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The pandemic created a multitude of operational crises in the multifamily world. As such, many apartment operators have chosen to pause renewal increases, waive a number of fees to current residents, and have not pushed rent growth as aggressively as they would have done under normal conditions. This has significantly impacted planned budgetary and revenue goals.

After all, the implications of falling shy of revenue goals go beyond profits. Planned community improvements, preventative maintenance, investments in technology, and additional staffing, trainings, and capital expenditures all depend on meeting budgeted occupancy targets. Even in locales where rent collection has remained fairly steady, communities are struggling to reach budgeted revenue levels.

Fortunately, operators can explore multiple opportunities for ancillary income to help make up for some of the lost income. Rentable items, pet amenities, and convenience-based premiums are some unexpected ways operators can drive ancillary revenue in hopes of recovering some of the pandemic-related losses.

“When we saw the impacts of the pandemic start to hit in March, our first thought was how job loss was going to affect the collection of rent,” says Crystal Martin, director of multifamily operations for Leon Capital Group. “In the Class A space, we’ve seen rent collection remain fairly high, but some of the planned ancillary revenue was lower as a product of late fees and credit-card reimbursement fees being waived. It’s the same thing with fees for amenity spaces, since they were shut down.”

While Martin makes it clear that forgiving these fees is absolutely the correct thing to do, apartment operators have had to develop strategies to supplement the missing revenue. Here are some of the ways.

Rentable Items

Garages, storage units, and bike stations should be managed in the same way as apartment homes, according to Martin. Their absorption should be tracked, as well, to enable communities to adjust rents on these and other rentable items as needed. To assist in this pursuit, Leon Capital has utilized Engrain’s Asset Intelligence platform to track and modify premiums of rentable items.

“The AI tool has the capability to better monitor the rentable items so you can more quickly see how fast garages are being leased—and by which segment of residents—or notice that 10-by-10 storage units are being rented extremely fast,” Martin says. “You can increase and decrease rates based on absorption.”

Martin’s team uses the tool to reassess trends after every five leases, performing a thorough analysis of what’s renting quickly and what needs to be adjusted. It also provides insights as to which types of apartment homes are leasing quickest, enabling communities to quickly pivot when necessary.

Leon Capital has also utilized the tool to assist prospects with wayfinding during self-guided tours. Granted, self-guided tours and other touchless leasing options are designed to recover primary means of income rather than ancillary revenue, but the widespread adoption represents a strong reaction to the pandemic. Many operators have had to fast-track the implementation of self-guided tours and other technologies, which has led to accelerated training schedules and fire drill rollouts. They have succeeded in this quest to varying degrees.

“Surprisingly, March through July were some of our most successful months of leasing,” Martin says. “Our team managed by Greystar in Lewisville, Texas, averaged 32 net leases per month over a 90-day period at market rate. Their portfolio ended the quarter at a 98% collection rate, thanks to the adaptation of different tools and processes that we had to put in place.”

Pet-Related Revenue

While the industry has been very forgiving of most extraneous fees during the pandemic, one form of ancillary revenue that has remained stable is pet rent. Pet owners typically have no qualms about paying extra for their furry companions, and pet adoption has skyrocketed during the stay-at-home months.

While Bridge Property Management adopted a screening platform prior to the pandemic, it has become immeasurably valuable during it. According to Peter Cowan, who oversees ancillary revenue and strategic initiatives for Bridge, it has allowed the company to better manage existing and newly arriving pets and has also helped recover lost pet-related income with more intuitive assistance animal verification processes.

“We were among the operators losing valuable time as our associates attempted to independently verify assistance animal documentation,” Cowan says. “Leaning on PetScreening for third-party verification has enabled our teams to quickly diagnose any insufficient documentation and recover rightful pet rent for household pets that would have otherwise sneaked through as an assistance animal.”

Other operators have reduced breed or weight restrictions, making their communities an option for a new segment of renters. Reduced restrictions also help in the pursuit to limit insufficient accommodation animal requests, in that residents are less likely to try to sneak in a pet under the guise of an assistance animal if its breed or weight isn’t restricted. In most cases, they are happy to pay regular pet rent.

Additionally, some communities have enhanced their offerings of pet amenities—such as dog runs, pet-wash stations, and pet concierge services—to help capture the increasing pet owner demographic. According to data from the Pet-Inclusive Housing Initiative, a research and resource development initiative that promotes the benefits of pet-friendly housing, 83% of apartment operators say that pet-friendly vacancies can be filled faster. Additionally, residents in pet-friendly units stay 21% longer compared with those in non-pet friendly units.

Reallocation of On-Site Resources

At a lease-up of a Texas-based community, Leon Capital utilized its package lockers to facilitate 17 touch-free move-ins in one week. This was an efficiency the company had not considered pre-pandemic, but using the vacant lockers to assist with move-ins led to fewer cancellations. As part of the process, the on-site team left keys in the lockers for incoming residents to help customize a hands-off experience.

Leon Capital also has reconfigured its conference rooms to include work pods and podcast pods to produce additional revenue with so many residents working from home. One community was modified mid-development to transform its conference room to work pods/work-from-home space that is rentable for residents.

The conference room at Hangar 19 in suburban Fort Worth is being shifted to a mini-market. This enables work-from-home residents to quickly retrieve a frozen meal, drinks, and household items while remaining on site. While on-site mini-markets are not a brand-new concept, they are typically relegated to urban markets but now are sprouting up in suburban properties. The community benefits in that it receives a share of the mini-market revenue.

Leon Capital is also partnering with GigaMonster on a revenue-sharing program in which residents have high-speed internet and cable included in their rent package. This makes it easier for residents, who don’t have to find their own providers, and creates partner revenue for the community in the form a convenience-based premium.

“We’ve had to be proactive and adapt to keep the revenue where we need it,” Martin says. “A lot of staying on pace for your revenue goals is based on how quickly your team is able to adapt and shift by utilizing tech tools and taking advantage of your existing resources.”

The industry has always proven to be resilient and has primed itself to rebound when normal processes resume. But it’s no secret that 2020 has presented a challenging stretch. Communities that have been able to produce ancillary revenue to supplement lost income are already ahead of the curve.