With a new year on the horizon, many professionals turn an eye toward the books as they gather materials for annual reports and year-over-year comparisons. While goals might change for the next 12 months, you’d be hard pressed to find anyone that doesn’t want to make more money next year.
While no one action item will leave your properties bulletproof or provides the golden ticket to success, implementing these three practices can give you a good chance of making the most when the market is sour and maximizing your profitability when times are good.
When you buy an airline ticket, the price will vary depending on the supply and demand of passenger seats for your desired itinerary. A round-trip flight to Paris will cost more if you purchase it during high season or closer to the departure date. Similarly, the property management industry now has tools that can optimize rental pricing to achieve the highest yield, or the combination of rent and occupancy, for a given property.
How do these tools work? The U.S. has 55 million rental units, half of which are in bigger complexes. Yieldstar® (RealPage, Inc.) and Yardi® (Yardi Systems, Inc.), which dominate the high end of the market, are tools that use analytics to mine its clients’ data. Yieldstar and Yardi each have 11 million units in their property management systems. With so much data, they have near-real-time information on rents in each area, and can thus determine what people are charging.
Since YieldStar and Yardi are out of reach for smaller complexes, a tool such as Rentometer, free of charge, can help landlords with a lower number of units measure comparable rents in their areas. For the smallest complex owners, building a spreadsheet linked to Rentometer is effective for tracking rents, so they’ll know what to charge when they have a vacancy.
As a landlord, you’ll want to keep this rate as low as possible, because turnover will drain your profits. Each time a tenant leaves, you must clean, repair, and paint the unit before you can rent it again. You must also invest to find new tenants, and you’ll lose rental income in the interim.
Some things you can do to keep your residents:
Lower your rent. If you haven’t researched average rental rates in your area recently, now is a good time to do so.
Make basic improvements. Add a dishwasher, repair an old washer and dryer, update fixtures, or renovate the kitchen and bathroom. Give tenants things that they prioritize.
Pre-qualify your potential tenants. Invest upfront with tenant screening and thorough background checks to examine their rental history. Look for things like broken leases, a history of moving frequently or legal issues, and avoid tenants who don’t seem to have reputable rental habits. If you get higher quality tenants in the first place, they’ll be less likely to leave, reducing turnover.
Foster a community. Hold regular Saturday morning socials or organize parties around holidays. Residents will begin to know one another and make friends. Take care of your residents throughout their leases, not just at renewal time.
Who doesn’t like a deal? Help tenants get better pricing on utilities like cable, internet, phone, etc., by partnering with a company like MyUtilities.com. This company shops for the best prices on utility connections at no extra cost to the customer and coordinates installation appointments, taking the headache out of setting up new accounts with each service provider.
Focus on customer service. Avoid the number-one reason for non-renewals that is under your control – service requests. Are they closed? Do you send a satisfaction survey after work order has been completed? Do you do a more personal follow-up?
Don’t be just another apartment complex. Offer new features that people want, whether that’s something physical like stainless steel kitchen appliances and hardwood floors or something intangible like convenience.
This is where technology comes into play. Your website needs to look like it’s from this millennia and it must be optimized for phones and tablets. Sure, people will go to Rent.com, but they will also check out your site on their preferred device before stopping by their final selections in person.
Take this even further by implementing online rent pay and electronic package notification, which are conveniences that tenants will appreciate and will make your property more efficient. Any online rent platform must be easy to use, so that residents can set up secure accounts to make their payments. For packages, staff should be able to notify residents by hitting a button on their office computer instead of taping paper notices to a resident’s door.
Finally, start an email campaign to keep in touch with your residents throughout the course of their lease. Email marketing to your dedicated audience gives you the opportunity to send them short newsletters at regular intervals to alert them about administrative changes or upcoming community events. If residents move in and then don’t hear from you, you will have missed the opportunity to build the relationship after you first welcomed them.
Copley Broer is founder and CEO of LandlordStation, an online solutions provider for small and mid-sized landlords and property managers with products including tenant screening, tenant portals, online rent payments, document and data management, and e-signatures.