How to Raise Rents without Losing Residents

How to Raise Rents without Losing Residents!

What’s up everybody? Chris Kennedy here with Mayfair Real Estate. And in this video, I’m going to talk to you about how to raise rents without losing your residents. Okay? So this is something that a lot of owners fear, especially if you have owned an apartment building for a good number of years, and you realize that your tenants are paying under market rent. Now, there are a couple of reasons that the rent might be too low. Number one might simply be that the condition of the apartments is less good than newer competing apartments for rent. So your prices are lower because your apartments don’t offer the same quality of finishes, the same amenities, et cetera, as a competition.

However, more frequently, what we run into on the management side of our business is an owner who has had a property for a while. Maybe the units are dated and don’t offer as many amenities and nice finishes as other apartments. But also because the owner has owned that property a while, they’ve gotten a little bit lazy or a little bit scared about losing residents that they like. So they haven’t bumped the rents up accordingly each time that at least a lease renews or they’ve just let a tenant go month to month and have forgotten about raising rents altogether. So what happens in that case is you’ve now got a bunch of people living in the apartment building, and they’re paying way below what they should be for the apartment that they live in.

So how do you then take those people, how do you, if you like the residents, how do you bump the rent without losing them, having them go elsewhere. And there are a couple of very basic things you can look at. Number one, you want to look at your rent comps, what else is available in the area? Okay. So put yourself in the position of being a tenant in the neighborhood. Maybe looking, what’s the state in the approximate neighborhood of your building and say, okay, what else? If this tenant was to move, what would they have available to them? Where would they move? Right. And you’ll see, you’ll probably be surprised at the rent levels on some of the competing properties. This is what happens to a lot of owners. They, through no fault of their own, they just stop paying attention to a building. And all of a sudden their rents are way below what they should be. So, and they haven’t been keeping an eye on the competition, right? So you look around and you see what the comps show the rent could be.

And there’s going to be a range, obviously, depending on the condition of the properties that are for rent and obviously the number of amenities and the type of amenities that they offer. But by looking at the comps, you can really get a good idea of where a fair market rent would be for your own property. Now, once you know that, what you do is you simply raise the rent, but you don’t raise it all the way to that fair market rent. You bring it up to a little below what that fair market rent is, right? So that way, when your resident takes a look around, they get the notice of rent increase and they may not be that happy about it. But then they may even say, “Hey, you know what? I’m not going to do that. I’m going to move.”

And then they start looking around and they see, oh, you know what? If I want to move, I’m going to have to pay another 25 bucks on top of this, what I’ve just been, the new rent here. So let’s say you’ve raised the rent from $1,000 to $1,100, and the fair market value is 1150, by them moving they’re not going to save any money. In fact, it also costs them money to move. Right? They’ve got to come up with security deposit. They’ve got to pay movers if they’re going to do that. They’ve got to figure … It’s just a hassle.

Right? So, it’s a lot more work for someone to leave a property than I think a lot of owners realize. So take advantage of that, right? Figure out what fair market rent is, offer a little bit less, and then you can bump the rent that way. Now that is, of course, if you are simply sitting on a property where the rent is below market rent and you’ve just not been paying attention. Now, you can also bump rent by simply providing better service to your residents or providing something in exchange for higher rent. And this goes a long way. We notice it. It goes a long way when we take over management of a property for a new owner or for someone who’s been self-managing and they give us the building to manage.

So what we like to do is we’ll put our best foot forward. We want to go into a community. We want to do some things that residents can visibly see that we are making an effort to improve their experience as residents at a community. This applies whether it’s a small duplex or a 40-unit apartment complex. You go in there and you want to do some things to show, to demonstrate that you are making a better experience for your residents. And once you’ve done that, you do that over the course, you’ll have a plan in place to improve a property. It doesn’t have to be super expensive improvements. It can be just simple things such as cleaning up landscaping, taking care of some deferred maintenance items and simply showing residents that you care about their home. And then it makes that conversation about raising rent a lot easier. Okay? So that’s a super effective way to maximize the income from your property.

The other thing that we do, and this is more on a case by case basis is if you are going through a larger scale repositioning on an apartment building, you can Actually offer to residents something in exchange for a rent increase. So you might say, “Hey, you know what? I’m sorry your rent is actually very low. We are working with the owner and as part of the improvement plan for this property, we actually have to raise your rent.” I know that’s not good news for you, Mr Tenant. But if we raise this by a hundred dollars and you want to stay here, what we’re going to do is we’ll put in a new backsplash for you in your kitchen, or we’ll put in a new light fixture in the bathroom. Or you know? You get what I’m saying. Something simple and relatively inexpensive that again, shows that you care about the residents’ home and giving them something in exchange for asking for a rent increase.
So these are a few things you can do to help maximize rents in your building. Just I think overall, you want to think about … I think part of the problem with a lot of owners is that they have a mindset that it’s very difficult to raise rents and people are going to be very upset. They’re going to complain and they’re going to kick and scream, and then you’re going to lose your residents. And that’s just not the case. If you handle it the right way, then it’s absolutely possible to do it with little to no turnover in your building, and all the while maximizing that rent.

So obviously as a management company, we’re very experienced with doing this. We’ve repositioned many apartment buildings, and it’s just part of our day-to-day. So we’re, I’m always happy to take a look at your property if you’re here local to us in Fort Lauderdale, Florida or South Florida. But if this is something that you’re not comfortable doing as an owner, I think getting a management company experienced in this involved is a great thing to do. And just by doing this, a management company will often pay for their own fees within a few months.

So I hope this was helpful. Hope there are some things you can use in there. And if it was, please go ahead and Like the video, subscribe to our channel here. We post new videos every single week. I really appreciate you tuning in and checking it out. And until the next time, I thank you so much and I’ll catch you later.

Christopher Kennedy

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