multifamily budget
Apartment Budgeting: Storage Income
One in Ten Americans Has a Self-Storage Unit
“Human laziness has always been a big friend of self-storage operators,” Derek Naylor, president of the consultant group Storage Marketing Solutions – New York Times article. I would say to my apartment friends – we/you need to get a piece of that action. Build garages not for parking cars but rather storing junk. Do some dual marketing – call it storage and or garage. It’s a place to put stuff and things.
Storage is such an epidemic that we now have Storage Wars (reality TV show) aimed at celebrating the agonies and lamenting the defeats of would be bidders. It also doubles as a back door way of marketing the self-storage business – a post for another day.
Storage Income Defined
Simply put – this is income that comes from those dusty old basement storage spaces that everyone tends to forget about.
Storage Income is a way to drive revenue to your bottom line. If your property has the space (basements are great for this) – consider the option of building out some simple caged space that people can use to store stuff. Or, if you already have it, just remember to market it. Price it to sell, create scarcity and urgency. Heck, give it away (for short stints) just to get people hooked on having it. Trust me, once they move their stuff in – as suggested above – they will be too lazy to move it out. Boom – you chance to get an extra $5 or so a month.
Budgeting Strategy
No real strategy here. Look at your trend lines over the trailing 24 months and get yourself an average. Use that average to straight line your storage income account and think about adding some inflation for the coming 12 months.
Any Other Thoughts On Storage Income?
Your having an amazing and over the top day multifamily maniac,
M
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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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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
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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