The Single Biggest Mistake Property Managers Make When Managing Multifamily Occupancy May 23, 2017 The single biggest mistake that you can make as a property manager is also one of the easiest to fall into: believing price reductions are the only way to increase occupancy. Here’s why. Property Managers and the 4 Ps For multifamily property managers, there are four major factors that can affect occupancy levels: Pricing – Overly expensive pricing can drive renters away. Promotion – A lack of marketing can lead to a reduced number of leads. Product – Outdated units can be more difficult to fill than renovated ones People – An ineffective site manager or resident manager can result in lower occupancy rates. When you’re trying to boost your occupancy rates, you might be tempted to automatically zero in on pricing, because it’s quick and simple to change. However, the easiest move isn’t always the best move. Pricing: The Easiest Lever to Pull When you need to make leasing decisions and you don’t know if the three other Ps are increasing occupancy rates, a change in pricing can be a tempting knee-jerk reaction. After all, it’s simpler to lower rent than it is to rethink your entire marketing strategy. Without visibility into the other three Ps (promotion, product and people), you won’t know if your marketing team is generating enough tours, if tours are converting into applications and if your ratio of accepted applications to denied applications is on the right track. Some property investors do research before automatically lowering prices, often using generic surveys to determine if the units’ pricing should be higher. However, with the addition of other factors, such as vacancy time, you’re often left with a convoluted math problem when all you really wanted to know was whether the trade-out cost would outweigh the cost of a simple renewal. Because of the confusion this can cause and the common lack of visibility into the other three Ps, some property investors will resort to discounting their unit prices to fill a vacancy. The Problem with Underpricing Offering a discount sounds like a straightforward way to attract renters, but the longer a resident stays in a discounted unit, the more profit you’ll lose. After several years, a unit that was initially discounted by a seemingly insignificant amount might be renting out for hundreds of dollars less than its market price. In terms of opportunity cost, underpriced units can create an increasingly greater amount of debt with each passing year. Data Analytics Is the Answer With the right insight into data, and understanding of tradeoff decisions, multifamily property managers can make better decisions without sacrificing profits. Here’s how: Comprehensive pricing analysis can help prevent unnecessary discounting. Holistic insight into all four Ps can help property investors determine when they should be pricing more aggressively. Basic data from surveys might help you compare your pricing to the rest of the market, but comprehensive analytics will allow you to compare your pricing to more valuable benchmarks. Say you have a list of units with leases that are expiring within the next 90 days. The right data will make it possible to isolate the 10 units that are underperforming in comparison to your other units, not just to the market as a whole. Then, you’ll know that any lease renewals on those 10 units will require an aggressive price increase. Or, if you’re planning to find new renters rather than renewing, the proper data will take your marketing efforts into account and tell you which sources generate more new leads. With comprehensive analytics, you’ll be able evaluate all the factors that affect your occupancy rate, find the statistical answers you’re looking for and ultimately make more informed and effective decisions in the long run. Do You Have the Right Data? With so many generic tools available to multifamily property investors, it can be hard to tell which ones will help you make informed decisions and which ones will create more trouble than they’re worth. Rentlytics supplies valuable, actionable data in an intuitive and easy-to-read format so that you’ll never be in the dark again. To shed some light on your leasing decisions, request a Rentlytics demo today. Go Recent Post Key Steps to Consider Before Making a Multifamily Tech Purchase Making the Switch from Traditional to Active Asset Management Secret’s out: Introducing Rentlytics BI 2.0 Subscribe Tell us your email address and we'll add you to the list. Subscribe If you are human, leave this field blank.