Good business sometimes relies on playing hunches. A property manager may have a gut feeling that it’s time to increase new rents and settle in for longer-term leases. Or that upgrading floors in each unit will net even higher rents and give the bottom line an extra lift. Great business leaders will tell you that following an instinct at some point in their careers paid dividends. But not every successful business decision comes from deep within. Market dynamics and business intelligence offer a broad view of the playing field to help make the right decision.
Solving the challenge of carrying out strategy at site level
Inquiring multifamily operators always want to know when to make the next move on rent rate or lease duration. The front office may have a strategy, but how well it’s executed at the site level sometimes remains to be seen. A critical decision on the rent roll could be made by a property manager without first digging into market data, or leveraging business intelligence software. Having that data available for key players to utilize is a must-have, says RealPage Director of Business Development Andrew Bowen.
“Our client base is in at least one of three businesses: investing in real estate, running a property and running property management company,” he said. “All that data—business intelligence—presented in an easy to digest format, is a tool that helps you run a property management company.”
Bowen says an ongoing challenge for business leaders is making sure front-line employees have the tools to carry out a portfolio or property strategy.
Building a dashboard that includes key market data about the company’s property and others around that site-level managers can access is the solution. The dashboard is where investment and performance analytics (benchmarking) meet, providing operators with critical information to make better property management decisions.
Bowen says RealPage’s YieldStar Business Intelligence software tool enables property operators and managers to assess a portfolio’s performance and identify risks and opportunities as market conditions ebb and flow. The product features customizable dashboards and custom reporting so that executives can have a macro approach while property managers can access the details necessary to better manage new lease and renewal rates and terms.
Making moves based on accurate forecast and benchmarking data
The tool is especially useful in forecasting and benchmarking, helping to walk that sometimes fine line between adjusting renewal rates and term versus new leases depending on market conditions.
“If we see a cool-off coming within next 12 months, I really may want to offer a bunch of shorter-term leases because I want one more opportunity to push those rents more before the cool-off happens,” he said. “Once the cool-off happens, it’s going to be a lot harder to push rents.”
Forecasting at the granular level by sub-market zip code and product type combined with benchmarking offers a true picture of what the market will bear. Benchmarking shows what people are signing leases for, not the asking price, which aids in determining what a marketable rate and term could be for a particular property type and sub-market.
Bowen said lease transaction data clearly showed the turn in Houston in recent years when the energy sector started to crumble, months before market survey data reflected the change. Lease trade-out rates started to move long before asking rents dropped, an indicator that the gap between rates for new leases and renewals was tightening. Such a scenario signaled an impending market change, and that raising renewal rates could get dicey.
The information also suggested that, ideally, properties would fare better by renewing residents at a less aggressive rate than trying to earn slightly higher rents for new leases and risking costly turnover and turn rates.
“Based on lease transaction data, we saw that metric start to come down long before we saw asking rents come down,” he said. “People don’t move on their asking rent until they are no longer able to achieve it,” Bowen said. “You start asking less once you realize that’s not working.”
Honing in on the metrics that help drive property success
The information is just one piece of a bigger property management picture. With a robust business intelligence tool, Bowen says, property managers are able to see real-time views of the data that matters most to their strategy—whether it’s lease trade-outs, benchmarking, renewal trends or other specific information regarding the property and market—that factors achieving the right rent at the right time.
Business intelligence easily takes operators from a big picture to a small picture by honing in on specific metrics relevant to a particular property.