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In multifamily real estate, revenue and property valuation are dependent on multiple factors, but none is more important than tenants. Tenants are the lifeblood of multifamily real estate – limiting vacancies is key to maximizing revenue, profitability and valuation. Retaining tenants often is as important as attracting new tenants. If a property owner has high tenant turnover, profitability, operational efficiency and brand reputation can be damaged indefinitely. Therefore, it is important to understand how to implement effective strategies to strengthen tenant satisfaction, build tenant loyalty, and ultimately ensure low tenant turnover. This guide will cover the best strategies to increase tenant retention and provide practical advice for commercial real estate investors, developers, owners and managers.
Understanding what drives tenant turnover is essential for property managers and investors who want to maintain a stable and profitable real estate investment. So, what causes tenant turnover? There are several factors that can lead to tenant turnover. For example, high rent prices, especially if rent is higher than comparable properties or not aligned with your property’s value, condition or amenities can cause tenant dissatisfaction. Below average property management, including delayed or non-responsive behavior to maintenance requests, can adversely impact a tenant’s decision to renew a lease. If a multifamily property lacks amenities, or has old amenities, tenants may choose other properties with modern amenities. Sometimes, the tenant community can be essential when choosing whether to renew a lease. For example, if neighbors are loud or disrespectful, a tenant may feel uncomfortable or dissatisfied with the overall living experience, which could cause them to move.
To increase tenant satisfaction, real estate investors and property managers can focus on several key areas, including:
Tenants want to feel valued as residents, and they want to belong to a larger community when they rent in a building. If they feel connected to the broader tenant community, they will be more likely to renew their lease and live in the property for the long-term. Property managers can renovate the common areas with amenities such as a pool table, ping pong table, media center and private events room. Further, hosting events such as holiday parties can encourage interaction among residents.
Property managers should be accessible and responsive, so that tenants can get help promptly with maintenance requests, have their questions answered, and know how to reach managers on demand. Implementing a digital communication platform is one effective way to drive efficient communication. Likewise, property managers can use this digital platform to share property news, maintenance schedules, and upcoming events with the building community.
Invest resources to upgrade and install amenities that are competitive in the neighborhood. Tenants will compare amenities across comparable buildings, so it’s imperative that you understand that many tenants decide where to live based on the on-site amenities. Lifestyle amenities like fitness centers and pools and in-unit amenities like modern appliances represent some ways to attract and retain tenants for the long-term.
There’s nothing more frustrating than having a property manager be unresponsive to tenant requests. With a digital communication platform, tenants should be able to communicate easily with property management. Likewise, property managers must be responsive to address maintenance requests and repairs promptly. Why? Tenants care about high quality and timely maintenance services, and a property manager’s ability to be responsive can increase tenant satisfaction. Property managers have an opportunity to show tenants that management cares about their needs and wants to improve their daily lives
Tenants prefer flexibility. While revenue and profitability maximization are paramount, be flexible and promote customer service. For example, if a tenant is late on the rent, consider a reasonable grace period without late fees occasionally. Tenants also may require creative leases that differ from the traditional one-year lease. If possible, consider flexible lease plans, such as if a tenant needs a two-year lease, for example. Allowing tenants to paint their interior walls or install fixtures (assuming they return their apartment to its original condition) can go a long way in building tenant loyalty.
Pay attention to the local market. Comparable properties should be monitored so that you understand rent, amenities, services and other factors that could influence a tenant’s decision to renew a lease or move. If competitor properties are offering incentives for lease renewals or new leases, then you should, if possible, consider incentives as well. When tenants receive incentives, they feel appreciated and valued.
Tenant retention is crucial for maximizing the revenue, profitability and stability of your multifamily real estate investment. By creating a welcoming community, offering competitive amenities, providing responsive maintenance and customer service, and incorporating tenant feedback, you can significantly increase tenant satisfaction and loyalty. Implementing these strategies will not only improve your retention rates but also make you a preferred choice for renters. If you implement these changes, you can build a loyal and stable tenant community and increase the value of your multifamily investment.
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