None of us want to pay more money for the apartment or house we are renting. Most of us have trouble increasing our customers’ prices when we ask for a new renewal commitment. One of the things I’ve learned is that perception is reality. So the key to raising the rents while keeping resident retention high is to help your residents perceive that they are getting a bargain.
The Programs: Three months before their lease renewal date, send them a Rent
increase/ Lease notice. Include an early bird incentive to get them agree to the rent increase and sign immediately, thereby preempting a search for a new place to live. For example, let’s say you are trying to increase your rate by 5 percent on an $800-per-month rental unit, which comes out to $40 per month. Send them a rent increase for 8 percent, but offer them a 3 percent discount if they come and renew the lease within the next two weeks, a 2 percent discount if they come in within four weeks, and a 1 percent discount if they come in within five weeks.
Design the letter to outline the savings for each percentage offer. For example:
· The 3 percent discount would equal $24 per month or $288 per year.
· The 2 percent discount would equal $16 per month or $192 per year.
· The 1 percent discount would equal $8 per month or $96 per year.
The residents perceive that they are saving $288, while you’re increasing revenue by $480 per year. The resident may ask for the full percentage of savings during the course of the three months, but that’s okay. You still get the same perception and same revenue.
The keys to success are to design and test different initial rent increase notices, incentive pieces, and reminder cards announcing the end of another discount.
Projected Results: You will be able to test this program on a monthly basis and determine its net effect. The risks are small, but the rewards are large. One community that implemented the idea received a 65 percent early bird signing response rate!
Contributed by Rick Brown