All landlords aim to keep high-quality tenants in their rentals to minimize vacancies. However, you won’t always find the perfect tenants to stay in your properties long-term. That said, one of the most expensive parts of owning a rental business is tenant turnover. Therefore, landlords work hard to increase their tenant retention rate. If you’re looking for ways to maximize your rental business and experience fewer turnovers, keep reading as we go over some tips.
Why is Your Tenant Retention Rate Important?
Your tenant retention rate is significant because it measures the number of tenants that stay in your property for multiple rental periods. Ultimately, it gives landlords an idea of how many tenants are sticking around and offers areas for improvement if tenants don’t stay.
You can measure your tenant retention rate by dividing the number of tenants that move out over 12 months by the total number of tenants you have in those 12 months. Then, multiply by 100 to get your final rate.
It’s essential to calculate your tenant retention rate to evaluate how your rental business is doing. Additionally, if you have a low retention rate, you can explore areas of improvement to increase your rates. After all, fewer turnovers in your rentals can maximize your overall return on investment. Keep reading to learn how.
How Can Fewer Turnovers Help Maximize ROI?
Landlords that have fewer turnovers can experience higher returns. After all, when tenants stay in your rental properties, you have consistent income that covers some of your expenses. On the other hand, if you have several vacancies, you’ll need to use savings or pay out of pocket for some expenses.
The higher your retention rate, the more your rental business succeeds. When you keep tenants in your rentals, you can make up for some inevitable costs of running a rental business. For example, if you have a low retention rate, you need to account for factors such as:
- Rental property marketing
- Vacancy time
- Leasing fees
- Tenant turnover costs
- Valuable time
These costs can add up quickly, and if you’re not generating income from tenants each month, it can cause more stress. As such, it’s crucial to work towards a high tenant retention rate. If you’re not sure how to maximize your rental business, here are some tips to consider.
7 Tips For Increasing Tenant Retention Rate
Seeing a low retention rate for your rentals may seem discouraging. However, there’s always room for improvement. Here are a few considerations if you’re trying to increase your tenant retention rates.
- Screen Tenants Thoroughly
- Prioritize Maintenance
- Keep Rate Increases Fair and Consistent
- Offer Incentives for Lease Renewals
- Stay Up-to-Date With Rental Markets
- Remain Professional Yet Personable
- Provide Outstanding Customer Service
Screen Tenants Thoroughly
Starting with a thorough tenant screening is the first step in finding quality tenants for your rentals. Retention rates will be the least of your worries without a tenant screening. That said, tenant screening is one of the most critical steps of the rental process, and it has a significant impact on your tenant retention rate.
Before you allow an applicant to live in your rental property, you’ll want to verify their income, run a background check, and contact some references. When you speak with tenant references, ask them open-ended questions that allow you to obtain more information.
For example, you may ask:
- Did the tenant make payments on time and in full?
- What was the monthly rate?
- Were there any issues with the tenant during their stay?
- How did the tenant maintain the property?
- Would you rent to this tenant again?
Previous landlords can offer incredible insight about your potential tenants. Use this information to determine whether or not they would be a good fit for your property. Luckily, Washington DC property management professionals can help if you need assistance with tenant screening.
When you own rental properties, maintenance is inevitable. So, being proactive with routine maintenance tasks can avoid emergency repairs in the long run. Aside from keeping your property in good shape, regular maintenance is a great way to increase your tenant retention rate.
When a tenant issues a maintenance request, landlords or property managers should take care of concerns promptly. Additionally, keeping your tenant informed and updated will build rapport and better landlord-tenant relationships.
Keep Rate Increases Fair and Consistent
Most likely, one of your main goals in owning rental properties is earning profit. Sometimes, you’ll find yourself increasing rental rates to keep up with the competitive market. However, if you are overly aggressive with rental rate increases, it may steer tenants away from your property.
Instead of automatically increasing your rates at each lease renewal, do market research and justify your rate increases. Typically, investors should keep rates below market rates and implement smaller increases over the years.
Offer Incentives for Lease Renewals
The end of a current tenant’s lease is crucial for landlords. Ultimately, you want your tenant to renew their lease and remain in your rental property for another term. One way you can encourage a tenant to renew their lease is by offering incentives.
For example, you could consider partnering with other companies to offer promotions or deals for tenants. Otherwise, you could provide monetary incentives such as a discount on the renewal month’s rent.
Stay Up-to-Date With Rental Markets
Keeping track of local rental markets is a huge factor in retaining current tenants. One great way to increase tenant retention rates is by monitoring local amenities and upgrades in the local market.
For example, if your rental unit is outdated while others in the community are upgraded and less expensive to rent, you may need to implement some changes. Think like a tenant to ensure you’re providing an ideal renting experience. How does your rental compare to others in the local area? How can you improve your property to keep up with comparable properties?
Remain Professional Yet Personable
Landlords are responsible for enforcing lease rules, local laws, and rental standards. For example, most landlords have repercussions for late rent payments, damages, and other lease issues. However, while you may have to enforce some lease rules, remain understanding of certain tenant circumstances.
If one of your best tenants pays late or misses a payment, check in with them to see if any issues are preventing them from paying. If they’re lost their job or fallen on hard times, consider working with them to find a solution.
Provide Outstanding Customer Service
One of the simplest ways to increase tenant retention rates is by providing top-notch customer service. Although it seems straightforward, it’s crucial that your tenants feel heard and appreciated. Excellent customer service starts at tenant screening and move-in time, where you can provide your tenant with all the information they need. For example, you can give them a welcome packet, an outline of rental procedures, and your contact information.
When issues arise in your rental properties, it’s vital to answer requests and complaints as soon as possible. Try to respond within the same business day and keep tenants updated with maintenance progress so they know it’s being handled. Keeping honest and effective communication with your tenants is a great way to establish good landlord-tenant relationships.
Increase Your Tenant Retention Rate With Property Management
If you’re experiencing a low tenant retention rate and not sure what else you can do to increase it, consider hiring property management. Hiring a full-service property management team can help you raise your tenant retention rate and maximize your return on investment.
When you have a professional management team on your side, you don’t have to worry about the day-to-day tasks of running a rental business. Bay Property Management Group can help with tenant screening, move-in, and move-out reports, maintenance, rent collection, eviction services, and more.
Contact BMG today if you need rental management services in Baltimore, Philadelphia, Northern Virginia, Washington DC, and other surrounding counties.