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A Vendor's Perspective on Resident Retention.

It's interesting that in a down economy, there are so many low-cost opportunities to "wow" residents.  I'm noticing that residents are responding especially well to community-building "interactive" amenities much more so than the usua

l "physical" amenities like pools, fitness centers, and business centers.   It's really shown me the value of more community-building types of amenities as a cornerstone of resident retention and leasing strategy.
In talking to property managers, they all share the same complaint in these economic times.  Old tenants are moving out, and new tenants are not moving in as quickly as they used to.  How are their management companies responding?  Many are slashing marketing budgets and lowering rents.  I don't see this strategy as working well for them, however.  It's a bit of a Catch-22: they need visibility, but they can't afford to buy it.  We're seeing that our most successful customers are actually increasing their budgets for small-ticket items that pay off in big ways, and they are still charging among the highest rents in their territories.

I think the a big reason so many communities keep lowering their rents in a recession is that they get into a bidding war, because they aren't making themselves stand out.   Many offer the same types of "physical" amenities like gyms, business centers, and pools, so that they become relatively indistinguishable and compete mainly on location and price.  But in fact, residents tell us time and again that they are more likely to sign or renew their lease

s, regardless of location or price, when they feel emotionally connected to their communities by getting to know neighbors with similar values and interests.  What they want more than anything is to meet other residents more often, and in the right way!  You might call this a demand for "interactive" amenities, rather than "physical" amenities.  We also notice that some physical amenities, such as clubroom areas, kitchens, or certain outdoor spaces, go largely unused, just waiting for managers to turn that dead space into a profit-generating "interactive" amenity.  The great thing is, creating these sorts of amenities is extremely quick and easy to implement.  Best of all, it's incredibly inexpensive, since communities already have a multifunctional space, and they already have the residents!  All managers need is to pull them together with the right activities and a little creativity.

We always tell our customers to think of their clubhouse as the neighborh

ood's town center or social hub.  Imagine residents filling those empty areas socializing in small groups each week, really getting to know each other, and making friends in the neighborhood.  Those beautiful clubhouse areas are specifically designed for group gatherings!   By organizing such gatherings, managers finally put those spaces to good use and tap into their biggest marketing asset of all - the residents themselves, waiting to meet each other around interest-based activities.  We've seen many types of community-building activities flourish, including:

  • Volunteer Groups - organize a group of neighbors to participate in a charity walk, or create a bake sale fundraiser.  Get the staff involved!
  • Book Clubs - get residents together to read and discuss bestsellers.
  • Gourmet Cooking Classes - bring together residents with a hands-on, live cooking show with a professional chef.  This is an ultra-p opular, high-class amenity at little cost.
  • Wine Lectures - have a vivacious wine expert bring together your residents for a trendy, upscale "happy hour."  It's like a night out at a wine bar with friends, but on-site!
  • Group Fitness Classes - bring in professional fitness instructors to host after-work pilates or yoga classes once a week.
  • Intramural Sports Teams - organize a community softball team to participate in local intramural leagues.  This increases pride in the community.
  • Mom-and-tot Play Groups - Buy some inexpensive toys and games for the kids, and host a morning coffee-and-muffin indoor play gathering in your clubhouse.  Moms can relax on sofas and chairs while kids play in a safe space.  Or, organize a bring-your-own lunch outdoor playgroup in a grassy area or playground.

These are just some of the things that we've seen work at our customers' communities over the years.  But especially now, they are really hot!  And we're getting strong feedback that the monthly cooking class and wine lecture program is their number one most successful amenity.  They even use this event as a marketing tool in their "For Rent" magazine ads, on their property tours, and even announce it when new residents are "on hold" when calling in.

Anyway, today I just wanted to talk a bit about this idea of interactive amenities helping communities create a real in-group mentality and a lot of b

uzz among their residents, since it requires a bit of a different mindset.  Next time, I will touch upon some of the challenges we face in dealing with different property management styles, and maybe some of you will be able to offer some insight on that.

I look forward to meeting more of you in the weeks and months to come.

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Tips to make your lender happy...part 3

Tips to make your lender happy....Tips to make your lender happy....real estate taxes and utility bills.   to continue with the information you need to send your lender to refinance or acquire a multifamily property it is time to talk about real estate taxes and utility bills.Real Estate TaxesRefinances are pretty straight forward.  If you have the bill we will underwrite to the current year tax bill.  If you don't have the bill we will look at the previous years and try to estimate some reasonable increase.  It only gets tricky if the property is due for a new assessment and/or you plan to do some substantial rehab to the building which would bump the assessment.Acquisitions are tricky when the transfer of the asset triggers a new assessment.  That is particularly painful in states like Michigan.  The new assessment will most likely increase the real estate tax which will directly effect the net operating income.Utility Bills Newer buildings are typically individually metered and the tenant pays their own utilities.  Older buildings are often master metered and either the tenant pays a set utility allowance to the owner or the utilities are included in the rent.   I even have one client that was able to negotiate their gas bill in advance for a three year period.  This was a huge benefit when prices were rising.  It really doesn't matter how your building is set up you just need to let your lender know what utilities are in the rent, what utilities are paid directly by......
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Which is more important? Price? Quality? or Service?

What is more important to you as an apartment investor, owner, or contractor doing a remodel in a rental property?

Is everyone only looking at price now because of our economy? Or do some people still give credence and importance to quality of materials, loyalty to the vendor they are getting a bid from, timeliness of receiving the bid, the delivery, and installation?

 I would really like to know what is more of the  driving force in the market. We have seen a large upswing in people wanting a bid, but putting more emphasis on Price than anything else. What does that say about the relationships you have built with your vendors? About our society as a whole?

 

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Tips to make your lender happy....

Tips to make your lender happy....insurance and payroll.  To continue with the information you need to send your lender to refinance or acquire a multifamily property I wanted to talk about two big ticket items on the operating statements:  insurance and payroll.InsuranceWhether buying or refinancing a property the lender is going to look at the cost of hazard insurance for the previous three years.  Take a close look at those numbers before you send the information to the lender.  If you think the number is too high go out and get a bid from another insurance company and send it along.  Most lenders will underwrite to the new bid when it is lower than the previous costs.  This is particularly important with acquisitions where the previous owner of the property may not have the best insurance rates.  PayrollPayroll is always a sticky line item.  From a lender's perspective the best operating statements separate out the cost of full time employees, temporary employees,  employment taxes,  and benefits.  One property I looked at recently had a lump sum number in for payroll.  There was a $10,000 jump in the line item last year which if carried over to my numbers had a direct impact on the net operating income and  lowered the proposed loan amount by $124,000.   Once we started investigating the increase we learned that the property hired temporary labor the previous summer to complete  capital improvements.   Since this capital improvement was a one-time expense I was able to leave it out of my numbers.  Most......
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Short Term Gain...Long Term Sacrifice

It’s a Catch 22 – you need to reduce expenses at the same time today’s consumer is skittish, demanding and expecting better quality and value for their money.  Morale is low, your team is expected to do more with less, and job cuts have placed a strain on operational capabilities.  Tough call, but you’re saving money, right?  Not so much.According to Business Week, the Internal Customer Management Institute, a call center consultant, has done studies that show cutting just four reps at a call center of three dozen can send the number of customers put on hold for four minutes from zero to 80.  That’s right, 80.  It makes sense to reason that if there are less people in the office, there is a greater likelihood that a client, or potential client will be missed, or will need to wait a greater length of time to see product or resolve a challenge. The immediate reaction to tough times is to tighten the wallet and squeak every dime available out of it.  Think about the airline “charge for a checked bag” policy.  I cannot think of one person that isn’t highly offended, or at least greatly irritated by this policy. A trip requiring more than two nights will require a checked bag.  The consumer knows they have to eat it and have no option.  Makes me fester just thinking about it.  Unless, of course, they elect to fly Southwest, an airline that promotes the fact that they do not charge baggage fees.  ......
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E-Newsletters and a personal touch go together better than chocolate and peanut butter!

In a year when our community’s budgets are running with razor thin margins, we have to trim some fat, without sacrificing occupancy or service.  Luckily, there’s an easy way to trim money from the budget, up our resident retention, and be eco-friendly all at the same time!   Your community newsletter is one of the most important resident retention tools, but, unfortunately, it's also one of the most under-utilized. Many communities send out a monthly/quarterly newsletter that has a little bit of relevant information on the front page, but the rest of the letter is brimming with space filling articles like recipes for chicken casserole or reminders about the postage price increase. Whenever we use a filler article, we are robbing ourselves of a valuable opportunity to connect with our residents! Instead of contracting out your newsletter to a company that doesn’t know your community, why not take a few moments to produce one in-house?  Rather than giving residents a crossword puzzle that they won’t do, you could choose to view your newsletter as a chance to do some great marketing about up and coming events, mention some easy preventative maintenance tips, or even put your new residents in the know about local hot spots. It's important to get everyone involved in the process, from your maintenance to your leasing and all the way up to some notes from property manager's desk.  When you make it a team effort and everyone has a stake in it, your employees are more likely to talk......
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4 Current Trends in Housing

We’re witnessing deflation and rising unemployment, resulting in trailing decreases in consumer spending.  The movement towards thrift spending has impacted the housing market, and I am noticing a couple of obvious trends.1)  Empty nests are being filledRenting is the largest living expense and consumers are moving home to reduce that cost.  Many recent college graduates, young professions, and the unemployed will be forced to move home.  2)  Per unit occupancy is increasingBefore the recession, a typical 4 bedroom unit would house 2 or 3 occupants.  Now, residents are forgoing the luxury and privacy of living alone, and moving in with roommates.  We will continue to see a trend of more one bedrooms vacant compared to cheaper four bedroom counterparts.3)  Influx of second homes becoming rentals As downward pressure is placed on the pockets of the upper-middle class, many owning vacation homes will begin to seek additional income via rent.  With some 6.6 million units classified as “second homes”, this will results in more rentals on the market.4)  Rising vacancy, declining home purchasingWe’re seeing a positive correlation between the volume in home buyers and renters…And by positive correlation, keep in mind that I mean they are both decreasing.What does this all mean?  Simply put, increases in vacancy and decreases in rental rates.  It does not mean that the rental sector will resemble the price sensitivity of the airline industry, but we will see a push towards more affordable housing options.  Anecdotally speaking, I've seen my properties decrease 10% in rental rates yoy.How do you combat the......
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Marketing. Budget for it.

    Adjusting the Marketing Budget?I have never had a client that did not rely on a marketing budget as a guideline and many view compliance as a measure of management competency. In the marketing classes that I teach, we refer to problem solving and sustaining advertising. The high-cost of problem solving advertising, (usually three times more than sustaining advertising in time and dollars) is usually a result of poor budget planning. If you have considered these ideas, there is no need to re-invent your marketing budget. If not, it may not be too late to make adjustments for 2009.Making Money? The purpose of the marketing plan and budget is to generate revenue. Do not overlook any areas of spending that are generating income now. Consider doing more if the pay-off is there. So analyze past strategies and tactics before deciding which ones to repeat. Budget for it!Also, remember that the allocation of dollars must reflect the seasonal trends that affect occupancy. Depending on your market, there will be times when you have greater exposure and will need to campaign resources to elevate interest. Along the way, an incremental review of the plan and current market conditions may stimulate adjustments or a slight tack in your direction. If the marketing strategy and related tactics are well thought out, it is generally wise to stay the course. Be sure to consider the real cost of every strategy. Budget for it!Time IS MoneyOften a dimension that is overlooked in the budget is the cost of......
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Manage...to have it all, part 1 - The budget

As the manager, one of the best tools available to you is your budget.  It provides you with the blueprint for the expectations for your property's performance in the coming year.  A budget will provide you with a guideline for the following, just to name a few:Rental increasesRenewal increasesOccupancy expectationsConcession guidelinesAdvertising programsExpense guidelinesCapital improvement planWhile I understand that a budget can be intimidating and there are many professionals out there who break into a sweat just thinking about the budget process, the more familiar you become with the budget the easier it will be to work with.  When I worked with Lane Company, I was fortunate enough to participate in a budget workshop.   During this workshop, I learned what each budget category meant, where the numbers came from, and how to create a budget.  As a result of that budget workshop, I was confident with my budget and knew that going forward the budget process was never going to be intimidating to me again.As you start your new budget year, I would suggest the following:1. Understand the chart of account category and where the number comes from. For example:Gross potential - total of all of your apartments at full market rentGain/Loss to lease - difference between market rent and lease rentReview the account categories that you are unsure of with your supervisor to better understand what they mean and where the number comes from.2. Review the budgeted income to determine the following:Is there a rental increase budgeted? If so, when and......
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Pot luck anyone?

Whether it is gas prices, unemployment, or other general economic concerns, we are all chosing to spend our money differently.  Americans are rethinking their spending habits and most people are cutting out all unnecessary spending.  Dining out has been a luxury in many households.  Has it for your residents?In an effort to continue to build resident satisfaction and a sense of community, why not host a pot luck function at your property?  How nice to provide a "night out" for your residents without the high cost to the resident or the property?  The property can provide an entree and have the residents bring the side dishes, drinks, and dessert.Another idea might be to host a movie night - either for adults or for kids.  The property can provide a movie appropriate for the audience and the popcorn.  The residents will enjoy a night out and get to know their neighbors.  Instead of hosting a breakfast on the go, why not do a networking breakfast for the community?  With unemployment increasing, it would be great to be able to help people within your community meet other professionals who might be able to assist them in their search for new employment.  If budget constraints are present, you might want to reach out to your community for event sponsors.  Businesses are struggling in all sectors and are looking for ways to increase their customer base.  Improving your resident's sense of community and letting them know that you understand their circumstances and challenges will help your property reduce their turnover rates.  Plus, what is the best form of advertising out there?  A......
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