Multifamily property managers devote a significant amount of time to courting new customers. We use all sources of marketing at our disposal to identifying viable leads, always seeking new and improved methods to target our audience. This post is about a single component of marketing 101; identifying competitors.
The low hanging fruit in terms of knowing your competitors are finding other similar multifamily in your market, right? Simple. Yours is a Class B product in ABC market, find other similar property, shop the competition comparing amenities, price per square foot, interior finishes, concessions offered, yada yada...
Alas, this is only one of the many competitors facing your asset. Following is a list of competitors to a multifamily asset.
1.Mom. Based on the depth and length of the recession many young people are staying home with Mom. Frankly, there is little you can do to compete with free; free room, free food and maybe even free laundry service. If you know of a strategy to compete with Mom, please let me know.
2.Room mates. What was once the standard one bed, one head is not always the case anymore. There is the live-in couple with a two bedroom now willing to 'sublet" their other bedroom to lower overhead. This is another unit not rented for multifamily operators.
3.Banks. Certainly, banks would prefer not to be home owners, they wish even less so to be landlords. Consider those with huge concentrated inventories. This segment represents thousands of single family homes rented, therefore competing with multifamily for tenants.
4.Motels. Any city of size has these, they are the outlier places where a person or family can rent a one room hotel for $189 a week. Granted, they may not be in the best of locations, but hey, for $800 a month and the option of leaving at any time it's a competitor to some multifamily assets.
5.Foreclosures. I'm not referring to the shadow rental market here (although that's what this is). I'm referring to squatters. A disparaging term for good people that purchased a home in good faith only to see all of their equity disappear in the housing market collapse. Here is the best example as told by William Wheaton of MIT.
There are not less than three million homes in the United States where home owners have lost all or most of their equity. This equity is not coming back. In places like Florida it can take over a year for a bank for foreclose. Thus, there are thousands of "home owners" that could live in their same house free for a year.
This should make any multifamily owner shiver. For those thinking "we have tons of foreclosures in my market- why is there not more traffic"? Because there are no concessions you can provide that competes with free housing.
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Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. We discuss best practices in multifamily management and methods related to how to buy apartment complexes. Our focus is sharing strategies and tactics that can be implemented and measured. For more information, visit: www.MultifamilyInsight.com