New Leases and Renewals: These Two Things Are Not the Same

Print Friendly

Resident renewals have long represented one of multifamily’s unrealized opportunities. Many operators have approached their efforts to retain residents with only half-hearted attempts and outdated software, inadvertently leaving potential revenue and numerous business benefits on the table. In light of the recent decline in demand for new leases following years of a highly competitive market, apartment companies may now begin to prioritize resident renewals.

Unfortunately, many operators still mistakenly view the renewal process as essentially identical to signing a lease with a new resident. To truly optimize their retention performance in both strong and softer markets, multifamily companies need to understand all the nuances and unique factors surrounding a resident’s renewal decision and build their procedures and tech stack accordingly. 

Understanding the Differences

When it comes to signing new leases, apartment communities are dealing with a “many to one” scenario. They encounter numerous prospective residents who all share the common goal of finding a suitable home within that community. While their specific needs may vary slightly, ultimately, they all seek residence within the same property.

In contrast, when a resident is considering renewal, it becomes a “one to many” scenario, wherein a single resident has multiple potential pathways to choose from. Maybe they simply want to renew the lease for their current apartment and be done with it. However, it’s highly likely that their circumstances and preferences have evolved since their initial move-in. They might desire a smaller or larger apartment within the same community. They could have unresolved maintenance issues that they expect to be addressed before committing to a renewal. Perhaps they need to relocate to a different area of town or even to another city altogether.

Regrettably, communities typically don’t engage with residents who are up for renewal in the way that they should. They don’t communicate with them early and often to understand their experiences and how their needs might have changed. As an industry, we behave as if we don’t know the residents living at our community when it comes time for renewal. Even when we do understand a resident’s needs, operators fail to leverage that data and knowledge, and continue to put residents through an outdated and cumbersome end-of-lease experience. This ultimately leaves residents looking for something else and causes unnecessary turnover.

Optimizing Renewals

Once operators acknowledge the nuance and distinct nature of renewals, they can begin to optimize their process.

If equipped with the right tools and procedures, operators can create highly personalized experiences that resonate with residents who are considering renewing their lease. They can actively leverage feedback from residents, gauge their intent to renew and understand how their needs might have changed. By offering renewal packages that accommodate different pathways, operators can expedite renewal decisions and enhance the overall user experience. Moreover, they can adopt a holistic approach to retention, realizing that it doesn’t necessarily always entail keeping a resident in their current unit. With the right technological infrastructure and mindset, operators can seamlessly transition a resident into a different unit within the same property, or even to another community within their portfolio. In instances where the renter needs to leave the operator’s portfolio entirely, because they are unable to accommodate them, the company can turn move-outs into a revenue stream by sharing leads in a closed network.

By giving renewals the time, resources and strategy they deserve, operators will experience a significant range of business benefits. A focus on renewals will boost retention rates, reduce vacancy loss, improve occupancy forecasting and strengthen real-time pricing decisions. Furthermore, the insights and feedback gathered from residents can highlight areas where improvements are needed to enhance the overall living experience.

In the end, apartment operators should recognize renewals for the unique moment that they are and the business opportunities they offer. By doing so, they will undoubtedly recognize a significant boost in their net operating income and asset value.

Source: Multifamily Insiders