How to Improve Tenant Retention

12/3/2024 (Permalink)

Tenant with landlord

How to Improve Tenant Retention

High turnover costs make tenant retention important. Unit vacancies, marketing costs, and between-tenant cleanings all eat into your bottom line. That's why tenant retention is a hot topic among landlords and property managers. Ideally, you'll hang on to good tenants for as long as possible without needlessly "chasing them away" with how you run your property.

Of course, the truth is that no property manager can hold on to every great tenant forever. Tenants often leave for reasons that are beyond their control. However, high tenant turnover is avoidable. At a typical residential real estate property, the retention rate is around 50%. If you can get yours to 60% to 65%, your rental property will be ahead of most.

Here's a look at six tips for how to improve tenant retention.

1. Price Rent Fairly

Is high rent chasing tenants away? If you've noticed tenants renewing their leases at a lower rate than usual, rent costs could be blamed. You may have elevated your rental price at a faster pace than competitors. Analyze where your rent falls based on comparable properties in your rental market.

Tenants have more access to price comparisons than ever before. Even happy tenants won't stay if it means paying more for the same general location and square footage. While lowering rental rates often feels like a step backward, boosting tenant retention rates could make you money in the long run.

2. Incentivize Lease Renewals

Entice tenants to renew by offering perks for loyalty. It's common for property management to offer discounts when tenants commit to renewals by a certain date. This generally means allowing tenants to lock in the current rate instead of being subject to the new tenant rental rate. Getting an early commitment also helps you to plan accordingly based on whether you'll need to list the apartment on rental websites. The ability to start marketing a unit early if a tenant won't be returning can help you avoid "lost months" caused by unexpected vacancies.

3. Help Tenants Build Positive Credit

A quality tenant may be more likely to stay if they feel they're getting a long-term benefit beyond getting the cheapest rental rate or high-end amenities. The truth is that many renters are working their way to homeownership. However, it may be a few years until that happens. One win-win situation for the landlord-tenant relationship is a credit-reporting program. Under this arrangement, on-time rental payments are reported to credit bureaus to help tenants build their credit scores.

Why is this such an important perk? One of the biggest complaints among renters is that they don't get any "points" for paying rent on time. With rental payments often equaling or eclipsing mortgages today, this is frustrating. Most property managers and landlords don't report positive rental histories because they don't want to be bothered. This is what makes this such an underused tool for tenant retention.

4. Reevaluate Your Approach to Maintenance

If you want to know how to improve tenant retention, the key is making a rental feel like home tenants don't want to leave. Maintenance plays a big role in this. Unfortunately, the stereotype of the "landlord special" for most apartment upgrades and maintenance requests is true at many properties. It's common for good tenants to leave because they're frustrated by the state of a property.

Maintenance should be a priority instead of an obligation. Start with an orderly, clear process for submitting maintenance requests. Next, have a system for keeping tenants updated on when requests are expected to be completed. It's also important that you have a qualified, professional maintenance person or team available to handle repairs and upgrades at your property. Many property managers try to handle maintenance on their own to save money. However, fast and high-quality maintenance should be considered an important investment in the overall financial health of your property.

Of course, maintenance isn't just about reacting when tenants make requests. You must proactively ensure your property is free of pests, mold, water damage, and other underlying problems. Owners of damaged properties need to handle remediation before even allowing tenants in.

5. Learn Why Tenants Are Leaving

High tenant turnover rates may be unavoidable in your market. However, you may lose good tenants because of what your property lacks without even knowing it. This is why tenant feedback is such an integral part of good property management. There are several ways to handle tenant feedback. The first is to consider an annual tenant survey. A 10-question survey about general satisfaction, quality of life, and likelihood of renewing provides a look into the tenant experience. It can also help you anticipate tenants renewing their leases or vacating within the next 12 months. Be sure to leave an open space for tenants to suggest what they'd like to see improved at the property.

6. Consider Being More Flexible With Reliable Tenants

This tip for how to improve tenant retention requires some judgment calls. Anyone in property management for a while knows that some renters are autopilot tenants. They send their rent check in on time, they never make complaints, and nobody ever complains about them. They are simply responsible renters who are trying to enjoy a good quality of life at your rental. There may be times when these tenants make special requests. For example, they may want a cat even though the lease agreement didn't include pets. They may want to paint the walls in the living room because they're tired of drab white walls. There may even be a rare time when an unexpected circumstance causes them to pay their rent late.

In most cases, there's more to lose by being rigid or penalizing these tenants than by being flexible. Make a policy of pulling up a tenant's rental history before passing automatic "no" responses. Think of the benefit of retaining a tenant for an extra three to five years simply because you said "yes" to painting a living room green. Additionally, think of the bad blood that is created if you charge a late fee or make a report to a credit bureau just because a tenant was a few days late on rent one time after several years of consistency. There's a good chance the tenant will care much less about respecting your property afterward. They may also feel inspired to start browsing rental listings in the area.

Happy Renters Are Good for Your Bottom Line

Getting tenants to renew doesn't have to feel like pulling teeth. The "secret tip" for improving tenant retention is creating a space where people want to live. This starts with creating a safe, clean, and inviting space where tenants don't feel like they're at the whims of their landlord when it comes to enjoying things like maintenance and amenities. If you need to make updates or repairs to enhance the quality of life at your rental property, SERVPRO® is here to address all of your remediation needs for fire, mold damage, water damage, and more. Our teams offer unmatched expertise and professionalism for jobs of every size. Contact us today!