Using Revenue Management to Determine ROI on Renovations in Multifamily

As discussed in RealWorld 2018 sessions  Rehabbing a property no longer means applying a fresh coat of paint on the outside and new carpet throughout. In today’ highly competitive multifamily world, an upgrade is sometimes the complete transformation of an asset, down to the studs. Renovations in multifamily are the new reality and they are visible around the country and across asset classes. “It is the new norm in our business, it’s clearly the new norm,” LRO Vice President Tracy Paulk said at RealWorld. “Twenty percent of the properties that we do business with are under renovation. It’s not isolated to one part of the country, it’s all over.” The “amenitization” of multifamily is leading the charge and defining how developers and property management companies orchestrate their portfolios. In a renovation, apartment operators have to find the balance between an amenity investment or upgrade that promotes rent lift and a sound trade out compared to one that’s just money down the drain. The big question is, how do you calculate return on investment through the renovation process when rental rates are a moving target? Revenue management and business intelligence are providing many of the answers. Slowly but surely, multifamily is adapting to the coexistence of property renovations and the deployment of revenue management. With increasing demand to know the true impact of amenities − how upgrades like granite countertops truly affect the rent roll − monitoring renovation performance and staying focused on ROI is key. Using revenue management for renovations has become an effective way to chart performance so investors and managers can walk away with the knowledge to make key decisions for a portfolio or property. Combining data science with revenue management Revenue management for renovations is combining the same market rate data that’s been its signature for 15 years wi...