Cash flow is the primary attractant in apartment investing. And, cash flow is definitely damaged by higher than necessary vacancy and credit losses. While credit losses are rooted in tenant qualification, selection, and rent collection practices, vacancy losses can come from several areas of apartment investing, from marketing through tenant relations. Let's look at how these two items can creep up on an apartment or multifamily owner, and what might be done to bring them back to normal lower levels.
Vacancy Losses in Apartment Investing
The Marketing Plan - We might as well start at the beginning, the ways in which we market our property, and the media we use for advertising. If our vacancy losses are higher than normal due to poor marketing, or just a poor market with heavy competition for tenants, then the first step is to thoroughly analyze our marketing plan and advertising media. Part of than analysis is a market study, checking out our project's strengths, features and amenities against the competition. Where we have an advantage, it's important to promote that advantage in our marketing. It's impossible to predict just what minor or major feature or amenity will hit our prospective tenant's hot button. Virtually every positive attribute of the project should be mentioned or featured in our marketing.
Advertising Media - The worlds of marketing and advertising have been rapidly evolving around the Internet and social media. If an apartment investor and owner is still using the same advertising media from years ago, it's probably less effective, but just as expensive. Most print and broadcast media presents our information to a great many people with little or no interest. But, we still have to pay for those "impressions." First, every apartment community must have a website. It's become very inexpensive to build a website, with hosting and free site software, it can be less than $100/year. Compare a year's online exposure to the world to one display ad in the newspaper.
With 350 million+ users, Facebook presents a unique opportunity for advertising. Because an ad on Facebook can be targeted based on location, gender, age group, and other factors, that huge audience can be narrowed down to the very best prospects for our project. If a major employer is a source of many of our tenants, we can even place that employer's name in as a criteria. If we do, that ad would only be shown to people who have that employer mentioned in their profile. It's the most highly targeted marketing out there, and we don't pay unless our ad is clicked and the prospect comes to our website with all features and amenities there to get that application.
If Vacancies Are More About Losing Tenants -Are facilities and common areas unattractive? It's possible tenants are leaving due to rents, but it's just as likely they're leaving because of antiquated appliances or other features that we can improve to make their homes more appealing. Is management maintaining good customer relations with tenants? Hopefully, they have easy and friendly ways in which to express dissatisfaction or to report problems with their units. Marketing and advertising get them in, but it's tenant relations and quality of life that keep them.
Go on to the next page for a discussion of credit losses and prevention.
