Then there is the marketing, advertising the vacant unit, showing it, holding open houses, collecting and processing rental applications, running tenant screening reports, and calling employers and landlords. And if you pay a leasing agent or property manager, they may charge you a month’s rent for their labor.
Read on to learn how to boost your tenant retention rate and keep those rents flowing and your work at a minimum.
Boost Tenant Retention for Higher ROI
By Pierre Mouchette | Bits-n-Pieces
Know Your Market
You could have the best relationship in the world with your tenants. However, your tenants will move if your property is outdated or overpriced compared to other available properties in the area. Keep your finger on the pulse of your neighborhood and market. Know what your competition is charging and why. Most importantly, know how their properties and amenities compare to yours.
The trick is to step into the shoes of a renter living in the neighborhood. What appeals to them? What are their expectations? Every so often, walk through a vacant rental unit offered in the area. Put yourself in the shoes of a prospective renter. What amenities jump out as appealing? How modern is the feeling inside the property? What is your impression of what it would be like to live there? If possible, attend open houses and talk to prospective renters. Ask them their thoughts about the property. Ask them what they think about specific amenities.
You should also conduct exit interviews with your outgoing tenants. Why are they moving? What would they have liked to see from you or the property manager? What might have induced them to stay?
Learn Your Tenants’ Dream Improvements List
Do not stop interviewing outgoing tenants or prospects at neighboring properties. Your best resource for understanding what renters want is your tenants! When you conduct your semi-annual inspections with your renters, ask them, “What are your dream property updates if you could wave a magic wand?”
Start A “Friends To Neighbors” Program
Own apartment buildings or single-family properties in the same neighborhood? Everyone loves the idea of their friends or family members moving close by and becoming neighbors. And the close ties of having family and friends as neighbors are difficult to give up.
Announce to your renters that if they refer a friend or family member, you will give their family or friend a $XXX voucher to help cover their moving expenses. That’s important! However, the incentive must go to them, not your renter.
Thoroughly Screen Applicants
There is a lot to be said about the finer points of tenant screening, which can fill entire articles and ebooks. But tenant screening is one of the most critical activities that landlords and property managers undertake, directly impacting turnovers.
Bad tenants need to be evicted, or at the very least, non-renewed. In other words, signing a lease with bad tenants sets you up for quick, expensive turnover. It does not stop at tenants who fail to pay the rent or even those who pay but damage the property. Screen out house hoppers (renters who frequently hop from one home to the next). The preceding must be accomplished if you want to minimize turnovers. Yes, lease to stable renters with a history of living in one house for long stretches (three or more years, ideally longer).
Maintain A Quick-Reference File On All Renters
Do you remember all your renters’ children’s names? Do you remember all their hobbies or what’s happening at their jobs? Of course not. So keep a quick, short-n-simple digital file on your computer for each set of renters. A few notes on whatever was going on in their lives the last time you spoke. You should be able to pull up these files in the time it takes to dial a renter. You can then spend 60 seconds warming up the conversation by demonstrating how much you remember about the renter and their family.
Your renters will be surprised that you remember these little details about their lives. It sets the stage for a much friendlier conversation, and they will be left with the impression that you think of them as individuals, not cash machines.
Consistently Raise Rents, And Offer Strategic Relief
There are plenty of reasons to raise rent yearly, even if marginally. Remember, you do not want rents to go too far below market levels and bump your renters with one big rent hike.
Then there is setting expectations for your tenants. Rents go up every year. It is a fact of life, and your tenants should come to expect incremental rent hikes every year while also knowing that you will not gouge them with a massive jump.
Setting these expectations also sets the stage for a better option. Every time a lease comes up for renewal, offer your renter three options for renewal:
Call When Sending Important Notices
Have a lease renewal coming up? Is the rent late, and you are filing for eviction? Call them! Yes, by law, you often must send specific notices in writing. But that does not mean you should leave it there. Speak with your renters on the phone before they receive a cold, written notice, and establish a dialogue rather than an edict. You want a relationship with your renters, albeit a professional one. Calling them lets you explain the lease renewal options and varying rent hikes. It also allows you to learn why a tenant missed their rent payment. It should not affect whether you file for eviction or not. You should always file for eviction like clockwork; it is a business, but it does give you context.
Your renters will appreciate the human connection of a conversation rather than just receiving certified letters in the mail or a notice taped to their front door.
Call Before Entering The Property
The same concept applies to entering the unit. Yes, you have to give written notice, but a phone call is an appreciated human gesture. Even if it is an emergency and you are not legally required to give written notice, you should still call. It demonstrates respect for the renters’ privacy. Yes, to you, the property is an asset. It is your business and your property. But to the renter it is their home, where they cook dinner for their kids, relax after a long day of work, shower, and sleep. It is their refuge from the world.
The phone call need only take 60 seconds, but it is a meaningful gesture, and your renters will appreciate it.
When there is a repair problem in your property, it is urgent. It is critical for you because the longer a problem festers, the more damage it creates. It is acute for your renters because any problem in their home is inherently urgent.
When your renters report a problem, jump on it immediately. Keep a rolodex of contractors of every skill set and every price point, so you can call a repair pro as soon as you get off the phone with your renter. If there is a delay for some reason, explain it clearly to your renter, and stay in communication with them every few days, even if there is nothing to report. It sends the message that they are a priority for you, and you are on top of it.
Send Holiday Cards To Tenants
When December comes around, send holiday cards to any renters you want to keep. If you have screened your tenants well, that should be almost all of them. Holiday cards are more meaningful if they are faith-specific, so if you know what holiday your renter celebrates, send a card for that specific holiday.
Address the card to each family member by name, including the children. It is more personal: “Bill, Amy, Peter & Sally Jones” rather than “The Joneses.” The cards and envelopes should be handwritten. They do not have to be long. A couple of warmhearted sentences will suffice. You can include small (e.g., $25) gift cards to universal retailers like Best Buy or Amazon if you want. It might even be tax-deductible!
Note: The best property management combines human relationships with business best practices.
Prune Your Money Tree
Prune away the dead tenants. Bad tenants are expensive. You cannot afford to keep bad tenants from property damage to eviction filings and pushing your good renters to move away. No matter how well you have done with the above tips, good renters will not stick around if their neighbors are loud, dealing drugs, or just plain rude, disruptive jerks.
Every month, look at which renters’ leases are coming up for renewal soon. Send non-renewal notices to any renters you question. If you must ask yourself whether they are worth keeping, you already have your answer, non-renew them and get better renters. Landlords constantly look for excuses and justifications to keep bad renters because they do not want the hassle of a turnover. But do yourself a favor and get rid of bad tenants now, before they cause more damage to your property and cause more of your good renters to move away.
FYI: The formula is simple: Keep your good renters, get rid of your bad renters, and you will find your costs down and your management much lower.