There seems to be an entry surge into the multifamily property management industry and investment space. I’ve had several conversations through social media platforms about the desire to enter into the market. In 2020, some property owners and operators experienced great financial rewards with the historically high resident retention rates.
According to various sources, most communities are not experiencing high move-outs and maintaining healthy numbers. Resident retention rates held or improved in most of the most metropolitan areas.
You must admit that we are in an unprecedented time in history. Now one could have predicted that a major pandemic would happen. It is crazy to think that we are approaching the one year answer to our first lockdown.
Every operator may have had different experiences around resident retention. The mandatory lockdown and economic changes have impacted the retention rate for high-density urban areas like New York, San Francisco, and San Jose. Also, Class A and B buildings are experiencing rates dropping lower than use.
Resident retention is vital in current times. At the core, resident retention reflects the property management team’s overall effort to impact resident satisfaction. When a resident is happy, they will want to remain in the community. A property owner needs to have a retention plan that focuses on lessening the resident turnovers. The longer you keep your resident, the more money your property will save long-term.
Resident retention is one piece of the puzzle. It is one of the main components of your overall property health.
#1 Reason Why Resident Retention Is Important: Stabilize Occupancy Rates
The national average for apartment occupancy rate is 96 percent. Maintaining high occupancy rates is always a priority in the multifamily industry. Your rate tends to rely on a combination of retaining residents and new prospects. It means overextended leasing and office staff to keep potential leads constant for communities with low retention rates.
There are ways to improve retention. Your tenant relationships should be maintained all year round, not only during renewal season. You can nurture relationships during the offseason. As stated in Zillows article called Multifamily Apartment Leasing Tips for the Off-Season, “Happy renters are more likely to renew their leases and make referrals. Take advantage of the apartment leasing off-season by shoring up your resident-appreciation program.”
#2 Reason Why Resident Retention Is Important: Marketing Costs
It is cheaper to keep a resident satisfied with your community than acquiring new. The cost to attain a new resident can range from several hundred to thousands. Your tenant renewing eliminates the money spent to achieve new tenants and the risk of a vacancy. The costs can vary from advertising, staffing shortages to managing the paperwork for the move-in/out process.
Every resident will have to move at some point. It is ideal to part on the best terms. As stated in Zillows article Resident Retention: 7 Tips to Keep Renters Happy All Year Long, “And when residents do have to leave for reasons beyond your control, they’ll have good things to say and wonderful stories to share.” Positive resident relationships can provide lasting results along the road.
#3 Reason Why Resident Retention Is Important: Improves Return On Investment
Recently, it seems familiar for properties to offer more concessions to impact the occupancy. Concessions like free rent and waived deposits can help attract new tenants and impact the occupancy. The downfall is the effect on the margins and ROI. Sources stated properties offered double the concession during summer 2020 compared to the previous year.
Concessions will always negatively impacts net operating income (NOI). Every industry discusses the difference between investing money to keep a happy customer or acquire a new one. Hands down! It is best to maintain current residents in their homes.
Conclusion
Resident retention importance will differ for every operator, yet it is still vital. MarketApartments article called A Resident Retention Plan That Keeps Multifamily Residents Happy is an excellent resource for creating a resident retention plan. The report states, ”One of the biggest mistakes that frequently happens with resident retention is a lack of planning. Events and ideas that are sprung on your residents spontaneously will not bring the results that they could. Establishing a detailed plan that correlates with each season will help any property management team feel more organized. The more organized that you feel, the better that you will be able to actively participate in resident retention. If it is something that always takes the last priority, you are going to be disappointed with the outcome. The goal is to have a specific enough plan so that you can then delegate responsibilities and make all of the work easier.”
Also, you can view tips around how to use resident events and engagement on our blog. The LuxeGiving Mastermind Group Program supports property managers of every size with creating a retention plan perfect for their community needs.
How has your resident retention program been affected by the pandemic? Comment below.