Financial amenities have added to the amenity wars in the battle for the latest and greatest.
By Morgan Dzak
Just when it seemed like the apartment “amenity wars” were coming to an end, the pandemic revived a new front: financial amenities. The battle for the latest and greatest amenities continues. But emerging financial amenities make a much larger impact on residents and operators than any rooftop pool, fitness center or dog park.
Apartment operators and residents have faced 20 percent+ monthly delinquencies, as highlighted by NMHC and its monthly Rent Tracker. Properties are increasingly turning to financial solutions and technologies to solve their challenge of collecting rent. Solutions include credit-building tools that add incentive for on-time payments, digital payments and flexible rental payments, among others.
“The financial amenities and resources are just as important as any type of physical amenity for a meaningful number of residents,” said Les Menkes, founder and managing partner at Asia Capital Real Estate (ACRE), which owns and operates across the country. “It’s really a win-win between resident and operator, and that should be our ultimate goal. It leads to longer-term, deeper and higher quality relationships with residents, and that is a huge benefit to both parties.”
Here are some of the ways apartment operators can participate in the financial-amenities trend and sweeten the deal for residents while improving net operating income (NOI):
Flexible Budgeting and Rent Payments
Apartment operators who have historically required a resident to pay all their rent on the first of the month have found that providing residents flexibility can increase on-time rent by 70 percent.
“Providing flexibility to residents in a space where there is generally a lack of flexibility makes a significant impact,” Menkes said. “Operators can be progressive in their approach to rent payments and better embrace the reality of many residents, and how their lives, cash flow and income works. Paying rent once per month doesn’t match how many residents manage their lives, so we have room to embrace these realities and implement a solution to better support that.”
Today’s renter has a different income profile than yesterday’s, with a significant portion of renters working in the gig economy, leveraging government stimulus or even working multiple jobs to make ends meet. According to research from Statista, there were 59 million people doing freelance work in the United States in 2020, and the number of freelancers has been steadily increasing since 2014.
Earning levels for these workers are different and pay schedules vary greatly from resident to resident. Work hours can fluctuate week to week, and freelance workers generally aren’t paid biweekly. It can be difficult for operators to adapt to income- and earning-schedule discrepancies, but it’s not impossible.
“Paychecks will often have 20 percent variability to them and that can get really tricky for the resident when they are trying to pay 40 or 50 percent of their income for rent on the first of the month,” said David Sullivan, founder and CEO of Till. “The rental-housing industry underwrites residents to an annual gross-income-to-rent ratio. But that’s not always reflective of the resident’s cash flow. The key to resident-payment success is to adapt to how the resident is getting paid in a way that empowers renters to pay in full and on time, and operators to get what’s owed to them on the first of the month. Better budgeting really supports that.”
This year, ACRE partnered with Till to offer flexible rent-payment options to residents in approximately 6,700 units across 33 properties located in Florida, Georgia, Kentucky, North Carolina and Ohio. Till’s analytics-driven platform positions renters for success by creating a customized payment schedule that aligns with their individual cash flow. In this way, residents participating in the program are empowered to become consistent, on-time rent payers, deferring late fees and eviction proceedings for as long as they comply with the agreed-upon schedule.
Menkes noted that a one-size-fits-all rent approach doesn’t necessarily work for all residents. Even though the industry is fixed, there are still ways to provide flexibility for residents and resources for better cash-flow management and financial savviness.
Credit reporting for rental payments is really starting to take off. Historically, credit reporting has had slow adoption. It has been expensive for renters or operators and can sometimes put data burdens on the property. With a new wave of credit-reporting tech that is free for renters, more and more operators are starting to offer this financial amenity. When residents make on-time, in-full rent payments, data furnishers in partnership with properties can report payments to credit bureaus, which can help residents build their credit scores with their largest expense of the month.
According to a TransUnion Consumer Pulse report for Q3 2021, 62 percent of consumers believe it’s extremely or very important to have access to credit to achieve their financial goals. Sixty-five percent of consumers believe monitoring credit is very to extremely important, and just 5 percent noted they don’t believe credit monitoring is important at all.
“ACRE offers credit reporting to all residents, but it especially makes a difference for the workforce residents,” Menkes said. “This financial amenity is a huge benefit and bona fide way to help residents build credit when many are trying to either build their score or maintain their score.”
Offering a credit-reporting amenity can be critical for many modern residents. Credit scores are wired into the economy, and without a decent credit score, many residents can be excluded from several key facets of life, like getting a car loan or a mortgage.
“Many residents in the workforce housing space are really at the inflection point of having and/or building a credit score,” Menkes said. “If you think about it, a renter’s single largest expense outlay is going to be housing, and it’s not traditionally reported to credit bureaus. If we can provide a solution to recognize and share these on-time payments to the credit-rating providers it will make a big impact for residents.”
Resident Empowerment, Operator Success
Operators can set up residents for success by extending different financial resources. Financial amenities not only help residents build financial stability, but they help residents better understand and develop budgeting skills and cash flow management. These amenities enable residents to take a large payment and turn it into a more manageable expense in the long run.
“There are some really critical, foundational financial amenities that we can offer to residents that make a tremendous impact, not only for the resident, but for the operator as well,” Menkes said.
Financial amenities are first designed to help residents, but the long-term benefits extend to the operators as well. When residents are successful, operators are successful and can boost NOI and asset value. Operators can eliminate delinquencies and bad debt by setting residents up for financial success and providing the means to pay rent while building a financial foundation.
“ACRE really tries to create a high-caliber resident experience,” Menkes said. “We all know it’s good for business, and why aim for satisfied residents when you can have delighted residents? We might as well aspire to please our main constituents.”
The “amenity wars” will probably never end, and if anything, amenities will continue to shift with industry and resident needs. Financial amenities can be a real differentiator for modern communities. They set residents up for success, help them develop better budgeting skills, support them for making on-time, in-full rent payments while building financial stability, and significantly improve NOI and collections for operators. Financial amenities are a win-win for residents and operators alike – a distinction few other apartment amenities can claim.
About the author:
Morgan Dzak is an account manager for LinnellTaylor Marketing. She previously spent time as a digital content specialist for Cornerstone Apartment Services and a sports reporter and producer for The Denver Post and 9NEWS in Denver.