Focus 2011--Raising Rents--anyone else facing this challenge?

The focus for 2011 at my organization is "RAISING RENTS!" As the economy begins to make an upward swing in many markets, we at Berkshire are going to begin raising rents, even if it means lower occupancy. This will be a huge shift for our teams as our focus has been on retaining residents and occupancy for the past few years.

Anyone else facing the challenge of getting your teams on board with "raising rents?" What are you guys doing to make it happen? How are you selling it to the residents and prospects when you may have the highest rents in the market--especially early in 2011?

Hi Tandi! Hopefully we are all facing this challenge - each of the markets we are in is in a nice recovery mode at the moment with lead numbers and demand very strong.

Just to start a discussion, I would probably drop the talk of "raising rents" and break it down to a more reasonable stat that your teams can understand and visualize.

We experienced just a small dip in average net rent collected per unit at the beginning of the recession (well, probably late 2008), but that picked up and continued the "right" way (as in, up) in early 2009 through now.

Your teams may be somewhat afraid of "raising rents," but they will most likely buy into a strategy that is manageable, that they control, and results in steadily increasing rents over time.

Set goals often and use your financial gurus at your company to communicate rent growth to associates to really show what they are achieving. It's very important to have a good in-house model of rents collected per unit and where they are going, especially in these times when so many firms are entering a real yield management environment (to the on-site teams, the rents may be all over the place, but rent growth is still a number that can be pinned down).

In addition, it sort of sounds silly, but the way to explain "value" sometimes seems like a lost art - it's not just that you have a cheap price....it's the whole package. It's the service experience, the service stats, the company's philosophy - prospects/renters really buy into that because so many renters have had what they feel is a bad experience. Play to renters seeking comfort - that really helps sell higher rents (comparatively) - sit down with teams and make sure that they really know how to "create" this value in prospects' and residents' minds (and do role play on the "my renewal increase is too high" scenario).


-S

Isn't Berkshire on Yieldstar? If so, given market conditions, that pricing system should be raising rents. We've been on LRO for 10 years, and it has had us in "raising rents" mode for months now. The demand is clearly there, so it's not particularly scaryto us.

One message that has worked for us is to appeal to sites' competitive nature. "We'll follow markets down if we have to, but we always want to lead markets up" is a message that has been very well received.

The biggest challenge is renewals. Sites understandably want to keep all residents and get scared by big renewal rent increases. But all the research we've done shows that renewal has MUCH more to do with where the resident is in their own tenure/need to move (or not) and whether we've delivered good service (i.e. fix the toilet, and they'll be much more likely to stay). We've beefed up our conversation and negotiation training and celebrated renewal rent increase success to help overcome that. And success breeds success--the more we renew, the lower the exposure, the higher LRO drives rents.

You could control their (renters)electric consumption by installing,solar pv, insulation, high efficient equipment and appliances.Then included that bill in rent so raising rent with the understanding the renters electric bill will be lock-in at the going rate.
The investment in these electric saving equipment and solutions will pay back in 4 to 5 years depending on the area and incentives at the time of installation.

Steve says is all perfectly!

I just want to add that employees need to realize that if they can't sell the value, can't get the rent increases, it would be hard to ask for a pay increase.

Give your managers an explanation of why rents must go up and how to present it to tenants. Higher profits for the parent company is not a good enough reason. How have expenses changed to justify an increase in rents? Has the market shifted so that your prices are now below market? Arm managers with the tools they will need to deliver the news to tenants.

We have a class A property in one of the best school districts in the city. Every time the neighborhood passes an enormous tax levy for the schools, we raise rates. The last time, some residents had increases of $40-$50 per month. When many of the residents questioned the rent hikes, the manager simply asked them if they had voted for the levy. They all had and never said alother thing as they signed their renewals.

We have to remember that renters choose our properties for certain reasons like location and schools. When the community at large votes to do something that effects our bottom line as landlords, we have a right at reflect their choices back to them in their rent.