Will Apartment Revenue Management Systems Drive Residents To Homeownership?

Handing the keys back? Will apartment Revenue Management Systems drive tenants to homeownership?
Who’s handing who the keys?

Property Management Insider had a piece out last week How Revenue Management Systems Make Leasing and Renewals Easier that talked about how RMS took all the emotion out of raising rents on renewing residents.

…a community manager may occasionally resist a rate increase for a long-time resident or one who has become valued over the years.  Business is business, however.

“When they start to say, ‘Oh, Mrs. Johnson has been here six years,’ we try to get them away from the emotional aspect of pricing,” he said. “We say if we really wanted to lift our rents and maximize our revenue, we have to make some tough decisions, and some people who can’t afford it may have to move out.” [Emphasis Mine]

As owners, operators and property managers who doesn’t love getting top dollar rents?

The math behind RMS (if done correctly) can definitely drive rents higher if it’s backed up by enough data to draw statistically valid references. At its Continue reading Will Apartment Revenue Management Systems Drive Residents To Homeownership?

Increase NOI at Your Apartment Building with Fannie Mae’s Energy Star Findings

Fannie Mae launched their Energy Star program for apartment building investors by releasing their study on utility use. The report, called Transforming Multifamily Housing: Fannie Mae’s Green Initiative and ENERGY STAR for Multifamily (PDF). It’s loaded with great info on reducing energy and water use as well as stats on use broken up by unit, square foot and region. They also talk about their Green Preservation Plus loans which combined with certified Green Buildings they have financed $130 million in loans on as of Q1 2014. But let’s cut to the chase, key findings [Emphasis mine]:

  • On average, a 100,000 square foot property spends $125,000 on energy and $33,000 on water annually.
  • If this property saved 15% on energy and water costs, it would increase asset value by almost $400,000, at a 6% cap rate.
  • The least efficient properties use over three times as much energy and six times as much water per square foot as the most efficient properties.
  • When owners paid for all energy costs, median annual energy use was 26% higher than when tenants paid for them.
  • High-rise properties use almost 10% more energy per square foot than low-rise properties
  • Properties in the West use almost 50% more water per square foot compared to properties in the Northeast.

Clearly reducing common area utility costs and getting tenants to pay for their own use are the two of the best ways to improve Net Operating Income (NOI) and they have a nice graphic showing  just how to do that:

Reducing Utility Costs on Apartment Building Investments raises NOI

It’s an interesting finding that buildings in the West use Continue reading Increase NOI at Your Apartment Building with Fannie Mae’s Energy Star Findings

Apartment Building Investors beware: Important changes coming to Oregon landlord-tenant laws.

Cliff Hockley over at Bluestone & Hockley has the details on upcoming changes that apartment building investors should be aware of regarding their Oregon properties. A few bullet points, changes affect:

  • Screening of Section 8 and Section 42 tenants.
  • The establishment of a fund to offset damages caused by Section 8 tenancies.
  • Renter’s insurance can be required but…
  • Limits on tenant screening for evictions and arrest records.
  • Timing of notice periods.
  • Temporary occupancy.
  • Abandonment.
  • Plus: a good definition of ‘Person Crimes.’

Portland Oregon Apartments

See Cliff’s whole report here: A Review of the Legislative Changes to the Oregon Landlord Tenant Act and to Section 8 Tenancies

Continue reading Apartment Building Investors beware: Important changes coming to Oregon landlord-tenant laws.

Charging apartment building residents for water, sewer AND garbage- the growing trend.

In a study by Dupre+Scott they found a growing number of apartment building investors in the Puget Sound region are charging tenants for water, sewer and garbage which make up can make up a pretty large chunk of operating expenses:

apartment expense for tenant water sewer cost

Two-thirds of the properties we surveyed pass through water and sewer charges to residents, and 50% also pass through garbage costs. The average monthly water/sewer charge in the region ranges from $46 for studios to $70 for three-bedroom units. Adding garbage charges increases costs to $55 for studios and $90 for three bedroom units. Our March Apartment Expense Report found that utility charges paid by residents increased 50% between 2008 and 2012.

apartment building utility bills

Do you or have you considered charging for water and sewer via sub-metering, individual metering or a RUBS system? how about garbage? Continue reading Charging apartment building residents for water, sewer AND garbage- the growing trend.

Back To The Future: A Brief History of Apartment Building Design

Mike Scott of Dupre+Scott Apartment Advisors gives a tour through the last hundred years or so of apartment building design. Plus ça change….

In the accompanying article (here) Mike talks with builders and developers about current trends in apartment design and amenities. Interestingly many of these changes provide a competitive advantage to Continue reading Back To The Future: A Brief History of Apartment Building Design

Apartments 2080: The future of apartments or just channeling the Jetsons? Infographic via MHN Property Management

Multihousing News yesterday posted an infographic called Apartment Living in 2080 suggesting what features might be standard in urban units sixty-seven years in the future. Some cool ideas but there was something familiar about it….

Apartment Building Standard Features in 2080
Click on the image for the full graphic

Oh that’s right, I’ve seen that TV show before!

Jetsons Space Age Apartment

Just one question: When’s my flying car going to get here?

My Challenge to Zillow on repair and maintenance costs in their rent vs. buy comparison.

The Fiscal Times had a piece the other day reviving the good old rent vs. buy meme. The new angle was that Zillow has updated its method for comparing the costs of renting and the costs of buying and uses it to produce what it calls a ‘Breakeven Horizon.’  Besides sounding vaguely like the title of an old sci-fi movie, beyond the breakeven horizon is where buying a home makes more sense than renting and in theory the less time to the horizon, the more the market is tilted towards buying.

Now I have to admit I was intrigued with the thought that Zillow had re-examined their methodology because as I have written about earlier, their previous calculation ignored the real costs of maintenance, repairs and saving up for replacing big expensive things like the roof, the furnace and the driveway and that is a pretty big chunk of money over time. Industry figures for repairs and maintenance on single family housing run from one to three percent of the home value.  Have a look at the chart* below to see how much a relatively modest 1.5% adds up to over time.

The Myth of Home Ownership as an Investment Debunked
Click for full screen chart view.

 

Surely I thought, Zillow had been convinced Continue reading My Challenge to Zillow on repair and maintenance costs in their rent vs. buy comparison.

Some perspective on New Apartment Building Unit Starts: Census Bureau’s stats charted by the NAHB

The NAHB is out this morning with a chart that gives some perspective on apartment building investment starts. The Census Bureau reported 285,000 unit starts in October for 5+ unit buildings. At that rate it looks like we’re just returning to what was a sustainable level of starts in the ’97-’06 period.

Apartment Building Investment Starts Returning to Sustainable Level
Census Bureau data plotted by the NAHB

While developers tend to overshoot the sustainable level (which is where the apartment building investment cycle comes from) the hope is that Continue reading Some perspective on New Apartment Building Unit Starts: Census Bureau’s stats charted by the NAHB

Risks to Apartment Overbuilding Averted, For Now says ReisReports

In a piece just out today ReisReports says that new apartment starts have been postponed to 2014 by many developers.

The “bubble” now shows up in 2014, but if economic growth ramps up, then additional supply will most likely be absorbed relatively painlessly.

But not all Metros escape. The report mentions Washington DC and suburban Maryland as two of those who will still see large increases in supply next year.

US Apartment Market moves big supply increase to 2014

Interestingly they name Seattle as a market that should be able to absorb the new supply coming because Continue reading Risks to Apartment Overbuilding Averted, For Now says ReisReports

The Seasonal Effects on Apartment Building Effective Rents, Occupancy and Revenue Growth. Plus much more…

Axiometrics’ monthly apartment building investment report has a great chart showing the seasonal effects on effective rent, occupancy rate and revenue growth. How do you model seasonality in your budgets? What do you think is the best way to do this?

Seasonal Effects on Apartment Building Investment Results
Source: Axiometrics Inc.

Their report this month also has a very Continue reading The Seasonal Effects on Apartment Building Effective Rents, Occupancy and Revenue Growth. Plus much more…