The financial crisis and real estate meltdown has hurt almost every sector of the real estate market, including apartment building owners. Vacancies in many apartment buildings have increased to between 30% and 40% in many areas of the country. Apartment building owners who just a few years ago had occupancy rates as high as 90% to 100% are now facing a situation where they are unable to pay their mortgage and can’t cover their operating expenses. This can create a domino effect which ends up with the property owner losing the apartment building to foreclosure.
Competition for renters is fierce in many areas and individual apartment building owners must act early and aggressively to market their buildings in order to improve occupancy and help their bottom line. Unfortunately, many smaller apartment building owners are facing competition from large multi-family complexes owned by large corporations. These larger buildings have slashed rents and are offering attractive rent concessions just to fill their empty units. The competition has deep pockets, so they can afford to spend the dollars that it takes to increase occupancy, while the typical individual multi-family owner must use creativity and marketing acumen to achieve the same results.
Here are some important ways to get those units filled:
- Research – The first step that an apartment building owner should take in order to increase his or her building occupancy is to carefully research the competition. Market rents are constantly changing and the apartment building owner should find out exactly what his or competitors are asking for similar units in the same area.
- Marketing – The apartment building owner must ask themselves honestly if they are fully utilizing all of the marketing tools at their disposal. Many multi-family owners who have been in the business a long time are not fully utilizing the power of the internet to reach prospective renters. Now, more than ever, these landlords need to get out and focus on both traditional and online marketing.
- Realtors – If you are seriously in trouble with your building occupancy it may be time to hire a Realtor to list your vacant units. A good Realtor is familiar with the marketplace and should have a successful marketing plan in place. Make sure you ask your Realtor for the exact steps they will take to market your vacant units. Don’t trust empty promises.
- Concessions – It may be painful but many apartment building investors may find it necessary to offer rent concessions to be competitive in the marketplace. Again, see what others are doing in your market and think about how you can match or beat them?
Photo: sectionz
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Article Author: Ted KarschTed has written 70 articles for us.
Visit Ted's Website: http://www.apartmentbuildinginvestor.com
Joshua Dorkin
{ 6 comments… read them below or add one }
Ted – What kinds of concessions are you seeing right now as the most common?
Josh – The most common rent concessions we are seeing are landlords offering free move in and free first months rent. We also have retail strip center owners who have lowered rents by as much as 80% to be competitive and keep their current tenants.
.-= Ted Karsch´s last blog ..Commercial Loan Modification for CMBS — What You Need to Know =-.
Hi Ted,
An interesting article.
Am I reading your comment correctly when you mention ’80%’?
I am curious to know what markets (states) the 80% reduction of rent is taking place in.
Best Regards,
Neil.
.-= Neil Uttamsingh´s last blog ..The Eight Most Common Questions Joint Venture Partners Ask – Part One =-.
Neil,
Thanks for reading my post.
The 80% reduction in rent actually refers to a client of mine in Minnesota. He bought a 5 unit retail strip center about five years ago. It was fully occupied when he bought it. Now he has 2 units vacant and on the other three units he has had to drop rents drastically, 80% for one tenant. A similar strip center to his, located directly across the street, was recently foreclosed on by a bank and now the real estate agents working for the bank that owns the property are poaching his tenants by offering major concessions including rent reductions of 80%.
I would like to add a point that the rate of occupancy in apartments could be increased by the government of any country. The government should not allow the supply of apartments to grow drastically. The occupancy rate also declines when the supply surpasses the demand. This fact should also be taken in consideration.
Here’s a few tricks I use in the New York City market increasing occupancy (they work){
1) Offer existing tenants a fee for each referral
2) Make sure your rents are in line with the market. We like to be near the higher end of the rent range (but not the highest). We also look at competitive apartments and add finishes and details that is a step above the competition. This tips the scale in our direction when a would-be tenant is faced with a choice (as they always are). In short, we make our apartments a little nicer within the same rent range.