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The Tenants Have Spoken: Here is the Secret to Retaining the Best Renters

by Brandon Turner on January 10, 2014 · 25 comments

  
Tenant Retention

Right now, I have more vacancies than I’ve ever had.

That said, that’s only because I just bought a new triplex and have yet to get them finished and filled. However, it still grinds my gears a bit to have to write out a check to the mortgage company but not get any income from the tenants.  I need to fill those vacancies quick.  After all, as I mentioned in a previous article “The Two Most Painful Words a Landlord May Ever Hear” – tenant vacancies are the #1 largest expense for a landlord over the long run.

This is why a recent study done by Property Management Reviewer SoftwareAdvice.com stood out to me when I was made aware of it this week. In the survey they conducted, they asked approximately 4,600 renters about the incentives that they would most like to see to encourage them to renew their lease and sign for another year.  (Yes, the survey focused on retention, but I think the results would apply the same for attracting new tenants.)

The results were very interesting!

I thought I’d share with you what they found out – so you may be able to offer the best perks to get your tenants to re-up their lease!

Monetary Discount or Special Upgrade?

To encourage tenants to renew their lease, is it better to offer some sort of “monetary” benefit… or something less tangible (like new appliances, upgraded, unit, etc?)

Overwhelmingly, tenants chose a monetary benefit:

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What Kind of Monetary Benefit?

So, 52% of tenants would prefer a “monetary benefit” – which is not too surprising. We all like money, right?

But… what exactly are we talking about? Handing a wad of cash over? Discounting rent?

According to the tenant’s surveyed…

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What About Unit Improvements?

Okay, maybe you are not able to offer discounts on rent or cash.. but perhaps you could improve the unit some. After all, according to the first graph I showed you, 27% of tenants would prefer a unit upgrade.

The great part about improvements as retention tools is that certain upgrades can actually increase the value of your property – so it’s often a win-win.  So, what could you improve, as an incentive, to retain the best tenants?

This is where it gets even more interesting.  According to the study, it’s a close three-way tie between “new carpet,” a “washer/dryer upgrade,” and “kitchen appliances.”

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Other Incentives

Finally, perhaps the most surprising part of this study. What if you wanted to get creative and offer another perk… something “off site?”  What would the tenant prefer?

According to the study – survey says… a Gym Membership!

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Conclusion

If you want to read the rest of the results of the survey, check it out here.   You’ll learn some interesting things – like “when is the best time to offer incentives” or “who does a free TV most appeal to?”

Whether or not you plan to offer incentives to your tenants is up to you – but remember… vacancies are the #1 cash flow killer for real estate investors. By offering some kind of incentive to either sign up or re-sign up a tenant, you can hopefully cut that expense considerably and add more to your bottom line.

Thoughts? Suggestions?

I’d love to hear what YOU are doing for incentives to retain great tenants. Leave your comment below!

Data: SoftwareAdvice.com: Survey Reveals the Best Incentives for Retaining Tenants
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{ 25 comments… read them below or add one }

Jon Kepler January 10, 2014 at 1:49 pm

Brandon, I really enjoy your writing. However, the problem with this study is that they simply asked the tenants questions rather than testing and measuring actual results. In other industries, I’ve seen evidence that cash discounts or refunds are never as effective as free services or gifts. Until you actually test, you never know for sure.

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Brandon Turner January 10, 2014 at 2:13 pm

Thanks for the comment Jon. And I agree- it’s definitely not a scientific approach, and I’d love to see a more thorough study someday. But I think it brings up a valid discussion on how a landlord can improve their vacancy rate. My thoughts anyways! Thanks again for the comment!

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Michael Sadler January 10, 2014 at 1:53 pm

Thanks for sharing Brandon!

It’s a lot of fun to see what tenants value in pie chart format!

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Brandon Turner January 10, 2014 at 2:14 pm

Thanks Michael!

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Brandon Foken January 10, 2014 at 2:18 pm

It’s funny to see these discussions while renting/living in San Francisco. Landlords here have it so easy: people lining up (usually at least a dozen) to view apartments with checkbooks ready, credit reports and a “rental resume” to prove their worthiness to get that apartment. Sometimes I’m convinced I live in a fantasy world. Anyways, good stuff for landlords in the real world.

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Brandon Turner January 12, 2014 at 2:15 pm

Hey Brandon,

Yeah – I’ve heard San Francisco is pretty crazy! :) Who knows- maybe someday it’ll change and you’ll see!

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Amit M. January 14, 2014 at 12:54 pm

Umm…you’re forgetting a minor detail in favor of tenants: rent control!

It creates such a distorted market; really benefits long term tenants and makes it like you describe for newly arriving tenants. I know, it’s crazy!

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Elizabeth Gray January 10, 2014 at 3:22 pm

I’ve never had trouble renting any property. We currently own a 16 unit apartment complex, 7 homes, and are flipping 3 houses.

I give my tenants a clean and functional house, everything fixed up front, and price it at “best product, best price”. I look at market rents for comparable homes in the subdivision and then price my property right under market rent (usually $25 or so). All of this analysis is done upfront.

When it’s time to renew, I analyze the market rents again. I’ve been investing for almost 3 years in Houston, Texas and rents have held stable or gone up each year. If they renew for a longer term than 1 year, I’ll usually give them a small discount on the rent.

And I vigorously screen my tenants.

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Justin January 10, 2014 at 3:49 pm

“You wanna know what grinds my gears”?

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Brandon Turner January 12, 2014 at 2:21 pm

Lol – it’s from “Family Guy” the TV Show. :)

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Geoff January 11, 2014 at 1:01 am

This is an interesting topic, waiting to hear other comments,

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Adam Roberts January 11, 2014 at 10:07 am

Good article and study. I have toying around with the idea of offering a reward for those who pay rent on time. My electric company here in Texas gives me $50 every time I pay on-time for 6 straight months. For electricity, that’s a pretty sizable prize. While $50 may not be enormous, I must admit it makes me set an alert on the calendar for the electric bill!

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Brandon Turner January 12, 2014 at 2:14 pm

Hey Adam, that’s not a bad idea at all. Maybe a bit of a pain to Keep track of, but if I could automate that, I would totally make an incentive program like that for my rentals! Thanks for the tip!

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Andy King January 12, 2014 at 8:42 am

I’m pretty sure I got this idea from BiggerPockets, so I can’t claim that it is original, but it’s working great on one of my duplex rentals. On a 1-year lease, I offered my tenants a $50/month reduction in rent for the last 6 months if they paid rent for the first 6 months on or before the 1st. They loved the idea, it helps them out, gives them an incentive to pay on time, and trains them to do so.

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Brandon Turner January 12, 2014 at 2:14 pm

Hey Andy – I haven’t heard that before – but I love it! thanks for sharing!

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Geoff January 12, 2014 at 1:40 pm

I have read every word or your tenant retention articles and have spent a great deal of time on this. I deal mostly with lower end tenants (still good hardworking people) and when I ask what they like most about where they live they almost always reply that I fix things in a timely manner. My maintenance guy takes calls directly and is instructed to respond within 24 hours. I have instilled in him a customer service attitude. I also keep rents below market. With those two items, I provide the best product and they know it. Like Ken McElroy said in last weeks podcast, it’s all in the management. I just sent everyone a $25 grocery store gift card at x-mas, the response was great. This year I plan on sending a $100 “rent coupon” redeemable upon lease renewal. It will be sent 60 days before the lease is up with a one page lease extension agreement and a self addressed, stamped envelope. I firmly believe in making things easy and predictable for your residents. Stability and fairness give people a good feeling. Poor communication and unresponsiveness to requests is stressful and build resentment. Just be the best landlord in town and tenant retention will follow.

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Brandon Turner January 12, 2014 at 2:13 pm

Awesome suggestions Geoff! I like the $100 coupon upon renewal. Smart! And I agree with the responsiveness thing. I have trouble finding contractors that have that “customer service” mentality – any tips?

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Geoff January 12, 2014 at 5:40 pm

Believe me, I’ve gone through many, many bad contractors. I have established a great relationship with mine. He was actually my very first renter that I asked to leave because he couldn’t keep up on rent. He vowed to pay me back every dime he owed and he did-though work. That was 7 years ago and he does all my handyman calls now. He even coordinates when we have to call in a plumber, electrician or hvac guy. It’s tough to find loyal people-but I pay very well. I pay him $25/hr with a 2 hr minimum. He has his own Lowe’s and Home Depot card. He takes maintenance calls directly. For that I give him $50/month stipend for his cell phone, for which I just give him $600 at the beginning of the year. He’s not even really that great of a handyman, but he’s 100% honest and treats residents with respect which to me is way more important. We spend just as much time discussing dealing with the resident as we do on the actual maintenance item. He even does tenant placement for me, for which I pay him $250. I prepare the leases, paperwork, etc. He mainly does the running around which has killed me timewise in the past. I give him a few hundred at Christmas, he can borrow tools whenever he wants, he can use my home depot card for personal use if he wants (he always pays me back). I always lend him money (he owes me about $1500 right now), and he pays me back $100 here, $100 there. I just don’t give him a hard time. I’m usually pretty generous with paying people and it has hurt me many times but all you have to do is burn me once and you’ll never work for me again. It’s a very hard relationship to find, but when you do, be generous with him.

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Kizzy January 12, 2014 at 2:01 pm

Brandon

This is good. I know as renter I’d like upgrades, discount on rent or small gifts. I think these are all great ideas especially for loyal and dependable renters.

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Brandon Turner January 12, 2014 at 2:13 pm

Thanks Kizzy for the comment!

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K Budd January 12, 2014 at 7:26 pm

I can just imagine the response when I tell my tenant, “Here is a one year membership to a gym as a way to say Thank You.”

Silence

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jessica January 12, 2014 at 9:52 pm

great article!

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Michelle January 15, 2014 at 7:27 am

I have a Menu of Living I send with all my renewals. If they sign a 1 year renewal, they are eligible for an item off of the list. The items get nicer the longer they are residents. Such as carpet cleaning or curved shower rod for a person who has been here only a year, updated faucets or accent wall for 3 years, and new flooring or appliance for 6 plus years.

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Geoff January 15, 2014 at 3:21 pm

I really like that Michelle. would you be willing to share your “menu” as the tenant sees it?

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Kevin Vitali January 15, 2014 at 7:46 am

When working with investors, vacancy is one of the biggest problems they complain about. Holding out for an unreasonable rent. 4 months of unrented space costs far more then a $100 or $150 rent decrease if it attracts a renter immediately.

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