Making Tenant Retention a Priority
As tenants adjust to unaffordable high prices while seeking other wanted rental benefits, they will be on the move to find other accommodations. This post helps motivate you to prepare for higher vacancy rates (Zumper report shows they rose last month) and keep your tenants.
This concerning trend poses potential losses of 10% to 20% in churn-related events. We’re assuming it can’t get worse, however some businesses have cancelled hiring plans for this summer. The Fed keeps saying it can fix the inflation issue with much higher interest rates. You’ve likely seen your own mortgage payments rise, thus rents have to be increased in 2022/2023.
Since rent prices don’t fall fast, and landlords costs are rising (taxes, supplies, labor, financing), with renters fleeing high cost cities, your own herd might be looking forward to the end of their leases too.
The Great Renter Migration is Underway
For you, the Great Renter Migration/churn trend happening means higher re-leasing and turnover costs, cash flow disruptions, along with more evictions, collections, and challenges in attracting new tenants willing to pay your current rent prices.
More than half of apartment vacancies receive new tenants rather than current tenants, so tenant acquisition becomes an added task. When house rental turnovers occur, it’s always to new tenants. Turnovers mean inspection and costly, ill-timed repairs and perhaps some remodeling.
Tenant comfort, security and a sense of good value along with managing their needs responsively are at the core of any tenant retention strategy
What Do Renters Want?
Surveys show renters want better service than they experienced during the pandemic. Many don’t believe they’re getting good value for the price they’re paying. They gauge value received based on the rental experience in the last 20 years. That might not be the fault of landlords and property managers, but this is the injustice of perception.
And many would like to rent month to month and still look for a more suitably priced rental. This reveals their intent.
The Challenge of Renter Migration
Apartment List publishes a helpful quarterly Renter Migration Report. In the latest renter migration report for Q1, 2022, they analyze data from millions of website searches to see where renters are interested in relocating to.
Denver, Charlotte, Cape Coral, Raleigh, Orlando, Nashville, and Tampa are the cities with most interest with Apartmentlist searchers. Cities they want to leave include Washington DC, Ann Arbor, Fresno, Fort Wayne, Gainesville, Springfield, Ocala, Durham and Fayetteville. The state of California dominates for those looking elsewhere. Los Angeles renters like their city, but it’s simply not affordable for them.
What are Renters in Search of?
This would include:
- cheaper rent
- moving out of an aging building in poor state of repair
- new jobs in new cities (often out of state)
- more favorable lease terms
- shorter and less expensive commutes to work
- cities with vacancies
- larger units/homes with more modern work from home capacity/features and a backyard
- cities with better lifestyle
- safer neighborhoods free from crime, noise, stress and smog
Big Savings, So Why Wouldn’t they Leave?
In many cases, landlords only have low vacancy rates on their side. They’ll have to be more creative and knowledgeable to slow the exodus.
Many renters are looking due to the fear of not being able to pay the rent and meet cost of living increases that has them anticipating moving (because they visualize being evicted for non payment of rent).
Wages have been on an upward trajectory meaning some renters feel they deserve a better rental unit. That may be a false picture. Rents are climbing faster than wages, and even faster than inflation (14% compared to 8.6% CPI hikes). Costs are a significant concern to people.
As Zumper, Rentcafe and Apartmentlist rent price reports reveal, rents keep rising even though the growth rate is easing. There are landlords who haven’t raised rents as yet, and when they feel the pressure of rising costs, they’ll join the upward march too.
Tenant Communications are Extremely Important
How you speak to tenants and what value you bring in speaking with them is important. This value can be expressed in many ways.
For instance, tenants need to be reminded that any move right now is risky. During turbulent times young people especially need stability. Some tenants are risk takers and they’ll jump at a weak opportunity, influenced by news reports or a friend’s nudging, or because they don’t realize the move won’t work out.
A good dose of realism might be your Ace card. Before communicating, consider how it is valuable to them.
For property managers, apartment managers, leasing agents and landlords, the migration means engaging more positively with your current tenants to keep them stable. If you don’t present an argument against leaving, they’ll see the lease end as a godsend.
Churn is estimated to be costly, up to 2 months rent. You likely have your own loss numbers from your property management software and accounting software.
Let’s Take Tenant Retention Seriously
Okay, it’s a significant threat to your cost picture and cash flow, and you must take action.
Important questions to ask are what do renters want and what keeps them happy and content . Being an awesome landlord or property manager certainly helps because that improves responsiveness, being heard and respected, and feeling secure are the emotional issues you’re resolving.
Renters want some flexibility in leases, from terms to perhaps being able to paint their unit. And they’d like some minor upgrades (fixtures, flooring, and perhaps better air conditioning).
- respond quickly and compassionately to maintenance requests (you’re servicing your assets after all). Use a mobile app which is their preferred communications medium and be ready to speak via voice when needed.
- provide digital management tools for tenants which give them a feeling of control/mastery while giving you an opportunity to make continuous positive impressions on them (tenants today love digital amenities such as online rent payment, rental account document access, smart home controls, online security, keyless technology, and direct communications with property management)
- conduct a home inspection to detect damage and safety issues (you may have to do this anyway if turning over the unit)
- use your property management platform to conduct a tenant survey to keep up on their sentiment and issues
add a new amenity such as a faucet, light fixture, or fix a broken window crank
- engage them in conversation and let them speak about what issues they’re facing. If they show signs of not being able to pay the rent, then you might find them a cheaper unit in your portfolio, or prepare to acquire a new tenant
- let them keep their current rent by signing a longer lease term (rents won’t rise forever so you’re solving a long term problem)
- write blog posts on your website explaining the value tenants receive and why staying put in 2022 is wise (blogs are powerful communication tools which create a happy context)
- let them adjust some clauses in the lease or let them upgrade their lease in lieu of rising rent
- give them a gift, sports ticket, or discount for signing a new, revised lease (reward cooperation they give you. Those managing older buildings which renters are leaving need to grow incentives such as a free month rent for resigning the lease)
- show them you’re modern and observing professional service standards
- visit their unit when they complain and make some immediate repairs to ease their agitation
- be an awesome landlord, one whom they can receive a glowing reference from when eventually do move
- provide extra lawn maintenance, landscaping to create extra outdoor space for them
- new appliances, security cameras, and free high speed internet may work well too
Is renter migration just a hard cold numbers thing, or have they lost their feelings of security and comfort and you’ve lost touch with them?
Many of your renters will be moving and you’ll enjoy the opportunity to improve your tenant acquisition strategy. Long term, acquiring great tenants is the best lease retention plan. Great tenants pay the rent, are financially enabled, and are stable.
We hope you’ll be using ManageCasa to improve relations with your tenants and you’re able to convey value and understanding to them.
Check out the ManageCasa SaaS cloud management software and discover a new level of tenant care.
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