Raising Fees

How to break the news

By Erica Rascón on Feb 20, 2015 in News

Increasing fees without losing tenants is all a matter of presentation.

When the economy slumped, many businesses explored ways to cut costs and stay afloat. Some property management companies offered fees as low as 4 percent in exchange for basic services. Owners jumped on these contracts, using the low costs to attract renters to their properties.

Now, as supply lags behind demand in many cities, it’s a managers’ market. Some are raising their fees and exploring ways to improve the services provided to owners. This creates the ideal opportunity to re-evaluate your property management services. Can you provide residents with the online and mobile conveniences offered by other properties? Are tenants satisfied with property upkeep? Taking advantage of improved management services could lead to higher quality tenants, longer-term tenant retention, greater tenant satisfaction, and less hair pulling on your part.

Improved services will likely lead to higher fees from your service provider, typically between 8-12 percent. Pass those increases on to tenants; when you can offer more to your residents, you can ask for more in return. It’s important to make sure that residents still feel that they are getting a great deal. Their perception depends on your presentation.

You are willing to sign on to a better management contract with higher rates because of what you will gain. Likewise, it’s important to let renters know what they’re gaining as the costs increase. That’s not to say that the improvements offered must directly correlate with the change in fees.

Announce the increase in fees at the same time as other property improvements. Tenants will connect the slight raise in payments to tangible improvements. If you’ve planned to pressure wash exteriors, paint, redesign landscaping, update appliances or resurface the pool, this is the perfect time to do so.

Give residents a sneak peek of improved services. Most renters won’t care about behind-the-scenes operations in property management. But if your management provider has increased fees because they’re adding additional staff, staff training, or technological conveniences, those changes affect daily resident life. Such changes will mean faster replies to service calls, better customer service, or easier bill payments. Let renters know when raised costs will make their daily routines easier.

Offer options to reliable tenants. It’s a good idea to give your reliable, existing tenants an option. Offer to renew leases with the increased rate for the same duration of time or offer their existing rate for a shorter duration. These options may help you avoid turnover for good tenants who’re hesitant to pay more upfront.

Stay competitive. While multifamily demand exceeds supply in several cities, new construction may soon level the playing field. Continue to stay abreast of local developments, ensuring that your property is competitively priced with comparable properties. This is especially important since new apartments aim to lure away tenants with flashy short-term deals.