So, you have a great new building in your portfolio, whether its market, mixed income or 100% affordable housing, your lease up and how it’s handled is vital to the asset’s overall performance. How hard can it be, you have available units and people want to rent them, fill the building right? Not so fast, there are several factors to consider as you set out to lease your vacant units.
What affordable programs are associated with your project; what promises did you make when financing the acquisition or development of the property? Make a list of the programs and the requirements, keep in mind that the most restrictive requirements in your financing docs will always apply first and foremost. If you use a management company, make sure they are provided with all regulatory documents. Filling a unit with an unqualified resident is a costly mistake.
A Tenant Selection Plan should be created to ensure that residents are selected in a way that is consistent, legal and avoids fair housing pitfalls. Your Resident Selection Plan should cover the following items:
- Income Restrictions
- Eligibility Requirements- Credit score, rent to income ratio, screening process and how residents will be selected from the waitlist.
If you have a minimum credit score requirement it should be outlined in your TSP, keep in mind that you will be narrowing your prospect base by setting a score minimum that is too high- its best to review the reports as they come in and make exceptions where needed.
Will you deny any applicant with a criminal record, or is there a threshold and does it depend on how much time has elapsed?
- Household composition and unit size determinations- check your local code
- How will you advertise your property, do your state and local offices have an online database to list affordable housing? Reach out to local housing authorities to place flyers in their waiting rooms. If your property has an Affordable Fair Housing Marketing Plan, be sure that it is being followed and updated annually
- If a prospective household has less than perfect credit or criminal activity that is 5+ years old, we would recommend gathering income verifications and landlord references and then looking at the whole picture to see what’s been happening in the last year or two, the applicant may have hit a rough patch but is now doing better and ready to rent responsibly.
A typical rule for rent to income ratio in 30-40%, but in some cases residents demonstrate the ability to pay up to 50%.
- Put together a marketing budget and strategy, be clear on when your units need to be filled in order to meet cashflow projections.
- Work with your management team to develop a comprehensive set of House Rules for your property. Consider whether you’d like to make renters insurance mandatory, and if it’s legal in your state/municipality. House Rules should include all pertinent property information, including contact info for management, emergency maintenance numbers, police, fire and poison control.
- Make sure management team has ample time and incentives to fill units with the RIGHT residents; putting staff under pressure and offering leasing bonuses can lead to an undesirable resident base. Consider alternative incentives plans for lease up.
Finally, providing your residents with a small welcome basket containing a plunger and a few basic cleaning materials specific to the finishes in your building and instructions on how to use them is a nice touch and can help to save you time and money down the road.
