With the unemployment rate rising, rents dropping and vacancy rates trending up, property owners need to have additional tools to keep your current residents in your apartment buildings. One of the best methods is to create a resident retention program to keep your turnover rate low, your tenants happy and encourage them to refer your apartments to other potential renters.
Every time a tenant fails to renew their lease and moves out, you will incur expenses to make that unit rent ready. In addition you will loose the rental income for the time that unit is down. On the low end of the scale you may just have to paint a unit and make some minor repairs to get it ready to be rented again and this might cost around $500. If you have to replace carpet and make extensive repairs the cost can increase to $1,000 or more. During the current economy it can take 45 to 60 days to rent a unit. If you average rent is $1,000 per month then you have lost $1,500 to $2,000 in addition to the rehab expenses.
Property owners can follow a two prong strategy to reduce the potential costs associated with a vacant unit and entice your tenants to renew their lease. This strategy requires you to proactively make repairs and implement a "thank-you" program. The details are listed below.
At the start of every month, property owners should review all leases that will be expiring in the next two to three months. Your maintenance man should visit every one of these units and ask tenants if they have any repairs that need to be performed on the unit. This strategy is contrary to how property managers act since repairs are usually performed in a reactive manner. Tenants will be surprised and pleased with this action. The number one reason that tenants move out of a property is because the landlord did not perform repairs on the property. This strategy removes this objection.
The second prong of the attack is to send a new lease to the tenant 30 days before renewal. Create a "thank-you" program of gifts that the tenant can select from if they renew their lease. This part is critical to your ability to retain tenants. The tenant already has a positive image of your property in mind since you have just proactively made repairs to their unit. This is followed up with a program to reward the tenant for staying in the unit.
Our "thank-you" program allows the tenant to select a $20 gift certificate to any place that they select. These can include local department stores, bookstores, grocery stores, gas stations or online vendors like Amazon or iTunes. Next the tenant has an option of selecting 2 items from one category of items that cost approximately $75 each or 1 item from a different category where items have a value of approximately $200. The list includes items that will improve the condition of the unit (paint, tile floor in kitchen, carpets professionally cleaned) and items for the tenant (iPods and DVD players). To entice tenants to sign a longer-term lease we allow them to pick 2 items from the more expensive category.
By using this new strategy you will be encouraging your tenants to stay in your property. The cost of rehabbing a unit coupled with loss rent can easily reach $2,000. The "thank-you" program can cost you only $200. Would you pay out $200 or loose $2,000? Studies have shown that when people are not pleased with your product they will tell 11 people about their negative experience but will tell only 3 people when they are pleased with your product or service. I would rather have fewer referrals any day of the week.
Immediately after the tenant renews their lease, send them a letter reminding them that you will pay them for any other tenant they refer to your property. They will be more likely to refer someone to you when they are pleased with your proactive repairs and "thank-you" program.
By making this simple change in your daily operation you can out from the crowd.