Why Maximizing Rent Does NOT Benefit Residential Owners — A Real Case Study
This is an 8-unit, owner-level case study anyone can understand — and it still destroys the “max rent” myth.
This is a case study on Why Maximizing Rent Does NOT Benefit Residential Owners (8-Unit Property Example).
Property Snapshot
- Property Type: Small Residential (8 units)
- Asset Class: Class B
- Market “Top Rent”: $2,300
- Current Avg Rent: $2,050
- Two Pricing Options:
- Max Rent Strategy: $2,300
- Optimal Rent Strategy: $2,150
- Market Cap Rate: 6.25%
- Avg Turnover Cost per Unit: $2,500
The Two Strategies
🟠 Strategy A — Maximize Rent Push units to the highest possible rent.
🟠 Strategy B — Optimal Rent Price slightly below peak to prioritize occupancy, speed, and stability.
This case study focuses on why Strategy B wins financially.
Leasing Speed & Time on Market
| Metric | Max Rent Strategy | Optimal Rent Strategy |
|---|---|---|
| Avg Days Vacant per Turn | 80 days | 30 days |
| Turnover Rate | 35% | 22% |
| Concessions | 1 month free | None |
| Avg Occupancy | 86% | 97% |
Lost Rent from Vacancy (Per Unit)
Max Rent
- 80 days vacant ≈ 2.67 months
- Lost rent: 2.67 × $2,300 = $6,141
Optimal Rent
- 30 days vacant ≈ 1 month
- Lost rent: 1 × $2,150 = $2,150
📌 Extra rent lost per turnover at max rent: $3,991 per unit
Annual Rent Collected (Reality, Not Asking Rent)
🟠 Strategy A — Max Rent
- Gross Potential Rent: 8 × $2,300 × 12 = $220,800
- Effective Occupancy (86%): $189,888
- Concessions (1 month free on 35% turnover ≈ 3 units): 3 × $2,300 = ($6,900)
👉 Effective Collected Rent: $182,988
🟠 Strategy B — Optimal Rent
- Gross Potential Rent: 8 × $2,150 × 12 = $206,400
- Effective Occupancy (97%): $200,208
- Concessions: $0 👉 Effective Collected Rent: $200,208
📌 Lower rent generates $17,220 MORE rent per year.
Turnover Cost Comparison
| Item | Max Rent Strategy | Optimal Rent Strategy |
|---|---|---|
| Units Turned / Year | ~3 | ~2 |
| Cost per Turn | $2,500 | $2,500 |
| Total Turnover Cost | $7,500 | $5,000 |
📌 $2,500 saved annually by avoiding excessive churn.
Net Operating Income (NOI)
| Metric | Max Rent Strategy | Optimal Rent Strategy |
|---|---|---|
| Effective Rent | $182,988 | $200,208 |
| Turnover Costs | ($7,500) | ($5,000) |
| NOI | $175,488 | $195,208 |
📌 NOI improvement: +$19,720 per year
Asset Value Impact (This Is the Real Game)
At a 6.25% cap rate:
- Max Rent Value: $175,488 ÷ 0.0625 = $2.81M
- Optimal Rent Value: $195,208 ÷ 0.0625 = $3.12M
📌 Value difference: $315,000 All from not pushing rent to the max.
Missed Opportunity Cost (Often Ignored)
Max rent causes:
- Units sitting empty longer
- Missed months of rent that can never be recovered
- Weaker rent roll optics for buyers
- More owner stress and micromanagement
- Higher perceived risk by lenders
Lower rent with faster lease-up locks in cash flow instead of gambling on a premium tenant that may never show up.
Bottom Line (Say It Without Apology)
Maximum rent is a pricing fantasy. Optimal rent is a wealth strategy.
For small residential owners:
- Speed beats price
- Stability beats spikes
- NOI beats ego
If your goal is long-term value, not bragging rights on rent, maximizing rent is often the wrong move.
Curious how strategic pricing could improve your property’s performance?
Every property is different, but the right pricing and management strategy can unlock value owners often leave behind.
Contact American Vision Group to explore a smarter, more stable approach to residential property and asset management.
