Rents are stagnant, as indicated by Radix data showing that rents are down 1.5% on a year-over-year basis, nationally. Combine that with the more than 400,000 new units that came online in 2023 and another half million anticipated for 2024, and economic conditions will continue to be challenging.
To combat stagnant rent as well as supply issues, many operators implement traditional concessions, which can be short-sighted and more costly in the long-term. While measures such as offering free rent may fill apartment homes faster and bolster occupancy, concessions can ultimately be a slippery slope and detrimental to the bottom line and overall property performance.
In today’s economic landscape, it is crucial to sidestep traditional concessions and get residents on board with technologies that align with multiple business objectives.
Concessions versus Rewards
One of the most effective strategies operators can deploy at their communities involves digitizing the collections process and rewarding residents for positive behavior.
In doing so, they are providing the perception of concessions without having to incorporate large discounts. Instead, operators allow residents to earn discounts through acts such as making timely digital payments or posting community reviews, which helps them retain the market value of apartment homes.
By definition, the word concession means to give something up. For operators, offering concessions equates to giving up revenue in order to drive occupancy. On the flip side, by rewarding positive renter behavior, both operators and residents can benefit.
The rewards given are nominal in comparison to costs associated with concessions. Residents are able to earn points that add up to a dollar amount that is significantly less than offering free rent. For instance, 400 points earned in rewards may feel like 400 dollars to a resident even though it isn’t. Those points are of tremendous value when residents redeem them and see a discount on their next month’s rent.
Embracing Technology: A Digital Approach
The implementation of digital payment platforms embedded with a rewards program is also modernizing the rent collection process.
Via a mobile app, residents can pay monthly obligations in a convenient, secure and contactless environment that enhances efficiency and optimizes on-time payments. This type of platform simplifies the process with features such as access to payment history, upcoming payment reminders and the ability to sign up for autopay or schedule one-time payments. For residents who still prefer traditional methods of paying rent, the platform also provides access to a mobile check-pay service.
“Having access to multiple payment options is something that our residents really love, and the rapid adoption rate of digital payments at our communities speaks volumes,” said Chris Gray, president at Moss & Company. “They appreciate the flexibility in how they can pay their rent every month. With more residents using the platform, we’re seeing a more stable income stream and even increased associate efficiency.”
In addition to providing a more seamless experience when paying rent, operators that combine rewards with digital payments can realize even greater returns. Offering points for cash-back rewards for such positive renter behavior as posting online reviews, referring new residents or participating in community events can motivate residents to pay their rent on time each month. Moreover, offering resident rewards costs operators less than offering eight weeks of concessions.
According to internal data from Domuso, offering rewards for on-time payments plus the option for autopay reduces late payments by 5% annually. In terms of cash-flow, that can potentially add up to $800,000 per year.
Long-term Benefits, Sustainable Economic Success
“The rent collection process is one of the most crucial aspects of ensuring successful operations,” said Ron Klein, VP of Product for Domuso.
“In a financial climate where many factors are beyond our control, it’s essential to see the bigger picture and be proactive when possible. By streamlining the process for residents and offering rewards for positive behavior, operators can improve community satisfaction and maintain optimal occupancy rates in any economic landscape.”
Beyond increased occupancy rates and greater resident satisfaction, operators using an intuitive payment platform can drastically diminish financial risks by having 100% chargeback protection, as well as by offering certified payment options, including credit, debit and ACH transfers.
“With certified funds, we reduce our exposure to potential fraud because we know the money is there,” Gray said. “By using a platform that doesn’t charge for ACH payments, we are realizing almost $9,000 in savings every month. The platform has renewed our financial confidence, knowing that not only are rent payments more consistent and on time, but there are safeguards in place to protect both residents and ourselves.”
Although economic challenges are inevitable, they do not have to hinder rent-collection processes or damage the bottom line.
Embracing modern solutions such as digital payment platforms that streamline the process while incentivizing timely payments is one of the most effective strategies in mitigating the negative financial impacts of late payments and delinquencies. By leveraging technology and resident rewards in the rent-collection process as opposed to offering traditional concessions, operators can better navigate economic struggles, maintain occupancy rates, position their communities for long-term success and bolster NOI.
Source: Rental Housing Journal
robertsrentalsblog 