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Strategies for Selecting an Effective Multifamily Utility Billing Services Provider

If you own or manage multifamily residential units--apartments, condominiums, student housing, affordable housing, manufactured homes, or military housing--you are probably involved in utility billing in some fashion.  Utility expenses for these types of properties can be substantial so most owners look for effective ways to manage these costs. The Master-Metered Complex Predicament It's common for multi-tenant commercial and multi-residential properties to be "master-metered."  Master-metered properties receive a single utility bill that includes consumption for several tenants.  The problem with master-metered properties is that there's no way to bill tenants for their actual usage. This has led owners to use different methods to divide utility bills so that they can recoup the tenants' share of the overall utility expense.  In fact, transitioning a multifamily complex from owner-paid utilities to tenant-paid utilities can be one of the fastest ways to boost net operating income (NOI). Utility billing is usually managed in two ways: Internally by owners and property managers Externally by a third party utility billing service provider. While some owners prefer to manage utility billing "in-house," billing providers have invested extensively in software tools and technologies to streamline the process so that it is efficient, affordable, and well-supported.  Multifamily utility billing is a task that can successfully be outsourced, saving property owners and managers significant time, effort, and money. Choose A Billing Provider Wisely As with any outsourced service, you'll want to pick a provider carefully.  Common industry problems include: Inaccurate and late resident bills Unresponsive customer service for residents and m......
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Building Revenue: 10 Tips to Decreasing Apartment Vacancy Time

The market is firming up in many markets across the United States. After three dismal years this is a great thing!  Many owners are looking for ways to gain back some of the revenue they have lost over the past three years.  When inventory is leasing quickly, there are only a few ways to do this:  Increase rents and drop specials Decrease expenses Reduce down time between vacate and the new move-in Increase rents & drop specials When a market improves, most site managers want to bask in the glory and comfort of a solid 100% occupancy.  It is possible; however, despite the emotional gratification, it is not profitable.  Whenever your site is over 95%, it is time to kick the rents up a notch.  You can even analyze this by unit type.  This is your opportunity to get your largest revenue boost. (More on this at a later date.) Decrease expenses Most of us have spent countless hours renegotiating contracts, looking at utility savings and eliminating the nice-to-have vs. the need-to-have items on our sites.  In a recent blog, Amy Kosnikowski wrote, “Let’s face it – Frugality is now cool.”  While we should always be reviewing this, most of us have beat this up pretty well. Reduce down time between vacate & the new move-in The time a rental unit sits vacant between the previous resident moving out and the new one moving in is becoming an area of increased focus.  When the market is good, the vast majority of......
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Resident Retention: A Lot of Attention for Being #29

According to the 2010 SatisFacts Index, when asked what can be done to improve the community, residents ranked “Social Activities” #29 out of 30. All this hype about being 29th? Consider this scenario: Ms. Jones is going on Day 3 of being without A/C during a week-long heat wave. She has submitted her service request online and has also called the office. As she looks out her open window, desperately trying to catch a breeze, she sees the property manager directing a couple of maintenance techs on the set up of chairs and tables for this afternoon’s resident pool party. How thrilled do you think Ms. Jones is about the upcoming pool party?   Not very. She wonders, “Why is the maintenance team gathered ‘round the pool when there is an HVAC emergency at hand?” An intended perk has now become a slap in the face. Ouch.   Social activities should never be the meat and potatoes of a retention strategy. Think of them as gravy. On its own, it tastes good but is not ultimately satisfying. You miss the meat and potatoes when they are not there. In fact, you wonder where they are.   Meat and potatoes consist of the residents’ ability to a.) Communicate with your team quickly and easily, and b.) Get service requests resolved promptly the first time they report it. In fact, there is a direct correlation between residents’ outstanding maintenance issues and their likelihood to renew their lease. The more outstanding issues on a property,......
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A Small Group Of Tenants May Be Doubling Your Multifamily Utility Costs. Find out what you can do about it

When utilities are included in an apartment complex's rent, some tenants are naturally going to consume more than others.  High utility users, even if they represent a small group of tenants, can substantially increase costs. Since these cost increases are effectively hidden in the rent, those residents who use utilities responsibly subsidize those who don't.  A question to consider then is how much are high users increasing utility expenses?  Does it make financial sense for an owner to include utilities or bill tenants directly?  If an owner does decide to transition away from the utilities included model, what options are available? The Challenge of a Master-Metered Multifamily Complex An owner is most likely to include utilities in the rent when his multifamily complex is master-metered for water, gas, or electricity.  The drawback of a master-metered community is that there's no way to tell how much of a given utility each resident is using.  If I'm one of those residents who runs the heat continually, lets a broken toilet flapper leak without reporting it, or keeps the air conditioning on even when I'm not home, it's my neighbors who pick up most of the tab.  The usual feedback loop that links the amount I pay, to the amount I consume, is missing.  Without this feedback loop, I'm more likely to consume carelessly. As we're about to see, careless or abusive consumption can raise multifamily utility expenses as much as 70%! The RUBS Example Assume you own a 150 unit complex, each ......
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How Bright is the Light at the End of the Tunnel?

“Area Rents Up, Vacancies Down” can be heard across the land as the new census statistics come out. Vacancies are down and rents are on the rise HOORAY! For a moment the excitement is heard across our industry as the communities that have suffered immensely from the recession see a light at the end of their long journey. Suffice it to say, rents are up and vacancies are probably down, but what have we all sacrificed in the past few years to get us through the dark days. During this time of struggle our industry strengthened a trend that we were hoping to make extinct which were the rent concessions, the lavish giveaways, and in some cases lower rents. Our industry as a whole has opened a door that cannot be easily shut. Due to the fear of high vacancies we have allowed the prospective residents to take control of an industry that was once controlled by quality apartments, great curb appeal, and luxurious amenities and turned it upside down to an industry that thinks it needs to survive by "outgiving" other communities. We have all seen the enticing ads in the newspapers, Craigslist, or Apartment Guide, “First Month Free Rent” or “Rent today and receive a $100.00 off your rent”. The oversaturation of these deals has changed the way prospective renters think about leasing. Five years ago, it was highly uncommon for a prospect to call an apartment community and ask for something free but today it is the norm.......
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Multifamily Owners: Including Utilities May Be Killing Your Profits

Learn how to protect your NOI If your multifamily complex includes utilities in the rental fee, brace yourself.  Utility cost increases are coming your way that may erode your hard-earned profits.  Even more concerning is that you're responsible for a sizable expense that you have little or no control over.  The "utilities included" model puts you squarely at the financial mercy of tenants, their usage tendencies, and utility companies.  "Utilities included" also means that you have to be an accurate budget forecaster to ensure that your rental rates cover the annual utility expenses.  Miss the mark and it's you who'll pay. You can quickly and easily change this situation by separating utilities from the rent fee and billing tenants directly--at no cost to you.  By doing this, you'll make a positive and immediate impact on your net operating income (NOI) and the value of your property. From a price perspective, your complex will be more appealing to prospective tenants and you'll have effectively removed yourself from the utility equation altogether.  Billing residents means no more worrying about the effects of runaway tenant usage and it leads to higher profits. Another intrinsic flaw of the "utilities included" model is that it offers no financial pressure for tenants to notify property management when maintenance problems occur.  Water leaks are a perfect example.  A broken toilet flapper can waste hundreds of gallons of water in a short amount of time.  The owner relies on the tenant to inform the maintenance team when an issue......
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Overwhelmed with New Year's To-Do Lists? Ditch the List and Start With a Walk Through the Kitchen

It's 2011. The holidays are over. Back to reality, right? To help ease back into work-mode and get a handle on what I need to accomplish this year, I started by making a list. The problem is the list just keeps getting longer and more detailed, making it harder for me to decide what my urgent, top priorities are. As you contemplate the goals you want to achieve this year or simply the things you might want to avoid, a good place to start may not be a list on a piece of paper, but a walk through the kitchen. Why the kitchen? The kitchen is a hot-spot for home fires. Cooking, in fact, is the leading cause of all winter residential-building fires. And the winter season brings the highest number of home fires than any other time of year, as reported by the U.S. Fire Administration.* Residential building fire incidence is collectively highest in the three winter months of January, February, and March. Winter residential-building fires result in an estimated average of 945 deaths, 3,825 injuries, and $1,708,000,000 (yes, that’s 1.7 billion!) in property loss each year. “These fires are a painful reminder of what we see every year,” said National Fire Protection Association (NFPA) President Jim Shannon. “The temperatures drop and fires increase.” So what can you do to prevent your property from becoming the next victim of a fire? The first step in prevention is knowledge: knowing how and where fires typically start.  Quick: what was the leading......
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To Sublet or Not to Sublet: A Tenant's Perspective

Throughout the course of my college and young professional years, I moved quite a bit — to new student housing, then back home for the summer, then to a new city for a new job. Throughout the course of these events roommates were shuffled and I encountered several different subletting scenarios, each of which was handled differently. For sake of better understanding a tenant’s reasons for subletting, I thought I would share a couple of the different scenarios that I encountered. Scenario #1: The Summer Sublet I first found myself subletting the summer following my graduation from graduate school. I hadn’t yet landed a job and wasn’t prepared to move back in with my parents, so I found an apartment to sublet in a condominium complex near a local University. I didn’t know the student whose room I was subletting or either of his two roommates, but the place was clean, spacious, and I’d have a balcony off of my room. I was psyched. In this scenario, I simply paid rent to the tenant whose room I was subletting. He asked for a $300 security deposit and then I mailed him a rent check every month for the duration of the summer. I wasn’t in my new place very much and was always quiet and respectful, so the situation worked out great — I even got my security deposit back. That said, I’m pretty sure the property managers had no idea that I was living in the apartment or that it......
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To Sublet or Not to Sublet: A Property Manager's Perspective

Chances are you put a lot of effort into finding just the right tenant to entrust with your unit: you run a credit and criminal background check, you verify employment, you speak with applicants’ past landlords, and perhaps you even require an additional personal reference or two. In short, you do everything within your power to make sure that your unit is rented to the most reliable, responsible tenant possible. Performing this due diligence protects your property, your financial well-being, and also generally makes your life easier by bettering the chances that you’ve selected a tenant who will be a thoughtful neighbor to other tenants on your property. Therein lies the biggest problem with subletting units: in such instances, you are typically entrusting this screening process to another party, essentially allowing a pre-existing tenant to select someone to occupy your unit on your behalf. Of course, it certainly works in the pre-existing tenant’s best interest to find a subletor who is responsible, who will take care of the unit, and who will make rent payments in a timely manner. After all, it’s the pre-existing tenant who will remain on the lease and ultimately be held responsible for any damage or financial obligations until the initial lease term has run its course. However, most tenants simply don’t have experience in property management or a complete handle on what it is that constitutes an ideal tenant. Because of this, problems can arise when subletting enters the equation. On the other hand, there are......
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Finding the Right Multi-Family Property Investment

In many ways, the current economic climate makes for a great time to purchase a multi-family investment property. The prominence of short sales and foreclosures has given way to good purchase prices in many areas of the country. Add to this the fact that there are some incredible interest rates out there right now (even for investors) and the fact that many former homeowners have now found themselves back in the rental market, and there’s a very valid argument that this is a good time to get into the multi-family market. If you are considering making a multi-family property investment of your own, following are a few things to consider before taking the leap. Know what you’re looking for Before you even begin to look at properties, have a clear idea of what you’re looking for and what you’re willing to put into a property, both financially and in terms of your time. Of course, this is always subject to change if you find just the right place, but that doesn’t mean that you shouldn’t go into the house-hunting process without a fairly narrow baseline in mind. Aside from basics like location and size, you also want to have know whether you’re looking for a “fixer-upper” or a “as-is” property. Look at the whole package Looking for a multi-family investment property is different from looking for a single-family home and requires a bit more of a discerning eye. Remember that you will be renting multiple units out to different tenants. To......
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