Demographics: The Style of Money

Demographics: The Style of Money
When it comes to multifamily demographics, including the level of household income and where people live, eagles do flock. Families with similar incomes tend to live in the same neighborhood. This includes high income families that choose multifamily. The style of money here refers to amenities utilized by those with high incomes.

Starbucks now has over 17,000 stores. At one time, however, they were a small growing company. Where did they place their initial stores? In high income neighborhoods. Example: Identify any Ritz Carlton or Hyatt Regency hotel. You will find a Starbucks is within a stone's throw of each.

What are some of the amenities demanded by high income family's? Easy right? Just start listing them. Good design. Security. Plush landscaping. Fitness facilities. Pet and laundry services. All good, but not enough.

People Buy Neighborhood

In multifamily, our customers are people buying many things; a place to live, proximity to employment and lifestyle. Put another way, they are buying interior space and exterior space, or access; access to a lifestyle defined by the style of money.

Is there really any difference between a nice scarf purchased at an airport kiosk and Saks Fifth Avenue? Yes. The difference is at Saks the purchaser obtains the scarf in a very nice Saks Fifth Avenue bag and carries said bag around for a while for other to see where they've been shopping.

This feeling, this aura brings with it a certain standing, albeit brief. It is long enough, however, to create a willingness for the purchaser to pay a premium.

The same applies to an address. One great example is the television show "Beverly Hills 90210". The number is nothing other than a zip code- but oh what a zip code. The median household income here is significantly higher than for other zip codes in Los Angeles.

It is intriguing how this zip code can be utilized to market "adjacent" locations. It is common today to see for sale housing and for rent multifamily marketed as "90210 adjacent". The meaning being if you cannot live in this zip code, at least you can live next to it.

How often do you see a single luxury car dealer? Very seldom because they tend to be concentrated in one area (flocking again). When looking to buy multifamily income property, look beyond the asset in question to review competitive properties. Do they stand up to each other? Are they "competitively aligned"?

There is seldom a reason to buy a new Mercedes if it is surrounded by Chevy Nova's from the 1970's. In many instances, multifamily properties need similar competitive properties to justify their pricing. In other words; competition is good. Competing against similar properties allows for an area to attract the same clientele. This remains true for attracting high income customers to multifamily.

Case in point: find any McDonald's and there will be a Burger King not too far. The same applies for Apple-bees and Ruby Tuesdays. And again for Morton's Steakhouse and Ruth Chris... they flock together (yet again). See the pattern?

As a buyer of multifamily, segregating needs from wants and what tenants are willing to pay for in rent is more science than "feel". The subject really can be defined, reviewed and measured with high degrees of accuracy.

An initial focal point is knowing as much as possible about the customers and potential customers for the acquisition candidate under consideration. Demographics really do tell a story. Better yet, they can sometimes predict the future.

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About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. We discuss best practices in multifamily management and methods related to how to buy apartment complexes. Our focus is sharing strategies and tactics that can be implemented and measured. For more information, visit:

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