multifamily budgeting
Apartment Budgeting: Telephone Income
I have taken a bit of a pause here at MBG due in large part to Mills Properties budget season. Every year around this time we dive head first into a process that takes the better part of two plus months to complete. We do our best to space it out so that any one VP, RM or AM does not get creamed. And, in the same respect it does take a good deal of focused time to do a budget right. With that in mind, I want to get back to posting to the blog as it provides good therapy for the day-to-day hustle of property management.
Today’s topic is telephone income.
Telephone Income Defined
Telephone Income is derived from a couple of different sources. Roughly twenty years ago plus or minus, it came from the likes of AT&T and or other local providers. Our on site sales teams would offer to transfer existing phone service or they would initiate the call for new service to be set up. For that, the property received a commission. It didn’t amount too much but it was income.
Around the same time, at least according to my aging memory, revenue share models arrived on the scene. Similar to cable and internet shares, in exchange for exclusive marketing rights, the providers gave the property owners a piece of the revenue. The share amount was equal to your ability to negotiate. These amounts started to mean something in the way of overall property value. Not huge but something nevertheless.
Cell phone towers changed all that. Providers would come in, especially in the case of high-rise buildings, and pay huge lump sums with ongoing payments. They would erect cell phone towers on your building and or land, sign mega long contracts (10 years plus) and be on their merry way. Huge deal when it came to adding value to your real estate.
I have likely left out a few income angles so feel free to fill in the blanks. And, thank you ahead of time.
Budgeting Strategy
This line item is a bit different from the prior line items. That is in terms of straight lining the income based on history. Because the income is based on contractual terms and agreements you can plug the income. That is to suggest that sometimes the payments are made annually, quarterly or monthly. And, they are specific in amount. Whatever the case, review your contracts, make note of the payment amounts and months they are to be paid and enter accordingly.
Refreshing
It’s good to be writing again. I really miss this part of my world. In the same respect, it felt good to take a pause.
Your looking forward to rockin’ the world today multifamily maniac,
M
Apartment Budgeting: Laundry Income
To continue with our Apartment Budgeting conversations; this week we are penning on the subject of Laundry Income.
Laundry Income Defined
Laundry Income can otherwise be termed as revenue share. This comes in the form of upfront concessions given at the time of contract signing. Or, in the way of refurbishment of your laundry facility. In addition to the aforementioned, one can negotiate a long-term share of washer and dryer collections. The payments can be set to arrive monthly or quarterly.
There are an endless number of ways that these contracts can be negotiated ranging from the vendor coming out-of-pocket to completely update your laundry facility to paying for a small share. In lieu of that, you can negotiate for a larger share of the ongoing revenue and forego the upfront incentives. You really have to consider this on a case by case basis. And, if you don’t know which way is best – reach out and ask.
Laundry Income Budgeting Strategy
If you are setting up anew – request a collection analysis from your vendor of choice. Ask them to pull trailing data from a comp that is similar in size and demographic. Consider drivers that could cause differences in your property versus another. Drivers such as; in unit washers and dryer connections, in unit washers and dryers present in select units, usability of room (is it centralized or located in the basements of each building), number of machines in the room, etc.. All things should be considered to give you a fair idea of what to budget.
If you are set and forecasting the new year – consider your most recent twelve to eighteen months trailing. Consider any foreseeable causes for disruption to up or downside. And, consider your timing. Plug the numbers accordingly.
Laundry Income Marketing Strategy
Not to over stress the marketing is everything mantra but it really is and producing Laundry Income is no different. Make sure you rooms are dialed in multiple times throughout the day. Make sure that the floors are swept and mopped. Make sure the folding tables are clean and free of clutter. Make sure the trash cans are emptied regularly. Make sure the machines are clean to include the lent traps. And, make sure the lighting is 100% working 100% of the time.
And, by all means – hand out free tokens or swipe cards from time to time. Host a – do your laundry for free – happy hour every Wednesday night. Call is Duds and Suds – they bring the duds you supply the suds. Make it social. Have T-shirt folding races. Have the neatest fitted sheet folding contest. Blow it all out on Facebook. Share the love of duds and suds. Above all – give people are reason to love the laundry room so that they come back and spend money using your machines.
Your lovin’ laundry income multifamily maniac,
M
Prop pics: Apartment Therapy
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.
Apartment CapX Budget Over Again
The Apartment CapX Budget is Over Again? How many times have you heard that statement in some form of fashion? And, I am sure – if you are anything like me – you just can’t understand it. Nor, in all fairness, do you take the time to understand it because you have a million other things that need your attention. But, I do have an idea as to why…
Humans Make Mistakes
Simply put – humans make mistakes. And, or they are innately incapable (not a dig – just plain reality) of thinking about every little nuance of a project. Or, they are too confident in their ability to forecast. But, most of all there are just too many steps in the process. And, the more steps there are the more opportunity there is/are for mistakes.
Apartment Project Management
A project is set up as a series of steps and each step has a probability of failure. With that in mind, I thought I would list a few examples of where exactly things can go wrong:
bad process, choice of vendor, equipment/mechanic, technology, your expectations are mis-communicated or not well understood, wrong leadership, wrong manager, inexperienced leader, poor choice of incentives, deciding to try something new, ordering the wrong product, product ordering mishaps, shipping delays, delivering the wrong product, weather, ignoring the canary in the coal mine, killing the canary in the coal mine (no canaries were harmed when writing this post), no tracking, loose tracking, leaning on our ability to track it in our heads.
And, the list goes on and on and on.
Solution: Fewer steps.
I think it is easy to assume that the weak link defines the extent of the success or the failure of the project. And, with all of these areas of opportunity for error – it’s no wonder that many times we come in over. But, still not acceptable in my head.
It’s a problem I am thinking through from an operational perspective. It’s one I think is solved with less steps and fewer people. And, I’m sure it will result in some posts along the way.
Hope your weekend is a crazy good one.
Your consistently thinking about apartment project management multifamily maniac,
M
Apartment Budgeting: Legal/Collections
We are working out way down the Other Income vertical in our budget series and today we are going to explore Legal/Collections.
Legal/Collections Defined
These are charges that are assessed back to residents for attorney’s fees and or fees associated with collecting outstanding apartment related debts. That is to suggest if you hire an outside agency to levy and or collect debt on the behalf of your apartment community, then you can and should charge it back to the resident. And, the legal/collection line is where you would book that income.
Budget Strategy
This is another line item where the use of history as the best dictate is likely the best practice. There is no real way to determine exact velocity or exact amounts to budget. In the absence of that precision – it would be best to pull your last 12 or 24 months trailing and come up with some averages.
Your wishing for a cool-front to roll in multifamily manic,
M
