by David Sullivan
Apartment perks for residents vary by community, from an incredible amenities package to resident events, local business discounts and everything in between. These are nice incentives for prospects to move in, but there are other ways to make a positive, long-term impact in residents’ lives that simultaneously support owner/operators.
Financial amenities are emerging as the next distinct amenity offering at apartment communities. From flexible payment options and budgeting tools to credit building, financial amenities help support on-time, in-full payments and boost resident morale. These amenities provide a huge benefit to owner/operators as well by proactively reducing delinquencies.
Residents are in a precarious state of financial health, especially coming out of the pandemic, and owner/operators are at higher risk of bad debt when residents have unstable finances. According to a 2020 American Payroll Association survey, nearly 69% of Americans say it would be somewhat or very difficult to meet their financial obligations if their paycheck were delayed by a week.
Here are some of the reasons financial amenities can make a positive difference for residents, and in turn, reduce bad debt for owner/operators:
A Proactive Approach to Bad Debt
Bad debt has become an even larger issue plaguing the industry after the pandemic. According to an Aspen Institute study in August 2020, about 12.6 million households are at risk of eviction, and TransUnion estimates that it costs operators on average $3,500 to evict a resident. Based on this average, evicting 12.6 million households could cost the rental housing industry $44.8 billion.
The late fee process is inherently flawed. Although late fees are technically additional income, the amount owner/operators make in late fees doesn’t cover the overall net loss incurred by delinquency. Collections are time consuming and difficult to deal with, and rarely do owner/operators recoup rent after a delinquent resident leaves the community. Financial amenities provide a proactive approach to bad debt. Flexible rent payments and budgeting tools can help get residents caught up on late payments and budget to make on-time, in-full payments moving forward.
Without cash flow management resources, most renters have volatile cash flow balances that often dip into the negative on a monthly basis. Financial amenities help residents stabilize their financial lives and stay in their homes while providing owner/operators another layer of financial protection and a proactive delinquency mitigation strategy. Operators utilizing Till’s cash flow management technology experienced a 50% increase in on-time collections and spent 70% less time collecting from late renters.
Financial resources are a huge amenity differentiator for apartment communities that owner/operators can reap the benefits of as well.
A Holistic Approach to Receivables Management
Innovative, technology-powered financial platforms don’t just help residents – they help onsite teams too. These resources are saving onsite teams a lot of time and headaches when it comes to tracking down late payments. No one likes dealing with revenue recovery and onsite teams have been inundated with requests from struggling renters throughout the pandemic, and even to this day.
Automated processes and daily data pulls help onsite teams better manage this process and provide a more comprehensive financial snapshot of residents and portfolios. Third-party customer service-oriented teams utilize this data to reach out to the residents in need of assistance and to see how they can be helped. It’s a holistic approach to receivables management that provides another layer of communication that is proactively trying to help residents with their finances and budgeting.
Additional voices and resources can help underscore the significance of getting caught up on rent and paying on time. This process optimizes financial strategies with technology to lower delinquency rates and improve NOI.
An Amenity Differentiator with Credit Building
Throughout the pandemic, many people tried to use credit cards to support themselves, building on their accrued debts. Many renters are in a position where they need to build credit or are actively working to rebuild their credit history. While homeowners accumulate credit based on mortgage payments, renters don’t build credit by paying rent on time unless it’s reported by their apartment community.
Credit building resources for residents can be a huge differentiator when it comes to community amenities, and it extends far beyond the scope of traditional resident benefits. Some communities have begun using services and new technology to report rental payment history to the credit reporting agencies, resulting in thicker credit files, which can lead to better credit scores. Residents probably don’t get this lifestyle perk in many communities.
Helping residents stay in their homes and feel better about their financial stability creates benefits all the way around, from residents and onsite teams to owner/operators. Owner/operators who leverage financial amenities can eliminate bad debt up front when residents utilize these programs, and provide a truly life-enhancing experience for residents.