Raising Rental Rates

Is it time?

By Pamela Alton

Raising rental rates is probably one of the least enjoyable aspects of aself-storage manager's job. No one likes to field those calls from tenantsthreatening to vacate because they received a $5-per-month rental increase. Howdo you handle them? When do you raise rental rates and whose rates do you raise?

When?

Obviously, researching the rental rates in your market area is a mustbefore you raise your own rates to existing tenants and new move-ins. At leastevery three months or so, you should contact the other managers in your area andtrade information on rental rates, changes in office or gate hours,administration fees or deposits, etc. Most managers are cooperative with eachother; however, like anything in life, there are exceptions to the rule. Somecompanies, for one reason or another, refuse to exchange rental-rate informationwith those they consider to be their "competition." If that is thecase in your area, you could be forced to play the "rental-rate game,"placing a mystery call as a tenant inquiring about a unit. But how you get theinformation is not as important as having it.

You want to be competitive--not too high or too low. One way to "testthe waters" on rental increases is to change your walk-in rates to beslightly higher than what your existing tenants are already paying. If you findyou can easily rent them at a higher rate, then consider increasing the rates ofyour existing tenants as well. Similarly, when someone vacates a unit and youare otherwise full in that unit size, try putting a higher rate on that unit. Ifyou can easily fetch a higher price, you can consider a rate increase across theboard.

There are times of the year when rental-rate increases are expected andusually considered part of doing business. Winter months around the holidays orearly spring are good times for increasing rates. Most tenants expect a rateincrease around the first of the year. Just before the holidays is a good timeto send out your rental-increase notices indicating a January or Februarychange. Most tenants are busy with the holidays and don't have the time ordesire to move even in the event of an increase. The weather could also act as adeterrant, encouraging renters to stay in their units until spring. Spring isalso a great time to increase your marketing efforts, allowing you to make upvacancies with new rentals.

A word on notices: Some rental agreements say you can change rates, officehours, etc., with only a seven-day notice. I personally give my tenants at leasta 30-day notice, if not slightly longer. Seven days is not enough time,regardless of what your agreement states.

Whose Rates?

You might choose to implement an annual rental increase across the board onthe first of the year to all tenants, regardless of how long they have occupieda unit. This is fairly easy to calculate. It is a little more difficult toselectively increase certain tenants or unit sizes. In this case, you will haveto print several computerized site records, such as rental history, discountedunits, past-due accounts, etc. You will use these reports to determine who willreceive a rental increase.

Tenants who pay below the standard rate because of a discount or otherspecial are good candidates for an increase. Similarly, those tenants who oftenpay late are good candidates. Those who pay late and receive discountsshould be at the top of your list! Make certain you tell each new tenant whomoves in under a discount program that the discount could be changed or removedat the end of X number of months. Tenants who have been with you for more than ayear and have never received a rental increase should see a raise.

Handling Those Irate Calls

Once you have sent out your rental-increase notices, be prepared to field thecalls and tenant inquiries. A vast majority of tenants will accept the increaseas part of doing business. However, when you get an irate tenant, kindly explainthat it's your job to do as the owner or management company requests, and thatrental increases are standard. Let your tenants know you have enjoyed havingthem as renters, and remind them of any discounts they have received, or whatthe current "walk-in" rate for their unit now is.

If the tenant rants and raves about the increase and threatens to vacate,your response could be something along these lines: "The rental rates atlocal facilities are all within a few dollars of each other. We would hate tolose you as a tenant, however, if you feel you can get a better deal--a cleanerfacility, better location, longer access hours, more security features,etc.--then you owe it to yourself to go elsewhere. " Then remind them ofyour vacate policy and wish them well.

The facility owner or management company should rely on the input of theonsite manager when considering rental increases. I love it when one of mymanagers calls me to ask if he can raise his rates. It shows he is looking tobring in as much income as possible. Some managers think in terms of occupancylevels, bragging, "I have been 100 percent full for the last threeyears." I say, then your rental rates are too low and the owner is notmaking the income he should be. And you are not making the salary youshould be making! Ask yourself: Is it better to be 100 percent occupied with anincome of $40,000 per month, or 92 percent occupied with income of $42,000 permonth? Which numbers do you think an owner would like to see?

Rentalincreases are a necessary evil for the onsite manager. How you select tenants orunit sizes for increases or handle objections shows the type of professionalmanager you are (or aren't). As spring and summer approach, be prepared withadditional postage, paper and envelopes; research those rental rates and getthose letters out--at least 30 days before your changes go into effect.

Pamela Alton is the owner of Mini-Management^®, a nationwidemanager-placement service. Mini-Management also offers full-service and"operations-only" facility management, training manuals, inspectionsand audits, feasibility studies, consulting and training seminars. For moreinformation, call 800.646.4648.