Tenant retention strategies aren’t as complicated in residential real estate as in commercial real estate, but they do require attention at every stage of the tenant-landlord relationship. That said, it’s worth the effort. Finding good renters can be a challenge, even in the hottest rental markets. If you don’t -- or you have high tenant turnover -- you lose potential profit and absorb the expenses on that unit every day it sits vacant. Not to mention, every time you go through the rental process, you incur other costs such as screening and cleaning.
While other lists recommend birthday cards and holiday wishes, the likelihood is, renters don’t need a friendly or congenial relationship with their landlord. They want a responsive professional who takes care of needs around the unit. Whether you hire a property management company or handle it yourself, prompt answers and problem-solving makes for a happy tenant.
During the screening process
If you can’t tell a bad tenant from a good tenant at the screening stage, you could be the greatest landlord in the world and still struggle to keep tenants in good standing. Here are a few things to keep in mind as you sift through applications from potential tenants.
1. Check the domestic partners equally carefully
In many cases, the best presenting partner in a twosome will be the one who interfaces with potential landlords. Meanwhile, the quieter person might have problems such as prior evictions, liens, ongoing litigation, or an enormous firearms collection. As much as you might love one applicant, make sure that if they’ve got a domestic partner, that person goes through the same background checks -- and thoroughly, not just a formality. Also, make sure both are on a lease or on separate leases if you want to be extra careful.
2. Evaluate your (potential) tenants beyond their credit score
Credit bureaus in this country want people to have a certain amount of open credit cards and loans. But this can spiral out of control in uncertain times, and it’s especially bad for younger people who may have just begun building a credit history when they got hit with a run of bad luck. If someone has a poor credit score but is working, has good references, and has always paid their rent in the past, you may want to look beyond what FICO says.
This may seem counterintuitive, but it isn’t. Say you accept a tenant who’s 25 and two years into their career with major student loan debt and recent credit card debt. If they’re working, they may very well be heading toward stability and trying to pay off their debt, but it may be a few years before they can afford their own home. Within this window, they can be a great tenant if they like where they’re living.
Preparing the property
3. Be vigilant on security
One of the top three things that residents want from smart-home technology is smart security: This means smart locks, smart gates, and more. Assess your property and figure out all the places you can add smart security, and then do it. Key-fob entry for garages and lobby doors. App-controlled gates and main doors. Smart deadbolts. Camera systems. The list goes on and on, and tenants usually want as much building security as they can get and that you as the property owner want.
4. Digitize your property management system
Landlords who insist on check payments for rent and phone calls to report a problem with the property are so behind the times they’re doing themselves a disservice. First and foremost, allow your tenants to pay electronically. Second, if you bill them for things like water and trash pickup, get on a system that sends the monthly bill digitally instead of through the mail. And third, set up a system where they can report problems in the unit with a direct message. This will end up being easier for you as well as tenants.
Best practices for property upkeep
5. Property maintenance is important
Regular landscaping, litter cleanup, new light bulbs, and other basic maintenance might seem both tedious and pricey, but in reality none of this costs much, and it makes a huge difference to the aesthetic of a property. Whether a building has five units or 500, tenants who pay good money to live there will become incensed by a dog poop-strewn sidewalk or a stairwell with burned-out lightbulbs that feels unsafe.
6. Have a handyman on call
When things go wrong inside units -- such as a garbage disposal quits or an icemaker goes on the blink -- tenants have only so much patience about getting them fixed. You obviously don’t want to be calling expensive contractors for every maintenance issue, but a handyman you trust could take care of many problems, eliminating the need to call in a specialist.
7. Be proactive in handling capital improvements
Beyond just basic upkeep, there are probably amenities your units could use that are an expense but not a huge one: for example, a new range after a year or a new washer and dryer after 18 months. Fixing up a patio. Installing smart locks. Although the expense can be calculated in the hundreds of dollars, the quality of life improvement for the tenant may be invaluable. And since surprisingly few landlords care about this once they get a tenant under contract, those who do care will definitely stand out.
Stay competitive in the market when it’s time to renew
8. Don’t increase rent
Monthly rent can in theory be increased by a certain percentage with every new lease, but if you want to make nice with certain tenants, the easiest way to do this is to keep their rent the same for the next year.
9. Lease renewal incentives
Tenants who can afford rent on the higher end of market rate have options and may be considering those options during the final three months of their lease. Beyond just keeping their rent reasonable, you could consider offering incentives just as people do with new tenants.
10. Stay up to date on comparable properties
Although there’s an entire function in real estate sales dedicated to knowing the value of one property versus comparable properties (i.,e., appraisal), landlords and owners often seem disconnected from this reality. You see them charging on the high end of market rate for beat-up properties, or telling tenants that it’s not standard for a property to have certain amenities when many other neighboring properties do, or asking for twice the deposit amount they’re legally allowed to. Even if these are honest mistakes, it doesn’t come across well to tenants and will turn away many of the ones who can pick and choose. Therefore, experts recommend going to visit a couple comparable properties in the neighborhood and using this research to help determine the price of your rental units and which amenities and extras to offer tenants.
When times get tough
11. Be understanding with long-term tenants in good standing
2020 has forced many landlords to accept that sometimes even the best tenants are forced into circumstances beyond their control that prevent them from paying rent in a timely fashion. Before that, even in the crash of 2008, landlords treated any delay in rent payment as a fineable offense. These days, it’s questionable whether landlords can evict, let alone demand up-to-date rent. So, even if your tenants have been on time since they’ve moved in, keep track of them -- and if one who’s always been in good standing suddenly needs a couple weeks to pay or is forced to ask for reduced rent due to illness, consider it on a case-by-case basis.
The bottom line
The fact is, everyone hates moving, and unless a major life change prompts it, most people will stay in a place that’s comfortable, safe, and within their means, especially if the landlord-tenant relationship is good. Since it’s usually easier and more cost effective to keep a good tenant than find a new one, being a good landlord is in your own best interests too.