While revenue management systems have gained some popularity in recent years, many multifamily operators are hesitant to make the level of investment necessary to implement that technology. However, another logical way for owners and managers to step-up income is to consider (or rethink) amenities-based pricing - something they may be able to easily employ using their existing accounting and property management systems.
Competition dictates that owners and operators must distinguish their apartment homes from neighboring properties. As always, value is the name of the game for prospective tenants. Typical marketing strategies focus on the traditional factors of price and giveaways. Yet an increasing number of innovative leasing professionals are using an amenity-based "value package" as their main sales strategy to close deals.
At its core, amenities-based pricing is a relatively "old" way of adding value to a multifamily property. Conceptually, it takes the market rent for a typical unit and then adds to that pricing for features like fireplaces, newly renovated kitchens, upgraded appliances, large closets and other add-ons. At the same time, it might subtract a few dollars if an apartment overlooks a dumpster or has dated finishes.
Landlords can create these aforementioned "value packages" by highlighting the special characteristics in each home they have available for lease. The rent add-on they place on these specific features should be based on the price they can draw in the marketplace, not on what they cost to incorporate. To determine the value, they must understand current market trends and know their target consumer.
Looking at each apartment and its individual features enables a landlord to market a specific home, rather than a unit type. In some cases, tenants are willing to pay more for the extras that matter to them. Again, this is not a new concept. Many multifamily operators already utilize amenities-based pricing. Some, however, are not taking full advantage of the ability to facilitate the different levels of pricing through their enterprise software.
For example, IBS multi-family users can store amenities and attributes on a unit basis through a built-in function that can in turn be used to help price the units by their individual features. This allows leasing professionals to easily access the data for marketing purposes. It also enables an easy audit - and potential upward adjustment - of current pricing.
Beyond that, the construction management function keeps track of all costs of renovation work, including an inventory of new features like granite countertops, stainless appliances and so on. It also can help to determine ROI on the capital improvements. An owner may ask, "If I spend $3,600 on updates in this unit, will I be able to get that back with a $100-per-month rent increase?"
These capabilities already are incorporated and integrated in systems like ours, requiring no additional financial investment. And, while doing the initial inventory of each unit in a portfolio takes time, it is not a job that needs to be done all at once. Rather, it can coincide with each unit's vacancy. Once an apartment's amenities have been identified and entered into the system, the unit can be flagged to indicate that it has been inventoried.
In short, many multifamily owners and managers utilizing accounting and management software may already have the tools they need to help them increase the bottom line without any additional technology investment. Given the current economy and continuing budget pressures, the option to positively impact the bottom line is a welcome message. As the economy continues to rebound, renters will be willing to pay more to get more, and amenities-based pricing can help landlords achieve the best rates for apartments with choice features while providing a competitive advantage in the marketplace.
Developing an amenities-based pricing model can help owners and operations maximize the profitability of individual apartment homes by generating "value pricing." The process of increasing revenues by adding value is relatively simple: determine which amenities are important in your market; assign a value to them, and lift your price by adding this to the existing unit base rent. It's that easy.
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About Integrated Business Systems, Inc.: Founded in 1979, Integrated Business Systems (IBS) provides in-house real estate automation systems for commercial and residential real estate owners, developers and property managers. The IBS software addresses virtually all property management, accounting and construction management tasks. Reflecting three decades of development history, the system offers unparalleled functionality and auditability. IBS is well known for its superior product and unparalleled service. As a result, IBS's client list boasts more than 100 prominent real estate companies' including many of the industry's most elite organizations in the United States.