Smart & Effective Rent Increase Strategies
When looking at new deals or analyzing where we are with current asset rents, we compare how our properties are doing against the market. We find it more art than science when setting the appropriate rates. We try to strike the right balance high enough to meet or exceed our projections and not have a mass exodus of tenants.
Pay attention to the competition when determining if you should raise the rent.
Quarterly, we will do a new rent survey to see how we are stacking against the competition. Below is an example of our rent survey.
One thing to note is that we use a weighted average based on how many of each unit type we have. We pay attention to the specific unit types because sometimes we may be at the market on one kind and below on another. We can adjust accordingly per unit type. Also, for example, we know we rent one-bedroom units more quickly, so we may be able to push those rents more. We will shop other properties along with these rent surveys to see how they compare.
Additionally, we solicit feedback from both current and prospective residents. This approach allows us to keep our units quite full. Our goal is never to be at the very top of the market. With that said, however, we do want to be close.
When do we know it may be time to raise the rent?
Every week, we participate in calls with our property managers to review metrics, renewals, and current occupancy. We know it may be time to make a move if we have been cruising at 96-97% or above for quite some time. If we hit 100% occupancy, in particular, we know there is room for growth. Even if a renewal tenant is already at market rent, we will still raise them about 2-3% plus add whatever new utility we charge back to tenants.
This process always goes hand in hand with input from managers. Just because the market might allow rent increases, we may not want to. Perhaps we have a lot of upcoming move-outs, and we want to keep occupancy at a certain level, and it may not be strategic to raise rents at that moment. Soon as we are sure we will be at a healthy occupancy level, we will increase rents. Our strategy is not to be the highest so that people stay a little longer and do not feel squeezed. If we can reduce turnover by that strategy, we make more in the long run, making it a more symbiotic relationship between the residents and us.
Deciding to raise the rent requires elements of both art and science.
Ultimately, it’s not a perfect balance of art and science, but it is indeed a blend. Therefore, rents need to be adjusted regularly, almost in real-time, so we always communicate with our property managers. They are the ones on the ground that inform us on how best to implement the business plan for the most beneficial outcome.