Resident retention is the investor’s best avenue to reliable cash flow. Vacancies cost money – costs for lost rental income, preparing for the next resident, and marketing the property, to name a few! As a real estate investor, one of your top priorities – regardless of your strategy – is to keep good residents for the long haul.
But how do we do that? What do retention rates mean? How are they calculated? Keep reading to find out more!
How Retention Rates Work
We can talk about metrics all day, but they’re useless if we don’t understand how to calculate and interpret the data! Generally speaking, your rental property retention rate is calculated by dividing the number of residents (or renter households) that moved out during a twelve-month period by the total number of residents/households you had over that same period. Then, multiply that result by 100.
On average, single-family rentals have higher retention rates than multifamily housing (75% versus 50-53% between 2013 and 2018).
Ideally, investors want a 100% retention rate! It won’t always happen – there are unforeseen circumstances – but there are steps you can take to ensure turnover is rare.
8 Ways to Incentivize Rental Retention
#1 – Responsive Property Management
Ensuring maintenance requests and inquiries are promptly addressed significantly improves resident satisfaction and willingness to renew their lease. No one likes to ask again and again when a household necessity will be fixed! Your management team should quickly acknowledge the complaint or problem, look for a solution, and communicate a timeline.
Further Reading: 5 Big Reasons Renters Prefer Professional Property Management
#2 - Competitive Rental RatesInvestors must always strike a balance between prioritizing cash flow and securing good residents. Too high rental rates can drive away quality renters. We need to be competitive here. Does the price make sense when stacked against the area’s comps? Are the property and amenities worth the cost?
#3 – Quality of the Property
No one wants to stay in a dump. No matter what kind of property you own, make it the best it can be. This isn’t to say every property needs to be a luxury home. The quality and level of upgrades, renovations, and amenities must make sense in the property’s context. Focus on clean finishes, durable and aesthetically pleasing materials, and attentive maintenance.
#4 – Clear Communication
Keeping open lines of communication with residents and being transparent about any changes or updates regarding the property or lease terms builds trust and loyalty. Not only should residents feel comfortable initiating a dialogue, but your management team should over-communicate. They must respect the residents enough to be transparent, honest, and timely.
#5 – Flexible Lease Terms
Offering flexible lease options, such as shorter or longer lease terms, can accommodate residents’ needs and increase the likelihood of lease renewals. Not every household has identical needs. Understanding and a willingness to negotiate are valuable to your renters. While some hard and fast rules are worth sticking to, flexibility can reap long-term rewards.
#6 – Positive Rental Experience
What kind of experience are your property and its managers creating? Is it frustrating and uncomfortable, or easy and welcoming? Don’t underestimate the power of sentiment. When residents have a good experience with your property, they want to stay there. Trust us – there’s no shortage of nightmare landlord stories. If people find a rental with an easy-to-worth-with team and a quality property, they’ll want to stay there!
#7 – Respectful and Professional Interactions
Treating residents respectfully, addressing their concerns professionally, and maintaining a positive landlord-resident relationship means satisfied customers. You don’t have to look far to find horror stories, from altercations with landlords to drawn-out litigation. It’s so, so crucial that your management team values and respects the residents. If you get even the hint that there is hostility, inappropriate behavior, or anything less than respect, reevaluate your partnership with these managers.
#8 – Incentives for Renewal
Incentives like lease renewal discounts, upgrade options, or referral bonuses can encourage residents to renew. Now, these incentives must be backed up with everything else on this list. They can’t be your Hail Mary, last-ditch effort to secure a renewal. That said, it can help residents decide to stick with you. They may be contemplating a slightly cheaper property or one that suits them just a little better. Your incentives can win them over and prevent turnover!
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