What does a good month look like for a rental property owner? The rent came in on time. And nothing else happened.
Turnovers, on the other hand, are both incredibly expensive and time-consuming. Sure, you have the lost rent during the vacancy period. But that’s only the beginning.
Consider maintenance costs like repainting and replacing carpets – these are only incurred during turnovers. These two costs alone will amount to thousands of dollars in turnover expenses.
And what if the outgoing tenants leave the property in bad shape?
Nor do turnover costs end there. There are the marketing costs, and all the time spent showing the rental property, collecting applications, screening tenants, signing a new lease…
In other words, rental turnovers are where real estate investors spend the most time and the most money on their rentals.
So, how can rental property owners cut down on their turnover rate in order to boost their returns?
Here are eight tips to help you earn more and work less on your rentals.
1. Start by Screening for Likely Long-Term Renters
Some people move every year. Others stay put for ten years at a stretch.
Guess which tenant you want in your rental property?
A quick look at their housing and job history will help offer insights into how frequently the applicant hops around. Don’t stop at their rental application though – make sure you actually verify what the applicant told you by calling their employer and prior landlords.
Beyond looking for tenants who are interested in staying long-term, double check that they are willing and able to actually pay the rent. How comfortably can they afford the property? Will they be able to afford it when you raise the rent in a year from now?
How consistently do they pay their bills according to their credit report?
The last thing you want is to bring in a new tenant, only to have them default in three months’ time and need evicting.
2. Know Your Market Rents
What is the normal market rent for your rental property? How confident are you that you priced your rental right?
It’s hard to keep good tenants if you’re overcharging for your rental property.
One tried-and-true trick is to advertise a discount on the rent (even if the actual discount is small). Say the market rent for your rental property is $1,000 – consider advertising it as discounted from $1,100 down to $975. Everyone loves the feeling that they’re getting a discount!
A word of wisdom though: when advertising a discount, be sure to explain why you’re discounting the rental property. This is itself an opportunity to secure something else that you want. Perhaps you want the tenants to take special care of the landscaping and advertise the unit as “discounted for renters who will maintain the landscaping.”
And remember, you can always raise the rent at the end of the lease term.
3. Consistently Raise the Rent, by Small Increments
Sounds counterintuitive to raise the rent in order to keep your rental property occupied?
People understand that the cost of living goes up every year. Taxes go up, insurance goes up, rents go up.
… But they only go up a little!
Your tenants paying $1,000/month in rent won’t balk if you raise the rent to $1,025 at the end of a one-year lease term. But if you raised the rent to $1,100? Expect a reaction, and not a happy one.
The worst thing you can do as a rental property owner is to let three years go by without rent increases only to hike the rent by 15% out of nowhere. Your tenants will have come to expect the rent to stay the same, and then will be shocked by a huge rent hike.
Instead, set expectations from the beginning: rents will rise every year like clockwork, but not by very much. Tenants should expect a small-but-manageable rent hike every year when the lease comes up for renewal.
That stability and predictability keeps everyone’s expectations in sync, and you get to keep raising the rents on your investment property without ever losing a tenant over sudden sticker shock.
4. Incentivize Your Tenants to Bring Their Friends, Build a Community
How great would it be if your friends lived within walking distance of you? You wouldn’t want to move away!
If you manage a multifamily or manage several rental properties in close proximity, try this tactic. When you expect an upcoming vacancy in one of your rental properties, contact all your tenants in the vicinity and tell them about it. Tell them you’ll offer their friend a special move-in discount since they were referred by “a trustworthy tenant in our community.”
Some rental property managers also offer a discount to the referring tenant. I don’t like to offer my existing tenants a financial incentive – their friends will be able to smell “bribe” on their breath.
Instead, keep the benefits for your tenants about having their friends live nearby.
You get a wave of referrals from trusted tenants, without ever having to advertise the property for rent. They get their friends to move closer to them.
And best of all? None of them will want to move out because they will have built a life around having their friends as neighbors.
5. Ongoing “Dream” Improvements
Over time, rental properties need updating. Far too many landlords only bother making property updates in between tenancies, hoping to command higher rents.
What if you instead made regular updates to your rental properties to keep your tenants in place and to justify ever-higher rents?
Imagine you call your tenant six months before their lease is up for renewal. “While I can’t make any promises, we may have a positive return on the rental property this year. I want to keep investing in the property, and I know you care about the property, too. If you could list your top three choices for ‘dream’ improvements, what would they be?”
Reiterate that you may not be able to make any of them, but you wanted to hear their ideas and input because you value them as renters.
Are any of the three ideas good long-term improvements for the property? If this tenant were to move out tomorrow, would this improvement help you command higher rents?
If you find that one of your tenant’s dream improvements is a good investment, consider making it. Your tenant will want to stay long term and will be happy to pay your small annual rent increases knowing that they are living in a better rental property.
6. Build a Personal Relationship (Within Limits)
When tenants like their landlords, they are more likely to stay longer. Hardly rocket science, is it?
It doesn’t take much work to build a personal – but professional – relationship with your tenants.
First, always make a phone call, whenever you send out a written notice. If you need to enter the property to meet a contractor, by law you must give them written notice (in a timeframe specified by your state). But what’s legally required and what’s good property management are not always one and the same. Give them a courtesy phone call on the same day you send the notice.
Likewise, when the lease is coming up for renewal, give them a courtesy call to explain the small rent hike and ask if they will be renewing or vacating.
When you make these calls, always spend at least 60 seconds on small talk. Ask about their children (by name!), their jobs, they hobbies. You don’t have to remember these, just add a quick note in their file that you can pull up easily.
Share a little bit about yourself. Not a lot – they don’t need to know your home address, but you can look for common ground to build a personal connection with them.
The idea is simple: you want them to know that you think of them as a person, not as a paycheck.
7. Be Responsive!
Nothing drives tenants crazier than an absentee landlord.
Rental property owners need to be available to their tenants in an emergency. And your rental property itself needs you – if a pipe bursts and water is leaking through the property, every minute lost means more money lost to damage.
When there’s an outstanding issue at your investment property, remain in touch with tenants daily. It can be as simple as an email or text message; you just want to reassure them that you are on top of the issue.
Keep your tenants posted about contractor schedules, status updates, and any other information you can give them to ease their anxiety.
Remember, it’s not about what they need to know, but rather what will keep them reassured and stress-free.
8. Get Rid of the Rotten Apples
Not all tenants should be retained.
Even tenants who pay their rent on time could be costing you money in other ways. Are they loud, or rude, or obnoxious to your neighboring tenants in a multifamily rental property?
Do they cause damage and heavy wear and tear on your unit?
Get ‘em out. When their lease term comes up for renewal, send them a polite and professional non-renewal notice.
You don’t want to lose your good tenants in neighboring units or nearby rental properties just because of a few rotten apples. And you don’t want to pull your hair out as a real estate investor because a few tenants make your life miserable.
Streamline your rental property management and boost your returns by placing and keeping low-maintenance, long-term tenants. It’s a stressed real estate investor who constantly hassles with turnovers, vacant units, advertising, tenant screening, and the like.
A happy real estate investor is one who simply cashes checks each month.
What are your tips for keeping good tenants long term? For reducing turnovers in your rental properties? Share them below!
G. Brian Davis is a real estate investor, landlord, real estate writer, and co-founder of online landlord resource SparkRental. He’s owned dozens of investment properties over the last 15 years, and now loves teaching and writing about real estate just as much as investing itself! With the help of his rentals, he gets to travel internationally and split his time between the US, Europe, and the Middle East.
