4 Strategies for Attracting New Residents—Without Concessions

It might be tempting to reduce rents, but this could have unintended consequences.

It’s no secret that the multifamily industry is facing headwinds in many markets. A confluence of factors—slowing rent growth, rising expenses and an increase in apartment supply—are creating headaches for apartment owners and managers anxious to maintain monthly rents and keep occupancies high.

Under these conditions, it might be tempting to offer concessions to attract prospective renters and to convert them. But concessions have consequences.

Image by AlexSecret/iStockphoto.com
Image by AlexSecret/iStockphoto.com

“Rent concessions reduce your cash flow, which impacts your trending net operating income,” said Cristy Andrews, a certified public accountant with Warren Averett in Montgomery, Ala., who regularly works with multifamily companies. “That impacts your value, since real estate is valued by your historical NOI.”

Since concessions lower rental income, that can adversely affect an apartment community’s valuation for sale or financing purposes, said Michael H. Zaransky, managing principal of MZ Capital Partners in Northbrook, Ill. He also said that a reduced rent roll can impact staff bonuses.

Still, according to data released by Zillow in November 2023, renters are seeing more concessions than in the past two years, with 30 percent of apartment listings on Zillow offering at least one concession, compared to 24 percent a year earlier. Markets where multifamily construction is booming have the most concessions, according to Zillow’s data.  

What can apartment owners and managers do to market communities without concessions?

Waive Fees, Not Rent

In markets where vacancies are rising, Zaransky waives application fees, usually $150. “It doesn’t affect the ongoing rent roll or income the property is producing,” he said. “People like the idea, and it makes a difference. The key is to get someone to apply and to see the apartment, whether virtually or in person, and if we waive the application fee there’s no barrier to that.”

He also on occasion waives upfront move-in fees, usually $150 to $175, to help a property compete better in a slower market, or he creates a sense of urgency by offering “look and lease specials,” where new renters receive an Amazon gift card if they apply and sign a lease within a week of their showing.

One successful example is the company’s Vantage Naperville community, a ground-up development with 112 units. “It was a new lease-up, and we didn’t want to use concessions because we didn’t want to affect our rent roll of stabilized income,” Zaransky said. “We used all three of these techniques to get the property leased up in record time for our company—about 90 days.” The project sold, fully leased, in June 2022 for $24 million.

MZ Capital Partners was able to lease up Vantage Naperville, a 112-unit new build, in a record 90 days by waiving application and move-in fees and by offering Amazon gift cards to renters who apply and sign a lease within a week. Image courtesy of MZ Capital Partners
MZ Capital Partners was able to lease up Vantage Naperville, a 112-unit new build, in a record 90 days by waiving application and move-in fees and by offering Amazon gift cards to renters who apply and sign a lease within a week. Image courtesy of MZ Capital Partners

Start Marketing Early

Many apartment marketers don’t start marketing early enough, according to Tammy Casserly, senior vice president of growth and brand development for Resident360, a multifamily branding and marketing agency.

“I can’t count how many times we get a call, and it’s last minute for a community opening in four or six months, and they haven’t done a thing yet to market the community,” she said.

Casserly suggests starting marketing efforts at least a year before a community is ready for occupancy to create a vibe and momentum. “You want people talking about it, and that’s what marketing does,” she said. “Create your landing page early, engage with local businesses, and set yourself apart right away so people are talking about you.”

Create a Sense of Community

Some apartment owners try to differentiate themselves by establishing a reputation for their communities as great places to call home. The Breeden Co. hosts quarterly pet-specific events and offers move-in gifts to new pet residents. The company also hosts dive-in movies, food trucks, live entertainment and other social events to foster a sense of community.

“The experience for prospects and residents is all about the details,” said Christine Gustafson, the firm’s vice president of marketing. “It’s those small details that set us apart.”

A community’s reputation as a good place to live not only attracts new prospects, but also encourages current residents to renew and helps avoid the cost of turnover. But events aren’t the only way to encourage renewals.

“One cause of avoidable turnover is poor-quality maintenance, so we focus a lot on ensuring that we have highly responsive maintenance teams to correct issues when they arise, to ensure that residents know that their concern is our concern,” said Ian Mattingly, president of Dallas-based Luma Residential, a property management firm. “It comes down to taking care of the places our residents call home.”

After changing the communication style of the on-site manager at Berkmar Landing, a 261-unit community in the Charlottesville, Va. market, The Breeden Co. was able to better convert prospects. Image courtesy of Richard George, The Breeden Co.
After changing the communication style of the on-site manager at Berkmar Landing, a 261-unit community in the Charlottesville, Va. market, The Breeden Co. was able to better convert prospects. Image courtesy of Richard George, The Breeden Co.

Remember the Basics, Both Old and New

In a challenging market, it never hurts to step back and focus on the basics of marketing strategy. Determine your target audience for the apartment community you’re marketing, and then decide how best to attract prospective renters. Create an advertising budget, and stick to it. Understand the community’s unique selling proposition—your competitive advantage—and be consistent with your messaging. Have a laser-like focus on analytics so you can determine what strategies are working to attract prospects—and redeploy funds when necessary to pivot to other strategies.

When The Breeden Co. was trying to lease up Berkmar Landing, a 261-unit community in the Charlottesville, Va. market, it faced competition from new construction nearby. After analyzing the practices of the leasing office, Gustafson realized that the on-site manager’s communication with prospects was informative, but not optimal.

“A lot of prospects were young and in college, and they wanted responses quick and fast,” she said. “So, we shortened our communication and got creative, and people started responding.” The community’s occupancy rate is now 95 percent.

Another marketing strategy, revenue management, is commonly used in the hospitality industry, but it’s now embraced by multifamily owners and operators as well. The strategy involves using an algorithm and data analytics to price apartment units in an effort to maximize rents. “Everyone now has access to pricing all of the time, so an important part of your marketing strategy is what price you are advertising,” said Mattingly. “If you’re not advertising a price that’s compelling, that will be a detriment.”

Luma’s revenue management tools analyze rents daily across its entire portfolio, so an experienced staff is key. “In a declining market, these systems need to be managed even more intensely than in improving markets,” he said. “Having pricing managers who understand market cycles and know when and how to react, and when not to react, even in the fact of frightened site managers, is very important.”

Read the April 2024 issue of MHN.

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