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

 

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,

M

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.

Timelines

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,

M


Apartment NSF Fees

Apartment Budget Installment

NSF or Non-Sufficient Funds Fees are not uncommon thing in the world today. In fact they have been around for a very long bit of time. Simply defined, it is a fee for a returned check be it paid by electronic or paper method.

NSF Amounts

The amount can be anything within reason. I have seen them range from $25 to $125 depending on average rent rates, markets and sub-market primers.

Reason for NSF

The chief reason in my head is to shape behavior. Not to penalize. Suffice it to say – if a resident has to add $125+/- to their rent check, they will likely not do it twice. It will likely feel like an excessive amount and thus a penalty but it will shape the behavior you are after.

How to Budget for NSF Fees

Where you have trailing historical numbers, you can simply take a 12 month trailing average and plug that number for the forward-looking 12 months. Where you have no information, you can look for like kind assets in the market do per unit comparisons to come up with your averages [something I will define with more detail in future articles].

I leave it at that this week. NSF Fees are fairly straight forward but I have left some nuggets out in hopes that we pick them up in the comments.

Publicly Calling Out

Speaking of – I am going to reduce to a lower means of influencing by publicly calling out a member of our accounting team. I will only identify her as CK for now and I hope that she joins the conversation at some point as it was her idea to get the budget series started.

Your enjoying the weather today multifamily maniac,

M

Employee Rent Concessions

Employee Rent ConcessionThis week we are rounding out our budget concession discussion with the topic of employee concessions. People are the difference that make a difference in property management. I would argue that it is not location location location but rather people people people that make or break the present and future value of an asset. You can have the best location on planet earth with the worst people and you are guaranteed sub-par valuation. Relocate that asset to a B+ location and team it with A+ characters and you will have yourself a winner. It really is all about the people. And, employee rent concessions are one way of saying thank you.

Value in Responsive Service

Beyond the concept of reward, concessions can be looked at as incentive for an employee to live on-site. There are clear advantages to owners when an employee lives on-site. It lends well to responsive customer service, especially if that employee works on the service side. As an example, if you have an A/C go out after hours, he/she can provide rapid and responsive service. If you provide lock-out services; the idea of rapid response is a real plus. In the event of a major crisis, employees living on-site can act as first responders in the way of organize and deploying crisis  management protocols.

Things to Think About

I have seen this amount vary over the years and is certainly subject to ownership or property management protocols. It typically ranges from 15% to 100% and is credited monthly over the course of a lease term. It also typically carries a caveat in the way of an employee addendum that spells out strict concession payback and move-out protocols if the work relationship turns sour.

The biggest thing to consider is IRS implications. Always consult a good tax attorney when thinking about giving away money as I am certain our great Uncle will want his part.

Your – advocate of employee rent concessions – multifamily manic,

M

 

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”

Student Concession

Concession for students living in apartmentsWe are continuing our budget discussion this week with another short and sweet concession entry. Student concessions are used to attract those who are pursuing advanced educational opportunities at schools or institutions around your apartment community. This is a way that apartment operators can both attract and retain students in addition to giving them cause to talk about you. It’s all marketing all the time.

Concessions or Discounts

As an item of clarity – a concession is not a discount and  a discount is not a concession. Both impact the bottom line but one lives on while the other has a one time impact. Student concessions are typically given up front at the beginning of the lease and or at the time of renewal. They are considered a one time event whereas a student discount is some that lives on over the life of the lease. Example of a concession might be: $200 off of your June rent if you move in by June 10.

A student discount on the other hand is a rent reduction from the market rent over the course of the lease. Example: you give a 5% or flat dollar amount discount off the market rent rate for the term of the lease that you sign if you move in by June 10.  Both have an impact on the bottom line and both have a potential opportunity for you in the way of marketing.

Your – continuing the budget journey – multifamily manic,

M