There's a specific type of apartment rent special we see come around every year like clockwork, usually in advance of the slower leasing season when communities are desperate to occupy any lingering units before demand declines.
It's something along the lines of, "First month of free rent and a new iPad if you sign now!"
Here's the problem: while this may trigger more prospects to convert, specials like these significantly hurt a community's bottom line. It's important to remember that specials last the entirety of a tenant's lease. If you're giving away $1,100/month of free rent and you sign 10 units using this special, you're losing $11,000 over the next 12 months. (Not to mention the free iPads...ouch.)
We believe there's a smarter approach to implementing rent specials—one that actually works to maximize your apartment community's revenue and not hurt it. That is:
Run specials more often on fewer units.
In this blog, we'll explain how to rethink the timing and execution of your apartment rent specials so that they both fulfill their purpose and prevent unnecessary financial strain.
When is the right time to run a special? Timing comes down to two things: lost rent and vacancy duration.
Every single day a unit sits vacant, you're losing money. This is why it's key to run specials on specific units that have experienced a longer vacancy duration in order to minimize lost rent.
It's also vitally important that you set and adhere to a specific goal for how many days one of your units at your community sits vacant between residents, because this number can help you correctly time when to run your specials. It's going to take a certain number of days to both turn a unit over and make it ready for a showing, as well as earn and succeed in that showing. Be sure to base your goal for days vacant between residents on your team's actual performance so it's reasonable to achieve.
In order to maximize revenue, it’s important to think of an apartment community as many ‘little’ communities—different floorplans and different units—and adjust your specials accordingly.
Applying community-wide specials, like the one we mentioned in this blog's introduction, when only a few units are in trouble is a financially-implicating mistake. Apartment managers should only rely on unit discounts and floorplan-specific discounts.
Let's say you've set a goal of days vacant between residents at 14 days. If a unit exceeds that time frame, then it becomes pertinent to apply a discount on that unit and, if necessary, incrementally increase that discount the longer it sits vacant. It wouldn't make sense for the same discount to be applied to a unit that has been vacant for only six days as one that has been vacant 28 days.
The same mentality should also be adopted for floorplans. Say your community has four different floorplans available. If there are six units vacant in Floorplan 'A' and only two units vacant in Floorplan 'B', why would there be the same special for both when one is in demand and the other isn't? It's smarter to run a floorplan-specific discount on all of the available units in Floorplan 'A' because that one is currently struggling the most. Then if those two units in 'Floorplan B' continue to stay vacant longer than you'd like, run a unit discount on them.
The main takeaway here should be to never apply a discount on any vacant unit that isn't actually a problem for you. A smarter approach is to implement specials more often on fewer units.
When you do this, you're actively working to decrease the overall vacancy duration of all of the units at your apartment community. This means your occupancy can stay at a healthy level year round, which is essential to maximizing revenue.
For more helpful insights like this, download our ebook Best Practices For Multifamily Revenue Management by filling out the form below.