Within your property management department, lease renewals are one of the areas you have to stay on top of. For the most part, it is a systemised job, and I am a big fan of systems. You can build a process that handles a renewal from start to finish and runs reliably every time.
With the legislative changes we have had nationally, and the various changes at a state level, the one part of that process I would pay closer attention to right now is the rent you recommend. The mechanics are the same as always. You run a CMA, confirm you are charging a fair market rent for the property, and take that recommendation back to the landlord. What is harder at the moment is being confident that the number you land on is still the right one.
Over the last three or four months, rents around the country have stopped moving in step. Different areas are moving at different rates, and in some cases in different directions. Most of us have been working off a fairly sensible assumption that with fewer investors coming into the market, there will be fewer properties available to rent, and that will push rents up. In a lot of areas, that is what has happened, and where it is happening, you want to be lifting rents to the right level so your owners get the best possible return on their investment.
There is a quirk, though, that has caught a few people out. As sale prices have come down, something has changed in the higher socio-economic areas, the suburbs where tenants are paying $1,000 to $1,500 a week and above.
At that level, a lower purchase price suddenly puts homeownership within reach, and many of those tenants can step into first-home-buyer status. In a number of states, there is now very little penalty for breaking a lease, so we are seeing tenants do exactly that: break the lease, buy a home and move out.
That, of course, lifts vacancy rates in those higher-end pockets, and as vacancies rise, the pressure on rent is downward, not upward. It is the opposite of what most people expected in those areas.
The message, then, is a simple one. Keep a close eye on your lease renewals, keep your systems in place, but check the current rent on each one against what that particular area is doing today, rather than assuming it has moved the same way as everywhere else. There are two ways to get it wrong at the moment, and both land on your owner:
Lease renewals are only one of the many things you have to stay across when you are leading a property management department, and most of them have details like this sitting underneath. At Smartre Training, we work with property management departments across the country, from smaller operations of 50 to 100 properties through to businesses managing a couple of thousand. The issues change with scale, but the value of good systems and structures does not.
If you would like a hand with your property management department and with getting better systems and structures in place, we’ve put together a complimentary webinar as good place to start. Register here.
Within your property management department, lease renewals are one of the areas you have to stay on top of. For the most part, it is a systemised job, and I am a big fan of systems. You can build a process that handles a renewal from start to finish and runs reliably every time.
With the legislative changes we have had nationally, and the various changes at a state level, the one part of that process I would pay closer attention to right now is the rent you recommend. The mechanics are the same as always. You run a CMA, confirm you are charging a fair market rent for the property, and take that recommendation back to the landlord. What is harder at the moment is being confident that the number you land on is still the right one.
Over the last three or four months, rents around the country have stopped moving in step. Different areas are moving at different rates, and in some cases in different directions. Most of us have been working off a fairly sensible assumption that with fewer investors coming into the market, there will be fewer properties available to rent, and that will push rents up. In a lot of areas, that is what has happened, and where it is happening, you want to be lifting rents to the right level so your owners get the best possible return on their investment.
There is a quirk, though, that has caught a few people out. As sale prices have come down, something has changed in the higher socio-economic areas, the suburbs where tenants are paying $1,000 to $1,500 a week and above.
At that level, a lower purchase price suddenly puts homeownership within reach, and many of those tenants can step into first-home-buyer status. In a number of states, there is now very little penalty for breaking a lease, so we are seeing tenants do exactly that: break the lease, buy a home and move out.
That, of course, lifts vacancy rates in those higher-end pockets, and as vacancies rise, the pressure on rent is downward, not upward. It is the opposite of what most people expected in those areas.
The message, then, is a simple one. Keep a close eye on your lease renewals, keep your systems in place, but check the current rent on each one against what that particular area is doing today, rather than assuming it has moved the same way as everywhere else. There are two ways to get it wrong at the moment, and both land on your owner:
Lease renewals are only one of the many things you have to stay across when you are leading a property management department, and most of them have details like this sitting underneath. At Smartre Training, we work with property management departments across the country, from smaller operations of 50 to 100 properties through to businesses managing a couple of thousand. The issues change with scale, but the value of good systems and structures does not.
If you would like a hand with your property management department and with getting better systems and structures in place, we’ve put together a complimentary webinar as good place to start. Register here.
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