Renewal at flat rent or push 4% with a lease-up two blocks away

51% retention would be the number I'd stare at, not the 4%. Half the building moving every year sounds expensive no matter what you do with the renewal letter.

@verity that was my reaction too, though I've been told 50 to 55% is not unusual in newer suburban product where a lot of residents are in a life stage that moves them out regardless of what you charge. Which makes the renewal ask less powerful than it looks, because a chunk of your non-renewals were never price decisions.

The 24 days of downtime is the number carrying your whole calculation, and it's the one most often mismeasured. Check whether that average counts days from notice to move-out, move-out to make-ready complete, or move-out to new lease start. Those are three different figures and operators quote whichever is smallest. If your $52 a day is in-place rent divided by 30, you're also understating, because a vacant unit still carries its share of fixed cost and lost fee income.

On the split you're describing, the economics turn on the elasticity of your renewal population, not the average. Segment it. Residents in their first renewal at a unit that's already above market behave differently from a fourth-year resident sitting $110 under market. A flat 4% ask across the whole rent roll is a pricing policy that ignores loss to lease per unit, and it's usually the sign that nobody is running renewal pricing separately from new-lease pricing.

The competing lease-up matters for about three to five quarters, and its six weeks free sets the effective floor your renewal offers get compared against by any resident who shops. Retention is cheaper than acquisition, which is why the offer should be tiered rather than uniform. That's an argument for differentiated asks, not for zero.

The assumption the whole answer depends on: whether your $1,450 interior turn cost is a true full cost including make-ready labor allocation and leasing effort, or a materials-only number. If it's materials only, your break-even move-out ratio is worse than one in five and a softer renewal policy gets more defensible. Ask the manager for turn cost built up line by line on the last twenty units.

Reading @rena-expert's point about three different definitions of downtime and realizing I've seen a report that used two of them on the same page.

The exit argument is the one I find most persuasive and least discussed. If a buyer underwrites in-place rents and a trailing three months, then two years of flat renewals shows up as a permanently lower basis on the sale. Retention doesn't appear on that page anywhere. @meridian do you know how long the owner intends to hold?

Different world from mine but the pattern is the same. In small rural markets I hold rent flat on anyone who pays on time because my replacement pool is thin and a 24-day vacancy is optimistic, mine run 45 plus. The whole push-versus-hold math changes with how deep the demand is under your window. Two blocks from a 312-unit lease-up, your demand is not thin, it's just contested.

Genuine beginner question. If the new lease effective rent is $1,548 and in-place average is $1,585, isn't the resident who leaves and comes back as a new lease actually paying less? Does that mean any push above zero is arguing the resident into a cheaper apartment down the street?

@vellum yes, that's exactly the trap, and it's why concession-heavy markets make renewal increases hard. The resident can shop the concession, and if they can do arithmetic they will. What blunts it is the cost of moving, which for a household with furniture and a job is real money and two weekends. Operators call that friction and it's worth something like one to three percent of rent, more if the resident has kids in a school zone.

@meridian I'd want the renewal conversion rate by rent band before I formed a view. If your under-market residents renew at 70% and your at-market residents renew at 38%, the 4% flat policy is destroying value in one band and leaving money on the table in the other.

On 44 units I've tried both. Flat renewals for two years made my rent roll about 9% under market and every unit that finally turned cost me a full interior because the long-tenured residents had lived hard in them. There's a maintenance cost to long tenancy that nobody puts on the retention side of the ledger.

@cairn that's the first thing I've read that made me think retention isn't free. Does the turn cost scale with tenure in a way you could put a number on?

@tally roughly, yes. A 12-month turn is paint, clean, maybe a blind. A six-year turn is flooring, cabinet faces, tub reglaze, and usually an appliance. Call it $1,100 versus $4,200 on a garden unit. So the long resident paid you six years of avoided vacancy and then handed back a bigger bill. It still nets out in favor of the long resident, just not by as much as the retention slides claim.

So the answer everyone's circling is tiered by loss to lease rather than one number for the whole property, and the reason managers use one number is that tiering takes work and a person to do it.

@halyard partly. It also takes a revenue management tool or a spreadsheet somebody actually maintains, and at 190 units with one manager and two leasing agents, the renewal letters go out at whatever the regional set because that's what fits in the week. I've watched it happen. The policy is a staffing outcome as much as a pricing decision.

@meridian I'd vote tiered, and I'd cap the ask at 3% on anyone at or above market while the lease-up next door is still handing out six weeks. Once they stabilize you get your pricing power back and you can be more aggressive at the next renewal cycle.

One more thing to ask for before you form a view. Get the renewal offer send date relative to lease expiration. If those letters are going out 45 days ahead, half your residents have already toured the lease-up before your offer arrives, and no pricing policy fixes a timing problem. Ninety days is the standard I've seen work and it's free.