NUTS & BOLTS
REVENUE MANAGEMENT
for decades: six- and 12-month leases. When most of those leases expire, you can see certain landlord behaviors change right along with their rental rates. Leasing agents have been working for years to manage the lease-expiration process with minimum turnover and maximum profit. AREVENUE MANAGEMENT CASE STUDYONTHE “ACTIVE” LANDLORD SCALE: A Chicago apartment owner has been a landlord for over 30 years and invests in the North side of Chicago near the lakefront. Her rent is always higher than all the neighboring investors’. She doesn’t have the nicest building nor all the latest amenities. Her strategy involves preserving boutique vintage style in her units. Basically, she is disrupting the algorithms and appealing to a certain trend. By preserving the old small ceramic tiles (see image of tiles at right), antique cabinet details and other such details, she is able to appeal to a group of clients who will com- pete for her rare and smaller supply by paying a premium. 2 DEVELOP A SYSTEM TO EVALUATE CURRENT TRENDS IN YOUR AREA. Depending on your portfolio size you can research potential returns on various strategies by signing up for a service such as RentFax to perform a detailed analysis with comparables (comps) in both your regional and immediate area. Another option is to create a spreadsheet analysis and consider hiring a virtual assistant (VA) that performs a call campaign to surrounding buildings that offer similar units. Remember this spreadsheet analysis should be weighted to adjust for plus and minuses to reflect your unique amenities or location. Also, remember when conducting your survey to verify the number of units available. If the survey reveals the other landlords are asking for much higher rent than you are but they have more open units, you might be best served by lowering your rent if you are in need of a quick turnover. There are many variable factors that can influence how quickly someone needs to fill a unit as they must take into account what fixed expenses are incurred such as cost of financing, real estate taxes etc. TAKEAWAYS 1 ALWAYS LOOK TO MAXIMIZE RENT WHILE MINIMIZING VACANCY. Use data and analytics to determine how to set the rental rates on your vacant units as you enter peak leasing season this spring. Constantly monitor your results to determine how effective your strategy is.
3 FACTOR IN CURRENT INTEREST RATES AND MARKET TRENDS ON HOME PURCHASE VS. RENTAL DEMANDS.
This includes the impact of local munic- ipal developments: highways, neighbor- hood expansions, new industries, parks, etc. Remember revenue management, as a discipline,
requires that we achieve and maintain the proper balance between technology and human input. This has always and will always remain a challenge. However, neither humans nor software will operate well independently. It is the ability and effort you put into it to perfect that balance that is data and analysis. •
Understanding and Applying Theories of Revenue Management to Multifamily Investments IMPROVE YOUR BOTTOM LINE BY REACHING THE RIGHT CUSTOMERS & CLIENTS WITH THE RIGHT PRODUCT AT THE RIGHT TIME.
Linda Liberatore is the founder and CEO of Secure Pay One and a Think Realty Coach. She may be reached at lindal@securepay- one.com, and her coaching materials may be viewed online at https://thinkrealty.com/coaches.
A single burglary on a vacant or renovation property can cost over $8,000. That’s over 4 times the national average per break-in! Real estate investors can experience higher losses due to stolen appliances, HVAC Equipment, wiring, plumbing and more. 56% OF THIEVES BREAK-IN THROUGH A DOOR. WE'RE IN YOUR CORNER.
by Linda Liberatore
he most common example of “revenue management” is when a hotel sells off rooms at a discount at the last minute to fill them up or charges higher rates when demand for housing in an area suddenly rises. The decision-making process behind the rate adjustments is revenue management, which is essentially just offering consumers the opportunity to obtain your services or products at the best possible price for a given market scenario. In some cases, this means charging more, and when an investor does this effectively they may end up dramatically improving their bottom line. Sometimes, this means charging less; when done correctly, it will still improve the bottom line by creating more demand for your product. As software and data analysis evolve, real estate investors can and should incorporate revenue management into their investment strategies. T
REVENUE MANAGEMENT: The use of analytics to predict consumer behavior on a micro-market level and optimize product availability and price to maximize revenue growth. In real estate, this involves identifying ways to “beat” market rental rates with unique offerings or to improve vacancy rates by “beating” competition.
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CONNECTTHE DOTS Revenue management has been around for years in the institutionalized multifamily market. For example, there have been two primary options for lease-length for renters
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