Good tenants are the first line of defense when it comes to caring for your property, and they also keep those ever-important rent checks coming in — which makes them expensive and time-consuming to lose.
Turnover costs such as lost rent, tenant placement fees and getting the property rent-ready add up quickly, especially if you’re replacing tenants year after year.
The national average cost of a turnover is equal to three month’s rent, according to Real Property Management Express — and that doesn't even include lost rent during the vacancy.
According to SmartMove tenant screening services, the average monthly cost of a vacant apartment during tenant turnover is $1,750. Granted, that’s for an apartment, but you get the drift … it’s money down the drain.
So how do you keep tenants happy and content to stay where they are? From responding promptly to maintenance requests, to checking in without being intrusive, here are some of our top tips for retaining good tenants.
- An increase in rent isn't necessarily worth losing a tenant
- Limit drop-ins to necessary ones only, such as maintenance requests and bi-annual inspections
- Respond promptly to tenants’ emails, calls, or texts
- If you're self-managing, consider hiring a property manager
- The cheapest appliances aren’t always money-savers in the long run
- Sending your tenants the occasional gift can be a nice way to build a better relationship and generate goodwill
Weigh the cost benefit of rent increases
If you've got stellar tenants with excellent payment history, not raising the rent may be more financially advantageous than raising it.
“It doesn't make sense from an owner’s standpoint to lose a great tenant just to pick up a little bit of extra rent,” explains Mike Tamulevich, Director of Sales - Property Management at Marketplace Homes.
Tamulevich cautions landlords to think through the full cost of losing a tenant at their current rental rate — even if that rate is a little under market.
“Do you want to risk being on the market? You’re going to lose at least two weeks of rent, and there's going be the cost associated with finding a new tenant. If you end up having to wait 60 days to get an extra $100 bucks a month, the math just doesn't work out,” he says.
On the flipside, if your tenant approaches you for a rent reduction, review the rate with your property manager to determine how it stacks up against fair market value. If it’s on the higher end, lowering it a bit may inspire good faith with your tenants and encourage them to stick around. The rent comparison tools on sites such as Zillow, Trulia, RentBits, Rentometer, and City-Data.com are convenient ways to get a good sense of the fair market value in your area.
To boost your negotiating power, Tamulevich recommends walking the tenant through the financial burden of finding a new home. Remind them that if they move out, there will be moving costs, a new security deposit and potentially a month of paying rent on two homes.
Don't be a helicopter landlord
Unless there’s an issue that needs to be addressed in person, “we advise our owners to stay away from the property as much as possible,” says Tamulevich. “People rent single-family houses rather than apartments because the house feels like it’s their home.”
Rather than conducting quarterly inspections, Tamulevich recommends using routine maintenance requests as a chance to do a visual inspection.
“Anytime we get called out, even if it’s just to fix the garbage disposal or a toilet that won’t stop running, we use that as an opportunity to do a quick visual inspection of the property," he explains.
For predetermined inspections, always provide your tenants with a reasonable basis for the visit. You don't want the tenants to think you're just nosy, says Tamulevich.
In short, no one likes feeling watched. You (or your property manager) have the right to enter the property with 24 hours’ notice, but by limiting drop-ins to necessary ones only — such as maintenance requests and bi-annual inspections — your tenants may be more likely to renew their lease.
Attend to any inquiries, repairs, or complaints in a timely manner
As one of our Roofstock investors and guest bloggers once put it, “the tenants pay your bills, and if you treat them poorly, you will pay the bills.”
>>Related: 4 Important lessons I learned during my first year of owning rental property
Communication is key. Whether you’re self-managing the property or working with a property manager, quickly replying to tenants’ emails, calls, or texts is probably the most important thing you can do to keep them content. Tenants should trust that you value their comfort and the condition of the property. You don’t always have to provide an immediate solution, but you should send a quick response letting them know you’ve received their message and will get back to them soon with a solution. (Once again, this is a task you can hand off to a good property manager.)
Maintenance requests are particularly important. No matter how fantastic your tenants are, appliances break, faucets leak, and general wear and tear happens. Your tenants will feel valued when you promptly respond to their needs, and they are more likely to care for the home when they see that you do, too. Landlords who are slow or non-responsive to maintenance requests are a major cause of tenant turnover.
“It’s a huge hot button for tenants,” says Tamulevich. “Compared to rental rate increases, we see many more tenants move out because the owner is unable to handle everyday maintenance items in a timely manner. Even if you’re not able to fix a particular issue, it's important to make sure your tenant feels heard and offer some sort of concession, such as a reduction in rent.”
From a practical standpoint, attending to required repairs in a prompt manner saves your property from more damage, which ultimately saves you money. (Fixing a leak before it worsens is one obvious example.)
Hire a property management company
While some people choose to self-manage, hiring a property manager can save you a lot of time and keep your tenants satisfied. Think about it in practical terms: do you want to answer a midnight phone call about a finicky smoke detector or a critter trapped in the crawlspace? Do you even know what to do in those situations?
With years, if not decades, of experience behind them, property managers know how to handle a wide range of urgent calls and routine maintenance requests with ease.
Tip: At Roofstock, we set all of our investors up with vetted, local property managers.
Many property managers have in-house maintenance teams as well as established relationships with proven vendors who are certified, bonded, and insured. This spares you the stress of searching for a trustworthy repair person, pest control person, etc. and ensures your tenant doesn’t have to put up with a neglected maintenance issue or botched repairs.
Property management companies are especially beneficial for out-of-state investors. They provide your tenants with a neighborly face to turn to if something goes awry and they relieve you from the role of long-distance landlord.
>>Related: The role of the residential property management company
Don’t skimp on appliances
The cheapest appliances aren’t always money-savers in the long run. At some point, you’ll need to replace a washing machine or dishwasher. In many cases, it’s more cost efficient to purchase sturdier, more reliable appliances than to buy multiple replacements over the years. What’s more, your tenant will likely appreciate the high-quality items and feel motivated to take better care of them.
“A lot comes down to the kitchen,” says Tamulevich, who recommends sticking with one color of appliances. “Uniformity is really important. You'll often see a white dishwasher, a black refrigerator, a stainless steel stove, and it just looks messy.”
Ultimately, the whole suite of appliances is what really attracts (and retains) the best tenants, says Tamulevich — and that includes having a washer and dryer.
A recent analysis of residential real estate industry trends from John Burns Real Estate Consulting found that single-family renters value having a private laundry above storage or their relationship with their landlord. Because really, who wants to lug bags of dirty clothes to a laundromat every week?
Consider renewal incentives
Every time someone moves out, you’ll need to clean, repaint, or revamp the unit, and these costs add up quickly. Then there’s the missed rent checks while you’re searching for a new tenant to fill the vacancy.
To avoid these expenses, ask your tenants what their renewal plans are a month or two before the lease is up. If they’re unsure about renewing their lease, ask them directly what it would take to get them to stay and then negotiate from there. It’s all right to ask them what they want — in fact, it’s better than surprising them with something that doesn’t mean much. Common renewal incentives include an Amazon or Visa gift card or a property upgrade. Such incentives may feel costly in the moment, but could save you money in the long run.
A word of advice from Tamulevich: “Always avoid cash or a discount on rent whenever possible. You can get much more play out of a $50 gift card to a local restaurant than you can from lowering the rent from $1,000 to $950. That rent reduction will practically go unnoticed by your tenants, but it will open up the mindset that they can ask for a discount if they ever need it. Whereas, they're not going to call and ask for a $50 gift card to Papa John’s.”
Send small but thoughtful gifts on important occasions
Sending your tenants the occasional gift can be a nice way to build a better relationship. The gesture shows that you are a thoughtful landlord who cares about more than just the property — you care about the people living in it.
Soon after your tenants move in, send an edible arrangement or gift certificate to a nearby restaurant. These packages don’t cost much, and they generate goodwill. The same logic rings true for the holiday season. Consider sending movie passes, a bottle of wine, or even a simple card wishing them a happy holiday.
One great example comes from Paul Kidwell, VP of Research and Development at Roofstock. Paul owns a number of investment properties in Cincinnati and sends a small token of appreciation to his tenants during the holidays. Here is his template that he shared with us:
Dear [tenant name],
Happy holidays to you and yours! Hopefully it’s been a great year for you.
Thanks again for being a great partner on the property. I very much appreciate the care you’ve given it. As small token of my appreciation, I’ve sent a Target gift card (you should receive it via email — if you don’t, let me know).
Every year I like to take stock of the property, prepare for any upcoming maintenance issues, and handle anything that might have slipped through the cracks. I’m sure you have a good handle on anything that might need to be fixed, or will need help soon. When you have a chance in the next few weeks, would you please pass along a list of these issues so I can make sure to be prepared (or give attention to it now)?
As always, I’d prefer to keep the property in great shape, and preventative maintenance is typically the better route. I sincerely appreciate your help with this! Also, please don’t hesitate to get in touch if there’s anything else I can do.
Happy holidays, Paul.
All of these actions show consideration and care, which will ultimately build the positive landlord-tenant rapport you’re seeking for long-term success.