The student housing industry is going strong. The bed count has grown by leaps and bounds and the quality of the assets that offer those beds has increased. Great locations, nicer accommodations, more amenities; it just keeps getting better for student residents.
While this eruption of innovation and progressive thinking continues to evolve, owners/operators/management companies all work toward the same fundamental goal — fill their beds and maximize profit. But “easier said than done” doesn’t begin to describe the challenges student housing companies face. Generally, the time-honored practice to fill beds is to entice the prospective resident with some sort of tangible benefit in the form of an incentive. Typically, the owner/operator/management companies absorb the cost of the incentive, citing the age-old business axiom, “it takes money to make money.”
Game Changer
What if there were an incentive to offer that would be both beneficial to the student resident and the owner/operator? Here is one something that fits that criteria.
Rent Credit, developed by the Multifamily Professional Group, is a service program catering to both residents and owners/operators/management companies. Rent Credit quickly and conveniently reports through state-of-the-art institutional-level encrypted and secure electronic transfer, monthly on-time rental payment and late/non-payment details of your tenants to multiple credit bureaus. Within 24 hours, on-time payments, late payments and delinquencies are posted to those credit bureaus.
The benefits for student housing companies are multifold. In a recent targeted survey, 86 percent of respondents offered the price they would pay for the service in a multiple choice question. Only 9.5 percent said they would expect the cost to be $0. By offering Rent Credit as a subscription to your student residents, the price to subscribe provides the owner/operator/management company with a direct and substantial secondary income stream.
Student housing companies can generate great exposure with logo-tag advertising to their existing marketing, coupled with social media, website advertising, print advertising, leasing-office signage and press releases. The intended result of that exposure will be to generate interest, which will in turn lead to an increase in new lease signings and renewals. In the same survey, 73 percent of the respondents said they would choose a residence that offers Rent Credit over one that does not if all else was comparable.
The peripheral benefits for student housing owners and operator are equally as important. Millennials and their parents are well aware of the advantages that come with a positive credit history. Rent Credit will attract more qualified, credit-conscious applicants and encourage on-time rent payments, while at the same time deterring chronically late or non-payers. In the longer term, owners/operators will benefit from lower bad debt and reduced delinquencies.
There are also short-term and long-term advantages for the student resident, who will have a path to establishing their immediate and long-term financial footprint via establishing a strong credit history — and to do it while attending school rather than waiting until they graduate. Consider the financial advantages the student resident will have the day they graduate:
- Improved prospects for landing a job, especially in government and financial sectors
- Lower interest rates on car loans and future home mortgages
- Lower interest rates on credit cards and other lines of credit
- Waived or reduced deposits when setting up new utilities or cell phone plans
- Easier access to funding when starting or expanding a business
An Idea Whose Time Has Come
Credit bureaus only recently began accepting rental payment data — up until several years ago, this type of reporting wasn’t possible. But while rental payment data is now being accepted, the practice remains largely un-utilized.
One reason is because if owners wanted to offer and perform this themselves, the expense — both short-term and long-term — would negate any benefit. No owner/operator/management company aspires to incur the hard costs of additional staffing, computer hardware, training, proprietary software development and all of the other accoutrements it takes to perform this service consistently and seamlessly. Additionally, the required adherence to stringent guidelines and regulations elevate the level of commitment and responsibility to an exceedingly high standard.
Rent Credit does all the back-end work and the resident pays for the program (including a mark-up for owners/operators) which means there is a path to immediate profitability, potential increases in occupancy/retention and the aforementioned peripheral benefits to the owners/operators/management companies. For the student resident, Rent Credit offers something that can only be earned over time: a positive credit history. The student resident is only required to subscribe with Rent Credit and pay their rent on time, which is something they are hopefully doing already.
Joseph DeBuck is Principal of Multifamily Professional Group, LLC.