Dynamic Pricing in Multifamily Real Estate
Dynamic pricing isn’t only limited to airlines and hotels!
You, too, can decide what the rent for any specific unit should be on any given day. To achieve this capability, you will need to build an intelligent data infrastructure that provides you demand and supply information.
What is Dynamic Pricing?
Dynamic pricing is the practice of opportunistically setting rents and other charges by matching supply and demand. So, instead of publishing your rents on your website and being obliged to honor them week after week, you can decide what the rent for any specific unit should be at any point in time.
Life With Dynamic Pricing
Once dynamic pricing is implemented in your multifamily portfolio, you will have the ability to decide on the “optimal” rent for any unit on any day.
Your leasing agents will be able to look up the latest recommended rent and drive the prospect conversation accordingly. Your daily or weekly meeting with your leasing team will cover the upcoming inventory in specific detail (bedrooms, baths, floor, amenities, upgrades, view etc.) and decide on rents on a case by case basis.
Capture very specific information about the demand from phone and web inquiries
Data Intelligence for Dynamic Pricing
You might need to overhaul your lead management process so that you capture very specific information about the demand. Of course, you have to have a healthy number of leads coming in in order to compose a picture of the demand.
Inquiries from prospective tenants (whether by phone, web form, walk-in or any other method) should capture detailed information about what the prospect is looking for. At the very least, capture the following:
- Desired unit type (bedrooms, bath ….)
- Move-in date (range)
- Desired rent (range)
- Location (assuming you have multiple properties in the same area)
- Amenities and other features desired
Companies that can capture this information from in-bound inquiries are setting themselves up nicely for implementing dynamic pricing.
On the supply side, make sure you know what inventory will be becoming vacant and ready lease, and when.
Demand vs Supply for Apartments
Match the supply and demand by week and unit type. This can be a simple Excel report that gets updated daily. Take this report into your leasing team meetings and decide on the rents to be offered.
One process closely related to Dynamic Pricing is Leasing Velocity. Here is the Leasing Velocity blog post, and a Leasing Velocity project with RentViewer.