Quality tenants—those who pay on time, take care of the property, and follow the rules of their lease—are a rental property manager‘s dream.
After all, finding new tenants is expensive and time-consuming. The cost of advertising, showing the property, screening potential tenants and more eats into landlords’ profits, especially as the property sits vacant.
“I will keep a less-than-ideal tenant to avoid the hassle of finding a new one, while my property sits empty—not making me money. Having a bad tenant is bad. Having no tenant is unacceptable,” says M. Ford, a landlord in northern Virginia.
Many other landlords likely share the same sentiment—and it’s those same landlords that could blame you when you lose a tenant or fail to find a new one quickly. Tenant turnover kills their profits. It destroys your reputation as a rental property manager.
When you have good tenants, you need to hold on to them for dear life. That’s why so many rental property management companies use incentives to entice quality tenants to first sign a lease—and then renew it. Here are ideas that actually work.
Reduce their expenses
Monetary incentives beat out all other incentives. According to a Softwareadvice.com survey, 52% of renters prefer cash or other types of spendable rewards.
The most popular is rent reduction. But, warns Philadelphia-based agent and property manager Chris Benedict, “tenants will often ask for a lower monthly rate if they sign a two-year lease. That incentive was thrown out by our company after people broke their lease at 12 months, leaving the owner with a vacancy and lost rent for the ‘discount’ they never earned!” So you may want to write into the lease agreement that if a tenant doesn’t renew at 12 months, you’ll withhold the security deposit to recoup the cost of the discount.
Keep in mind that not all monetary incentives are created equal. According to the survey, 58% of renters want a rent discount, while only 28% want cash. Still, any offer that allows tenants to experience immediate reductions in their monthly expenses ranks high. Other popular options include offering a free month’s rent or cash bonus upon renewal. Or you could cover other expenses, such as parking; utilities, including cable and Internet; or free gym or other memberships.
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Upgrade the property
Twenty-seven percent of respondents in the Softwareadvice.com survey said that unit upgrades would prompt them to sign a new lease. If that percentage doesn’t seem high enough, think about it this way: If tenants move out, the landlord will need to make the repairs anyway, while the property sits empty. So if the walls, carpet, landscaping, and so on is starting to look shabby, or the appliances or décor has become dated, talk to the owner about freshening the place up a bit.
“In some of our communities we’ve upgraded the entire interior. So instead of moving down the street to a shiny new property, they opt to move into a fully renovated apartment,” says Kristin Stanton, senior vice president of operations at Greensboro, North Carolina–based Bell Partner, says in an interview with Multi-Family Executive. “Making sure residents are aware they have options to transfer on-site is smart too,” she says. “Maybe their personal life has changed, and they want to transfer to a smaller or larger apartment.”
Not sure which upgrades to make first? According to the survey, the flooring, kitchen appliances, and washer and dryer rank highest to renters, while only 8% said new paint is a priority.
Forget about wowing them with gifts
While some people could be enticed to stick around for a new gadget or gift card, most renters don’t see much value in those types of perks. Only 11% rated free household items, such as TVs or tablet computers, as incentive enough to renew. And a mere 4% of respondents would renew because they received a gift card to local retailers.
Your best bet is to forgo the gimmicks altogether and put your cash to better use. One caveat: If you want to thank tenants for renewing, gift cards to local stores or services, such as a house cleaning service, send a powerful message to tenants about just how much you value them. That could certainly lead to renewals next year.
Start with good rental property management customer service
Your best bet to retain tenants, however, is to provide outstanding service. “If a resident is unhappy and you haven’t resolved the issue quickly enough, then no matter what you do, they’re going to move out,” Shailene Casio-Smith, vice president of business development at Texas-based FirstService Residential Realty, shares with Multi-Family Executive. “It’s very hard to re-establish that relationship if they haven’t been attended to. A lot of people have been focused on resident events and amenities, and that’s great, but ultimately it’s a relationship that keeps people there.”
In fact, according to a Kingsley Associates survey, 44% of renters who are likely to renew do so because of their experiences with the rental property’s management—a priority that matters to them more than the cost of rent (42%).
Following up with tenants and resolving issues quickly is critical. Around the clock maintenance and service delivered with a smile goes a long way to making tenants feel appreciated—and that is the first step toward a renewal.
If you don’t know where to go from here, talk to your tenants. Have them tell you what it will take for them to renew their lease, and then work from there.