Do you own or manage rental properties in a city with low vacancy rates?
I speak daily with management companies with properties in Toronto and Vancouver that are benefiting from the housing crisis' that currently exist. Aside from regular turnover, they rarely have to worry about their properties being full or an apartment lying vacant for a month.
If this is your situation, you might ask yourself - should I still be focusing on marketing efforts and potentially spend more money on marketing when I'm already riding the gravy train of constant low vacancy?
The answer is a definite, yes. Marketing should never be ignored and while marketing complacency may not lead to immediate vacancy, it definitely will affect your bottom line over time.
3 Reasons Why You Need to Avoid Marketing Complacency
1. Attracting Better Tenants Can Save You Money
If you were to hire an employee, would you look at only 3 or 4 resumes and interview just a couple candidates? Likely not. When it comes to prospective tenants, just like bad employees, bad ones or even mediocre ones can cost you lots of money. Just like hiring, tenant prospecting starts with generating interest (typically online) for the opening. In 2017, this is done through online marketing. The more online marketing that a company does (especially effective online marketing), will ultimately lead to more rental leads. This will give you a larger pool of prospects and ultimately a larger list of applicants for each availability that you have. This means of course, that property managers will have more choice over who they accept as their tenants and they will be able to choose more strategically. Improving the quality of your tenant pool at a property can lead to significant cost reductions including: lowering your bad debt loss, lowering your eviction rates, lowering your utility usage, lowering your turnover costs (advertising, painting, administration), less tenant complaints, and lowering your general wear and tear on the property.
2. Market More for Revenue Maximization
Are you considering raising your rent $100.00 per month on a certain property or unit type, but not sure if you will still be able to attract a renter? How much more confident would you be if you were getting three or four times the amount of rental prospect inquiries every time you had an availability and you were constantly turning down applicants? Perhaps your current marketing efforts are doing enough to keep your properties full, but are not doing anything to help push up your rental rates up. Sometimes it can actually be a red flag if you are getting too much interest with very little marketing on a specific availability. It could be that you are under-valuing your apartments and undercutting yourself. Raising your rates and your marketing spend to increase exposure will add long-term value to your property.
3. Increase Property Values
The combination of finding better tenants to spur cost reductions and marketing more to optimize rents, leads to greater profit margins. At the end of the day, rental income Real Estate is largely valued on cap rates and profit. Thus, through marketing there is actually an opportunity to increase the true value of your real estate.
How to Improve and Generate More Leads
In a low vacancy market it's not always about increasing your marketing budget. Sometimes additional money can be the answer, but often times it is more about looking at your existing marketing spends and optimizing them. Here are a few strategies to consider:
Calculate your cost per lead on each of your marketing services to determine your most efficient sources and least efficient sources. Here's a great article to read about cost-per-lead if you are less familiar with the concept.
Be willing to sign up for trials to test new sources of marketing. Most listing sites offer 30 day trials to new clients. RentSync.ca is one of the platforms that has partnered with several Canadian ILS' to provide 30 days trials on several listing sites. Data syndication services like RentSync make it easy to trial many sites at once without having to invest administration time in creating ads
Continue to monitor and track your advertising on a monthly basis. Marketing sources trend in effectiveness and we have seen drastic shifts within the last two years on the top performing ILS' in Canada. Each ILS' has markets where they are stronger and weaker. It's important to stay on top of the trends.
Improve your own rental website and on-site property signage. Using your own website and your own physical Real Estate presents a great opportunity to generate inexpensive, highly qualified, rental leads. If you don't have a rental website or you have a sub-par or non-mobile friendly one, you are definitely missing out on the cost effective rental marketing source available to you.
In the end, marketing complacency may be serving you okay at the moment, but it will hurt you in the long run. Robert Grove, the former CEO of Intel, has a great quote that I'd like to end this article with:
"Success breeds complacency. Complacency breeds failure. Only the paranoid can survive."
- Robert Grove (Former CEO of Intel)
Oh, and by the way…Do you operate properties in high Vacancy markets? Not to worry, I'm releasing an article in a few weeks as a second part to this series that will focus on strategies for you!