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,

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

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”