The multifamily rental market steadily climbed upward over the past few years. In fact, lease renewal rates hit a 10-year high. So, what does that mean to you as a property manager?
Forecasts suggest we’ve reached a peak and market shifts may be around the corner. As a result, past motivators for renewing leases may change, and community and property managers may need to develop new strategies to entice residents to stay.
Lease renewal is an art rather than a science, so there isn’t a one-size-fits-all formula that guarantees success. Adding a few creative strategies to your property management toolbox, however, will assist with increasing resident retention and get you a step ahead of volatile market changes. Check out these tips to inspire your efforts.
1. Keep a pulse on the market
A resident is closing in on their lease expiration date, and they’re unsure of the next best step. Should they renew their lease, or should they make a move? Before making a final decision, they decide to research available units in the area and their rates. Make it your business to know what they’ll find.
If you can understand changes in the market before your residents start looking, you’ll stay better positioned to retain them. For example, Daniel Amaral, Senior Director of Pricing and Revenue Management for Irvine Company Apartment Communities, recently reported to the National Apartment Association that he routinely checks out recent community performance to find any signs of slippage in the market or softening of retention. He then uses this data to create a new strategy for better retaining residents when their lease expiration dates draw closer.
2. Work on renewals from day one
Some apartment communities make the mistake of working on renewals very close to when the expiration date approaches. Instead, implement a strategy to increase the chances of renewal the first day a resident moves into a unit.
If this strategy feels a little premature, consider an apartment community that has a “concierge state-of-mind,” where one onsite team member is in charge of renewals. Their job is to create amazing relationships with each resident, make continuous resident touch points throughout each lease's longevity and are paid based on the community's lease renewal rate.
3. Negotiate on lease term rather than rate
If the market has truly reached its peak, a strategy focused on lease-term, rather than lease-rate, is one to consider. Offering long-term (1+ years) lease agreements at a lower competitive rate can not only entice your good-standing residents to stay longer, but feel secure their finances will stay consistent for a longer period of time.
RentPrep states, "Think of all the time you spend renting out a property. Everything from e-mailing back and forth with potential renters to showing the property and doing full screenings on your top applicants. I know the time that I’ll save more than makes up for the 3% rent increase I would have charged."
4. Foster long-term residents through building a community
Apartment communities vary in amenities, but many of these amenities are not maximized to build a sense of community. This can weigh heavily in a person’s decision to renew a lease or live elsewhere. Do they like the people that live in the community? If they know and trust their neighbors, the decision to sign a lease renewal is much easier.
For example, one apartment community invested in an outdoor movie screen for exclusive use at the pool. During hot summer months, management showed movies by the pool and hosted a “dive-in movie night" to get resident together and show their appreciation.
5. Add more perks to renewal offers
A powerful strategy for encouraging early renewals is to offer extra services to those residents who renew early. First, get to know your residents to determine what types of services would be most enticing. For example, because cleaning services can run at an expensive rate, offer a free monthly cleaning service for the first three months of a lease renewal, if the resident renews early.
6. When all else fails, don’t make the first move
You made every effort to retain a resident, but they still have not signed a new lease. With their lease end-date in sight, what should you do?
Some apartment managers are making the intentional decision to do nothing. Although this strategy is counter-intuitive, Kathy Whitman, Executive Vice President of the Dallas-based property management firm, LumaCorp, explains that the company’s resident turnover has decreased since implementing the "do-nothing" policy.
A FEW LAST WORDS ...
Renewing leases is about building a community and learning about the needs of your residents. While social aspects will be important to one person, amenities and feeling appreciated for continued loyalty will be of greater importance to another.
The key is to take the time to get to know your residents, understand their needs and put a systematized strategy in place to increase lease renewals. You can iterate as you go but look for win-win situations where your residents will continue to appreciate and enjoy living in the community.