It’s critical to know how to use apartment occupancy calculators and why those calculations are important. These numbers, whether current or the goal number, can inform multiple initiatives, crossing into planning for finance, operations, and marketing efforts.
Here’s a little more information about the importance of apartment occupancy calculators that you’re going to want to know.
What Is an Occupancy Rate?
While many of us know what an occupancy rate is, there’s always a benefit in going back to the basics.
Occupancy rate definitions can fall into two general areas: physical occupancy and economic occupancy.
- Physical occupancy is calculated by taking the total number of occupied units and dividing it by the total number of units on a property. For example, if you have 282 units currently occupied by residents, but you have 300 units on your property, you divide the 282 by 300 to get a 94% occupancy rate. If you had only 250 occupied, divide 250 by 300 and you’re around 83% occupied. You don’t need a fancy piece of technology to make those calculations, it can be as simple as learning how to calculate occupancy rate in an Excel file or with your phone calculator.
An economic occupancy rate is the proportion of the gross potential rent that is collected—the money that is actually paid to your business. The gross potential rent (GPR) is the amount of rent that would be collected if you rented out all the apartments at the amount of rent shown in the rental contract. The economic occupancy rate formula is (GPR minus deductions)/GPR * 100.
- In the example above, it would be the total rent received by all 250 occupied units at their current rental rates divided by the amount that would be received if all residents were paying the full market rent. That number is your economic occupancy. The issue is that normally, not all units are paying full market rent. Properties give discounts, or if you raised rent this year but some of your residents still have 6 months on their prior year’s lease, they aren’t paying full market rate.
Economic occupancy is almost always lower than physical occupancy. However, you’ll want that gap to be as small as possible or you’re giving away a lot of free or heavily discounted rent. It is also a much more accurate indicator of the financial health of a property than just physical occupancy, since it takes into account how much income is being made or, usually, lost, on either a monthly or annual basis.
Now that we’ve covered the definitions for different occupancy rates, here are a few more reasons apartment occupancy calculators are important.
These calculations help you know how to calculate current occupancy or a goal occupancy you’re trying to get to. Then, you can break down your goal based on your current rate into smaller, more manageable mini-goals. If your occupancy sits at 90% today and you’d like to get it up to 95% by the end of next month, that’s a large time gap and it’s easy to lose track of how you’re progressing. If you calculate that 5% increase in occupancy and look at how many rentals it would take to get to the 95% by your deadline, you can break it up into daily or weekly goals. That makes the goal more manageable for your team to track what they need to do on a daily and weekly basis, which, in turn, makes you much more likely to hit your goal. This is true for both physical and economic occupancy rate goals.
Calculating Other Important Metrics
Knowing how to use an apartment occupancy calculator to see what your rates are will help you calculate other important leasing metrics. For example, that occupancy rate information can help you calculate closing ratios or your lead-to-lease conversion rates. Those are critical performance indicators that will help get to and attain better occupancy rates or hit your occupancy goals.
Informing the Marketing Plan
When calculating occupancy, you may find it’s beneficial to get extremely detailed. In fact, you can dial into occupancy by floorplan. So, not only would you use an apartment occupancy calculator for the entire property, but you can also see what floorplans are most occupied or sitting empty.
For example, your one-bedroom A-floorplan is at about 50% occupancy while your one-bedroom B-floorplan is at 75% occupancy. That data helps inform your marketing plan so you can focus on where there is inventory or which floorplans need filled. So, knowing your A-floorplan could use some love, maybe get in and do some refreshed video tours for social or show some improvements you’ve recently made for those units.
Every multifamily professional must be ready in case of a low occupancy situation. Knowing how to calculate that data will help you get ahead of it. When used to its full potential, your apartment occupancy calculator can guide multiple initiatives across the property, providing an invaluable return with a relatively small amount of effort.
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