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4 Steps to Increase Your Apartment Building's Occupancy
Use these four common-sense approaches to fill your empty apartments and keep your current residents in place.
Occupancy is one of the most important metrics for a multifamily investor. If you don’t have renters in your apartments, you don’t have money coming in. If you don’t have money coming in, you can’t pay the bills — or your mortgage.
So, yes: A high, stable occupancy rate is the hallmark of a strong apartment building. In the last couple of years, it hasn’t been that hard to keep folks in your complex: As long as your rents weren’t absurdly high, you pretty much just had to keep the lights on. At the start of 2022, nearly every major market had occupancy rates north of 95%.
But it’s not the start of 2022, and things have changed. With a huge number of apartment buildings and units scheduled to deliver throughout the year, the sector will be tested in terms of occupancy.
RealPage expects occupancy to fall nationally by about 30 basis points this year. That’s significant — but it may get even worse, as the rate could likely drop even further earlier in 2024.
Every multifamily owner and operator must do an audit of their portfolio to identify — and respond to — any potential occupancy issues, both now and in the future. We’ve identified four key ways to prepare your apartment building and keep your portfolio’s occupancy strong.
Step 1: Evaluate Your Marketing Channels
Effective marketing is obviously critical for getting new renters. But are you certain what you’re doing now is effective? Think of all the different ways you can market your available units:
Online listing services
And that’s just naming a few. You know where you’re advertising. You should also know if your overall marketing strategy is working.
But do you know which components are working, and which aren’t? You don’t always need a complicated attribution process, but it does help to note where your leads — both those that converted into residents and those that didn’t — came from. You may need to cut your marketing costs in the future, and throwing money away on ineffective methods is a poor way to run a business.
Not sure where to start? I’d recommend reading RentVision’s comprehensive, data-driven report which looked behind the curtain on more than 70,000 leases and their sources.
Step 2: Ensure Your Pricing Is Competitive
Another obvious one, for sure. However, as rental rates continue softening across the country, you may be hesitant to lower your rents. That’s understandable — and while you may need to eventually reevaluate your monthly rental rates, do consider offering more rent concessions in the short term.
Rent concessions are any one-time waiver involved in the leasing process. Because they aren’t recurring with each month’s rental payment, you’ll make up the costs of these over time. Some examples of common rent concessions include:
Waiving application fees
Offering the first month’s rent for free
Providing gift cards or other rewards as a “move-in special”
Allowing for more flexibility in the lease’s terms
Just be sensible and cost-conscious about what you’re able to offer. In the end, though, depending on your market and competition, you may need to examine adjusting your rents. This shouldn’t be a decision you make easily, but just remember: A unit with lower rent income still generates far more money for you than an empty apartment.
Step 3: Keep Your Building Well Maintained
An apartment building with no visible issues is attractive. Residents are looking for a low-stress renter experience, and knowing that you or your property manager are on top of things is a great — and relatively easy — thing to showcase. This doesn’t necessarily mean a full renovation of your building. However, walk the halls of your property. Check out the common areas and the outdoor spaces. Inspect the parking. Log any issues, minor or major, and get them addressed.
Keep your units well maintained, too. If a resident has moved out, don’t just do a very basic cleaning. Ask yourself: Does everything in the apartment look brand new? (Hint: The answer to this question is always no.) You don’t have to gut-rehab a lightly worn apartment, but a fresh coat of paint and replacing the blinds may be just the thing to make your unit stand well apart from the crowd.
Step 4: Maximize Your Resident Relationships
Don’t forget about your current residents! It’s way, way easier to keep a resident than it is to find a new one. It’s also considerably less expensive. If you manage your property yourself, ask yourself what your residents wish your community or their apartments had. If you use a third-party property management company, ask them how they would answer the same question.
If you or they can’t answer clearly, you’ve almost certainly got work to do. Don’t underestimate the importance of checking in with your residents to ensure they’re having a great experience living in your building. Don’t overdo it, of course, but checking in with your residents once per quarter is a great way to check their temperature.
You can’t give every resident everything they want, naturally, and I wouldn’t recommend doing that anyway. But, if you understand that you have unsatisfied renters — justifiably or not — you can make plans to deal with any vacancy issues before they even begin.
Occupancy isn’t a black box.
It’s easy to measure, and it’s relatively straightforward to address. However, the longer you hold off identifying the source of your occupancy woes — and identifying the best way to remedy them — the more you stand to lose.
As we move through 2023, occupancy will begin to soften, especially in those markets with major construction activity. You’ve got to be prepared to act to keep your apartment complex in a strong position.
Thankfully, it’s not all that difficult to prepare, and most of it is common sense. Above all, don’t just look at your building as an investment, but view it through the eyes of your renters — prospective and current.
What are the best strategies for increasing apartment building occupancy?
The best strategies for increasing apartment building occupancy include offering quality amenities, such as a community garden or updated fitness center equipment, and keeping up with the competition by making necessary renovations. Additionally, you can command higher rents by offering quality amenities and services.
For more information, please see the following sources:
What are the most effective ways to market an apartment building?
The most effective ways to market an apartment building depend on the target demographic and the budget available. Potential marketing efforts could include online paid advertising and social media, local radio and television ads, fliers, and sponsorships of local organizations and events. For apartments geared toward college students, campus-wide promotions may also be ideal. Adding amenities such as a community garden or replacing fitness center equipment can also be beneficial.
For more information, see Do You Need a Business Plan for Apartment Investing? and How to Renovate Your Apartment Complex.
What are the benefits of offering incentives to tenants?
Incentives can be a great way to attract tenants to your property. Offering incentives can help you stand out from the competition and make your property more attractive to potential renters. Some of the benefits of offering incentives to tenants include:
- Reduced Vacancy Rates: Offering incentives can help you fill vacancies faster, reducing the amount of time your property is empty and increasing your rental income.
- Increased Tenant Retention: Offering incentives can help you retain tenants for longer periods of time, reducing the amount of time and money you spend on tenant turnover.
- Increased Rental Rates: Offering incentives can help you increase your rental rates, allowing you to make more money from your property.
Incentives can come in many forms, such as discounts on rent, free amenities, or even free rent for a certain period of time. It's important to consider the cost of the incentive when deciding what to offer, as well as the potential return on investment. For example, offering a free month of rent may cost you more than offering a discount on rent, but it could also help you attract more tenants and increase your rental income in the long run.
How can I make my apartment building stand out from the competition?
You can make your apartment building stand out from the competition by investing in upgrades and adding amenities. This could include something as small as adding a community garden or replacing fitness center equipment. Additionally, you can command higher rents by offering quality to your residents.
For more information, check out this article from Multifamily.Loans.
What are the most important factors to consider when setting rental rates?
When setting rental rates, the most important factors to consider are the average rental rates in the target area, the expenses associated with the acquisition, and the historical performance of rent asks in the area.
According to Apartment Loans, it is important to try to match your property’s rent with the average rent price for the area and slowly adjust your rates to match the quality (or potential quality) of the asset. Additionally, it is insightful to calculate what the property will actually cost you — and then determine if the rent is enough to cover that.
According to Commercial Real Estate Loans, investors should make sure any property under consideration can collect enough rent to cover the expenses that go into an acquisition. A deep-dive analysis of the area should be done to gauge where rent prices may be headed in the foreseeable future.
What are the best ways to attract long-term tenants?
The best way to attract long-term tenants is to make sure you are selecting quality tenants. This means running background checks, reviewing rental history, and evaluating tenant income and credit. You may also want to consider creating a point system to help you pre-screen tenants for your final approval.