One of the most important components to a successful rental real estate business is keeping good tenants for as long as you can.
It can be challenging to know which incentives are the most effective at getting tenants to stay and renew their lease. It is also important to understand when you should offer these incentives to tenants to have the most impact. A recent survey conducted by Software Advice, a company that evaluates residential property management software, reveals some interesting facts from the 4,600 current and former renters they asked questions of.
Why You Need to be Competitive
Keeping tenants in your rental property is less expensive for you as a property owner than having to bring in new tenants.
Since there are more people renting in the United States than choosing to buy at the moment, there has been a massive increase since 2010 (300 percent) in the number of multi-family homes constructed. This increase means that tenants now have far more options available if they want to move after the expiration of their lease.
The basic breakdown of how these different incentives work is that the monetary rewards are looked upon far more favorably.
With approximately 52 percent of those surveyed stating that the monetary incentive would sway them, it is clear that this is the key component to long term tenancy in most cases. Incentives such as unit upgrade and improvements came in with only 27 percent, services such as gym memberships came in as a tie with household appliances at 11 percent.
Monetary Preferences by Age
It is useful to look at the age groups involved in the specified incentive preferences with relation to monetary compensation.
It would seem that those renters in the 25-34 year range preferred a lower rental rate as their incentive (with a percentage of 49). Individuals age 35-44 preferred the cash option for incentives (with a percentage of 23).
In this situation a property manager will want to offer those targeted age groups the incentive that best fits their preferences in order to improve the chances that they will stay.
Household Items Preference Ratings
When it comes to offering tenants items such as kitchen appliances and entertainment systems, 37 percent of those surveyed choosing household incentives preferred kitchen appliances over all other choices.
A new television came in at 26 percent, iPad and tablets came in at 20 percent and furniture fell last at 17 percent. Among these findings, 64 percent of men would choose a television and 59 percent of these women would choose a tablet computer.
Covered Parking over Unit Upgrades
While the race was tight on this topic, covered parking with 35 percent took the lead over unit upgrades.
With 24 percent of tenants choosing free upgrades to a better unit, 22 percent of tenants chose free upgrades to a green unit and 20 percent of tenants felt that more free storage space would be enough to renew their lease. Parking is always a major consideration when a tenant is looking for a new apartment, especially in city areas and those that have significant snowfall, where parking comes at a premium.
Offering parking checks a box on their necessities for a new apartment, especially if they do not currently have that covered parking as a part of their lease.
Convenience Perks Rank Differently Based on Age
While off-site service incentives are somewhat popular with 30 percent choosing a free grocery delivery service, tickets to local events ranking in at 13 percent and free car sharing service being at 11 percent, consideration should be made for these services.
Many of these were most popular for residents over the age of 55. Tenants overall ranked an off-site gym membership as being a 47 percent success incentive.
Maintenance Perks vs Multimedia and Entertainment
Interestingly enough, the younger renters between ages 18 and 34 preferred incentives such as free cable television and internet services over house cleaning and laundry services.
In fact, 41 percent of those surveyed preferred to have free internet and cable added to their package while 17 percent chose free house cleaning services and 11 percent chose free laundry and dry cleaning services. In many cases this comes down to renters viewing not having to pay a cable or internet bill as putting money back in their pocket.
These are typically items they would pay for anyways, unlike a gym membership or laundry service which they might not take part in at all but for a free offer from their leasing agent.
When to Offer Incentives for the Most Effective Results
Not only is it important to choose incentives that fit the renters’ needs or desires, but it is also important to choose the best timing for presenting these incentives.
Approximately 45 percent of the renters surveyed said that they would be more receptive to incentives offered if they came just before the lease is going to end, but before the move-out notice is received. Nearly 43 percent of the renters agreed that they would consider extending the term of their lease if they are presented these incentives at the time of signing the lease initially.
Only 6 percent of renters thought they would be open to remaining at the property if the incentives where presented after they received their move-out notice and 5 percent would be interested if presented the incentive a few months after signing.
Offering incentives is a powerful tool for increasing the longevity of a lease term for tenants that have been a good fit.
Choosing the right time is essential as tenants are less likely to be interested in incentives if they are presented part way through their tenancy or right as they are already looking to move. Choosing the appropriate incentives is also vital to being successful in encouraging tenants to stay with you.
It may be to your advantage to have a large number of options available so that you can tailor each one based on the age of the tenant and their overall needs and desires.
How has incentives help motivate the longevity of your tenants?
leave your thoughts and comments below!