How to Profit from Multifamily Real Estate? Heighten the Customer Experience
Multifamily real estate is a tough business, but at least it doesn’t compete with Amazon—yet. The e-commerce giant and its peers have transformed retail, spurring brick-and-mortar stores and landlords to fight back with lifestyle-focused features that offer customers an experience that e-commerce can’t match. Retailers have learned that exceptional service and exciting offerings builds a loyal following, even among people who would rather stay at home.
Although retail and multifamily real estate are different types of real estate properties that each present their own opportunities and challenges for investors, the disruptive changes that e-commerce has brought to retailers offer lessons multifamily real estate investors must heed. The anonymity of the online experience has made the social interactions, customer service and extras of experiences—from refreshment bars and lounging spaces to mini-art exhibitions, lectures, and performances—a differentiator and path to success for many retailers.
Today, the American dream has changed; homeownership is not an end goal for a large segment of the population. For many Americans, last year’s Tax Cuts and Jobs Act made it more economical to rent, especially at a luxury level. Millennials are putting off household formation and Baby Boomers who have sold homes no longer want to be tied down. But across all generations, renters want the places where they live to feel as much like a home as homeowners do.
This means the customer experience is integral to the success of multifamily real estate and is transforming renting from a transactional experience to an emotional one. Tenants who feel at home and valued will stay, engage and tout a property’s assets to friends. This gives landlords a reliable income stream—and more—which benefits real estate asset management whether holding a property or grooming it for sale. The ability to stand out from the crowd plays an important role in Origin’s identification of economic opportunities not yet realized—we call these opportunities “trapped value” and we seek to unlock their potential.
At Origin, we recognized early on that service and engagement are powerful differentiators in real estate assets. We know it’s not enough for landlords to provide a building with working plumbing and a refrigerator. Our residents choose to live in our community because the experience supports and enhances their personal brand and identity. People must be able to relax and build relationships at a property to feel at home. For that reason, our real estate asset management team and the property managers we hire elevate our multifamily spaces into places that provide tenants with favorable, meaningful and memorable experiences.
Here are the four steps we take to do so:
Step 1: Establish Excellent Customer Service
Customer service is what seals the deal. Real estate asset managers must insist on a service mindset in its marketing and property management teams, and hire, train and monitor them appropriately. These professionals must communicate with tenants at every touchpoint of their lifecycle as residents. For example, our managers survey new tenants, and again when they renew or need something fixed, and pay attention to the responses. Good apartment managers nurture relationships, right down to knowing residents’ names and greeting them when they interface with each other. There’s nothing better than a warm welcome.
That personal touch extends to gifts and perks. For example, when new tenants move in, instead of welcome baskets ordered in bulk, we personalize them with offers from local vendors. To give tenants closer ties to properties and make their lives easier, our property managers work out ways to add services, such as inviting a dog-grooming service to set up a station in an underused space on the property’s premises. If a tenant is a chef or yoga instructor, they may have her or him do a class—or several—to build community and put amenities to use.
Step 2: Bring Neighbors Together
To bring residents together, we have property managers take the lead in planning social events, especially those that use communal spaces on the premises. At Origin properties, these have ranged from running clubs, movie nights or icebreaker where people bring their dogs to pool parties and potluck dinners to watch TV shows such as “The Bachelor” and “Game of Thrones.” Some of our properties have event planners onsite, who organize activities in return for a rent discount.
Once a community environment is in place, residents may also organize their own meetups. At Olmstead Chamblee apartments in Georgia, tenants who didn’t have family nearby got together to celebrate Thanksgiving at a big farm table in the clubhouse. This sociable property brought Origin investors a 2.45x gross multiple and a 30% IRR at sale.
Step 3: Use Experiential Design to Create Community
Service alone will not help distinguish an apartment that’s simply space for a bedroom and a couch. When evaluating a potential investment’s location, design, and amenities, we anticipate how to overcome shortfalls. An experiential design envisions how spaces are used in entertaining, working from home, or just relaxing. The floor plan should allow for traffic flow. Countertops, shelves, and drawers should be convenient. Electrical outlets should be located where they’ll be needed, and light switches won’t be out of the way. Properties that lack these characteristics must be fixed before they can become successful investments.
Often, we also reimagine common spaces. Physical cues make a rental building feel like a community. Dog runs and washing stations are not only a convenience but also a way for pet owners to meet. Music playing over speakers in the lobby, a video board to communicate upcoming events, a party room with monitors for video games and TV watching, a coffee bar with bottled water and snacks—or sometimes beer on tap—all create an atmosphere that encourages neighbors to socialize.
Tech is also an integral part of experiential design and it must be meaningful and productive for the tenant. While high-speed internet access is a must, it’s also critical to include reliable technology that makes life easier. Smart home design can make units accessible for dog walkers or dry-cleaning deliveries. Streaming on-demand workouts will boost the use of the fitness center. In northeast Atlanta, our luxury apartments and townhouses feature keyless entries, internet-controlled thermostats and electric vehicle charging stations.
Step 4: Make Social Media Part of the Experience
With activities for tenants and convenient amenities in place, it’s time to make sure they’re posted on social media. These photos tell a great story, especially when residents share their own experiences. In effect, these become referrals that bring in new tenants. Reviews on Google and Apartments.com are practically priceless today thanks to their power to convert; in one survey, 91% of renters said that online reviews informed their decision in their most recent apartment search and 85% of young consumers said they trusted online reviews from complete strangers as much as if they were from friends and families.
Property owners that do their homework and offer exceptional experiential design and customer service attract not only the Millennials that dominate the rental space, but also Baby Boomers who want downsized homes in vibrant communities. They are also staying ahead of the game considering that Amazon is already getting in on the action. The company has invested in modular housing and sells dozens of sheds, cabins and tiny houses, including a backyard guesthouse kit. But a focus on the customer experience is a powerful way to defend property investors’ home turf against any disruptive force.