Concessions & Move-In Incentives, Revenue Killer or Secret Weapon?

The topic of rent concessions & move-in incentives is quite frankly one of the most polarizing topics amongst leasing professionals & property managers alike. Many who utilize them for closing deals, swear by them, others are vehemently opposed. Very few people in our industry are on the fence about this one.

For some, move-in incentives are always locked and loaded, and a highly utilized piece of their sales toolbox. For others, they are never even considered as an option, and seen as unnecessary cashflow killers. 

Why is this?

If you jump on your local Craigslist housing pages right now, I am almost certain you will find a cornucopia of different property types being advertised for rent with ad titles barking major move-in deals. "First Month Rent-Free, Low Security Deposit, No Application Fee's, $99 move's you in...". The list goes on and on. For some, the use of move-in specials is a huge part of their entire marketing strategy. This is how they drum up leads, and without this sort of marketing tactic, their property inquiry call volumes would suffer drastically.

Those who are opposed to incentive programs often scoff at the notion that they could "give-away" a portion of initial proceeds, in order to finalize a deal. Why would they ever consider doing this, when there are a ton of people out there in their market who do not expect such enticements, and would gladly sign on the dotted line without such prodding. Those opposed deem incentives as completely unnecessary and make it clear that this sort income killer is not something that they will ever make a habit of.

There is validity to both sides of the argument. Both have legitimate concerns, for and against. The key piece of the debate is whether or not one is comfortable with lost property income in trade for a quick and solid deal.

As I see things... 

Personally, whilst understanding the points of contention for those who do not utilize such sales tricks & gimmicks, I do not leave home without incentives locked and loaded in my salesperson toolbox.

However, make no mistake about it, I do not throw move-in deals out to the masses all willy-nilly like.

When utilizing these tricks of the trade, moderation is an absolute must. Also, creativity is paramount.

First and foremost, it should be noted that leaning on the move-in special crutch within your marketing plan, should be avoided in most instances.

If it is lead-volume you are after, before hitting the market with incentives, first do these sometimes overlooked marketing tools:

•  Make sure your property is visually appealing. Curb appeal goes a LONG way in keeping the phones ringing (note: We will be discussing curb appeal further in upcoming posts). Is the landscaping well groomed & the structure well maintained? If not, study where you can cost-effectively improve, and implement property improvements immediately. Groomed landscaping, fresh paint, etc. If the property looks like a place that your prospects would want to call home, they will probably pick up the phone and call you. 

• Signage, Signage, Signage. The quintessential marketing staple...signage. When driving by your property, is it hard for your prospects to miss the fact that there is vacancy for rent, because there is a large (easily readable) sign screaming FOR RENT at their eyeholes? If you property is not on major thoroughfares, do you have "banjo-signs" on local corners, steering those in the market to your front door. If your answer is no, how is the mass market to know that you have vacancy?

• Flood the internet with ads for your property. Craigslist, Facebook, Zillow, are always good places to start. Make appealing ads with lots of pictures & info. Update frequently!!! 

• Make sure your rent price is fair & competitive. This ensures that other competing properties aren't stealing large amounts of your target market.  

If you have implemented the property marketing plan, and you are receiving reasonable-to-great call volumes, then move forward with sales procedures as you typically would...

...but if you have a tough sell, or a fence-rider, do not hesitate to bring in the heavy artillery...

We've all dealt with fence-riders, prospects that are almost sold... a lease deal is just outside of your reach, but then out of the blue it appears that they are beginning to teeter backwards. UH OH...crunch time.

In this situation, to know which tool to fetch from your sales toolbox, it is imperative that you find out what is preventing them from being slayed by the charm of your amazing property. So ask them! Find out what their objections are, and tackle them accordingly.

...Especially in the event that it is rent or utility cost(s) that are preventing them from signing on the dotted line, now you can consider bringing out your concessions & incentives.

But do you just throw on the savings? Slicing away a hundred bucks from the rent price in one sales-adrenaline fueled blow? No. If you are using incentives, you still have to be reasonable & logical. Even if you have been sitting on the vacancy for a long period of time, and you have your first showing in weeks, do NOT "throw in the kitchen sink", out of desperation.

Here's how I utilize incentives such as price drop...

• If I plan on hitting a prospect with a price drop incentive, I typically do it in anywhere from $10 to $50 increments. Depending on the resistance, and the flexibility that I have on the price mark will dictate how low I can comfortably go. For me, $25 is the magic number. I have signed with hundreds of great tenants, who were on the fence, until I dangled the magic $25 per month rent discount at them. For example $600 per month is now $575 per month, and that sounds a whole lot better to most. If they still aren't sold on the price and do not see huge savings in a $25 p/m rent deduction, I hit them with a right hook of basic arithmetic. I usually explain that a rent drop of $25 doesn't sound like a lot, but that it will save them several hundreds of dollars over the course of their lease ($300 over the course of a 12-month lease term). The manner of delivery is almost as important as the raw numbers, flattery is a must! It is a cheesy sales tactic, but it works wonders. Before dropping the price drop on them, explain that you really think that they would make a perfect tenant for your property, and you would be insane to let them walk the door without having signed a lease. Also, in dramatic fashion, let them know that you really aren't able to do it, but you feel that the personally "hit" will be well worth it in exchange for having them as a tenant...then hit them with what you propose as the rent discount/incentive.

For the aforementioned opposition group of leasing professionals who would rather be shot dead than lose out on revenue, I will explain how this sort of thing can be worked to your advantage. First and foremost, as you will often hear me say..."Don't forget your ABC's... Always be closing & Always be creative!". Creativity is the key to proper utilization of move-in incentives & rent rate concessions.

As it relates to "lost income", we have to back up to the point where you are initially pricing units. I personally hyper-inflate my rent rates, arbitrarily, typically somewhere in the ball park of ... you guessed it... $25 dollars. My logic on this is, the additional $25 will rarely break leads from coming in, but removing it will often close deals. If you aren't met with objections, and a deal goes through as planned...boom...additional revenue!!! If you have to "trim the fat", and throw out a $25 rent discount in your meeting with the prospect...guess what? You are just hopping back down to your baseline price (note: next week I will post on how to properly price your unit for marketability & profitability--stay tuned).

Of course there are pro's & con's to utilizing incentives, it really all comes down to creativity, and knowing when to hit them with this sort of secret weapon. But when you need to bring in the heavy artillery, STAY CREATIVE...and drop the BOMB to close that deal!!!

 
 

 

Tenant Communication, In The Modern Era.

It is no secret the the world around us is fully immersed in technology. It truly makes our world go around, and most of us cannot imagine living a life sans email, text messages, status updates, or tweets. For the majority of us, these are our communication life-lines. Heck, even people aged 60+ are now diving into the world of smartphones, Facebook, Twitter, etc.

The world of communication has changed remarkably, even in just the last 15-20 years.

These modern conveniences undoubtedly run most of our personal/social lives, so it is understandable just how easy they drift into our business life. In recent years past, this has mostly been in exchanging information or sending messages with our colleagues--or those in our business networks, that isn't so much the case anymore. Now I see a large number of landlords & PM's communicating directly with tenants via text messages and social media. Actually this trend is growing quite rapidly. We have seen property management companies hitting tenants with email/text/social media blasts, communicating news & announcements, for several years now.

These communication technologies are here to stay, and we all use it. Some of us even strictly rely on this type of tech to communicate with our tenants. Well...is this a good thing or a bad thing?

I won't go as far as saying that this is a bad thing, because there are a lot of positive ways that we can utilize these quick-hit methods of communicating with our tenants, but I do want to make it quite clear that we must use our technology wisely, and use it only with appropriate correspondence.

Informing a multi-family building with a core demographic aged 18-30 might be quite receptive to text/social media blasts, especially with things like: letting them know that the common recreation courtyard will be closed on Tuesday between 1:00PM-3:00PM, for landscape work. They will quickly get the message, be appreciative of the "green" way of communicating, and move forward with their week informed. However, a tenant may not be so receptive to hear via Facebook wall post or text message that you will be entering their home on Tuesday for an inspection.

Announcement Vs. Notice.

This whole discussion really comes down to: there is a time and a place for our wonderful technology.

With general announcements, that are low sensitivity/priority, it might not hurt to shoot emails, texts, Facebook posts, etc. to your tenants. If it is medium sensitivity/priority, you probably ought to get that tenant on the phone and speak with them verbally. If it is something that is a higher sensitivity/priority, such as items related to entry of their rental unit, violations of lease terms, collections activity, you are definitely going to need to communicate the old fashioned way...

..."Snail Mail"...

Don't get me wrong, perhaps you can supplement "snail-mail" with those other things... phone calls, texts, notices posted on doors, etc.--things we would reasonably assume would get the message across, however we cannot rely on such things with the aforementioned higher sensitivity items.

When communicating with tenants about lease related matters, RELY ONLY on sending them post certified letters with return receipts. When the tenant receives the mail, they are required to sign for these letters, and a signed return receipt is mailed back to your address. Now you have proof that they have received your communication, as far too often (especially if matters go in front of a judge), tenants often claim that they have not received any of your communication (even if you have phone records, printed emails, texts, etc.), even if you know that is simply not true. If the tenant refuses to sign for your letter, you will receive it back through the mail, and will at least have it for proof that you made a reasonable good-faith attempt at communication, in case resulting matters involve courts/lawsuits/judges.

So the long & short of it is that technology makes our lives much more comfortable, efficient, and quick in the communication areas, however, we must be very careful in how we utilize tech communication in our professional worlds.

Regardless of your communication methods with tenants, make sure it is reasonable & verifiable. This will make all of the difference in front of a judge.

Landlord Academy Seeks Input For Output!

As Landlord Academy progresses, it is my goal to cover a lot of core topics regarding property management, while keeping things progressive, and occasionally touching on more advanced subjects. 

Furthermore, to supplement the day-to-day posts here at Landlord Academy, I would love for followers to chime in with questions, and requests for specific topics to be covered.

So this is a call to action. If you have specific questions, or would like my insight on specific topics, please shoot me an email HERE. Also, if you have suggestions/ideas for how I can better serve you through Landlord Academy, do not hesitate to send me a message!

I look forward to hearing from you!

Thank you!
Best regards,

Brandon Wright

Leaky sinks, Crying Tenants, Detective Work...and Hats!?

So I am opening up my blog with a simple question. "What do landlords and property managers do?".

Frankly, the better question would be "What don't they do?". This saves us a TON of time in analyzing the roles of landlords and property managers.

To accept the role of landlord or property manager is to accept a far and wide gamut of responsibilities, hidden within an infinite number of sub-roles. Honestly, some days I fully believe that the word "landlord" must be an old native term for "man of many hats". For a landlord can and often does change "hats" ten times a day.

Of course when I use the term "hat", I am merely referring to a different role that can be assumed by the person in charge of managing any given property unit.

Sometimes this can be a stressful juggling act, as at any given time, a person who manages rental properties can be required to go from friend and confidant to robotic dictator at the drop of a...well...hat.

Let's explore some of the different...ummm..."hat's" that landlord and PM's routinely switch back and forth between.


Roles that a landlord can reasonably expect to assume any given point during their day:

Salesperson:
Someone has to show the vacant units, talk contracts, and seal deals...am I right? Heck, even once you have a quality tenant sign on the dotted line, this comes back around full circle at lease renewal time. Oh my, can't we catch a break!? A landlord and PM's job is never truly finished...

...As this is an unalienable truth of landlording, the list goes on...

Detective/Investigator:
From the moment we initially receive their rental application, we find ourselves digging for information about this prospective tenant. (One might even argue that the process of investigating a tenant actually begins at the point of first contact, I mean we have a lot of questions for them right out of the starting block...what area would you like to reside in, what is your price range, would an apartment or home better suit your family, etc...so the questions begin!) Thereafter, we find ourselves receiving something as subtle as a noise complaint phone call from a neighbor, that can send us on a full bore investigation. We must ensure that the alleged violation is actually occurring, right? So then our fact finding mission begins. We get statements from all involved, diligently noting the situation. Then of course we receive conflicting reports, so instead of haphazardly issuing a noise violation to our tenant, we must do further due diligence. This results in periodic property visits by ourselves and our colleagues, until we have cracked the case! This sort of Sherlock Holmes work is imbedded in so many different areas of our roles, that these examples go on ad infinitum.

Debt Collector:
It is no secret that we have to collect rent payments from tenants as they roll around, but some times people simply pay their rent late...or not at all. When rent isn't received, we gear up, put on our debt collector hat, and get to work. We hit them with telephone reminders, late notices, late fees, and a variety of correspondence saying "You now owe $XXX.xx, and it is due and payable immediately to avoid any further action.". Sounds very much like debt collector activity to me.

Contractor/Repairman:
This one is simple to understand. Things break. Plumbing stops up. Heat goes out. At any given point, regardless of how much preventative maintenance work you perform, you inevitably will receive maintenance calls from your tenants. When this occurs, you kick out a work order to your specific maintenance personnel or contractor, sometimes even to YOURSELF (Especially if you are a landlord on a tight budget, and have this skillset.). Then you follow up to make sure the issue is resolved in the following days and weeks. What about when a property becomes vacant, or needs updating, you certainly are going to have to put on your contractor hat to complete these projects. At this point you can almost drift into an artist or designer role (which I personally love).

Counselor:
The role of counselor/therapist/advisor comes in often, and usually imbeds itself in other areas/roles. Whether you are listening to a tenant's sob story about how their dog died and why they do not have all of their rent as a result, or you are acting as a mediator between two feuding neighbors, it's the same, you are going to have to act as a voice of reason, providing advice, assistance in finding a reasonable resolution... above all else, lending a set of kind, attentive ears. Trust me, you should put a high priority on ensuring that you become a good listener. It will help you professionally more than you could even possibly imagine. Sometimes being a good listener is all that it takes.

Enforcer:
People break the rules. In our case, most often through a multitude of lease violations/defaults. Some one has to keep them in line. 'Nuff said.


I could ramble infinitely describing the roles, responsibilities, duties, and "hats" that a landlord or PM can/will encounter... but I assume you get the point here. If you are new to managing investment properties, my biggest piece of advice is to STAY FLEXIBLE, and expect that if something is stressing you, not to worry long, as you will be working in your next role before you know it. If you do these things, you will be on your way to success. In my opinion, the variety in our field is what I love so much. There is no point when I get "burnt out", because one moment I am working hard in sales...the next I have a tenant crying on my shoulder...then the next I am overseeing a total remodel of a vacant space. Every day is fresh and exciting. I love it and I hope you do too.

What you should really take away from this post is that...

...Landlords and PM's must always be prepared to venture into a new role at the drop of...ummm...

                                                            ...a hat!

 

 

Welcome to Landlord Academy!

Riiiinnnggg Riiinnnggg, Riiinnnggg Riiinnnggg...


...of course, that's the bell, and school is now officially in session.

My name is Brandon Wright, and I will be your insider-guide to investment property management's "Ins & Outs". I have spent many years in the real estate management industry, as a professional property manager, leasing agent, and property management consultant. Of course, early on I made my fair share of simple mistakes, although I didn't give up, I pushed forward learning from them and turning those defeats into huge future successes. Now I am using this blog as a method by which to share my vast knowledge of the industry, the lessons I have learned, and how to succeed.

The reason for my success in this industry is simple... From the beginning I have persistently & consistently been a student of the game. My thirst for knowledge is unquenchable. When I am not working my "9-5" as a professional property manager and consultant, I am either: A.) Face first in a book,  B.) Perusing online real estate/business/personal development resources, C.) Networking, or D.) Working my own investment real estate deals.

Whether you are a principal property ownership who elects to manage their own properties, or a career real estate pro- like myself, novice to pro, I hope to help you refine your skillset in your management of rental investment property(s). Through the following of my blog, you will gain new tools, cleaned up old tools, and tips on how to handle every type of landlord situation.

I encourage you to follow along with my blog posts and to always be a student of the game. If you do, success WILL always find you!


Thanks for visiting, and happy reading!!!
Best Regards,

Brandon Wright