Key Terms Defined: MDU Market

Property managers and owners perceive strong business benefits from installing smart home devices throughout their properties. These benefits include increased rental revenues, improvements in operating efficiencies, and an increased ability to attract and retain residents. Smart home solution vendors also perceive MDUs as a potentially lucrative channel for new business. As a result, traditional MDU technology vendors are making investments to rapidly expand their service offerings, including through acquisitions and IPOs. Parks Associates latest research Smart Home and MDUs: The Property Manager View Study examines MDU property managers’ use of connected services and products at their properties.??Below are key terms defined, as part of this recent study.

? MDU - Multi-dwelling units (MDUs) are buildings designed to house several different families or other groups of people contained in a single building or several buildings within one complex. The building is typically divided into separate housing units and is owned by one entity. – Source: Business Dictionary, “Multifamily Housing.” Accessed May 2019

? CLASS A Property - These properties represent the highest quality buildings in their market and area. They are generally newer properties built within the last 15 years with top amenities, high-income earning tenants and low vacancy rates. Class A buildings are well-located in the market and are typically professionally managed. Additionally, they typically demand the highest rent with little or no deferred maintenance issues.

? CLASS B Property - These properties are one step down from Class A and are generally older, tend to have lower income tenants, and may or may not be professionally managed. Rental income is typically lower than Class A, and there may be some deferred maintenance issues. Mostly, these buildings are well-maintained and many investors see these as “value-add” investment opportunities because the properties can be upgraded to Class B+ or Class A through renovations and improvements to common areas. Buyers are generally able to acquire these properties at a higher CAP Rate than a comparable Class A property because these properties are viewed as riskier than Class A.

? CLASS C Properties?- Class C properties are typically more than 20 years old and located in less than desirable locations. These properties are generally in need of renovation, such as updating the building infrastructure to bring it up-to-date. As a result, Class C buildings tend to have the lowest rental rates in a market with other Class A or Class B properties. Some Class C properties need significant reposting to get to steady cash flows for investors.

? ISP?- Internet Service Provider. A company that provides internet connections to individuals and facilities.

? Bulk Internet Service: Bulk internet access is an arrangement where residents pay the property management company for internet access in their units.?The property management company, in turn, negotiates and pay service fees directly to the ISP.