Gaining long-term tenants is a desire for any landlord. Securing a long-term tenant provides security for the unit along with a decrease in vacancy rate. These tactics are used to ensure units are occupied by tenants with a desire to stay longer.
When first starting out, I made every mistake imaginable: bought the property too high, underestimated rehab cost, screening tenant criteria was little to none, and many more. Because of these initial mistakes I found myself trying to re-coop the overages on the backs of the tenants, which is a big NO-NO! Finally, after reviewing my business plan, it triggered my purpose for becoming a landlord; long term wealth. The only way to become a successful landlord was to keep all units occupied and minimize vacancy.
After evaluating all processes from screening procedures to exit interview, I focused on the patterns and behaviors of tenants, once these patterns were identified, minimizing vacancies was not hard to do. All humans are socially, physically, and emotionally connected to someone or something. Learning how to identify what the prospective tenant is most connected to will help determine what needs to be focused on during the ongoing conversations regarding their needs. By listening attentively, all candidates will tell exactly what they are looking for in a unit. If the unit does not offer the basic amenities the tenant is requesting; then the tenant will not qualify for long term tenancy. That being said…
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Here Are 3 Factors to Help Minimize Vacancy Rates
1. Social Connection– One way to determine if the prospective tenant can be encouraged to sign a long term lease is to find a social connection between them and the unit. This may be a close family member that lives nearby. This connection can be made by always adding a “For Rent” sign in front of the property. This form of advertisement is still the best, in my opinion, because it provides a referral from someone in the area that is a family member or friend. Having a connection with a neighbor minimizes the likelihood of the tenant making a brash decision to move unexpectedly. The best referral is from an elderly parent or some other elderly family member. Finding the social connection will assist you during the screening process for long term tenants.
2. Physical Connection– I have never met anyone that enjoyed moving. This is a huge expense and an unsettled feeling for everyone involved. By focusing on the physical distress of moving I offer potential tenants the option to reduce the monthly payment if a long term lease is signed for a minimum of 18 months versus the traditional 12 month lease. For example if the going rental rate for a SFR is $650-$800, the rent for a traditional lease maybe $725, i would explain “by signing an 18 month lease or longer at $700 monthly can reduce your rent by $300 throughout the term of the lease.” In actuality, by signing the 18 month lease, you will limit turnover and will secure $12,600 per tenant versus $8700 for a traditional lease. I make sure to offer this solution while the tenant is in the midst of moving, this is done for 2 reasons: fatigue enhances poor decision making and the tenant will have a fresh reminder of how difficult it is to pack and move.
Tenants with school aged children are a major advantage. These tenants are looking to secure a stable placement and a good school district for the kids. On average, when securing a tenant with school aged children, the length of stay is 3 years. As discussed previously, offering an 18 month lease will provide the security you are looking for and the tenant becomes settled in their home. After the 18 month lease it is customary to then continue with an ongoing 12 month lease.
3. Emotional Connection– this tool is essential when communicating with tenants and potential tenants. The emotional connect is closely tied to the social connection, normally these connections go hand in hand. I call the emotional connection the “Jedi Mind Trick.” If any of you are familiar with Star Wars, the “Jedi Mind Tricks” is a psychological tool used by the Jedi to persuade their counterparts to do whatever they say. I use this tool when communicating by making the tenants feel as though their rental unit is exactly that: “THEIRS.” I am not an advocate of manipulation and do not condone it in any way, but the “Jedi Mind Trick” is valuable. For example, when referring to the unit; its always theirs “is everything alright with “YOUR” home, or “is there anything that can be done to make the move into YOUR new home easier?” This technique instills the pride of ownership. This simple approach subconsciously provides an immeasurable value to the property.
Tell me if you know of any more tactics/connections landlords use to secure long-term tenants to reduce vacancy rate…
Photo Credit: Marcin Wichary