Want higher ROI on your rental properties? Easy—slash your turnovers to the bare minimum.
Turnovers mean vacancies, during which you’re not bringing in rents, yet still paying the mortgage. It’s not just the mortgage, either. You’ll probably need to repaint, you might need to replace the carpets, and you’ll need to clean the unit thoroughly.
Then there’s the marketing—advertising the vacant unit, showing it, holding open houses, collecting and processing rental applications, running tenant screening reports on all applicants, plus calling employers and prior landlords.
And if you pay a leasing agent or property manager, they may well charge you a month’s rent for their labor as well.
The bottom line is that turnovers will devastate your bottom line. So how can you minimize your turnovers and keep your properties occupied at (nearly) all times?
The trick is to retain your good renters for the long haul. You want them “snug as a bug in a rug” as my mother used to say. You want them so comfortable in your property that the idea of moving is a headache they would only consider under the most pressing need.
Here are 11 ways to boost your tenant retention rate, to keep those rents flowing and the work at a minimum.
11 Ways to Boost Tenant Retention for Higher ROI
1. Know your market.
You could have the best relationship in the world with your renters, but if your property is outdated or overpriced compared to the available property down the street, your renters will move.
Keep your finger on the pulse of your neighborhood and market. Know what your competition is charging and why. Most importantly, know how their properties and amenities compare to yours.
The trick is to step into the shoes of a renter living in this neighborhood. What appeals to them? What are their expectations?
Every quarter, go walk through a vacant rental unit offered in the neighborhood. Put yourself in the shoes of a prospective renter, and channel your inner method actor. What amenities jump out as appealing? How modern is the feel inside the property? What’s your impression of what it’d be like to live there?
If possible, attend open houses and talk to the prospective renters. Ask them their thoughts about the property. Ask them what they think about certain amenities.
You can (and should!) also conduct exit interviews with all of your own outgoing tenants. Why are they moving? What would they have liked to see from you or the property manager? What might have induced them to stay?
2. Learn your tenants’ dream improvements list.
Don’t stop at interviewing outgoing tenants or prospects at neighboring properties. Your best resource for understanding what your renters want is, well, your own renters!
When you conduct your semi-annual inspections with your renters (which you’re doing, right?), ask them, “What are your dream property updates if you could wave a magic wand?”
Compile a list of in-demand property updates. Some might be outlandish, but others will be affordable updates that will raise the property’s desirability for years to come.
Keep updating this list, and every once in a while, choose the update with the best return on investment.
When you inform your renters, tell them you listened to them, and because you value them as renters, you’re going to make XYZ improvement. They’ll feel valued, and they’ll (of course) want to stick around and enjoy this new property update.
3. Start a “friends to neighbors” program.
Have a multifamily building or own multiple single-family properties in the same neighborhood? Here’s a win-win strategy for everyone involved.
Everyone loves the idea of their friends or family members moving close by and becoming neighbors. And the close ties of having your friends as neighbors is difficult to give up.
Announce to your renters that if they refer a friend or family member, you’ll give their friend a $300 voucher to help cover their moving expenses. That’s important. though—your incentive has to go to the friend, not to your renter. People can tell when their friends are acting in self-interest when referring something to them.
Win #1: You fill your vacancies faster, as your renters become marketing agents on your behalf.
Win #2: Your renters form deeper ties to your property because their close friends are now their close neighbors, too. They will be much, much less likely to move away.
4. Screen applicants like your incomes depends on it (because it does).
There’s a lot to be said about the finer points of tenant screening, which can fill entire articles and ebooks. But tenant screening is one of the most important activities that landlords and property managers undertake, and it has a direct impact on your turnovers.
Bad tenants end up needing to be evicted—or at the very least, non-renewed. In other words, signing a lease with bad tenants is just setting yourself up for quick, expensive turnover.
And it doesn’t stop at tenants who will fail to pay the rent or even those who pay but damage your property. Also, screen out “house hoppers”—renters who hop around frequently from one home to the next. If you want to minimize turnovers, lease to renters who are stable and have a history of living in one home for long stretches (three or more years, ideally longer).
5. Keep quick-reference files on all renters.
Do you remember all your renters’ children’s names? Do you remember all their hobbies or what’s going on at their jobs?
Of course not. So keep a quick, short-‘n-simple digital file on your computer for each set of renters. A few notes will cut it; just note whatever was going on in their lives the last time you spoke.
You should be able to pull up these files in the time it takes to dial a renter. You can then spend 60 seconds warming up the conversation by demonstrating how much you remember about the renter and their family.
“Hi, Mrs. Blake. How are you doing? I remember the last time we talked, Timmy was about to start a new school. How’s that going for him?”
“Hi, Mr. Smith. How are you doing? The last time we talked you were training for a triathlon. How did it go?”
Your renters will be surprised that you remember these little details about their lives. It sets the stage for a much friendlier conversation, and they’ll be left with the impression that you think of them as human beings, not cash machines.
6. Consistently raise rents—and offer strategic relief.
There are plenty of reasons to raise your rents every year, even if only marginally. Higher revenue, of course. And you don’t want rents to get too far below market levels and then jar your renters with one big rent hike.
Then there’s setting expectations for your tenants: Rents go up every year. It’s a fact of life, like rainy days or inflation. Your tenants should come to simply expect incremental rent hikes every year, while also knowing that you won’t gouge them with a massive jump.
In setting these expectations, you also set the stage for a better option. Every time a lease comes up for renewal, offer your renter three options for renewal:
- Option A: Continue on a month-to-month lease, with an incremental but real rent hike.
- Option B: Renew for another year’s term, with a smaller rent hike.
- Option C: Renew for a two-year term, and lock in that smaller rent hike for a second year.
If they know that rents will increase for them next year, then it becomes a real incentive to lock in a good rent rate for the next two years.
7. Call when sending important notices.
Have a lease renewal coming up? Is the rent late and you’re filing for eviction? Call them!
Yes, by law, you often have to send certain notices in writing. But that doesn’t mean you should leave it there.
Speaking with your renters on the phone before they receive a cold, hard written notice will establish a dialogue, rather than an edict from above. You want to have a relationship with your renters, albeit a professional one.
This gives you a chance to explain the lease renewal options and varying rent hikes. It also gives you a chance to learn exactly why a tenant missed their rent payment. It shouldn’t affect whether you file for eviction or not—you should always file eviction like clockwork; this is a business—but it does give you context.
Your renters will appreciate the human connection of a conversation, rather than just receiving certified letters in the mail or a notice taped to their front door.
8. Call before entering the property.
The same concept applies to entering the unit. Yes, you have to give written notice, but a phone call is an appreciated human gesture.
Even if it’s an emergency and you aren’t legally required to give written notice, you should still call.
It demonstrates a respect for the renters’ privacy. Sure, to you, the property is an asset. It’s your business and your property. But to the renter, it’s their home, where they cook dinner for their kids, relax after a long day of work, shower and sleep. It’s their refuge from the world.
The phone call need only take 60 seconds, but it’s an important gesture, and your renters will appreciate it.
9. Prioritize responsiveness.
When there’s a repair problem in your property, it’s urgent.
It’s urgent for you because the longer a problem festers, the more damage it creates.
It’s urgent for your renters because any problem in their home is inherently urgent.
When your renters report a problem, jump on it immediately. Keep a rolodex of contractors of every skill set and every price point, so you can call a repair pro as soon as you get off the phone with your renter.
If there’s a delay for some reason, explain it clearly to your renter, and stay in communication with them every few days even if there’s nothing to report. It sends the message that it’s a priority for you, and you’re on top of it.
10. Send holiday cards to your (good) tenants.
When December comes around, send holiday cards to any renters you want to keep. If you’ve screened your tenants well, that should be almost all of them.
Holiday cards are more meaningful if they’re faith-specific, so if you know what holiday your renter celebrates, send a card for that specific holiday.
Address the card to each family member by name, including each of the children. It’s more personal: “Bill, Amy, Peter & Sally Jones” rather than “The Joneses.”
The cards and envelopes should be handwritten. They don’t have to be long—a couple warmhearted sentences will suffice. If you don’t have the time yourself, have an employee or virtual assistant write and send them.
If you want, you can include small (e.g. $25) gift cards to universal retailers like Best Buy or Amazon. It might even be tax-deductible! But no pressure.
Sensing a theme? The best property management combines human relationships with business best practices.
11. Prune your money tree.
Prune away the dead branches. Toss out the rotten apples. Use your plant metaphor of choice, but get rid of your bad tenants.
Bad tenants are expensive. From property damage to eviction filings to pushing your good renters to move away, you can’t afford to keep bad tenants.
No matter how well you’ve done with any of the above tips, good renters won’t stick around if their neighbors are loud, deal drugs, or are just plain rude, disruptive jerks.
Every month, look at which renters’ leases are coming up for renewal soon. Send non-renewal notices to any renters you have doubts about. If you have to ask yourself whether they’re worth keeping, you already have your answer: non-renew them and get better renters in there.
Landlords constantly look for excuses and justifications to keep bad renters because they don’t want the hassle of a turnover. But do yourself a favor and get rid of bad tenants now, before they cause more damage to your property and cause more of your good renters to move away.
The formula is extremely simple: Keep your good renters, get rid of your bad renters, and you’ll find your costs down and your management much lower-maintenance.
What’s worked well for you to keep renters long-term?
Share your tips or your turnover horror stories!