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Should You Charge a Premium For High-Maintenance Residents?

With the movement towards revenue management systems like RealPage's Yieldstar and LRO, we are seeing a much more advanced look at rent pricing strategies throughout the industry.  Those systems take into account a variety of factors, such as traffic, availability, and market trends to develop sophisticated rent pricing for an apartment community.  But what if you also added in factors specific to a certain resident?  For example, what if a resident is habitually late with their rent?  What if they have had several noise complaints or often leave trash on their balcony?  Or what about those residents that seem to be overly high maintenance?  (Note that I wrote "overly" - I think that many on-site teams see residents as a nuisance just by default, which is unfortunate since they are their customer!  But there are residents who do truly go above and beyond to waste an office's time.) Along this same line, I was reading 50 Interviews: Successful Property Managers by Michael Levy, where he interviews a variety of property managers.  In it, an interview with Michael Daniels provided this great quote:  "Ninety-five percent of tenants are good ones; it's the other 5% of your tenants who cause 100% of the problems."  So my question to you is:  Are you reflecting these factors in your renewal pricing?  If one resident habitually (and unreasonably) takes up 5 times the amount of time as a quiet resident, why not be more aggressive with their renewal increase?  If they accept, you get more income,......
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Resident Retention: Maintenance Issue? Blame the Office Staff!

What??? That can't be right. And yet, that's the perception residents often have. If a service request has not been completed as quickly as the resident expects, or if something wasn't done quite right, residents will often blame the office staff rather than the maintenance team. Why?   Everyone loves the maintenance team! They are the ones who swoop in and save the day. They stop that annoying leak, put new weather stripping around the bedroom window to keep out the draft,  fix the oven just hours before the family comes over for a birthday dinner! It's more convenient to blame the office staff. As we all have experienced, however, the key to resolving service requests is approaching them as a cohesive team. Everyone plays a critical role in resolving maintenance issue:, from taking the request, to doing the repair, to cleaning up, to following up. So, what are some things you can do to bring the team together and make service request resolution everyone's super-success?Here's an idea. Format a Word document into 3 columns: 1. First Column. As a team, identify the 10 most frequent maintenance issues at your community. Every community is different, from slab leaks to mysterious light switches, to termites, to bed bugs, to aging appliances.   2. Column 2. For each issue, note whether there is a troubleshooting tip that can be offered to the resident for that issue. Example: Garbage disposal won't work. Troubleshooting tip: Have you tried hitting the reset button? It is located here......
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Resetting the Anchor For Renewal Rates

For my previous blog regarding negotiating apartment lease renewal rates, Johnny shared his strategy for the renewal letter, which included listing out the previous rental rate, the current market rate, and the new renewal rate, which was in between the first two.  His letter listed them out clearly to the reader (rather than mixed into a paragraph), and is a great example of anchoring the new rate relative to the higher market rate. So what is price anchoring?  You see price anchoring every day through sales - the price of a product or service is initially listed at, let's say, $30 and then discounted to $20.  That $30 serves as the "anchor" to show the customer exactly how much they are saving.  If they just showed $20 as the price immediately, it may or may not be perceived as a good price to the customer.  A good example is how the iPhone was price anchored to an extremely high price tag initially, so that when discounts were applied it had much more of an impact on sales. The problem with renewal rates, as Johnny pointed out, is that the "anchor" is what the resident is currently paying for their apartment.  If they are paying $900 for their apartment and you raise them $20 per month, it is a worse deal relative to their anchor price.  In other words, all they see is that they are having to pay more for the same apartment. But when you include the market rate in......
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How Much Should You Negotiate With a Lease Renewal?

How Much Should You Negotiate With a Lease Renewal?  Often in the renewal process, residents will get their renewal rate from the renewal letter on their door and make a decision based upon that number.  Some, however, will take that renewal letter, come to the office, and seek a better rate.  Do you have a set strategy to handle these situations? Each manager tends to have a different plan when it comes how they handle these types of requests.  Some are not good with confrontation and are quick to give away a renewal increase, and others like to "stick to their guns" and refuse to budge a penny.  I'm not saying either is right or wrong, but my goal is that each reader of this blog uses it to really assess their own strategy, or develop one if they haven't yet taken the time! Before we take into consideration the negotiation itself, let's first consider the basic economics of turnover and a related renewal.  As you all know, existing residents are more profitable than new residents, based purely on turnover cost, which usually hovers around $3,000/unit.  But not all of the costs in that figure are "variable".  For example, if you retain a resident, you can't reduce your maintenance tech's salary by a small percent to offset the lack of a turn...  So instead, you must look at actual dollar savings per saved resident to determine how much more profitable they truly are compared to a new resident. Once you have......
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ASKING FOR IT. "Bring it." Nuggets are out there.

Litmus Test - Ric Campo, CEO of Camden, national REIT based in Houston, BELIEVES in litmus tests. Camden is awaiting waves and raves. Multifamily Executives are asking for it. They're sticking their toes into the water...they just want Reviews and Communication through Social Media done RIGHT. They are seeking new ways to bridge the Consumer & Community Gap. Check out these recent Tweets; A national Apartment Management Company sent out this St. Paddy's Tweet..."My Lucky Day! I just turned my first negative Resident Tweet into a Positive!" And this one during March 19th's weekly Friday afternoon Twitter #AptChat. "Rented on of our apts recently? If so, let other renters know how you like it by rating it at http:..." In an ironic twist and despite the ever-growing frustration with various apartment ratings sites, several Multifamily executives are not only willing to put their properties up for review, but they are actually asking for it. “Regarding apartment reviews, it’s not that somebody has to do it, it’s that somebody has to do it right,” said Mark Juleen, VP of marketing for the JC Hart Company based in Carmel, Indiana. “Ratings and reviews have been out there for a long time in the form of ApartmentRatings.com and now Yelp.com. The problem is, these companies aren’t fostering open communication between the renting community and the apartment community.”  Companies eager to engage in the two-way dialogue taking action today include Camden, Mission Residential, Mills Properties, Gables Residential, Urbane Apartments, and the JC Hart Company.“We believe in......
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Renewal Letter: Another Email Follow Up

For those new to this blog series, I have been updating the Insider community about the process of renewing my apartment, all from the resident's point of view.  And so far, the experience has left me less than impressed.  That said, I think things are on the way up, and although I still think the ideal renewal process is a long way off, I'd like to share the latest email follow-up which definitely makes strides in the right direction!  For your reading pleasure:  (not originally italicized) Hello Brent, Here are the top 10 reasons why you should STAY:WE APPRECIATE YOU & WANT YOU TO STAY!You won't have to clean out every closet and drawer in your place.You don't have to buy boxes and pack up everything you own.We are so close to all the best "fun" in town!WE APPRECIATE YOU & WANT YOU TO STAY!Your car already knows how to get here without you thinking!You know where everything is in your neighborhood grocery store!You have a great dry cleaner and a convenient membership at the local gym or video store!This is your home and you have great friends that live here too!WE APPRECIATE YOU & WANT YOU TO STAY!Make the right decision and STAY! Call us today to sign a new lease and reserve your apartment for another year! Sincerely, Your Team at XYZ Community  Now frankly, I still believe that we should be personally calling every single renewal.  Their initial renewal letter even said they were going to do that, but......
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Don’t Just “Shove” Your Leases

There is a fine line between training and application.  Take a trip back to your school years and reflect on the moments when you said to yourself or your teacher: "Why do I need to learn that?  I will never use it."  As we made our way into the workplace, we should be able to see why advanced algebra, trigonometry, calculus, physics and other subject have served us well.  They developed our ability to think, reason, multitask, and progress in our career path.  It taught us the ability to emotionally handle challenges and to not just give up.    So this brings us to our current moments in life and how we view and apply our continuing education we receive at work.   How can it be possible to score 100% on a multifamily leasing course but only score 60% on a secret shop?  You can add as many thoughts as you want in the comments below.  Follow me on this analogy.  Last week I purchased some paper towel in one of those bulk packages.  I left it in the hallway to see if one of my children would take the initiative to put it away for me.  I left for Pittsburgh for a few days and returned to see that the package was still in the same place, which I then pointed this out to my children.  One of them decides to "put it away" for me and when I opened the cabinet this morning this is what I found.   Yep, the......
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Resident Retention: Dare I Say It - Don't Believe the Hype

I know I'm dipping my toes into dangerous waters here, but I think it's time we take a good, hard look at the data surrounding social media and the hype associated with it. I fear I may be taking my life into my hands, but we've got some new data to work with that may start some very valuable conversation - so to me, it's worth the risk!The industry marketplace is filled with seminars, tutorials, podcasts, chat rooms and articles on how to get the most out of your social media marketing strategy. There is no denying that our culture is embracing social media in a variety of aspects of life, however, the data is currently showing it has not gained enough of a foothold in the rental housing market to be an effective leasing or community-building strategy. Based on data from SatisFacts’ 4th Quarter 2009 Annual Resident Satisfaction Surveys, when asked “When you rented at this community, what sources of information did you use to find out about the community?” only 1.24% of residents identified social networking sites, such as Facebook or MySpace…and Twitter was not identified by any respondents.In addition to being promoted as a way to find new prospects, social media/social networking sites are also receiving a lot of attention and focus as a great way to build visibility and community among residents and prospects, the reality is that residents prefer to be contacted by email or cell phone. Respondents to the SatisFacts Annual Resident Satisfaction Survey ......
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WHAT ARE WAYS TO REDUCE MARKETING INVESTMENTS OR INCREASE ROI? (I can't get myself to call marketing a cost because it should be a revenue center)

After many conversations revolving around multifamily management I have heard a recurring theme around the "costs" associated with marketing. The value of renewing more of the leases that expire and the possible gains of more strategic marketing investments appears to be a very important focus in the current economic environment. Last night, while at a great presentation at the UCF School of Real Estate in Orlando, a not so pretty picture of the market was shown. The theme of the presentation was; Repositioning Real Estate, Political & Economic Trends, it was very interesting and gave a good sense of the challenges as well as opportunities. What I heard is that, while these are challenging times, it is making for better business practices, sharper companies and will result in greater performance for those that keep looking ahead.The thought of repositioning is as much strategic as it is emotional. It is strategic in the sense that we have to do the math to warrant new investments or reallocations, and emotional in the sense that because when writing a check it really needs to be viewed as an investment. Cutting to cut can often prove to be actually detrimental in the long haul. In the course of conversations I often hear that budgets have to be managed aggressively and I believe this always should be true. Many have accumulated some legacy expenses that do warrant a hard look. So here are my questions to you:When it comes to marketing, is cost really important if......
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Getting Resident Referrals: Watch Out For Overselling!

My poor apartment community...  It often gets the blunt response of my blogs because it's just so available and easy.  I really don't mean to pick on it, as I can tell it is definitely making strides, but I just can't ignore what they place on my door or email me.    Yesterday, I received an email from my community hoping for resident referrals.  The concept is great, as resident referrals can be a great source of leads.  However, after reading this email, I almost came away less impressed with my community than I was before reading it!  For your reading pleasure: Love where you live? Yes! The time has come, to let your friends and loved ones know about the best kept secret in town. XYZ Community... where enchantments await you. You indulge yourself in unique floorplans, elegant landscaping and fine amenities daily. Show off your dream home by reffering a friend or family member. Let them know to tell us your name and apartment number, after the first month here you will receive $250!! on us. How does that sound? Pick up that phone and send them our way. XYZ Community... where we customize prices to fit your needs.  A funny thing happens when a review, compliment, or anything else subjective comes out too positive:  Unless the object truly is better than sliced bread, the audience tends to actually devalue the opinion to the point of actually taking the other side of the argument.  So let's take that concept to the email above. ......
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