Closing any real estate deal is impossible without understanding all the facts. Several property management decisions require direct and deep knowledge of the subject; otherwise, it can lead a company towards losing money as well as business. When it’s about property management, you must know two important concepts and the difference between them. These include Rent Optimization and Revenue Optimization. Let’s discuss them in detail and determine their role in successful property business.
Rent Optimization
Calculating the rental price of any rental property often becomes difficult because it is important to strike a balance between the true value of your property and the optimal rental price. There are several factors on which this depends, such as market competition, property location and desirability, and the overall state of the rental property market. You need to do robust research on all these relevant factors to choose the most suitable price. You can achieve it with the rent optimization feature of any property management software.
Rent Optimization allows you to maximize your rental information by taking into account all the facts mentioned above along with relevant variables to ensure that you don’t leave any money on the table. You can easily price new and renewal leases at the current market rate and adjust them accordingly to get the best possible income through rent optimization. You don’t have to conduct manual market research daily or weekly to make the right pricing decisions.
Revenue Optimization
Revenue Optimization involves customer behavior prediction using analytics so that property managers can optimize property availability and price to generate the maximum revenue possible. If we particularly talk about the rental system, the primary purpose is to increase revenue while renting the same number of rental properties. It is all about matching supply and demand. It also includes successful revenue management, which involves understanding how customers think and their insights into value. This may also mean refusing to rent an apartment today so that you can rent it for a higher price tomorrow. But it might also mean recognizing when the demand is less so that you can rent at a lower price.
“Selling/renting the right property to the right customer at the right time through an appropriate distribution channel with the best cost efficiency” – is a revenue optimization!
Below are some reasons why property managers should choose a property management tool equipped with a revenue management system.
- To make the best decisions while setting rent rates, having access to real-time information is vital. Most property managers decide to rent through manual calculations, leaving room for errors. By adopting a revenue management system, they can do it automatically. An excellent property management tool incorporates different variables such as leasing velocity, available inventory, current rental rates, and market position to help you make decisions on pricing. The right tool also tells about the factors overlooked when calculating rates, giving your portfolio an edge over the competition.
- Continuously adjusting the rates based on different factors, prospective residents have the incentive to lease quickly and lock the deal before it’s gone. Property management software with a revenue optimization system can help you set the correct prices, minimize vacant apartments and get more business.
- A world-class revenue optimization system combines a property manager’s operational experience with software design. You would definitely need software that is designed for the real estate sector. It should be flexible, allowing property manager’s view and override recommended prices, improve customer support, and empower the leasing team by giving customers alternatives in pricing based on lease length, move-in date, and amenities.
- Choosing a revenue optimization solution to generate property pricing reduces exposure to fair housing infractions. This is because subjectivity is completely removed when using pricing, and an objective source determines it.
REDA: Flexible & Future Ready Property Management Software
REDA is a Property Management CRM Software. It has a unique data 7 process design that provides immense flexibility to property managers to efficiently manage any property type varying from residential to commercial and parking lot. REDA is designed around a multi-dimensional approach to help real estate businesses increase their profits while simultaneously scaling up their business operations. We do this through revenue optimization, in which we follow three important strategies. These include:
- Maximize: We help you maximize a few things through innovation in the property business and the finest user experience. This will automatically maximize – occupancy, renewals, and resident success. On the other hand, you can help your employees make the highest and best use of their time and productivity.
- Optimize: You can easily optimize rental rates, revenue forecasting, ROI analysis using metrics, team collaboration (both internal & remote), and cash flow.
- Minimize: You can minimize Non-Performing Assets (NPAs), costing you high but not contributing anything to your business. It would help you minimize holding costs by renting those properties in advance whose leasing agreement will end soon. Avoiding communication delays like vacant properties and their numbers, rent issues with the tenant, and others are a few things that you must know to get the things done at the right time. You can minimize taking risks by avoiding rent agreement renewal of tenants who have not been paying rent on time. You can reduce cash delinquency due to improper cash management.
Everything you need to minimize, maximize and optimize can be quickly and efficiently done using the REDA property management system. From vendor management to estimations, RI analysis to budget management, and agreement renewal to termination, we can help you handle everything in one place using a single platform –REDA. For more information, feel free to connect!
