The shortest way for you as a landlord or your property manager to lower down the vacancy rate in your rental business is to increase renewal rates. If you have found great tenants who does not harm your property and pay rent every month before or on due date, avoid the stress of tenants turnover.
Lease renewal has been on the rise for the past twenty years reaching its all time high in 2020 while majority of the tenants were not able to or did not want to relocate because of the situation.
If you want to improve your renewal rates and having a hard time doing so, here are a few tips to consider before diving in.
1. Improve Tenant-Landlord Bonding
Creating an effective tenant-landlord bond won’t happen overnight. This will take time. But it is worth the time and effort as it will play a key role in your tenant’s lease renewal decision. Tenants often complain about poor communication with the landlord or bad customer service from property managers. And this can later result in tenants going against the lease renewal decision.
Therefore, it is highly recommended to respond to maintenance requests on time, send timely updates and make sure your tenants you have no problem approaching you with questions or concerns. Reach out to your tenants regularly to check if they are having problems and if the problems they face or being sold or not.
Never forget the fact that your tenants are your regular customers. Make sure you keep customer satisfaction at the top of your priorities list in rental business.
2. Keep on Open Feedback Culture
Pay close attention to any complain you receive from your tenants. And find solutions to those problems proactively. If you receive a similar complaint and it is not about a problem, instead it is a request for amenities or updates, look at the pros and cons of the requests and act accordingly.
Create a set of questions and a protocol to ask these set of question from the tenants that are moving out. Find out why they are leaving and ask them if they could stay if you solve the problem. This simple procedure can help you persuade the leaving tenant to stay and renew the lease. Even if they refuse to stay, you can use the information you just received to keep your future tenants for longer periods.
3. Encourage Tenants
How can you turn a lease renewal into a sweet deal for your tenants? Well, the answer is offer something as an incentive like parking benefits, gift cards, a new screen or buying them a nice dinner can prove to be a worthy investment during renewal season. If a mature, responsible and trustworthy tenant is happy to stay and renew the lease after the incentive, your investment is justified.
Another effective way to encourage your tenant to renew lease is offering incentives in the form of added amenities or upgrades to the property. If your tenant is missing a new AC, it is worth the investment. At the moment, it will help renew the lease and in the long run these added amenities will increase the value of your property.
4. Raise rent the smart way
To keep up with the market rents and meet expenses, you will need to raise rents. But the problem here is, some tenants use this as a reason to refuse to renew their lease. Now, you can’t change the fact that you need to raise rents regardless of what your tenants think or how they would react. But you need to find a smart way to do it so that they may not use it to decline lease renewal.
A smart way is to raise a small percentage every year instead of a sudden jump. This way, you won’t lose profits while your tenants will find it as a reasonable raise. And when they are comfortable, they won’t consider relocation.
5. Timing is key
If a good tenant is considering to vacate, you need to approach them as soon as possible. Approaching early gives you sufficient time to consider their request or offer incentives to make them stay and renew their lease instead of leaving.
If your tenant is moving because of a job or business in another state or because of another reason like family, in that case you will have sufficient time to market your unit. To secure potential renewals, it is best practice to approach your tenants 3 months ahead of the expiry date of the lease.
Generally, yearly lease renewal is better for property owners to have better renewal rates. However, you need to see if you want the tenant to stay at your property. It is better to find another tenant than constantly dealing with a difficult tenant.
As you test different strategies with time, your retention plan will advance based on what works and what doesn’t. Decreasing vacancy rates and pushing renewal rates is an objective that need continuous attention through the lease term.