Deciding on Amenities in a Multifamily Development - EP03

amenities build-to-rent clubhouse landlords multifamily property owners rental trends Sep 07, 2021

"There are other projects around us that have more amenities than us, and some that have less. So a tenant may be looking at that as well saying, I want this amenity or I don't want this amenity... so don't over monetize. Because that could go against you.

In some areas, there's a certain amount of rent that people are going to pay. You could put in all of the amenities in the world and think "I'm going to get $2,500/mo in rent", but then tenants simple aren't going to pay that." - Sherida Zenger, B2R Show

Episode Highlights:

  • Should You Let Your Tenants Have Pets?

  • What Amenities to Avoid - Best Amenities for Build-to-Rent

  • Building a Park in a Multifamily Development

  • Parking & Garbage

  • Walking Trails & Grass Areas

  • Installing Gates

  • Amenities Your Tenants Actually Want

Steve Olson: Welcome to the "Amenities" episode of the Build-to-Rent Podcast. In this show, we explore the rapidly expanding world of build-to-rent properties across the United States.

The housing crisis in the US is difficult. There's just not enough affordable inventory out there for people to rent. Developers, builders, and property managers are all rushing to fill that void. This podcast is meant to help you, the investor, explore that space a little bit more as we bring our experience to the table (having assisted in the development of 4,000+ build-to-rent properties across four states).

We encourage you to follow the Build-to-Rent Podcast on social media, and wherever you get your podcasts (ie. Apple Store, and Spotify). You can also watch each episode as we film them in our studio here at the Fourplex Investment Group on our YouTube channel.

Today we want to explore something that needs to be considered. I've got Chase and Sherida with me here today.

When we build something to rent it... there are two spaces to be considered. A tenant is going to move into an apartment, townhouse, or home, but that doesn't compute as to the whole experience that they're going to have. They're going to have a yard or common area, HOA managed area, and even a local economy that they interact with. This all needs to be considered when we're planning, whether it's a home or a small apartment building, or a large, massive master-planned complex.

Today, we're going to talk about what you need to consider, or at least what we found to be helpful, as well as some of the painful lessons that we've learned on that front.

Chase and Sherida, what is on your mind when it comes to amenities in a build-to-rent property? That could mean something in the project itself, or nearby businesses, and/or entertainment. What are we looking for?

Sherida Zenger: I think in a project itself, if this is more of a tenant-based project, and there's we're maybe speaking of a condo community, a townhome community, something of that nature, you probably want to have some kind of a clubhouse. A pool is nice.

Obviously, there are unwanted things that come with a pool as far as I can. Hoa would go. But a pool, some kind of a playground for kids. dog parks are always nice, you know if you're a pet-friendly community, grass area. Yeah. Some commentary for grass. Maybe basketball court. pickleball. That's huge right now. Pickleball...

Steve Olson: Many of those things that you just listed are all very applicable. And I think it depends on the size. When you say I'm going to put in a swimming pool and build for rent community, well, how big is the community, the cost of running and operating a swimming pool and the hassle of it, frankly, only apply, in my opinion, you need to have at least ad units to want to be able to do something like that to be able to afford it within your budgets.

Otherwise, it's just not worth it. You're gonna be going out there all the time. And you get that budget every month. And wow, we're spending a lot on this pool based on what we're bringing in. But something that chase said like this is a weird little exception. You said grass, right. And that grass, you know, you got to mow it. You got to care for it, fertilize it, you got to do all those things. We've noticed one thing in our projects in Houston, Texas, I wish we could get all the grass out of there. Right because it's expensive to water in that market all the time.

And it's Houston. There's all kinds of weird bugs and stuff in the grass and you know where we live here in Utah. kids go out and they play on the grass. It gets green in April. Right, It starts to fade by October. But you get six months out of the year where people are playing in the grab their soccer whatever and games. In Texas, it's a place to call them chiggers, right? And all kinds of bugs and you don't want to be on the grass nearly as much as I think when we talk about the landscape and the amenities, what what's the standard and what's good popular locally, but also don't let that sacrifice being creative. You mentioned pickleball A few years ago, that wasn't a thing. But now it's absolutely crazy in a lot of the projects that we do.

Sherida Zenger: Back to grass. So one thing that was interesting is we had a conversation down in Lake Powell last year with some friends. And they were saying like St. George, so location south of Salt Lake, Southern Utah, they a lot of people down there are doing astroturf just to give it that look, right, and people still pleasant for people to look on. We obviously I haven't experienced that in any of the projects that I've been involved in. I haven't seen that. But you know, maybe that's another option for some people where you're not having as many bugs. Obviously, there's maintenance to that.

Chase Leavitt: Maybe something we should do in Arizona. But does that get too warm or too hot?

Sherida Zenger: These people actually put sprinklers that came up through it. So it kind of defeats the point of wasting the water. Right. But I don't know, I know, a lot of people are going to zero escapes. That's what a lot of Arizona is is more of a zero escape, right? Yeah, I think you do need some kind of an area, even if it's in the tot lot area for kids to play if this project lends itself to throw a bunch of kids younger demographics.

Steve Olson: Yeah, if you're doing like an infill build-to-rent apartment building, like near downtown in some major American city, that's much less of a concern. But if it's that kind of garden style, you're spread out over a lot of acreage, you have to have somewhere for people to, to run around. But that Yeah, like we spend a lot of money on water in Texas, and we may tear some of that stuff up, and doozers get a lot less maintenance.

I think that walking trails instead, is probably something that tenants like a lot more. What do you think about that?

Sherida Zenger: Well yeah, because if you have little kids, that's a great place for them to go ride their scooters or their skateboards, bikes, something like that, where it's not in the street, you're not having to go behind the units and drive in the alleyways.

Chase Leavitt: I think it comes down to who is your tenant? What if it's a 55 and older community? What if it's a larger apartment complex? What if it's townhomes? Whatever the case is, who is going to be your consumer, the tenant?

Steve Olson: How do you find that out?

Chase Leavitt: By doing your research ahead of time and in who you're trying to target comes down to what you're looking to build within that area? And what makes the most sense.

Steve Olson: But if it was you. Let's say I pitch a project to you. It's 100 doors, it's townhomes. Right. What specifically Are you going to go do? I'm curious to go find out who is this tenant who's going to live there?

Chase Leavitt: I would look at what's there currently, and what's coming in. So surrounding properties, see what's working, just have an idea and a good feel for the area, and what they need, and what the demand is for that location. And then once you figure out and understand who your tenants gonna be, then Okay, let's talk about amenities.

We talked about pickleball. I think a lot of not just younger crowds, but 55 and older, they're loving pickleball as well. Probably doesn't make sense to put a big old tennis court there. Right? I think they'd probably like the pickleball and maybe some other amenities versus maybe like the younger families. So that could differ or change depending on who your demographic target is.

Sherida Zenger: When we're talking about even a smaller project let's just say you have an infill lot and you're gonna do one single-family home, maybe you look around and see Hey, is this close to parks where somebody could take their kids if you're building you know, three, four-bedroom home something of that nature?

I think sometimes not it may not just be project-specific but let's look in the neighborhood and see what's walkable, you know, like I know a lot on a lot of websites, they give it a walkable score, you know how walkable is this project to other amenities, meaning outside things, grocery stores, stuff like that because amenities can go both ways.

Steve Olson: Well, that walkable score, I think it's neighborhood scout Comm. They do one you have one. A lot of places have one. But that lends itself to a lot of what Chase was saying about what are the demographics, right. Are you going to put a playground in an area where most people are 55 and up, right? We did a project recently, Blackstone farms in Provo, where this specifically came up. We have a small playground, like a basketball hoop like a pavilion with a barbecue. But that's it.

Why was that?

Sherida Zenger: Because just north of us was a park. A city-run park.

Chase Leavitt: There was a huge park, and then within the project in order to make the numbers work with the doors that we put in there... we normally like to put a clubhouse in a pool, but we couldn't fit that in there.

Steve Olson: We weren't going to be able to get the revenue. So the city is putting in a brand new beautiful park with all kinds of you know, bathrooms and parking and huge playgrounds and everything. What is like a block north is all.

Sherida Zenger: It's connected. Like if you take the road going north, you're going to run right into it.

Steve Olson: That's right. That's right. So sometimes the city or surrounding developmental do your work for you on that. And that usually is going to tell you the tale about what kind of amenities you need to put in.

We had a... should we call it a horror story? On the development, we did somewhat recently. Why don't we talk about that, the pool and clubhouse in Vineyard, Utah. Let's talk about something to avoid when you're cooperating with other builders and/or investors to set up amenities in a commercial investment development.

Sherida Zenger: That was more of a master-planned community. Several builders were in here. We had two projects in the north end of this master-planned community and we were tied to their clubhouse. They were going to build the clubhouse.

Steve Olson: They're a master HOA that we have to abide by. But by building within our own sub-HOA, we had access to whatever it was they were gonna build. Their pool, their clubhouse, their trails, their pickleball courts, their tennis courts, all of that.

Sherida Zenger: We finished this project. And we were told, if I remember correctly, it was like six months later this clubhouse was supposed to be done. Yeah, literally, it was like two and a half years later, maybe that it would end up being done. We had tenants that were expecting to have amenities that had nothing. But we're still paying an HOA fee. Which got them very upset.

Chase Leavitt: From this story, it's important to understand what you have control over. You're being told one thing, but things can happen. And if it's out of your control, you need to be careful about what you're promising, or what you're saying to your investors and the tenants.

Steve Olson: Bottom line is don't advertise amenities to your tenants in your lease up that you don't have control over. Right, because that's what, you know, we're gonna have clubhouse pool. That's a hard conversation for the property manager to have, you know, when lease renewal comes, hey, you want to renew your lease? Well, I did. But yeah, I don't have any of this stuff that you promised.

And they paid for it. And yeah, you have no way to facilitate that or make that go faster. Because it's some other builder that doesn't care. So I think we learned that that, you know, we don't advertise, we don't assume that somebody's just going to come in and complete this. And ideally, to those core amenities that you really have to have. Whatever you decide those to be, you have to have control over them. Otherwise, you may consider not doing that deal.

I think there's another project of the road from that one. That has been a really good success story on amenities and that's Easton Park.

Number one, when that was planned, pickleball was kind of a thing. And you look at years later and on what that's been. That five or six pickleball courts and people are using them all of the time. It's been a huge, huge draw.

Chase Leavitt: And then there's like a seven-acre park right in the middle of it.

Sherida Zenger: The nice thing with that one, though, is that park is maintained by the city.

Chase Leavitt: Exactly. So a nice green space was maintained, a couple of nice little zip lines for the kid’s park area.

Steve Olson: That project turned out really nice. And that park was genius. And I don't know if it was intentional or what, but yeah, the situation there is, in order to get the development approved, the city wanted a park, we've got to build it and pay for it. But when it's done, we turn it over to them. So it's a huge draw.

But it's not coming out of the HOA budget, it's a city budget, and they have to take care of it and, and maintain it. But it's literally in the middle of our project. We've got this kind of stacked flat style unit. All along the park, people go out the front door. And there it is.

I think another huge amenity that really works. And you got to decide if you want to deal with this, right? Dog parks.

What do you think about dog parks?

Chase Leavitt: I think it's better to have a dog park where it's sectioned off with fences versus not having one. So hopefully you can kind of control where the dogs go because a lot of tenants that we've noticed, they're gonna come with pets or dogs or animals, right. And so, if you can control where that goes because we know what dogs like to do, right, doo, doo, doo doo. And so a lot of times you can't help that the tenants are gonna take their dogs out or maybe they're gonna see it happen or not see it happen, but dogs are gonna go to the bathroom in places and so if you can control where they go and where they hang out, that's gonna help hopefully.

Sherida Zenger: That same American Fork project does have a dog park that is fenced and it works well. There's another one that we did up in Idaho. Same fence dog park right across from the clubhouse. It's actually kind of cute. It has little toys and stuff, like little ramps and tunnels they can run through yet it's kind of funny.

Steve Olson: People ask all the time, should I take tenants with pets in my property?

We've kind of just accepted that. You have to. People want to bring them. And if you say you don't take them, a lot of those tenants are gonna bring them anyway. You get to find out about it, you have to find them, it's gonna be stupid. So make yourself pet-friendly, have that, that dog park.

I was doing some vetting on a project in Texas once I went out with our broker down there, john, great dude. And we toured a couple of these properties. And this leasing agent, this was like five or six years ago, I thought she was literally joking, I thought maybe she's got a really dry sense of humor kept telling me about how they DNA test dogs. And there, like, you literally collect DNA and send it into a lab. And, yeah, and so now we do that almost across the board, you can bring your pet, but they're gonna have to submit a sample.

When we go to the random spot check, we send that in, there's no way to lie about if it was you or not, and then you get fined. And, and because yeah, you do bring in those dogs, you got to do it. But it's expensive, handle this situation. And if somebody knows they can get DNA tested, they are probably a little more likely to clean up after their dog.

Sherida Zenger: And I think that makes it nice for the rest of the tenants. If you don't have a dog knowing Hey, we can hold some people accountable.

Steve Olson: And you got to put those doggy stations, right. I'm president of one of the HOA boards right now. And yeah, we've had to install extra doggie stations and trash cans. I think that's another big, big thing. We've said around here, many times that amenities draw tenants to a project, but they stay because of parking, and garbage. When you're going to renew your lease, and you're like, I can never park or I can never have friends over.

There's nowhere to park and we've got some projects like that where parking is hard. I think a lot of cities give you less parking than you actually need. And it's tempting as a developer, right? parking is the ultimate density killer. It kills your profit.

You see those big parking lots and you think I could have built units there. But you know, you can get so dense that nobody wants to live there. So what does it matter? There's that line across, but the garbage can be a challenge. I've noticed that even culturally between states there's there are ways that people think about garbage differently. Like should I have to take it out? Do I have to put it in the dumpster? Right. And there's a big education process there.

Chase, are you still president in one of the Vineyard, UT HOAs? Yeah? Does Tucker row do dumpsters or cans?

Chase Leavitt: When we started that project, they used to do dumpsters. And then shortly after, I think I was like three to six months into that community when it was finished and stabilized. We found out that a bunch of just random people, we didn't know who they were, didn't live there. Were coming in just randomly dumping their garbage, their couches, whatever it was in the dumpsters. And so the owners or the tenants weren't able to take out their trash. They're just getting filled up too fast. So we had to make that adjustment.

Steve Olson: I'm going through that in Texas right now. And one person just can't couch bandits. Yeah, I mean, it's just couched, just tossed outside of dumpsters. And it looks terrible. It just clogs up the whole dumpster and then it looks gross. And it's unsightly.

We just spent like $8,000, doing a complete power wash of the entire subdivision because, you know, you build it and there's dust and things happen. And you know, a couple of years later, it's due for a bath, right? But when you have that trash situation, those enclosures, they get so nasty, and the before and after of power washing out those enclosures, and just how the project looked. In general, it's just a great way to maintain it.

So you did cans. Now people have nowhere to go toss a couch or random trash. I may or may not know a guy that occasionally when he has too much trash finds a dumpster. I don't know if you know anybody like that, or if any of our listeners may have ever thought of doing something like that.

Sherida Zenger: Kind of like I did last night after I moved my kids into their townhomes and boxes and there happened to be a dumpster. It was on-site though. So at least it was the builders that we bought from.

Steve Olson: Yes, exactly. It's a temptation that people have you know, you go toss stuff in a dumpster. So I don't know I've been kind of flirting with the idea of going to cans at that project because you know what would happen.

We get to demo those dumpster enclosures and pick up two to three extra parking spaces. spread out evenly over. There are probably six or seven dumpsters. I've got 18 extra guest parking spaces. But the units aren't really designed in a way where there's a good place to keep a trash can.

Chase Leavitt: Yeah. So there's some give and take there. If you get rid of the dumpsters, do you have extra parking? Possibly, yeah. But if you have trash cans, then there's not really much room to put the trash cans in some projects, or depending on what the project looks like.

Steve Olson: It might be a good idea for us to think in the future when we design these buildings, have the architects try and put in place a small concrete pad for a trash can to go.

Sherida Zenger: Yeah, right off to the side or something like that.

Steve Olson: Because the drawback to this is if we have dumpsters, this turned into a garbage conversation, right? If we have dumpsters, people are tossing stuff. They're not putting stuff all the way in the trash, right. And one project I've worked with, we took the lids off because we observed mom sending kid kids out. And he couldn't sling the big heavy trash bag up over the top and hold the lid open at the same time. So we took the lids off. But guess what happens? When does the big garbage truck come in? It sticks those forks through the slots on the side and lifts them up over the top.

The lids aren't holding the stuff in. So trash goes everywhere. I mean, we've had to hire an on-site property manager to just clean stuff up all the time, because it's there all the time. So I think the dumpsters are you saying I'm willing to deal with this problem in like six locations? The trash cans, you might be creating it over 200 locations? I don't know. So have you been pleased with it? is trash a problem? It's helped. It's helped out a lot.

Chase Leavitt: I think it costs a little bit more for every individual unit to have its own trash can. That's why they didn't do it before. But it helped. I mean, they just didn't have anywhere to take the trash out. So we had to make that move.

Steve Olson: There's a new one I'm involved with where it's a different kind of dumpster where there's like a door you open in the side. And so people aren't leaving trash out there, putting it in the side of the dumpster. And that means when they pick it up and dump it, it doesn't go everywhere. Because they trigger a button on top that opens it just for the trash truck. There's still the occasional couch.

So now we're putting in a gate to gate that community so not just any random can come in there. And that would help a lot.

What do you think about gates as an amenity?

Sherida Zenger: I think that there are pros and cons. Obviously, depending on the location of the project, a gate could be a good thing, you're going to deter people from just driving through sort of getting random people, you know, trash-wise or using the amenities in that project. I know sometimes I feel like it may be a hindrance because maybe it would scare a tenant off from even wanting to come in. I don't know.

Steve Olson: I think if you got good leasing. I know there's a new technology where they can, they can do apps on their smartphone. And that opens the gate forum. And then that there's like a master code given to Amazon and the postal service that everybody can get in there that needs to get in there. You have to have a fire a crash gate for emergency services to get in through. More and more, I'm feeling like gates are probably a good thing. As long as you plan for it on the front end.

I've got one I'm dealing with where we didn't plan for it on the front end. So we got to put it in, it's gonna be a mess.

Sherida Zenger: It'll be interesting to see what happens on one of our Arizona projects that will be gated versus some of the others that aren't so I mean, I think time will kind of tell on that. Give us more experience. I don't have a ton of experience with that.

Steve Olson: You learn things about a build-to-rent project as you go down the line. You get feedback from the tenants and from your investors and you realize things that you might need.

One that I'm looking at right now, and this is pretty common in an A-class apartment building, it has a big beautiful clubhouse. And they'll receive your packages for you. We've got one more people are the packages getting stolen yet those porch pirates, right?

So we're gonna put in one of those packages, lockers. But where do we put it? I mean, it wasn't designed, the project wasn't designed for that. So there's going to be some construction that we're going to have to do but bottom line, everything that you can do to make the tenants happier, to stay longer to put up with those rent increases or to get new rental rates and raise them over time. That's stuff that you got to do.

It pays off 1000s and 1000s of dollars in expenses for amenities. If it keeps people longer and gets them to pay even 25 bucks a month more. That's important.

Chase Leavitt: 100%. And that's key. It's understanding your demographic that we've talked about already. And then understanding what amenities are going to fit that demographic? figuring out what those costs are going to be for that demographic for that project, right? And then is that gonna allow you to get more rent? Or the rent that you're looking for? And then what you just talked about... Is it going to keep the tenant longer? and decrease that vacancy, or lease up faster.

Sherida Zenger: You need to look at the projects around you, too. We have a few projects that we've done, where there are other projects around us that have more amenities than us, and some that have less. A tenant may be looking at that as well saying, I want this amenity, or I don't want this amenity.

Don't over-amenatize either, because that could go against you.

Steve Olson: Because in some areas, there's a certain amount of rent that people are going to pay. And you could put all the amenities in the world and think you're going to get $2500 a month in rent. And somebody that's gonna live in there is just not gonna pay it. You definitely hit a ceiling.

In our next episode, we definitely want to get in more detail about communities and some of these amenity answers. We gave some options but let's get in on the next one into the actual units themselves, things like smart home features, types of flooring and layouts, and unit counts that are important in a build-to-rent investment property.

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