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SHOW NOTES FOR EPISODE 278: RAISING YOUR RENTS HIGHER THAN MARKET RENTS
One of the great things about owning rental properties is that you can “force appreciation” and value by decreasing expenses and increasing rents. But what if you feel there’s no room to increase rents? In this podcast, Bill shatters some of the myths about setting rental rates and shares how, through proper marketing and branding techniques, you can ask for higher than market rents easier than you think.
Announcements
- I hope you’re doing well and off to great start in 2019
- One of the best things to happen is that because I’m not finding all these great deals I’m focusing more on current properties to maximize optimization to increase cash flow and force equity
- Upgrading
- Reducing expenses
- RUBSs
- transferring expense costs to tenants
- Maintenance
- Capital expenditures
- Still actively pursuing 100 plus units
- Combating Neighborhood Problems
- Prostitution & drugs – mostly at night
- There have been sting operations – good for a while but it returns again because certain blocks become known. Make it bad for business and trouble will be moved
- Closed circuit TV – Great Investment!
- Bright Lights
- “…men loved darkness rather than light, because their deeds were evil.” – John 3:19
- When you bring light into darkness, those that love the darkness flee
- Purchased four 96-lumens lights – $129 each
- Posting signs
- We have video cameras and will report license plates of cars involved in illegal activities to the police
- Offer your place for sting operations during the day
- Offer your property for police drop by for coffee and complete reports
- Organizing Neighborhood Watch
Raising Your Rents Higher Than Market Rents
- How I was able to increase studio/efficiency rents from $395 – $675 in less than 3 years
- Within a few months of purchase, we increased studio rents to $450 / 1 bedrooms to $500
- Did mostly foundational improvements (upgraded electrical, other mechanicals, improved common areas, etc)
- As we are looking at all our properties we’re looking to invest to boost rents before a recession hits
- Recently started a second phase of upgrades to the units
- Upgraded to create more of a “Wow Factor” reaction from potential tenants when you show the place
- Find features that are positive and accentuate key selling points
- High ceilings
- Spacious closets
- Bold molding
- Lots of light
- Find features that are positive and accentuate key selling points
- The Psychology of pricing & branding – “You get what you pay for” mentality. Charging more is part of your positioning and branding
- Gucci
- Yves Saint Laurent
- Nike
- We decided to apply the same ideas and principles to our 22-unit with 4 vacancies we had that were being rehabbed
- We started looking at branding the apartment as hip, retro and a “cool place to live”
- We started asking, “Why can’t we get a ‘higher than market’ rent?”
- “Why can’t we attract a higher level on tenant?”
- We purposely did not listen to the naysayers and so-called experts
- Our goal – increase the value of the building 350% in less than three years by expense reductions and income increases
- Rentometer (some say it’s not accurate – too high – and fall back on cheap) but it was supporting what we wanted to do
- For my 22 unit studio apartments, Rentometer.com says rents are:
- Average: $639
- Media: $575
- We decided to set rents from $650 to $700
- For my 22 unit studio apartments, Rentometer.com says rents are:
- Started pricing newly rehabbed (400 sq ft) studios at $675 to see what the reaction would be
- My contractor, while working on the rehabs, was showing the properties (because we didn’t have a property manager officially on board yet), even before the units were finished, people were signing up left and right
- Why was he able to sell the new price so easily? Because he believed in the vision and the brand
- Got some agencies to place people at $675
- Once people started renting for $675, it was easier to sell more
- Others found out we were renting at $675 and interest started to build
- Out of the 5 rehabbed units all of the units rented at $675
- My contractor, while working on the rehabs, was showing the properties (because we didn’t have a property manager officially on board yet), even before the units were finished, people were signing up left and right
- Setting rents higher than market is all a matter of mindset, positioning and branding – too often we cave-in and just get the easy tenants instead of positioning or branding our property to attract a higher level of tenant
- Why can’t you do the same?
- Give it a try
Pictures of the Studio Rehabs
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Episode Sponsor: Meno Studio – menostudio777@gmail.com
