Maximizing Rental Success

No surprises here: concessions tend to be far more frequent in markets where more new supply is delivering. Taking a look at stabilized existing units (i.e., excluding lease-ups which almost always have at least some degree of concession offered) we can see that the high-supply Sun Belt markets see concessions offered more frequently than some other spots of the country. San Antonio and Austin lead large national markets with about 25% to 30% of vacant units offering a discounted rent via concession. Meanwhile, Jacksonville, DFW, Atlanta, Phoenix, Raleigh/Durham, and Houston are all in that 20%-ish range of vacant units with a concession being offered. Minneapolis/St. Paul is the lone trend-breaking market that counters the high-supply Sun Belt narrative. But not all concessions are created equal and the average range of discounted rate can vary quite substantially. Austin, Nashville, and Salt Lake City for example are high supply markets where concessions run especially deep. Market-wide concessions average greater than five weeks free among stabilized assets here, and that means you can certainly find submarket-level (and especially property-level) instances where six-to-eight week concessions are being offered to compete with all the new supply delivering. But deep concessions aren't inherently a "high supply Sun Belt thing" either. Out west, Oakland and Sacramento are two examples of metro areas with relatively modest supply (at least in terms of % inventory delivering) that have pretty deep discounts for current move-ins. Like the Austin/Nashville/Salt Lake City examples, renters signing leases today can expect an average concession of about five weeks free (albeit harder to find properties where concessions are being utilized). A few additional thoughts and trends that caught my eye: -- We get asked pretty often if there's a "magic number" when it comes to supply tipping the balance for rent growth in a market. I don't know that I have a silver bullet answer to that question, but I will say this: notice how concessions really start to crank up in those markets with >4% of existing inventory delivering... -- ... that 4% threshold is also the point at which exceedingly few markets are currently seeing positive YOY rent change. (I'll share a chart next week that outlines this idea). A total of 37 of the nation's 150 largest MSAs currently have >4% inventory growth. But only six of those markets have positive YOY rent change (and even then, only three of those markets have growth that's much more than just a rounding error). -- Acquiring assets with deep concessions may help offset some market-level pressure in the near-term. After all, a one month concession burning off is equal to 8% of a 12-month lease's rent. The challenge here though of course is assuming that turnover doesn't spike upon that initial concession disappearing. This is doubly true in lease-up properties.

I am on a mission to answer the question "Do upfront concessions lead to lower renewal conversion ratios?" It has been a personal quest for multiple years now so happy to share my latest attempt to gain insight and the question I may have fostered as a result. For the quick readers - the size of the concession does not seem to have a correlation but the number of sites in a market that are offering concessions does.....but not when I would have thought. Also, concession may be actually creating demand vs. just incenting leasing of the demand that already exists. For those who want the details: I took the top 50 markets in the US and looked at the following metrics for the years of 2023 & 2024: Penetration of Concessions (% of the market offering any concession) Level of Concession (expressed as a % of rent) Renewal Conversion The answer: As you can see by the first chart below, there is clearly a trend line in both current leasing year (2023) and subsequent leasing year (2024) between the use of concessions and the renewal conversion experienced in these markets. The surprises: ~ There was no statisical correlation between the amount of the concession and renewal conversion in either year ~ The correlation is STRONGER in the current leasing year than the following leasing year. Strengthening the case for concessions as it could be deduced that they are helping to generate new lease demand without paying a significant cost at the end of the lease. ~ Only four (Akron, Austin, Pittsburgh & Tampa/St. Pete) markets had a lower renewal conversion rate in 2024 than in 2023. I knew renewals were strong nationally in 2024 but did not fully appreciate how uniform the independent markets performed. But we all know concession increased in 2024 in several markets so if above was true, we should expect lower renewal conversion in 2024 (which clearly was not the case). Enter chart 2 - which charts the delta between 2023 & 2024 on both renewal conversion and concession penetration. Same trend persists. More concession = Lower Conversions in the same leasing year. I still don't think we have the answer to year 2 of the lease but it does seam plausible that what many of us have postulated, concessions can create demand, might actually hold water.

Are you struggling to find consistently profitable real estate investments? Ever wonder how some investors always seem to pick the winners? The secret isn't luck—it's mastering market analysis. When I first got into multifamily real estate, I was eager to jump into deals. But it didn't take long to realize that rushing in without understanding the local market's nuances was a recipe for disaster. I quickly learned that to succeed, it wasn't just about finding a good deal—it was about finding the right market. That's when I shifted my focus to deep-dive market analysis, and it changed everything. At CalTex, we've built our investment strategy around this principle, ensuring every property we invest in has strong, data-backed potential. Here's why comprehensive market analysis is critical to successful multifamily investing: ➡️ Population Dynamics Knowing who's moving in or out—and why—can signal growing demand for rental housing. ➡️ Economic Health Local employment rates and industry growth paint a picture of tenant stability. A strong job market leads to higher occupancy rates. ➡️ Supply vs. Demand Understanding the balance between available units and tenant demand helps forecast occupancy rates and rent potential. The tighter the supply, the better the returns. ➡️ Rental Rate Trends Tracking rent prices and historical trends gives insights into what tenants are willing to pay and how much potential income growth you can expect. ➡️ Local Amenities & Accessibility Proximity to essentials, schools, and public transport significantly boosts property desirability. Higher desirability often leads to lower vacancy rates. ➡️ Regulatory Climate Understanding local regulations, such as rent control and property taxes, can impact your investment strategy. No surprises = higher returns. ➡️ Median Income Metrics A crucial affordability check is ensuring the local population earns at least 3x the proposed rent. This ensures tenants can comfortably afford to live in your property, reducing turnover and increasing stability. At CalTex, we incorporate all these factors into our market and deal analysis to identify properties primed for success. By leveraging market data, we don't just find good deals—we find the right deals. What other factors do you look at when analyzing a market?  Something you'd add to the list? Let me know in the comments!

From my experience, a common mistake real estate investors make is not doing enough research before jumping straight into a deal; sometimes, they simply forget to ask ALL of the right questions. Here’s my framework to make sure you have all the bases covered. I’m happy to share my editable deal analysis checklist – shoot me an email at [email protected]. - 1. Market - Supply: Current inventory and new developments entering the market. - Demand: Drivers of demand, such as population growth and business activity. - Context: External factors like adjacent markets, news, or events influencing the market. 2. Financials - Initial Investment: Development costs, acquisition costs, and capital expenditures. - Operations: Projected revenue (rental income and other streams) and operating expenses. - Financing: Debt structure, equity contributions, and cost of capital. 3. Strategy & Risk Management - Execution Plan: Timeline, milestones, and key actions to achieve the business plan. - Risk Analysis: Identification and mitigation of potential risks (e.g., leasing risks, market shifts). - Exit Strategy: Long-term goals and options for exiting the investment, such as refinancing or selling.

Most real estate companies are skeptical about the impact of strategic early engagement. But the success of One West Drive is hard to ignore. Here's how early preleasing, targeted renter nurturing, and a solid investment in branding can significantly drive leasing velocity and ROI. 1. Early Preleasing Strategy: - Engage with potential renters early and often, even during construction. - Leverage the "buzz" of the upcoming property to drive anticipation and desire. - The goal is not just to fill units quickly but to activate the property's community and spirit ahead of its opening. Outcome: - This approach has not only accelerated leasing but has also infused the project with vibrant community interest from the get-go. - One West Drive is already over 60% leased before its doors have even opened, with only 24 units remaining. 2. Renter Nurturing Strategy: - Make each prospect feel special and integral to the community. - Identify and engage with target audiences early, ensuring they buy into the vision and lifestyle the property promises. - Invite potential renters to be part of the journey, offering them a sneak peek into the lifestyle and community forming at their future home. Outcome: - This personalized approach has helped build a loyal base of future tenants who are invested not just in a home but in a lifestyle. - Early engagement has led to early commitments, reducing marketing spend post-opening and enhancing overall tenant satisfaction. 3. Investing in Brand Strategy: - Commit to a comprehensive branding and marketing strategy that goes beyond mere advertisements to embody the essence of the community. - Move away from piecemeal marketing efforts to a cohesive, team-driven approach that ensures every touchpoint with prospects reflects the property's values and lifestyle promise. - Concentrate on crafting a brand experience that not only attracts but retains tenants, thereby driving net operating income (NOI) and ensuring long-term property stability. Outcome: - The focused investment in branding has not only differentiated One West Drive from competitors but has also significantly contributed to its financial performance and market position. - The property already enjoys a stable, engaged community that resonates with the brand's promise. TAKEAWAY: While many still doubt, the proof lies in the numbers and the stories. Early preleasing, dedicated renter nurturing, and strategic brand investment are not just trendy buzzwords—they are proven strategies that yield tangible ROI. Early NOI is ROI... In the competitive real estate market of 2024, these strategies are not just advisable; they're essential.

Six years ago, our leasing process lived in someone’s inbox. Today, it lives in Whale. Everyone follows the same workflow. Everyone knows what “done” means. That shift didn’t just improve operations. It made us a better company. If you’re trying to scale a property management business or lead a more accountable team, these are the three tools we rely on at Coastline Equity every day: 1️⃣ AppFolio – The foundation. It’s our operational core, leasing, maintenance, and accounting all live here. But software is only as strong as the workflows inside it. 2️⃣ Whale (usewhale.io) – Our SOP brain. Every process lives here, from onboarding a vendor to finalizing a lease renewal. Visual. Searchable. Mobile. This is how we protect quality and train at scale. 3️⃣ Bloom Growth™ – The system that keeps leadership aligned. Scorecards. Rocks. To-dos. This is how we track progress and solve issues weekly. It’s EOS Worldwide, operationalized. None of this is a hidden secret. These are the tools I talk about all the time, because they work. If you’re navigating growth or trying to clean up the chaos, start with one documented process. Then build from there. What tools or systems have helped you scale with clarity? #PropertyManagementExcellence #RealEstateLeadership #PropTech #SOPs #EOS #OperationsThatScale #PropertyManagement #Leadership

Maximizing Returns on CRE Investments: The Overlooked Strategy When we talk about maximizing returns on commercial real estate investments, the focus often falls on buying right or securing the right tenants. But there’s another crucial factor that’s often overlooked: operating it right. Early in my career, I worked on the property management side and noticed a common trend among new owners a few years into their investments. Some felt disappointed, while others were thrilled to exceed their projections. Why the difference? It usually boiled down to two key factors: 1. Over-optimistic projections: The investment sales broker may have painted a rosy picture to make the deal look appealing. 2. Operational excellence: The operations team either enhanced the property’s performance or, in some cases, struggled to meet aggressive targets. We often celebrate big sales and overlook the unsung heroes: the operations team. - They’re the ones reducing operating costs, allowing for higher rental rates and improved NOI. - They’re the ones keeping tenants satisfied and profitable, ensuring long-term retention. - They’re the ones maintaining the property so well that leasing becomes a breeze. On the flip side, poor operations can destroy value, returns, and tenant satisfaction. My advice to investors? Always have a solid plan for the operational side before making a purchase. It’s the difference between feeling duped and beating your projections.

The first 90 days of a lease-up will either set the pace,or set you back six figures. I’ve seen it all. Empty models. Wrong pricing. Weak hires. Marketing that doesn’t match the product. And leaders who realize too late that they’re reacting instead of orchestrating. Here’s how I avoid the most expensive mistakes in a lease-up: • Hire for hunger, not just experience. Culture starts with the first three people through the door. • Nail your digital presence before your banner goes up. You only launch once, make it count. • Be best friends with construction. Missed turns, slow unit releases, or misaligned delivery dates = massive delays. • Walk every unit, every week. You don’t lease what you don’t know. • Don’t just “track leases” track conversion, follow-ups, and tour readiness daily. Your lease-up is a race against time and perception. You don’t get grace you get one shot to build trust, traffic, and traction. The first 90 days are the most expensive days of the deal. Lead like it. What’s one move you always make in a lease-up to protect your timeline or budget? #LeaseUpStrategy #MultifamilyLeadership #PropertyManagement #OperationalExcellence #AvoidTheChaos #First90Days #OccupancyMatters #ExecutionWins #PeopleProcessPerformance

Let's talk about concessions again. As we all know with so much new product hitting the market, competing has become increasingly challenging, especially for vintage assets. Even my most stabilized property, which typically holds steady at 94% occupancy, is now trending closer to 88% over the next 60 days. We've tried upfront concessions, but I'm leaning more toward prorated concessions to maintain long-term stability. The challenge with prorating is that when residents reach the end of their lease, they're not only adjusting to the full rent amount but could also be facing a renewal increase. Here are some strategies I’m exploring to make prorated concessions more effective: 📌 Weekly Discounts: Instead of offering one month free upfront, break it into smaller discounts — like one week free each month for four to eight months. This helps residents manage expenses after move-in costs without overwhelming them when their lease ends. 📌 First-Year Discount Plan: Offer a stepped rent approach where residents pay a reduced rate for the first few months, gradually increasing to the full rent amount by the end of the lease. This allows them to adjust to market rent more gradually. 📌 Split Concessions for Retention: Provide a portion of the concession upfront to help with move-in costs, then apply the remainder as monthly credits spread throughout the lease. This approach balances immediate savings with long-term affordability. 📌 Utility Credit or Fee Waiver: Instead of a standard concession, consider applying the savings toward utilities, valet trash, or parking fees. This helps residents feel the value while still supporting your revenue goals. The goal is to provide value without creating a financial shock at renewal time. Balancing incentives with long-term strategy is key. What creative strategies have you tried to manage concessions in this competitive market? I'd love to hear what’s working for you! #Multifamily #LeasingStrategies #Concessions #PropertyManagement #clearpm

How to design a multifamily Lease-Up that creates a 4x return on investment: First, the principles: - Start early. If a shovel is scheduled to hit the ground it's not too early. - Build & execute a holistic Go-To-Market strategy. Tactics without strategy causes excessive marketing costs and stalled lease ups. - Align your marketing & leasing teams. Disconnected silos kill leasing momentum and create a disjointed resident experience. Go-To-Market Strategy is not often a phrase used in multifamily. The result is a waste of money on "spray and pray" marketing tactics that don't drive actual leasing results across absorption, revenue acceleration, and resident experience. Avoid that with real strategy. A Go-to-Market strategy in multifamily is a detailed plan to introduce a project to the market, reach the right target audience, and achieve a competitive advantage. Properly designed, it will ensure a positive ROI with faster leasing (including much more leasing even prior to building completion), quicker revenue realization, earlier positive cash flow, and a better resident experience. GTM should be fully documented and include: 1. Target resident psychographics, behaviors, wants, and needs persona analysis. Who and why will residents choose your property? 2. Unique value proposition and competitive advantages. How is your project going to be differentiated from the competition? 3. Brand positioning and core messaging, tailored by audience. How will your project look and feel and talk to it's audience such that it creates a powerful attraction? 4. Activation and Awareness Playbook. How are you activating your site, offline/locally AND online to start building awareness. 5. Demand Playbook. There are literally 100s of ways to waste money attempting to attract leads. How are you cost effectively driving demand - inquiries, leads, tour requests - from your target audience? 6. Nurturing Playbook. Resident journeys & apartment searches are more convoluted than ever. How are you nurturing and building trust with prospective residents such that the only inevitable choice is your property? 7. Organic Playbook. Content plays a bigger role than ever, but attention is more scattered than ever. How will you make appropriate investments in the right type of organic content that actually works? 8. Leasing Enablement Playbook. Disconnected Marketing and leasing teams is THE biggest breakdown in Lease Ups. Marketing doesn't end at a "lead", and leasing doesn't begin at an "appointment". The two need to be inextricably linked to maximize absorption. Processes, feedback, & content must be shared to analyze, adapt, and amplify what is working. Within each component and playbook there is a LOT more detail to build and execute the GTM plan. I will dive into each with real world examples in future posts. ➡️ Follow Michael DiMella to see all the follow up posts. #multifamily #leaseup #marketing #propertymanagement