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How to Protect Economic Occupancy Regardless of Market Condition or Asset Class

How to Protect Economic Occupancy Regardless of Market Condition or Asset Class
Driving occupancy in a time when demand dips is challenging. Recent data indicates the pace of leasing is picking up after bottoming out in the early stages of the coronavirus pandemic. But we’re still in the midst of a recession caused by COVID-19, and many residents and prospects will continue to experience profound economic hardship.   In an effort to fill apartment homes, many operators will offer prospective residents a helping hand in the form of a month of free rent, reduced or slashed security deposits and fees or lower monthly rates. But in their quest to maintain or bolster their physical occupancy rates, apartment communities should be careful not to sacrifice their economic occupancy rates (i.e., the percentage of potential gross income that a property achieves for the lease). Unfortunately, common lease concessions - especially reduced security deposits - can eat away at a property’s economic occupancy.  Don’t Reduce Deposits and Call It a Day When an apartment community collects rent from a lease, the economic occupancy rate equals the money actually received. So, if the property was able to receive all of its potential funds, the economic occupancy on that lease would be 100 percent. In a sluggish demand market or in submarkets with competition from new construction, communities might turn to financial concessions to draw in new residents. How often have you seen offers of six weeks of free rent or a 14-month lease with two months free, or deposit specials of $99 or even $0? I would ventu......
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6 Indicators that it's Time for a Pricing Health Checkup

6 Indicators that it's Time for a Pricing Health CheckupModern pricing strategies and revenue management systems have had a tremendous impact on the performance of multifamily owners and operators. While systems like LRO and Yieldstar are quite robust and continuously improved, they are not infallible on their own. In fact, the flexibility they give operators to implement a range of strategies means that users need to review and modify settings as market conditions and strategies change. Forward-thinking and high-performing property management companies realize that, as with any system, a routine assessment or checkup is a powerful tool. Inevitably when you look at your pricing and revenue management system in depth, you find areas of meaningful improvement. Here are six indicators that the time has come for a pricing health checkup: 1. Large Occupancy and/or Price Swings If you see that your occupancy is spiking up and then spiking down, either your system may be configured wrong or there may be something about how you're executing the use of the system that needs to be looked at. This could be caused by a variety of factors, including overrides or lack of compliance with the revenue management system’s pricing. The whole point of a revenue management system is to have much more stable occupancy and steady revenue per unit growth, so if you see volatility in occupancy or revenue per unit, that means you're getting the opposite results from what the system is supposed to be delivering. If you see an occupancy drop of a point or a point and a half in a s......
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A Mid Year Report Card, Is Your Property Achieving Its Goals?

With the end of June,  take this opportunity to review your property’s achievement or progress toward its goals.  Explaining goals during team meetings gives each team member ownership and understanding of these objectives.  Converting each objective into SMART goals gives a value every team member can measure. What occupancy is needed to produce the budgeted rent revenue?  What is the average occupancy for the first half of the year? How do the year to date expenses compare to the budget?  How do occupancy and expenses compare to the property performance from a year ago? With many organizations, success is not only measured in a comparison to budget, but also, it’s year over year expenses, same store sales. The results of changes to revenue and expenses will determine the effect on NOI, Net Operating Income, for the property. Has the Gross Rent Potential increased over the previous year?  This would be achieved if the market rent has been increased.  The impact of rent increases, is lessened by the existing leases on a property.  Managing lease renewals will reflect in a decreasing trend in the rent dollars tracked in a loss to lease expense area.  Failure to increase rents on renewals will decrease the rent revenue on a property. What change has affected the average or economic rent?  Market rents can be increased, but if lease renewals do not result in increased rental rates or move in concessions are increased; the average rent will have decreased from the year before. A property coul......
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Multifamily Leasing Concessions: A Tale of Two Cities

Multifamily Leasing Concessions - MiamiAny followers of the multifamily industry will doubtless be aware of the column inches currently being devoted to the subject of changing market conditions.  This week National Real Estate Investor announced that Manhattan renters are currently receiving record incentives as the market is flooded with new supply.  Last month the Wall Street Journal published an article about recent rent declines in Houston, New York, San Francisco and San Jose. That article noted that the drops, as well as slowing rental growth rates in other areas, could be the first indication that the multifamily sector's historic, six-year bull market may finally be coming to an end. A significant drop in demand often corresponds to an increase in concessions in the marketplace. Operators typically react to softening market conditions by offering concessions to new residents, usually in the form of free rent. With the multifamily sector performing so strongly over the past half-decade, concessions have been relatively scarce. (It is worth noting that even in some markets that are still exhibiting exceptionally strong fundamentals, such as Denver, operators will begin to offer concessions ahead of a wave of new supply).   Determining Leasing Concessions: The Methodology We recently partnered with ALN Apartment Data Inc., the largest collector of apartment data in the United States, to study this phenomenon.  We developed a methodology for identifying the presence of concessions in apartment markets. The methodology examines the difference between asking rents (gathered from Rainmaker’s comprehensive internet listing data) and effective rents (gathered through ALN’s property surveys) in various markets across the US.  The......
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5 Leasing Incentives Your Residents Will Love (That Aren't iPads, iPods, or iPhones)

5 Leasing Incentives Your Residents Will Love (That Aren't iPads, iPods, or iPhones)
We all love to give away an iPad at the housing fair. But at $500 a pop, it isn't the most economical gadget for a leasing incentive. Whether you're giving away a renewal concession or throwing a raffle, it's important that the item you offer has a high perceived value without breaking your marketing budget. Here are 5 awesome tech gifts, under $250, that your residents will love.   1. Nest Thermostat How Much? $249 Nest, designed by an ex Apple Executive, is the smartest (and coolest) thermostat around. Promising a quick 30 minute installation and compatibility with 95% of American homes, Nest will sure to put your old apartment thermostats to shame. Not only will it save you around 20% on your heating and cooling, it learns your habits as time goes on and automatically adjusts the temperature when you leave the house, go to bed, and wake up. Oh, and you can control it using your iPhone.   2. Nexus 7 How Much? $199 While the Nexus 7 may not be the long-awaited iPad killer, you can't deny its beauty and performance; and at a price point $130 less than the iPad Mini, it is the must-have Android tablet this year. Features include a stunning 7 inch, 1280 by 800 display, quad core processor (whoa, that's fast), and 10 hours of battery life. The N7 also gives you access to over 750,000 apps and runs the latest version of Android, Jelly Bean 4.2. 3. Jambox by Jawbone How Much?......
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