Apartment Budgeting
Apartment Budgeting: Damages
From time to time people vacate apartments and believe it or not they leave the space damaged. It could be anything from a cigarette burn on the kitchen counter top to fist hole in the bedroom wall. Whatever the case may be; it is considered damage and it can and should be charged for.
Fees associated with damages made to an apartment. Charges are applied at the time of move out and are taken out of apartment security deposits. Nearly every company I have worked with and for has a standard set of charges that are applied for specific damages. For example, if the apartment is left full of trash and debris, most companies will charge a fee to bag (per bag) and remove it. If there are pet stains on the carpet – depending on the extent of the damage a charge will be levied. If it is extensive and the carpet has to be replaced charges might apply for a full carpet replacement. There really is no end to what you can charge for provided it is within reason and according to city, state and national law.
Budget Strategy
This one is fairly straight forward. The line is typically built on twelve months of trailing information given the fact that it can and will fluctuate over any bit of time. You take the full twelve months of trailing numbers, add them up and average them. You can then straight line the information. That is to suggest that you can use the average number to budget each month. Another strategy might be to average the numbers quarterly so as to catch seasonality. Either way is appropriate.
Your getting pumped for budget season multifamily maniac,
M
Pic Props to ITSOGS
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Insufficient Notice Fee
What is an insufficient notice-fee? Simply put, it’s an acceleration of rent due to giving a notice that does not meet the necessary lease protocol.
I am back for the weekly (save last week – vacation) budget installment. I took some time off last week and ultimately (save a pic post here and there) unplugged. All I can say is – DO THIS. Give yourself three to five days off every quarter and get away from everything. It’s good therapy. So – this week, we are talking about the Insufficient Notice Fee.
Insufficient Notice Fee Defined
What is an insufficient notice-fee? Simply put, it’s an acceleration of rent due to giving a notice that does not meet the necessary lease protocol. For example, Mills Properties requires a 60-day notice before move-out.
Budget Strategy
The Insufficient Notice Fee is a line item that you can budget based on T-12 (Trailing 12 months) information. The frequency is random, so there is a real chance that you could estimate for four based on your trailing information and end up with two or six. You will likely never be precise with this number. In the same respect, you will probably never be too far off.
It’s short and sweet this week. And it’s hot in #STL.
Your trying to keep cool in the 100+ temps multifamily manic,
M
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Apartment Lease Termination Fees
It’s time for another installment of our series on apartment budgeting. Today we are tackling the top of apartment lease termination fees.
Lease Termination Fees Defined
What are lease termination fees? The fee is applied if a current resident decides to break their existing lease contract prior to the lease end date. I have seen the fee vary in amounts – some as low as one months rent and others as high and two and one half times the amount of the monthly rent.
Budget Strategy
The apartment lease termination fee is a line item that you can simply use history to forecast forward. If you collected three of these fees last year, it is fair to say that you might do the same in the coming year. Or, if you have more history to pull from then do so. If you have three to five years of history, go back and consider the number of fees you collected over that time and simply average it out.
Once you have determined the number you have collected, space them out over the course of the year. Feel free to pick your months at random as there is no absolute way to predict when someone might need to break their lease.
Charge and Beware
This is likely the second most contested apartment related fee standing close behind late fees. A quick search yielded more than a few Q&A sites that advised everything from – pay it to challenge it.
The fee is perfect legal and it is agreed to at the time of the lease signing so feel compelled to stand your ground.
Your lovin’ other income multifamily manic,
M
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Simple Timeline
I heard a story this week (it was really a rant) about a broken system. The system existed between a project management team and an accounting team. As I listened (from a third-party removed perspective), it became clear to me that there was a fair amount of pre-work to include simple timelines did not exist.
Timelines
Simple maps that memorialize the steps between inception and conclusion. Simple steps put down on paper that capture the essence of letting out a contract for work to be done and the follow through to completion and payment for that work.
In the absence of a simple timeline you get chaos. You get the finger-pointing. You get he said and she said and they said and we all said – time-sucks. It’s exhausting and it usually involves the highest of pay grades to solve.
Creating an Apartment Project Timeline
1. Budget
2. Bid work (even though you have a budget, do the bid work)
3. Make sure the money is there (remember your apartment community budget was written months ago – in some cases many months ago). If the property is not performing to budget – the project may need to be put on a shelf.
*Item of note – don’t skip #3, it is where 99% of the problems can be traced back to
4. Put together a simple vendor list – who is working on the job, telephone number, lead (accounting contact), roughly what they are to be paid and when
5. Host a project launch meeting (in person if possible, by phone if not). Invite the property manager, maintenance supervisor, every vendor involved and your accountant
6. Give a weekly check-in update (via email or by phone whereby the above team calls in)
7. Wrap it up – tie up the loose ends and deliver the product
8. Host a post-mortem for every project no matter the scope. This is where you create excellence. Set the stage for an unadulterated conversation and tear apart the good the bad and the ugly of the project. Have your simple timeline laying in front of everyone and up on a computer screen for all to see. Have it set in an edit mode and change it (for the good) right there on the spot.
No system is perfect but every system should be evolving at all times.
Your counting on simple timelines all the time multifamily manic,
M
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Apartment Budgeting: Forfeited Security Deposit
Mike Brewer · · 1 Comment
Hope your Tuesday is off to a good start. I am still in the vein of Other Income as I venture through these budget installments.
Forfeited Security Deposit
Defined: A fee taken when an applicant fails to follow through with physically moving into your community after they have been fully qualified to do so.
***As a note of clarity: the security deposit in the refundable portion of the deposit collected at the time you collect a signed application.
The justification for charging and collecting this fee is that you and your team have spent time and resource getting an application processed. That is to include completing the application, running credit and criminal background checks and calling the applicant to let them know that they are qualified.
If you do all of that only to have the applicant call you at the last-minute to cancel, you should be paid for your time. That is what the forfeiture of security deposit covers.
How much?
This various by market and sub-market and in some cases is governed by state and local laws so be sure to do your research.
For reference fees in the St. Louis Apartment Market range anywhere from $150 to $500 with extremes on either side.
Lease Application
Make absolutely certain that you clearly define this practice and the amounts you charge for it in your lease contract. Void of the language, you will have a tough time collecting on it. Make sure the language is in concert with the laws that govern such things in your respective markets. And, don’t be shy about collecting it. No matter how customer-centric you are – you don’t work for free.
That is it for this week – I have left some nuggets out of the conversation on the outside chance that we get some comments. So, let us know what you think if you have a free moment today.
Your lovin’ the budget series multifamily maniac,
M