Leasing In High-Inventory Markets
How to Thrive in a High Inventory Market
If you’ve been in the multifamily industry in recent years, you’ve probably done pretty well, and it may have even felt easy, that’s because it was. When the multifamily market is hot, all you have to do is build your community and more renters than you can house will be calling you to setup their showing appointments. Those days, my friends, are long gone…. at least for now.
In this article, we’ll take a look at the challenge most markets are facing, why most multifamily investors and management companies aren’t built to thrive in this type of market, and what you can do to not only survive in these times, but to continue to take your communities to the Next Level.
Challenges With Leasing & Inventory
It’s Become Harder to Get Leases, Here’s Why…..
The first step in addressing any issue is identifying the problem. The good news is that the #1 challenge we are facing in multifamily today is far different from some of the challenges people faced during the housing market crash in 2008. Today’s challenges aren’t a sign of a crumbling housing market or a bad economy, and I don’t think the challenges we are facing today are expected to be around for years and years. That said, multifamily investors and management companies are scrambling, and unfortunately, we are already seeing owners have to sell due to underperforming assets, resulting in their lost ability to keep up with their loan payments and/or operating expenses.
So, what’s the problem? The challenge we are facing today is an excessive amount of inventory. This means renters have all kinds of options to choose from and most communities don’t have the same demand they did just a couple of years ago. When demand is reduced, leases are harder to come by, vacancy is increased, concessions are increased, and even retention becomes more challenging.
Our current inventory issue started during the Covid-19 pandemic. During that time, we saw projects going on hold, supply chain delays, and a variety of issues that put projects on hold. Developers and investors didn’t know what to do. With the state of the economy, jobs being shut down, as well as the eviction moratorium, the future of multifamily and how everything was going to play out was uncertain, and many projects paused until they could gain an understanding of where things were going.
Fast forward to today and many of those projects have finished or are in the final stages of construction. This has resulted in the market being flooded with inventory, giving renters all kinds of options to choose from. To make matters worse, our management company mainly manages class-A communities, and the majority of the communities going through a lease-up at this time are class A communities. Not only is there a lot of us going through a lease up, because we are all in the same boat, we are all offering the same thing. We all have the same amenities, similar finishes and quality, and the same old “2 months free” that everyone thought sounded really great at the time, but it’s not, everyone is offering it so there is nothing special about it.
Just a couple years ago, if you went to market offering 2 months free, you would have filled your property quickly, but that’s not the case today. In fact, we are even starting to see communities offer 3 months free, insane gift card amounts, aggressive “Look N Lease” specials, and some of the most creative move-in gifts I have ever seen (because who wouldn’t want a canoe as a housewarming present?). Many multifamily owners and management companies went into their lease-ups bullish with the 2 months free strategy, only to be disappointed by the results, and now they are stuck with occupancy sitting way lower than they expected.
Interested in hearing more about how the increased supply has created a challenging market for multifamily owners and how this has affected the industry? The Real Estate Takeoff dives deeper into this topic in Episode 22, released on April 1st, 2024:
The Problem with Inventory
The #1 Problem in High-Inventory Markets
Now that we’ve identified the challenge, let’s take a look at the problem that challenge has created and why multifamily communities are struggling. The increased inventory means that we are now in a very competitive market. Renters have all kinds of options to choose from with some of the best deals being offered that we have seen in many years. Renters are now in control and the problem this has created is that multifamily management companies and community owners simply don’t know how to react or compete in these conditions, here’s why…..
There are a lot of multifamily management companies and professionals out there, and the truth is that very few of them are actually experts in what we are tasked with doing on a daily basis. I say that with respect for all of the hardworking people in this industry, but I also say that from an honest standpoint of identifying the problem. To understand what I am saying, it’s important to look at what it takes to manage multifamily assets effectively, there are really 4 key departments:
Marketing/Sales: These are 2 big ones, and they should actually each be broken down into their own category. But, for this article’s sake, we’ll keep it simple. Once a property is renovated or construction is completed, it’s our job as multifamily managers to market the community and get residents to select our communities as a place to call their new home.
Operations: When you work in property management, our residents are our customers. It’s our job to take care of our customers and create that one-of-a-kind experience. This involves guiding residents through move-ins and move-outs, handling maintenance issues, throwing community events, and so much more.
Accounting & Reporting: In order to be a great management company, not only do you have to understand accounting fundamentals, it’s important to understand how these critical financial aspects affect our clients’ budgets, loans, property values, and more so you can help your clients make informed decisions, avoid risks, and create positive outcomes.
The #1 problem I’ve identified in a high-inventory market lies within Marketing/Sales. If you really think about it, it’s pretty easy to understand why. Most property managers are not marketing experts, they don’t do branding or design, they’ve never built an avatar or sales journey, they don’t understand search engine algorithms, website optimization techniques, or conversions strategies. This shouldn’t come as a surprise as marketing is an enormous industry with lots of different branches, platforms, and strategies. There are marketing experts that have dedicated their lives to mastering this important aspect of being in business, even they are continuing to learn every day, and to top it off there is absolutely no training or education on marketing when it comes to entering the real estate industry.
What most management companies rely on for their marketing is the Internet Listing Services (ILS) like Rent.com and Apartments.com. When the market gets competitive, these platforms are only going to take you so far and, beyond that, most management companies are helpless. Putting communities on ILS platforms is pretty much all most property management companies have up their sleeve, that is the only way they know how to market your community. When the market was hot, you could get by with this limited understanding of how to effectively market multifamily communities, but that’s not the case anymore.
I’ve been in multifamily management and consulting for 8 years, I’ve also owned and operated a digital marketing agency for 12 years. I knew that going into this industry, we were going to bring the most advanced marketing strategies to the industry to help separate our clients from the competition, and we’ve been successful at doing this. Knowing what I know about both industries, this has caused me to do a lot of research on this aspect of the industry, which includes researching digital marketing efforts, identifying effective and ineffective strategies, shopping communities, and talking with multifamily owner and investors. It’s become clear to me that the problem lies within their marketing and sales strategies. This became obvious to me after seeing $100m+ projects finish construction with a low-quality website and a digital presence that was lacking the essential elements of an effective digital marketing strategy. It always shocked me anytime I would see businesses invest that type of money into developing real estate without setting aside a reasonable budget for a professional marketing plan.
Leasing Economics
It All Comes Down to Basic Economics
Let’s look at the problem and solution from a very basic economics standpoint.
When it comes to valuing real estate, whether we are talking about selling or renting, we all know that value comes down to one thing:
Supply vs Demand
In a high-inventory market, the supply has been affected, so naturally this is going to affect your bottom line. There is too much supply, this causes demand to go down since renters have more options to choose from.
Here’s the good news, you actually have the ability to effectively increase your demand, and you can do this through advanced marketing strategies. For example, if your marketing strategies are generating 100+ more leads every month than a neighboring community, your community has more demand than the neighboring community as a result of your marketing efforts.
Knowing that you have the ability to control the equation should tell you the importance of equipping your communities with an advanced digital marketing strategy that helps you stand out from the competition and generate results in any market conditions.
ILS Platform Marketing
You’re On the ILS Platforms, So Is Everyone Else….
Don’t get me wrong, I think there is value in the ILS platforms. After all, these are the trusted websites that renters already know to visit when they are looking for an apartment. Lately, we’ve had a great experience listing our communities with Rent.com, their platform supplies a reasonable amount of leads every month. We do subscribe to ILS platforms, so I’m not saying you shouldn’t be. What I am saying is if you are a property manager or multifamily owner and your entire game plan relies on the ILS platforms to keep your communities full, you might as well start planning your exit now so you can get out fast as things get more and more competitive.
The problem with ILS platforms is that everyone is using them. Sure, you can have your listing posted, but it will sit there with every other community that is looking for renters, all of them with great photos, a laundry list of amenities, and a cheesy description that often doesn’t communicate anything unique. Remember, our current market has a ton of communities that are currently leasing, this comes in the form of countless listings on the ILS platforms for your listing to get lost in.
As multifamily experts, we are tasked with marketing communities that our clients have invested a substantial amount of money into. In my opinion, we owe it to our clients to either understand how multifamily marketing works so we can be effective at leasing, or to establish a reliable partnership with a marketing expert that can help guide our clients and give them the resources and tools they need to compete in this type of market.
Multifamily Websites
It All Leads Back to the Website
If your job is to lease multifamily communities, it’s important to understand your customers and how they are finding you, we call this your target audience and their sales journey. If you aren’t investing time or resources into establishing quality target audiences and optimizing your sales journeys, you should be.
It’s no secret that renters are beginning their search online. When you have a digital marketing strategy that goes beyond the ILS platforms, every other marketing effort you deploy is going to direct those potential renters back to your community website. The thing most people don’t realize when it comes to websites is that you don’t just need a website, you need a professional-grade website that is developed for your unique goals and has the ability to generate results, not all websites are created equal.
If I had to guess, 90% of community websites fail right here. They aren’t unique, they aren’t SEO optimized, they aren’t optimized for conversions, and in many cases, they don’t even work right. The question is, why? It can’t be because of cost, how could anybody spend the type of money that goes into real estate, without setting aside a reasonable budget to take care of the advanced marketing strategies that will ensure that asset outperforms the competition and delivers exceptional results.
What I’ve come to understand is that most multifamily investors don’t even realize they are lacking in this department. I can’t blame them, they didn’t study web development, they don’t know HTML or CSS, they don’t understand that how the website is coded can and will affect the results it’s able to generate, they don’t know the first thing about any of this. To make matters worse, there are a ton of amateur marketing companies and freelancers that also don’t know what they are doing, these types of companies have created poor experiences and distrust for many, and then there are some people who think digital marketing is just a complicated topic that nobody can really control, but you can.
I truly believe that every piece of multifamily real estate should be paired with a digital piece of real estate, this comes in the form of a community website. An effective community website ensures your community can thrive in any market, puts you in control of your marketing efforts (this is huge), and gives you the ability to compete in even the toughest conditions.
Here’s How to Identify If You Have a Website That Can Perform:
- If you are a developer or investor and you haven’t paid anything to have a custom website developed, or you went with a really cheap option (Under $10k), you are most likely not setup for success with your website.
- If you are relying on a property management software-generated website, like one of those templates Yardi or AppFolio will provide, you are not setup for success with your website.
- If you are not getting renter leads that are coming in directly from your website every single day, you are not setup for success with your website.
- If your website is built with a tool like Wix, or it’s built with one of those pre-made themes or “drag and drop” website builders like Elementor or Divi, you’re not setup for success with your website. I won’t go too much into why here but, remember, the effectiveness of your website heavily relies on the code your website was built with, you really have not control over the code when using any of these tools, and no marketing expert is going to be able to help you because you cheaped-out on the website and now you don’t have a professional set of tools to work with.
- If you’re not analyzing your website’s performance every week/month, looking into the number of visitors, bounce rates, conversion rates, etc., then you are not setup for success with your website. A high-performance website is a living, breathing thing. It takes ongoing work, maintenance, and optimization to achieve consistent results with your website. You can’t do any of this without analytics.
- If you don’t even have a website, you’re in trouble because you have no way of marketing your business and you have no control over your marketing efforts. My recommendation is to get your act together and to equip your business with this essential marketing tool.
As a reference point for those who may not know what it takes to equip their community with a high-performance website, a great community website should cost you around $15,000 – $35,000. If you think that’s a lot, consider the amount of money used to purchase or build the apartment community it’s meant to represent, then consider what it’s worth investing in to ensure a successful outcome so you don’t lose way more than any website is ever going to cost you. The reason a community website should come in around this price range is because building an effective website with all of the tools needed to market real estate is a big job, but only if you actually expect the website to perform (you should). If your goal for your community website is to get the cheapest price, don’t even bother, save your money, a low-quality website is pretty much the same thing as having no website at all.
Why you should be paying that price and what makes a community website great is a huge topic on it’s own (I’ll link to a full article on this once we have it ready), but to briefly describe what makes a website great is:
- Unique and Great Design: The design is important, it builds trust and excitement. You don’t want to look like your competition because you both work with a management company that relies on Yardi to generate a mediocre website. Design is very important, but there are many other important aspects of an effective website….
- Conversion Strategy: Getting potential renters on your website is half the battle, converting them into workable leads is another science on it’s own. From your content to your site architecture, it’s important your website is built with conversions in mind.
- Clean Code: Search engines can’t see your site, they rely on your code, so your website needs to be coded in a way they can understand. Stay away from “drag and drop” builders and web designers who use them.
- Semantic Tagging: Another aspect search engines are looking for is proper HTML semantic tagging. The elements used to build your website need to bring semantic value for search engines. This is also another aspect that can be delivered on when working with most “drag and drop” builders or property management software website generators.
- Website Performance: How quickly your website loads is a ranking factor. From serving images and videos in next gen format, to lazy loading assets, and more. If this sounds complicated to you, it should, but if you partner with the right expert, they will make sure you are covered here.
- Detailed Analytics: It doesn’t matter whether your website is performing great or horrible, without analytics, you can’t do anything about it, and you’ll never know how your investment is paying off or where your optimization opportunities are. In marketing, at least good marketing, you are only as good as the data you have to work with.
Targeting Your Offer
Where Are You Marketing Your Offer?
We talked about the importance of thinking beyond the ILS platforms, so where else should you be advertising once you have a nice community website and marketing strategy in-place?
At Next Level, we equip every community with a customized advertising and digital marketing strategy, and if you manage communities, you should be to. We’re Google AdWords and Analytics Certified, that was important to us because, again, marketing is one of the main pillars of effective multifamily management and we are dedicated to delivering a certain type of results to our clients.
To provide a brief snapshot and give you an idea of what our marketing strategies look like, it all starts with the target audience. If you don’t know who your target audience is, don’t’ do anything else until you establish that. Who you are marketing to will help you identify the type of marketing you need to put together and where your efforts should be focused. Don’t start designing, developing, or marketing anything until you understand who you are marketing to.
Once we have our target audiences established, we make sure we are in front of our target audience everywhere they go. We use platforms like the Google Display Network, Google Search Network, Google My Business Listings, Bing Search/Display Networks, Facebook, Instagram, TikTok, Snapchat, LinkedIn, email marketing, text marketing, geo-targeting campaigns, and more. To be clear, we don’t always use all of these platforms just because they are there, we determine which platforms are going to return the greatest results based on our initial research on the target audiences, then we select our marketing platforms, create our messaging, and establish our conversions strategies.
The reason identifying your target audiences and using them to develop your overall marketing strategy is critical is because you can spend an unlimited amount of money trying to be everywhere. I don’t think there is a business in the world that can afford to be on every advertising platform, and just allow their ads to show to everybody. Successful marketing strategies designate why and where they are spending every dollar.
Remember, great digital marketing starts with identifying your target audiences, establishing where you are going to reach them, dialing in your ad targeting, and creating messages that will deliver conversions and engagements.
Search Engine Optimization is another beast of its own, but it’s valuable. With SEO, you are putting in efforts on your website and third-party sites to increase your website’s ability to rank (or display) in search engine results. If you think about it, there are probably thousands of people looking for an apartment in your area on Google every day. Imagine what that would do for your business if your website appeared at the top of those search results when renters went to look for an apartment? You would undoubtedly get your offer out to many more people. Most people who don’t understand SEO won’t get the value, some don’t even believe in its capabilities. SEO is a very real thing that can produce lots of results, but it’s also important to note that SEO takes time and it’s a long game.
Additionally, it’s also important to be careful where you spend your SEO budget as there are many SEO companies and professionals out there who don’t have the skillset to actually get your website to rank at the top of search results, so it’s important to team up with someone that has a track record of producing results.
Beyond Digital Marketing
Digital Marketing is Great, But It’s Not Everything
Technology is powerful, we use it to generate renter leads every day. That said, we are firm believers in some of the long-standing marketing strategies that many management companies choose to pass on today. This is mainly because they either don’t believe in them or they are just too lazy to put them together.
For example, we love throwing open house events during lease-ups, this opens our doors to the community, and gives us an opportunity to network and build relationships. Also, don’t discount the power of professionally created flyers and signs for drive by traffic.
When it comes to getting lease agreements, marketing is half the battle, the other half is sales. Our company has a dedicated dialer for our leasing staff, we’re equipped to work hundreds of leads of every day, and we record and listen to calls to improve our sales efforts. Our sales process, techniques, and training go far beyond what you will find at most management companies. We connect with our leads however they prefer to connect, whether they want to talk on the phone, through email, or by sending a text. We don’t turn showings away because it’s getting later in the day. During lease-ups, we are in sales mode, and we go out of our way to close as many sales as possible. Tackling all of these aspects involves setting up technology but also putting in a lot of work. Many managers aren’t willing to put in that much work.
When things get competitive, it’s important to check all the boxes so you can take advantage of every opportunity to generate leases and keep your apartment community full.
Customized Marketing
One Size Does Not Fit All
If effective digital marketing was easy, we’d all be able to go to some website and purchase an “effective digital marketing plan”, nice and easy. It’s not though, there isn’t a one-size fits all solution, at least not one that will actually work.
When it comes to digital marketing, you don’t want to go into business with the same plan as everyone else or rely on a template of action items that isn’t specific to your business. Effective digital marketing all starts with the strategy. Your strategy should be tailored to your business, customers, and unique goals. Without a strategy, it’s like trying to build an apartment community without an architect or building plans. You might be able to pull it off, but would you really expect it to pass code?
It’s important to identify your target audiences, create sales journeys and funnels, test different conversions strategies and more.
Don’t look for a cheap and simple, being effective at digital marketing requires valuable expertise, hard work, and creative ideas. An effective digital marketing strategy is worth its weight in gold, and it takes consistent monitoring and optimization.
Stepping Your Game Up
Ready to Step Your Multifamily Marketing Game Up?
In high-inventory markets like the one we are in, the difference between thriving and closing your doors is the effectiveness of your marketing tools and skills. There is no need to worry about your sales, operations, or accounting processes if you don’t get the marketing right, because you won’t have any leads or residents to work with. It all starts with marketing.
Tips for Multifamily Investor and Developers
Invest in the success of your communities. Don’t rely solely on your property management company to generate leads and increase demand. The truth is most management companies aren’t marketing experts. When you start preparing a budget for a project, make sure you budget for the digital piece of real estate (the website) you need to achieve success and withstand any market conditions, this will protect your money and/or investors with a high-performance marketing strategy.
When you get ready to start putting your website together, make sure you partner with the right people. Don’t look for cheap, look for something that is going to deliver results. High-performance websites aren’t built on Wix, they don’t cost $5,000, and there aren’t any shortcuts.
Tips for Multifamily Managers
If you are a multifamily professional and you aren’t confident in your ability to develop marketing strategies, launch websites, research and structure advertising campaigns, or create SEO optimized content, you need to understand that you are not currently equipped to effectively market multifamily communities, or any business for that matter. The good news is that’s OK, most multifamily professionals aren’t. If you are looking to equip yourself and your business with this capability, you have 2 options:
- Start learning what it takes to be effective at digital marketing. Become Google AdWords Certified (the education is free), research the aspects of an effective website, look into search engine algorithms, and start equipping yourself with the marketing skillset you’ll need to make your communities stand out in a crowded market. Better yet, join Multifamily Managers Pro where you will find consistently updated multifamily marketing resources and training. You can even discuss marketing topics and gain insights from others in the community.
- Develop a relationship with a digital marketing expert that you can trust. Make sure you involve them in your projects and prepare your clients to pay them what they need to bring a marketing expert onboard. As a real estate professional, you aren’t expected to be a digital marketing expert, but you are obligated to help your clients, and this is how you can do that.
At Next Level, we have a vast amount of experience equipping multifamily communities with the most advanced digital marketing strategies in the business, so if you need some guidance, give us a call at (775) 502-8287.