Why is Tenant Retention Important?
Tenant retention is crucial for improving profitability as a landlord. For every tenant who leaves a property, the cost is estimated to be 2-3x of monthly rent with lost revenue plus leasing, administrative, and marketing costs. Move-out inspections must be conducted, searches and screenings for new tenants must be started, and new leases must be drawn up and signed.
The solution seems pretty simple, have tenants who don’t leave. So the question is, how do you improve tenant retention?
How to Improve Tenant Retention
To improve tenant retention the best strategy is a three-pronged approach centered around finding the best tenants, consistently communicating with them to build trust, and fulfilling maintenance requests within an appropriate timeline.
How to Get Good Tenants for Tenant Retention
Finding the right tenant to improve retention comes down to a couple of principles:
- Finding someone who wants to be there for a long time
- Finding someone who can afford to be there for a long time
- Finding someone you’ll want to be there
Finding someone who wants to be there for a long time
Individuals committed to a location are more likely to stay in a rental for multiple years. Ideal candidates include professionals who have a history of staying at a company for multiple years, students in the middle of their degrees, and young families with school-age kids
Professionals who have an employment history of staying at a company for multiple years before moving give you the confidence that they will stay working in the same location for multiple years and possess the characteristics of a loyal tenant.
Check a potential tenant's resume and LinkedIn and notice if they are constantly on the move between companies and locations. While landlords should not rely on social media for background checks it can be useful to analyze an employment history of a tenant.
The Persistence in Post-Secondary Education in Canada Report found that 1 in every 5 first-year students dropped out of post-secondary. However, students who are in their second or third years of studies have a significantly higher likelihood that they will stay for multiple years.
Another assessment for students is to see their past grades. According to the same report, individuals with an average between 90%-100% had only a 9% chance of dropping out over the course of their degrees while those with averages between 50%-79% dropped out 30% of the time.
Families with young children rank stability as one of their top priorities. Living in the same rental enables a tenant’s children to stay at the same school and receive a consistent level of education.
Attract families to your properties with the description in your rental listings. Use language like “family-friendly”, “active neighbourhood with young kids”, and “great schools nearby”.
Finding someone who can afford to be there for a long time
Assessing a tenant’s financial background is crucial for a successful tenant retention strategy. If a tenant can’t pay their rent it doesn’t matter how much they want to stay there.
The Federal Agency on housing, the Canada Mortgage & Housing Corporation, recommends a rent-to-income ratio of 30% so for every $3 in rent per month they should earn $10 in monthly income. Or for a $1200 2-bedroom apartment the tenants should earn $4000 after-tax monthly.
Tenants are finding it increasingly difficult to meet this requirement but if your goal is specifically tenant retention screening out applicants who can’t meet this requirement is a must.
A credit check is also an easy way to assess whether a tenant is a good candidate for your property. Using a service like Equifax enables you to easily check a tenant's credit with minimal hassle.
Most tenant checks will include a report outlining how good the score is but for reference according to Equifax “credit scores from 660 to 724 are considered good, 725 to 759 are considered very good, and 760 and up are considered excellent.”
Finding someone you want to be there for a long time
Reference checks are crucial to ensuring that the tenants in your property are people who you will actually want to stay there for a long time. Call a potential tenant’s previous landlords, and if possible, avoid their current landlords as they may have an incentive to lie if they want to get rid of a bad tenant.
Some questions to ask their previous landlord include:
- Have they ever missed a rent payment or were frequently late?
- Was there any damage to the property?
- Were there any complaints from neighbours about the tenant?
- Were there any problems communicating with the tenant?
- Would you rent to this tenant again if given the chance?
How to Improve Communication with Tenants
Communication is the next step in our strategy for improving tenant retention. Just remember your ABCs, Always Be Communicating.
Communication is the basis of all trust. When you consistently communicate with your tenants you're giving yourself more opportunities to build a connection and trust. A tenant that feels comfortable will want to stay there.
Let’s look at an example of this theory with something in almost everyone’s work lives, performance reviews. If your company has only one or two performance reviews per year think about how stressed you’ll be entering the review. Every piece of communication you’ll get from your boss, good or bad, will be from this one moment and will set out how you’ll feel for the next 6-12 months
However, if your boss is constantly communicating with you with weekly or daily check-ins each moment isn’t anything to stress about and trust with your boss is built.
Now, consistent communication with tenants sounds nice, but sending a weekly message to 100s or 1000s of tenants, in reality, is ugly. That’s where technology can come in to support you.
How Technology Can Improve Tenant Communication
Communication with tenants is simplified with property management software like Propra.
Announcements from Propra give property managers the option to send a message to every tenant in a property either by email or a text-to-voice phone call. Individual messages can then be sent within Propra so managers can notify tenants of overdue rent or address the reason behind a delay in maintenance without leaving the Propra web app.
Having all tenant communication come from a single source provides clarity to tenants and ensures that miscommunication and frustration from being out of the loop never happen again.
How to Improve Maintenance Request Fulfilment
According to a study from 2021, maintenance request handling “significantly influenced tenant satisfaction”. The number one reason tenants leave a rental is dissatisfaction with the maintenance process. Tenants are frustrated both with the time it takes to get things fixed and a lack of communication from their property managers on the status of their requests.
This communication issue can once again be solved with technology. It begins with submitting a request. Using Propra, tenants can submit a maintenance request with just a short email to firstname.lastname@example.org. This ease of use starts off the process on the right foot.
After submitting their request, tenants will be prompted by Propra’s automated Smart Templates to include details regarding the issue and the best time for operators to come by.
This gives property managers all the information they need to schedule a maintenance request with the right operator at a time that works for all parties, and removes the time-consuming back and forth that normally occurs between tenant, manager, and operator.
Tenants will then receive automated emails when the appointment is scheduled, in process, and completed with all the details about the issue included.
Tenants who are satisfied with their maintenance request fulfillment are going to stay there.
How Can Property Managers Improve Tenant Retention?
To improve tenant retention property managers need a calculated strategy of finding the right tenant, building trust with consistent communication, and fulfilling maintenance requests within a timely manner with automated continuous updates.