Critical Metrics to Consider for Your Budget Prep

It’s budget season and Units Magazine has a well-timed article about which metrics are important to focus on during your budget prep:

To be a successful operator, one must often focus attention on organizational data beyond the traditional metrics of physical occupancy, exposure and revenue growth. “By the Numbers: Calculating Critical Metrics” session panelists at NAA’s Apartmentalize discussed big data in property management operations and how operators should leverage data to be proactive instead of reactive.

Jared Miller, COO at property management company Red Peak, stressed using data to look forward and to use the market to define the KPIs that matter to your organization.

“When you do your budgets, you look at numbers through July, so you’re comparing to that data,” Miller says. “But we need to focus and shift our mindset to a year-over-year perspective. Focus on what will really move the needle. The market impacts what KPIs you should look at. If the market is strong, you might not look at occupancy. The critical thing is to measure what matters and what is actionable.”

Panelists agreed that operators should redefine the metrics they use to make decisions. Instead of focusing on physical occupancy, operators should focus on closing ratio, revenue per unit and year-over-year metrics. If operators can look at their performance over an extended period and set a goal based on improving performance over the same period during the next year, they will make impactful improvements.

Richard George, NOI Coach, says the “Measure, React, Measure” concept should be a recurring theme. “Do something different tomorrow based on what you measured today,” he says.

Operators should use data to track unexpected revenue drivers such as customer retention as well as employee engagement. While this data isn’t readily stored in a property management system, Clio Barker, President and CFO for The Associated Management Company, says operators should pull these metrics from third-party sources such as Yelp, Apartment Ratings and Google Reviews.

“[It costs] between $1,000 and $5,000 to turn a unit,” Barker says. “We know that the resident makes the decision to renew on the day they move in. So, the process of transferring that prospect to the resident and the handoff from the leasing team to the maintenance team is critical. We can learn how we did by checking third-party review sites.”

May 2019 Apartment Jobs Snapshot

The National Apartment Association has a nice infographic showing the apartment jobs outlook as the leasing season kicked into high gear. You’ll notice that Raleigh is on the list for metro areas with the largest concentration of job postings and it has the longest time to fill open positions.

Source: National Apartment Association

New Breed of Lenders Helping Pay the Rent

Several startup companies are offering loan products meant to help people pay their rent. From an article in the Wall Street Journal:

These companies, which also include Domuso and Till, are entering a market long associated with payday lenders. Compared with cash-advance loans, which come with annual interest rates as high as 700% in some states, funds from the rent-lending startups are available at much lower cost. Some are competitive with credit-card borrowing rates at less than 20%...

Other companies offering rental loans see their products as a backup for tenants in more precarious circumstances. Till, which advertises its loans as much cheaper than those of payday shops, pitches rental financing to renters and landlords as a way to avoid evictions.

Data on how often renters default on their loans is hard to come by from third parties, and most of the rental-lending companies won’t share such information. Some lenders say one measure could be the “serious” delinquency rate on unsecured personal loans, which is defined as borrowers who are more than 60 days behind on payments. It stood at 3.6% in the fourth quarter of 2018, according to the credit agency TransUnion .

10 Most Commonly Collected Types of Ancillary Income

Multifamily Insiders has conducted a research study on apartment communities’ use of ancillary income and here’s their list of the top 10 most commonly collected:

Here are the 10 most commonly collected forms of ancillary income:  (Percentage shows percent of responders who collected that type of income)

Application Fees92.09%
Late Fee87.05%
Pet Rent82.73%
Early Termination71.94%
Month to Month Fee67.63%
Parking/Garage Fees54.68%
Admin Fees53.96%

How Credit Privacy Numbers (CPN) Impact Screening

NAA posted an interesting article about CPNs that explains what they are and why apartment managers need to be aware of them.

Through ads targeting high-risk individuals, groups selling CPNs entice individuals with claims of a clean credit slate and most commonly, the car, house or apartment that is beyond reach. For approximately $150 to $250, a group such as CPN Direct will provide the buyer with a “clean” 9-digit CPN which can be used in place of their existing SSN on credit, loan and lease applications. Included within each CPN package are credit lines that have been opened and maintained to establish good credit — often in the 750 range — for the buyer.

Using CPNs in place of an SSN in a financial transaction is a federal crime, according to the Federal Trade Commission — and for good reason. CPNs are directly tied to predatory identity theft practices that target children, the elderly and those incarcerated for long periods of time, and aim to build credit off of the victims’ stolen Social Security numbers. With each victim group, it often is years after the events that the crime is recognized, often crippling the victims’ financial wellbeing…

Unlike other fraud schemes such as chip reading, which focuses on flash scams, CPNs and Synthetic Identity fraud are designed for major transactions, including apartment rentals. While the cost of a resident skipping or being evicted varies greatly by market, the cost to prematurely turn an apartment is universally a burden of time and finances for a management company. Compounding the risk of fraudulent lease activity are secondary risks to premise liability that all rental housing operators must factor in.

Turnover Rates Hit Historic Low

Renters are staying put at a historically high rate. In the Executive Summary for their 2018 Income & Expense Survey, the National Apartment Association reported that:

…turnover rates sank to their lowest point on record (data available from 2000) at 46.8 percent. Owners strived to lower turnover costs by focusing on resident retention and increasing renewal rates. The U.S. Census Bureau reported a similar historic low in renter mobility rates in 2017 (21.7 percent) compared to 35.2 percent in 1988.

Source National Apartment Association

Key Takeaways from NAA’s Income & Expense Survey

The National Apartment Association recently published the results of their 2018 Income & Expense Survey, and offered some key takeaways in an Executive Summary:

  • Operating expenses increased by 2.1 percent, the slowest rate of growth since 2013.
  • Net Operating Income (NOI) grew by 5.8 percent, up 2 percentage points over 2016, impressive amid slowing rent growth.
  • Increases in payroll expenses were in line with wage growth in other private sector industries, averaging 2.4 percent.
  • The number of market-rent garden-style units per full-time employee increased for the third consecutive year to 44.3. The challenges of an ongoing labor shortage within the industry likely kept some communities understaffed throughout the year. Increased pressures on wages can be expected in 2018 and should be evident in next year’s survey results.
  • Once again, property taxes were responsible for the largest increase in expenses, up 5.3 percent year-over-year. The average property tax bill was $1,833 per unit and represented one-third of expenses. Fifteen years ago, property taxes comprised less than one-quarter of operating outlays. Contesting assessed values has become commonplace for many owners feeling the squeeze from skyrocketing taxes.

Click here to read the full Executive Summary and click here to order a copy of the survey results, which provide breakdowns for each metro market.

Preparing Your Property for Hurricane Florence

It’s looking more certain that Hurricane Florence will be impacting the Triad area – our homes and the homes of our residents. You can find updated information on the predicted track of the hurricane HERE.

The National Apartment Association has provided many resources on their website for addressing emergencies and disasters. We have also gathered a few key tips for preparing from the website and listed them below.

Take Forecasts Seriously
Many use prior experience with hurricanes to judge whether or not to ride it out, but each storm is different. Pay close attention to the National Weather Service and local law enforcement.

Give residents an emergency preparation plan
Consider distributing a pamphlet with precautions to take, including information about food spoilage from power outages and clearing patios of furniture and projectiles.

Secure your community
Trim trees, lower the levels of swimming pools and turn the pumps off, open electronic access gates, stow pool furniture, umbrellas, or anything that can become a projectile in high wind.

Own a generator or gas-powered chainsaw
There can be no predicting how long it may take for power to return or for the city to respond to fallen trees and limbs.

Stockpile necessities
Have residents fill their bathtubs with water and stock up on batteries and flashlights. Remind residents of the danger of open flame or gas indoors.

Make sure you have your residents’ contact information
You’ll need to alert residents on the condition of the community. Also, consider posting updates on your website or social media.

Why Seniors are Choosing to Live in Apartments and What That Means for Managers

PTAA hosted a Community Manager Roundtable in Winston-Salem on June 18 which featured a presentation from Corinne Auman of Choice Connections of NC. Her presentation was focused on explaining why apartments are becoming more and more popular for retirees, and what that means for community managers. Here’s some of what we learned:

Why we’re seeing a rise in the number of elderly residents living in apartments:

  • Growing (some would say exploding) elderly population. 10,000 baby boomers turn 65 every day.
  • Maintenance-free living
  • Financial constraints. Independent living communities are significantly more expensive than most market-rate apartments.
  • Not wanting to live with all those “old people.”
  • Not seeing health conditions as serious, or unlikely to improve, and as a result, believing that they don’t need the additional services provided by senior living facilities.

Corinne also provided some tips on how to recognize some indicators that a resident might be struggling or need professional care services, as well as a list of resources to which community managers can refer the resident or the resident’s family members.

We will likely have Corinne lead another session in Greensboro in the near future so keep an eye out for the calendar announcement.

7 Sales Tips for Leasing Professionals

Multifamily Insiders has a good article about the challenges faced by leasing professionals, and they end it with seven helpful tips for developing a prospect-centered approach to leasing. Here’s three of them:

Have a conversation, not an interrogation. Too often we’re asking question, question, question, question. Interview. Interview. Interrogate. This is a very scary thing when you’re on the buying side. Have a conversation with the person that you’re talking with.

Focus on the prospective resident. Pay attention to the prospect and treat them like a person. Don’t treat them like a guest card. Don’t treat them like a tour. Don’t treat them like a number. Focus on them, pay attention to them, and listen to what they are saying. Interact with them the way you would want to be treated if you were in their situation. Make them feel like they matter, and you’ll see a tremendous difference.

Start and finish the tour strong. Your prospective resident will be impacted most by what you do at the beginning of the tour (it “frames” the rest of the tour) and the last thin you do (it’s what they’ll most likely remember).

You can find the rest of the tips here.