Raise more than rents when occupancy is highHigh occupancy is a pleasure many of our apartment communities are enjoying this banner year. The on-site teams' diligent efforts to offer a high-quality product to rental prospects, backed up by an appropriate level of prompt, friendly, and efficient service after move-in have resulted in lower overall vacancy rates. Finally, an overall healthy economy and strong apartment demand in most markets throughout the country has helped many properties set fiscal records. Go ahead and pat yourselves on the back for achieving these higher occupancy rates. You deserve the credit! Yet let's get the self-congratulations over with quickly and get ready to seize the incredible opportunities that higher, stable occupancy present. Many apartment communities are positioned to do the "right thing" when occupancy rates are pushing 100%. We know the right thing to so - the prudent response to low vacancy - is most often to raise rents. Yet rental rates are not the only thing you'll want to raise when the market is strong. Raise rents, but also rental qualifications
Strong occupancy usually indicates a high demand in a particular submarket that can support higher rental rates. Assuming your turnover is under control and move-out notices are manageable, it may be timeto test higher rates at your community. Whie this affects your property's overall income. there are other benefits to raising rents. It also subtly improves your rental prospect pool. In other words, the increased rental rates require that prospects have a higher income to qualify to live at your community. And there's more! The strong occupancy and higher rental demand in your apartment market present more opportunities to increase the value of your property. Besides raising rental rates, consider raising your rental qualifications. By raising rental qualifications along with your rental rates, you can make an even greater positive impact on the property's Resident portfolio and overall stability. For example, if you move income qualifications from three and one-half times the rent to four times the rent, the result is Residents who have a higher income level. With a higher income level, these more qualified Residents could be more predictable in payment of rent and more likely to absorb future rent increases. Other rental qualifications you might change to positively impact your property's value are in rental history and credit. Rather than requiring a "clean" rental history for the last two years, increase that requirement to three, four, or five years. After all, rental history is the best indicator of a rental prospect's ability to be a good neighbor and a prompt rent payer at your community. Most rental prospects have some blemishes on their credit records, and many communities allow for som eprevious credit mistakes or mishaps. Yet when demand is strong, recruit an even stronger prospect by increasing credit requirements. You can wither lower your allowance for certain credit blemishes or lengthen the time your prospective renters mist have no significant credit problems. Can't raise rents? The raise qualifications and reduce incentives!
Maybe your rental demand is strong but your market will not support significant rent increases. Don't despair! You can still take advantage of this strong market to benefit your property's Net Operating Income. Go ahead and increase your rental qualifications to a more exclusives level. This will improve your rental prospect pool as it eliminates some marginal prospects. In addition, reduce any incentives that you may be offering. Eliminating the $100 rent special is equal to a rent increas in the way it hits you "fiscal" bottom line! An update of your market comparalbe study may also reveal that your security deposits are at a level that makes them an "incentive". Test higher security deposit rates to further improve the overall profile of your new Residents. Prospects that have a larger security deposit tend to have more respect for the terms of their lease. When you raise rents, don't lower service!
When apartment demand is strong and availability is scarce, some on-site professionals have been known to lower their service and their attitude toward the customer. Yet recent history has shown our industry what happens when the Residents are taken for granted in a strong market. When services are lowered or eliminated and the on-site staff lowers its professional attitude toward the Residents, the property owner pays for this mismanagement. Ultimately, markets soften and the properties that have forgotten to be "Resident oriented" and have neglected the practice of good service will find themselves in trouble. As the market declines, they will first experience above average turnover. Finally, the mismanaged properties, who have not practiced positive Resident relations, will settle into occupancy well below average as their market further softens. Apartment market cycles are inevitable. Markets that have strong demand andhigh rental rates will eventually soften slightly - or, in some cases, significantly. For that reason, during a strong "gull" apartment market, raise your rents andyour rental qualifications but never lower your standards. Focus on these items: