Post written by
Aaron Galvin
<p class="bio fs-responsive-text" innerhtml="Aaron Galvin is the CEO & Founder of Luxury Living Chicago Realty, a multifamily consulting, marketing, branding and strategy brokerage.“>Aaron Galvin is the CEO & Founder of Luxury Living Chicago Realty, a multifamily consulting, marketing, branding and strategy brokerage.
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Once an apartment building reaches 90% occupancy, it is considered a stabilized asset and no longer in lease-up. Whether the investors who own the building are developers hoping to sell once it has been stabilized or long-term investors, renewal percentage and stabilized rent trends are key ingredients to the financial health of a building. One thing every investor has in common is that they are all looking to bump rents, and the renewal strategy sets the stage for how much the rent can be increased year over year. Investors should continuously evaluate their methodologies and consider the most innovative ways to manage the renewal process to bump rents and minimize vacancies. Following are the most effective strategies I’ve seen for renewal at a multifamily property.
Analyze The Lease-Up
Before venturing into renewals, take a step back and look at the lease-up. Which units were the hardest to lease? Plan to allocate concessions to these units and consider not bumping the rents as much on these floor plans as others. Then, ask what concessions really drove leases. Were renters more interested in a $100 “look and lease” gift card or one month of free rent? Knowing which concessions worked best will help you budget for concessions moving forward. Looking back at the lease-up process will help you better forecast and strategize how you will manage renewals.
Set Goals For Renewals
Are you looking for a 3% average rent increase? Are you hoping to never have occupancy drop below 95%? As the market continues to become more competitive and stabilized buildings compete with new lease-ups, understanding your goals becomes even more important.
Minimize Seasonality
When were the best months for new leases? The winter is a historically slow season for leasing apartments, while the summer is known to be the busy season. Multifamily investors should consider offering additional lease terms on renewals and new leases to minimize negative seasonality. For example, if a handful of leases are expiring in February, instead of only offering the residents a 12-month lease, ownership can also offer 15-month lease renewals with an added perk such as a half month free rent to incentivize the renter to select the longer option. If the renter selects the longer lease term, the next time that unit comes up for renewal it will be in May, which is a premium month for a lease expiration with traditionally fewer concessions.
Find Additional Revenue Sources
While the lease-up is about “getting heads in beds at the highest possible price,” once a multifamily building is stabilized, it’s about net operating income. In addition to better understanding the rent roll, analyzing the renewal strategy and minimizing seasonality, you can also find additional revenue sources. Examples of additional revenue sources could be contracts with parking companies like Spot Hero, experience apps with revenue share opportunities like Tide Spin or Rise Buildings and potentially short-term housing partnerships to capture revenue if a unit becomes unexpectedly vacant.
From analyzing the lease-up to setting goals for renewals to minimizing seasonality, there are many ways to manage the renewal process to bump rents and minimize vacancies. Implementing these strategies will lead to a more successful lease-up campaign.
” readability=”45.481802426343″> Once an apartment building reaches 90% occupancy, it is considered a stabilized asset and no longer in lease-up. Whether the investors who own the building are developers hoping to sell once it has been stabilized or long-term investors, renewal percentage and stabilized rent trends are key ingredients to the financial health of a building. One thing every investor has in common is that they are all looking to bump rents, and the renewal strategy sets the stage for how much the rent can be increased year over year. Investors should continuously evaluate their methodologies and consider the most innovative ways to manage the renewal process to bump rents and minimize vacancies. Following are the most effective strategies I’ve seen for renewal at a multifamily property.
Analyze The Lease-Up
Before venturing into renewals, take a step back and look at the lease-up. Which units were the hardest to lease? Plan to allocate concessions to these units and consider not bumping the rents as much on these floor plans as others. Then, ask what concessions really drove leases. Were renters more interested in a $100 “look and lease” gift card or one month of free rent? Knowing which concessions worked best will help you budget for concessions moving forward. Looking back at the lease-up process will help you better forecast and strategize how you will manage renewals.
Set Goals For Renewals
Are you looking for a 3% average rent increase? Are you hoping to never have occupancy drop below 95%? As the market continues to become more competitive and stabilized buildings compete with new lease-ups, understanding your goals becomes even more important.
Minimize Seasonality
When were the best months for new leases? The winter is a historically slow season for leasing apartments, while the summer is known to be the busy season. Multifamily investors should consider offering additional lease terms on renewals and new leases to minimize negative seasonality. For example, if a handful of leases are expiring in February, instead of only offering the residents a 12-month lease, ownership can also offer 15-month lease renewals with an added perk such as a half month free rent to incentivize the renter to select the longer option. If the renter selects the longer lease term, the next time that unit comes up for renewal it will be in May, which is a premium month for a lease expiration with traditionally fewer concessions.
Find Additional Revenue Sources
While the lease-up is about “getting heads in beds at the highest possible price,” once a multifamily building is stabilized, it’s about net operating income. In addition to better understanding the rent roll, analyzing the renewal strategy and minimizing seasonality, you can also find additional revenue sources. Examples of additional revenue sources could be contracts with parking companies like Spot Hero, experience apps with revenue share opportunities like Tide Spin or Rise Buildings and potentially short-term housing partnerships to capture revenue if a unit becomes unexpectedly vacant.
From analyzing the lease-up to setting goals for renewals to minimizing seasonality, there are many ways to manage the renewal process to bump rents and minimize vacancies. Implementing these strategies will lead to a more successful lease-up campaign.