Tenant Retention

Assessing the Impact of Low Tenant Retention

Most property owners know that it is financially detrimental when a tenant moves out. After all, there will be at least one month of rent that is lost during the transition. However, it can be more when you take a look at the bigger picture. For example, one Scottsdale rental property owner examined the following line items that appeared each time a rental went vacant and this is what was found:

  • Administrative fees - From processing the paperwork, managing inspections to be sure that repairs were not needed, booking repairs and cleaning, screening new applicants, to then drafting a lease and meeting to sign the new tenants, many hours (i.e., money) went into the administration of this vacancy.

  • Advertising fees - Though some listings are free, you still have to use some paid advertising that includes signage and printed ads.

  • Screening - between the hours spent driving to and from a vacancy to show a potential renter the property, to the application review process, to running credit and arrest reports, many hours are spent during the screening process.

  • Repairs and cleaning - Though a landlord might do some maintenance, most hire others to complete these jobs and the costs can be staggering. In some cases the damages are so severe that it leads to a month or more of vacancy.

Clearly, it behooves any rental property owner to retain tenants, and this can be done with excellent customer service. While many landlords do not see their tenants as customers this is what they are, and this is why savvy landlords work with property management firms to deliver premium services that keep costs at a minimum - including vacancy costs. In a perfect world, the tenant and landlord will have a good relationship with excellent communication and high levels of customer (tenant) satisfaction.

Improving Customer Satisfaction through a Property Manager

While it might seem counterintuitive to spend money on a property management company in order to save money, it actually works. This is because an experienced property management company knows that the loss of a tenant is damaging, but unavoidable, and will have plans in place to keep costs under control. They will review your lease and usually instruct you to require a 60-day warning that a lease is not going to be renewed.

This gives you, and your property management company, a window of time to prepare for marketing the property. Your property management group may even keep a list of pre-approved tenants who requested to be on a waiting list in the event of a vacancy. Likewise, they will be ready to hit the market immediately following the vacancy so that they can find someone to move in within days of the previous tenant moving out.

In addition, your property management partner may be able to perform an inspection on the rental before the tenant vacates, alerting you to any need for further action.

Being proactive is one of the best ways to reduce the financial impact of a vacancy, but as the old saying goes: an ounce of prevention is worth a pound of cure. Working with a property management group is often the best way to prevent low tenant retention and create many long-term residents.

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