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Aug 02
2010
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Got VACANCY? Apartment Models - Is it a DO or DON't or CAN't Afford It?
Posted by: Daisy Nguyen on Aug 2, 2010 11:31 |
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If you have vacant apartments, and thinking about modeling an apartment, you're probably thinking, can you afford it?
You can't afford NOT to have a model!
CONSIDER THIS:
- All new apartment developments I work with have apartment models. If the apartment has lots of different floor plans, especially if there are any odd angles, or funky spaces, or weird lighting, usually, the question isn't "Should we have a model?" it turns to "How many models can we have?" Typically, when we do a model, the modeled floor plan leases up MUCH more quickly than other floor plans, leasing activity spikes, and the closing ratio's rise.
- In the real estate world, (for-sale of single family homes), it is widely accepted that A.) Potential buyers make their decision to purchase a home in the first 30 seconds upon entering. First impression is the key! and B.) well staged homes sell for 30-50% faster than their counterparts. (Not only do they sell fast, they usually sell for MORE.) (real estate facts found here.)
Which feels more welcome to you? The vacant room or the staged/modeled family room?
What happened to that school of thought - give them a blank slate, and let them imagine it themselves! The reality is, people have stressful lives, they want immediate gratification, they want EASY. Why is television so much more popular than books these days? Television is easy gratification, no imagination needed. People don't have to think after a long stressful day. Let's give them EASY folks! Make it easy for your prospects to imagine living in your apartment community - in one of your apartments. After a long stressful day at the office, or a long day of apartment hunting, having imagination is the last thing on your prospect's mind. Make it EASY for them! Make the model apartment feel welcoming!
The question always comes back to COST. If you have more than 10 vacant units at a time - you can't afford NOT to have a model. Consider this example of vacancy loss:
OK, let's make it easy and do the math. Let's say we're talking about ABC Apartments. They have 100 units. Their average rents are $1000.00/unit.
Prior to the rental market taking a downward turn, ABC Apartments has been running along great, apartments never took very long to lease, and they had been at 97% occupancy for many years. (only 3 vacant apartments)
Fast forward to today, they are at 88% physical occupancy, which means they are at 12% vacancy or 12 vacant apartments. All of the sudden, they are struggling with just staying ahead of the renewals and turnover. Increasing the occupancy in the midst of the resident turnover looks very daunting.
Let's do the math.
At 97% occupancy, the vacancy loss is:
(Average Apartment Rents) x (# of Vacant Apartment Units)
$1000.00 x 3 vacant apartment units = $3000.00 of vacancy loss monthly. This is what they are used to operating at. Annually (x12), this amounts to $36,000.00 of annual vacancy loss.
TODAY, the apartment project is at 88% occupancy, the vacancy loss is:
$1000.00 x 12 vacant apartment units = $12,000.00 of vacancy loss monthly. Annually (x12), this amounts to $144,000.00.
The different in vacancy loss monthly is $9000.00! ($12,000 - $3000) And annually, the difference is $108,000.00! ($144,000 - $36,000)
If we apply the real estate facts - that well staged homes sell 30-50% faster than their vacant counterparts, how much does the $108,000.00 mean to this apartment project? The Owner/Developers/Investors? The apartment community manager?
If we can spend a little bit of money to recoup that HUGE un-budgeted vacancy loss and reduce the vacancy by 30-50% over the next couple of months, wouldn't that model be TOTALLY worth it?
My next blog will focus on budget conscious tips for putting together a model! It doesn't need to cost a FORTUNE to make an IMPRESSION! Please check back to read all about it!
You can read the original blog entry on my blog at: http://blog.rentsoda.com/2010/07/apartment-models-is-it-a-do-or-dont-or-cant-afford-it/
Daisy Nguyen is owner and CEO of RENT SODA, a consulting company offering apartment marketing, business & operations consulting and apartment industry training.
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Mary, what do you recommend as far as buying furniture vs renting furniture?
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You are right about decorating trends. It needs to look fresh, comfortable, appealing. We don't want tired, blah, or bah humbug! :-)
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It is so nice you lay out those numbers. Look forward to seeing your budget conscious tips for putting together a model next!
ROI and cash is the key. That's we see the technology will continue shape the apartment leasing business operation and play bigger and more important role; such as interactive real 3D online apartment system which enable the potential renter walk through the model rooms, amenities from their fingertip just like they are visiting the physical site in person. It combines TV advertisement, animation, simulation, multimedia and 3D interactive online technology into one. It is easy to upgrade and cost effective.
Static picture/rendering, simple 360 virtual tours are only provides fragment info which is no longer enough or somewhat out of date.
Andy
http://boundlessadvantages.com
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For your situation, the virtual model units could be perfect solution. You can fully furnish the as many as possible considerably different floor plans as needed by computer generated model. The real 3D interactive furnished model unit, the cost will be fraction of fraction.
Combining one physical fully furnished model, the potential renter can walk through the different floor plans, see the particular view from the living room window, etc and touch and feel physically in your sales office.
If you like more information or find out more how the different technologies work for your situation, feel free contact me off line andy@boundlessadvantages.com . We don’t put those information on our public website.
Andy
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I would choose a floorplan that you have the most of, or one where you hear the most objections in. My experience is that once you can help people visualize the floorplan, it will lease MUCH quicker. Also, when picking a unit, pick one that has the least desirable location for the floorplan - i.e. bad view or weird angles, or something that is not as desirable. Again - once you can overcome those less-than desirable obstacles by wowing your prospects with your model, those objections will no longer be objections for lone.
Another way to choose the location of your model so that it is most convenient to your leasing office - that way, your leasing agents show the model FIRST, and comment that it's good indication of the finishes/colors/feel of most of your apartments, and THEN, they can show the vacant unit. That way, the prospect has a good idea what of what their unit COULD look like furnished, and then they can look at the actual layout of the unit that has all the features they indicated they needed - i.e. 2 bedroom or overlooking pool or on the 3rd, floor, etc.
Hope that helps!
-Daisy
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All wonderful ideas. Generally we show the model last so the customer leaves with a visual of a furnished apartment. I'll try to turn this concept around.
Andy,
We will be in touch.
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