The simplest way for landlords and property managers to decrease vacancy rates at their rental properties is to maximize renewal rates. If you’ve found great tenants who pay rent on time and respect your property, avoid the overhead and stress associated with tenant turnover by focusing on retention.
Lease renewal rates in the US have been climbing steadily over the past, reaching record highs in 2020 as many renters were unable or unwilling to relocate due to the pandemic. If you are struggling to secure lease renewals at your rental property or are looking to up your renewal rate metrics, here are some tips to consider.
1. Prioritize your landlord-tenant relationships
Fostering strong landlord-tenant relationships can take time. These relationships are likely to be a key differentiator when your tenants are considering whether or not to renew their lease (especially if they are being a lower rental rate somewhere else offered). One of the most common renter complaints is poor customer service from property managers or poor communication from landlords.
To maintenance requests promptly, inform tenants of any news or updates as far in advance as possible, and ensure your tenants feel comfortable reaching out to you with any questions or concerns. Keep lines of communication open and touch base with your tenants regularly to see if they are experiencing any issues – every few months or so is usually a good starting point. Remember, your renters are your customers and their satisfaction should be your highest priority.
2. Be open to feedback
Keep tabs on any common complaints you’re hearing from tenants, and be proactive in finding solutions to these problems. If multiple tenants are requesting similar updates or amenities, carefully weigh the pros and cons of all reasonable requests. When tenants do move out or decline to renew their lease, create a protocol to ask them why they are leaving and/or what it would take to get them to stay. The information you learn will help you keep future tenants around longer, and potentially help you resolve a simple issue that will persuade your current tenants to stay.
3. Offer incentives
What can you do to sweeten the deal for tenants who are on the fence about renewing their lease? Offerings like discounts on rent, incentive parking benefits, cash, gift cards, or even something like a new television often proves to be worthwhile investments that lead to increased renewal rates. Your out-of-pocket costs will be justified if trustworthy and responsible tenants are persuaded to stay, saving you tenant turnover costs.
Incentives can also come in the form of added amenities or reasonable upgrades to the property. If the only thing your tenants are missing is a dishwasher or a new air conditioning unit, it might be worth considering making the upgrade. Not only will it help with current renewal rates, but many upgrades and security additions will also increase the value of your property in the long run.
4. Raise rent the right way
There will come a time when you need to increase your rental rates to keep up with expenses and market value. Many tenants will use this as their reason for declining to renew their lease. While this is an unavoidable affair, try to build in small percentage increases upon lease renewal each year, as opposed to keeping a steady rate for several years followed by a significant jump. This strategy will help you avoid losing profits while expenses increase and keep your tenants happy with reasonable rent increases.
5. Timing is key
If your desirable tenants are considering a move, the earlier you can reach them in the process, the better. Asking them to renew before they have settled on a new place allows you to present incentives or see if you might be able to meet any of their potential requests. You will also set yourself up for success by knowing well ahead of time if you’ll need to market and show any units in the near future. It’s best practice to capture potential renewals early on by approaching tenants approximately 90 days before their lease is set to expire.
In general, year-over-year lease renewal is the best way for landlords to avoid tenant turnover and keep vacancy rates low. However, an important step in the lease renewal process is determining whether or not you want a tenant to stay at your property. If you’re dealing with irresponsible or difficult tenants, it may make sense to find a better fit in some cases.
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Your retention plan is likely to change and evolve as you notice strategies that work and those that do not. Preventing tenant turnover and increasing renewal rates is a goal that requires constant attention throughout the lease term.