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An inside look at laundry revenue (commissions)

Greetings Gentle Readers! Today's topic is one that is of some concern to multifamily apartment owners currently in a laundry lease or thinking about signing a laundry lease. "Commissions" is a colloquial term used by laundry vendors and property owners alike but in reality "commissions" are legally "RENT" for the space the machines occupy. Typically the property will receive a percentage of the gross revenue (collections) that the machines generate from usage by the residents on the property and in some cases off property usage. How that percentage is computed can be confusing.  There are 3 very broad categories of RENT payments that are computed and made typically monthly. First let's look at what some variables the laundry vendor will input to calculate any type of RENT payment. Capital investment (buying the machines and providing technology payment systems if suitable)  Operating expenses (installing, servicing, collection, processing, insurance, vent cleaning, etc., etc) Term of the lease (Typically, 5, 7 or 10 years) Contingency Risk (Occupancy, market risks, competition from in unit hook up) Revenue (collections) from historical performance over the past 12 - 18 months Condition of the property (new construction or existing) Class of Property (A, B, C, D) In unit connections Vend prices Competing laundromats in the area # of Machines Vandalism risks Type of Machines (front load or top load) Quality of Machines (Factory New or from Inventory)   Once those variables are collected and input the commission or RENT payments can be determined by the laundry vendor's software program. ​And, as I......
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Parking still a necessity of foreseeable future, even with self-driving cars

Image result for self driving carsMany people who live in cities are electing to forego car ownership these days. But city dwellers aren’t hitting the brakes on vehicle custody so hard that it will render parking lots obsolete in the foreseeable future, despite claims to the contrary. With the increase in utilization of ride-sharing services like Uber and Lyft and advanced technology ushering in the era of self-driving cars, some apartment developers in the U.S. have been preparing to revamp parking structures into other uses for when car ownership becomes sparse and parking places expendable. Whether it’s a private, shared or self-driving vehicle, it won’t be on the road 100 percent of the time, and parking will still be a necessity.  The International Energy Agency forecasted the number of cars on the roads worldwide would reach 1.7 billion by 2035 – which is doubled from 2012. But a recent LA Times article contends the magnitude at which people are renouncing car ownership is leading to extraneous parking lots that will soon be repurposed. Based on the increasing overall car ownership numbers, can things actually get to the point that parking garages are so unutilized they can be rehabilitated to serve as shops, gyms and movie theaters instead? Yes, some new apartment developments have reduced their parking space to as low as 0.6 spaces per unit in urban areas, but a further decrease doesn’t appear imminent for the foreseeable future. It’s true the world is amidst a transportation revolution. But cars aren’t going away altogether. Why should parking facil......
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What are the Top Sources of Ancillary Income?

Ancillary income for multifamily properties is always a hot topic, both for punitive fee-based charges, as well as service upgrades, and was a compelling session topic at the 2017 National Apartment Association Education Conference and Expo.  According to Chase Harrington, COO of Entrata, ancillary income averages 4.4% of scheduled monthly charges, and he shared their research on the top 20 sources of ancillary income: Additionally, the panelists at the session, Gunti Weissenberger of Westover Companies, Kellie Hughes of Mill Creek, and Robert Speck of Bonaventure, shared their top 10 sources of ancillary income: Westover Companies Mill Creek (Modera Brand) Mill Creek (Alister Brand) Bonaventure Utilities Garage Early Termination Fees Late Fee Income Early Termination Fees Parking Parking Garage Income Laundry Early Termination Fees Laundry Income Bldg Facility (Renters Insurance) Month to Month Fee Amenity Fee Late Fee Pet  Rent Pet Income Storage Pet Premium Month to Month Premium Water Application Fee Administration Fee Laundry Income Billing Fee Pet Premium Application Fee Valet Trash Cable Internet Initial Pet Fee Initial Pet Fee Application Fees Late Fee Administration Fee Misc Income Pet Move-In Fee Short Term Premium Late Fee Storage Parking Income   The session also shared some data from NAA on actual ancillary income averages in some top metro areas:   The panelists also shared some insightful comments about specific ancillary income options: RUBS - Gunti Weissenberger indicated that they don't prefer using RUBS as their residents don't like the way utilities are broken out.  He mentioned that when they switch to......
Recent Comments
Guest — Al Williamson
Excellent list. Sounds like a wonderful discussion. Thank you for a well organized summary. Side income is a powerful thing. Thank... Read More
Tuesday, 01 August 2017 11:53
Guest — Andrew Smith
Brent Great post and a wonderful synopsis of the session! I believe that almost everything is covered in some capacity in your ... Read More
Tuesday, 01 August 2017 15:54
Brent Williams
Great comment, Andrew. I know you all do some really interesting stuff at ASM. What's your take on self storage tie ins. Are th... Read More
Tuesday, 01 August 2017 21:44
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The Sharing Economy is Thriving: Just Look at WeWork

The Sharing Economy is Thriving: Just Look at WeWork
  The sharing economy is so much more than Airbnb. The sharing economy continues to progress on a daily basis and shows no sign of dissipating any time soon. The recent success of WeWork is ample proof of that. New York-based WeWork, which provides shared workspaces, recently received a $300 million investment from Japanese telecommunications company SoftBank, which catapults the company’s value to more than $17 billion. Not too shabby for a sharing-economy business founded seven short years ago. Perhaps it’s more of a surprise that the post-millennium concept took so long to be discovered in the first place. Rooted in convenience and cost-savings for consumers, and ancillary income opportunities for businesses, the sharing economy is the perfect blend of modernism and common sense. Airbnb was the first of this breed to truly take hold on a global scale, facilitating part-time rentals for houses, apartments and other living spaces. This essentially bypasses the need for hotels for many consumers while providing a more intimate experience at their destination. Since Airbnb was founded in San Francisco in 2008, numerous other examples of sharing economy have sprouted up, particularly in recent years. Most metropolitan areas now offer a bicycle-sharing service, in which individuals can rent a bike on a short-term basis at Point A and return it at Point B. RelayRides facilitates the use of neighbors’ cars, enabling individuals to rent cars by the day or the even by the hour. DogVacay serves as an alternative to the kennel, allowing dog owners to utili......
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Guest — Ann Dykstra
The article would be more relevant if you wrote about WeWork's new venture, WeLive.
Tuesday, 16 May 2017 14:08
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Google Maps’ New Parking Feature Underscores Demand in Urban Core

Even Google understands how frustrating parking can be in urban markets. By now, nearly everyone has utilized the Google Maps features that shows how congested the highways and side streets are on a particular route, and offers the most expedient routes given the real-time traffic. Now Google Maps is taking it a step further with a similar feature for parking. According to a recent article in TechCrunch, Google is using historical parking data to calculate a parking difficulty score, which will be presented in the app’s direction card as “Limited,” “Medium,” or “Easy.” This feature was first spotted in January when users of Google Maps’ beta on Android had access to the addition. The benefits to commuters are clear, as now they can mentally prepare themselves not only for the forthcoming drive, but also the parking situation when they arrive. For apartment communities in those urban cores that possess a fair amount of extra parking space, the ancillary revenue opportunities are tremendous. Apartment communities in those congested markets can transform their empty spaces into cheaper and more efficient parking options for the local businesses and their employees and visitors. To be clear, the Google Maps parking feature is still a work in progress. It relies on historical data (such as: this area is usually popular in November) rather than the real-time data, but its anticipated that the feature will quickly gain traction and improve as time passes. For now, Google is launching the feature in the top 25 metros of the U.S., which is ......
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What is the Value of a Departing Resident?

This is meant to be a conversational blog post, so please chime in with your thoughts in the comments below! When a resident decides to turn in their notice to vacate, does that mean they suddenly don’t have any value to their community?  For most communities, once they receive that NTV, that resident isn’t really a primary concern anymore, as they fall through the cracks between the status of a prospect who needs to be sold, and a resident who needs to be retained.  But even though they are moving out, they are still a dedicated audience, and my question to you is this:  Are you getting any residual value from that relationship? I met someone about two weeks ago who worked in the home buying sector, where his company helped home buyers get a discounted rate for their real estate agent.  Although we are not in the exact same space, our industries deal with the same clients, just at different points in their timelines.  Oftentimes, our residents become their prospects, so the question came up about whether multifamily properties, who had received a notice to vacate, could actually be a referral source.  For many of us, the idea doesn’t sound quite right – it’s like breaking up with someone and then introducing your ex to a future boyfriend/girlfriend.  Although we would like to feel we are all mature adults, the idea doesn’t necessarily sit well.  But if we could get away from that feeling and look at things in a completely ......
Recent Comments
Guest — Christian Lauter
Brilliant! This idea could spawn an entirely new (and lucrative) relationship with multifamily housing companies and real estate p... Read More
Thursday, 06 March 2014 14:33
Brent Williams
Thanks, Christian!
Thursday, 06 March 2014 15:18
Mindy Sharp
The value to me is the Referral. When you receive the NTV, I hope it is not coming as a surprise to the management team. There is ... Read More
Sunday, 09 March 2014 12:22
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Apartment Leases Resemble Commercial Leases?

A major factor contributing to the improved health of apartments is many apartment leases are becoming more like triple net commercial leases. Many if not all “utility” costs as well as well as governmental and quasi-governmental costs are being passed through to residents, however,  owners cannot pass on increases in property taxes, insurance, maintenance or standard on-site administrative costs in excess of a base year to residents. Somewhat surprisingly, residents haven’t balked en masse at the increases in charges, perhaps because many are former homeowners who are accustomed to paying them. As pointed out in the Winter 2012 issue of Texas Apartments by Wendy Wilson, the Texas Apartment Association General Counsel, developing lease provisions to meet the realities of the marketplace while conforming to the intricacies of the law is a top priority.  She has developed a new lease addendum allowing apartment owners to allocate a variety of governmental charges and fees to residents, such as “street repair/maintenance, emergency services, conservation districts, inspection and registration/licensing”. Owners and operators who also charge for services more akin to utilities such as central cable and satellite TV, stormwater/drainage, and trash pick-up/recycling fees, can include all such charges in one addendum. In some states, amortized capital improvements for stormwater/sewer facilities and school district expenditures, are also being passed through to residents regardless of whether such charges appear on utility bills or property tax bills. Ms. Wilson points to a variety of formulas for allocating such costs. No doubt, there is and will continue to be......
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Mindy Sharp
I remember having to explain in detail to people when we implemented a RUBS program and their pushback on that. I can't imagine ha... Read More
Wednesday, 12 September 2012 06:33
Guest — Scot F. Worden
I think it is great to pass on the fee's itemized out so that people can see what costs are to landowners Maybe tenants will thin... Read More
Friday, 14 September 2012 02:50
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Other Income is a Gold Mine

Ancillary Income for Apartment CommunitiesAre you unconcerned by those ‘inconsequential’ miscellaneous income lines?  Well, “there’s gold in them thar hills.” Frequently in our multifamily property evaluations, we see money left on the table. IREM’s Income and Expense Analysis shows a downward trend in Other Income from 2006-2010 perhaps following the recessionary decline in rents during that time. That needn’t be the case. For example, in the category of Low Rise Buildings of 24 units or more, IREM reports for 2010 medians of $.30 per square foot, 2.7% of Gross Potential Income and $266 per unit, down from $.47, 4.2% and $406 in 2006. How about $1.03 per square foot, 9% of GPI and $931 per unit? There may be differences in terminology but we count the following as Other Income: Termination fees Late and NSF Fees Application fees Pet rent and pet fees Parking fees Vending income Telephone, data and cable TV commissions Administrative fees Short term premiums and amenity surcharges (often considered “rent”) When rents are soft, Other Income can generally be collected with regularity. But you need to make sure that they are clearly provided for in your lease documents. There are many more areas that provide opportunities for ancillary income, particularly in data technology. However, you must provide value to the residents.  Jim Carrillo, portfolio director of the Towbes Group who manages 2,200 units concludes that, “Residents may not mind that they are charged for ancillary services as long as they believe they are receiving high-quality service…. If you back it up......
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Can the Security Deposit Convert Into Additional Income?

Note:  This is a conceptual blog that does not account for legal ramifications – please seek legal advice before implementing. Many a shady landlord have tried to unfairly keep security deposits from their residents moving out, which is not only unethical and illegal, but also a guaranteed route to negative ratings and bad word of mouth.  But what if that money could be used for the benefit of the resident, as well as be a profit generator for the community? Ryan Green recently wrote about making the resident move-out experience a positive one, and one of his suggestions was essentially offering cleaning services to residents as a hassle-free option as they move out, allowing them to “pay” for the cleaning using part of their security deposit.  Not only is that a beautifully elegant way to provide value and ensure a clean apartment, but it also uses already spent money.  By allowing residents to use their security deposit, there is no additional cash outlay for that resident.  On the opposite side of the transaction, the community can either have its own housekeeping staff provide the service, or pay a 3rd party at a negotiated lower rate, thus earning the difference between the supplier cost and the amount charged to the resident.  Either way, a portion of that former security deposit gets converted into income. In this way, we stop seeing the deposit as money that is “stuck”, but rather money that can potentially be used on transactions.  And if those transactions can......
Recent Comments
Guest — Travis Cox
great idea! would be hard to make happen, but still great thoughts! Would love to see something along the lines of this. I think t... Read More
Tuesday, 31 July 2012 04:29
Mindy Sharp
The lease at one of my communities I inherited had a clause in it specifying Resident was responsible for ensuring the carpet was ... Read More
Wednesday, 01 August 2012 04:52
Michelle
This is an excellent idea. I have been doing it for the past 7 years! In those 7 years I have had more residents opt for us to tak... Read More
Wednesday, 01 August 2012 05:40
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Open The Window of Opportunity with Owner-Financing

By Linda Day Harrison, theBrokerList, Chicago, IL Today more than ever, many people do not have traditional sources of employment income. With the job market shrinking, many of us are working for ourselves and are creating jobs by starting businesses and new ventures. With that being said, how does a self-employed individual purchase a residential or commercial location with the stringent financing requirements currently in place? Simple! Look at properties with owner-financing. What is owner-financing? Owner-financing is when the seller of a property is in a position to act in the capacity of a lender. The seller accepts a down-payment and an agreement for repayment. The advantages are tremendous and can be a win-win for both parties. Advantages include: More favorable rates and terms. Easier qualification process. Able to sell a property in a depressed market. Seller can get a much higher return than other vehicles such as a CD. Seller can receive a substantial down payment. Tenant can now become an owner. Less closing costs. Now like anything, there are many pros and cons depending on each seller and buyer's tax consequences and personal financial situation, including whether or not the property is held free and clear. Owner-financing should definitely be a serious avenue to consider when selling a property and when evaluating your lease vs. purchase decision on residential or commercial property. An attorney is needed to assist in the process and as a buyer, you should still do your homework, via a due diligence period. Whether buying or......
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