vary from $25 to $200 a month. The real point to the fee is to make it painful enough that someone would want to renew their lease instead of stay month to month. But, in the event that they need to be month to month, you want the fee to offset your risk. The risk being to many leases expiring in a given month.

Month to Month Budgeting Strategy

When you are sitting down each month to consider your exposure (leases expiring in the coming two to three months), you have to include your month to month leases. If you property is 100 units in size and you have five leases expiring in the month of August but you have five month to month leases then you really have ten expiring leases. Ten lease holders that could give you proper notice to vacate. That is ten percentage points of occupancy that you would have to cover. Not a pretty position to be in.

As for budgeting month to month fees; I would use twelve months of history as a way to forecast the future. The bigger thing you have to deal with as it relates to this line item is charge up. Many times this fee gets waived out of sympathy for the lease holders situation. Gentle reminder: we are in a business to make money and part of making money is pricing in a risk premium on items that have potential downside effects. Like the scenario above. So, charge the fee and collect it.

Your always considering the downside risk premium multifamily maniac,

M

Apartment Budgeting: Legal/Collections

We are working out way down the Other Income vertical in our budget series and today we are going to explore Legal/Collections.

We are working out way down the Other Income vertical in our budget series and today we are going to explore Legal/Collections.

Legal/Collections Defined

These are charges that are assessed back to residents for attorney’s fees and or fees associated with collecting outstanding apartment related debts. That is to suggest if you hire an outside agency to levy and or collect debt on the behalf of your apartment community, then you can and should charge it back to the resident. And, the legal/collection line is where you would book that income.

Budget Strategy

This is another line item where the use of history as the best dictate is likely the best practice. There is no real way to determine exact velocity or exact amounts to budget. In the absence of that precision – it would be best to pull your last 12 or 24 months trailing and come up with some averages.

Your wishing for a cool-front to roll in multifamily manic,

M

Apartment Budgeting: Damages

From time to time people vacate apartments and believe it or not they leave the space damaged. It could be anything from a cigarette burn on the kitchen counter top to fist hole in the bedroom wall. Whatever the case may be; it is considered damage and it can and should be charged for.

Damages DefinedMove Out Charges

Fees associated with damages made to an apartment. Charges are applied at the time of move out and are taken out of apartment security deposits. Nearly every company I have worked with and for has a standard set of charges that are applied for specific damages. For example, if the apartment is left full of trash and debris, most companies will charge a fee to bag (per bag) and remove it. If there are pet stains on the carpet – depending on the extent of the damage a charge will be levied. If it is extensive and the carpet has to be replaced charges might apply for a full carpet replacement. There really is no end to what you can charge for provided it is within reason and according to city, state and national law.

Budget Strategy

This one is fairly straight forward. The line is typically built on twelve months of trailing information given the fact that it can and will fluctuate over any bit of time. You take the full twelve months of trailing numbers, add them up and average them. You can then straight line the information. That is to suggest that you can use the average number to budget each month. Another strategy might be to average the numbers quarterly so as to catch seasonality. Either way is appropriate.

Your getting pumped for budget season multifamily maniac,

M

 

Pic Props to ITSOGS

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,

M