In part 1 of this blog series, Melissa explained reported rents are not effective rents.  There could be back-end concession or other facts that overstate rents.  Landlords should always have their property manager provide a market analysis before considering changes.

In part 2, I want the property owner to determine what their goals are and some considerations and potential costs before looking to maximize rents.

Goals:  Most investment properties are intended to be held for a number of years and therefore decisions tend to support the long-term, such as maintaining market rents.  Maximizing rents by choosing rents at or above the very top of the market range tends to be more of a short term goal, like the example we used in part 1 with the builder selling the newly constructed multifamily building.

Considerations:

                Bad will:  Many landlords feel increasing rents at lease renewal should be expected and are not personal whatsoever.   I can tell you that a good portion of tenants take it personal.  They really do associate rent increases to poor performance, which is not the case.  Some get defensive.  Others fight back.

                Goodwill:  By showing a tenant what market rents are and offering a renewal lease within the middle of the market range, the landlord and/or their property manager can show some goodwill.  Additionally, by offering a renewal incentive like free carpet cleaning is a nice way of saying thank you.

                Tenant performance:  Do not increase rents because the tenant is regarded as a bad tenant.  If the tenant has a history of lease violations and other performance related issues that are of real concern, just give notice to terminate.  Then you can focus on maximizing rents once vacant.

                Market Data:  Know the actual market rent range and be able to identify differences between comparable rentals, to include amenities.  Know the market and current occupancy rates.

                Market Seasons:  Identify the peak and slow seasons and know that being aggressive in the slow seasons can result in extended vacancies.  With multi-family rentals, be consistent throughout your property.

                Improvements:  How recent and to what degree has the interior and exterior of the property been updated.  Additionally, what improvements have been made in the area that makes it a “destination” location?

Kristen Curtis, Leasing Team Leader
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Property Rental markets in Boise and Idaho.