Apartment Operators Learning to Handle Renters’ Volatile Income
Automated and customized payment schedules that allow renters to align their rent payments with their income help gig workers.
Apartment operators have frequently used the phrase “meeting renters where they’re at” over the past few years. For the most part, they’ve been referring to leasing, touring, marketing, and resident communications.
The industry has made notable strides to better accommodate modern renters while streamlining the leasing journey and sales process. However, there are some areas throughout the entire resident lifecycle where operators can cater to residents and reap more benefits.
One area that can significantly impact NOI and the asset value is the collections process. While renters’ behaviors and preferences have evolved, so have the ways in which they get paid. The gig economy was already on the rise before the pandemic, but remote work and technology expedited this growing workforce, and many renters have volatile incomes.
This is a challenging reality for operators and renters. When renters struggle to make their largest monthly payment, it sets a bad cycle in motion that impacts operators, onsite teams, NOI, and asset value.
Operators are starting to meet renters where they’re at financially through automated and customized payment schedules that allow renters to align their rent payments with their income. In turn, operators are seeing an increase in on-time rent payments and a reduction in delinquencies while modernizing and streamlining collections.
According to TransUnion research, 84% of operators indicate that payment problems are their top concern when it comes to residents.
Comprehensive payment strategies equip operators with a tool that encourages on-time payments by allowing renters to better align their rent payments with cash flow and avoid delinquency. This is particularly helpful for renters with volatile income, and customization is key when no two renters have the same income schedule, and the ways in which they get paid vary.
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“With residents using our comprehensive payment platform, we know at any point in time what’s owed and exactly when they’re paying,” said Jennifer Roebuck, Asset Manager of Revenue at Elevate Commercial.
“Residents have some say in setting up a plan that works for them, and we’re seeing that those residents are better able to meet their payment obligations on time, according to their schedule. This approach helps us proactively mitigate delinquencies and set residents up to successfully, and sustainably, pay rent on time.”
By supporting renters in making their largest monthly payments with a mix of flexibility, automation, and customization, operators put a process in place that transforms the entire community and improves financial health across the board. This allows operators to set both renters and them up for success while protecting and improving their NOI – even during a recession when renters are at the highest risk of becoming delinquent.
Based on internal data from payment technology company Circa, operators that utilize a comprehensive payment platform experience a 17.5% increase in on-time payments at their communities. The data also reveals that operators collect up to four times more outstanding balances than before using Circa’s platform.
“Collectively, operators are owed nearly $15 billion in back rent each month, and current rent collection processes seem to be failing both operators and residents, which is even more concerning during a recession,” said Leslie Hyman, CEO of Circa.
While rent payment innovation caters to residents, its primary function is to provide security for operators.
“Our goal is to help residents stay in their homes as well as improve our collections,” Roebuck said. “Since implementing a comprehensive payment platform, we’re able to offer flexibility and payment customization to residents, helping them stay on a financially stable path while avoiding evictions. It’s a sustainable way to set residents up for rental success while allowing us to reduce delinquency and improve our asset value through rental income.”
While automated and customized payment schedules help keep residents on track to pay on time every month, they also help residents more effectively catch up on arrears and help operators recoup losses from delinquencies. Rent innovation helps break the bad debt cycle and keeps residents in their homes. Internal data from Circa found a savings of three to five months in lost income per each eviction that’s avoided.
“When households are more financially stable, the entire community and overall business are also financially strengthened,” Roebuck said.