In the competitive landscape of multifamily real estate, apartment amenities play a crucial role in driving rental revenue. While community features like pools, lounges, and fitness centers are often highlighted, unit-specific amenities can significantly influence rent calculations and overall profitability. The recent Apartmentalize 2024 conference, hosted by the National Apartment Association, shed light on the importance of unit amenities and provided valuable insights for investors looking to optimize their rental income.
The Hidden Value of Unit Amenities
Panelists at the conference emphasized that any features present above the base offering, such as balconies or desirable views, can add substantial value to the base rent per square foot. These additional amenities can translate into higher income, as reflected in a poll of attendees where the majority stated that between 3% and 7% of their revenue came from unit amenities.
“Rent growth is anemic in 2024,” said Donald Davidoff, CEO and co-founder of Real Estate Business Analytics. “So when you’re looking for pennies and dimes, things you hadn’t paid attention to in the past suddenly really matter.”
Leveraging Unit Amenities for Maximum Revenue
1. Utilize Satellite Maps for Amenity Identification: Features such as corner units and wood or lake views are often preferred by renters. By identifying these features and considering them as premiums on top of the base rent, property owners can increase revenue significantly, especially in large properties.
2. Correct Pricing Errors: Ensuring that units are accurately marked for amenities is crucial. If a unit is listed as both having and not having an amenity, potential revenue may be lost.
3. Integrate Universal Features into Base Rent: If all units possess a particular feature, include it in the base rent calculation. Listing the amenity as a $0 charge in pricing reports can help showcase its presence without implying it adds no value.
4. Apply Data Tools for Market-Responsive Pricing: Using sophisticated data tools to determine the proper pricing for amenities based on current market conditions is essential. Mispricing can lead to certain amenities moving faster than others, indicating an imbalance that needs correction.
5. Test Value Through Small Charges: To understand what tenants are willing to pay, place a small charge on services like bike permits or parking. This approach helps gauge the value residents place on these amenities without undermining the overall rent value.
Avoiding Bias and Understanding Target Renters
Panelists also stressed the importance of avoiding bias in pricing decisions and understanding the specific value of amenities to target renters. Carol Enoch, CEO of multifamily consultancy Enoch & Co., highlighted the variability in amenity value based on the renter’s profile.
“Something that has value to an executive living in a 4,500-square-foot, four-bedroom, 3.5-bath house in Marin County, California, might not have value to your resident in an 800-square-foot urban core loft in Fishtown, Philadelphia,” Enoch explained.
Balancing Ancillary Income and True Rent Value
Enoch also cautioned against getting too focused on ancillary income at the expense of true rent value and placing quality residents in the buildings. “Somewhat paradoxically, don’t step over a quarter to get a dollar,” Enoch advised. This means not losing sight of the primary goal of maintaining high occupancy with quality tenants while seeking additional income through amenities.
The Role of Asset Class and Market Nature
The actual dollar value placed on unit amenities depends heavily on the property’s asset class and the nature of its market. Ensuring an accurate configuration of amenities and applying sophisticated statistical algorithms to recent leasing data is critical for optimizing unit amenity charges and overall rent.
Summary
For investors in the multifamily real estate market, understanding and leveraging unit amenities is key to maximizing rental income. By focusing on accurate pricing, utilizing data tools, and keeping the target renter's preferences in mind, property owners can enhance their revenue streams. As the market evolves, staying attuned to the value of both community and unit-specific amenities will be essential for sustained profitability and growth in the competitive rental landscape.
Comments