Enticing Tenants to Re-Lease Amid Challenging Times
Times are tougher and tougher for tenants
During economic downturns, and what could be (if we’re already not in one) a long recession, people’s priorities shift and they make different choices because they have to. Your tenants are no different.
What may have been a steady income for your tenants when they signed their first lease with you may have changed. There are more pressures from inflation, rising interest rates, loss of employment risk for your tenants. How people are managing their money now includes a sense of caution and even desperation, which can make people make choices that in the short-term are painful, and negatively impact property owners.
Let’s talk rent increases. Have you increased rent on your tenants in the last year? If so, by how much? Are you keeping with the average rent increases for your market or are you on the aggressive side? Just like the Fed increasing interest rates too rapidly which, according to some experts, invites in a recession, your increased rent payments have an impact on your tenants because they’re getting hit on all sides with increases. We all are.
Some investors increase rents due to the opportunities associated with inflation. They hold the attitude, “Well, the value of my property has skyrocketed and everyone else is paying more for everything, I want to take advantage of that.” Other investors are more thoughtful about raising their rents. Yes, your investment property is designed to provide passive income you can grow over time, and if your cash flow is at a certain level or you believe you’re below market rates for rent, you should increase your rent. But consider how it will impact a high-quality tenant when their overall expenses are increasing across the board.
Here are a few things to keep in mind to make sure you not only have a good relationship with your tenant, but that they know that you care about their loyalty to you and will renew their leases and continue take good care of your property:
Responsiveness—Whether you are self-managing or using a property management company, be responsive. If a tenant is making a reasonable request, what turnaround time frame can they expect for you to respond and manage the request? Is it within 24-hours or less? When you acknowledge their requests/questions and stay in open communication, you build trust. Trust is at the heart of tenant loyalty.
Maintenance—When your property needs maintenance, whether it’s from a tenant request or routine maintenance like replacing HVAC filters, work closely with your tenant to plan the maintenance work. Deferring maintenance or not responding to requests will send a clear message to your tenants that you don’t care about the property, and by proxy, them. Provide tenants appropriate information regarding the maintenance service, who will be doing the service, access to the property and what to expect after the service is completed. They are your eyes and ears post-service. Enroll them in making sure the vendor or contractor who is completing the service does the job satisfactorily.
Show compassion—If you have a longstanding, good tenant, work with them if they are going through a hardship. Even tenants that have been consistently in good standing can experience a hardship. Offer a different type of payment schedule for example. If a tenant has lost a job, learn where they are looking and use your network to possibly help them find a new opportunity. You can even vouch for their payment regularity if they need a short-term bank loan. There are many ways you can help, but don’t be a doormat either. Tenants can also take advantage of a good-natured landlord.
Educate—Do your tenants understand the lease clearly? Many just sign based on the monthly rent, security deposit and utility responsibility. Make sure all sections of the lease are reviewed by the tenant and encourage them to ask questions. By doing this, you are setting expectations early and your tenant will have a a clear understanding of the rules that apply, for example if you choose to sell the property, what happens to them? By educating them from the start, it prevents tenants from feeling blindsided. If a tenant feels misinformed, or duped, they could act out and damage the property, so making sure the lease terms are understood will be beneficial for both parties.
Lipstick—Fresh paint, an appliance swap or a landscape improvement can make your tenant happier, especially if you offer first. Whether it’s your idea or theirs, offer more latitude in freshening their living space. Encourage your tenants to spruce up the yard or make minor cosmetic interior design alterations that make them feel engaged with their living space and even have a sense of ownership.
Respect—Being communicative with tenants is part of the broader picture: respect. Whether it’s keeping them up-to-date with their requests or answering them in a timely manner, it shows that you respect them and your business relationship. Even though you own the property and you reserve the right to enter whenever, respect their space. Giving tenants at least 24-hour notice is more than fair on both sides. Put yourself in their shoes when making any decisions about your property as it will impact them in one way or another.
Thoughtfulness—Do you know when your tenant’s birthday is? You certainly know when their lease is up. Have you ever thought of sending them a card or flowers or something thoughtful that lets them know you care about them as people not just as a monthly transaction? Look at ways to add value to the relationship with thoughtfulness. We all could use a lot more kindness in the world today.
The more you look at your tenants as people with lives that are impacted by many things—not just inflation, but health concerns, parenting, politics, income, work pressures—the more you’ll be able to eliminate potential lease turnovers or damage to your property from a tenant. Ride the turbulence together and you’ll both come out better for it in the end.