Tenant turnover can cost at least $1,000 for most properties. This doesn’t even factor in the time and effort it takes to clean, perform maintenance and market an apartment or condo.
Keeping good tenants around is always a smart move. While your day-to-day property management style makes the biggest impact, incentives offered strategically can help persuade renters to stay.
We surveyed nearly 200 renters to find out which incentives are likely to convince them to stay, and got advice from a long-time property management expert to find the best ways to retain tenants.
Millennial Renters Most Likely to Respond to Incentives
Much ink has been spilled about millennial renters, or those renters born roughly between the early ’80s to the late ’90s.
For one, they are generally less interested in homeownership compared to older generations, and more likely to choose a rental to live in preferred neighborhoods or remain free to move and travel with ease.
These factors make millennials an attractive segment for property managers, and luckily, they’re more likely to remain renters if offered the right incentives.
Half of males and 41 percent of females aged 26 to 35 say they would be more likely to stay at a rental property if offered an incentive when the lease is nearly up.
Strong Maintenance and Improvement Practices Are Most Effective
Many apartment complexes offer parties or other social activities as a way to create a community feel. These can be fun, but for retainment purposes, your overall level of service needs to be the top priority. This is the view of Nick Mertens, VP of Property Management for Atlas Real Estate Group.
“There are a million places you can live. If you want to retain tenants, the best way to do it is to treat them like they have never been treated before,” he says, “which is getting their requests done quickly, being responsive and being respectful.”
Our respondents say clean, safe units (35 percent), ongoing improvements to units and facilities (32 percent) and great service (26 percent) go a long way to keep them around.
But beware: incentives of most types can also be a detriment, Mertens says—in smaller communities, the renters may start expecting more and more discounts or other perks.
That’s not to say the appropriate incentives at the appropriate time can’t be effective. But Mertens says it will depend on your relationship with tenants and learning what they truly need to stay satisfied at your property.
Offer Temporary Rent Discounts to Undecided Tenants
Some tenants are firm on leaving, and that’s simply a normal aspect of running an apartment building. Others may start exploring their options due to rent increases.
Mertens very rarely suggests dropping rents because tenants can, again, start to expect a flat rate year-over-year. Depending on the housing market in your area, even increasing rents by $10 a month can help balance tenant expectations with your financial goals for your property.
Despite his advice, tenants responding to our survey want some kind of monetary perk: 80 percent of renters would prefer a discount on rent, an easy-to-understand and direct incentive.
Mertens says the following process can be effective in fostering a positive relationship with these tenants:
- Send lease renewal notice.
- Reach out by phone a couple days later.
- Offer to walk through their unit and start a conversation about what they need for the apartment.
- If they’re on the fence, offer a simple perk like a carpet cleaning.
- If that doesn’t work, try offering a half months’ rent for free to show your appreciation.
While you want to avoid dropping rents for all tenants, if you feel a good tenant is worth keeping, a discount could be the ticket. Base this incentive on the needs of the particular renter.
“The phone call is key and having communication and a relationship is key to this whole thing,” he says.
Update Unit to Keep Good Tenants
Money isn’t always the biggest issue for tenants. Sometimes updating the look or function of the unit can make a difference.
This requires an open dialogue with your tenants to find out that, for example, they’re having a baby and need more room, or they feel the unit isn’t functional enough for their needs.
Depending on your long-term plan for updating the units, Mertens says, it could be effective to offer new appliances, which can impact both the look and usefulness of the apartment.
When we asked about the types of unit upgrades tenants prefer, more than half (53 percent) would be most convinced to stay with updated kitchen appliances.
“You know you have to replace that appliance sometime soon anyway because it’s that old … and it keeps them here for another year,” Mertens says. “And I’m not having to do the turn cost.”
You may also have a case where the tenant does want more room, and you have another unit that meets their needs available within that same time frame. These are viable, relatively inexpensive options that keep good tenants happy.
How Can Software Help Retain Tenants?
Since identifying the most effective incentive depends on your relationship with tenants, taking notes on your interactions creates a repository of data you can refer to repeatedly.
“We check in with our tenants quarterly, and I take notes on that stuff when I call my tenants,” Mertens says. “I ask how their job is going and how their kid is. They sometimes start to talk about things and sometimes that triggers you to know what’s happening in the future.”
Modern property management software can include a couple key features to facilitate this relationship:
- A tenant tracking or real estate CRM functionality to keep notes on important details, accessible on mobile devices, that can help reveal ideas for incentives.
- Online portals and text messaging capabilities offer an easy way to instantly contact tenants.
For more help with your property management software search, call our advisors at (844) 687-6771 for a free consultation to narrow down your options.