Tenants are the lifeblood of any landlord.
Therefore, attracting and keeping quality tenants is one of the major keys to a landlord’s success. Attracting and keeping quality tenants also leads to what I call tenant stability, and it should be a goal for all landlords.
Tenant stability is just what it sound like: tenants who remain in your properties for a few years. Tenant stability is a great thing. It provides us landlords some assurance that we are not going to have to constantly re-advertise, repair and re-rent our properties, and it greatly improves our cash flow.
What can landlords do to achieve tenant stability? Several things come to mind.
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5 Ways Landlords Can Achieve Tenant Stability
1. Instate a good screening process.
Tenant stability begins with your screening process.
I am sure that most of you will screen your applicant’s credit and criminal history. But do you also look at how often they move? Are they moving year after year or generally staying in place? If they move often, ask why. If no good reason for moving is provided other than “they like to move,” it should be a red flag to you.
After all, why go through the time and trouble of renting to them when their history shows they are very likely to move again, leaving you in the same place you are now?
2. Make sure your lease encourages stability.
Tenant stability should also be built into your lease. Unless you are in the vacation rental or student housing business, try to tie your tenants down for at least a year, maybe two. Short term leases are generally a no-no, but on the other land, anything longer than two years in a residential property may deny you some flexibility later on.
3. Establish tenant stability at your lease signing.
Tenant stability also begins during your lease signing process. Whenever you sign a lease with a new tenant, make sure you set up a meeting in a quiet location where all the provisions and terms of the lease can be thoroughly discussed. Use some of this time to promote tenant stability.
First, be sure to explain that a lease is a legally binding contract. As such, the tenant is legally bound for the full amount of the lease. For example, if the rent is $1,000 per month over a one year period, explain that they will still owe the full $12,000 amount even if they decide to move before the term of the lease is over. Point out that you can take them to court and get a judgment for the full amount. And while you may not collect it all, you will at the very least put a major ding on their credit.
Secondly, have provisions in your lease that hurt them financially if they choose to break the lease. You can, for example, charge a lease breakage fee of one month’s rent. Furthermore, you could add a provision that the tenant agrees to surrender their security deposit (check with your local laws here to be sure you can do such a thing). The goal here is not to be mean, but to achieve some stability by getting the tenant to think long and hard before they decide to break their contract with you.
Of course, if there is some sort of hardship, or if the need to break the lease is not of the tenant’s fault (such as a long distance job transfer), you can waive some of these requirements, especially if you think the property can get re-rented quickly, and it is returned to you in a superb condition.
4. Maintain a good relationship with your tenants.
Of course, tenant stability also comes from how you treat your tenants.
Do you maintain your properties? Are you quick to make necessary repairs? Do you quickly address any concerns or complaints from your tenants? Nothing will chase away a good tenant faster than a negligent landlord. Keep your properties in good condition, and communicate with your tenants.
If you like your tenant, have a system in place to offer another lease renewal when the lease term is about to expire. If your tenant likes you and is happy in their home, they will most likely sign up for another year. But you have got to be sure you offer it to them, as many tenants are used to a month to month conversion or assume that you are not willing to resign them. In sum, ask and you shall receive.
5. Adjust your rent accordingly.
Another technique is to keep your rents just slightly below market. Many tenants often think the grass is greener at some other property and will start looking around towards the end of their lease term. If you provide a decent property that is slightly under the market rent, they will be less likely to jump ship even after looking around.
Tenant stability is something all of us landlords would love to achieve. It would be awesome if all of our units were filled and would stay filled with quality tenants for years to come. However, that rarely happens.
That does not mean, however, that there is nothing to can do to try to achieve stability. By following the advice laid out above, you will go a long way towards achieving a moderate amount of tenant stability.
[Editor’s Note: We are republishing this article to help out landlords newer to BiggerPockets.]
What suggestions do you have for holding on to your good tenants?
Let me know with your comments!