Today, Tomorrow, Next Year: Where’s Your Focus?
One of the key challenges for property managers is effectively managing today’s conditions without losing sight of long-term goals. In the multifamily housing industry, forward thinking managers know that sustaining long-term growth demands management tools and solutions that use accurate demand forecasting methods.
This article will briefly discuss demand forecasting and how looking ahead puts property owners in a better position to restructure rent tiers, redefine occupancy rate goals and respond to local demographic preferences.
Budgeting and forecasting tools give managers a peak into the future; examining potential rent levels, occupancy rates, make-ready expenses and market trends. For example, based on Fannie Mae’s report titled Is the Development and Design of Multifamily Rental Housing in Line with Recent Trends? released in 2013 reveals demand for smaller homes will increase as lifestyle changes and smaller family units impact rent preferences.
Research indicates two of the most significant factors for renters today are lifestyle and financial consideration. Younger adults (57% according to the Fannie Mae report) are more interested in home ownership today and see that as a future goal, but not all young adults will achieve that dream.
Today, and in their near futures, this demographic is looking for small, affordable housing with technology rich environments and green living amenities. Think hidden electrical outlets, ample wall space for flat screen monitors, on-sight recycling centers and energy-efficient appliances.
As college grads marry and start a family – a few years down the road – their wants and needs will evolve. To capture this cohort’s attention in the future, property managers’ focus must shift toward providing family-oriented amenities such as expanded sleeping spaces and access to on-site storage.
Although the prime renting cohort today in many communities is young adults, the next 15 to 20 years holds another promise for property managers – tens of thousands of retiring baby boomers. This group also seeks smaller apartment homes as they scale down their possessions and adjust to a single or “couple only” lifestyle as empty-nesters. Attracting baby boomers young adults simultaneously demands responding to two unique lifestyles.
Adjusting Strategic Expectations
The primary goal of many property management teams is achieving 100% occupancy. While that makes sense on the surface, demand forecasting processes that explore demographic expectations, economic conditions and renter trends sometimes reveal that higher rental rates combined with 90% or 95% occupancy nets higher revenue.
On a grand scale, some community managers may opt to modify existing floorplans. While converting a portion of your larger apartments into two smaller units may not seems financial prudent, it’s worth considering if there’s a large population of young single adults and people approaching retirement age living in your broader community. If you’re currently renting a 1200 square foot apartment for $1200 and you can rent two 550 square foot apartments for $750 to $850 per month, rent potential increases significantly.
Modifying Routine Processes
Another effective strategy that successful property managers implement is exploring property practices. Scheduling turn-around activities throughout the month, spreading out the cleaning and painting, affords greater control and often reduces turn-around costs. By streamlining operations and focusing more on revenue than occupancy rates, many properties see less overtime, higher quality work and faster availability.
Although changing company strategies should never be a quick decision, increasing revenue potential focused on demand forecasting models helps property managers and owners achieve growth expectations with target-focused strategies. Developing a demand forecasting model that includes research, local demographic profiles and market conditions in your area improves outcomes – and revenue potential.
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AppFolio, Inc. develops Property Management Software that helps businesses improve their workflow so they save time and make more money. Appfolio submits articles & blogs including topics of Resident Retention, Improved Owner Communication, Time Management, and more.