Resident retention is always a popular topic in property management. And it should be! With turnover rates hovering in the 50% range, keeping people longer is probably the easiest way to improve operating performance and bring more cash to the bottom line.
And yet, it seems that for all its importance, and all the discussion, the amount of time and money actively spent on retention is a pittance compared to the amounts spent on leasing. I believe that the least expensive turnover is the one that does not even occur. So, why not take a page from the operating books of other industries and incent our residents to stay?
Most of us know that, when all costs are factored in, that a turnover can easily cost anywhere from $2,000 to $5,000 (including maintenance, lost rent, marketing, etc.). Yet, how many communities do you know that are willing to spend even $400 or more to help keep that resident longer? You could buy them a new TV and give them a nice dinner out – and you’d still be ahead even if they stayed just a few months longer.
If a 100 unit property goes from turning 50 units annually (50% turnover) to 40 units annually, that property can easily save $35,000, assuming just a $3,500 turnover cost (They’d actually save more, because staff time wouldn’t be taken up with repairing and re-leasing all those units). How many of your residents would stay another year if you were willing to offer them that $3,500?
I’m not saying you do. But you can certainly spend more than you currently are in order to keep a customer.
Yes, we still need to place a strong focus on building community at our properties.
Yes, we still need to do events, try to create meaningful relationships amongst our tenants, and build ‘stickiness’ into our properties.
Yes, we still need to maintain the physical asset and focus on the curb appeal.
And, yes, we need to offer excellent customer service, and prompt maintenance service.
But, we need to really focus pro-actively on retention plan. I recommend you create a loyalty and rewards program, if you don’t already have one. And, if you do, maybe focus on it a bit more. That way, when their rental anniversary comes up, rather than sending that lease renewal letter, how about sending them a gift selection guide. They can see what items, experiences, or upgrades they will get when they renew for another year. THEN you can discuss staying a little longer.
The whole arc of the tenancy is important. Renewal starts at move in day, and is working all through the tenancy. You will need to earn those renewals. However, if your tenant would move over a $50 rent increase, then they’ll probably stay for a reward.
Done right, this will increase your average length of tenancy and pay for itself many times over.
Source: Multifamily Insiders
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