The market is firming up in many markets across the United States. After three dismal years this is a great thing! Many owners are looking for ways to gain back some of the revenue they have lost over the past three years. When inventory is leasing quickly, there are only a few ways to do this:
- Increase rents and drop specials
- Decrease expenses
- Reduce down time between vacate and the new move-in
Increase rents & drop specials
When a market improves, most site managers want to bask in the glory and comfort of a solid 100% occupancy. It is possible; however, despite the emotional gratification, it is not profitable. Whenever your site is over 95%, it is time to kick the rents up a notch. You can even analyze this by unit type. This is your opportunity to get your largest revenue boost. (More on this at a later date.)
Most of us have spent countless hours renegotiating contracts, looking at utility savings and eliminating the nice-to-have vs. the need-to-have items on our sites. In a recent blog, Amy Kosnikowski wrote, “Let’s face it – Frugality is now cool.” While we should always be reviewing this, most of us have beat this up pretty well.
Reduce down time between vacate & the new move-in
The time a rental unit sits vacant between the previous resident moving out and the new one moving in is becoming an area of increased focus. When the market is good, the vast majority of building owners in the Minneapolis/St. Paul market try to turn apartments within 24 hours. We have a limited inventory and cannot order more product from the factory if we run out! Using the example of bathing suits at Target–If they start selling well, Target orders more. We cannot do that. We get paid for time, if we don’t get paid, we’ll never capture that revenue. Our inventory is fixed so we have to maximize it–meaning less downtime = more revenue.
Tips to increase revenue by decreasing down time:
- Hold a group meeting to discuss ways to better manage the turnover process. This encourages those who are ‘experts’ to share with their peers and build buy-in.
- Walk your move-outs early in the month to determine needs. Which homes need new carpet, what repairs have to be done, etc. Any repairs that can be done while the current resident is in the home should be done prior to move-out. This will also clue you into any homes that need major renovation and therefore will have to be down for an extended period (meaning one or two weeks—not months!)
- Make sure expectations for your vacating residents are clear. Ideally they received some kind of unit condition form. Let them know replacement and labor costs so they know what to expect when they vacate. It is a good idea to send another copy of this along with a notice confirmation letter. Hopefully, they will do the bulk of cleaning for you!
- Order parts and supplies by mid-month so time isn’t wasted running to the hardware store during turns.
- Establish a good rapport with vendors. Schedule them early (e.g. carpet extractors, carpet replacement, painters, outside cleaners if you use them). If you set your expectations they will adapt to the pressure of turning between noon on the last day of the month and noon on the first. A key item to consider, if you contract much of the work out, you can get it done faster but at a higher cost. Take a look at this to see if it makes financial sense for your property.
- Talk with the residents who are moving out. Are any going to be moving out early? If so, schedule their move-out inspections earlier as well as the subsequent turn work requests.
- If you have more move-outs than demand, create a priority list—divide and conquer. Make sure your most popular styles are turned first so they are available to show and rent. After those are ready, make sure you have one of each style available.
- In many markets, it is not unusual to have staggered move-ins and move-outs. Consider if this is a system that would work for your company. Many prefer it because it staggers the work; however, others find it bothersome to track notices, etc.
- This process of tightening up your turn time may take a few months to implement. Set achievable goals and tighten the timeline a bit more every month.
- Celebrate a job well done with your on-site team! It takes a lot of work so bring pizza in for lunch, snacks, etc.
As managers of real estate, it is our job to grow the investment we manage. If your company has not started to focus on this yet, you will be a rock star when your boss starts to notice your revenue increasing. Follow these easy steps and you will see positive results!