Source: Todd Ortscheid on PMAssist Industry Insights. Originally posted February 7, 2025.
In a soft rental market, price and presentation matter more than gimmicks. Here’s why rental incentives don’t work—and what actually does.
SFR Consumers are Not MF Consumers
In order to figure out the best way to get your units rented as quickly as possible for the best rate possible, we first have to consider how the consumer behaves when looking for rental properties. And when it comes to multifamily versus single-family, there are plenty of commonalities, but also some key differences.
Multifamily Renters:
- Generally start their search online, but only to narrow down their search
- After locating communities that interest them, they tend to drive around and visit several of these communities to compare and contrast
- Almost always have to interact with a leasing consultant in the apartment office in order to view a property
- Tend to view an apartment as a temporary home without a whole lot of regard for its exterior appearance or how it makes them “feel”
Single-Family Renters:
- Generally conduct their entire research online and narrow down to one property or a small handful of individual properties to go tour; they will frequently apply to the first property that interests them without even touring others
- Frequently tour the homes either using self-showing technology or with a real estate agent of their own, never once directly interacting with the property manager who listed the property until it’s time to apply
- Are more focused on things like the appearance of the house and its floor plan, as these tend to be very diverse in SFR but pretty homogeneous in many markets among MF
- Tend to “fall in love” with a specific home and make decisions on that basis
When you examine these generalities (and they are, admittedly, generalities), it becomes clear that these are different consumers who need to be appealed to in different ways. What works for MF won’t work for SFR, and vice-versa.
Rent Incentives Need to be Sold
Unlike the rent price, rental incentives aren’t in the headline of a Zillow ad, so the only way to make them useful in reducing your days on market (DOM) or improving your occupancy rate is to have some mechanism to get them in front of the eyes of consumers. The problem is, that’s not very easy in SFR because of how SFR renters look for properties. Let’s look at what a renter sees when searching Zillow, the source of around 80% of renter leads:
This was a quick search just in our home city. What’s important here is what the consumer actually sees:
- Location on a map
- Photo of the home
- Price
- Beds & baths
- Address
- How long it’s been on the market
That’s it. That’s the first impression you get with renters on Zillow. Unless you decide to replace the photo of the house with a graphic that includes your rental incentive, which is likely to be counter-productive since the most valuable part of your listing is the photo, then there is no way for your potential renter to even know that you’re offering a rental incentive.
How does Zillow recommend to advertise rental incentives? Their advice is to put it in the marketing description. The problem is, most renters are never getting to the marketing description. Don’t believe me? Let’s ask ChatGPT:
If you understand how ChatGPT works, then this is compelling information, because it is drawing from all of the information publicly available on the internet to determine consumer sentiments on such things. In other words, it’s probably pretty reliable. And what it tells us is that marketing descriptions are only useful if someone is already highly interested in your property based on the photos, location, etc., and renters are likely to only skim your descriptions even then.
This means that it in order for rental incentives to be effective, you need to have some way to actively sell them to people. Apartment complexes have an advantage here, because renters are driving around and talking to apartment leasing consultants who can push their incentives. In the SFR world, we usually don’t get this chance. Not only are renters less likely to drive around and look at a bunch of different single-family homes, but it’s likely that the homes that they do look at, they’ll look at by themselves without you there to sell it to them. Some of you may be reading this as an argument in favor of in-person showings again instead of using self-showing technology, but nothing could be further from the truth. Self-showings give you an advantage because it’s what SFR renters want due to the convenience. Getting rid of that just so you can push rental incentives puts you in a worse competitive position.
Another advantage that apartment communities have here is that they can literally advertise on the side of their giant buildings. It is not uncommon nowadays to drive down the expressway and see apartment complexes alongside that have huge signs saying things like “first two months free!” We don’t exactly have that same marketing opportunity in the SFR world. Not only are our homes usually nestled away in neighborhoods, but even if you did hang a big poster out, the HOA is likely to fine you, or the neighbors are likely to lose their collective minds.
No, we need to focus on what actually gets our target consumers to pay attention, and that’s three things:
- Price
- Location
- Appearance
This is what we compete on, folks. That’s it. It’s just like an airline ticket. When you go to Expedia and need to find a flight from Chicago to Miami, you’re looking at the ticket price, the time it leaves, and how many stops there are. The airline can drone on in their television ads about who won the latest JD Power award for best airline, who has the best seats, who has the best inflight entertainment system, etc., but ultimately the average consumer is just going to decide based on price, time, and stops. We’re operating in the same situation, only it’s price, location, and photos.
Incentives Set a Bad Precedent
Not only do I argue that rent incentives don’t really work for us in SFR, but I argue that they are setting bad expectations for your renters that you’re going to regret later. If you sign a 12 month lease with two months of free rent, you have effectively given that tenant a 17% rent discount, and they aren’t going to forget that next year. Tenants aren’t stupid. By offering that incentive, you have broadcast to the tenant that you’re desperate and doing unusual things to get that property rented. A measly one year later, they aren’t going to think that your situation is all that different, and they’re going to hold it over your head and use it as leverage at renewal time.
“You gave me two months free last time, so you’d better not raise my rent or I’m leaving.”
You’ve setup a scenario where the tenant knows that you were desperate to rent that property, because you broadcast it openly with free rent. This isn’t the case if you just price the rent 17% lower, because there is no obvious incentive being offered. The renter doesn’t know the market well enough to know that you’ve actively discounted the property that deeply to get it rented, they just see a property that is attractively priced on Zillow. But when you openly give away free rent, it’s a sign of desperation. You might as well put a big headline on your lease renewal offer that says “Please, play hardball with us and try to haggle!”
This is less of a concern for apartment complexes, because their renewal rates aren’t all that high to begin with. A good SFR property manager usually keeps a tenant for over 3 years on average. By contrast, apartment complexes are lucky to maintain a 50% renewal rate. Apartments are simply more transitory forms of housing, and while renewal rates are certainly metrics tracked and constantly worked to improve upon, when you’re starting with an expectation that only half of tenants are going to renew anyway, what the lease renewal rate is going to look like is a much less pressing concern than the empty unit you have right now. It’s just a shorter-term relationship than SFR rentals are.
Focus on Price & Photos
Rental incentives aren’t the way to go to solve your DOM and occupancy rate problems in this soft market. So what is?
First and foremost, price is king. Just like on Expedia when searching for a flight, the first thing you have to do is make the cut on the search results. If you’ve priced your house at $2,095/mo and the consumer is setting their search criteria at no more than $2,000/mo, then you aren’t even in the conversation. Getting rid of this idea from your landlord clients that you should “start high and see how it goes” is the first priority. This isn’t a house sale, and it can’t be treated like one. People will frequently search for houses for sale that are a bit outside of their target price, but renters generally don’t do the same because rents aren’t viewed as negotiable to the same extent that house sales are. You need to set the rent at the fair market price of the house right out of the gate and stop playing these silly games. The reason your DOM is so high is because the first two weeks is lost to this silliness, usually because you’re bowing down to the wants of your landlord client rather than educating them on the importance of setting the right price.
Second, listen to what the market is telling you, and listen fast. It doesn’t take a month being on the market to get a sense for what the market’s response to your listing is. You should be making pricing decisions WEEKLY (unless it’s a weird circumstance like a major holiday week). If you don’t have 2-3 people touring the house that week, then it’s time to drop the price. I don’t give a damn what you think the fair market price should be, you aren’t the market and your opinion doesn’t matter. Your opinion is only relevant at the beginning when the first price is set. After you have actual data from real consumers, your opinion is meaningless and only the market data matters. If people aren’t touring your listing, then it’s because of one of two things:
- You have the price wrong; or
- Your photos suck.
That’s it. Those are the options. The location is irrelevant, because you can’t change that and it’s baked into the fair market price anyway. Either people aren’t touring your property because your photos aren’t compelling, or because the price isn’t appealing. So take a look at your photos, and if they’re professional quality already, then it’s time to cut your price. If you aren’t using professional photos, then you need to start. I recommend PlanOmatic, who operate nationwide and integrate with your PM software. After you’ve solved for that factor, if your listing still isn’t getting attention and showings, then you and your client need to bite the bullet and accept that the consumer is demanding a lower price. “But it rented for this much last year!” Mr. Market doesn’t give a damn. “But the house down the street rented for more six months ago.” Mr. Market doesn’t care about the house down the street or what happened six months ago. You’re renting THIS house TODAY. And the market is telling you what it’s worth. Listen, or suffer.
Source: Todd Ortscheid on PMAssist Industry Insights. Originally posted February 7, 2025.
Todd is a property management company owner and industry consultant, as well as a frequently sought-after public speaker on topics related to revenue maximization, profit, systems, and process automation.
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