Property management is a challenging task, especially when cost of living and inflation is on the rise. For a property manager it becomes difficult to liaison between the property owner who wants better returns and the tenants who are looking for lower rents. It is tight balancing act, where rental rates are to be kept conducive for keeping the vacancy rate down and yet manage a good return for the property owner.
Suitable Information Accumulation
The only way for managing a property optimally is to increase revenues and decrease costs. There is salient scope for keeping check on costs with clever maintenance and repair management, but usually property managers find limited scope for increasing revenues due to prevailing economic conditions. However, there are ways for doing this as well, by collecting proper data and evaluating the exact impact the economy is having on rentals.
The usual route for increasing revenue is to finding new prospects; improve marketing of the property, and decreasing the vacancy rate. While occupancy rate plays a major role in improving revenue, it is necessary to understand what an optimal percentage should be for occupancy. Having full occupancy is indeed ideal, but 95% occupancy rate would be more realistic target to aspire. Experts believe that if vacancy rate is more than 5%, then there is something wrong with the marketing or promoting of the property. However, experts also believe that if the occupancy rate is over 95% then the rental rates for the property could be too low for that specific area.
Most successful property managers follow the guideline of having the rental high enough so that the property is comparable in the top 10% available units in the area. This would be an appropriate guideline to follow for several reasons. One obvious reason is that if the property is not classified in the best 10% of the available rental units in the area, then there is something seriously wrong with the condition of the property, and only better maintenance procedures can fix such an issue.
However, most property managers make the mistake of lowering costs by forgoing required maintenance and not implementing inexpensive improvements. Such tactics might decrease costs for some time, but it proves much expensive in the end, as it will take much longer to fill vacancies.
When the property is kept in top-notch condition, it makes it conducive to retain existing tenants and to attract new ones, as well. Secondly, however, and more importantly, it becomes much easier to raise the rent when the lease expires, and tenants will be much less likely to seek other accommodation if the rise in rent is reasonable. Property management need not always look at raising the rent with trepidation, as it improves the property value, and property owners will appreciate such a strategy.
Lower Class of Tenants
However, the percentage rise in rent has to be calculated carefully, taking into account rentals of other top properties in the area and the prevailing market conditions. Too much, and the occupancy rate might dip below 95%. On the other hand if the rent is not increased, the occupancy might be noteworthy, but the value and reputation of the property might take a hit, which is not desirable.