It’s much easier to keep great tenants than to find them in the first place. That’s why an effective retention strategy is essential for multifamily investors, Michael Zaransky writes.
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Why do renters choose specific properties? Price, space, proximity to work and amenities are top of mind. They leave or renew for those reasons, sure, but also based on their rental experience.
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The retention process begins even before customers become renters. Every multifamily operator must have a retention strategy. This is where we focus.
1. Start early and be personal
Potential renters form their property impressions quickly. They grade everything: a property’s online showing and lease processes, its curb appeal upon arrival, the available unit’s care and condition, and the property’s feeling of welcome. Managers can’t change their property’s address; they can ensure the address’ appeal.
Property managers must be available and communicative with renters from the beginning of the application process. They should welcome new residents on move-in day and be a continuing touchpoint through the rental experience. When renewal time arrives, on-site personnel should augment automated notices with personalized recommendations and offers. This goes to the next point.
2. Create a sense of urgency
Personalized renewal products are useful tools when incentivizing renewal. These can include a rent freeze or offers to repaint or recarpet a unit for longer-term renters. The offer is tied to a short-term window (say, re-signing within 10 days) to create urgency to the value proposition. It’s Sales 101 but still a useful tool.
3. Maintain a property where people want to live
The biggest renter complaints often involve their complaints not being addressed, and retention rates suffer for it. Property managers who create, and adhere to, standards for responding to maintenance, security, and quality-of-life concerns develop trust with tenants.
Lease agreements often reference “reasonable” response times for maintenance requests. While operators must triage the urgency of requests, testing the limits of “reasonable” isn’t advised. Respond within hours, and advise residents of the next steps.
Outside the units, properties that look distressed, dirty, or shabby don’t prod renters to become long-term residents. Care is a service and goes a long way.
4. Invest in people and communities
“Community” is a buzzword, and naming convention, in multifamily housing. Every property wants to be a community, but how many actively pursue it?
At our properties, we strive to foster a community experience through amenities, activities and experiences. It doesn’t cost a fortune to provide occasional breakfast-to-go boxes, an evening food truck or barbecue, or a weekend pool party for residents. What about s’mores kits for residents to gather around a fire pit?
Through these simple offerings, managers create property goodwill and a meeting place for residents, which can increase retention. I’ve discussed this before, but it merits repeating. People want to live near friends and are willing to pay for it. Make the “friendship factor” part of your retention strategy.
5. Be transparent
As much as they disapprove, people understand and expect rent increases. They might lead residents to explore other options. Being transparent about rent increases can help broker a lease renewal.
Upon advising residents of rent increases, we also inform them that their new rate remains lower than that of a new resident. We intentionally charge renewing residents a lower rate than what their unit will rent for if they move. Further, we encourage residents to shop around. Usually, they find that their increased rent is lower than the market rate for a similar unit.
Yes, more Americans accept, even embrace, renting as a “lifestyle.” And people are nesting in their rentals for longer. More than 16 percent stayed put for at least 10 years, as Redfin found. However, multifamily operators shouldn’t get overconfident.
“Ignoring the resident renewal strategy comes at a great cost,” Darcey Forbes, head of real estate operations at Renew, recently told Multihousing News.
A successful retention strategy is fundamental to the success of any multifamily community — emphasis on the community.
Michael H. Zaransky is the founder and managing principal of MZ Capital Partners in Northbrook, Illinois. Founded in 2005, the company deals in multifamily properties.
