First rate change is several years

rmason

My company is being purchased within 60-90 days.  Assume new owner will direct a rate review/change shortly after signing papers.  

We haven’t had a rate change (units or tenants) in several years.  Currently at 93.7% occupancy.  Most unit prices are below street rate and unit price of same size unit varies.  Tenant rates vary by as much as 39% below street rate.  Is there a recommended order to correct all these discrepancies?

Do we correct the street rate first?  Do we raise rates gradually every six months or so?  Or do we raise them with one change.  I know we will lose tenants and get those unhappy tenant telephone calls.

Appreciate your thoughts!  Thank.

themage

We generally raise street rates first, in March or April, and then we set up the current tenants to go up in June. We generally don't raise everyone to street rates, just get them a little closer each year.

MamaDuke7

Raise street rates immediately.  Raise existing tenants by 10% or so every 9 months.  But I wouldn't do more than about 10% of your tenant base each month.  Start with the longest tenants first.

And make sure covid mandates in your area don't prohibit you from rate increases on existing customers.  Some areas still do, dsadly.

rmason

Assume that once the street rate is adjusted on units requiring it the current tenant remains at their rate until they move out and then the unit goes to street rate? 

Also is there a program that can monitor all competitors within a specified distance? Or do I go back to my old way of visits, calls, and check their website?  Thanks

teamcapitola

Had a similar issue awhile back. We had a bunch of customer who rented back in 2010 when we first opened, and enjoyed really, really, really low rates.

Our annual increase is between 5-6%, but even doing that we had a lot of legacy tenants who were paying 20-40% less than current street rates.

We ended up drafting a letter for a one time major adjustment  pushing them close to current rates; we gave them 60 days and allowed for a lot of yelling. We lost a few, but the majority stayed since we kept the adjustment slightly under other local facility same size rates.

We were right around 94% occupancy at the time, and most of the units were high demand sizes.  We ended up renting the vacated units pretty quickly.