Posts tagged Tami Siewruk
26 Steps To Offering Concessions With A Sensible Approach
May 25th
By Tami Siewruk
Anyone who knows me, including our long-time subscribers, can attest that “concessions” is practically an expletive in my vocabulary. Choosing whether or not to offer concessions is often not a decision you or a supervisor makes rather it is one that the market dictates due to the fact that other communities made the decision and therefore forcing your community to follow suit.
The whole reason why companies and communities offer concessions or incentives is to gain a competitive advantage, right? So, let me ask you this… if everyone in the market is offering concessions, then where’s the advantage? It only puts us all right back where we started, on a level playing field. We all end up giving away the moon rather than educating our prospects and residents, and playing the never-ending game of one-upsmanship that some of us have been trapped in. Ok, Ok I’ll stay off that soapbox, it just drives me mad! Anyway, concessions are one of those things that work well in theory, but actually create a world of, well, concessions.
If you find your community in a concession situation, as many markets are today, I hope you’ll take the time to consider these factors with an eye for the “big picture”. Believe it or not there is a sensible approach to the issue of offering concessions .
So if you find that community occupancy is falling below a profitable level, or you find yourself with more supply than demand, perhaps this common-sense approach will help you as much as it helped me!
Review the Overall Picture
1. Meet with the entire staff, and ask for feedback from everyone on what they feel is happening. (Actually, you should do this regularly anyway, whether you perceive a problem or not. Some of the best and most practical insight comes from your “front line”.)
2. Have your entire staff shopped along with your top three competitors. Use a third party independent company so that you’ll be able to compare the whole apartment shopping experience from your prospects’ perspective, and make adjustments if needed.
3. Meet with the staff again. Review the shopping reports together, make the necessary adjustments, and arrange for one-on-one training where it’s needed. In a few cases, we found that our staff was doing a great job, and our prospect’s experience in shopping our community was great, if not better than our competitors.
4. Review each floorplan independently, and consider its pricing carefully. Make any necessary adjustments to the rent based upon the floorplan’s strengths, weaknesses, and competition within the marketplace (compare your floorplans to your competitors’ similar floorplans and pricing). In other words you need to do a side-by-side, floorplan-by-floorplan comparison of your community versus your competitors’ floorplans. Jennifer Nevitt of Bravo Strategic Marketing created a comprehensive and widely used method for doing exactly this.
5. Walk all of your floorplans with a critical eye for weaknesses. Create a training list with tips and techniques for overcoming objections and selling the strengths of each floorplan as compared to the competition.
6. In existing communities, I would also take the “less desirable” locations and floorplans and determine if there is anything within budget that we could do to improve the interiors. I’ve used this technique repeatedly with great success.
7. Create / evaluate the model. We completely upgraded our model with added crown molding, optional paint color, special plumbing fixtures, special lighting fixtures and ceiling fans, closet organizers etc. In other words, we dressed the model up with all of the added options that were available for our residents to choose from. This showed our prospects what they could do with the apartment home if they chose to. We priced each option by adding only a 15% mark-up to our cost. Five percent of the mark-up is given to the leasing professional who sells the upgrade, and the additional 10% is administrative income. We call this our “Custom Home Apartment™. Note: Use plumbing fixtures that are in keeping with the brand in the community so you don’t have seat and “O” ring issues.
8. Photograph the entry of your community and your competitors’, and compare them. Make yours more inviting.
9. Look at your advertising. How does it stack up against your competitors? Do you sound different? What do you offer that they don’t? Are you advertising the floorplan with the highest availability? Are you showing both photos of your community and lifestyle photos too, or are you showing the same thing as the competition? Keep in mind that it is very difficult to have a good interior shot that actually sells.
10. Have you tried offering an incentive (i.e. a washer/dyer, ceiling fan, or upgraded fixtures). The best incentives are stay with the community long after the resident is gone, and create added value in the long run.
11. Pull your last two weeks worth of guest cards, and call each and every one. Tell the prospect that you’re conducting a third-party audit of the apartment shopping experience, and need to ask them three quick questions. Promise that you won’t take more than a couple of minutes of their time. The questions we ask are: 1. Have you made a decision on where you are going to move, and if so, why did you select that community? (If they say that they’ve chosen your community, communities, thank them, and move on to the next person.)2. Did you visit _________ apartments (your primary competitor), and if so what did you think about the community? Don’t be surprised if you find that who you consider a competitor really isn’t. 3. Is there a specific reason why you’ve decided not to lease there?
12. Have you determined if you have a leasing problem or a marketing /advertising problem?
13. Have you strengthened your resident retention program?
14. You must WORK your renewals. Remember that residents today are not only smarter (the industry has given them a good education) and knowledgeable about market conditions. They see the competitor’s signs. Don’t let them get taken away by an offer that’s too good to be true. In really competitive markets ( I dislike this so much but…) you not only have to give them an education on the cost of moving but you may need to offer them the same concession as people moving in, just to keep them. I have found that an open, honest conversation is the best approach. One last comment on renewals, Have you considered returning security deposits if they have been a resident in excellent standing for 2 or more years, have completed an apartment inspection and renew their lease?
15. You never have truly know whether or not you could have leased-up without concessions if you didn’t try to do it before offering concession if you simply follow suit;
16. Your staff is a powerhouse of product knowledge! If you have followed the approach above they’re more educated than ever before about their product and their competition;
17. Your competitors need to learn that you don’t offer concessions as standard practice, and that when you do, your doing it because they have forced your hand! We all know that price fixing is illegal but if your competitors learn that your company/community doesn’t give concessions as a standard practice ( a crutch for poor leasing and marketing) they just might reconsider and not jump to concessions as a standard practice. Call all your competitors and offer to fax or email you rental rates and concession packages to them weekly in exchange for them doing the same thing.
18. If you have to give something away, ask for something in return. Along with the free rent, ask the resident to sign a paying lease term of either six months or one year. In other words, their free rent period, although covered under the lease, should not be included when the lease term was calculated. For example: with one month free rent, the lease term should be 13 months. This will enable you to get a full year collection of rent without increasing your operating expenses the next year. If you don’t do this, (as you may be aware), your turnover expenses are divided into 11 months instead of 12, so the concession actually costs you more than a months rent.
19. Cover your bases. As even further protection, ask the resident to sign a concession agreement, stating that if their lease is broken for any reason, the entire amount of the concession is due and payable. Where the lease terms and conditions are met, there is no liability.
20. Sometimes it makes sense to spread the concession over the first six months of the lease. I have not used this method, but I have heard of many companies that have used it with great success. I think it’s a great idea, where the market is receptive to it. Because if you decided to offer concessions in order to be competitive, you have to consider that part of your competitive edge involves how and when the concessions are delivered. In some cases you’ll find, the market is the most receptive to a one-time offer; and you’ll find this to be true in many areas where residents view the concession as a welcome means of offsetting moving expenses – but I think the six month idea is a great one if you can pull it off.
21. You really can increase rents even though you are offering concessions. In fact, it’s probably easier to increase rent in some places, where the market is focused on the short-term benefit instead of the long-term effect. This rings especially true when you are offering the better product. I have heard of an apartment community in Dallas that leased 100 plus apartments (70%) in two months by giving away 1.5 months rent. Unfortunately, they didn’t increase the rents while doing it, not to mention that they weren’t under the gun because they didn’t even have the apartments out of construction yet. Don’t miss the opportunity to raise rents when offering concessions, whenever you can do so sensibly.
22. Before you make the decision to offer the market standard for example one-month free on a one-year lease(13 months), and 2 weeks on a 6-month lease. You may want to test using the dollar amount such as I have. For example: Try $500 on a 6-month lease and $1000.00 on a one-year lease (which is less than a half a months rent and a months rent, respectively).
23. Only offer concessions on floorplans with the highest availability. In addition, and this is key, continue to adjust your rents upward as you lease apartments. Remember that in many market conditions people are looking for the short-term benefit instead of the long-term effect.
24. Consider a graduated rent level depending on the date the moves in date. For example: The apartment is ready for move in on April 1, if the resident moves-in the first week it rents for $100. If they move in the second week it would rent for $110. I have never used this approach myself but have heard of several communities doing this with great success.
25. Establish a rotating bonus plan based upon leasing certain apartment types. For example, “All A-1’s leased this week are bonused at $100!” I typically select the apartments that have either been vacant the longest or have the highest availability. Establish team goals with bonus incentives. Any opportunity to foster teamwork is too valuable to pass up!
26. Provide weekly articles of interest that focus on dealing with concessions, over coming objections, closing and follow up. I email our communities a new article every Monday morning. Keep the tone encouraging and motivational.
If you’re caught in the concession trap, or have to give in to it, please take the time to consider the HOW, WHAT, WHEN, and WHY of it all before you follow your competition over the rail of that proverbial bridge! Depending upon your own unique situation, there is an economically sensible approach to offering concessions.
Tug Of War Apartment Marketing
Apr 26th
By Tami Siewruk
Warfare is one of the most common analogies used to describe the marketing process. Most of us have read books and articles with titles like “Guerilla Marketing” or “Strategic Marketing”, and most of us suspect (especially when budgeting time rolls around) that our corporate conference rooms aren’t that different from military command centers during a conflict. The analogy works so well because it’s not much of a stretch. Marketing is the most powerful piece of ammunition in our arsenal—and where there’s power, there’s competition! What’s warfare if not competition taken to its highest extreme?
I’m really detail-oriented by nature, and “plan your work, and then work your plan” is a message that I believe strongly in. This has served me tremendously well in marketing, because I’ve seen proof time and time again that there’s nothing like a good marketing plan to ensure success. On a fundamental level, in order to ensure success and maintain an effective marketing position, it’s important to think the process through—from start to finish—before you make a move. In a word, strategize. You can’t have a good fight without a good strategy.
Now, strategy is a grown-up word. Strategizing is something that adults do because growing up means taking control of one’s own destiny and destiny isn’t easily steered without a plan. Unfortunately, in learning how to strategize like grown-ups, we often forget how to act like children—on instinct.
My goal in writing is to help you bring a little of your childhood back into your adult actions, and make your marketing efforts far more successful as a result. We’ll be relying on the same old tried-and-true warfare analogy, but we’re going to make it a little more fun by mixing in the rules of a good old-fashioned game that man of us played as children: Tug of War!
How to play Tug of War
Lesson One: To win the game, play by the rules that are known to be effective.
It has always been amusing to me that as small children, each of us had an innate understanding of the correct strategy for playing and winning a game like “Tug of War”. We might not have had the strength or weight to be able to pull the other person or persons across the line, but what we lacked in brawn, we made up for in instinct. Sometimes, we sat down, or gave in just enough to let the other team think we were easy “pull-overs”—then inches from the line, we gave it all we had and pulled our way to a surprise victory. We didn’t know that we were strategizing when we whispered to each other to slack off for a count of ten, and then pull like crazy, but we knew how to win.
Somewhere between childhood and adulthood, we lose a great deal of understanding along the way. We forget the deceptively simple rules of staying on top. It happens to sports teams. It happens to armies. It happens to companies. It happens to brands.
The rules are simple:
· Rule 1 – Hold on tight.
· Rule 2 – Don’t let go.
· Rule 3 – Use all of the ammunition at your disposal.
· Rule 4 – Leverage your allies.
· Rule 5 – Move secretly and deceptively.
· Rule 6 – Don’t let the enemy gain momentum.
· Rule 7 – Don’t let the enemy see you sweat.
These are also the rules for Tug of War, and they’re also the rules for maintaining market leadership … but first and foremost, to benefit from them, you must have the will to be the leader.
You Must Value the Position.
Lesson Two: Know the value of winning.
Is it important to maintain your company and or communities’ leading position? What bad things might happen to you if you don’t? If the answers are unclear, create various winning and losing scenarios, and assess the importance.
Assuming that you do value the position, and do want to defend it forever, we offer the following:
Rule 1 – Hold on tight.
In Tug of War, holding on tight requires that you get a good grip, and keep it. You cannot expect to win by simply watching the line. You must keep your eye on all the players to see how they are reacting — and even when the tug gets stronger and harder to hold, you’d better maintain a good grip and tug right back as hard as you can.
In a Tug of War, you must also protect maintain a good foothold. Footholds in apartment marketing fall into three general categories: target residents, apartment and community variations, and advertising channels. Leave the competition no convenient means by which to gain a winning foothold.
Rule 2 – Don’t let go.
In direct hand-to-hand combat, the tall heavy guy has certain undeniable advantages of leverage. In a Tug of War, the same kinds of advantages are magnified.
Everything is harder for the guy who is holding on the opposite side. Always keep your opponent in site. In the Tug of War game, this means pulling harder and longer or with substantially stronger and heavier teammates. In marketing, this means continually training and developing your team in order to maintain a competitive advantage.
Rule 3 – Use all the ammunition at your disposal.
It’s hard to win at Tug of War if you’re only using your hands and the guys on the other side are using their arms and legs. The relative strength and superiority of teammates is vitally important. In Tug of War marketing, your valuable ammo includes (but is by no means limited to) your teammates, apartments/community, marketing and leasing techniques, and budgetary decisions/spending. Here’s where some of the rules of true warfare come into play:
Apartments/Community – You cannot protect the line with inferior Apartments. Our recommendation to anyone who wants to maintain market leadership is to work twice as hard as the next guy to improve and maintain the community. Your apartments do not have to be 100% superior, but they must offer some unique feature(s) that makes them more appealing to your target residents.
Marketing & Leasing Techniques – The second line of defense is vested in your marketing strategy. Fight with superior selling techniques. Within each technique, have the most advanced idea or concept. For instance, if advertising is important, have dramatically better copy than the competition. Remember, you don’t have to use all weapons, just those that work best for you, and those that work better than your enemy’s. Remember also that the element of surprise didn’t become a key defense strategy by accident – it’s in your best interest to the be first to develop new, even more effective “weapons”, so an aggressive development and testing program should be part of your strategy.
Spending – It takes strength to fight off challenges. Just having bodies in the right place is not enough. They must be strong bodies. You can’t save resources when you are losing the battle. You must use the reserves. You can save resources only during times when no battle is being fought. Too many companies forget that sometimes the decision of how much you will spend and where isn’t entirely yours to make – sometimes that decision is made for you by your competitors.
Rule 4 – Leverage your allies.
It is a lot easier to play Tug of War if half of the neighborhood decides to help you win. The same is true for an apartment community. Focus on building alliances with the major local employers, merchants, city offices (like your local chamber of commerce), and other businesses in your neighborhood. Get them on your side.
Rule 5 – Move secretly and deceptively.
Remember what we said about the element of surprise? A surprised enemy is a weak enemy. The element of surprise has two dimensions for successfully playing Tug of War.
First, do not let the enemy see where you are heading unless it is in your advantage to do so for deceptive purposes. The principle is: look strong when you are weak, look weak when you are strong.
Second, know the enemy. A strong market leader knows more about the competitor than the competitor knows about himself! If there is any mystery in your mind about why your competitors are succeeding or behaving the way they do, find out. Know what they are doing and why.
In a real war, intelligence and information are the most important elements of a successful strategy, because on them depends an army’s ability to move. In market warfare, competitive research, knowledge, and analysis are your intelligence agents. Take your steps one at a time, and as quietly as possible. There’s only one reason to shout to the enemy that you’re throwing down your sword, and that’s to lure him out into the open so you can blow him away with your new cannon.
Rule 6 – Don’t let the enemy gain momentum.
This is a concept that we’re all pretty familiar with form our experiences with sports or other games. Energy is a function of momentum. Energy fuels the will to win. In Tug of War, if you let the other team pull you too long and too far in their direction, they then benefit from what is known in psychology as the goal gradient. The opposite is true also. An enemy making no progress gets demoralized. A demoralized enemy is much easier to beat. For every inch you’re pulled in the wrong direction, pull the other team two inches back! Energy increases as you near the finish. Take advantage of it by channeling all of your strength into that winning tug!
Rule 7 – Don’t let the enemy see you sweat.
Finally, even when you are in critical stages of near defeat, it is clearly in the leader’s best interests to look cool, assured, and filled with boundless reserve energy for the fight. Never let a shark smell blood. Never let the other team see you struggling to hang on. The same is true for a competitor. Remember that in any fiscal period, somebody at the competitor’s office has the decisional authority to decide what resources they will continue to risk in the battle for your leading position. Rarely is there absolutely no money left, all credit used. There is always more for the person who has the courage to risk it. If you look tired, or in any way not up to the fight, they will decide to pursue you with renewed vigor, and that decision will directly affect the resources needed to defend yourself. Send the kind of clear messages that discourage would-be competition.
Marketing is a war – a Tug of War. It’s a little bit of pull and yield, a little bit of give and take… the secret is to always pull and take more than you yield or give, and that requires a sound strategy. I hope these rules serve you as well as they’ve served me. Hold on to the rope, get a good foothold, keep your eye on the other team, and pull with all your might!
Tami Siewruk is the founder and Chief Imagination Officer of Multifamilypro, Inc. For more information on Multifamilypro’s products, and events, please visit www.Multifamilypro.com.
Free Live Broadcast of the Social Media Optimization Summits Meet & Greet Tweet-Up
Mar 17th
Next week’s Optimization Summits Meet & Greet Tweet-Up, Sponsored by For Rent Media Solutions, will be webcasted live online and FREE, featuring interviews with several of our Workshop Leaders! Monday March 22 6:30pm central time. Register today!
Social Media Optimization Summits Meet & Greet Tweet-Up
Not able to travel? You can still join us for a portion of our Optimization Summits event live and online! We’re webcasting from the Meet & Greet Tweet-Up, sponsored by For Rent Media Solutions, from 6:30-7:30 pm central on Monday, March 22nd! Sign up to receive your FREE username and password for access!
Hosted by Tami Siewruk, the webcast will include interviews with several of our Workshop Leaders, including Jason Falls, Mack Collier, Chris Penn, Erica Campbell, Mark Juleen, Duncan Alney, Brent Williams, Charity Hisle, and more!
Please note that each free registration will generate password access for only one computer (controlled by IP Address) and cannot be shared for access by another computer simultaneously. Attempting to share your username/password will result in cancellation of your access. Multifamilypro reserves the right to cancel scheduled broadcasts, should unforeseen technical difficulties arise.
Review the Apartment Leasing Process
Mar 2nd
Part One of Three: Review the Leasing Process
Over the years, several different leasing approaches and philosophies have come and gone. Our industry has changed, and more importantly, so have the people we serve. Though many of the techniques that we used in the past are still valid, many others are no longer effective. Where people once wanted to be sold, they now prefer to be served, and today’s leasing approach must fulfill this desire in order to be effective. In other words, we are no longer in the business of simply selling the features and benefits of our apartments and communities. Today’s most successful leasing strategies call for demonstrating how those features and benefits are in keeping with the lifestyle expectations and desires of our future residents. The difference isn’t as subtle as it seems on the surface. Where it was once enough to simply close a lease on an apartment that met the future resident’s immediate needs; today’s resident wants and expects a longer-term commitment. If you really want to succeed in leasing apartments you must move beyond “leasing apartments” to helping the future resident solve their moving and lifestyle needs and wants.
Information is one of today’s most valuable commodities, and as a leasing professional, you possess a wealth of information about one of the most valuable decisions an individual can make — their choice of a home. Naturally, the future resident who has gone to the trouble of contacting you has done so because they want you to help them find the new apartment home that best meets their wants and needs. Needs are easy — most of the old leasing approaches can handle needs, hands down. Wants are a little more personal. Determining what they are requires that you win a future resident’s confidence; and satisfying them means that you’ll have to develop an effective rapport. As you can imagine, conveying a committed, resident-oriented attitude while successfully satisfying the future resident’s wants and needs requires a comprehensive approach. This approach is known as relationship leasing.
Focusing on the needs and wants of the future resident is only one of the skills that relationship leasing requires. Leasing Professionals must also develop the skills to exercise personal judgment, build a long-term relationship in order to improve resident retention, ensure the ongoing satisfaction of both residents and future residents, and connect with them personally as a true professional in the apartment home decision-making process. This means knowing your resident’s needs and wants, and then positioning your community, apartments and services to remain their number one choice.
Relationship leasing involves focusing on building a relationship with the future resident. Closing ratios and leases are increased because instead of pushing apartments, you are presenting a more comprehensive commitment to improve their lifestyle and serve them throughout their residency. Relationship leasing emphasizes the intangible side of every lease. It includes not only the apartment, community and services; but also the real value that each of these offers the resident, and what you personally bring to the mix.
Relationship leasing requires leasing professionals to understand where they are coming from, to maximize their strengths, to learn new skills, and to take full responsibility for managing the leasing process. It’s your responsibility in leasing to fully understand your future residents and how you can help them before you lease them an apartment. With Relationship leasing, you are in the driver’s seat at all times. You have a clear understanding of where you are in the leasing process and what it will take to have this person as your newest resident. The days are gone of closing hard, offering a concession and overcoming objections and then hoping for the lease. With relationship leasing, you create the relationship and mix in the leasing techniques that work. The rewards of being resident-focused are increased commitment, loyalty, referrals, and of course increased occupancy and reduced resident turnover! Relationship Leasing Professionals are top producers because they are connected to their Residents beyond the scope of their apartments and services, and way beyond their competition. The key to success in relationship leasing is to understand what happens during the future residents’ decision-making process and how you can positively influence their decision.
Relationship leasing helps you differentiate yourself from the crowd of competitors first by the approach you’ll take and finally by the results you’ll obtain. Your future and new residents will view you as a true professional expert. The relationship between resident and leasing professional is powerful, and it is your responsibility to foster that relationship so that both sides win. Many of you have already experienced the power of relationship building in the leasing process with future residents who have leased from you and prefer to continue to deal with you personally when they have a service request or a problem to be resolved. The reason for this is that you did a great job of relationship building in the leasing process!
Lease Renewal Strategies that Help You Manage
Feb 1st
Wouldn’t it be nice if we didn’t have to worry about lease expirations? If every resident simply moved in and stayed….and stayed…and stayed? Ah, but this is the real world—and in the real world, leases expire and residents move out. Even the best resident retention plan won’t eliminate turnover.
Because lease expirations are a fact of life, they must be managed like any other aspect a property. You need techniques for ending leases at the most appropriate times and in manageable numbers. You also need strategies for getting a little more mileage out of a resident—for those times when the market is terrible and your occupancy is not all that it should be. This article will look at some lease-expiration strategies that help you protect your occupancy and your income.
It’s Staggering!
One of the most effective techniques for controlling expiration’s and ensuring that your occupancy doesn’t take any sudden plunges is to stagger lease-end dates. Some companies follow very strict policies about how many leases can end in a given month, ensuring that only a certain percentage of the total number of apartments turn over at the same time. Others try to make sure that most of their leases end in the spring and summer months, when traffic is at its highest. Companies with high numbers of student residents often write their leases with the school year in mind, offering lease-end dates that coincide with the ends of semesters or terms. By controlling the number of leases expiring in a given period, you make life easier on yourself and your entire staff. Your service teams won’t be faced with a daunting number of make-readies all at once, and your leasing professionals won’t suddenly find themselves with impossible numbers of vacancies to fill.
Another approach involves staggering leases by apartment types. This ensures that you don’t end up with an oversupply of one apartment type and no availability in other types. If you are very in tune to your market, and you notice that there is a higher demand for certain floor plans at certain times of the year, you can stagger leases to ensure that vacancies in specific apartments coincide with demand for those apartment types. If you don’t have a sense of which apartments are most in demand at certain times, review your traffic reports and lease information for the past couple of years and see if you can discern a trend. You might be surprised.
Any staggered expiration approach will almost certainly involve offering non-standard lease terms. For example, if a resident signs a lease in February, and you have already scheduled your maximum number of move-outs for February of the following year, you will have to offer either an 11-month or a 13-month lease. If you’ve already filled up your move-in slots for January and February and March, the lease expiration will have to be pushed into either December or April. Some companies put a “flexibility” sales spin on the funky lease terms, allowing residents to pick their own move-out month based on expiration availability.
Going Month to Month
Offering residents a month-to-month option may also help you manage move-outs. There are some disadvantages to the approach—the most obvious, of course, being its uncertainty. The more residents you have on month-to-month leases, the more precarious is your occupancy. You have no way of accurately forecasting your turnover beyond 30 days unless you REQUEST a 60 to 90 day notice to vacate.
But stress level aside, month-to-month agreements can work wonders for a community’s occupancy. If you simply can’t afford to lose residents, they can be just right carrot to entice those who are hesitant to sign a year or six-month lease. A month-to-month can also be useful for eking out just a few more months of occupancy when you need them most. For example, if you can convince a resident whose lease is ending in February to stick around for just another two or three months, you will be that much closer to warm weather—and to the traffic you need to fill vacancies.
If you opt to let residents renew their leases on a month-to-month basis, you are entering into what is properly called a “rental agreement” rather than a lease. Essentially, this agreement expires at the end of each month, and is automatically renewed when the resident pays his or her rent for the next month. In addition to specifying the standard terms that all leaseholders agree to (resident and management obligations, rules, etc.), the agreement should specify:
· How much notice the resident must give if he or she decides to vacate, and
· How much notice the property or manager must give the resident in order to either change the terms of the agreement or end the agreement
The length of both these notice periods is often 30 days, but may vary from state to state.
If possible, when offering a month-to-month lease you should ask for more rent. In many markets, residents are willing to pay a premium for the flexibility of such an agreement. However, if it is the weakness of your market that is forcing you into a MTM in the first place, you may find it impossible to increase the rate. If this is the case—and if you really need the resident for a bit longer—don’t get stuck on the idea of charging a premium. Keep your eyes on the prize: you’re NOI.
The Ostrich Approach
In markets that are extremely difficult, some communities may opt to simply ignore lease expiration’s altogether. That is, they do nothing to bring the lease end to the resident’s attention, in the hope that the resident will simply go on living there—and go on paying rent—as if nothing has happened. Doing this creates a “tenancy at will,” which means the tenancy has no specified duration and can be terminated at any time by either party. Laws may vary from state to state, so you should check, but in most cases, the original terms of the lease are still binding (with the exception of the lease term dates). Either the resident or the community may residency the tenancy with a certain amount of written notice, which varies from state to state. The community may also change the terms of the lease—such as the rent or security deposit—with a specified length of notice.
In practice, then, this approach differs little from a month-to-month rental agreement. The main difference is the lack of paperwork. Another practical difference is usually the ability to charge a premium. While some communities charge a higher rate for the month-to-month option, those that opt to create tenancies at will are almost certainly not asking for more rent. Quite the opposite, in fact— they generally need their residents so badly that they’ll do whatever they can to avoid rocking the boat.
Squeezing in Some Marketing
Which ever strategy or strategies you use for renewals, one challenge you undoubtedly face is managing them in such a way that you have enough time to market newly vacant apartments. This requires balancing two sides of your managerial personality. On one hand, you want to give a current resident every possible chance to renew his or her lease—right down to the wire. On the other hand, you need to know what apartments are vacating so you can start advertising them. The longer you wait to market, the longer the apartment may have to sit vacant. So how do you satisfy both of these demands?
Part of the solution may lie in how much in advance you contact your potential renewals. The question of when to first approach residents with notice of their impending lease expirations depends largely on the state-mandated length of notice they are required to give of their intent to vacate. The general rule if to make contact at least one month before this formal notice is required. Following that guideline, then, communities with a 30 day-notice might make contact 60 days in advance, while those with a 60-day notice might make contact 90 days prior to lease end. Giving yourself the extra month accomplishes two things: (1) it allows you to surface objections that can be overcome, overcome them, and get the renewal, and (2) it allows you to identify those “solid” no’s, so you can start looking for replacement residents.
Solid no’s are generally those residents who are making major life changes—buying a home, moving out of town, getting married, etc. While it’s not impossible that they’ll change their minds, it is mighty unlikely. You are probably safe to assume that they’ll be vacating. Other solid no’s are those residents who, for whatever reason, are clearly unhappy in your community. You know who they are—every property has at least one.
Once you’ve identified those residents you know will be moving out, you can start your marketing efforts for those apartments. If you have a close-knit community, you may want to start close to home—with the neighbors of the soon-to-be-vacant apartment. Simply call those residents in the vicinity of the apartment, and say, “Mrs. Smith, can you think of anyone you’d especially like to have as a neighbor? The apartment right across the hall from you is opening up next month, and I wanted to let you know before we start advertising it, in case you had someone special in mind.” Who knows—you might just get a referral! And even if you don’t, you’ll win points with Mrs. Smith and the other residents you contact.
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