5 Proven Strategies to Increase Tenant Retention
Most experienced landlords and property managers will agree that tenant turnover is often one of the largest expenses for rental property owners.
A recently vacated unit will usually require an inspection and a varying degree of repairs and upgrades to restore it to a rent-ready condition. Re-leasing the unit will incur additional costs, including advertising, tenant screening, showings and legal fees. All the while the unit remains vacant, generating no rent for its owner.
It is no surprise that after finding good tenants, the second most important aspect is to keep them for as long as possible. A sound tenant retention strategy will result in a direct reduction of operating expenses and vacancies.
Here are 5 proven strategies for keeping your tenants happy and wanting to rent from you for years to come:
1. Maintain Excellent Communication & Responsiveness
One of the simplest, yet often overlooked strategies involves simply being responsive, straightforward and honest when communicating with your tenants.
There should be no reason for a tenant to be unsure about how to submit a maintenance request, notify you of potential late payments or just ask a general question. Neither should a tenant wait days to hear back from you or your property manager, or have to follow-up several times just to get their toilet unclogged.
Your tenant welcome packet should list several ways a tenant can contact you – via text, phone, email or an online tenant portal. You should go over this process with each tenant during their lease signing or orientation appointment.
Additionally, train your property manager to be prompt and clear when responding to tenant requests or questions, and to follow-up with them to make sure their requests were met every time.
2. Keep the Property in Great Condition
Keeping up with ongoing maintenance, repairs and capital improvements is another no-brainer way to increase tenant satisfaction and retention.
When a tenant notices that you are prompt to respond to their maintenance and repair requests and even go beyond that by providing ongoing services such as filter replacements, pest treatments and grounds maintenance, it shows them that you care about the property and the people living or working there.
On the flip side, not many tenants would likely renew their lease if it constantly takes days or weeks to fix simple problems and the property is kept in a declining state.
Not only will this strategy help you keep great tenants, but it will also help you maintain the property’s condition, improve its longevity and minimize make-ready expenses when you do have a tenant turnover.
3. Establish Lease Renewal Incentive Programs
Every time a tenant’s lease comes up for renewal, they will be making a choice whether to stay at your property or not. Sometimes external factors that you can’t control will influence their decision, but often you can do small things that will turn the tables in your favor.
As a perk for good tenants who renew their lease, offering things like small cash bonuses or gift cards to local shops or restaurants will be of minimal cost to you, but can mean the world to your tenants and help them make a decision to renew.
Another option to consider is to allow them to choose from a list of pre-approved property upgrades, such as new appliances, new flooring, new paint or window treatments. You’ll have to consider the costs associated with these upgrades, but if you were going to do them anyway during a turnover, you can offer them to your best tenants to keep them happy.
4. Keep the Rents Below Market
As a rental property owner, you obviously want to maximize your rental income. But being too aggressive with rent increases may cause tenants to leave, forcing you to incur make-ready expenses and vacancies, which will cost more than a slightly lower rental rate.
So instead of raising the rents to market level and increasing them with every lease renewal, consider keeping them slightly below market and only increasing every 2-3 renewals.
This strategy accomplishes two things. First, by keeping your rents below market, you will make it harder for your price-sensitive tenants to find a better alternative. This, combined with keeping your property in a good condition will simply make it uneconomical for them to move.
Second, by limiting how often you increase the rent, you will likely decrease the tenants’ anxiety associated with lease renewals and frequent rent increases. Nobody likes to see their rent go up and a tenant that knows you’re not going to do it every year is more likely to stay for the long-term.
5. Maintain a Degree of Flexibility with Good Tenants
Even the best tenant may occasionally fall on hard times and be forced to pay their rent late. Although having clear late payment and collection procedures is necessary, it is also a good idea to remain flexible and understanding, especially with your best tenants.
A sensible thing you can do in such situations is talk to the tenant, understand their problem, and come up with a solution that benefits both parties.
This may involve giving the tenant a few extra days or a week to pay their rent, waiving the typical late fees, or agreeing to allow them to pay partial rent now and the rest at a pre-determined date.
While you don’t want to allow your tenants to take advantage of you by constantly paying late, if an otherwise great tenant requests a payment arrangement once or twice a year, it is in your benefit to remain flexible and understanding.
Higher Tenant Retention = Higher Profits
Considering all of the work and costs that go into finding great tenants in the first place, it only makes sense that an equal amount of effort be placed into keeping them.
Even simple, inexpensive strategies discussed above can go a long way to showing your tenants that you care about them and the property, keeping them satisfied and renting from you for a long time.
A thoughtful, documented tenant retention strategy is absolutely necessary for all serious landlords and property managers who want to minimize their vacancies, reduce make-ready expenses, and maximize their profits.
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