I learned early on in the business world that success is all about building relationships. I knew I had to build a strong relationship with my tenants, and those long-term lasting relationships would translate into long-term loyal clients for my real estate investing.
On the other hand, the real estate investors who simply look at an investment property as a vehicle where the tenant will pay their mortgage and generate them some positive cash flow tend to have tenants who move out annually. When tenants feel or sense they are nothing more than a revenue stream for their landlord, they tend to move on quickly. Here is my system:
No. 1 Set boundaries and expectations for tenants
Early on while interviewing, we would inform the prospective tenants that our aim was to retain a long-term rental. We did this by being totally transparent; here is what we offer and here is what we expect. Within this information was a notation of an annual rental adjustment, letting them know up front that expenses rise each year and rents would also adjust accordingly. The objective here was to set the expectation for this rental increase so they were expecting it instead of defying it.
No. 2 A reduced rental increase
For one year of on-time payments we would offer tenants a 25% discount off their renewal amount. If rents were to go up by say $20, they would only be increased to $15. Small rewards go a long way. People like to earn their rewards and it shows that you do care about them. At lease renewal we would identify a renewal rate and the discounted renewal rate. Tenants loved striving for this discount. If they unfortunately were late a month or two, they were still offered an incentive for renewing if we wanted to keep them.
No. 3 Welcome to the neighborhood
A few days after a tenant moved in we would send a “welcome to the neighborhood” letter. We would include things like who are your neighbors, nearby shopping and attractions. We also would provide things like refrigerator magnets with local restaurants names and numbers. Again, just a small touch but shows they are important to us.
No. 4 A personal phone call
One month into tenancy we would call and check to see how their move went and if there was anything they needed. Consistently we were met with gratitude and rarely did anyone feel they needed anything, they simply appreciated the reach out. It was a perfect time, however, to correct the path of any pending challenges.
No. 5 A Christmas gift for tenants
In recent years these are transitioning into holiday gifts around the end of the year. A simple fruit basket or small gift card to the local grocery create great appreciation.
No. 6 Birthday cards or gifts
Acquired at time of lease were the birth dates of all tenants. All the adults would receive a birthday card and the small children would receive a gift card for a free ice cream cone at the local McDonald’s. This one dollar gift is something the kids remembered forever and looked forward to each year. It also created a bond that would allow us to ask the kids to make sure they keep their bikes put away and simple things like keeping proper order to the place.
No. 7 Referral money opportunities for tenants
When a vacancy did appear we would send out letters informing tenants there was going to be a vacancy coming up. It would be a chance for you to pick your neighbor. It would say something like, “We like to have great tenants like you, and as you are a great tenant, your family and friends are likely a match to live in our friendly community as well. If your referral meets our renting criteria and we rent to them, you will receive $100.” This created a source of great prospective tenants and served to let the current tenants know we appreciated them. It also gave us a list of future tenants, as we often received more prospects than we had available rental units. People are now lining up to rent from us. This has helped to keep our vacancy rates very low.
No. 8 Keep the property maintained
This sounds rather simple but is worthy of mentioning. Great tenants want to live in neat, clean and well maintained properties. When you show that you love the property they will love the property as well. Keeping the properties maintained keeps your values high, allows you to raise rents and keeps happy tenants who renew at lease time.
No. 9 Renew lease and receive handyman for the day
Do it for a day, or half day, depending on rent value and/or property condition. Renewal time does not have to be scary and leave you wondering if they will re-sign or not. Their expectation of a rental increase has been identified up front. If they paid their rent on time without any late payments they understand they will receive a reduced rental rate increase and now as a bonus if they renew they will have the opportunity to have some improvements done around the home. With your criteria established, these improvements will only add value and are going to be less expensive than tenant turnover. We did things like add shelves, paint a room, perhaps add a built-in microwave. You set the criteria here and zero in on items that should add value and rentability to the property. This has always been a great win for me.
It is the little things that are remembered
These little differences in how we manage our properties have people wanting to stay and rent with us. As families outgrew their homes they would ask us if we had any other properties that were bigger, as they wanted to maintain our relationships. Their friends were always inquiring about renting from us. We have great reputations as property owners who care about their tenants. As a result, the only time people moved is if they left the area or if they bought a house.
You all heard of, or personally live the “Pride of ownership.” When you can create this same type of pride for your tenants, you have created a great partnership that will have them renewing their lease. A person’s home is his castle. It is his independence. Even though they do not actually own the home, you want them calling it their home. When they feel great about where they live and are happy with it, they will call it their home and they will treat it like their home.
When you show you genuinely are interested in a happy partnership where you provide a nice home and maintain the home in turn for happy tenants who pay on time, you have a successful business that is scalable and your investment portfolio can flourish.