The world has gotten a lot better for property managers over the past couple of years. Instead of slashing and burning to get residents to stay, they’re now bumping up rents as much as they can. “In some cases, we can get a higher renewal increase than we can on the street,” said Erin Ditto, senior vice president of multifamily operations for Greensboro, N.C.-based Ball Partners.
This comes with challenges though, as the panelists on “Out of the Fog: How to Adjust Operations in a New Rent-Growth Paradigm” pointed out at the 2011 Multifamily Executive Conference. It starts with the leasing personnel. Many agents came on during the recession. The goal then wasn’t raising rents. It was keeping heads in beds. “They did a fantastic job holding rates,” said Robert Grant, vice president of property management for Southern California for Equity Residential, a REIT based in Chicago. “People were in the mindset of keeping things flat or holding rates.”
But now, things are different. These agents need to push rents. “We’re having to re-program those people who joined us during the recession,” Grant said.
Re-teaching the leasing staff is easier said than done. In many cases, they’re asking residents that they forged relationships with to pay more. That’s hard. They’re used to giving discounts, not raising rates. “You want people to be happy, but we’re running a business,” Grant said. “The business model is increasing cash flow.”
Sometimes these unhappy people start comparing notes with other residents, which can be an issue. It can be an even bigger problem if they take to the web. “I don’t worry about them talking to each other,” said Julie Smith, president of Greenbelt, Md.-based Bozzuto Management Co. “I worry about them going on Google, ApartmentRatings.com, or Yelp.”
There was a little bit of debate about how much managers should push existing residents with rental increases. Smith cautioned attendees that turnover costs money when you think about the amount of time a unit is down. Daniel P. Ford, director of property management for Nashville, Tenn.-based Freeman Webb Cos., however, argued that’s its not as hard to find new renters. “We can replace them [residents] if they leave,” he said.
Still, moderator Mark Fogelman, president of Memphis-based Fogelman Management Group, wondered if these people would ultimately be able to pay that much more in rent without job and wage growth. “There has to be a limit [to what a landlord can charge], without people making more money,” he said.