Fee
Multifamily Apartment Budgeting: Month to Month Premium
Photo by Mediamodifier on Unsplash
Welcome back to our series on Multifamily Apartment Budgeting for Tuesdays. I apologize for any confusion last week when I accidentally published Tuesday’s post on Sunday. This week, we will be discussing Month-to-Month Premiums.
Month to Month Premium Defined
The month-to-month premium, also known as the month-to-month fee or MTM fee, is a charge that is applied to residents whose lease has expired without renewal. This fee can either be a significant flat rate or a healthy percentage of the monthly rent. The main goal of this fee is to encourage residents to renew their lease instead of continuing on a month-to-month basis. However, if a resident needs to remain on a month-to-month basis, the fee helps to offset the risk of too many leases expiring in a given month.
Month-to-Month Budgeting Strategy
Including your month-to-month leases is crucial when reviewing your lease expirations every month. For instance, if you have 100 units and five leases expiring in August but also have five month-to-month leases, you have ten expiring leases in total. This means that ten leaseholders could provide notice to vacate, which may result in a significant drop in occupancy.
As for budgeting month-to-month fees, I would use twelve months of history to forecast the future. Charge-up is the more significant thing you must deal with regarding this line item. This fee is often waived out of sympathy for the leaseholder’s situation. Gentle reminder: we are in a business to make money, and part of making money is pricing in a risk premium on items with potential downside effects, like the scenario above. So, charge the fee and collect it.
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
