Turnovers are ROI killers.
There’s the lost income, during the vacancy. You also have to pay the mortgage, and pay to keep the utilities on.
Most residential units need to be repainted. Tack on another several thousand dollars.
Do you need new carpets? Often you do. Or maybe the last tenants left a mess, and the unit needs to be cleaned out?
Then there’s all the time and money involved in advertising the unit, screening new tenants, signing new lease agreements, potentially paying a leasing agent or property manager a month’s rent as a fee.
Have we painted a gruesome enough picture of the ROI slaughter?
Luckily for you, there are some easy steps you can take to minimize your turnovers, through better renter retention. Here are 11 simple tips, tricks and tactics you can steal, to keep your renters renewing year after year and avoid costly turnovers!
1. Stay Up to Date on Your Market
First and foremost, how do your rental units compare to the competition: neighboring rental properties?
How does your pricing compare to competing properties?
How do your amenities compare to competing properties?
If you’re charging more than neighboring properties, there should be a good reason. Better amenities, more space, more modern fixtures; whatever the reason, it should be compelling.
Otherwise you may be losing good renters to your competitors down the street.
Part of knowing your market involves market research. But go beyond online searches and actually walk through vacant properties near yours. Get a firsthand, gut-level understanding of them. Try to see them through the eyes of a renter in your neighborhood.
Also perform exit interviews with outgoing renters. Why did they choose to move? Where are they moving to? Are there any changes that would have persuaded them to stay?
Consider cost-effective updates you may be able to make, or amenities you may be able to add, to make your property even more desirable.
Understand what makes the renters in your market tick!
2. Implement a “Friends-to-Neighbors” Program
If you manage a multi-family building, or have multiple single-family homes in the same neighborhood, consider a Friends-to-Neighbors program.
Your renters would love to have their friends and family become their neighbors, for their own custom tight-knit community. So make it enticing for their friends and family to move in!
Offer a discount on the first month’s rent for their referred friends who move into one of your properties. That’s the trick though – don’t offer your renters money, offer their friends the discount. People can smell it when a friend is acting in self-interest, and they become wary. But this way, the referring friend is squeaky clean, no stench of a bribe. Just a great offer for their friend.
How does this help you? First, it enlists your existing renters as advertising agents on your behalf, to fill your vacancies faster. But more to the point, once a resident’s friends move into the community, both parties will be much, much less likely to move away.
3. Proactively Ask for a “Dream Improvement” List
When you do your semi-annual inspection, ask your renters for a dream list of property improvements. Pay particular attention to what your good renters say. However, you can still gain insights about demand from your bad renters; they just won’t be sticking around to enjoy them (more on that later).
Review these lists carefully, and identify the best long-term investment. Find improvements that are not too expensive to implement, and will add value for many years to come.
As money allows, occasionally make one of these improvements. Send a card to renters informing them that you listened to their requests and because you value them so much, you moved forward in implementing it.
It demonstrates to your renters that you pay attention to them, and value them. Even better, it gives them a great incentive to stick around and take advantage of the new improvements you’ve made!
4. Keep a “Personal Tidbits” File on All Renters
What does the renter do for a living? What’s going on at their job? What are their children’s names? What are their hobbies? What did they mention the last time you spoke, about what was going on in their lives?
You don’t need to know everything about a renter, but it goes a long way if you can follow up on past conversations, when you contact them. If in February they mentioned they’re training for a marathon in May, and the next time you talk to them is in June, they’ll be pleasantly surprised to hear you start the conversation with “Last time we talked you were training for a marathon – how’d it go?”
By referencing even one of these things as you open the conversation, you send a clear message that you think of them as a human being, not just an income source.
These “personal tidbits” files should be short and sweet, something you can pull up in under five seconds, when you’re dialing renters. It takes no effort on your part, but it will be meaningful to your renters, and help them like and trust you.
5. Screen Applicants Aggressively
Having good relationships with your renters doesn’t help if you’re leasing to deadbeats who won’t pay the rent.
Run eviction reports, tenant credit reports, and criminal background checks on all applicants. Call employers. Call current and prior landlords. Have a system in place to comprehensively screen all rental applications.
Drive past their current residence, or perhaps an impromptu visit (find an excuse). This gives you a seat at the front of how their housekeeping habits are. Is the home tidy? Are there pet smells? Property damage? You don’t want to lease to someone you’ll just have to turn around and evict or non-renew within the first year!
But tenant screening doesn’t just end with identifying tenants who may need to be evicted. You also want to screen out “house hoppers” – people who live somewhere for a year, then leave.
Look carefully at all applicants’ housing history, and only rent to people who stay in the same place for years at a time.
6. Use Consistent & Strategic Rent Hikes
It may seem counter-intuitive, but you actually do want to raise the rent incrementally every year.
First, it prevents your rents from falling too far below market levels. That costs you money, and when you raise the rent to market levels, it’s a jarring rent hike that might push your tenants to leave.
Second, it sets expectations. You send a message to your renters: rents go up every year, but by fair and modest amounts. They won’t be surprised by rent hikes; they’re just a fact of life, like inflation. They will also grow to trust that you won’t crush them with random, jarringly high rent hikes.
Perhaps best of all, it sets the stage for you to incentivize longer-term lease renewals. Consider offering the following options to your good renters, when their lease agreement comes up for renewal:
The renter can renew on a month-to-month basis, for a higher rent bump. Or, for a lower bump they can sign a one-year lease renewal.
Alternatively, they can lock in that smaller rent hike, for a two-year lease renewal.
This creates a clear incentive for your renters to stick around and stay with you for the long haul!
7. Always Call When Sending Important Notices
Yes, by law you have to send some notices in writing to your renters. But your renters will appreciate the human contact of a phone call, before receiving the cold, legally-required notices in their mailbox.
When lease renewals are approaching, call the renter to discuss the rent hike and renewal options outlined above.
When a tenant misses their rent payment, call them to ask what’s going on.
Keep that human connection open, even while managing your rentals like a business and still moving forward with written notices, eviction filings, and so forth.
8. Always Call Before Entering a Rental Unit
Likewise, you have to give written notice (usually 24-48 hours’ notice, depending on your state’s landlord-tenant laws), but you should also call before entering a tenant’s home. It’s polite, and it shows you respect their privacy.
For you, the rental unit is part of your business, and you own it. It’s an asset. But for your renters, it’s their home. It’s where they make their meals, brush their teeth, go to sleep.
Even in an emergency, when you don’t legally have to give written notice, still call your renters.
Privacy matters, and giving a phone call before entering only costs you two minutes but sends a clear message to your renters that you respect their privacy. They’ll appreciate it.
9. Send Holiday Cards to Your Good Renters
In another human gesture, send holiday cards to all of your good renters. If you happen to know their religion, send a religion-specific card – it’s more personal than a generic “Happy Holidays” card. But a generic card is better than no card, if you don’t know what holiday they celebrate.
You can include a small (e.g. $25) gift card to a broadly-appealing retailer like Amazon or Best Buy, if you like.
Address the card to each family member by name, including the children. It makes the card more personal.
Noticing a theme here? Human connection combined with business efficiency!
10. Make Responsiveness a Priority
When tenants call you about a needed repair, jump on it.
First, it will save you money; the longer a property problem sits, the more damage it does.
But it also shows that you care about the property, and you care about the renters’ concerns. Call them every day or two, even if you have no news to report, just to check in and let them know you’re working on it.
In order to make repairs quickly, keep a full rolodex of all contractor types. Also keep plenty of low-cost handymen in your rolodex, because some problems don’t need a full-blown licensed contractor.
Stay on top of property repairs, and stay in touch with your tenants about them.
11. Prune the Rotten Apples
What do you do with bad tenants? Simple. Get rid of them.
What, you thought we would sugarcoat this? Forget it. Bad renters cost you money, and will drive your good renters to leave.
And then it won’t matter how well you’ve done all of the above: your good renters will still move away, to be rid of noisy, dirty, shady neighbors.
It doesn’t matter if your bad renters pay the rent on time every month. If you get complaints about them, or if they don’t treat your property well, send non-renewal notices well in advance of their lease renewal. And make sure you give the legally-required notice, for non-renewal!
It’s a simple calculus: Keep your good renters, non-renew your bad renters, and you’ll find yourself with high ROI, low costs, and low-maintenance property management.
Have any tricks you use to keep your good tenants? Pass them on!