Rent Optimization

As a member of the Institute of Real Estate Management, we are ethically required to charge as much rent as the market will bear.  In a property management class geared toward marketing, property managers learned about setting rents according to competitive analysis, rent optimization and rent retention.  The rent optimization caught my attention.  At Jacob Grant Property Management we have always optimized rent, but it has been intuitive rather than using finite data to set the rents.  Common sense suggests, using objective data along with some subjective intuition is going to raise overall effective rent.
When there are several unit complexes there are different features that make a property more desirable to a potential resident.  Examples include a patio, upper floor, new appliances, new carpet, and paint.  The interesting part of this is assigning a value to each item.  It is very subjective in nature, but with experience a property manager can start to set these amounts with some effectiveness.  Other contributing factors include, property condition and age, updating, tenancy, area, and consumer price index.  These additional variables add another layer of complexity to rent setting.
Jacob Grant Property Management is doing some serious interior renovations on a multi-family property in Pocatello.  Market response to the condos has been overwhelmingly positive.  Market rents started at 525 and go up according to the following factors: 

• counter top refinish   $4
• new carpet               $7
• kitchen vinyl             $3
• bathroom vinyl         $3
• stove                       $5
• fridge                      $5
• patio                       $11
• upper floor              $3
• midfloor                  $2
• new paint                $3
• master bath             $35
• laundry hookups     $35

The next step in this research process is to test it out.  The price changes make sense, but may need some adjustment according to market response.
Other factors property manager will consider:

• What is the overall feel of the property?
• Will ground level condos be more attractive to some because there is no elevator?
• How will rent incentives affect success?
• How will seasonal nature of college town affect success?
• How much will rent hikes affect vacancy?  What is the cost to overall effective rents?

A ramification of this research will be rent optimization on other multi-family properties in Eastern Idaho.  Would it be possible to generalize these numbers?  It could be reasonably expected that these numbers would fluctuate according to other property amenities, overall rent, local consumer price index and concessions being offered. 
The Institute of Real Estate Management has given us some exciting rabbits to chase in the property management industry.  We are excited to see where this research leads and if we can generalize according to the data!