Seth Godin has an excellent post today titled “The bitter taste of nickels and dimes” You can read the details of Seth’s post here à http://sethgodin.typepad.com/seths_blog/2008/08/the-bitter-tast.html
It provoked me to ponder about the things that we do in the Apartment World that create separation and aggravation with our residents.
One such is an extra fee or charge to go to a Month to Month Lease. We have this argument regularly in our own office. It is pretty silly to penalize a great resident because they want to stay longer. We are saying sure, you can stay longer, but it will cost you more tomorrow than what it did today, yet we have added no additional value, only exasperation. There certainly are the pressures from lenders and partners to not have month to month leases and the unexpected vacancy that can occur quickly. However, it really makes no sense from the resident’s point of view. Perhaps we should completely abolish this silly rule or to Seth’s point do we Waive them early and often to create Delight? What are you doing at your property? What does the community you think about this? We welcome an open conversation surrounding this, and Enjoy the Weekend!
10 Responses
I’m a new landlord with only one single-family house at this point. But what I try to do to create “delight” is that I perform things that I require my tenant to perform (agreements in the lease). For instance, when I was called for a slow drain in the bathroom, instead of pointing out that it was her responsibility to call a plumber if she couldn’t figure out how to use a plunger and Draino, I made an appointment and went to investigate. I discovered exactly what I suspected – hair clogged in the trap of the bath sink. I pulled off the trap and cleaned it out but in the process, I discovered that the toilet was a little wobbly and water was starting to lead around the base.
Since the toilet had been replaced just 2-yrs. ago, I tried tightening the bolts and that seemed to solve the problem. The wax ring was probably compressed more over the past two years and allowed some slack in the bolts. Easy problem to fix.
If I had been stubborn and not investigated, the problem could have been very costly if ignored.
Also, I was able to educate my tenant an the need to use drain killer once in a while and to be careful about what goes down the drain. She was very thankful – I saved her money!
Another way I created a sense of delight for my tenant was that I gave her a 3-month reprieve on her portion of rent. As a Section-8 tenant, she only pays $110 per month for her portion. I gave her a 3-month suspension of rent so that she could apply it to painting the first floor. Since she is a wonderful decorator and takes great pride in keeping the place clean, I gave her permission to paint it any way she likes (within reason) and that I would contribute to the cost by $330 (her portion of the rent).
She is one happy tenant and I am one happy landlord! I do realize, however, that this would be totally different if she were one tenant in an apartment complex. Probably a whole different ballgame in property and tenant management.
Dave Schmidt
http://ComfyQuarters.com
Dave,
Thank you for the comments and sharing your experience. Good Luck on your quest
Dave,
Sounds like you are off to a great start.
Thank you for taking the time to post a comment to the blog. It is stories like this that help knit the fabric of the community.
Best providence to you! M
Nice post Eric & Mike. We need more of these “conversation starting” blog posts. This is something we have struggled with over the years as well. I still struggle with giving rent increases to those willing to sign another 12 month lease.
While I like Seth’s post and 50 cents worth of free ice would have been a good customer service decision, I do think that the issue was in the way the 50 cents was presented. If the pricing for a hot rooibos poured over a glass of ice was just listed as $2.29 then there wouldn’t have been the issue. Seth wouldn’t have known they included a 50 cent charge for ice. He would have just bought an expensive iced tea. Then, this winter when he wants the hot tea Whole Foods could surprise him by discounting the drink 50 cents because he doesn’t need ice. We do this with washers and dryers. While most of our apartments do not come with washers and dryers we will typically quote prices including that extra $40 and if the prospect doesn’t need a w/d then we say “Great, I can now save you $40/mo.” Everyone’s happy and we never have to give away w/d rent free just to make a deal.
When trying to make “customer service” decisions I always lean back on my days with Toyota and Lexus. While these brands are known for their quality, the company also takes much pride in customer service. That being said, their position was that nothing is for free. For example, of someone had a concern or issue with a vehicle that was out of warranty Toyota and Lexus would not just repair a vehicle for free just because a customer was loyal or a good customer. Instead, we would ask for some type of participation. Let’s say someone had a repair just out of warranty, maybe Toyota would cover the parts while the customer covered the labor. This way that person understands there still is a warranty, but feels good about the brand because we helped them. Now, for the car over 100,000 miles helping on repairs was rare, but for customer loyalty we might offer a $2000 rebate or their next new vehicle purchase. Toyota and Lexus are in business to sell cars and make money, and sometimes there is a fine line for when to charge more or give things away in the name of customer service.
In our industry we must also be fair. I feel that Fair Housing guidelines somewhat limit customer service decisions we can make (especially with rent or concessions). For me, I think as long as you are consistent in our industry your brand will be fine. I think you can put yourself at risk if you are not consistent. In this situation with MTM lease fees it is clearly outlined in the original lease for us, and by someone committing to a longer term they get a better rate. I think this helps follow the Toyota model by someone needing to make a commitment or do something for the company in order to get a better deal. We’ve also recently begun to use the Yieldstar Revenue Management System with a few of our communities. Instead of giving concessions we are able to offer discounted rates by asking the prospect to make some type of commitment. By asking the prospect to move-in 2 weeks earlier or commit to a 15 month lease the system may discount the monthly rental rate $20 or $30. The property actually ends up making the same revenue, but the customer is happy because we gave them choices and helped their budget. On renewals this works similarly. Depending on what the resident is willing to commit to for a lease term will dictate their price.
I think in business we have the opportunity to make great “customer service” decisions that help our brands, but we need to be cautious as to how they effect our bottomline as well.
Mark, Good Morning
You make some excellent points here and thanks for sharing. The issue with Fair Housing does dilute what Seth refers to as treating your best customers differently, I appreciate the open discussions here, keep them coming. I would also like to here more about your experience with Toyota and Lexus
I’ve always thought a MTM fee was kind of silly for someone who is extending a lease. If you did eliminate them, just think of the EXCELLENT word of mouth that would create, especially in markets like the east side of Seattle where you have a lot of people who are on tech contract jobs. Word travels fast through your contractors (I work with a lot of them personally) and they KNOW where the good housing deals are. Want to get first crack at Microsoft’s new crop of contractors? Be the more flexible then the apartments across the street.
Do you really have that many month-to-month leases for this to be an issue? On average I would assume a 300-unit property in Atlanta might have anywhere from 3-8 month-to-month leases. With that small of a number does it:
a) Matter to the resident who is probably in a unique situation (maybe a job transfer on hold) that appreciates the flexibility that can be bought by paying an extra $100/month?
b) Come up as an objection when someone is leasing a new apartment with you?
c) Create that much of an incentive for someone to sign a new 12 month lease renewal?
I appreciate the thoughts and conversation, but I have wonder if it really matters to anyone other than us? If the answer is “no” than I guess you could argue the case either way.
Just a few thoughts… 🙂
We have quite a few MTM leases. Honestly, people KNOW it’s more expensive, and they expect it to be more expensive.
The simple explaination: It’s a priviledge to be able to go month to month.
If they’d moved in at a 1-month lease, would you not have charged them a higher rent? If someone is MTM, and we only require a 10 day notice (in CO, at this property, for this company) — it’s definitely worth paying the extra amount for the flexibility it offers.
Okay, after reading Seth’s post, I don’t see that it relates to MTM at all.
Here’s what I think of. Charging $25 for an extra copy of an apartment key. That is freaking ridiculous, and when ANY resident can say, “Excuse me, but I can go to Home Depot and copy it for $2.50…” — What leg do we have to stand on? “Well, it’s that expensive because it’s a huge pain in the butt for me to do anything for you.” — I think it’s the LITTLE things we DO nickel and dime people for that make them upset.
We should re-evaluate all the little charges. Charging $3 to replace a drip pan? Seriously? It’s an item in the home that will NOT be new or clean when the tenant leaves. I consider that to be “normal wear and tear” — and yet when a resident sees the $12 charge for those, they’re going to be really upset. It’s not a large amount of money (akin to .50 for ice) – but it’s equally as ridiculous.
You’re absolutely right, Jennifer. Very good points in your first post. Those were the exact same examples that came to my mind too (referring to your second post). Want to come work in Atlanta? 🙂