When investing in apartments, the one thing that matters, after the health, safety and welfare of your residents, is income. Income is fundamental to multifamily investing and without it, there is no value or reason to own these types of assets. During the holding period, the ability to increase income through maximizing rental income and occupancy is critical to executing the business plan and adding value for investors.
Below are just three ways your property manager can increase occupancy in your multifamily investments.
Offer Promotions and Competitive Rents
This is often the go-to for many property managers because of its responsiveness. By offering promotions such as free or discounted first-month’s rent, property managers can get future residents in the door and signed to a new lease in relatively short time. While the immediate benefit is increased occupancy, these types of arrangements are referred to as “concessions” and hurt gross potential income (GPI).
This is how it works. Every property has its maximum income potential. Simply put, that is the market rent times the number of units. Each time concessions are made, property managers are not maximizing the rental income and are forgoing potential value. Of course, higher occupancy at competitive rental rates is often preferable to not offering incentives or charging the highest rent with more vacancies. However, when concessions are offered, it lowers the effective income on the property.
Occupancy and Rental Rates are trade offs. Some mom and pop owners with keep rent low to keep occupancy high and all units filled (these types of situations make for great acquisitions) because they believe that occupancy is more important than getting the exact market rate in rent.
In any case, an assessment must be done to find the right balance on when concessions should be offered. In highly competitive markets where there is high demand for apartments, concessions are less needed to keep units filled. It pays to know your market and understand the situation.
Improve Physical Look/Branding of Property
Perception is everything when it comes to finding and maintaining high quality tenants. Your team and your property management company must be aligned not to skip out on the outward appearance of the property through curb appeal, cleanliness and overall property refreshment.
When properties are neglected, word spreads fast. In college, I worked as a leasing agent at a top student housing community and can attest, when things change, people found out. There was a time, during our peak of competitiveness in the market that we were at the top of any student‘s (and parent’s) list for where to live. However, as a result of a combination of additional supply and neglect, the discovery of mold in a few buildings and the need for refreshment and rebranding, word spread quickly that our property was not what it once was. It took a few name changes, new management and a few other key changes to improve that reputation.
From the time that potential residents drive into the parking lot, they are taking in clues and hints as to whether or not your property is the place for them. Make the decision easy for them by giving them a beautiful and positive first impression.
Provide Excellent Customer Service
In addition, it is critical that all onsite property management staff provide excellent customer service. Excellent means friendly, professional and timely. Treating residents as annoyances is not putting residents first.
If I could highlight the level of customer service in a way we all understand, seek out property management that provides Chik-Fil-A level customer service, and not McDonald’s. Sorry, but broadly, it is accurate to say that Chik-Fil-A has higher-level and more professional and friendly service than any fast food chain restaurant. This is why I frequent there and pay higher prices than the competitor. See the connection? Residents will sign a lease, renew and stay for years when they love and appreciate the service and attention of the staff onsite.
Real Estate is one of the simplest businesses on the face of the Earth. Income is earned from rent. Value is created from improving income and reducing expenses. Improve net operating income by growing rents and increasing occupancy (while concurrently attempting to reduce expenses) and value is created for you, your team and your residents, who love and appreciate their community. Work with a great management team, ensure there is alignment on the importance of minimizing vacancy and how occupancy will be increased, and hold your management company accountable to those results.
