Real estate investing is a wonderful way to improve your financial future and earn financial freedom. Unfortunately, there is a lot of bias and uninformed thinking that goes into real estate education. For example, how investors choose to focus on “good” tenants verses “bad” tenants can have a significant impact on their business. Although all investors would choose to get rid of bad tenants, perhaps that should not be their focus.
Information shared on social media platforms and at real estate meetups tends to focus on getting bad tenants out. However, after having thousands of tenants over the years, I can tell you with 100 percent certainty you should be focused on keeping good tenants. Why? Do you know what the greatest cost to most landlords is year over year outside of their mortgage? You guessed it—tenant turnover.
I argue that the most expensive tenant turnover a landlord can endure is a tenant who pays like clockwork even if they leave the place clean after they leave. The loss of a paying tenant who creates no issues and is dependable is an asset to a landlord and as soon as you lose them, the odds are you might get a problem tenant.
Frankly, a problem tenant is easy to deal with as each state has laws and a process to remove non-paying or non-performing tenants. Instead of discussing and highlighting that process, why not talk about the ways to keep great tenants so you don’t suffer the loss of a true asset?
If I take care of my good tenant and let them know they are special, they are very likely to invite their friends to enjoy the complex the next time I have a vacancy. Rewarding good tenants doesn’t take much time or money. The following simple means of saying thank you have encouraged my best tenants to stay longer.
Waive a rent increase.
If a tenant has paid rent on time for 12 months straight, I thank them and tell them their rent increase that was going to be X amount is now waived and we will revisit next year.
Be proactive on repairs.
If a tenant has been great for multiple years, I reach out to them and ask if the place needs anything. By doing this, I have learned about leaky faucets, broken stove burners, and other small issues the tenants did not want to complain about. I have fixed or even replaced items to thank them.
Offer to upgrade.
If tenants have been great for multiple years, I ask them if they want new carpet or new paint in bedrooms.
Why do I these things?
I want great tenants to stay, and I do not want to have turnover. If I can have quality tenants stay longer and invite their friends and family to occupy other units, I can create a nice community where everyone knows and likes each other and have higher profit and fewer landlord headaches.
Over the years, I have found that my quality tenants stay longer because I let them know they are great tenants. The few that I have lost are because they left the area or they bought a home, which is awesome to hear about. I have delivered several welcome mats to tenants as they close on their new homes as a small gift to congratulate them.
Real estate investing is a people business, and your tenants are your customers. As property owners, we need to provide great service, and I suggest giving special attention to the customers who deserve reward. The more great tenants you have, the better and more profitable investor you will become.
Problem tenants get too much airtime as it is easy to tell scary stories. Instead, let’s celebrate and talk about great tenants as they are what make real estate investing fun and profitable. Do yourself a favor and learn about your good tenants. Then, go out of your way to thank and reward them, so they stay longer.
Michael Zuber worked in the Silicon Valley since graduating from Santa Clara University 20+ years ago. After wasting time and money in his 20s, he began investing buy and hold rental properties and never looked back. Michael grew his rental property portfolio from a single rental house to financial freedom in 15 years. Now that he no longer has a day job, he shares his story via his self-published book and YouTube Channel, both called One Rental at a Time.
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