Tenant Mindset

18 Replies

Hi everyone,

I searched, but couldn't find anything, so am starting this post. I have rentals in decent, middle class neighborhoods, sort of upple middle of the spectrum in the area. My objective is to decrease vacancies and decrease tenant turnover. What's do you think the mindset of your tenants are (and please list the types of rental). Mine has changed throughout the years. When I was 18, it would be cheapest rent possible, college it was finding a nice place, but when they would send the renewal letters with a slight rent increase, I felt upset and had no clue back then that they were running a business and their expenses increase. I just thought they were being greedy... little did I know.

At this point in my life, we are property tax payers, but I know that being in the military, where I go next, I will likely seek a cheaper apartment in a moderately safe area and seek a company that maintains their propertly well and addresses repairs and issues quickly, but won't care if the interior is dated looking so longs as it is clean and things work, but I am definitely not seeking a place with a yard that has to be maintained. I just don't want to spend my time maintaining someone else's yard.

I know everyone is at different stages in life and opinions change over time, but what do you think the mindset of today's tenant is? Does a 3-5% increase make them upset and want to move? Do they mind having to cut the grass or change the air filters? Do you think they are glancing at the rents of other homes in the area, or do they find one home and stick with that and stay content? Do they manage their money in a way to ensure rent is factored into their budget first and that's the first bill they pay, etc? Other thoughts on your tenants? Please describe your home/neighborhood type and what you think that tenant's mindset is. Thanks in advance.

I can't find an edit button, but started a new word of upple. I meant upper.

We are not, any of us, purely rational economic actors.  Psychology matters.  Yes, people will get upset with continual rent increases, even if small, and really upset with nickle and dime fees.  upset enough to move, even if it costs them money.

I have single families.  I have never raised a rent on an existing tenant yet.  So I give up 3% a year?  So what?  You know what an month of vacancy plus a turnover costs, and how it really whacks your financials if you are in SFRs?

My houses are fairly small.  They are a step up for most of the people renting them.  Maybe they are starting a family.  Maybe they want to get out of apartments so they can get a dog.  Maybe they are checking out the town before deciding if they want to buy here (I have one of those now.)

My main selling points are 1.  Best school district in the area, 2. a house not an apartment, 3. I allow pets, 4. Nice yards.

P.S.  Would someone increasing your costs 3-5%, when we are in a 1.5-2.0% inflation environment, cause you to suspect they were nickling and diming you?  It would me.

Impossible to generalize like this...

Some are families that just want a safe home and neighborhood for their kids.

Some are young and just starting out and want whatever they can afford.

Some are young and just starting out and want a cheap place so they can move up/out to their own place.

Then there was a recent story in the San Diego paper about people who are paying MASSIVE rent for luxury apts with fire pits, dog runs, on site gyms,  decks, grills etc.

Hi @Scott Stevens   - I just read the following two posts in the last two days about some of the ways that other BP Members retain their tenants.  I guess I am not really answering your question about "what kind of mindset do you think your tenants have" -- but I think maybe you don't really need to think too much about that.  In the words of @Rob K (seen in the first thread listed below) "The bottom line is if you want them to stay, treat them right and make them feel they are getting a good value".   I think those are wise words, and the threads below have some excellent ideas on how to achieve this.  Many of the ideas are creative (and simple!)-- most I never even considered doing; many I am now considering implementing for the future!  Hope these are of some help to you: 

http://www.biggerpockets.com/forums/52/topics/77470-what-kind-of-incentives-do-you-have-to-retain-tenants?page=1#p77470

http://www.biggerpockets.com/forums/432/topics/139609-what-is-something-nice-i-can-do-for-apt-residents?page=1#p139609

Thank you @Julie Greene, I will be checking those two links out. That's what I strive for, responding timely, treating them as I'd want to be treated and maintaining the property.

@Scott Stevens  

I am an awful landlord lol. I raise the rent on the tenants at renewal if the market supports the need. I don't supply lawn services, they change their own filters, light bulbs, etc. I have military and non-military. Some stay their 3 year stay other leave. I have had 4 people break the lease (I charge 60 days notices and 2 months fee).

I have a great product. My houses are either townhouses (with a pool, community center, etc) or single family home located in great schools close to base/town. They are in higher end neighborhoods appealing to the professional. They are normally homeowners who are renters for some reason. I am writing more about this part on my blog/website. 

I do not worry about longevity because theirs no guarantee on anything (your military :)). My houses are clean but nothing fancy. Fancy doesn't earn more money. My houses rent from $1150-$1775.

We are also active duty military. We buy at each duty station with as little down as possible and rent out the house when we leave. The houses are the worst house (not fancy, no granite, etc) in the nicest neighborhoods. They are simple great houses who's mortgage is at least $200 below rent. They are in areas that appreciate so the rent also goes up.

Sounds like we are about the same Elizabeth. I also have townhouses with the pool and playground in the community and have been fortunate to be able to buy with as little down as possible. I never understood this, but I have coworkers who tend to buy expensive houses at this duty station, places with big yards, 2500+ sq feet and where the monthly rent isn't even 1% of their purchase price and they don't have an exit strategy after they have to move in 3-4 years. It's just assumed that the price will go up or I'll just rent it out. Do you ever see that where you are at? I didn't know you had a website, but I'll be checking it out.

And Elizabeth's post raises a good point.  It all depends on your market.  She has a more-or-less constant stream of new potential tenants.  And a group of tenants used to thinking in terms of annual adjustments and so forth.  I am in a small rural town, tenants are valuable things, everyone knows everything, and not acting accordingly will burn you quick.  So maybe it is easy for me to be the "nice" landlord, because the bottom line is that in my market, being "nice" is good business, and being "all-business" is bad business.

SFR rural - average rental for area. When we first started renting we had horrible tennants. We finally figured out it was our own fault. Once we figured out that we needed to treat it like a business instead of personal endeavor we changed our mindset. We charge first and last month upfront, no rent increase, pets welcome, and we provide lawn service and we only do month to month. We haven't had problems with keeping tenants in over a year now. Previous tenants stayed right at year and within 2 days of them moving we had new tenants moving in with a small increase over what the last were paying.

Originally posted by @Richard C.:

P.S.  Would someone increasing your costs 3-5%, when we are in a 1.5-2.0% inflation environment, cause you to suspect they were nickling and diming you?  It would me.

No. Most tenants don't equate rent to what... say.. froot loops cost.

I assume by inflation you mean the CPI...

Besides being a terribly flawed government stat, it is a worthless proxy for the rental rate of 123 Main St, HappyTown USA.

Know thyself. Know thy niche. Figure out who your ideal tenant is and cater to what that type of tenant would need and want.  Our longest term tenant has lived in the same apartment for 26 years!  Our shortest term tenants stayed only two months (first time renting, young, best girlfriends - until they found out they couldn't stand living together.)  We learn from our experiences.  

During tenant screening we ask prospective tenants what kind of place they are looking for.... what features are important to them.... what is their idea of the ideal landlord?  We let them know what we value and tell them about our management style.  When the tenant moves out we ask them what they liked best and what they liked least about living in our property.  Over time, we are figuring it out.  Safety and comfort is big on everyone's list.  Everyone says they want a clean place, but their definition of clean varies considerably. Some tenants like to keep to themselves, others are quite social.

It helps that I was once a tenant.  I've rented apartments and houses.  I still remember what it meant to me.  I remember when I was young, one year seemed like a really long time to live in any one place.  As I matured, I appreciated being able to settle in for a longer period of time and wanted to put my own touch on the place where I lived.

@Scott Stevens being a landlord has nothing to do with tenant mindset - it's your business and you should never let it become personal.  Its more of a landlord/owner mindset that needs to be established before renting otherwise just doing it will teach you what you are doing that works, what you are doing that doesn't work and then you'll readjust your mindset and/or decide that landlording is not for you.  Hope this doesnt come off as rude-so not my intention. I've just learned  landlording by doing and had to take a hard look into my own mindset-and decided it wasnt my tenants faults that they were horrible it was mine because I gave them the right to be there. Once I changed my mindset I now enjoy landlording.

Originally posted by @Shelly Swanzy:

@Scott Stevens being a landlord has nothing to do with tenant mindset - it's your business and you should never let it become personal.  Its more of a landlord/owner mindset that needs to be established before renting otherwise just doing it will teach you what you are doing that works, what you are doing that doesn't work and then you'll readjust your mindset and/or decide that landlording is not for you.  Hope this doesnt come off as rude-so not my intention. I've just learned  landlording by doing and had to take a hard look into my own mindset-and decided it wasnt my tenants faults that they were horrible it was mine because I gave them the right to be there. Once I changed my mindset I now enjoy landlording.

 But really Scott is asking about marketing psychology.  It is always a good idea to have some idea what your prospective customers are looking for.

Originally posted by @Richard C.:
Originally posted by @Shelly Swanzy:

@Scott Stevens being a landlord has nothing to do with tenant mindset - it's your business and you should never let it become personal.  Its more of a landlord/owner mindset that needs to be established before renting otherwise just doing it will teach you what you are doing that works, what you are doing that doesn't work and then you'll readjust your mindset and/or decide that landlording is not for you.  Hope this doesnt come off as rude-so not my intention. I've just learned  landlording by doing and had to take a hard look into my own mindset-and decided it wasnt my tenants faults that they were horrible it was mine because I gave them the right to be there. Once I changed my mindset I now enjoy landlording.

 But really Scott is asking about marketing psychology.  It is always a good idea to have some idea what your prospective customers are looking for.

Thank you Richard, that is what I'm looking at. I wanted to see if anyone has had any experience on what moves landlords do and the tenant's response. One person on a podcast said tenants will move out over $15 rent increases. Has this been anyone's experience? Similar things such as making a tenant pay a repair that they were at fault for and the tenant moving out because of that?

Originally posted by @Scott Stevens:
Originally posted by @Richard C.:
Originally posted by @Shelly Swanzy:

@Scott Stevens being a landlord has nothing to do with tenant mindset - it's your business and you should never let it become personal.  Its more of a landlord/owner mindset that needs to be established before renting otherwise just doing it will teach you what you are doing that works, what you are doing that doesn't work and then you'll readjust your mindset and/or decide that landlording is not for you.  Hope this doesnt come off as rude-so not my intention. I've just learned  landlording by doing and had to take a hard look into my own mindset-and decided it wasnt my tenants faults that they were horrible it was mine because I gave them the right to be there. Once I changed my mindset I now enjoy landlording.

 But really Scott is asking about marketing psychology.  It is always a good idea to have some idea what your prospective customers are looking for.

Thank you Richard, that is what I'm looking at. I wanted to see if anyone has had any experience on what moves landlords do and the tenant's response. One person on a podcast said tenants will move out over $15 rent increases. Has this been anyone's experience? Similar things such as making a tenant pay a repair that they were at fault for and the tenant moving out because of that?

In general, no to both of these. Moving has "costs" associated with it.. Hard dollar costs, time costs, packing, actually moving, unpacking etc. So there has to be something to overcome all that inertial. Typicalyl 15.00 is not enough to do that.

The tenant might get more upset with the repair, depending on the cost of it. But if it is clearly their fault it is normally not a problem.

I absolutely believe that a tenant might move over a $15 rent increase, or similarly small-seeming thing.  My firm had a large client leave over a .25% "Infrastructure" fee added to their bills for management consulting.  Not economically rational.  Even assume they could get results as good elsewhere (which I don't)  there is time, effort and money involved in making the switch, and inefficiency while everyone gets to know the new operation.  On the other hand, it was also not economically rational for my firm to risk losing clients to recapture some money for IT types supporting the consultants.

The issue is, I think, two-fold.  First, you introduce some doubt into a stable relationship.  Is he trying to take advantage of me?  Am I going to start seeing a lot of these little fees and costs?  Second, you may just cause people who were on autopilot to actually look at what they are paying, and then they might decide to look around.

I don't think you can control all of this.  Sometimes you need to do what you need to do, and if that means a business relationship ends, then that's what it means.  

But it is always worth remembering that you are engaged in a two-way transaction.  There is no boss, and the power relationship is often a lot closer to even than many landlords realize.  I am thinking of my best tenant, who currently rents my worst house.  She could, in all honesty, replace me a lot easier than I could replace her.  Am I going to raise her rent?  Even if she is there 5 years?  Hello, no.

I had a tenant tell me that she couldn't afford a $50 rent increase because she had just put her daughter into private kindergarten. She was an excellent tenant and I didn't want to lose her, so I offered $25 a month. My mistake. She called my bluff and said, nope, sorry, can't afford it and I understand I'll have to move. I decided it was better to keep a great tenant than have her move and deal with turnover costs and vacancy.

2 months later, she called to ask if she could put in an alarm system. I seriously considered asking how she could afford that and not a rent increase, but it was water under the bridge at that point. 

I've had 2 other tenants move out after being told of a rent increase of only $25 or $30. Both were excellent tenants, and decided to spend the extra money on their own mortgages and bought their own houses.

If a tenant were to decide to move out and break the lease over paying for a repair they caused, they would likely lose their security deposit. But for increasing the rent? Yes, it could happen. And I'll find out soon enough, as I plan to raise the rent on two tenants who haven't had a rent increase in two years and are almost $100 under market.

Originally posted by @Richard C.:Second, you may just cause people who were on autopilot to actually look at what they are paying, and then they might decide to look around.

 Absolutely! And that's what happened to 2 of my tenants who decided to buy. That small rent increase was enough of a tipping point to make them decide on home ownership. Not that every tenant has that option, but the best ones do.

But it is always worth remembering that you are engaged in a two-way transaction. There is no boss, and the power relationship is often a lot closer to even than many landlords realize. I am thinking of my best tenant, who currently rents my worst house. She could, in all honesty, replace me a lot easier than I could replace her. Am I going to raise her rent? Even if she is there 5 years? Hello, no.

I have an awesome tenant in a good house in a bad area. She would like to move but really loves the house. We fix anything that's needed as soon as possible. We bought her a $300 room heater to get through this last horrible winter when the furnace just wasn't cutting it. We are installing a new shower surround, the plumber just put in a new toilet, we are insulating the basement and replacing 2 windows to help with the heating costs, and putting in a hardwood floor in the living room to replace worn out carpet. Am I going to raise her rent to cover all this even if she stays another 5 years? Hello, no! ;)

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