How do you determine rental increases? Through careful market analysis or hokum? Three phone calls to competitive properties or careful consideration of micro and macro events affecting the asset and surrounding competitive marketplace?
There is always a balance to strike between taking price and remaining competitive. Consistent calibration and goal oriented yield management can guide you towards meeting rental increase objectives.
Calibration: Calibration is just another word for “measure”. More precisely, calibration produces a quantitative measurement. Rent growth is derived from rental increases. Measuring rent growth provides the year-over-year increase in rent based on rental increases implemented throughout the year.
Obtaining a rent growth percentage of X over the course of the year requires a focused effort on maximizing rental increases over the entire year. No short-cuts.
Yield Management: Yield management has an end-game target tied to a timeline. For rental increases, depending on the size of the asset, this can be “calibrated” weekly, monthly or quarterly.
Yield management is a variable pricing strategy, based on understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, perishable resource (such as airline seats or hotel room reservations or advertising inventory). Wikipedia
For example, may assets have a “high season” for turnover, therefore this is where the rubber meets the road in terms of opportunity to meet yield management objectives. Other properties have two or three turnover “seasons”, therefore they have more opportunities to “calibrate” rents.
Following are three yield management software solutions:
Software Advice
Rent Push
Let it Rain
Real Page
Yield management software suites requires a certain discipline to gain quality actionable information (garbage in, garbage out). They have a high value when implemented consistently. See what you already have within your suites software before looking for an outside system or add-on.
Mr. Wilhoit is the author of two books: How To Read A Rent Roll: A Guide to Understanding Rental Income and Multifamily Insight Vol 1 – How to Acquire Wealth Through Buying the Right Multifamily Assets in the Right Markets. Multifamily Insight Vol 2 is set for release in 2015.
For 50+ hours of property management audio training, 3 books and live weekly leadership academy–surf to the PowerHour Property Management Books and Courses.
About This Blog: Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. See www.multifamilyinsight.com