With the country full-speed ahead on its pandemic recovery, there are many ways to define the new normal and offer what to do about it.
Here’s my take: It’s time to restore your pre-Covid resident fee schedule. Many suspended parts of it – and for good reason – during the pandemic as the country’s economy struggled.
The hangover effect of the pandemic is leveling off. Job creation is healthy. Wages are rising from the competitive demand for labor. Today, even struggling gateway cities are seeing boosts in rents and occupancy. In fact, our data is suggesting that we are not only seeing rent growth come back, double digit growth in some regions. Interesting that ancillary revenue has not bounced back at the same rate.
Typically, 7 to 9 percent of effective rent comes from ancillary income. It can be higher. Restoring your resident fees and even adding new ones will help to revive your NOI.
Reinstate Resident Fees
The market is well into recovery at this point, and so should your fee collections. Economic challenges are still lingering in many areas to be sure to evaluate where the asset is located when you reinstate fees. Don’t assume that your competition is charging what they use to, as with all things you need to know what the market will bear, so do shops the comps.
Take this advice to heart:
Figure out what’s important to your residents and come up with ways to monetize it.
The biggest no-brainer is to focus more on residents with pets. Don’t underestimate the value of pets. We have seen record numbers of adoptions across the country and many residents welcomed in new pets during the pandemic. The U.S. Pet Market Outlook Report 2021-2022 reported that retail sales of pet products and services reached $107 billion in 2020, up 9% over 2019, due largely to a COVID-19 driven spike in the pet population.
Residents are more emotionally attached to their pets than ever. People are willing to pay whatever it takes to keep their pets as part of their family.
Re-evaluate your breed and weight restrictions and with that your fee deposit and pet rent. Offer pet engagement activities for a fee. Provide mobile pet services. Offer pet clinics and grooming services, along with the standard pet fees and deposits as part of your lease. In years past, we have seen communities set up a mini store for convenience store items, why not work with a retailer to have cat and dog items for purchase.
Try It, You’ll Like It
Another idea: Continue things that worked for you (and that your residents loved) that were offered during the pandemic.
Did you offer classes in alcoholic beverage mixology? Host wine tasting parties? Cooking classes? Don’t be afraid to continue these events if they worked the first time. Regional managers need to give their onsite staff members the confidence to execute them. Remember: People will pay for value.
Some more: Have you done a deal with your popular, local food trucks? Identify the best ones in your neighborhood and arrange for a revenue share with the truck owner.
It can’t hurt to create fees for VIP parking, package concierge services, scooter rentals, mobile car detailing and premium fees for convenience-based services.
Here are the numbers:
For a 270-unit garden-style community, with $1,318 in average monthly rent and $2.5 million in annual net operating income, the impact of even small fee increases is significant. Think of it like this:
$5 per month, adds $270,000 in property value.
$15 per month adds $810,000.
$50 per month adds $2.7 million.
We’re in a period now where there’s no better time for businesses to latch onto the economic recovery – and that can happen in your apartment community.