11 Strategies to Increase Tenant Retention for Higher ROI
Do you want to boost ROI on your Philadelphia rental properties? Simply minimize your rental turnovers to the lowest possible.
During turnovers, your property is vacant, and you are not earning rent, but you still have to pay the mortgage. Additionally, you may have to repair the property, and apply a new coat of paint, and the unit has to be kept squeaky clean at all times.
You also have to do some marketing; you need to advertise the vacancy, show it to potential tenants, hold open houses, handle rental applications, screen applicants, as well as calling employers and former landlords.
If you don’t want to go through all this trouble, you can hire a property manager or try your hand with a leasing agent, but you might end up paying them up to a month’s rent for their services.
Rental property turnovers hurt your bottom line. The question is how to reduce your turnovers so your properties will be occupied year-round.
The best way to achieve this is to keep your good renters for the long term. You have to make your property as comfortable for them as possible so that they will only consider moving out under the duress circumstances.
In this article, you will learn 11 strategies, I’ve learned owning a Philadelphia property management company, to keep tenant turnover low, increase rent flow, and minimize work.
Understand the Needs of Your Market
You might be the best property owner in Philadelphia, but you will never be able to keep your renters if your property is overpriced or old-fashioned compared to other homes in the area.
The most important factor here is to know how your property and its facilities compare to other Philadelphia properties in the neighborhood. Stay abreast of developments in your neighborhood and the Philadelphia house market. Know the current home prices and why property owners are charging that price.
Think like a renter living in Philadelphia What would your expectations be if you were looking to rent a property as a parent or bachelor? What will you be looking for in a home?
Every three months, check out a vacant rental listed in your neighborhood. If you were a prospective renter, what would appeal to you in the unit? What amenities can sway your decision to rent or look elsewhere? Do you like your space modern or laid back? Can you picture yourself and your family calling the place home?
When it’s convenient, go to open houses and interact with prospective renters. Learn their thoughts about the property and its amenities.
Before your outgoing tenants leave your property, it’s essential that you conduct exit interviews with them. What made them move? What could you or the property manager have done better during their stay? What would have changed their decision about moving out?
Identify the Things Your Tenants Would Love to Improve in the Property
Interviewing prospects at vacant units or outgoing tenants isn’t enough. Your renters are in the best position to tell you what they want to see in your property.
During your semi-annual inspection with your tenants, pose the question; If you could wave a magic wand, what are the improvements you would like to see on this property?
Document the most common property improvements renters want to see. While some might be unrealistic, there will be many that can be put in place without breaking the bank while boosting the property’s appeal by several years.
Keep the list up-to-date, and select an update that promises the highest ROI once in a while.
When breaking the news of the update to your renters, make them understand you have a listening ear as you value them as renters, which is why you are going to make a specific property update they suggested a while back. The gesture will increase their sense of value and make them want to stay with you so they can enjoy the new facility.
Launch a “Friends to Neighbor Program”
Do you own a single-family property or multifamily buildings in the same neighborhood? This idea is a great way to forge a strong bond among your renters and keep them glued to you.
Most people love to live close to their family members and friends. Friends who are neighbors have strong bonds they don’t want to weaken for any reason.
Inform your renters that any one of them who refers a family member or friend will receive a $300 voucher to cover their moving expenses. Note that the voucher will be going to the family member because people can identify when a friend is referring something to them for personal gain.
With this strategy, you make your renters do marketing on your behalf, and your vacancies are filled faster. Also, your renters forge stronger bonds with your property because their loved ones now live down the street. Moving away will be the last thing on their minds.
Be Thorough When Screening Applicants
One of the most critical activities you can perform as a property manager or landlord is tenant screening as it has a significant impact on your turnovers.
If you take on a bad tenant, eviction will be the end of the contract or non-renewal of the lease. In short, you are inviting a rapid and expensive turnover if your property goes to bad tenants.
When screening tenants, it’s important to look beyond tenants who don’t pay rent or those who pay but damage your building.
Don’t sign a lease with house hoppers, i.e., renters who can’t stay in one property for a long time. Minimizing turnovers requires leasing your property to stable tenants whose history shows they stay in one property for three or more years.
Maintain Quick-reference Files on Your Renters
Can you remember the names of your renter’s children? Do you know what interests them and how they are doing at work?
You probably don’t remember anything about them. It’s important to maintain a short digital file for each set of tenants where you keep short notes about what’s up with them during your last conversation.
Before calling your renters, you should check out the files so you can cozy up to them by showing them you keep tabs on their family.
It could go like this:
“Hi, Mr. Jones. How are you doing? The last time we spoke, you mentioned your partner was starting a new degree in college. How’s she coping?” And things like that.
The fact that you remember such minute details about their lives will surprise your renters and foster an environment for more cordial conversations. They will leave the conversation feeling valued by you as human beings, not money machines helping to pay your mortgage.
Raise Rents Regularly- and Provide Relief Mechanisms
Raising your rents annually is perfect for many reasons, even if its marginal. For one, it increases your revenue. Plus, you don’t want the gap between your rent and the market levels to become too far, and then suddenly hike the rent to the dismay of your tenants.
It’s also about setting expectations for your renters. Its normal for Philadelphia rent to increase every year, like inflation and seasons are constants. You want to make your tenants expect a gradual rise in the rent every year, as well as the assurance that you won’t slam them with a disproportionate hike.
With these expectations, you are setting your renters up for a better choice. Whenever a lease is due for renewal, provide your tenant with three options for renewal:
- Continue with a monthly lease, with an incremental but real rent raise.
- Renew the lease for another year and get a lesser rent hike.
- Renew the lease for a two-year term, and enjoy the smaller rent increase for both years.
Since they already expect to pay a higher rent for the next year, it becomes more attractive to choose the option that allows them to enjoy a smaller rent hike for the next two years.
When Sending Important Notices, Always Call
Do you want to file for eviction because the rent is late? Is a lease due for renewal? Give them a call!
While the law requires that certain notices must be sent in writing, it doesn’t prevent you from calling your tenants.
Verbal communication with your tenants on the phone before sending them a chilly notice will prepare the ground for dialogue, rather than a terse warning handed down by a judge. You should aim to build a professional but cordial relationship with your renters.
A phone call enables you to inform your renters about the lease renewal options and the variable rent hikes. It also allows you to learn the main reason why a renter defaulted on their rent payment. You still have to file for eviction though; after all, you are not running a charity. But you get the message across without losing a good tenant.
The conversation will endear you to renters because of the human treatment. Compare that to getting a notice rudely taped to their front door or a certified letter in the mailbox.
Dial Your Renter Before Entering the Building
While you have written notice, your renter will appreciate the human connection of calling them before entering the unit. You should always call, even in situations where it’s not binding on you to give written notice.
It shows you respect the tenants’ privacy. While the building represents an asset and business to you, renters consider it as their home where they sleep, cook, play with their kids, groom, and have fun after a hectic workday. It’s their private space where they are protected from the prying eyes of outsiders.
Your renters will appreciate the call even if it takes only 60 seconds.
If a repair problem comes up in your property, you should tackle it with urgency.
It’s urgent because the damage becomes bigger the longer the time it takes to correct it. Your renters also see it as urgent because it’s where they live.
Respond immediately to your renters report a problem. Have the contact details of different types of contractors so you can quickly call a professional to handle the repairs as soon as possible.
If for any reason you need to delay the repair work, let your tenant be aware of the reason and always check in with them every few days even if it’s to show you are trying to get everything in order. You are demonstrating that they are important to you and can take care of your responsibilities.
Send Your Renters Holiday Cards (Good Tenants)
During the holiday season, send holiday cards to the good tenants you want to retain in your property. That should include all your renters if you did a thorough screening during the application process.
Your renter would appreciate the holiday card more if you sent them a card specific to the holiday they celebrate.
It’s also important to mention each family member by name in your address, including the children’s names. An address that reads: “Peter, Tiffany, Sandra, John & Dana Rudolph” is more personal than simply writing “The Rudolphs.”
Handwritten cards and envelopes are also better than printed versions. A few short, heartwarming sentences work fine. Your assistant or virtual assistant can write and send them if your schedule is too tight.
You can even include small gift cards for global retailers such as Amazon or Best Buy if you like.
By now, you should already notice that property management requires being adept at business best practices and human relationships.
Prune Your Cash Tree
To keep your money tree healthy and vibrant, prune off the dead branches, get rid of bad apples. The point is; to evict your bad renters.
Bad renters are costly. They can damage your property, make you spend on eviction filings and even drive off your good tenants. Your bad tenants are too expensive to retain.
Your good tenants will have a hard time staying if their neighbors are dangerous people, use or deal drugs, disruptive, rude, or loud, no matter your human relations skills.
Every month, monitor the renters whose leases will soon be due. Send non-renewal notices to tenants that you don’t want to retain in your property. If you are not sure of keeping them, it means you have some misgivings about them already. Let them go and get better tenants in the unit.
Landlords shy away from getting rid of bad tenants to avoid the headache of getting a new renter. But you will lose more in the form of damages and good tenants getting frustrated and moving away if you don’t get rid of the bad tenants now.
The strategy is straightforward: Retain your good tenants, remove the bad renters, and costs and maintenance will go down.