The rental landscape has changed, to say the least, over the past two years. Michael Zaransky, founder and CEO of private equity real estate firm MZ Capital Partners, explains how his company plans its marketing budget for next year.
As with many other businesses, fall is a time to look to the future in the multi-family real estate industry – for establish budgets for the coming year, plan and project. And while this asset class has remained remarkably resilient during the pandemic, the main marketing lesson learned over the past 18 months is simple: be flexible.
Be prepared to rotate your plan at any time because you never know what might happen to you. Here are some things to consider when creating your 2022 marketing budget.
Take a look at the state of the market
At MZ Capital Partners, the Northbrook, Illinois-based private equity real estate firm that I founded (and of which I am the CEO), we have set our marketing budget at pre-pandemic levels, knowing that demand remains high. And yet, renewal rates and rents are still strong, and there is a shortage of new homes.
Indeed, the overall vacancy rate nationwide stood at just 5.7 percent in the second quarter of 2021, compared to 8.5 percent in the fourth quarter of 2020.
And he should stay between 5.25 and 5.75% until the end of the year. In addition, at the national level 95.6 percent of rents had been paid in June 2021, which is comparable to the rates for June 2019 (96.0) and June 2020 (95.9).
Vacancy rates have undoubtedly been affected by the national moratorium on evictions that began in September 2020. Steve Theobald, vice president of Maryland-based real estate finance company Walker & Dunlop, written in August 2021 that a resurgence in the number of available jobs is expected to compensate for the end of the moratorium or the end of the subsidies available to those affected by the epidemic.
We therefore remain hopeful that some of the high demand will persist and renewals will continue to be at higher levels, with the result that many of those marketing dollars will be saved over the next year.
But again, it’s worth being vigilant – to understand that current market conditions won’t last forever, and changes to your marketing strategy will undoubtedly be necessary at some point.
Rely on technology
The multi-family sector was ahead of the tech curve, having embraced innovation as part of its marketing strategy long before such advances were made necessary by the pandemic.
The main one of them was the use of virtual tours – something 2 out of 3 tenants preferred, according to a 2020 LCP360 survey – on owner websites, as well as in emails to prospects and in social media posts.
And indeed, the National Council for Multifamily Housing concluded that 14 percent of prospects would be comfortable renting an apartment without setting foot there first, a number that is expected to increase in the years to come as virtual tours become more sophisticated. An expected adjustment is an increase in virtual reality, which should be a 209 billion dollars in business by 2022.
Of course, some old-fashioned marketing approaches still have their place. A 2019 Zillow study noted that 71 percent of prospects expect to hear from property managers within 24 hours of their request, but only 51% actually do.
I would say 24 hours is way too long in today’s environment. And one publish on the Wepromote.com site suggested that increased use of gadgets – especially those involving artificial intelligence and machine learning – would free team members from repetitive tasks and allow them to respond to such requests in a timely manner.
Use the information you have
While marketing has changed dramatically in the 40+ years that I have been in the business, I would say it has become easier than in the past due to some of the analytics and software we use to track leads.
The metric we pay most attention to is the source of quality leads – leads that end up being converted into rental inquiries, rather than just inquiries.
The point is, the guesswork has been taken out of marketing. The numbers are the numbers. They are instantly available and of infinite value. They allow us to determine which Internet advertising providers are bringing us the most qualified leads.
This is especially valuable as it may differ by region, and we, in fact, own properties in different parts of the country. So we can explore and find out how to get the most out of our money in any region.
Going forward, we see growth in urban markets. In contrast, suburban markets – markets that were spurred on by the trend towards remote work earlier in the pandemic – have remained strong while expanding. This would indicate, as mentioned earlier, that there would not be much need to devote more capital to marketing at this time.
At the same time, it is best to keep in mind that change can happen at any time and that it is crucial to adapt. If we haven’t learned anything else from this public health crisis, we certainly have.
Michael H. Zaransky is the Founder and Managing Director of MZ Capital Partners. Founded in 2005, Northbrook, Illinois-based MZ Capital Partners operates multi-family properties.