3 ms·

A big part of the problem is the use of Revenue Management Software to set prices. This obviously ends up working like a cartel. I note that: -Even when natio

A big part of the problem is the use of Revenue Management Software to set prices. This obviously ends up working like a cartel. I note that: -Even when nation wide vacancies were at their highest in 30 years, rental price rose. -Even as home prices plummeted, rental price rose. -Rent has risen 30% _nation_ wide just since 2013 so zoning an limits on building can't be the main cause. https://www.census.gov/housing/hvs/files/currenthvspress.pdf https://www.census.gov/housing/hvs/files/currenthvspress.pdf

biztos 8y ago
I've never heard of Revenue Management Software. What effect does it have exactly? If you own some apartments, wouldn't you just check the local advertised prices and set your prices similarly, possibly also using whatever your social network of landlords can tell you?
- techsupporter 8y ago
  RMS is what airlines use to price tickets and have done almost since the automated calculating computer was invented. Use of that kind of software has spread to all kinds of industries. Large rental property management companies absolutely use RMS. You can see it in action if you go to the rental sites for a large apartment development (if you want one in real life, search for "Thorton Place Apartments" in Seattle). Every possible amenity or detail about the apartment is factored into the overall rent, including which direction it faces, floor, whether it's recently been painted, along with how many of this particular type or in this building are left over, and then your particulars like how long of a lease you want, whether you're bringing a pet[0], and even what employer you work for. That all gets crunched and a number falls out that sometimes has a relationship to what the glossy marketing copy also had printed on it. Rents for each unit can and will vary day-by-day as apartments are rented and notices handed in. 0 - Thorton Place doesn't do it but another apartment building in Lake City absolutely does bump up the base rent by around $17 if you pick "with pet" versus "without pet," in addition to lumping in a $45 "pet rent" fee.
  - ryanwaggoner 8y ago
    Yeah, I see this on cruise ship cabins now too. There are different classes, but the cabin pricing varies a decent amount within each class based on all kinds of minor factors. Midships vs forward or after, close to elevator, what's above / below you, size of balcony, adjoining room, pullout couch, obstructed view, etc, etc. Kind of annoying in that you used to be able to "get lucky", but it's more efficient in a competitive market (which cruising definitely is) to be able to select exactly what you want and only pay for that.
- beefalo 8y ago
  What it sounds like to me is better optimization of vacancy. If you can raise rent by 50% and only lose 25% of tenants, you have increased revenue while also decreasing expenses.
  - TomMckenny 8y ago
    Exactly. And the bottom 25% become homeless.
- kodablah 8y ago
  I've worked on the most popular apartment (i.e. multi-family) price optimization software in the past. Those market prices are used in the forecasting models (they are even obtained in some cases by teams calling complexes manually and asking for prices since they are not advertised). You can't easily obtain this data on your own, because these prices are only disclosed to larger entities for aggregating, they don't advertise them much. Essentially you forecast to optimize for mid-ninety percent occupancy and factor in market comparisons (with models to determine similarity) to come up with a price combined with lease lengths. It's ruthlessly capitalistic and primitively supply and demand oriented. In fact, you can do pretty well even without neighboring market data and only paying attention to yourself. I've watched my own software used to raise my rents often. The system works very well and makes landlords lots of money, but it is incredibly simple once you have the data.

biztos 8y ago

I've never heard of Revenue Management Software. What effect does it have exactly? If you own some apartments, wouldn't you just check the local advertised prices and set your prices similarly, possibly also using whatever your social network of landlords can tell you?

techsupporter 8y ago
RMS is what airlines use to price tickets and have done almost since the automated calculating computer was invented. Use of that kind of software has spread to all kinds of industries. Large rental property management companies absolutely use RMS. You can see it in action if you go to the rental sites for a large apartment development (if you want one in real life, search for "Thorton Place Apartments" in Seattle). Every possible amenity or detail about the apartment is factored into the overall rent, including which direction it faces, floor, whether it's recently been painted, along with how many of this particular type or in this building are left over, and then your particulars like how long of a lease you want, whether you're bringing a pet[0], and even what employer you work for. That all gets crunched and a number falls out that sometimes has a relationship to what the glossy marketing copy also had printed on it. Rents for each unit can and will vary day-by-day as apartments are rented and notices handed in. 0 - Thorton Place doesn't do it but another apartment building in Lake City absolutely does bump up the base rent by around $17 if you pick "with pet" versus "without pet," in addition to lumping in a $45 "pet rent" fee.
- ryanwaggoner 8y ago
  Yeah, I see this on cruise ship cabins now too. There are different classes, but the cabin pricing varies a decent amount within each class based on all kinds of minor factors. Midships vs forward or after, close to elevator, what's above / below you, size of balcony, adjoining room, pullout couch, obstructed view, etc, etc. Kind of annoying in that you used to be able to "get lucky", but it's more efficient in a competitive market (which cruising definitely is) to be able to select exactly what you want and only pay for that.
beefalo 8y ago
What it sounds like to me is better optimization of vacancy. If you can raise rent by 50% and only lose 25% of tenants, you have increased revenue while also decreasing expenses.
- TomMckenny 8y ago
  Exactly. And the bottom 25% become homeless.
kodablah 8y ago
I've worked on the most popular apartment (i.e. multi-family) price optimization software in the past. Those market prices are used in the forecasting models (they are even obtained in some cases by teams calling complexes manually and asking for prices since they are not advertised). You can't easily obtain this data on your own, because these prices are only disclosed to larger entities for aggregating, they don't advertise them much. Essentially you forecast to optimize for mid-ninety percent occupancy and factor in market comparisons (with models to determine similarity) to come up with a price combined with lease lengths. It's ruthlessly capitalistic and primitively supply and demand oriented. In fact, you can do pretty well even without neighboring market data and only paying attention to yourself. I've watched my own software used to raise my rents often. The system works very well and makes landlords lots of money, but it is incredibly simple once you have the data.