A market survey is typically done prior to implementing a rental rate increase. It usually encompasses the immediate geographic area of the subject community (your property) and sometimes is restricted only to those other communities which are deemed "comparable" in terms of amenities.
In most cases, Market Surveys are performed by the Community Manager and/or the Regional Supervisor. Some companies perform this comparison by making telephone calls from the Community Office. Others require a visit to the community being surveyed. Or, both a phone call and an on-site visit may be done to gather the necessary information.
Once the market survey is completed, the information is generally passed on to the Regional Supervisor who uses it to help set the amount of the rental rate increase for the coming lease term. A majority of companies then file the Market Survey information away for another year or more!
If this is your idea of the proper way to conduct a Market Survey you have only done about 1/3 of the work you should be doing!
The only valuable Market Survey is one which is up-to-date and complete. In order to keep your Market Survey current at all times, you must keep it handy! Do not file it away to be forgotten about until next year.
And most importantly of all, do it completely and properly. There are still several myths surrounding the preparation, content, and use of the Market Survey. Lets take a look now at some of those myths, and also at the "real truth" . . . . .
Myth #1 Only a Regional Supervisor, Owner or Community Manager should do Market Surveys. In many companies, this is the belief. And, if it is the Community Manager who does it, they are usually accompanied by the Regional Supervisor. A company-approved form is used, and extra comments or information are usually ignored.
This is a good example of a situation where you find the people who are used to looking at a familiar form; putting the numbers and information through the same thought processes each time; and coming up with an increase.
The "Real" Truth #1 A Community Manager and all full-time personnel employed at the community should complete the Market Survey, after receiving general guidelines from the Regional Supervisor or Owner. The Community Manager should know both their property and their competition better than anyone. So, it only stands to reason that they be totally involved in the Market Survey process.
Leasing personnel who are in the position of "selling" the community every day also need to know the positives and negatives when comparisons are made. This gives them the ammunition they need to overcome objections from a prospective resident.
And, finally, the maintenance personnel also need the exposure to other communities. Most residents talk more to the maintenance man on the mower or the one who works on their sewer than they do to management. And, nearly all maintenance men feel they are the primary source of information for the residents.
Myth #2 Only Regional Managers or Owners can really understand the information on a Market Survey and how to compute the amount of a rental increase by using these facts. One school of thought is that the Community Manager, leasing personnel, and maintenance men do not fully comprehend this process called "increasing the rent."
There is a fairly common belief that only those in higher positions, such as Regional Supervisor or Owner, are qualified to make those decisions. And, while those in higher positions certainly have the right to make rental increase decisions, I would suggest to you that on-site personnel have an obligation both to do the necessary research, and to make informed suggestions as to rental increase amounts.
The "Real" Truth #2 In order for a rental rate increase to be a positive experience for the community and for your Resident Relations Program all on-site personnel must be involved. A Community Manager who just receives a phone call or written notice of a rental increase will naturally not be as supportive of it as the one who helps make the decision.
To defend an increase to residents who question it requires that all on-site personnel fully understand and "buy into" the reasons for the increase. This is an educational process which is better accomplished over a period of time rather than in a few short hours.
Morale of on-site personnel is a fragile thing that is directly dependent upon the attitude and actions of the Community Manager. If "Orders from Headquarters" dictate an increase that is not supported or understood by the Community Manager, problems are sure to arise.
Many Community Managers will give lip support to an increase when it is questioned by Residents, but will speak otherwise when questioned privately by co-workers. Consequently, you have an on-site staff who has heard the Community Managers "non-support" attitude now answering questions from Residents.
Even though a Community Manager may tell employees how to answer questions from a Resident, if the employees live on-site, they will convey the true attitude of management to their friends. This starts a chain reaction as those "friends of employees" then tell their friends. Knowing that the Community Manager does not support a corporate decision only fuels the fire of a Resident who also does not support that decision. Such is the stuff of lawsuits.
Myth #3 There is only a limited amount of information required in order to properly prepare a Market Survey when a rent increase is planned. Nearly all companies have some type of internal form which they use when doing their Market Surveys. Practically none of these Market Survey forms is reviewed on a regular basis for content analysis. A familiar form provides a "comfort zone" where information can be entered, analyzed, and turned into a decision.
There is a grave chance that valuable information will be missed if this is your strategy. A Market Survey is only as good as the information contained in it, and if you short-change the information-gathering process; if you limit the areas compared; or if you in any other way ignore or refuse to acknowledge happenings in the market area you are doing a disservice to yourselves and your residents.
The Real Truth #3 The only valuable Market Survey is a complete gathering of all information which impacts your community and your Residents. When a rental increase is planned, everyone needs to be able to defend the reasons behind the increase. Everyone means the Owner, Regional Supervisor, Community Manager, Leasing Personnel, Office Staff, and Maintenance Personnel.
In order for a successful "defense", all employees must know and understand the process of making a rental rate increase decision. When they are involved in the process and when they participate in analyzing the information, they can then "buy into" the final decision. And, when any employee is later questioned by a Resident, they will have the added knowledge that can only come from being intimately involved with the decision-making process.
Myth #4 When planning a rental rate increase, you have to be prepared for Residents to complain and move out. To a Resident, the amount of rent they are willing to pay is translated into a "perception of value" which they find acceptable. Rental rate increases are also acceptable if there is this same "perception of value" in the eyes of the Residents.
The fact that our product is mobile does give our Residents the advantage of moving if they so desire. And, an announcement of a forth-coming rental rate increase used to be all it took for that to happen. However, increasingly professional management staff and more highly involved Residents are beginning to make this trend a smaller part of the reaction to rental rate increase notices.
The "Real" Truth #4 Residents are less mobile these days and are more willing to stay and fight. Resident Relation Programs are in place in most Communities and are used as tools of communication. One way to gauge the success of a rental rate increase is to look at the amount of money you put into the bank the month prior to the effective date of the increase. Then, compare that with the amount of money you put into the bank five or six months later. If the "later" amount is higher, the rental rate increase is generally considered to be a success.
This "success" may cost the Owner, Regional Supervisor, or Community Manager dearly in terms of emotional expense if it is not properly handled. Residents who do not understand the decisions made coupled with on-site staff who are not prepared with informed answers can prove to be a nightmare which causes unnecessary grief for all.
Over the past few years, it appears the trend is not for Residents to simply "pick up and move" when a rental rate increase which they feel is unacceptable is announced. Rather, they are becoming more vocal about it. They may try to organize to fight it. They may even go so far as to hire an attorney to mediate the announced increase or try to sue on the grounds of "unconscionability". In more and more circumstances Residents are staying and fighting when they disagree rather than simply moving.
And, in more and more Communities, the Community Manager effectively utilizes the Resident Relations Program to communicate. Knowing the concerns of Residents and working to ease their fears while giving them concrete information and documentation makes them feel that even though there is a rental rate increase, it is for a reason.
Sharing with them the reason for an increase in terms that convey a perception of value to them and in ways that shows them that they are not simply a number can eliminate those vacancies that used to be a normal part of rental rate increase periods.
By properly preparing a Market Survey, the values of your residents will be known. By coupling these values with other factors, you will have a basis for providing the reason behind the rental rate increase. And, if you have done your homework completely and thoroughly, you will have little or no resistance from your Residents.
Myth #5 Market Surveys are prepared in advance of a rental rate increase notice, analyzed, and filed away. Practically all Community Managers and even some Regional Supervisors and Owners adhere to this theory. There is a drawer somewhere in the officr with a file folder which holds Markey Surveys and it is routinely added to, but rarely looked at, during the year.
What a waste of information! What a lot of work you create for yourself once a year! What a game of catch-up you have to play when the time comes to do another Market Survey!
The Real Truth #5 Market Surveys are on-going tools which should be utilized to constantly stay on top of trends and happenings in your market area. A properly prepared Market Survey is not just a piece of paper with neat little numbers filled in all the squares which you look at once a year!
It should be a living, breathing thing which is constantly updated. It should be a file which is consistently and regularly added to and reviewed and new information is gathered or learned. It should be a part of your life just as surely as cashing your paycheck!
Next month, well take a look at some of the things which should be a part of your Market Survey information-gathering process: how to know what information you need, where to find it, what format to use, and why each piece of what you gather is important. Then, finally, well take a look at the method of communication with your on-site personnel and residents and share some ways to introduce rental rate increases in a positive manner.