When Your Rental Vacancies Aren’t Filling, Review Your 3 Ps

Announcer:

Welcome to Canada's Property Management Podcast, your number one resource for investing, managing, and maximizing the value of your real estate assets. And now here's your hosts, Carla Browne and Adrian Schulz, Canada's rental property experts.

Adrian Schulz:

Welcome to the Canadian Property Management Podcast. Hey Carla.

Carla Browne:

Hi I'm Carla Browne with Real Property Management and I am the operations manager. And Adrian, I am so excited to kick this off with you.

Adrian Schulz:

I am too. And we've got a great topic to get started with, which is when your rental vacancies are not filling to review your 3Ps. I hate acronyms though.

Carla Browne:

Well, I know. They come in handy sometimes though. This is why they come to us, right? As property managers often is because they are stuck here. They cannot figure out why they cannot put tenants into their property. So this is a common one. I think it's a great place for us to start.

Adrian Schulz:

In your experience, what do rental owners or property managers do by default when their vacant unit isn't renting?

Carla Browne:

They boil it down to price. Right away they're adjusting the price and they focus on a price good and bad, even in that pricing. They focus on how high they can go based on what they're seeing in other advertisements and they forget that there's other pieces of this puzzle that are so important for it to rent to not just tenants, but you're looking for high quality tenants. And that's something that's really important that it's not just attracting leads, it's attracting high quality leads that are going to place high quality tenants.

Adrian Schulz:

So the most important thing when reviewing your 3Ps and the 3Ps by the way are product, price, and process, not necessarily in that order, but the product itself is obviously of the utmost priority. When we say product, we're not just talking about luxury versus affordable, we're talking about how it's presented, right? Carla, what's product to you in that 3P process?

Carla Browne:

Product is the overall unit. So whether that's a single family home, whether that is a one-bedroom condo or a two-bedroom townhouse, whatever the case may be, the product is the whole piece. So it's like dating, Adrian. So if you're dating somebody, at first you're looking at... You're going to meet them and right away you're judging by that appearance. And then as you get to know them, it's everything inside. So as an investor, you've got to look at it in the same way. Your product is what's on the outside and what's on the inside. But that visual component, the very first thing that that prospective tenant is going to see is so important.

Carla Browne:

So if they're looking at your product, they're seeing it online, maybe they're going to drive by, they're going to want to see how's it being kept on the outside? What does that exterior look like? Oh, is there a whole bunch of garbage sitting in that mailbox? These are all things that are giving them that first impression similar to dating. Not that dating and renting are really the same, but they are in my mind, I guess, the way I kind of look at it. So trying to take your property and making it as visually appealing as possible so that when a tenant drives by, they think, yeah, I could see myself living there. I could see myself moving my family in there. And because you want them to think of this place as their home, not just as a unit or a house.

Adrian Schulz:

Yeah. And I think in our industry, we commonly refer to that as curb appeal, right? But the curb appeal is what you see from the outside. And then of course the inside, if it's in a multifamily, are the stairs to the unit clean? And wow, magic that you can do with fresh paint, fresh flooring, and just cosmetic upgrades, that really change the feel of the product. Interesting that you brought up dating as an example. Ironically, I had to ask my wife out seven times before she agreed to go on a date with me. And you know what? It's not that different from leasing. You have to ask for the sale and you have to ask for it multiple times. And we'll talk more about that in process. Next obviously is price, but there's a lot more to price than just lowering it. What's your approach to pricing?

Carla Browne:

My approach is I always look at pricing as a range. So you need to see what you're competitively marketed against because a tenant is going to be looking at a specific range when they're looking at properties and they're also going to be comparing your house to whatever else is in that range. So what I do when I do is similar to what we do in the real estate spaces, but do a competitive market analysis. So we see what's all out there that you're competing against and what has recently rented and we use our own data for that. That is not something that is standard right across Canada where we can get that information unfortunately, but then we try to price it according to how they're going to fit into that range.

Carla Browne:

So you want to start out on the top range, you might have to wait a little bit longer. Sometimes if you go in the very low range, that's also very dangerous as well for the quality of tenant that you're attracting. So then you might want to go in that mid range. And then we monitor that week to week to see what's changing in the market. So a lot of investors that maybe are new to the space will come and say, "My mortgage payment is this, my taxes are this, my insurance is this. You want to add that all up together. This is what I want to get for rent." It doesn't work that way, right? So it's a bit of an educational process to kind of go through that. But are you finding anything else different in the pricing strategy that you've taken?

Adrian Schulz:

Well, one of the things that I try to encourage people to be mindful of is that when you change your price, and that could lower or make it higher, that has an impact obviously on your cashflow and your passive income, but it also affects the value of the asset long term if you ever decide to sell it, right? So do you want to lower your price by $50 or $100 a month just to get a tenant next week when you really have to think about what's the long-term effect on this? And if I'm in a province that has rent controls, what happens to my ability to move them up again? Right?

Adrian Schulz:

So there's so many considerations and I would always encourage people to look at their product and their process, which we're going to talk about next, before necessarily touching or changing the price. So let's talk about process. In today's day and age, when you make a rental inquiry, I think most people expect an immediate response by email, I would argue by text message, and ideally a follow-up phone call. What do you think is a minimum process that one has to adhere to in order to lease out a vacant rental unit?

Carla Browne:

It's a tough one because some people like a whole bunch of communication and some people don't like a whole bunch of communication. But bottom line is as a landlord, you have to communicate. And some like a phone call, some like an email, some like a text message, like you said. So in our office, primarily we do things electronically. So you're going to get emails and you're going to get text messages, and we're going to probably continue to email and text you until you tell us that you don't want us to any longer. So being very aware that a tenant may be looking at 10 or 12 properties, if you are the only one that is coming at them on an ongoing basis to remind them of the property and that you're interested in them, then that's how you gained your wife, right? Like seven times asking her out. It's because you kept telling her, "Hey, I'm interested in you." And then she probably felt special enough to give you a chance and have that first date.

Carla Browne:

So it's very similar. You want your tenant to feel like they are partnering with you in this, that you are making them feel special, that they have been chosen to be in the property. And all of that communication then will set the expectation of what they're going to get from you on an ongoing basis through that relationship that you're going to have or that journey as they're renting your property.

Adrian Schulz:

Yeah. So in her case, she said she'd just gotten sick of being asked. So she agreed to go on a date with the plans of it being a one-time occurrence. I was, let's say aggressive enough to immediately ask for the second date on the first date. Something to keep in mind there. And obviously we say these things in fun, but there's context there and there's a meat and potatoes in that conversation that if you want to lease out that unit, you're going to have to have those touch points. I would argue it's minimum three, but in an ideal leasing process, very well could be seven and more touchpoints to get your vacant unit rented. And that's ultimately what it's all about.

Carla Browne:

Yeah. It's service and service requires communication. So if you think of in the past where you've experienced really great service, it is because there was communication that was coming at you from that, whether it be restaurant or store or service provider of any sort that came at you. And it really is the same thing. And as a tenant, if they've had a bad experience with a landlord not communicating with them over the time period, all of a sudden, that's all going to come back. All of that stuff is going to come back to the surface and they'll be like, "Hey, this guy's not even getting back to me," or this lady, but if you can show them right off the bat they matter, you've now set the stage for what they think they're going to get throughout this experience.

Carla Browne:

And I'll be honest, that's why a lot of tenants come to third party professional property management companies is because they want to know that they're going to have this person that's going to care about them as much as the person cares about the property. Often we'd say we're the middleman or matchmakers, but it all plays out well because that's really what they need is they just want... Sometimes they need a sounding board throughout that communication process.

Adrian Schulz:

And it's never too late to mention on how much those first impressions count, right? That the product impression on the tenant, the process impression to the tenant because that way they know how are we taking care of that property? And if I have a problem, when I contact my property management company, how are they going to communicate with me to solve that problem? And by having these things in check, it just sets a very, very good first impression.

Carla Browne:

100%.

Adrian Schulz:

Well, I think that's a great inaugural episode, Carla.

Carla Browne:

Yeah, I think we did it, Adrian.

Adrian Schulz:

We did it. We're done.

Carla Browne:

High five to us.

Adrian Schulz:

Yeah, we talked about price, we talked about process, product, and the bonus dating advice.

Carla Browne:

Exactly. What more could you want? Now, that's real property management.

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