This is a simplified way to go over our rental process, and the metrics we use to determine if the price of a home is generating the right amount of activity. If your property rents for $2,700 per month or more, these metrics may be a little high based on activity levels, but is a good representation of patterns to look for.
Each stage of the leasing process filters itself down to a smaller pool of prospects, and this is normal. Our marketing for each property is performed precisely the same way each time to eliminate as many variables as possible. We only use high-definition photos which are marketed in the right places to be found by potential renters. By eliminating variables, we can more accurately narrow in on the pricing of the property against the current market activity.
The first group of prospects we will look at is the total group of people who view the property online and inquire to set a showing. This group is always hard to convert into an actual physical showing. For every 3 inquiries we receive, we want to see 1 showing scheduled and attended. If there are more showings than that, we may be underpriced, and if there are fewer people, we may be overpriced. This is the first step in the tenant marketing funnel. By watching these metrics closely we can make sure that we are setting ourselves up for success right out of the gate. The number we are looking for in this part of the process is 3 inquiries per day. If we are receiving this quantity of inquiries and it does not result in an average of one showing per day than we know there may be additional factors we may need to investigate (such as pricing) to achieve the correct metrics.
The next step in the process is another 3 to 1 funnel. Let’s take a look at the group of prospective tenants that have seen the home. In this group, for every 3 people who viewed the property, we want to have 1 application submitted. If we see too many applications—here again—we may be priced too low. The great thing in this instance is that we have multiple applications, we can compare them against each other to see if one is more qualified than the others. If the applications are close to each other in qualifications, we can now work to see if we can make the terms of their offers more favorable for your individual goals. Some of our property owners prefer longer lease terms to overall price. Some investors prefer a higher security deposit from tenants. For many of our client’s, price is most important, and the qualified applicant who will pay the highest price will be the winner in this situation.
On the other side, if we are not seeing 1 application per 3 showings, there are a few factors that may be affecting the activity. First, we look at the condition of the home. If we are generating the right amount of showing for the house, but aren’t converting at the proper rates, the overall condition of the home may be affecting its ability to achieve the highest price. It may be time for a spruce up; new paint or carpet are often easy fixes to improve the properties marketability. If repairs are suggested but not in the cards at this time, it has likely come time to bring down the price to one based on current market conditions to avoid elongated vacancy. If the feedback and shape of the home are not issues regarding the property, then it’s likely the price itself is affecting the prompt leasing of the home.
These funnels may seem a bit basic, but it has taken years of data and renting thousands of properties to come to these figures.