Happy tenants increase the chances they'll renew their leases while keeping investment properties occupied and cash flowing. Here's how to do it
Beyond the bricks and mortar, maintaining good rapport with your renters is a key factor that can significantly impact the long-term success of your investment.
It’s more than just keeping lines of communication open; it’s about creating a positive experience that makes your tenants feel valued. At the heart of a successful real estate investment is not just the property itself, but the relationships you build with your tenants. Taking steps to increase tenant satisfaction pays off, as happy renters are more likely to renew their lease and pay rent on time.
Here are five creative strategies to retain good renters and ensure your property remains a place they’re happy to call home:
1. Set clear expectations in your lease agreement
Creating a strong tenant-landlord relationship starts with a clear and fair lease agreement.
This document not only ensures compliance with local real estate laws around security deposits, rent increases, insurance requirements and more — but also serves as a way for landlords to communicate their expectations to renters.
- Lease agreements should include a landlord’s policies and preferences around all aspects of their rental property, including basic details like rent amount and due dates as well as house rules around subletting, pets, smoking and repainting.
- Landlords should also outline who is responsible for utilities and landscaping and note any areas of the property that are not accessible to tenants, such as a basement or shed. Setting clear guidelines at the start of the tenancy helps to avoid surprises and prevent resentment among tenants.
- Additionally, landlords should update a lease agreement at the time of renewal or whenever a new tenant moves in to ensure it reflects your most up-to-date standards for tenants. And of course, these documents must comply with local real estate laws, which vary from state to state. For example, landlords in New Jersey must return security deposits within 30 days of the lease termination but in Alabama, they have 60 days.
2. Promptly address tenant concerns
A big part of keeping good tenants is being responsive to their requests.
Tenants need to know they can rely on their landlords to listen and take action when an issue arises.
- At the start of the tenancy, establish preferred communication channels for emergencies, non-urgent requests and maintenance issues.
- Maintain an open dialogue with tenants and encourage them to report issues early — before they become a major, more expensive problem.
- Quickly responding and following through on their requests demonstrates your respect for tenants and ensures their home is safe and comfortable.
- Timely repairs also maintain your property value, so it’s best to build relationships with trusted contractors before a maintenance issue comes up so you can quickly get it resolved.
- Lastly, when you need to access the property, don’t show up unannounced. Respect your tenants’ privacy by giving them notice about 24 hours before your arrival.
3. Provide flexible payment options
Your tenants, like everyone, are dealing with all sorts of stressors that can cause financial strain.
Everyday struggles, such as losing a paycheck in the mail, dealing with a health issue or not receiving enough tips at work that weekend can determine whether tenants make rent that month.
In fact, a recent study revealed that in the U.S., more than 8 million adults — 13 percent of the country’s renters — live in a household that’s behind on rent payments. And as rent prices increase, nearly 22 million households now spend more than the recommended 30 percent of their pre-tax income on rent.
- With that in mind, landlords can help by being empathetic to their tenants, especially during times of financial distress.
- Offering flexible rent payment options shows you’re willing to partner with tenants and increases your chances of getting paid.
Here are a few ideas to consider:
- Accept partial rent payments: If your tenant can’t make rent, see if they can make a partial payment so that you at least get some revenue coming in that month. Or perhaps you adjust that month’s rent deadline so tenants pay 50 percent on the first of the month and the remaining 50 percent on the 15th. If you don’t want to set a bad precedent, be clear that this exception just applies to the current month.
- Consider adjusting the rent due date: Ask your tenant if changing the rent deadline would help them pay rent on time. Perhaps the tenant doesn’t get paid until the 15th of the month, so setting a deadline of the 20th could help ensure timely payments.
- Offer multiple payment methods: Tenants are more likely to pay rent on time if their preferred payment method is accepted. Use a rent-collection platform that gives them the ability to choose their payment method, whether it’s bank transfer, credit or debit card or check. This enables renters to have more control over their monthly cash flow and more options during difficult times — for example, at the height of the pandemic, the number of people who paid rent with a credit card increased by 70 percent year over year.
4. Bring value to tenants through rent reporting
Despite often being a tenant’s largest monthly expense, rent payments historically did not have an impact on credit scores.
This has, in part, led to more than 26 million Americans being “credit invisible” — meaning they have no credit history and are therefore unable to access lending, housing, or other financial opportunities.
Rent reporting is a relatively new service that enables tenants to build their credit and improve their credit score by reporting on-time rent payments to the credit bureaus. Providing this benefit to tenants not only encourages timely payments but strengthens a landlord’s relationship with their renters.
“I like that there is a value-add that I can give back to the tenant,” Ohio-based real estate investor Andrew Winter said of offering rent reporting.
- Landlords can explore available rent-reporting services and choose the one that makes sense for their business. These services typically charge a monthly fee that is paid by the landlord or the renter, depending on the service.
5. Offer incentives for lease renewals
If you have great tenants and want to hold onto them, reach out at least three months before the lease renewal to get an understanding of their wants and needs.
While tenants may ask for lower rent — or at least no increase — there are other creative ways to incentivize them to renew. You could set a longer lease period to lock in their current rent price or even a discounted rate.
- Think about what else you can offer in return for resigning. Can you upgrade the appliances? Allow tenants to lease the unit to approved subletters? Give them free parking or storage? Talk through a few options with your tenant to see what they’re most interested in so you can negotiate a mutually beneficial deal.
- And if you do have to raise the rent on good tenants, soften the blow by providing ample notice and explaining the reason for the increase (e.g., market conditions, rising property insurance premiums, etc.).
- Whenever possible, raise the rent by a more palatable 2-3 percent, instead of a sudden 10 percent increase.
Maximizing your real estate investment by keeping tenants happy
Don’t forget that your tenants are people – with all the stressors, highs and lows that come with being human. By setting clear expectations in the lease, quickly addressing tenant concerns, offering flexible payment options and rent reporting services and incentivizing lease renewals, landlords will ensure their renters feel valued. These strategies help landlords create a positive experience for their tenants, which in turn keeps them happy and minimizes turnover.
Source: inman.com
