Ancillary Income

Report
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Incremental and Ancillary
Revenue Strategies
Driving Revenue, Returns and Value
Mark P. Vernon
Vice President
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Ancillary Income: Driving revenue, returns and
value
• Compete with others to drive revenue
• Transform the landscape to create value
•
Seek out the opportunities
•
Project the returns (ROI)
•
Track the income
•
Watch for the tipping point
Ancillary Income: Who are our competitors?
“Relax, Roger, everybody's doing it…” Bud Fox, Wall Street
• Multi-family Owners
• Multi-family Property Managers
• Multi-family Developers
• Self Storage
• Big Box Retailers
• Hotels
• Airlines
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Ancillary Income: Transform the landscape
• Utilize the economies of scale to leverage
income opportunities
• Increase property portfolio income through
multi-stream revenue sources
• Monetize resident service demands
• Impact property valuation at sale or refi
• Boost property bottom-line value
Ancillary Income Opportunity: Gumball machines
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Results: Gumball machine usage increases
resident tooth decay at the community
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Ancillary Income Opportunity: Community
Rickshaw Service
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Results: Increase in the number of beer cans,
cigarette butts and volume of emesis to clean up
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Results: Corresponding increase in the number of
internal transfers
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Ancillary Income: Seek out opportunities
• Income generating measures
• Services
• Cable and wireless (must have ample bandwidth)
• Laundry (in unit and internet based laundry facilities)
• Rooftop antennas for wireless transmission
• Vending (traditional versus healthy vending)
• Renters insurance (standard versus self administered)
• Furniture rental
• Coffee services
• After hours concierge services
• Alarm monitoring
• Parking space rental
• Pet washing stations
• Carwash income
• Language interpretation services (dial-in)
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Ancillary Income: Seek out opportunities (cont’d)
• Utilities
• Resident utility pass through
• Deregulated markets – electricity and gas related
• Mineral and gas rights
• Rate increases through applicable regulatory authorities
• Rate negotiations – flat rate versus spot rates
• Tax incentives, energy conservation and utility audits
• Vacant utility recovery
• Recycling /waste reduction
• Valet Waste
• In-house utility billing
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Ancillary Income: Seek out opportunities (cont’d)
• Property fees
• Pet fees
• Pet DNA fees
• Amenity fees
• Transfer fees
• Lease break fees
• Late fees
• Charging station fees
• Bicycle rack fees
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Ancillary Income: Define the risks (return on
investment – simple case study)
Washer and Dryer - 5 Year Lease Projections (2012-2017)
Months
(Cost)
Lease Washer and
Dryer
Monthly Rental Total Rental/Set
60
$40.00
7% taxes
$126.00
Total Costs:
$1,926.00
Months
(Benefit)
Monthly Income
Total Yearly Benefit:
$1,800.00
60
Monthly Income Total Income/Set
$45.00
$2,100.00
$2,100.00
Net Income
$174.00
5 Year ROI:
9%
Payback Period (Mos):
55.0
Assumptions:
* $5.00 is the leasing premium/set; The rental fee is $40 and resident pays $45.
**Based on a 5 year lease cycle.
***Net income achieved after 55 months of rental; 4.5 months maximum vacancy allowed.
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Ancillary Income: Define the risks (return on
investment – simple case study)
Washers and Dryers - 5 Year Purchase Projections (2012-2017)
(Cost)
Purchase W/D
7% taxes
Total Costs:
W/D Cost
$1,100.00
Months
(Benefit)
Monthly Income
Total Yearly Benefit:
Install Labor
Total Cost/Set
$20.00
$1,120.00
$78.40
$1,198.40
Monthly Income
60
$35.00
Net Income
*$600 for top load washer and $500 for top load dryer.
**$300 buy back after 5 years
***5-7 year life based on usage. Calculation assumes 5 years.
Total Income
$2,100.00
$2,100.00
$901.60
5 Year ROI:
43%
Payback Period (Mos):
34.2
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Ancillary Income: Track Performance
• Identify income opportunity
• Negotiate the terms
• Track income and performance
• Drive ancillary income strategy through reporting
• Renegotiate the terms
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Ancillary Income: The tipping point
“Are we simply trading rent increases for ancillary revenue.”
“This property nickels and dimes us to death.”
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Thank you!
Mark Vernon, Vice President Purchasing
Bell Partners Inc.
336.232.1900
[email protected]
Photos uploaded via internet Google search
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Incremental and Ancillary
Revenue Strategies
Driving Revenue, Returns and Value
Kevin Huss
Director of Revenue Management
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Maximizing Revenue is about Balance
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Application
Administration
Pet Fee/Rent
Water/Sewer
Trash
Gas/Electric
Common area
deduction
• Door to door trash
pickup
• Parking fee (every
car)
• Bulk cable or
internet
• Amenity fee
Revenue Shares
•
•
•
•
•
•
•
The Resisting Fees
The Basic Fees
Ancillary Revenue
• Cable, internet or
voice services
• Laundry centers
• Vending
• ATM’s
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• Food truck festival
• Farmers market
• Wine and cheese
events
• Blood drives
• 5K walk/run
Risk Management
• Parking – garages,
carports &
reserved
• Storage
• W/D rentals
• Accent walls
• Clubhouse rental
• Guest suites
Indirect Revenue
Optional
Ancillary Revenue cont.
• Renters Insurance:
liability, pet & bed
bug
• Deposit
alternatives
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Understanding your property is key?
In place rents vs.
current asking rents
Indirect income
generators
Are your ancillary
fees consistent with
your market?
Current asking
rents vs. market
rents
How long will you
hold the property?
Short? Long?
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How do you sell your monthly ancillary fees?
Not include in the rent?
Include in the rent?
Rent
$635
Rent
Door to Door Trash
Parking fee
$600
$25
$10
Payment from resident
$635
Payment from resident
$635
($25 door to door trash pick up and $10 parking fee included)
On the surface this looks no different, but when you market your
property there could be a calculated difference….
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How will a buyer underwrite your property?
Include in the rent?
Not include in the rent?
Rent
Door to Door Trash
Parking Fee
$650
$0
$0
Rent
Door to Door Trash
Parking fee
$650
$25
$10
Total Revenue Per Unit
$650
Total Revenue Per Unit
$685
• The next buyer will underwrite a targeted rent value
• Existing ancillary accounts will be included
$685 vs. $650 = $35/unit of additional revenue
$35 x 12 months x 300 units = $126,000
$126,000 at a 7% cap rate = $1.8 million of value
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Kevin Huss
Director of Revenue Management
Harbor Group Management Co.
[email protected]
212.644.0513

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