Landlords across the country are in uncharted waters. Unlike economic downturns of the past, the impact of the coronavirus is profound, and not only threatening people’s lives directly, but also the way in which we do business.
Reducing overall vacancy and maintaining or increasing occupancy will help a landlord weather this storm. As this is so unlike any previous recessions, we cannot rely on the tried-and-true landlord playbook, because it is now obsolete.
Instead, just like any good coach, we must play both offense and defense, and identify new and creative strategies to combat the novel opponent we face today.
Offense: Increasing Your Chances of Attracting Tenants
This is the most obvious approach and has a proven track record of being the go-to method people use during a recession.
But before you start slashing your first month’s rents, it is important to understand the type of concession that will attract the most prospective tenants.
For example, instead of offering a discount for the first month—$600 off, for example—it is probably more attractive to offer a discount spread across a few months—$400 off the first month and $200 off the second month.
Auditing Your Rental Offerings
It’s extremely important during a recession to audit your rental offerings per unit type and compare them to competitor properties. In a strong market, you may not see a competitor change their prices for months.
However, in a downturn, these prices can change weekly and even daily. It is important that you are always priced competitively, and if possible, a little bit below your competition. The number of people who move during a recession significantly decreases, making this one of the most important practices to carry out on a regular basis.
Advertising is typically the first expense that gets cut when the market tightens. While trimming unnecessary expenses is always a good idea, an all-stop defensive press is the wrong approach.
As the pool of potential tenants decreases during a recession, identifying the most cost-effective advertising by analyzing cost per tenant, per source, is critical. If the market only has 50 people looking for an apartment in any given month, and during an economic downturn there are only 10 people looking, it is more important than ever that you are spending money in a way that gives you the best chance to capture those 10 people.
Another expense that rides the bench during a recession is outreach events. Most people think outreaches entail huge cost burdens, but not all do. In fact, you can even have free events, depending on how creative you are.
For example, you could team up with your local humane shelter and waive pet deposits for anyone who adopts a pet. As an added benefit to the shelter, you can promote their organization and even host a supply drive.
Ask the shelter to advertise on their social media platforms that your property is pet friendly. You can take it one step further, which we have done previously, and contact local news organizations and ask them to do a story on your event.
Not only will you attract new tenants who were already looking for a pet-friendly place to live, you will also attract people who previously wanted to adopt and could not because of restrictions at their current property.
You can also offer programs like Rhino, a deposit bond program that limits out-of-pocket expenses for a new tenant.
Instead of paying a security deposit upfront, the Rhino program allows the tenant to pay a portion of their deposit each month. This may enable a potential tenant, whose savings may have been depleted during an economic downturn, to afford to move to your property, as this decreases the upfront costs of moving.
Defense: Maintaining Your Field Position by Keeping Tenants
Ask Tenants to Stay
It costs money to move, and every single tenant who has given notice to vacate will face this cost—unless you can convince them to stay. Now is a good time to contact anyone who has submitted their notices to vacate and see if they would like to stay.
This also provides an opportunity to hear if the reason they are moving has changed—for example, whether they need a larger space or can no longer afford the property. Depending on your property’s availability, you might be able to offer a larger model at a discounted rate, or alternatively, establish a payment plan to keep them as tenants.
Offer Renewal Bonuses
For anyone who has yet to renew, offering renewal bonuses will not only incentivize people to stay, but also provide some financial assistance to those in need.
Offer a Safe and Enjoyable Environment
Make your property safe, clean, and enjoyable to live in. There are several ways to ensure your property is safe:
- Light your property up like the house in National Lampoon’s Christmas Vacation.
- Hire a patrol service to routinely drive and walk your property, and/or have a security guard live on the property.
- Post signs throughout the property noting the security and other safety precautions you have in place.
- Fence in and/or gate your property limiting access to outside persons.
- Install cameras throughout all common spaces.
- Verify all appropriate permits are pulled and approved and equipment is certified.
- Confirm appropriate fire safety equipment is installed.
- Eliminate all walking and driving hazards.
- Ensure there are no safety issues when it comes to securing your mechanical equipment.
- Remove any tenants who are violating their lease terms and/or breaking the law.
In regard to cleaning the property, make sure you have a route that your porter walks at least once a day, where they clean and pick up trash, pet waste, etc.
To create enjoyment, foster relationships between your property management (PM) team and the residents. For example, have your PM company call each resident and ask how they are doing during the recession.
This also provides an opportunity to ask if they need anything personally or for their unit. Showing you care about your residents speaks volumes not only to your current tenants, but it also echoes loudly to prospectives that you may receive through current tenant referrals.
You may want to host community events at the property, as well. With today’s social distancing in place, you can host virtual events to provide educational opportunities for children at the community or entertaining webinars for adults.
Screen Tenants Well
I once had a coach who preached to our team, “A team is only as strong as its weakest link.” This principle holds true when it comes to the quality of your tenant base, and the quality of your tenant base is a direct reflection of your screening criteria.
The importance of a strict screening process is never more apparent than during a recession. Some owners forego this crucial step, as they are more concerned about physical occupancy. However, during a recession, occupancy will rear its ugly head and threaten your ability to pay your expenses.
It may take longer to build a strong tenant base, but the time will be well worth it, as a strong tenant base has more staying power during a recession.
Ultimately, the more you practice a strict screening process, come game time—in this case, a recession—you significantly decrease your risk of skips and evictions.
Keep Your Word
Mean what you say, and say what you mean. Creating clear expectations—for example, rent due dates and processing of evictions—creates respect and compliance to rules. Of course, during a recession, the rules may need to be adjusted.
Today, we find ourselves in a recession like none we have previously faced. Policies across the country are being impacted by county, state, and national mandates. This is evident with evictions being put on hold and late fees waived.
When policies are being created at a higher level, it is important to not only communicate them to your tenants but also to add your thoughts on the policy. For example, when it comes to evictions, communicate to your tenants that while evictions are put on hold due to court closures, if they fail to pay their rent, once the courts reopen, an eviction will still be processed, and it will go on their record.
At the end of the day, your economic occupancy is more important than your physical occupancy, so communication encouraging your tenants to continue to pay rent will keep your economic occupancy stable.
The Bottom Line
Facing a recession is like facing your toughest opponent. It is obviously important to have a game plan in place, but whether or not you win is based on your ability to adapt during play.
Today, we are facing one of the toughest opponents we have ever faced. Like a game, your property is on the line. So what are you going to do?
How are you approaching today’s economic challenges?
Join the conversation in the comments below.