Last year the Department of Defense announced its plan to engage in a comprehensive downsizing of the US military to address ongoing national budget concerns. The US Army alone is expected to cut 80,000 soldiers by 2017 as part of the massive restructuring. Throughout the US there are military bases of varying sizes whose troops contribute significantly or tangentially to the local economy. As a result of cutting troops, some apartment communities whose military personnel make up a large part of the tenant base may begin to see rising vacancies. This article addresses ways to hedge against the risk of losing military tenants by taking proactive and reactive measures to protect occupancy by targeting the top tenants in your market.
1. Increase Marketing Budget and Expand Marketing Efforts
Look at your current marketing budget and marketing plan. While the amount per unit may vary in each market, as a general rule you should be spending at least $100 per unit per year on your marketing. Forget running ads in the newspaper and phonebook. Hardly anyone reads those anymore. Direct your marketing dollars towards internet advertising and billboards. Advertise all the positive qualities of your complex with an emphasis on any new upgrades and leasing specials. Follow up with prospective tenants by sending them thank you cards for visiting. Sponsor a local charity and make your involvement with them known. It will show prospective tenants, you care about the community. Find out what is the largest industry or employer in your community and drop off flyers at their worksite.
2. Lease Specials and Concessions
Your apartment complex may not have needed to offer free rent before, but if the local economy is changing for the worse that may have to become a new practice to keep units filled. If you’re beginning to see some rising vacancies, consider offering a free month for every new one year lease renewal, referral fees for new tenants, or a free upgrade to the unit. Do not offer reduced rent for the lease term. If you do this for one person, word will get out you cut them a deal, and you will see a landslide in rental income. I would advise only doing this in the event your property is becoming destabilized (under 85% occupancy), and it is your last resort.
3. Unit Upgrades
Upgrading units is part of the execution strategy of many investors, but the extent of those upgrades will vary. Perhaps when you initially purchased your property, you decided to just update the look of the kitchen cabinets and counter tops and some fixtures. It may help experimenting with a couple of vacant units to give them a more premium look beyond your initial intentions by replacing the carpet with vinyl wood flooring and upgrading the kitchen appliances as well. This may give your property a reputation for having the nicest units in the market (even if only a few) which could drive more traffic to your property increasing the likelihood of signing up prospects.
Consider adding one or more amenities to your complex. Also, make sure the amenities are cost effective in the long and short term. For instance, if your complex doesn’t have a pool, I would advise against building one. Pools are expensive to construct, maintain, and could cause your insurance premiums to rise. Consider offering free WI-FI internet in the business center or creating a picnic area with free standing grills. Also, some amenities could create additional streams of income such as converting a unit or old clubhouse into a coin operated laundry facility or engaging a cable company to offer them the exclusive right to provide TV and internet to your complex.
5. Customer Service and Timely Repairs
Finally and most importantly, do not become a slumlord. When times get tough, many owners want to start cutting corners and running their complex on a shoe string budget. What they should call this is “running it into the ground,” because that is exactly what is going to happen. Be responsive to your tenants concerns, needs and complaints. Make repairs in a timely manner. You want to have the reputation of being the landlord that cares about their tenants and fixes problems as soon as they occur. When the tenant market knows you don’t let problems fester, their hot water will be back on shortly if the boiler malfunctions, their locks will be fixed promptly so they don’t have to worry about their apartment being ransacked, their HVAC will be fixed so they don’t have to be sleeping in sweat, etc. – you’ve earned their trust. And that is most important amenity you can offer them. If the tenant market knows you care about them, they will want to rent from you. In a declining market, some of your competitors will become slumlords. Don’t be that owner. You will go into a downward spiral of losing tenants and your property will devalue as it crumbles from deferred maintenance and repair issues. Take advantage of these irresponsible owners by absorbing their good paying tenants who will want to live in dignity at your complex.