Pinpointing the right rent price for a property is often a challenging task for property management. Charging the right dollar amount is not only important for maximizing profits but also for keeping vacancy rates as low as possible.
If the returns are not appealing or the retention rates are falling, then it is time for property management to review their pricing policies and make the required changes to get back on the road to success. Here are certain important points that can help a property manager make the right decision about the rent they should be charging.
Economic conditions in the area or country affect rental rates largely. However, apart from these conditions, trends, commercial development, and changes in inventory also drive price fluctuations. Therefore, having a flexible approach to rent structure is a better approach for property management, where the rent is adjusted responding to local developments and market or economic conditions.
Such an approach may not be possible when you are targeting specific tenant categories such as the highest earners or the Section 8 crowd. However, separate tiers can be laid down for the three main income groups of low, middle, and upper.
Aligning Profit Expectation and Tenant Expectation
According to a recent survey, about two out of ten tenants feel that they are being overcharged for the amenities and services they are receiving on the property. This can be easily remedied by upgrading amenities, engaging in renovations, and improving maintenance and repair services. A fresh coat of paint or change of carpets could make all the difference to tenants.
If that does not work then property management can consider upgrading amenities and/or making serious renovations. Or lower their revenue expectations and the price they charge for rent.
However, before making a noteworthy investment it would be a prudent idea to check out the competition in the area. Visit other properties and see what they have to offer from the point of view of what a regular tenant would expect. This could provide fabulous insights into the changes that may be required on your property. Hence, it is important to align profit expectation with tenant expectations, especially when property management is considering a sizeable increase in rent.
Estimating Tenant Tolerance Levels to Rent Increase
High vacancy rates can quickly diminish return on investment (ROI). However, reducing the rent is also going to have the same effect, especially when the vacancy rate is 10% or more. At the same time, vacancies over a long term can reduce profit margins and reputation of the property drastically. This is one of the worst scenarios, and property management will have to be highly creative.
First, property manager will need to keep a close watch on the pulse of the market, the rental rates in the area on similar properties, and the outcome or progress of any promotional campaigns that have been initiated. Therefore, reporting can be a powerful tool in the hands of a capable property manager. The manager will have to keep track of online reviews and comments on social media about the property and competition, and evaluate the possibilities of a rent increase or a decrease. Or continuing with the status quo (the same rent price).
While property management and property owners know the value of property coverage, there are very few properties that make renter’s insurance a mandatory requirement for a tenant. Even the ones who stipulate coverage do not have a standard policy for all their properties.
It would be simply unwise to risk losses due to fire, floods, strong winds, and other events that are not categorized under acts of God. Secondly, recovering the loss from tenants who do not have a policy is almost impossible, with current data showing 1:50 odds in collecting these types of liens.
If you are one of the few who is not concerned about renter’s insurance, here are some profound reasons why you should make it compulsory.
Reducing Exposure to Risks
Standards for insurance differ between states and there is good chance your property owner’s insurance will not fully cover you from liability. Certain renter’s insurance even covers medical expenses when a guest or resident is injured on the property. Property managers who might be living on the property could presume their homeowner’s policy would be adequate, however, in most instances it is not, and you need an additional policy.
Most leases hold tenants responsible for any damage they cause to their units, irrespective of having coverage or not. However, the real question is whether it is possible for property management to collect based on the lease deed. In most cases, it is almost impossible for property management to collect because tenants hardly have any balance in their bank accounts. Well, who really does? This ongoing recession has not helped any in this regard either.
Installment plans are not practical, especially the ones that are going to exceed the term of the lease, which they often do. Property management can obtain a lien if the tenant suddenly vacates the property, but odds of collecting are extremely small.
Reducing Operating Expenses
The purpose of renter’s insurance is for providing protection against losses due to accidents. Losses can mean many things, apart from repairs to the structure or replacing appliances after a fire. For instance, who will bear the loss of rent when the resident has to relocate temporarily during the repairs? There is also the cost of temporary storage of the tenant's personal property during this relocation.
Moreover, when there is not any insurance, how much will property management will have to spend on legal fees for defending their lien claim? The best solution is renter’s insurance, which protects the tenants and property management or property owners.
Cost of Coverage is not Much
Insurance costs money and property management might have to find an adequate policy that is affordable. However, it is not difficult, as many insurance providers have comprehensive policies that provide protection to all stakeholders. Whether property management pays for the coverage and adds it to the rent, or makes coverage mandatory for residents, it is a matter of policy and strategy.
Some property management companies even agree to pay a part of the coverage cost, but most pass it on to the resident. However, the cost of such policies is nothing significant, and most tenants will not mind paying the cost when they consider the risk coverage or what they get in return.
Many times property owners might flip the switch or approve a property management service because the property is in bad shape and wants or perhaps may need professional assistance to turn it around and make it profitable again. If property management has secured such a property, the first question would be how bad the situation is, and how long will it take to correct the issues?
Certain issues can be rigorously challenging and may require more time or acute strategies to fix them. Here are some of the difficult issues that a property can face, and the possible solutions that are usually successful in turning the property around.
Dramatic Increase in Vacancies
Increasing rate of vacancies is the number one problem on most distressed properties. However, there is no particular solution, as you need to know the possible causes for tenants to leave the property. Hence, the first step would be to explore things that are closely linked to this particular issue. For instance, property management can check to see:
The current reputation of the property
The condition of the landscape, structures, amenities, appliances, and the state of the inside of the units
The percentage of tenants making late rental payments or skipping out entirely
The recurring complaints that you have been hearing from former or current tenants
The number of evictions in a year that have to be carried out by a court order
Exploring these points can give property management a wonderful idea about where the main problems lie.
During hard economic times, most evictions were for non-payment of rent. However, bad tenants also contributed heavily to this number. In the past couple of years, the eviction rate has slowed down considerably, since some tenants were able to manage their finances much better.
Moreover, many people out there are financially stable, and property management needs to have a proper screening procedure in place, to weed out the non-payers and slow payers. Secondly, eligibility should not be based only on single events but rather on overall past performance, job history, and income of the tenant.
Improving the Condition of the Property
Take care of issues that have played a part in deteriorating the condition of the property. If it is a neglected lawn, have the landscape spruced up, if it is pest infestation, find a lasting solution, and get rid of the problem immediately. Pay special attention to the condition of the structure as well. Fix cracks and leaks, tidy up the common areas, and put a fresh coat of paint on the exterior. Most of these items carry a decent size investment, but the returns can be high since property management will be able to attract new tenants and retain existing residents.
Who wants to leave a place that has property managers that care this much? A basketball court could be on the horizon!
Creating a Reputation that Glistens
In the age of social media, you only need a couple of disgruntled tenants to tarnish the reputation of your property. The first step is to know what has been written on the web about the property, and then take steps to manage the criticism and negative comments.
It is important for property management to keep the communication lines open with tenants. It is much easier to discern the requirements of residents such as when they can communicate comfortably with the property manager or staff. This will provide an opportunity to know the true needs of tenants, which can play a major role in reducing vacancy rates.
The one-size-fits-all strategy does not work, as each tenant is different and he or she will have different personalities. Therefore it is important to treat tenants individually since they come from different backgrounds and may have different leasing requirements.
Apart from individual needs, general requirements of tenants might differ depending on the season. For instance, during winter, tenants appreciate pathways kept clear of snow and ice, whereas in the spring there might be a requirement for an area to be sectioned off so people can wash their cars.
In the fall, there could be many maintenance tasks and repairs, and tenants definitely appreciate an early response and fast resolution to issues that they have been waiting to get to after the summer dissipates and before the winter sets in.
One of the best ways for property management to open a comfortable channel of communication with tenants is to ask for feedback about the services provided and suggestions for making them better. When you ask for feedback, tenants are encouraged to speak openly and once they know they have a platform to provide feedback, relations can improve dramatically. Having a feedback platform is also necessary for knowing the level of satisfaction amongst residents. This can be an excellent reporting tool and property manager can take steps to improve services wherever there seems to be a shortfall.
Summer is a hectic time for property management in renting out units, and welcoming new tenants. During this period, it is possible to neglect some existing tenants, and this is the time most of them look for some gesture or offerings from property management. Organizing a community event during this period would be ideal since it can serve the purpose of indulging existing tenants, and getting to know new tenants that just moved in. Here are some of the events or activities that property management can plan for their residents this summer.
Summertime brings back memories of looking out for the ice cream van, and hence it would be ideal to hold a community event where all residents are treated to some ice cream. Such an event will provide a fun and comfortable environment for residents to open up, get to know each other, and property management will have the opportunity to find out what their tenants are doing and thinking.
Another event that is popular throughout the year is a barbecue. Hosting a community barbeque is a salient way of welcoming new tenants and appreciating existing residents.
When property management has been able to gauge the individual needs of tenants, then summertime is the best season for giving gifts to standout tenants, which caters to their specific requirements. Tenants feel most appreciated when you present them with something that they require at that time or which caters to their individual tastes.
According to a recent survey more than 90% of people looking to rent a home try to access a video that provides a virtual tour of the property. This is not surprising since a video is not only the most appealing medium, but it also provides a realistic view of the unit, which is much better than watching snapshots or reading lengthy descriptions.
A picture speaks a thousand words. A video may speak 10,000.
Secondly, the convenience of watching a video of the property before physically taking the tour saves time and effort. A video can capture much more than any other medium, and therefore property management should not cut corners while creating an excellent virtual tour. It should be professional and well done, and it will need the required investment to make this so.
Where to Post Virtual Tours
Out of the people who like to see virtual tours, about 80% access it on YouTube and from Facebook pages, and the rest like to see visuals on Google+. Judging by this, property management should have a YouTube account and a relationship with this social media outlet. They should have a Facebook page as well with this video easily accessible.
Points to Consider While Creating a Virtual Tour
A virtual property tour is no doubt one of the most effective marketing tools. However, when it is poorly made it can have the opposite effect, and people will certainly not be clamoring to move in. Property management staff may feel they can make this video themselves but the job should be given to a professional or a professional video unit who do this all the time. Nevertheless, here are some important tips that can help you make this video episode a success.
Make sure the video is sharp, clear, and shot in sufficient light. Too much light or too little light can make the project a failure. Another pivotal aspect is to include a panoramic view of every room, which provides a perspective from floor to ceiling. Focused views should be used mainly for spotlighting some aspect, fixture, or appliance in the room. You will also need to cover shots of the common areas, landscaping, pathways, and highlight special amenities like a pool or a gym that is on the property.
Not everything can be communicated through a visual medium, and hence you will need to include a voice commentary that provides information about total and room square footage, dimensions of closets and windows, and other overall details about the community, and so on. Do not forget about freeway access points and the distance from this complex and big time sites (malls, stadiums, movie theaters) in the area.
A marvelous video will convey a message that is difficult and perhaps impossible to convey with words. This is why, and based on this video, you want to make sure the apartment that you show is clean and majestic.
Before posting the virtual tour make sure you format the video properly and include everything that allows people to share the video with ease. People like to pass on information that they feel can be useful to friends and family. In fact, if this video is done right, your sales folks will have a much easier time selling units and promoting your complex as the place to be.
A beautiful landscape is a strongpoint of a property, but it can also be a major challenge for property management to maintain it in salient condition during the rain season: the winter. A heavy downpour can leave the landscape very soggy and there might be no way of preventing excessive growth, since mowing could do more damage to a saturated lawn.
One option is to leave the lawn as it is, and hope for a dry spell, but unfortunately, Mother Nature cannot always be predicted and heavy rains can turn nice bedding and grass into a muddy and soggy mess, respectively. If you plan to mow a soggy lawn, there is a good chance that creating ruts or damaging the turf will result.
Lawns need at least a three-day reprieve from the rain to dry out adequately, otherwise, lawn equipment can leave low spots, or ugly tire marks on the turf. Hence, it is always a tricky decision for property management, about mowing and risking damage or letting the grass grow wildly. Apart from soggy lawns, heavy downpours can damage plants and even trees, which are important elements of a landscape. The only thing property management can do is to detect signs of damage early and take certain precautionary steps to minimize the risk of damage.
Detect Fungus Early
Wet weather provides excellent conditions for fungus to grow and flourish. Fungus infestation can take a heavy toll on a landscape, and therefore it is important to detect fungus early and destroy it with available fungicides. Some of the tell tale signs of fungus include:
·Bright green patches that are visible in the yard
·Stunted growth, which is turning yellow in some places
·Growth of mushrooms
Put Notices for Tenants to Stay off the Grass
When the grass is soggy, it is highly prone to damage just by walking on it. The damage will be obvious, as you can see footprints or ruts appearing on the lawn when people walk or jog on it. Due to foot traffic, the soil will get compacted underneath, which will damage the roots, or restrict their growth once soil starts drying. Property management should consider putting clear notices, especially in squishier or heavily saturated spots.
Changing Appearances of Trees
If trees are changing their appearances during the rainy season, especially after storms or flooding, it is cause for concern. It is a sign of injury that can develop into something major. Property management can look out for the following signs of water logging, and take preventive action whenever possible:
·Excess leaves dropping
·Leaves turning yellow
·Sprouting occurring along the trunk, stem, or crown
When rains are abnormally heavy, properties that usually do not face drainage issues might also have to deal with water logging. Property management will have to identify low landscape spots and try correcting the issue. It would be better to call a professional drain expert and ask for solutions. Certain gradients in the landscaping might have to be redone to ensure drainage is allowed so that water can flow away more quickly and without hindrance.
Advertisements of certain properties might seem quite appealing to prospective tenants, when they mention no credit checks, or no employment checks. However, can property management take a chance with such ads, in the hope of filling vacancies faster?
This question can be answered by asking another question. Can property management risk having destruction of property, default on rent, criminal activities on the property, and so on? The answer is definitely no, and therefore you cannot gamble with tenant screening, since the losses can be much more than having a few vacancies. It is always better to have standout tenants and some vacancies, rather than fill the property with mainly solid people but while mixing in some troublesome characters.
That is a recipe for disaster. The good people will soon move out and after a few months you will be running a prison. Scary thought right?
It is usually tempting for property managers to skimp on tenant screening when a unit is lying vacant for a long time. However, the repercussions of insufficient screening procedures can be disastrous. Here are some of the major risks that property management will be exposing the property to, when proper tenant screening procedures are not followed.
Loss of Reputation
When people read ads that suggest lack of screening procedures, they at once form a low opinion of the property. They will also not feel secure, since they know that there are genuine chances of their neighbor being a criminal or of an unsavory disposition. Secondly, failure to adopt proper screening procedures could also deter current tenants from renewing their leases because of the same fears. All this can mean loss of reputation, and it can take property management many years to build up credibility after the damage is done.
Possibility of Lawsuits
When prior applicants had to undergo screening procedures and if certain applications were rejected, based on the screening results, then those applicants have a strong case against the property, if they file a lawsuit. According to Fair Housing Laws all applicants regardless of their religion, creed, color, or ethnicity, should be screened in the same way. When property management suddenly decides to scrap the screening procedure, they are answerable to applicants who were rejected in the past, and to future applicants who might be denied tenancy based on certain factors.
Extensive Damage to Property
Screening checks help to weed out unreliable tenants, as their history on previous properties will become known. Lengthy background checks will make such applicants uneasy, and they will move on to properties that are more lax. Secondly, implementing a security deposit as part of your orientation process is also a marvelous deterrent, as tenants become aware that you take the matter of property damage seriously.
Tenants automatically start taking more care of the property when they feel responsible for the condition of the unit. Hence, not taking a security deposit is a lousy publicity stunt that can backfire. The fact that you are not taking any deposits conveys the idea that you are not serious about property damage, and even quality tenants will begin to neglect their units. This is a bad precedent to set, and it can take this property a while to gain back its reputation that it is bound to lose.
Amenities might mean different things to different tenants, as their requirements and proclivities differ. However, there are certain things most modern tenants prefer to have, and they base their decisions on the availability of these amenities. It is a foremost idea for property management to focus on providing such amenities if they want to reduce vacancy rates and improve the reputation of the community.
1) Washer and Dryer within each Unit
Topping the list of amenities, it is still the availability of a washer and dryer within the unit, or at least a hookup where tenants can install their own. A few years ago this was a luxury, but now it has become a necessity, and going to Laundromats is considered highly inconvenient and unappealing by all age groups of tenants.
2) Convenient Storage Solutions
Everybody has stuff, and all tenants face the problem of fitting their things in a unit. Property management should consider including smart storage solutions within the unit, since that could attract the millennial crowd. Tenants want a safe place to store their things, which could include furniture, books, collectible items, holiday decorations, tools, equipment, bicycles, and so on. It is also magnificent to have storage lockers on the property or at least provide bicycle stands where tenants can safely park their bikes.
3) Safety Features
Safety is still a big selling point for properties, as most modern tenants are particular about the safety of their family. Safety can include many features including proper lighting, video surveillance systems, burglar alarms in units, warning signs, child safety features in common areas, tall fencing, and neat landscaping for improved visibility.
4) Secure Parking Space
Secure parking space or simply parking space for that matter is becoming increasingly valuable. Even though the millennial crowd prefers to walk to their places of work or schools, most households will average one to two cars. On many properties, a lack of parking space is often a deal breaker, even when the units are big with all the conveniences. Properties that provide at least one designated parking space are very much in demand, compared to buildings that only offer street parking.
Most tenants who have a busy schedule will want a dishwasher in the kitchen. The dishwasher has stopped being considered a luxury, and it is considered a common appliance in kitchens.
6) Utility Management
Almost all tenants look to ways that can bring down their utility bills. Property management can work with utility companies and find out smart ways to manage power consumption so that tenants can enjoy the most competitive rates available in the area.
7) Green Features
Surprisingly, many tenants are becoming increasingly conscious about saving the environment and look for communities that adopt green techniques. From managing power to disposing garbage properly (recycling), property management should think of various ways for reducing their carbon footprint, and combating pollution.
Many tenants are particular about the looks of the property and the common areas. Property management can take steps to mow the lawn regularly, remove weeds, keep bushes pruned, and keep the common areas neat without clutter, trash, or general disarray.