There is a universal truth in property management – turnover creates cost and work. That’s not to say there aren’t costs and work at other times. But it is true that when renters move out, our efforts and money are concentrated as we try to restore a revenue stream as soon as possible.
So seasoned landlords learn quickly an important lesson – if you can hang on to your tenants longer, you are likely to have less work and less cost. Some experts say each turnover costs an average of $3,000 in turnover expenses – things like cleaning, carpet replacement, marketing, etc. – and vacancy cost (the time the place sits unrented times the daily rental amount).
So … what are the keys to retention?
Why Tenants Move
First, understand why tenants move. Only 30% have to because they buy a home, move out of state or get married. A full 70% of renters that move from your rental will move to another similar rental within 20 miles. Of those who moved to another rental when they really didn’t have to, they say they did so because they weren’t getting what they wanted where they were. The landlord wasn’t responsive, reliable or respectful.
So, the good news is with better customer service, these renters say you would have been able to have kept them longer.
Getting Longer-Term Tenants
Second, implement the following practices to encourage renters to stay longer:
- Sign long term leases, if possible, that only expire in times of year convenient for you. There is nothing worse than having a month-to-month tenant give you notice they are moving at a bad time.
- Give incentives for renewing a lease and don’t let tenants go month-to-month. Month-to-month agreements give the tenants too much flexibility unless you are being compensated by a month-to-month fee. Try to offer improvements to the property you can tie to a renewal like new windows, a new garage door or something you should do anyway, if they will stay. Even carpet and paint can be used to lock them into leases (especially if you have to do it any way if they did move).
- Allow tenants to customize their rental. They will stay longer if you do. Maybe this is letting them have an accent wall the paint color of their choice, their own window coverings or planting their plants in the yard. If people can customize, they will feel more comfortable and stay longer.
Whatever you do, recognize having one tenant, even a mediocre one, for a long time, could be much less work and ultimately make you more money in the long run, than having a new tenant every year.
Work hard to keep them happy and use leases and incentives to lock them in to new long-term leases. If you do, you will be more successful.
L. Paul Smith is the Executive Director of the Utah Apartment Association. Reprinted with permission.