8 proven strategies to boost tenant retention
Achieving strong tenant retention rates is a goal on every property manager’s list.
Sadly there is no golden answer on how to convince your tenants to stay with you – but there are proven strategies that you can start to implement.
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Why is tenant retention important?
Any business development site will tell you that it’s five times cheaper to keep clients than it is to generate new ones, and this same concept applies to residential property owners/managers and their tenants.
By building a tenant retention plan, you can decrease your cost per acquisition, build a consistent income, and continue to scale your revenue, risk-free.
Calculating your tenant retention rate
Tenant retention rates are calculated much the same way as any user rate.
1. First, total how many tenants you have at the start of a period.
2. Second, total how many tenants you have at the end of a period.
3. Divide the second number by the first.
4. Multiply this by 100 to get your % tenant retention rate.
For example, if you had 120 tenants at the start of June, and 110 tenants at the end of June, you’d do (110/120) = 0.92.
Then, when you multiply this by 100, you’d discover you have a 92% tenant retention rate for that month, which you can compare with the year previous.
Additionally, to gain extra insight into which properties are a good investment, you can calculate average tenant retention for each individual apartment block, retail site, or office building you manage over a period of time that makes sense to you.
What is a good tenant retention rate?
For residential properties, you should aim to retain 60% of your tenants (slightly above the national average of 48%).
This means, out of the 120 tenants you had in June last year, you’d still have 72 of the same individuals renting the same property.
For retail/commercial properties, you want to aim a little higher. A retail tenant retention rate should be around 70%, as businesses tend to stay in one place for significantly longer than residents. However, if they are growing successfully, they’ll eventually save a deposit for their own space and move on.
How to retain your tenants: 8 proven strategies
It’s idealistic to assume that all your tenants will stay with you. In general, residential clients leave because they:
- want a better or bigger home
- are relocating for a job
- found a cheaper price elsewhere.
- moved to be with family
- have saved enough to purchase a property.
This sometimes means that retaining tenants is completely out of your control. You need to focus on what you can influence, rather than what you can’t.
1. Incentivize lease renewals
When you are rapidly approaching a lease renewal period, you need to consider how you can convince your tenants to stay with you. This may include offering rental discounts upon a successful renewal or even agreeing to previous requests they have made (such as permission to have a pet).
No matter what, provide them with a reason to stay, and you’ll be positioning yourself for a lower tenant turnover.
2. Be responsive and maintain good communication
In today’s digital world, we can assume that tenants are best friends with technology. This means they’ll be expecting almost-instant communication and will want to be able to reach you either by phone, email, your website, and social media.
3. Keep rental rates fair and consistent
It can be tempting to increase and decrease prices according to the market.
However, you can improve your tenant retention rates by charging a consistent price. This way, clients can budget accurately and will be more willing to stay at your property.
4. Prioritize maintenance
It’s impossible for a tenant to feel safe and secure when the building they are renting is falling apart around them. Standard maintenance should always be a priority on your to-do list, and not an afterthought.
5. Be flexible with good tenants
Tenants who have proven themselves as reliable individuals should be granted a little bit of leeway every now and then.
For example, you could:
- Allow them to paint the walls (as long as they repaint when they leave).
- Make exceptions for late fees caused by ill health or personal circumstances.
By being an understanding property manager, you are more likely to retain tenants.
6. Take tenant feedback seriously
Admit it. As humans, we’re bound to make mistakes.
When your tenants are complaining, or, at the very least, providing feedback, be sure to listen, take their advice to heart, and try to do better.
They might be upset that you accidentally booked a fire alarm drill for seven am on a Sunday morning, for example, rather than the usual Monday. When this happens, be proactive with taking responsibility for what has happened and apologize.
7. Pre-screen all tenants
Tenant retention isn’t simply about being the best property manager you can be. It’s also about choosing the right tenants and making sure they have decent intentions.
Look at their credit score and address history, and ask them how long they want to rent your property. If you keep onboarding tenants who only want to stay for six months, this is one quarter of the national average, significantly impacting your tenant retention rate.
8. Facilitate community building
The Wall Street Journal interviewed successful apartment owners on social media; these owners believe that tenants who make friends are more likely to stick around for another lease term or two. This idea of friend and community building is a key aspect for property owners and managers to retain tenants.
How to retain tenants
Retaining tenants ultimately comes down to their experiences and how you treat them.
Whether you run commercial or residential properties, it’s likely each person spends significant portions of their day in the unit they rent. When they don’t feel supported when things go wrong, or they don’t believe you have their best interests at heart, they aren’t going to renew their lease.
Tenant retention rate – FAQs
Tenant retention isn’t an easy concept to wrap your head around. Here are some FAQs to help you understand.
What is the average retention rate for a tenant?
The average tenant will stay in a property for around 25 months (or, just over two years). This brings the average tenant retention rate to around 50%.
What is a tenant retention rate?
Tenant retention refers to the sum of how many tenants stay with you over a period of time, for example, June 2021 to June 2022.
How do I get rid of a bad tenant?
Evicting tenants is never an easy process. You can consider raising the rent so they’ll leave naturally, pressing charges for damages, or simply asking them to leave. Typically, if they reach the end of their lease, you can then start an eviction through the courts.
How do I increase my commercial tenant retention rate?
Commercial tenant retention is a little tricky. The main cause of them moving to a new property is because they need a bigger unit or have gone out of business. Listen to their concerns, and consider offering cheaper alternatives if needed. For other ideas, read our blog on commercial tenant retention.
How can I communicate with residential tenants?
It’s important to put a system in place for property managers and tenants to efficiently communicate with each other, otherwise information can get lost and requests go unfulfilled. Residential properties that use tenant communication software can easily manage all interactions with new leads and residents through different contact methods – phone, email, text, web chat, and more.
How can I automate the lease renewal process?
Offering a quick and easy way for residential tenants to renew their lease can increase tenant satisfaction, improve retention rates, and streamline the property management lease renewal process. Electronic signature and storage tools that keep all your lease documents organized and secure can simplify the renewal process for residents and property managers.
Retain tenants with MRI’s property management software
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It’s an easy-to-use platform designed to foster strong relationships between yourself and your clients.
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Market Insights: The impact of COVID-19 on the Multifamily Industry, October 2020
The MRI Software Market Insights team continues to track the impact of the pandemic on the US multifamily sector. This report compares data from January through October 2020 with the same period in 2019 to track year-over-year changes and understand