Often in a given marketplace, competitive properties have many similarities. Granted, they may not have the same look or facade, but rent rates are similar (revenue per square foot of occupied space, for example) amenities are identical; they are the same distance from job centers or shopping, etc. A more in-depth look will often expose that tenants are coming from the same pool; tenants have similar job titles, educational levels, and credit scores—same, same, and more of the same. The ten percent rule proposed here is not an exercise to keep management busy or to assuage any particular interest group. The objective is to increase occupancy, and not just through the continued use of concessions.
The ten percent rule states that you will consider any single change from the norm in up to ten percent of the units in a development.
The following examples assume 100 units or more and that not more than ten units in total are “in play” to unconventional offers. The objective is to fill vacant, not change the character or viability of the property. Here are some examples of how to apply the ten percent rule:
Demographics. For starters- expand your demographic. Again, not by lowering screening standards, but through identifying additional people who fit your tenant profile. Expand advertising into channels previously ignored. A simple example is posting brochures in senior citizen and community centers. This demographic is more transitional than ever before- and they have income. Some sell homes and move to apartments close to where they have lived for many years. Many are looking to downsize but not leave their long-time neighborhood. Not everyone over the age of fifty going straight to assisted living. Baby Boomers are active in their community, and they have an income!
Short-term leases. Most operators have no interest in short-term lease contracts due to the increased turnover costs. However, when property-wide vacancy is persistent, consider offering a few units with short-term lease contracts at a “ten percent” premium to asking rents.
Utilities Paid. A quick review of utility costs history will reveal average cost per month for utilities (electric, gas) for specific unit size. Offer a single unit with “utilities paid” and adjust the rental asking price accordingly. Do not, in any manner, lower your screening processes to fill this unit.
Free cable and Internet. On a per-unit basis. Offer one or two units with “free cable and internet.” For many properties, this is standard already, but for many others, it is not. For many properties, the entire property is wired or it is not. Similar to other utilities, the cost of providing this service for one unit is straightforward to determine. Consider it a loss leader that may assist in filling one or two additional units. Likely, over one year, the cost will be similar to one-month free rent- but note the concession is granted over the term of the lease.
Furnished Units. Get quotes in advance from Aaron’s Rent’s or similar vendors for the cost to furnish a two bed with Living room, Dining room and bedroom furniture only. Corporate rental require a full kitchen and linens (the fully equipped kitchen is too extensive for a one-off rental). Just stick to offering the furnishings only and perhaps a television. Buy the offered insurance and factor this in your pricing.
Subsidized rents. Most individuals and family’s that have vouchers are good people. Even if you have not previously considered accepting HUD vouchers, consider doing so. There are thousand’s of families and people of retirement age looking for housing that has a voucher that cannot find a property to accept their money. This, in no way implies changing your screening standards. It will require having an inspection and filling out more paperwork than usual for a single lease but accomplishes a good public concurrent with decreasing your vacancy—a win/win.
Our objective is, continuously, to increase rents and revenue while providing the highest quality competitive product we can to our customer base. On that note, be prepared to step outside of your comfort level. In these economic times, with occupancy below historic levels, management’s best efforts to garner increases in occupancy may not manufacture positive results. As noted earlier, as everyone is continuing to target the same pool of tenants, you need to be willing to step outside of the usual box.