Apartment Loss to Lease – How do you book it?

In the spirit of the upcoming 2012 budget season; I wanted to recycle this post. This is a subject of much debate in our office and I am interested in what the industry thinks.

Loss to Lease

There is a question floating around our office along the lines of, “What do you book in loss to lease line of your budget?” Also, “On a percentage basis, where do you like to see that number trend?” With that question comes a number of schools of thought but no real definitive answer. And, that being said, I am not sure there is a right way or a wrong way to look at it. In the end, it all shakes out in the Rental Income line. That said, there is value in tracking the discount from new vs. renewals and even budgeted rental increases that drive the loss to lease margins.

Our current practice is to book both discounts from new sales and renewals to a single loss to lease line. And, we try keep the loss to lease number at two to three percent of the the gross potential or top line – if you will.

Here are a couple of schools of thought to throw out there:

What gets booked in loss to lease?

1. The only thing that gets booked in the loss to lease line is discounts from market on new leases only. Renewals that maintain any discount from the top line should be booked as a concession.

2. Any discount from market gets booked as an upfront or recurring concession – be it a new lease or a renewal that transacts at a rate lower than the top line.

Where should loss to lease trend as it relates to the top line?

1. The number should be maintain between two to three percent of your top line

2. The number will trend at nearly ten percent of your top line

Is there real value in tracking loss to lease as a line item?

If it all shakes out in the rental income number – is there any real value [up market or down market] to tracking this number?

I’m curious to hear your thoughts. I am really curious to hear from those of you that are utilizing LRO as I think you have done away with the concept of loss to lease – correct?

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What Jerry Garcia could teach us about Apartment Marketing

You understand that the consumer is in control of your brand – now what?

Do something about it –

It’s time to shine! It’s time to take that understanding of not being in control and do something exceptional with it. And, knowing that innate in every single potential apartment prospect or long term super loyal resident is a little thing called emotion – focus there. Get it on it! Crush it! – as Gary Van-ner-chuk (is it me or does he look like a hit man in the “It’s 2010…grab it” video) would say.

How do you do something about it in the apartment space

It all starts with giving your prospects or residents something to discover. How do you do that? Be it a blog – a Facebook Fan Page – a Ning site or Twitter – you have a chance to add value through a little word called discovery. It has to move beyond the typical recommendation or link pointing to this or that or the other. Or god forbid, your floor plans, amenities, current specials and the such. Chances are they have discovered most of the stuff you are pointing to – especially if you use curated content hosed from another source. People want surprise – they want intrigue – they want variation. Think Greatful Dead here.

JerryGarciaBand1What the Grateful Dead can teach us about apartment marketing

“You do not merely want to be considered just the best of the best. You want to be considered the only ones who do what you do.” – Jerry Garcia

There was nothing normal about a Dead show. Every single gig was 100% unique and full of mystery. Every tangent that Jerry went off on was unique from the former and or the next. It added an element that gave cause for one of the most radical followings of our life time. One thing their shows were not – static. They were spicy. They were ever evolving and full of flavor. As a result their repeat business was off the charts and the buzz (pun intended) marketing persists to this day – even beyond the death of Jerry.

What kind of spice are you ready to deliver in 2010?

Dare I say – get your Jerry on!!