What is a tenant retention strategy?
Landlords must anticipate tenant turn-over and have a tenant retention strategy to minimize vacancies and reduce expenses associated with tenant turnovers.
Lease renewals benefit a landlord in many ways. A good tenant is most often a good neighbor, a good caretaker of the rental unit, and can be depended upon for timely payment of the rent.
Keeping good tenants is cost-effective property management. Effective property management places emphasis on adequate tenant screening, selection of well qualified tenants, and good customer service as the most important factors in the retention of good tenants.
Moving is expensive, time consuming and stressful for a tenant. Unless there is a strong personal reason that requires a move, a tenant usually finds it easier and simpler to stay in place. Understanding the factors that can influence a tenant’s decision to move can help in developing a strong tenant retention strategy.
There are three key factors that can motivate a tenant to renew a lease rather than move on:
- The local market conditions
- The physical condition of the rental unit (maintenance and repair)
- The property management (quality of service)
Local Market Conditions
If a landlord wants to be competitive, he must know what’s going on in the local rental market. Without market knowledge, a landlord has no idea if his business is competitive, can be competitive or clearly in need of a makeover. If the landlord stays competitive in his local area, a tenant is not likely to find a better deal elsewhere and should be receptive to an offer to renew his lease.
Maintenance and Repair Issues
Maintenance issues can be a major motivation for tenants to move. A tenant is not likely to be receptive to a lease renewal option if he has had poor response to his maintenance and repair requests during his tenancy.
Property Management
A quality property management team invested in customer service can be a significant factor in tenant retention. Tenant satisfaction with customer service that promptly addresses tenant requests and resolves tenant concerns can be a major influence in a tenant’s decision to renew a lease or move on.
Tenant screening is a core management practice that has an impact on a tenant’s decision to renew a lease. Good tenants want to be sure that the management continues to screen and select more good tenants. Tenant retention has been shown to be higher in properties where landlords conduct complete and comprehensive tenant screenings for selection.
Enforcement of rental terms and conditions is a business practice that helps retain good tenants. Good tenants leave if a landlord does not enforce consequences for lease defaults or allows dangerous conditions or illegal activities to occur on the rental property.
Tenant communication and feedback are important tools to help improve customer service and measure whether rental policies, practices, and services are meeting tenants’ housing needs and lifestyles. However being responsive to market demands does not supersede the landlord’s duty of care obligations, legal compliances, and responsibility to operate his business using sound business principles.
A tenant retention strategy is a priority management function to reduce tenant placement costs through fewer turnovers and to provide a steady income stream.