What would your current or prospective renters say if you asked for their thoughts on your rent prices? What if you were to ask that same question to your on-site teams?
You'd hope that renters believe your rents match the value and lifestyle your apartment community offers and your staff agrees.
But the feedback you'll likely get will be less favorable. Why? How most apartment communities set their rent prices creates more distrust for everyone, whether they realize it or not.
In this blog, we'll reveal what multifamily communities get wrong about rent pricing and offer ways to fix them.
Mistake No. 1: Following competitors' rent prices.
Following competitor rent pricing data is common for most apartment communities. When the property next door raises the price, they raise theirs. When they lower it, they lower theirs.
Here's the problem with this approach:
- You're not accounting for unknown factors behind why another community changed its rent prices.
- Your competitors' leasing performance, unit availability, and revenue goals differ.
- Your rent prices change without rhyme or reason, just as a reaction.
Unfortunately, using competitor data has become ingrained into apartment pricing decisions as the belief is that it's the only way communities remain competitive. This is also why most multifamily revenue management software prioritizes it.
Solution: Set and adjust rent prices using your community's unique supply and demand data.
You already have the best information to set rent prices—your supply and demand.
Supply prioritizes your unit availability and lease expirations. Your organic website traffic is the most accurate assessment of current and upcoming demand. With these leading indicators, you can ditch competitor pricing and unlock your apartment's hidden revenue.
Using your supply and demand data can also make your price-setting strategy more objective and easier for everyone to understand. When you have more available units than anticipated demand, you can reduce your rent price or run a special. You can safely increase pricing when your demand is strong, and fewer units are available.
Instead of being a community that depends on others to make pricing decisions, other properties will follow you, except you'll now have the greatest advantage to sustain strong occupancy and maximize revenue through any season.
Using your communities’ own supply and demand data also improves how prospective renters perceive your community's rent prices, making them feel genuine about the value of your apartments. When your community's prices are just reactions to everyone else's, it could come off as a desire to match what others offer—whether or not your apartment's actual value justifies those prices.
[Set new lease and renewal rent prices automatically with the only multifamily revenue management software that ignores market and competitor data: RentVision Revenue Management.]
Mistake No. 2: Changing rent prices too often.
The easiest way for your teams and renters to lose trust in rent prices is when they're changing frequently and aggressively.
How would a prospective renter react to such a significant increase if rent is $1,200/month one day and $1,450/month the next? What message would that send to your staff?
This same concept applies not just when you're raising rents, either. Lowering rents quickly and often may improve occupancy, but it also appears uncoordinated when you raise rents just as fast and aggressively afterward.
Solution: Change rent prices regularly and incrementally.
First, focus on setting the right price with the right data to determine whether to increase or decrease rents. That will remove any infighting, get all stakeholders onboard with the price, and make it easier to explain to teams and renters why rents are changing.
Second, set a specific time for when the price changes. Whether it's once per week or once per month, the goal is to avoid wild, daily price adjustments that negatively impact everyone.
Finally, whether you need to increase or decrease pricing, do so in smaller, less aggressive increments. Extreme price changes shock renters.
Mistake No. 3: Evaluating leasing agent performance by an occupancy target rather than revenue outcome.
Leasing staffers want to work within a sustainable situation where filling units is easy, primarily when their incentive structure is based on an occupancy target.
It creates instability within their role when they cannot understand why or know when rent prices change.
For example, it's common to hear on-site staff blame every negative shift in demand or occupancy on a price raise, even if the increase is justified.
Why? They're not as in tune with a community's revenue goals as executives are; they're focused on occupancy because their incentives and job security depend on hitting that target. Any pricing decision that makes it harder to increase occupancy could negatively impact their confidence.
Solution: Change your incentive structure to align with your community's revenue goals.
Stop telling your on-site teams to achieve some arbitrary occupancy target. Instead, align their incentive structures to match your revenue goal for the apartment community they work at.
We know you have goals for each community, like increasing occupancy quickly or showing steady rent growth. Whatever your goals, your pricing and leasing strategy will look different, especially if you're trying to improve rent growth.
But your teams will be more confident when they have greater clarity about your pricing strategy (especially if you're using the correct data and making fewer aggressive changes).
They'll no longer feel anxious when prices change and how it will impact their role. Instead, they'll see price changes that make filling and keeping units occupied easy.
The Takeaway
- Do not use competitor pricing data to set your rent prices. Instead, use your supply and demand data to set more justifiable prices that are true to your community's value and revenue goals.
- Make rent price adjustments at smaller, more regular intervals. This will build more trust in your pricing strategy from your on-site teams and renters.
- Lastly, align your team's incentive structures toward your revenue objective instead of some arbitrary target so that they feel more confident when prices change.
Need help with your apartment community's pricing strategy? RentVision Revenue Management is the only price-setting software for apartments that ignores market or competitor data. It delivers optimal prices according to your community's goals using only your unique supply and demand data. Schedule your demo today to learn more.