New property managers often set expectations too early—before they fully understand their competition (or their customers). Establishing rent tiers, planning property upgrades, and getting the marketing strategies down will help you gain valuable insight and be better prepared for the future. You really need to start with a market analysis.
A market analysis allows you to know more about what trends are happening in your area and answer questions like “Am I charging too much? Too little? What do I need to do to make money on my properties? How much new construction is planned or in the works and how will it affect me?”
Here are a few tips on how to do your own market analysis.
Choose a Strategic Approach
An analysis can be tricky, as there is a lot of data to sift through. Before you start, know your goals and choose the right approach. There are two distinct, but complementary, strategies for doing an analysis.
The first, demand-based analysis, explores and identifies competition that offers similar housing features consumers expect—amenities, location, access to public transportation and price.
The second, supply-based analysis, identifies rental properties that market options similar to your apartments or single-family homes.
Looking at your competition from both angles will help you determine where you need to invest your resources and dollars to stay competitive. You might not be able to easily address some of these issues, like location and distance to public transportation, but you can make adjustments or plan upgrades to still make your property desirable.
Gather All the Info
It’s going to take some time and effort on your part to conduct a comprehensive review. You should start by researching the following information about properties in your area:
- Average vacancy rate
- Number of days on the market, per unit
- Tenant profile: age, occupation, length of tenancy, families or singles
- Proximity to your property
- Established vs. new construction
- Rent in the area (more below on this topic)
Use the Internet Wisely
The Internet makes conducting an analysis less time-consuming and exponentially easier than ever before. Social media sites, business directory reviews, and competitor websites all provide you with valuable information about how your competition interacts with consumers and what consumers think about those other property management teams and their properties.
Doing a Rent Comparison
Part of a market analysis is determining what is an acceptable rent for your area. Once you’ve looked at other properties in your neighborhood and performed some market research, it’s time to set the price of your rental units. Software solutions like AppFolio offer rent comparison for free as part of the web-based property management software service. Running rent comparisons are extremely important to your profitability, but they can be time-consuming and resource-intensive. They also need to happen often. Rather than spend days gathering information and analyzing numbers, a simple tool does it for you in a few clicks.
Once you’ve accumulated all the pertinent data, you can put together your plan of action. A market analysis gives your team valuable information about your competition and your target base; and using the information you gather will give you a competitive edge.