Continuing along with the Apartment Budgeting series today. The topic this week is Internet Income. This provides another opportunity to share in the revenues created by your allowance for exclusive marketing access.
Internet Income Defined
Internet Income can be defined in a very simple way – it is revenue share from your local Internet Service Provider (ISP). Not unlike revenue share from cable companies – you have to give up some exclusivity. That is to suggest that you have to provide exclusive marketing opportunities to the provider in exchange for the share of revenue. Item of note: Don’t confuse exclusive marketing with exclusive access. In essence, the only thing you want to give up is the ability for one company to market their services exclusively. It will not mean that your resident is limited in their choice. And, choice is a good thing. Good for residents and good for owners.
For apartment owners, internet revenue share comes in a couple of different forms:
1. An upfront per door fee.
2. A percentage of monthly revenues generated from total collections on billable subscriptions. More simply said, collecting a percentage of every dollar that your resident base pays to the internet provider.
3. A combination of both. You may get a lower per door fee and a higher percentage of share. Or, a lower percentage share and a higher per door fee.
4. Bulk – you buy internet for every door in the community for a base rate and then resell it for a profit. For example: you buy it for $15 per door and sell it for $25 and keep the $10 margin for yourself.
When it comes to negotiating a deal – I would recommend consulting with a guy like Mike Whaling. He has the expertise to negotiate the best possible revenue sharing opportunities that first and foremost provide your resident base with the best possible choices in service.
*One item of note – I’ve not lived in a market where internet revenues were shared with property owners. Therefore, I don’t have a lot to share in the way of norms.
**Another item of note – As the internet becomes more ubiquitous sharing opportunities might move to smart phone carries in lieu of cable/internet providers.
Internet Income Budget Strategy
This is a math problem any way you look at it. And, it is all predicated on penetration otherwise known as subscriptions. One thing to consider is the economy as a whole. The reason being that people get behind on the their internet bills just like they get behind on their rent. Except in this case, internet is likely something that is easily sacrificed where a home is not.
My best advice is to call your ISP representative and ask him/her to run a twelve month trailing report for you property and like kind properties. Use that to look forward and consider any stop service percentages that might be included.
Your always looking for ancillary income multifamily maniac,
About Mike Brewer
My mission is to tease out the human potential in the multifamily space.