Apartment Experiences

Rent is the biggest debit out of most bank accounts each month.

Is the experience that you’re creating in exchange for that rent worth it?

Is it compelling?

Do people feel compelled to tell their friends and family about the experiences that you creating in exchange for the rent payment?

Do you CARE?

Your desiring to make the experience worth the rent Multifamily Maniac,

M

People buy for the experience

I think it’s fair to say that people no longer buy things for the sole purpose of functional use. They don’t rent apartments just to occupy space.

They rather rent for the experience created in the leasing office or the perceived experience after they move in.

People want to experience something cool – something they can tell their friends and family about.

They need brag-a-log material.

Give it to Them

If you get nothing else out of this blog in 2014 – get this:

People who work in the multifamily space are in the experience making business.

Get busy creating compelling ones…

Your looking for compelling experiences Multifamily Maniac,

M

Apartment Late Fees

Mike Brewer Apartment Late RentApartment late fees are applied to a resident’s account if they pay rent beyond a pre-defined grace period. Generally grace periods do not extend beyond the first five days of any given month. And, apartment late fees are generally levied in an amount calculated as a percentage of the base rent and or as a flat fee.

Due on First Late on Second

Now technically rent is always due on the first of any given month. Despite what your grace period is rent is due on the first of the month and late on the second. That does not mean that you are applying your late fee but it does mean that rent collection procedures should be in motion on the second day of every month. You are building habits here and this is a good one to master.

A Word On Grace

I am a strong advocate for doing away with grace periods all together. I have never understood the appeal to use them. To me, it suggests that it is okay to pay late . Why would you do such a disservice to your respective business? Moreover, you have entered a binding contract and have agreed to provide some level of value in exchange for the monthly payment that will be made to you. So, in my head, you should ask for it on the first. And, define it as late on the second whereby you apply late fees.

Apartment Late Fees 

I have seen several variations of late fee calculations. Presupposing rent is due on the first and late fees apply on the fourth – here are a few examples:

1. $50 on the fourth and $5 per day every day after until it is paid in full

2. $75 on the fourth. Another $75 on the tenth.

3. 10% on the fourth and $5 per day every day after until it is paid in full

That is just to name a few – there are very obviously hundreds of computations out there. The main point with penalties is behavior modification. Make the pain certain enough and people will very likely deviate away from it. Make it marginal and people will take advantage of it. Remember – for most of you there is a mortgage that has to be sufficed each month.

Your – advocating for no grace period – multifamily maniac,

M

 

Pic prop: flickr

 

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

 

Apartment Budgets: Concessions

Welcome back for another installment on the subject of apartment budgeting. This week we are going to discuss the line items called concessions – new and concessions – renewals. Before we get started I have to admit some surprise. I did not think this kind of subject matter would spur much in the way of conversation but it truly has. And, we have posted some record numbers in the way of page views and the on and offline conversation has been very upbeat in nature. I have to give all the credit to Carin – one of our accounting team members at Mills Properties.

Up to this point we have discussed the main driver of revenue – rent. And, we have taken the time to walk through the ever complicated world of loss to lease for both new and renewed leases. And, just last week we penned about the quasi robber baron – vacancy loss. Let’s continue in the vein of loss this week with a discussion on the art of concession use.

Apartment Concessions 

Concessions are defined as credits (dollars) given to offset rent, application fees, move in fees and/or any other revenue line item. They are generally given at the time of move-in to offset physical moving costs such as those associated with cross-country movers or cross town movers. Concessions are also used at the time of renewal as a way of offsetting the cost of a rent increase or the addition of an ancillary expense [Read: utility billing, renter’s insurance, etc.]  to a new lease term.

They can be given up front or amortized across the life of the lease. They are also given during ‘oops’ moments. That is to suggest that if we drop the ball on the service side of things, we can give concessions as a way of saying sorry for the inconvenience. In short,  we can say they are used for marketing and with that comes any number of perspectives for and against the use of concessions.

That being said, we have left out a number of good points and as a result I am looking forward to the conversation.

Your, burning concessions off as fast as reasonably possible, multifamily maniac,

M

Apartment Budgets: Vacancy Loss

Back for another round of apartment budget discussions. Today we are talking about vacancy loss. Before we do, lets recap in the way of a list of line items we have penned about up to now.

Rental Income

Gross Potential Rent

Total Potential Rent

Loss to Lease

Loss to Lease – Move – Ins

Loss to Lease – Renewals

Total Effective Rent

Vacancy Loss

Let me introduce you to the biggest robber of revenue on the income side of the ledger – vacancy loss. It gets disguised under a number of line items, all seeming innocent in nature. Things like Down Units, Models, Offices and Fitness Centers (if housed in an apartment) get captured in Vacancy Loss. The line item as a total (Total Vacancy Loss) captures 100% of all physically vacant apartments in the way of a negative revenue number no matter the nature. And, it is driven by any number of stimulants.

Apartment Vacancy Drivers 

Vacancy is driven by the economy as much as it is by poor or sub par management. If the economy is stalled or sputtering along than vacancy tends to trend higher. If it is booming – think dot-com days – than vacancy is low. If job growth is anemic or trending net negative then vacancy trends higher. If jobs are growing on trees – the vacancy trends lower. If interest rates are low and lending standards are relaxed then vacancy suffers in the hands of home buyers. Interest rates rise and lending standard constrict then vacancy goes lower. Developers and builders take advantage of foreseen demographic trends, low-interest rates and relaxed construction lending standards to build tens of thousands new units and vacancy could suffer to the down side. They stall out for any reason and the inflow of new renters (demand) takes off and you yield to the upside.

Down Apartments 

Down units are a Big No in my book. To easy to lose track of. Put an apartment on a down unit status and the next thing you know you are spending 10k to get it back on-line. It gets cannibalized by the service team and left to rot by the management team. Just don’t do it. If it’s considered down – call it a tough turn. And, by all means do not let your service team pick it for parts and pieces.

Bad Management

Likely the biggest contributor to vacancy loss is bad management. From curb to commode, you can add to or take away from the loss to vacancy. From pricing to inventory turn time and ticket turn rates, you can give to or give back vacancy loss. And, from sales to renewal discussions – you can reap or spoil the line item.

Drawing it in

In summary, vacancy loss can wreck a budget inside of one months time. It can also boost your bottom line by many fold if managed well. It’s driven by any number of factors from macro to micro and everything in between. It can be a friend or an enemy.

What are your thoughts – would love to see them in the feedback section below. And, thank you in advance.

Your – fending off vacancy loss – multifamily maniac,

M

Apartment Marketing: Paying Rent is a Social Act

Paying the rent should be a social experience….

Apartment Electronic Check

Update: 4.30.12 – Social gifting, the new buzzword in e-commerce

I wrote about an idea along these lines sometime ago and Wrapp just might be the early way to get it done.

Original Article

Ran across Pepsi’s Social Vending Machine Story while I was in the process of purging some old files and it got me thinking about ways that we could make paying rent an even more social experience.

Is it reasonable to think that Facebook, Twitter, G+ or even resident portals could be robust enough to allow payments by third parties unassociated with lease contracts and the such?

Following the concept of Pepsi  creating a the experience of sending free sodas to friends; could you see the same thing apply to rent payments? If my buddy knows that I have fallen on hard times and wants to help; could he go to our website, log in without disclosing his identity [at least to me] and pay my rent? Or, a portion?

It already happens in the analog world. Or not, if leases are written such that you can not take third party payments [not smart in my opinion]. In the former case, parent’s pay their student’s rent via various payment methods. A process, at least at Mills Properties, that is usually administered by our onsite teams. Can we make it DIY for third parties with technology? Do you employ such a service today? Tell us about it.

Your looking to make paying the rent a more social experience multifamily maniac,

M