Apartment budget
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
Share this:
Rent Write Off
We are nearing the end of the first section of our property management budget discussions. Up to now we have been penning about rental income and the various losses that are booked against it. They come in the way of; loss to lease, vacancy and various marketing related concessions. To round it out we are going to discuss the Rent Write Off line item.
Rent Write Off can be summed up simply – it is monies that are not collected as a result of residents not paying rent. Most likely for multiply months as it takes some bit of time to evict a resident for non-payment. In some cases 90 days or more.
Rent that is written off should be booked in the month that they it is incurred. That is to suggest that if a resident moves out and the account is reconciled (for some of you – that means that a SODA is completed) and an amount is left outstanding, it is written off as debt that has a slightly better than slim chance of being collected.
One item of note on this point; you will likely be writing off an amount that includes late fees, NSF fees, charges for damages, etc.. With that in mind, the only monies that get booked to Rent Write Off are in fact rent monies. The fees and damages are booked to a line item we will discuss in the coming weeks.
In the mean time, I am interested in knowing if your company practice is to book the write off in the month your accounts are reconciled or do you apply a lag time?
Your – always curious – multifamily manic,
M
Pic props: Urbandigs.com
Share this:
Resident Referral Money
Mike Brewer · · 1 Comment
Before we continue with our budget discussion on the topic of resident referrals, I want to back up and remark on a comment that I saw this last week. The comment was posted on Facebook and whether it related to our post or not, I found it a bit amiss. It was along the lines that discounts for specific groups be it students, seniors, city service workers are dumb.
Now I would not debate the merit of the remark in the sense that there are more creative ways to give money away. I would/will take the position that if it works – do it. It’s kind of like print media. Despite our need/want/desire to get away from our reliance on print media and ILS’s – if they work – we should use them. That is until they run their respective courses.
Resident Referrals
I am fairly certain that resident referrals or giving money or gifts away in exchange for move-ins is employed by every multifamily operator out there in some form or fashion. On that note – are they dumb? If I apply the same logic as our Facebook commenter then I posit – yes. It’s a concession given to a specific group. And, there are more creative ways to give money, influence or incentive to that group. That said, I am both a fan and an advocate of using them be it in the form of a concession, gift card or otherwise. After all they are much cheaper that most print media and or ILSs.
Resident referrals are used to reward your best in place marketing machine. The people who live with you currently. Every single one of them are a marketing opportunity waiting to happen. And, giving them reward can/is a good thing. And, that reward can come in any number of means.
They are monies given in the way of a concession, gift card and or hard tangible item (think flat screen, iPod, iPad, etc..). Now, we could debate the amounts given or the merit of a gift in lieu of money. We can suggest that money is not remembered after it is given. In my mind, we could suggest the same for a gift.
It doesn’t matter where you book it (Read: which line item it hits in your budget) it all shakes out in the bottom line.
No matter how you give it away, I would suggest you make it an experience. If you give them a concession – couple it with an impromptu in-home celebration. If you give them an iPod – record an uber-cool celebration message and load it in. Have a party centered around resident referrals and introduce the idea of making a commitment to share 10% (matched by your company) of the fee. Invite the charity in to share in the experience. Get creative and make it worth remarking about.
Your – believing that if it works – use it – multifamily manic,
M [Read more…] about Resident Referral Money
Share this:
Apartment Budgets: Loss to Lease
Welcome back for another installment of the Apartment Budget series. Today we are going to talk about Loss to Lease. Interesting side note, I did a piece on this a number of years ago and to this day it remains the number one read article on this blog.
Before we get started, I wanted to post a note of clarity as it relates to my last entry – Apartment Budgets: Rental Income. Where I refer to Rental Income in that post – I am really talking about Gross Potential Rent as being the top line. You may also hear it referred to as GPR. In any event, I wanted to head off any confusion.
LTL
Now unless you have a brand new community in lease up, you will have in place leases that are very likely below the GPR. The primary reason being rent increases. Any time you increase rents you create a margin between the in place leases and the new increased GPR. This can occur in reverse and the impact to the LTL can go in reverse. That is to suggest that you can decrease the GPR and the margin or LTL becomes positive. Not a scenario you see to often as rents generally rise over time in lieu of decline over time.
Loss to Lease – New Move In
To put it simply; if you lease an apartment below the GPR, the discount is captured in a Loss to Lease – New Move In line item. To put some math to it; if your apartment’s GPR is $500 and you lease it for $450, the $50 reduction in rent is capture in the Loss to Lease – New Move In line item as a -$50 charge. And, it will exist for the life of the lease.
Loss to Lease – Renewals
When leases come up for renewal and they are under the GPR number – the margin is by default in the current Loss to Lease line item. When the lease renews, if it is still under the GPR that new number gets captured in the Loss to Lease – Renewal line item. Putting some math to it. Suppose your apartment’s GPR is $500 and the current in place lease is $450 – you renew it at $475. The $25 margin is captured in Loss to Lease – Renewals.
Total Effective Rent
Once you have accounted for your losses related to in place, new and renewed leases under the current Gross Rent Potential – you come up with a Total Effective Rent. That is where we will pick up next week.
We have purposefully left out the analysis piece this week because I think it will fuel some crazy cool discussion. Hope to see you in the comment section below.
Your – lovin’ budgets – multifamily maniac,
M