Ancillary Income Is Picking Up Steam
Keep up with the competition and drive NOI
Three Reasons Ancillary Income is Accelerating
In the landscape of multifamily operations, 2024 will be a year where Operators are innovating more to achieve financial goals.
One such strategy gaining traction is incorporating ancillary income charges for technology or community services bundles alongside traditional rent. While this approach might seem novel to some, its benefits are increasingly evident. Here are five compelling reasons why multifamily residential operators should consider this shift:
1. Enhanced Tenant Experience via New Technology
From our perspective, the acceptance of ancillary income has been a great win-win for innovation. New revenue = New budget = Innovation for expensive projects like high-speed internet, smart home automation, or access to lifestyle service amenities.
These things can significantly enhance the tenant experience… especially in a world where rent is driven by yield management (it’s a little harder to lift that hood and tamper with the rent software).
These beneficial innovations simply occur less frequently without being able to attribute direct income to the expense. Tenants increasingly prioritize such offerings when choosing a place to live, making bundled services a valuable selling point for operators. Furthermore, data analytics derived from these technologies empower operators to make data-driven decisions, optimize resource allocation, and anticipate tenant needs effectively.
65% of Operators
are charging additional fees via Welcome, Amenity, Technology, or Community Bundled Charges.
Source: Costar + Amenify Data across
~1.34 million units in 512 cities
2. Ability to Test… Then Scale
Implementing ancillary income charges allows operators to experiment with various bundled services, gather feedback, and iterate to create unique value propositions for residents. These services are:
Segmentable
Tested to find the balance of value vs. cost
Then scaled out
This iterative approach enables operators to tailor offerings based on resident preferences, ultimately enhancing the overall resident experience and creating distinct competitive advantages in the market.
3. Industry Adoption (read: everyone else is doing it)
The multifamily residential market is a case study in microeconomic theory. Residents will choose for value, and Operators will maximize NOI.
We all “want” to innovate, but the first question from most Real Estate Operators is, “who else is doing this?” The answer is most operators. More specifically, 61% of 1.3 million units analyzed by Amenify (with additional data publicly available from Costar), are charging some form of additional fees via Welcome, Amenity, Technology, or Community Bundled Charges.
Which means that if you, Dear Operator, are not doing this, you are missing out. As the multifamily housing market evolves, embracing ancillary income charges for bundled services is becoming an industry norm. We hope you don’t miss out on these benefits.