Rental Merry-Go-Round

[boris bubbanov]

Ok, it is annual renewal time on the rental apartment. 10-15% across the board increase, every unit. BUT, there are "specials" right now where if you switch from the existing unit to another 750 feet away in the same development, you can get a $ 100 cut in your monthly rent, from what you paid last year. Or maybe the unit 3 doors away from your old one. And these "specials" are almost always out there.

What is the point of this? Two aspects of the same corporation, one trying to generate easy revenue and another cleaning up the mess and maybe scoring some commissions, etc? Are real estate trusts really that paranoid about someone staying too long in any one unit? Are the stakeholders blind to all the make work going on here by the employees?

What are your thoughts?

[jimd]

If you are renting, now is the perfect time to tell them to pound salt and buy a house. No old house to sell and great mortgage rates and and prices.

[uriah1]

Marketing
They could be targeting slow selling rooms..

[boris bubbanov]

Originally Posted by jimd

If you are renting, now is the perfect time to tell them to pound salt and buy a house. No old house to sell and great mortgage rates and and prices.

Jim, between my girlfriend and I we already have 3 houses and an office building. But my girlfriend's current apartment is 1.2 miles from her well paying job, and there's no single family house anywhere near that close. And those within a few miles average a Million dollars apiece. Traffic in Metro Washington DC is a monster, as folks will tell you. We've got no choice.

[musicalmartin]

Originally Posted by uriah1

Marketing
They could be targeting slow selling rooms..

Maybe the agents get much higher commission rates for selling another vacant rental as opposed to renewing the same tenant .

[boris bubbanov]

Originally Posted by uriah1

Marketing
They could be targeting slow selling rooms..

Yeah, I think that's the idea.

But some of the "special" apartments are as nice as the one she's got now. Some are freshly renovated (all new cabinetry, appliances) and some not. No apparent rhyme or reason.

I could understand them easing people out of units, units that had not had the "makeover" yet but it isn't that, it is chaos basically.

[boris bubbanov]

Originally Posted by musicalmartin

Maybe the agents get much higher commission rates for selling another vacant rental as opposed to renewing the same tenant .

I think so. Maybe a renewal gets no commission at all.

This is why the employees are not stuffing the suggestion box, talking about how silly this is.

How many of the rest of you have seen this? We saw this in 2 apartment developments in Florida in 2005-2010, as well.

You could say this is as simple as, some people dicker for the best price when buying that tub or refrigerator, and some just don't. 2 price structures, side by side, and you gotta be willing to bargain and to move if necessary to "play" and get the discount.

[boris bubbanov]

We did the switch. The added expense of moving around the corner to another unit will be absorbed by the middle of the second month, in a 12 month lease. 12 months from now, we may do it again.

May not make much difference in markets where rent is $ 550 a month. But in metro DC, you betcha it can pay off. I am thinking the utility bill will be less in this other unit, too.

[jimd]

People are inherently lazy and will take the easy way out, not move and pay the extra. I applaud you for having the gumption to move. Take the savings and buy a guitar.

[Tim Armstrong]

That's basically insane. But I reckon I'll see if there are any deals like that when my lease is up in February!

[boris bubbanov]

The added surprise is, apparently the staff is on salary; no commissions at all. Didn't have the nerve to ask about bonuses.

So basically, an REIT using people's inertia and laziness to generate profit. And the staff on the site sees the situation, finds a way to "help" the tenants who are paying attention and keep the units occupied.

I've never leased a car, but I do remember situations when certain high ticket cars (big Jaguars, Infinitis) were crazy high price, bought for cash, as the brand insisted on protecting that high presumed value. But. When leased, only a portion of this claimed MSRP was genuinely covered by the lease terms. The idea was to just get rid of them; put the cars into the hands of some lease customers because another shipload of these fancy cars was already clearing customs and would arrive any day.

Another example was that rental car company the Mitsubishi used to have. They'd ship all the cars the dealers did not want to the rental units. They'd rent a Gallant to you for what you'd expect to pay for a motor scooter. Pick up a brand new car in Las Vegas, drive all over California and accumulate thousands of miles, and return the car in Las Vegas a week later for under $ 100. You can't make money doing that, but they did not care.

[boneyguy]

Originally Posted by boris bubbanov

Ok, it is annual renewal time on the rental apartment. 10-15% across the board increase, every unit.

10-15%. That's outrageous! The legal rent increase in British Columbia is 4.3% and in Ontario is 3.1% for 2012.

[boris bubbanov]

Originally Posted by boneyguy

10-15%. That's outrageous! The legal rent increase in British Columbia is 4.3% and in Ontario is 3.1% for 2012.

Yeah.

But, I wouldn't be surprised if this outfit cut rents in fact during the 2008 downturn and in the weak market years that followed. 4 times 4.3% = 13.2%. Your savvy BC landlord kept raising his rents every year the whole while, trying to get back to what the market might have genuinely handled.

I've talked to lots of people who rented in DC in the 80s and 90s, and they actually feel like the rents are less obscene in DC these days than they would have expected. If you can earn twice in the DC area what you can earn in small town USA, smaller cities, why shouldn't rents be quite high in metro DC?

And. Given that this means a net rent DECREASE for my girlfriend for 2012-2013 as compared to the previous year (and she is no way the only one) in truth the REIT is not getting a genuine 10-15% increase. They've just "repositioned" themselves in the hopes the market will heat up more, not just the gentle improvement.

[Ben Bishop]

That does sound odd, Boris. In some way, I guess it makes some number look good. Twice I've been in buildings owned & managed by a family company and they'd leave my rent steady 3 or 4 years at a time. I'm quiet, I talk politely and park carefully and my cheque is always on time. They don't want to mess with that.

[boris bubbanov]

Originally Posted by Ben Bishop

That does sound odd, Boris. In some way, I guess it makes some number look good. Twice I've been in buildings owned & managed by a family company and they'd leave my rent steady 3 or 4 years at a time. I'm quiet, I talk politely and park carefully and my cheque is always on time. They don't want to mess with that.

Yeah, I have friends near N.O. that own a dozen or two rental units, and they would rather rent to some quiet retiree or single workaholic and take a little less rent, and leave the amount alone for years. So much less trouble, seems to me.

[elicross]

Could it be they're giving people an incentive for moving to an unoccupied apartment so they can get into occupied apartments and remodel them? I think apartment complexes usually remodel only after a tenant moves out and before a new tenant moves in. If a complex didn't want to wait, they might decide to encourage existing tenants to vacate their apartments while staying in the complex.

[boris bubbanov]

Originally Posted by elicross

Could it be they're giving people an incentive for moving to an unoccupied apartment so they can get into occupied apartments and remodel them? I think apartment complexes usually remodel only after a tenant moves out and before a new tenant moves in. If a complex didn't want to wait, they might decide to encourage existing tenants to vacate their apartments while staying in the complex.

You would think then, that the rents would be higher on the newly redone ones. But no, all units that are up for renewal are up in price. And half the units on special are already redone and the other half, no.

The weirdest thing of all: To get you to stay in your current unit at the increased price, they are offering to renovate it while you stay IN the unit. Basically, these people work for Willie Wonka as best I can tell.

[elicross]

Wow. I can't imagine renovating a rental property while tenants are still living in it. Painting, putting in new carpet, new appliances -- that means moving the tenant's property around, just inviting them to blame you for anything that's lost or damaged. Seems like a bad idea.

[piece of ash]

hmmm...

[boris bubbanov]

Originally Posted by elicross

Wow. I can't imagine renovating a rental property while tenants are still living in it. Painting, putting in new carpet, new appliances -- that means moving the tenant's property around, just inviting them to blame you for anything that's lost or damaged. Seems like a bad idea.

IF I ever suggested it to a tenant, it would be to scare them into vacating. Lordy, I can tell you from too much personal experience that trying to live in the same place you are repairing (Katrina damage) is a depressing undertaking.