What do you do to minimize tenant turnover?

Fort Wayne, IN · Member since 2013 · 66 posts · 12 votes

When buying a property I always calculate 10-15% for delinquency and vacancies. With my portfolio this is a conservative average however I have a fourplex with small one bedroom units that seems to take a long time to fill. People either love or hate these units as the bathroom and kitchen are small and the units are all a little dated but comparable to neighboring properties.

We have decided to keep the units in the as-is condition as the units are not bad they just take a little extra time to fill..

My question is when you do not want to update units but you want to cut turnover what is the best strategy? Would you lower the rents, lower tenant standards, increase the advertising budget or is there another creative trick you know of the lower turnover time?

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Patrick L.

Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes

12y

The biggest thing is when something breaks I make sure I immediately get someone out there to fix it. I also don't raise rent on my tenants that pay on time that I want to keep. (market rate on rent here hasn't gone up too much here in the last 5 years anyway) Those are the two biggest reasons that prospective tenants give me for why they are looking to move.

Another thing I do for tenants that have been with me for a while is when the lease is up for renewal I'll offer to do a small upgrade of the tenant's request upon the signing of a new lease. It's generally something that costs a few hundred dollars and improves the property. (a new appliance, a couple new light fixtures, adding a flower bed, a new kitchen faucet, etc). It's a good way to get to something small that has potentially been bothering the tenant.

I have more than 40 rentals and I generally have 1-2 vacancies a month, under 5% for the year.

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Matt M.
Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
I usually keep rents low and cost to move in high (1st, last, & SD). It usually attracts a larger pool that I can screen from.

Make sure the units are clean and free of pesky handyman items (small leaks, holes, door locks work, etc)
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
Keep tenants happy. Make it so they never want to leave. When things break, fix them quickly. Keep good communication. Treat them like adults.
Podcast Guest on Show #29
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Sherrie P.
Florence, AL · Member since 2013 · 21 posts · 2 votes
12y
Ditto Dawn. We exceed our tenants expectations at every turn. We are blessed to have a wonderful family living there right now and anytime they call, 'we hop to it"! :) Customer Service is number 1 in my book, but i am old school.
1 Reply
Sean Kuhn
Minooka, IL · Member since 2013 · 353 posts · 85 votes
12y
Dawn is correct, keep things neat and fixed. I also keep my rents below market value and they rent very quick with a large selection of tenants. I would rather have lower rent and higher tenant standards than higher rent and lower tenant standards.
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Bill S.Pro Member
Moderator
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
12y
I don't really see that quality of tenants makes any difference with regards to retention.

Once you get them you want to keep them. Jeffery Talyor of Mr Landlord fame is the king of tenant retention in my opinion. He has several books. If you are really serious about this you should get his books (library is a place that fits most anyone's budget). He outlines several programs that a bit more than the space here allows.

I would say that costumer service is the start but when vacancy is your largest expense promptly fixing things only goes so far. In reality, most things shouldn't break so there is limited opportunity for that.
1 Reply
Lynn McGeein
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
12y
If they have been great tenants for a year, we offer a 2-year lease for renewal (usually offer one year higher rate, then 2 year option for same or slightly higher than current rent, depending on market). My PM convinced me to offer 2 years right from the start on one of my units that seems to turnover each year, and so far they've been in over 1 1/2 years of their 2 year lease, so likely will do that again in that neighborhood. Also, we purposely bought homes with large fenced backyards and like to cater to tenants with well trained large dogs as they seem to be happy to stay longer than normal and definitely less options out there for them so not likely to move as much.
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Sam Leon
Investor · Fort Lauderdale, FL · Member since 2012 · 1k+ posts · 465 votes
12y
offer them a 10 year lease where the rent slightly decrease each year.

encourage them to customize the property such as built-ins, landscape, paint colors so they grow attached.

as they stay longer and longer you might feel more and more secured because they have demonstrated their reliability so you can start to return some of their security deposit...what's that car insurance company that offers the "vanishing deductable"?

established long term tenants get to participate in new tenant screening, in that they get a say who they want as their new neighbors.

established long term tenants are classified into gold, silver and bronze statuses with gold being 5 years or more. Depends on your status if u pay rent on time each month you may get a 1.5% cash back from your rent and I say "may" because the reward is a rotating category that changes month to month sometimes its cash back sometimes its a dozen of bagels sometimes its a 20 pack AA batteries.

Uhhhh...ok...I was joking, relax... :)
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Patrick L.
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
12y
The biggest thing is when something breaks I make sure I immediately get someone out there to fix it. I also don't raise rent on my tenants that pay on time that I want to keep. (market rate on rent here hasn't gone up too much here in the last 5 years anyway) Those are the two biggest reasons that prospective tenants give me for why they are looking to move.

Another thing I do for tenants that have been with me for a while is when the lease is up for renewal I'll offer to do a small upgrade of the tenant's request upon the signing of a new lease. It's generally something that costs a few hundred dollars and improves the property. (a new appliance, a couple new light fixtures, adding a flower bed, a new kitchen faucet, etc). It's a good way to get to something small that has potentially been bothering the tenant.

I have more than 40 rentals and I generally have 1-2 vacancies a month, under 5% for the year.
3 Reply
Sean Kuhn
Minooka, IL · Member since 2013 · 353 posts · 85 votes
12y
@Patrick L.

40 is impressive, do you manage them all yourself?
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Patrick L.
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
12y
Originally posted by @Sean Kuhn:
@Patrick L.

40 is impressive, do you manage them all yourself?

I self manage with the help of a full time maintenance person who also helps out with showings and rent collection.
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Account Closed
Involved In Real Estate · Biloxi, MS · Member since 2013 · 76 posts · 30 votes
12y
Ditto @Matt M. , lower rent to attract interest and use higher move-in cost, along with other stringent criteria, to weed out the less desirable applicants.

I like @Sam Leon 's idea of a vanishing deductible. Handing a tenant a few hundred dollars of deductible back as a renewal incentive would be enticing.
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Al Williamson
Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes
12y
I agree with @Dawn Anastasi but don't stop there. I went through the exercise of deep thinking about the cost of vacancies. Concluded that I needed a full vacancy reduction plan because I will no longer tolerate accepting one day of lost rent.

Now I:

- aggressively market as soon as I get a notice to vacate

- try to grow a waiting list

- give a tenant incentive to get another lease signed before the move out

and some other things.

Basically planning on change might be safer than trying to continue a trend.
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John Chapman
Investor · Dallas, TX · Member since 2009 · 718 posts · 913 votes
12y
I do everything everyone else say, but I also make sure to use really durable materials (particularly flooring) when I rehab my units. I believe that no matter what, after a couple of years, your place is going to look a little rough, particularly the carpet (which I never install). The more durable the materials, the longer the place stays nice, and the less incentive the tenant has to move out of a dingy place.
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Michele FischerPro Member
Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
12y
Good advice here. I love to do upgrades while the tenant is living there. If the place needs a new kitchen, let them pick the hardware or counters from a few choices and work around them. They will be thrilled and more willing to stay, and now you have one less project to do while it is next vacant. If there are things you'd have or want to do at turnover, do it early for a great tenant. This also helps you have more control over some of your timing and costs - you decide when instead of being at the mercy of a vacancy. We swore we would never do custom paint colors, but our last two turnovers stumbled into "not white" paint and tenants sure love that too. We also don't have market rent increases, but I would split the difference with long term tenants - if rent should increase $50, move it $25 and let them know they are getting a break. Keeping rent below market even slightly makes it prohibitive to find something better.
Podcast Guest on Show #79
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Paul Mileny
Pittsburgh, PA · Member since 2014 · 9 posts · 3 votes
12y
Nowadays, tenants turn to online ratings of particular property management companies. For example, if you'll have 1-2 unsatisfied tenants and they go online and leave bad reviews, it will be quite detrimental to you....

So, in my opinion, it's best to renovate it and then rent out to avoid all the negative feedback.
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Dylan W.
Investor · Harmony, CA · Member since 2013 · 33 posts · 20 votes
12y
Nick

We give our good tenants a Home Depot gift card each year for Christmas, and ask them to buy something to make the house more comfortable to them. It has promoted long term tenancy. Ditto on much of the advice given above. Always resolve their concerns quickly and be generous in negotiations.
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Rick BassettBusiness Member
Property Manager · Greater New Haven, CT · Member since 2010 · 377 posts · 434 votes
12y
We usually rehab our places with good quality materials / fixtures before we rent them.

We bring all the electrical and plumbing up to snuff and insulate everything. We replace windows and doors with energy efficient (not top of the line) products if needed.

In New England its the utility costs that tends to drive tenant turnover. We hear from many prospective tenants that their current rent is affordable but the utility costs are excessively high.

We generally don't raise rents for tenants that adhere to our lease.
475-900-3100
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Pam R.
Investor · Delaware, OH · Member since 2013 · 224 posts · 64 votes
12y
@Dylan W. - Particularly interesting idea. How much is the gift card? And what do you find they buy - it is throw rugs and welcome mats or new knobs for the cabinets?

@Michele Fischer - we always stick with eggshell too, but have a long-term tenant who wants to paint. I think I'm going to let her, with a limited-yet-beyond eggshell palette of colors.

One thing we also did with the latest property we bought - the landlord said the one occupied unit was rented at $625/month. When we went through the paperwork, it was actually being RAISED to $625 at that moment - he put it on the market and raised their rent. In fact, we would be the first recipients of the rent increase. They had been there 8 years at the time. The very first time we met them, on day 2 of ownership - I handed them a letter stating I was rescinding the rent increase, and it was staying at $600. That bought far more goodwill than the $300 it was squeezing out of them.
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Dylan W.
Investor · Harmony, CA · Member since 2013 · 33 posts · 20 votes
12y
Pam

We vary the amount based on the tenant, but usually in the $100 range. They have bought yard tools (they are responsible for landscaping), drapes, welcome mats, etc... by the way how do you do the @ thing?
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Sam Leon
Investor · Fort Lauderdale, FL · Member since 2012 · 1k+ posts · 465 votes
12y
I also fix issues quickly, professionally, with minimum intrusion to the tenants.

However, I am not that sure that buys any loyalty.

Not from fixing things IMO, from the tenants perspective, these things shouldn't break in the first place. A house that never had any problem is more attractive than a house that has failed components every other month even the landlord hop on it right the way.

The communication, the quick response, the manner by which you handle the repair, and how much your repair process inconvenienced them all made a difference in their assessment of YOU as a landlord and may bring you some loyalty, how much is debatable.

"You are a great landlord but this place down the street is $25 cheaper" can be very eye opening.
1 Reply
Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
12y
When screening tenants I look for stability. I love ones that has been in their last rental for 7 years, are moving because landlord is selling, and says "I never want to move again."
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Aly W.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
12y
@Sam Leon is right. We've lost tenants mostly to family issues (unexpected new baby, breakups, etc.). There were even a few who said they needed to find a cheaper place.

We fix things almost immediately as well. Hearing that we're great landlords is, well, great, but it doesn't keep them in the property if they have a compelling reason to leave that you can't provide, i.e. extra space or cheaper rent.
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
Older tenants generally are less likely to move than younger people. The house I just bought, has a 57-year old woman living there. She's been there for 6 years and when I signed the lease with her, she said she never wants to move. Of course those are just words, but if you don't give someone a reason to move or you make yourself better than the competition, then it gives them less incentive.

It's much easier to do nothing than it is to do something.
Podcast Guest on Show #29
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Nicole A.Pro Member
Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
12y
I also offer to do a small project for long-staying tenants and if they always/usually pay on time, I don't increase the rent until enough time has gone by that I'm too below the current market.

One of my duplexes is honestly a bit ugly on the outside. This Spring I'd like to put in a flower garden or something to give it at least a touch of curb appeal.

Also, I have tried painting two of my apartments a tan/beige color rather than white and I got tons of compliments about it during the "open house". Repeatedly, I heard, "Wow! It's not white! It looks fantastic!" It didn't cost me much more...now just to see if I find over time it was truly worth it. :-)
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Sharon Tzib
Real Estate Broker · Cypress, TX · Member since 2013 · 822 posts · 468 votes
12y
@Al Williamson waiting lists are so powerful and so often under utilized. Great tip!
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