One of the easiest conclusions to reach when an apartment isn’t renting is that the rent is too high.
Sometimes it is.
But after nearly 40 years in the apartment business, I’ve learned that lowering the rent is often the first solution people reach for because it’s the easiest solution to implement.
The phone isn’t ringing? Lower the rent.
Nobody is showing up for showings? Lower the rent.
The apartment has been vacant for 60 days? Definitely lower the rent.
Maybe.
Before lowering the rent, I’d ask a different question:
Are we actually doing a good job of renting the apartment?
We recently had a situation where leasing results at one of our properties were disappointing. The explanation seemed obvious: rents were too high.
Except our rent surveys didn’t support that conclusion.
So we started digging deeper.
We looked at inquiries. We looked at phone activity. We looked at how quickly prospects were being contacted. We compared the leasing activity at this property with another property that was performing well.
A different picture began to emerge.
The problem wasn’t necessarily that prospects were rejecting the apartments.
Too many prospects weren’t getting far enough into the process to reject them.
That’s an important distinction.
An apartment inquiry is perishable. Someone looking for an apartment today is probably looking at several other apartments today too. If they call you and don’t reach anyone, they don’t necessarily wait patiently for your return call.
They call the next apartment community.
This is particularly important today because apartment advertising has become extraordinarily efficient at generating inquiries. Apartments.com, Zillow and other websites can put dozens or hundreds of prospects into your leasing funnel.
But generating a lead and renting an apartment are two very different things.
The best advertising campaign in the world won’t overcome a leasing process that doesn’t answer the phone, promptly respond to emails, schedule showings and follow up.
That brings me back to rent.
Suppose your apartment is $100 per month too expensive. Lowering the rent costs you $1,200 per year.
Now multiply that across 20 apartments.
You’ve just potentially given away $24,000 of annual revenue without first establishing that price was the problem.
Worse, once you lower rents, those lower rents become your new comparables when leases renew and future apartments become available.
Before cutting price, diagnose the problem.
Mystery-shop your own property. Call the leasing number from a phone number your staff won’t recognize. Submit an online inquiry. See how long it takes to get a response.
Look at your call records if you have them. Examine your internet leads. Compare a struggling property with one that rents well.
And, of course, do a legitimate rent survey. Maybe your rent really is too high. If it is, adjust it.
But don’t confuse a leasing failure with a pricing failure.
I’ve made that mistake before, and it’s an expensive one.
Reality Face Punch: Before you lower the rent, make sure someone is actually trying to rent the apartment.