Years ago, when I was just entering the industry and trying to understand pricing dynamics, at first I couldn't understand why strong communities ever struggled for prospects. It seemed that a really good community would be awash in prospects because, frankly, there are plenty of really bad communities out there they are competing with. But I quickly realized that as that strong community's occupancy went up, so did its pricing, which reduced demand. The decision to raise rents seemed completely logical to me at the time - a great community should be able to charge more, and it would be foolish to leave money on the table by not charging more. But what that did was put the community in a constant marketing push. As occupancy went up, rents went up, and the pool of prospects who would/could pay that level of rent went down. So we always had to push marketing to find those prospects who would fit that new requirement.
After thinking on the issue for years, however, I am unconvinced this solution is necessarily ideal or most profitable.
Read more...Is Raising Rents Really The Most Profitable Option In The Short Term? - Multifamily Blogs
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