I don’t know if it is because I am just stubborn by nature or if it was because when I was a kid I was always in trouble with parents, teachers, etc. but I am always thinking the opposite of what most people are. To put it another way, I am always looking at something and wondering why it is not done another way. In some ways this can be good but of course in other ways I can be a big pain – just ask my wife. Recently, I have noticed a dangerous trend among some apartment owners.
The trend that I am seeing is that many apartment owners are simply seeing what other apartment owners are doing and following suit. Just because there are a lot of apartment owners doing something they are doing the same thing – copying them. Before we go any further let me tell you that this can lead to trouble.
For example, just this last week I talked to three apartment property owners and the topic of our conversation was about raising rents. In all three of these instances all three owners told me that they are NOT going to raise rents on their tenants for at least the next 3-5 months because they are worried they will lose the tenants if they do.
When I talked to them about why they are not going to raise rents and why they are being conservative they told me that “Well – I have been talking to other landlords and it seems that they are not going to be raising rents, either, so I probably should not do it.” This is not exactly what each of these owners told me but it is very close.
My question to them is how do you know your tenants would not pay more rent? How do you know that your tenants might not think they are getting a great deal and cannot believe you have not raised rents on them yet OR you are charging way too little.
You see, the problem with approaching your apartment properties this way – by what the masses are telling you – is that you are not doing the necessary work on your apartments to see if in fact the EXACT OPPOSITE could be true – that you could raise your rents, raise them right now and raise them maybe even 10-15%! Here are some quick facts that I want to give you that will pull you out of this way of thinking:
1) I had a conversation with an owner last week of 100+ units – all of which are 12 and 24 unit properties. In every one of his properties he has raised rent for the second time this year and is getting about 15% more in rent than he did last year. He was told by three different apartment owners that he would NOT be able to do this and that he was crazy. Well, I do not know who is crazy but his guy is getting more income from his units than he has ever gotten before by doing the opposite of what many other apartment owners are doing.
Now I realized that this is just one example but it brings home a very good point that I think many of us fall into the trap of seeing what everyone else is doing – assuming that this si the right thing to do – and then doing it – whether it be raising rents, tenant improvements, etc. Just make sure that when it comes to the financial rewards you want and deserve from your apartments don’t do what everyone else is doing without considering the exact opposite – most of the time the crowd is WRONG!