“Business Research is a systematic inquiry that provides information to guide managerial decisions” (Copper & Schindler, 2006). Business Research helps an organization make better and more efficient decisions when it deals with their goals and everyday workloads. In this paper, it will discuss how business research is used in property management when deciding the most reasonable rent amounts with the example on how Alliance Residential handles a market survey. It will also discuss a more efficient way to handle the market survey and how to receive a more honest and truthful input from competitors.
Property management is the operation of managing commercial and/or residential properties. A property manager is responsible for making sure every day tasks are done properly, collecting of the rent, directing any maintenance issues to the maintenance staff, and writing rent and budget reports. It is important for a property manager to use research in their reports so the property being managed charges the correct rent amounts and provides the owner with reasons for charging those rent amounts.
One way business research is used in property management is when deciding the appropriate amount to charge for rent for an apartment complex. This is done by weekly market surveys. There is a lot of competition in the apartment business and it is important to always be one-step ahead of the competition by offering comparable prices and better move in specials. A potential renter will never look at only one property; they look at many in the same area. Therefore, it is important to have similar or better specials with great customer service so the potential renter chooses your property.
Each competitor is decided based upon similar type, style, location, size and upgrades. After the competitors are decided, it is important for the property manager to call each one weekly and find out what their market rent, reduced rent, extra fees, and specials are for that current month or current week. The reason this is done is so that proper and competitive rent amounts can be charged. It is also a way to show an owner proof or reasoning for charging the rent amounts that are decided.
Most properties use an Excel program that determines the average rent amount for each size bedrooms, including up-front concessions or move-in specials and low cost fees, so that your property can be very comparable to other properties in the area. An example of this is how Alliance Residential handles the market survey. They compare their prices to seven competitors. The average for every competitor with a one bedroom may be $900 per month with a one-month free concession at move in and half priced security deposits or administrative fees.
Alliance will then decide to place their one bedroom at the average amount and depending on how many one bedrooms are available to rent, will they decide to have one month free or just two weeks free at move in. They may also decide to place their fees at the same amount or lower depending on the budget for that month. If there are more than ten one bedrooms available, Alliance may decide to drop the rent amount lower then that average of $900. Dropping the amount down will result in more leased apartments compared to the competition.
Another part of the market survey that Alliance will use is the competitor’s occupancy percentage. If the competitor stands at only 91% where Alliance is at 96%, the market survey may not come into effect only because with a high occupancy, there would be no reason to lower the rent amount or make any changes to the current rent amounts being offered with move-in specials. It also shows that the specials and reduced rent amounts that our competitor is running may not be working out if they stand at a lower occupancy percentage than Alliance.
Making weekly phone calls does not always result in correct and truthful information. It is possible for a competitor to give wrong rent amounts and occupancy percentages to make it seem as if they are doing better than they actually are or to state they are running higher amounts then they actually are. Some properties use this tactic so they may seem like the better property to a potential renter. They may also give the higher rent amounts so they will be lower when a potential renter comes into their property. A way to get correct information would be to actually shop the competition.
Most competitors change their rent amounts and specials only once a month. If one were to take one day of the month to walk into the competitor’s property acting as a potential renter, one would receive more correct information, as the competitor would not likely give the incorrect pricing to someone they think will rent from them. A shop can also be done over the phone. Also with this more efficient way of collecting the results, one can compare the shopping notes with the market survey given over the phone. This will provide more truthful results, which will allow for more comparable prices to the competition.
If the competitor was to tell the truth over the phone compared to the shop, it is still possible to gain more from the shop than the phone call. Seeing how the competition handles a potential renter and their customer service style will help improve your customer service style. Going into a shop and leaving thinking you would like to rent from the competitor means you should apply their customer service styles to your own. If the competition had horrible customer service, it is still another way to step it up above them.
Business research can be used for so many more things in the property management profession. A market survey is the most important research to have in property management because the rent amounts and specials are what persuade a potential renter to make your property their home. If a property takes the extra effort to shop a competitor it will allow for better results and also make your property a bigger competition then not.
References Cooper, D. R. , & Schindler, P. S. (2006). Business Research Methods (9th ed. ). : The McGraw-Hill Companies, Inc.