Inflation just reached its highest level in over 40 years, and it's creating strain at every level in the multifamily industry:
- Property owners are seeing the value of their apartment communities fall.
- Property developers are nervous because the cost of materials to build their new apartment communities is skyrocketing, even after construction has already begun.
- Regional and property managers have to figure out how to set accurate prices and preserve occupancy in an increasingly volatile economic environment.
- Current and future residents question if they can even afford rent while dealing with increased prices for their basic essentials in addition to record-breaking rental rates.
- Apartment marketers are stuck because they're using the same budget or techniques they've used forever, failing to help their communities stand out in a tensely competitive marketplace.
Combating these pain points doesn't have to be a headache. Here are some actionable tips to help apartment communities overcome the effects of inflation.
Tip No. 1: Adopt a dynamic marketing strategy that maximizes your communities' revenue.
Too often apartment marketers stick to a static marketing budget—it never changes, regardless of their communities' performance.
One of their communities may be 97% occupied, but they resort to just writing the same check each month for a marketing service, like Apartments.com, to deliver the same amount of leads as when that community was 88% occupied.
This means during the times of the year when excessive demand isn't necessary, they're just wasting precious dollars because, well, that's all they've ever done before. It's not a sustainable practice.
A better solution is to adopt a dynamic marketing strategy that's built with flexibility in mind. When occupancy is stable, you can maximize your revenue by spending less on marketing tools like Google Ads because you don't need as much website traffic.
Dynamic ad spend is one of the core features in RentVision's dynamic apartment marketing system. In fact, our system's algorithms are able to predict your community's future vacancy and make automatic adjustments to account for it.
When it's your busy leasing season, and you have more turnover, RentVision's marketing system will recognize your need for additional demand and will increase your ad spend to drive the amount of leads you need to quickly increase your occupancy.
Once you've reached your occupancy target, our algorithms will know to dial down your ad spend again. You'll feel safe knowing that you have a system in place that works to maximize your revenue by eliminating wasteful spending on acquiring leads that aren't necessary.
A dynamic strategy like this generates the right amount of leads at the right time rather than the same number of leads all the time, regardless of need. More importantly, dynamic marketing prevents economic instability from impacting your apartment communities.
Dynamic ad spend is but one part of the RentVision's marketing system. For a complete overview, schedule your demo!
Tip No. 2: Lock-in financing for both new and existing communities.
If you're building a new apartment community but have yet to officially open, opt for temporary financing until after you've completed your lease-up.
This gives you the grace to handle the price increases for lumber, appliances, and other features during the construction phase, and then be in a better financial position to pay the loan after your new community has stabilized.
If you're still paying the loan for an existing community in your portfolio, now may be a good time to lock-in your interest rates and prevent any complications in the future.
Tip No. 3: Review your credit and income expectations in the screening process of future residents.
You'll need to make sure that the screening software you use to run credit reports, background checks, and more, is giving you the clearest information necessary to determine if a resident meets your credit and income expectations.
The last thing any property or regional manager wants to do is evict a tenant who failed to pay rent. But as we're all feeling pressure from inflation, knowing those important financial details in advance of someone leasing a unit actually protects all parties.
One thing to be aware of is that three of the most popular credit agencies—Equifax, Experian, and TransUnion—are removing medical debt collection from their credit reports beginning in July 2022. It's hard to know what impact that may have for apartment communities, but know that you won't be able to see some of that critical financial data when screening future residents.
Tip No. 4: Have a new construction lease-up strategy that enables you to lease units quickly.
The average duration of an apartment community lease-up is roughly 14 months. Given the challenges associated with the rising costs of construction and interest rates, being able to lease-up your new communities at a faster rate would significantly increase the amount of revenue gained.
You can learn how to increase leasing velocity during a lease-up
in our free ebook, How To Execute A Successful Apartment Lease-Up.
For example, if you're opening a 200-unit community with an average rent of $1,000/month, completing a lease-up four months faster than the average would amount to about $435,000 additional revenue generated.
Imagine how much of a buffer that money would provide as you combat inflation.
Tip No. 5: Use a revenue management system that automatically adjusts rents with precision.
Rather than dealing with the headache of having to set the correct rent prices, a revenue management system can do it automatically and with precision—no matter what the current status of the economy is.
That means that your rent is adjusted for every change in the market.
Having a system that automatically and accurately sets rent is actually very considerate of both current and prospective residents as inflation tightens their budgets. They must be able to ascertain if it's affordable to rent one of your apartments, and the only way they can do so is if they know exactly what their monthly rent would be when they sign (or renew) their lease.
In full transparency, we're currently bringing our own revenue management system to market called RentVision Revenue. Schedule a demo to learn more about how it works.
For your apartment community to be able to overcome the challenges from increased inflation, try these five things:
- Adopt a dynamic marketing strategy that maximizes your communities' revenue by enabling you to save money when occupancy is stable.
- Lock-in financing for both new and existing communities to protect yourself from any future complications.
- Review your credit and income expectations in the screening process so that you have the clearest financial information needed before someone signs a lease.
- Have a new construction lease-up strategy that enables you to lease units quickly and generate more revenue.
- Use a revenue management system that automatically adjusts rents so that future residents can ascertain the affordability of your apartments.
The truth is, these actionables aren't just effective during times of economic volatility and rising inflation—they're effective all the time.