Many owners, especially in urban areas, are having a harder time renting their apartments. The number of listings seems to be swelling each day on Craigslist and other listing sites. Rents at competing apartments are dropping. New properties are coming online, slashing rents even more and offering all sorts of move-in incentives in order to lease up and meet their loan covenants. How’s a person to compete?

While each downturn is different, there are many commonalities in how to approach this problem. The simple truth is that during the good times, many owners have gotten sloppy. A strong demand economy keeps buildings full, even if the quality of the product and service are only average. But in a downturn that all changes.

There is a flight to value when a downturn occurs. That doesn’t necessarily mean lowest cost. It means giving your existing and prospective residents what they want at a good price. Here are a few things to think about to keep your occupancy up and rent your vacancies.

Stop the bleeding

Whether your property is 5%, 10% or even 20% vacant, you still have over 80% occupancy.  These are residents you don’t want to lose.  Now is the time to review lease turnover and operations.  Many owners let their leases lapse into month to month tenancies after the initial term.  You need to stop doing this.

Pro-actively approach your residents who are paying close to market or above market and make a sweet offer to get them on a term lease and stop your bleeding.  Even offering a free month’s rent is cheap compared to a vacancy that will include the cost of repairing or upgrading the unit, a month or more of it sitting vacant, and you or your staff’s time in marketing and showing the property, amongst other costs.  With the holidays approaching and seasonality setting in, preventing move-outs is even more critical.

Focus on who and what drives performance

Resident satisfaction and retention are key to surviving a downturn.  Studies have shown that approximately 2/3rds of apartment turnover is due to poor service.  Look around your property.  Does it look well kept or does it look a little old and tired?  How quickly do you or your staff get back to residents when they have a concern?  Do your residents feel safe?  How is the lighting at night?  Does the place feel clean?

Focus on ways you can improve your resident satisfaction.  Survey your existing residents.  Manage the resident experience through the lifecycle of the tenancy.  This means pro-actively checking in at key points throughout the first few days and months of their stay and then at regular intervals later on.  Yes, your costs will be slightly higher, but so will your occupancy and likely, the rents you can charge.

Make your community ‘sticky’.  This means getting people connected to your property.  If your residents like where they live and have developed friendships with their neighbors, they won’t be looking to move and checking what the latest rental rates are at competing properties.

Focus on in-demand amenities

Amenities in apartment buildings can have tremendous appeal.  With the advent of the pandemic, people’s wants and needs have changed.  If your property lends itself to some of these changes, play it up.  Some top desires include:

  • Designated space to work from home. This might include extra electrical outlets and good internet connections.
  • Useable outdoor space. If you have large balconies or patios, market that.  If you have a good outdoor common area or roof access, market that.  If, until now, they’ve been more of an afterthought, now is the time to improve them.  A remodeled back yard with patio with good seating and a high end BBQ or a nice roof deck do not cost much to create, but will have a strong effect on leasing and retention.
  • Smart tech.  Whether it be keyless locks, enhanced security in common areas, Nest thermostats in the apartments, or LED lighting that keeps resident utility costs low, adding a little tech to your building can enhance resident convenience and also help differentiate you from the competition

I recently wrote a detailed special report that outlines the most in-demand amenities post-Covid and some improvements you can do to your building to increase resident demand. 

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Do Your Homework

Do you actually know what your competitors are offering or are you just scanning Craigslist ads? When was the last time you actually visited the buildings you consider your comps? Are they still your comps, or might there be other properties that your prospects are looking at now in addition to yours?

Look at competitor websites. Visit a few properties. What do they do better than you? What can you do to improve? What do they have that you do not? Is it a deal breaker?

What policy changes could you make? Credit screening cutpoints, revised pet policies, flexible lease terms, and security deposit levels are just some of the policies that should be up for review. How can you be more market friendly, while still protecting your investment?

Your prospective residents are looking at multiple properties (sometimes only online) in addition to yours. You need to know at least as much as them about what’s available in the market and be able to articulate why what you offer is a better fit for them.

Play to your strengths

If you have a smaller building, there are lots of renters who would rather have quiet neighbors and less drama than in a large community, even if they forgo some of the amenities.  Realistically, you are not going to have the features that a newer or larger property might have, but there are a few things you can do.

If you have an older building, emphasize the charm, the location convenience, the thicker walls, and any upgrades that show that the building, while not new, is up to date (and if yours is not, perhaps that’s one of your problems in leasing).  Provide appliances or fixtures that are ‘one step higher’ than your typical resident might expect.  The cost difference between a basic stove and a higher-end stove is only a few hundred dollars.  You’ll lose that in a week of not renting.  So add a few ‘wow’ features to your units to enhance your leasing.

Focus on the customer

This should be number 1, but I saved it to the end so you’ll remember it.

Focus on the customer, not on you or your product.  On most tours I take, the leasing agent is focused on their property ‘we have this, we have that…’.  Be client focused.  Ask great questions.  Focus on creating a compelling leasing experience for the prospect.  Script out your leasing process.  What parts of it could be improved?

Yes, people want to know that you follow good Covid-19 protocols.  But ultimately, they need to feel that the building is safe and well run.  After all, they are planning to potentially live there.  Little touches make a big difference.  Flowers in the leasing office or at curbside.  The scent of your building.  All these things work on the subconscious of the prospective resident.

The application process and other interactions should be customer focused and professional.  Property upkeep, competitive pricing, a unique feature they can’t get somewhere else, and the sense that the manager (or owner) want the potential resident to feel at home are all things your future residents value.  And remember: continue to focus on customer service and resident retention (the first 48 hours of occupancy are the most critical for guaranteeing longer term tenancies) after they move in.

You can keep your building full

You can keep your building full, even as people are moving out of the area.  It will take more work, but ultimately, the ability to create a desired product along with a compelling leasing experience will be necessary.  There needs to be a focus on value, which I interpret as giving the resident more for their money than they might expect.

The market has shifted.  Many site staff have never managed through a downturn.  You can survive and even thrive in a downturn by focusing their attention on customer needs.

Inaction is the riskiest response.  But rash and scattershot action can be nearly as damaging.  Take some time to evaluate the environment and to figure out what to do next.  There are hidden opportunities nestled amongst the bad economic news.  Doing this work now will make you a better multifamily operator.  And, eventually, you will be in a better position for a recovery, when it arrives.