The success of any investment is gauged by the risk and return. How you manage the risk and find ways to capitalize on opportunities is key.
During the pandemic, investors started to get nervous with the reality of many tenants not paying rent and eviction moratoriums. The media gave the impression that the future of apartment living was teetering on the edge of failure.
However, if anything, the pandemic gave investors the opportunity to shift and meet new needs and pivot toward new trends that had been evolving even before 2020.
Some saw that the future of the apartment living experience could result in the opportunity to raise rents and attract savvy tenants.
Prior to and post pandemic, apartment owners have been implementing changes geared toward the future making units more efficient and convenient. And surprisingly, the highest returns on investment are being found with lower cost solutions.
Improve the Management Experience
One area that can always improve for tenants with apartment living is management. Tenants want a hassle-free experience when they pay rent, make repair requests and communicate with management.
Connectivity to management can easily be integrated whether you are building new or retrofitting an existing building. The infrastructure cost is relatively low compared to the return. On the low end of connectivity, you can customize your management software platform to allow for event calendars, instant messaging and chat, and even on demand services for repairs.
On the higher end, connectivity could include remote access for tenant who lock themselves out or even weather sensitive temperature control. The “full experience” often includes remote door locks or keyless entry, light and temperature control as well as user “learning” capability where the technology will learn a tenant’s habits and automatically adjust settings to their usage.
For investors, connectivity should not focus on gadgets but rather data collection. Sensors for electricity usage, HVAC systems, water, etc. allow management to collect building data and make better decisions on running the building as a whole.
With better data, you can often cut expenses through higher efficiency. Data from StratIS, a smart apartment provider, found that access management is the top area where clients see the quickest return on investment.
Smart locks make maintenance trips faster and more secure for tenants and management. Further, smart locks have a lower up-front cost and reduce the cost of rekeying units. The return on investment is usually about three years.
Amenities
Amenities are another area for improvement where you can start small and have a big impact. It’s all about providing convenience and stretching beyond the pool and rec room.
A study conducted by Bailey Brands Consulting found that 74% of Millennials believe that technology makes their life easier. Installing voice assistance in common areas, motion sensor lighting, remote locks or offering services of convenience is the new trend.
Some apartments have their building set as an Uber/Lyft stop. Others offer salon services, house cleaning services or dog sitting. During the pandemic, a quick shift to offer a needed service was to provide package drop off and delivery. The possibilities are endless, and a quick survey of current tenants could offer insight into what is needed or desired. Further, the inclusion of “luxury” amenities may not cost a dime more than the time to collaborate with service providers to set the services up.
Very small changes or upgrades can result in almost immediate and long-lasting returns for investors. First, through value added services and amenities, tenants will find your apartment building more desirable than the one down the street.
Tenants will also be drawn to a more streamlined and hassle-free management system. Both resulting in the ability to demand higher rent. And while you are able to increase rental rates, more efficient building management will lower costs, making for a larger NOI.
The cost of housing has skyrocketed. The National Low Income Housing Coalition found that our country has a shortage of 7.4 million affordable rental units for low-income households.
The new trends and innovations to improve the experience and efficiency of apartment living is a very viable solution to provide more affordable housing and attract tenants that can’t afford home ownership.
And the pressure for more affordable housing coupled with greater efficiency and improved apartment living experiences could spur more affordable housing development. When demand is there and the cost to maintain and build affordable housing goes down, it becomes a more attractive asset to investors. This could be the perfect time to implement some changes!
We're excited to share our future deals with you all. We also have resources to help with further educating yourself on real estate investments such as our free eBook.
Sam Khairi
Afto Capital
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