Riverbend: Concessions vs. Closing Ratio
Riverbend is a 240-unit property at 88% occupancy - 29 vacant units - averaging 48 days vacant per unit at $1,450 rent. It sees about 95 visits a month and closes 12%, against a 20% portfolio benchmark. Of 78 leases expiring next quarter, the team projects 30% non-renewal because a new 300-unit competitor two miles away is pre-leasing at $1,395 with a gym and opens in 90 days. Last year's promotion, two months free on a 12-month lease, was taken on 62% of new leases. Marketing spend is $9,400 a month: $5,100 billboard, $2,600 print, $1,700 ILS. The website has no floor-plan or pricing pages, and 41% of inquiries arrive after 6 p.m. or on Sunday, when no one responds. The owner wants to double the free rent to reach 93% by year end.
1. Diagnose the leasing funnel and tell the owner what you would change, and in what order.
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Run the numbers before touching the concession.
- Demand required: 29 vacancies + (78 expirations × 30% = 23 move-outs) = 52 leases in 90 days, about 17 a month.
- Demand produced: 95 visits × 12% = 11.4 leases a month, about a 6-lease monthly gap.
- Cost of the gap: each lease at the margin is worth roughly $1,450 × 12 = $17,400 in annual rent; six a month is over $100,000 a year of foregone revenue. That is the number the owner should see.
- Cost of slow turns: 48 days vacant × $48/day × 29 units ≈ $67,000 in rent currently bleeding out of the asset.
The problem is conversion, not traffic. Riverbend gets enough visits to close the gap at benchmark performance. A concession buys a lease; it does not fix a 12% close rate, and every discounted lease trains applicants to wait for the next special.
Order of operations
- Stop the bleeding on response time. 41% of inquiries hit voicemail or silence. Add evening and Sunday coverage (shifts, not new hires) and a same-hour auto-response with pricing and availability.
- Publish floor plans and prices. An applicant who cannot find a price on the website assumes the worst.
- Reallocate the $5,100 billboard into ILS spend and paid search, where you can measure cost per lease. Billboard is a brand buy, not a leasing tool, at this property's price point.
- Train on the close - tour path, handling the competitor objection on price per square foot and proximity to the gym, and asking for the deposit.
- Then, and only then, consider a concession as a closing tool, targeted and time-boxed.
2. Cost both options the owner is considering - two months free on a 12-month lease, or a $75/month reduction on a 12-month lease - and explain the renewal consequence of each.
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Same headline rent, very different economics.
| Two months free | $75/month reduction | |
|---|---|---|
| Cost per lease | $1,450 × 2 = $2,900 | $75 × 12 = $900 |
| Effective monthly rent | $2,900 ÷ 12 ≈ $242/month off | $75/month off |
| Cost at 52 leases | $150,800 | $46,800 |
The two-months-free option costs roughly 3.2× as much to move the same resident, and the difference is about $104,000 a year of NOI - which at a 6% cap rate is over $1.7 million of value.
The renewal consequence is the larger effect. A resident who took two months free is paying an effective $1,208. At renewal, when the concession ends, market rent near $1,495 is a 24% increase. That is the single most reliable predictor of non-renewal, and it lands right as the competitor opens. A resident on the $75 reduction is paying $1,375 and faces an 8.7% increase at renewal - a conversation you can win. Concessions also depress appraised and underwritten value, because valuations are built on effective rent, not face rent.
Recommendation: decline the doubled concession. Use a defined closing allowance (for example, a one-time credit equal to a stated dollar amount, not a rent reduction) on 12-month terms only, capped in a written concession policy, and sunset it in 60 days. Pair it with the conversion fixes from the funnel analysis. If the owner insists on a rent concession, the $75/month structure is the defensible version.
3. The competitor opens in 90 days and 78 leases expire next quarter. What is your 90-day retention plan?
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Retention is cheaper than replacement, and the window is now - not at the 60-day notice deadline.
- Segment the 78. Renewal probability is driven by tenure, payment history, and whether the resident has already been contacted. Prioritize residents with 3+ years of tenure and clean payment records; they are the highest-value and most winnable group.
- Contact at 120/90/60 days, not 60. A renewal offer delivered at the legal minimum notice period is a decision already made. Do an in-person check-in at 120 days, a written offer at 90, and a follow-up at 60.
- Give a reason to stay that is not money. The competitor has a gym; you have location and, for long-tenured residents, a known building. Renewal improvements (flooring, appliances, paint on a staggered schedule) can justify an increase the resident can see.
- Price the increase against the alternative. A 6% increase that renews is better than a 12% increase that empties the unit and costs 48 days of vacancy plus a turn plus a commission - roughly $2,300 in lost rent alone.
- Never let a concession at renewal become permanent. Offer a one-time renewal credit, not a reduced ongoing rent; permanent reductions compound and never expire.
- Track it weekly. Report 78 accounts, offers delivered, offers accepted, and projected move-outs to the owner every week for the quarter. The count is the plan.