Property investing can be incredibly valuable. With the right property in the right area, you can benefit from property appreciation over time. But more importantly, you can collect rental income from your occupying tenants – often in excess of your monthly expenses, resulting in a monthly profit and steady cash flow you can use to fund your other endeavors.
Of course, this financial model is contingent on an important variable: occupancy. If your property is occupied, you might be able to remain profitable indefinitely, but sooner or later, you’ll have to deal with vacancies. When tenants leave, you’ll have to spend time and money marketing the property – and you’ll lose money because you’ll be responsible for ongoing expenses without any income to offset them.
While some vacancies are totally unavoidable, an abnormally high vacancy rate can ruin an otherwise profitable and consistent property investment strategy. Fortunately, there’s a way to fight against it by increasing tenant retention.
What Is Tenant Retention?
Tenant retention is a set of strategies and practices designed to keep tenants occupying your property for as long as possible. If they stay for a year, on average, you’ll have to incur the costs of vacancy and finding a new tenant on an annual basis. If they stay for 5 years, on average, those costs plummet – and your profitability skyrockets.
How To Increase Tenant Retention
Improve their digital experience. According to Crowncommercialpropertymanagement.com, one of the best things you can do is improve the digital experience. Your tenants will likely have access to an online portal, where they can submit rent payments, file repair requests, and talk to landlords directly.
The more fluid and streamlined this is, the happier your tenants will be. You can also improve the digital experience by giving them more opportunities and platforms to interact with their neighbors and feel connected to their neighborhood, such as by starting a community forum.
Screen Tenants Carefully
You can also improve retention by screening your tenants carefully. Tenants are forced to leave when they’re unable to afford rent – so it’s important to find people with a steady income and a reliable financial history. You may also want to disproportionately favor people who are looking for a long-term place to stay.
Talk To Them And Get To Know Them
You don’t have to be good friends with your tenants, but you should spend some time talking to them and getting to know them – especially at the beginning of your relationship. Get to know their families and what their major life goals are. When you have a more personal connection, it will be harder for them to leave.
Respond To Messages Promptly
Periodically, your tenants will reach out to you with requests, comments, and questions. Whatever their intentions are, make sure you respond to messages promptly.
Repair Things As Quickly As Possible
This should go without saying, but make an effort to repair things that go wrong in the property as quickly as possible. When they complain about something broken or something in need of maintenance, go out and address it immediately if you can. If you can’t get to the repair for a while, acknowledge the delay and explain why it’s happening. The more proactive and transparent you are, the better.
Take Care of Nuisances
Broken appliances and structural problems aren’t the only bothersome issues your tenants will deal with. They may also have complaints about noisy neighbors, breaking rules, and issues with the city. Try to address these issues however you can; even if you can’t fix them directly, you may be able to minimize or mitigate the problem.
Personally Call When Filing A Notice or Entering The Property
Occasionally, you may be required to give a formal notice to a tenant – such as notifying them that you’re increasing rent prices, or that due to lack of payment, you’ll be filing for eviction. Instead of coldly submitting these notices in writing only, make a phone call to talk to them directly about these.
Make upgrades and improvements to the property when possible. Not only does it result in a better overall experience for your tenants, but it also shows how invested in the property you are. Big structural changes and remodels are always helpful, but you can also benefit from small, strategic upgrades, like investing in the property’s curb appeal.
Raise Rent Strategically
No matter what, you’ll have to raise rent eventually. Even if you’re satisfied with your current profitability, you’ll need to raise rents to keep up with demand and inflation. Make sure you only increase rent periodically and in small amounts; tenants will often leave if you raise rent too aggressively.
Work With Your Tenants
When possible. If your tenants experience issues or if they have conflicts with the way you’re managing the property, try to work with them, rather than fighting them. Look for a compromise; for example, if your tenant knows they’re going to be late with their rent payment, would you be willing to waive the late fee if they get it to you a week later?
Give periodic rewards to your best, most loyal tenants. For example, you could send them a gift basket on the anniversary of their initial move-in, or simply send them holiday cards in the mail.
Start a “Friends To Neighbors”
referral program. Finally, you can consider starting a “friends to neighbors” referral program. The idea here is simple. If you have a multi-unit building or multiple properties in a given area, give rewards to tenants who refer their friends and family members to this area (such as $100 off rent). With friends nearby, they will be less likely to leave.
Not all of these strategies will fit with your property investment model, but some of them are incredibly simple and painless to pull off. Consider your tenant retention approach carefully and do whatever you can to help your tenants stick around longer.