Simple business practices determine rent

By Marie Wilson

Before landlords could start touring and leasing apartments for next year, they had to get one thing set: the rent.

Determining the cost of monthly rent for an apartment comes down to simple supply and demand, said Michael Jay, director of public relations for Campus Property Management.

The demand for certain apartments and locations is influenced by the number of housing options available, said Phil Bailey of Bailey Apartments.

Despite the increase in construction of apartments, he said he thinks there is neither a shortage nor a surplus of on-campus locations currently available.

“On campus, no, but in the total city we’re possibly reaching a saturation point because so many big companies came in and popped up 300 or 400 units all over town,” Bailey said.

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Just like any business, an apartment management company has to cover its operating costs, Jay said.

And those costs are going up.

“The costs of business, maintenance and utilities increase every year, so rents have to go up,” Jay said.

The monthly rent of an apartment can increase between 2 and 5 percent per year, said Cindy Brewer, manager of Illini Manor, a company that mainly offers one-bedroom efficiency apartments.

“For us, there are no rent decreases because it’s based strongly on the market and utilities,” Brewer said.

Ideally, rents would never increase more than 5 percent in a year, but sometimes a large increase is necessary, Bailey said.

The cost of mortgages on his buildings, the cost of necessary general repairs and the rate of property taxes all factor in to Bailey’s method of setting rent prices.

“You put it all together and add to it whatever you pay to the bank and then you can come up with a number,” Bailey said. “Then you consider what’s a fair rate of return to make on the investment.”

Bailey said he has been in the apartment management business for 40 years and he thinks of the properties he owns as investments.

He said over time, he has learned how to evaluate the market, offer a fair price and keep his business alive.

Bailey said all his tenants pay for their own utilities because their living habits and temperature preferences can cause a large amount of variation in the cost of water and electricity bills.

At Illini Manor, however, the cost of utilities is factored into each apartment’s rent payment, Brewer said.

“On campus, it’s more convenient if all the utilities are included, especially with the rising costs,” Brewer said. “This way, when someone signs a lease for x number of dollars, there are no hidden surprises.”

Brewer said paying for rent and utilities all in one bill is easier for the transfer students and international students that Illini Manor caters to.

But the company does not include utilities in the rent for its off-campus location because people looking for an off-campus apartment want the best deal, not necessarily the most convenience.

“We don’t really look at the location per se, so much as we do the market and how easily we were able to rent the apartment in the year prior,” she said.