How to Keep Your Tenants & Lower Vacancy Rates

How to Keep Your Tenants & Lower Vacancy Rates

Vacancies are inevitable, even if you own the nicest piece of real estate with the best management company at the helm. It’s just the name of the game. But tenant churn does eat into revenue and, potentially, create additional expenses beyond lost rent. Advertising costs, cosmetic repairs, cleaning—it all adds up. Here are a few tips on how to increase profitability by reducing tenant turnover and keeping your vacancy rate low (at least, as low as possible).

Be proactive about your landlord-tenant relationship.

Regular, clear communication is critical. Having a strong relationship with the people who rent from you goes a long way in building trust and keeping tenants happy with their living situation. This kind of open-door policy allows you to look for signs of the tenant’s dissatisfaction and lets you get ahead of minor complaints before they become irreversible problems. Ultimately, talk to and treat your tenants with respect and openness.

Once you’ve established a solid landlord-tenant relationship, you can ask your tenant whether or not they plan on renewing their lease prior to the expiration date. (And hopefully before they find a new place). If they are planning to move out, and the goal is retain them, gives you the opportunity to find an incentive that entices them to stay. But even if that’s not your goal, this proactive approach still gives you more wiggle room to find the right replacement tenant.

Offer incentives to long-time (high-quality) tenants.

Yes, incentives cost money, but sometimes sweetening the deal can help your real estate investment in the long run if it means keeping your best tenants and avoiding tenant churn whenever possible. Landlords have offered everything from reduced rent to free parking, but the best way to find an incentive is by knowing what your tenant really wants and whether you can afford it.

If you do have a tenant you hope renews their lease, you may find that they are only considering leaving due to rent increases. You might consider offering a lower rent increase (or no increase) for one year or one month as a show of appreciation for being such good tenants. If rent is a complete non-negotiable, maybe new or updated appliances—or a complimentary deep cleaning and a fresh coat of paint—would suffice.

Be fair with rent increases.

Sometimes, rent increases are unavoidable—especially when the cost of managing and maintaining your investment property surges. When and how you can raise rent and when you can do so will depend on your local laws but, as a general rule, it’s better to build in small jumps upon lease renewal each year, rather than having long periods of no increases followed by a substantial hike.

While you always want to keep your rent prices in line with the market, you need to stay competitive through fair rent prices and comparable amenities.

Be sensitive about external factors

Always be cognizant of what’s happening in the economy. During a recession, for example, a rent increase could be devastating for some of your tenants, forcing them to find more affordable housing. A poorly timed rent increase could result in a mass exodus. Renting is generally harder during a recession, so avoiding turnover is essential when we’re collectively up against hard economic times.

 The Bottom Line

These principles coupled with feedback from tenants will help you refine your retention strategy over time. Remember to give plenty of notice, and to communicate WHY rents are increasing.

The stronger your relationship with your tenants—and the more proactive you are in evaluating tenant happiness and quality— the better your renewal rates will be. And any landlord knows that higher renewal rates = lower turnover costs = better business overall.