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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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