As the weather warms up and the rental leasing season gets into full swing it is easy to get caught up in the rush of showing requests, rental applications, lease signings, and new tenant walk through appointments that usually fill these months for leasing agents and management companies. From what we are seeing in our area and what I have heard from managers and agents in other markets this is one of the more active springs in recent history for tenant moves and new leasing activity. We have seen our average vacancy time decrease from 30 days to less than 20 days over the last few months and some properties are renting as soon as they hit the open market. This is a far cry from just a few months ago when we were in the middle of one of the least active leasing winters that we can remember in the Midwest.
While this is all great news for those of us who earn a living filling and managing these vacant units, we have noticed one area where things have not picked up all that much. The “tough to rent” properties are still hard to move. The nice unit in the dirty building, the overpriced 1 BR apartment, the house with the crazy wallpaper, the home next to the hoarding neighbor, and other general nightmare rentals still continue to be issues. While the market seems to be increasingly active, I see the activity picking up for well maintained, clean, and competitively priced units. Unless the property is in a top-notch area, the properties with problems continue to be a tough sell but through some aggressive marketing and incentive offers we have seen even those properties move in a reasonable period of time. It takes a bit of creativity to get someone to look past things that they believe they can’t live with but sometimes it’s just a little bit of money or the structure of a deal that keeps things from coming together. Some of the more common and effective offers we see in our market lately have been:
– The waived pro-rated rent approach. While many property owners are opposed to waiving pro-rated rent for a mid-month move-in, we think it’s a great marketing tool. We try to explain to owners that the only true alternative is a vacant property and there is no upside in leaving the home vacant for 1-2 weeks while we wait for a tenant to move-in. By having the option to offer this as a bonus (free rent) to a potential applicant we have an advantage over other agents who do not have this option.
– The early move-in. Many moving tenants view the move as a stressful time where they have 1 weekend at best to finish packing, load a truck, move their items, and unpack before getting back to work on Monday. We have closed a ton of leases by just offering an extra week or two to begin moving items into the property. The tenants generally do not “live” in the unit during this time but use the time to bring in carloads of items based upon their schedule. They also have time to set up cable/satellite, utilities, etc. Cutting down on a potential renter’s stress is of great value to them. If a home is vacant and parties are agreeable to an early move-in period it can often make the difference.
– Reduced security deposit instead of reduced rent. We have dealt with literally thousands of tenants and I can remember only small percentage of them where we did not refund at least half of the security deposit to the tenant. In most cases we are returning 80-100% of the deposit upon move out but still we insist upon 1 month rent or more as our deposit guideline. Most renters are worried about the up-front cost associated with moving. They are less concerned about the amount of deposit that will be refunded 1, 2, or 3 years later. Instead of taking half off of the first month’s rent, offer half off of the security deposit. It accomplishes the same goal for the tenant by reducing up-front costs while keeping the rental income for the property fully intact. We even see $0 security deposit offers when times are tight although that’s more risk than we are willing to take on.
– Avoid psychological pricing barriers and rental search tiers. These are different in every market but they exist everywhere. There are cities where tenants won’t pay more than $X amount for a particular property type or location. You may be in a market where $1,000 for 2 bedroom apartment is the breaking point. No matter what you do you can’t rent units for more than $1,000 regardless of how nice they are. We have to be aware of these barriers and market accordingly. People in that market are not running online searches for properties $1,000-$1,499. They are searching $500-$999 generally and your property may not even be viewed by people searching in those ranges. The $995 or even $999 rental price is not only a psychological pricing issue for people who want to stay under $1,000 but due to the way that many rental website searches display listings you may be missing out on a huge number of potential tenants by overpricing units by as much as $1.
– Teaser or promotional rent rates. We only use these in times of high vacancy in larger multi-unit properties but this obviously works. By offering a significantly discounted rental price for 3-6 months which then re-rates to standard rental rates you can quickly fill properties with high vacancy rates. Now, the property owner must be prepared for the decreased potential cash flow in the short-term but if vacancy is an issue it should be considered as an option. We recently had a 72 unit property with 12 vacancies that we were having a hard time filling. We marketed $750 units for 2 year leases at $500 per month for the first 6 months and $750 for the last 18 months of the lease. We rented all 12 units in 30 days and they are now fully occupied. We had so much interest during that time that we now have 10 people on a waiting list although the promotional pricing program has ended. The owner’s potential income for the property was decreased by $3,000/month for 6 months but the 100% occupancy and longer term leases were well worth that risk in the short-term.
– Providing multiple payment options. A more recent option is the ability to offer multiple payment options. Offering online payments, weekly payments, accepting credit cards, Paypal, and other methods of payment open up options for tenants who otherwise may have to wait to sign a lease and move. The fact that these options are now being integrated and even offered by management software companies makes it all that much easier for us to implement these programs.
There are dozens of other tactics out there and every market and agent should have options suited to their area and business practices. The important point is that a bit of flexibility and creative structuring of leasing deals can make a big difference in leasing success and decreasing vacancy rates overall.
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