Why spend five times more money finding new tenants when you can retain the old ones who are 70% more likely to stay? Check out our expert advice on tenant retention leading to a high rental occupancy rate.
To be a field expert you need to deal with current and prospective tenants, maintain good relationships, and make efforts to retain them for a long time. Once you earn tenants’ loyalty, you’ll see how smoothly you’re winning over the competitors. Stabilized occupancy rate, turnover rate, and vacancy rate are matters of a strategic plan. An optimum rental occupancy rate can turn out to be a property manager’s biggest strength, and that’s exactly where we want you to aim at.
Before moving on, we want you to make a clear image of occupied and vacant properties lying in your portfolio.
How to Calculate Rental Occupancy Rate?
Calculating your rental occupancy rate is simple, it's the number of days your property remains occupied in a given year (365 days). In other words, it is opposite of your vacancy rate.
Moving on...
Do you know that the last few years have been one of the most “optimistic” ones for property managers? Because the average rental vacancy rates went down from 7.5 in 2017 to 5.7 in 2020.
But our main concern is, where do YOU stand as a property management company? Is your rental occupancy rate high or are you struggling with your vacancy rates?
Let’s dig into some expert advice to take you through these hard times....
Understanding the Rental Occupancy Rate
Property managers often opt for 100% occupancy rates but what’s the point of high occupancy when your profit isn’t maximized? That’s why an optimum rental occupancy rate should be your ultimate goal where economic and physical occupancies are equally taken care of.
Rental occupancy rate outlines a clear image of where your properties stand. To make your properties desirable to prospective tenants, you need to make continuous improvements or changes that might require work from the scratch.
Excellent amenities, friendly neighborhood, pleasant location, favorable policies, or even your professionalism can attract high-quality tenants and keep current tenants ones happy. With satisfied tenants and high occupancy rates, you also get the advantage of charging a premium on your properties.
5 Tips to Improve Your Rental Occupancy Rate
Tenant retention is one of the most important Key Performance Indicators (KPIs) you need to ace in the real estate business. Why? Because it is five times expensive to find a new tenant, instead of retaining one. Yet, there are only 18% of businesses focusing on retention.
The real estate industry is already operating in a highly competitive environment, and a concrete tenant retention strategy in place can help you strengthen your position in the market.
To help you boost your rental occupancy rate, we have shortlisted a few tips and tricks which will help you in tenant retention for a long-time.
Tip # 1: Strategically decide your rental rates
An insightful comparison between your and others’ properties can help you in setting your rent accordingly.
Look around and research what is happening in your neighborhood. Study properties near your surroundings and analyze their offerings along with their rent strategy.
For instance, the average apartment rent in the US is $1,468 in 2020. If your apartment’s vacancy rate is low, yet there’s a noticeable difference in your rental rates, you need to see where you’re missing out.
With the rapid technological advancement in the real estate industry, there are automation tools that can help you in deciding the rental rates for your properties.
Zillow has a rent estimate calculator called Zillow Rent Zestimate. Their rental comparison tool gathers data from a database of 110M units, filters them as per your area, amenities, and unit size, and tells you the exact estimated rent you should charge from your prospective or current tenants.
Tip # 2: Avoid renting to frequent movers
Setting your rental rates is followed by finding quality tenants. You simply cannot work on stabilizing your rental occupancy rate with unreliable tenants, can you? It's a two-way thing!
According to the American Moving & Storage Association (AMSA), 15.3 million people move houses annually.
Out of the average 11 of household moves made by each American:
- 6% of the population moves once
- 4% of the population moves multiple times a year.
To attain a high and stable rental occupancy rate, you need to stay away from these frequent movers.
The best way to filter them is through an AI-based pre-screening software right at the beginning. It can narrow down the list of prospective tenants by asking them questions like why they are moving or how long did they stay in the previous unit. The unfit or doubtful ones are automatically disqualified, leaving you with the high-quality rental leads only.
But don’t just stop there. Screening process is crucial for future tenant retention. You need to evaluate each qualified lead further with screening software that conducts background checks, credit checks, criminal and employment record checks.
Tip # 3: Retain tenants for a high rental occupancy rate
Screening software can provide you with the best tenants, but you, yourself have to sustain healthy relationships for a strong tenant retention strategy.
Send out personalized holiday messages or cards to tenants. Make your tenants feel valued by collecting their feedback regularly. These surveys will help you in identifying your tenants’ problems and deliver the message that you care about them. There are online survey sites like SurveyMonkey and Google forms, that help you in collecting the tenant’s feedback.
Once you start investing time in knowing each tenant, you’ll notice an improvement in your overall occupancy rate. The probability of retaining customers is 70% more than finding new ones. And that’s where we want you to focus on.
A healthy manager-tenant relationship gives you an upper hand in negotiating on crucial matters, such as rent increments.
Pro Tip: There are many other reasons why tenants leave, increasing your rental vacancy rates. If they have already decided on moving out, better do that on a good note. Try conducting exit interviews and use the responses for improving your property management business.
Tip # 4: Provide incentives at the end of the leasing period
Tenants leave, that’s a universal fact. But retaining them for the longest period is the trickiest part of your job as a property manager.
If you think incentivizing a tenant at the end of the leasing period is a waste of money, you’re missing out on the facts. As per Software advice’s survey, 50% of the male and 41% of the female population (aged 26 to 35) tend to stay longer, when provided with a discount on rent.
As a property manager, your options are limited but using them efficiently can be your key to a stable occupancy rate. You can consider a small gift or an offer with a percent discount on the upcoming rent.
Other options may include a free maintenance service or an installation like that of an energy-saving device. Or what you think works best for your tenants. After all, you’re the one who knows them best.
Tip # 5: Utilize each rental showing
Do you know that an average renter hunting for a rental unit visits 19 properties before making a final decision? We know this process takes a lot of your time and travel costs. How about we tell you a simple trick you can use to utilize each visit in stabilizing your occupancy rate?
Make the most out of your rental showings by taking feedback from the visitors. Use a portable device, that will save you from high paper costs. Or you can also switch to LetHub, which automatically collects post-showing feedback from renters by sending them automated follow-up messages.
This feedback can help you figure out the loopholes in your customer’s journey and can enhance the overall user experience.
Make sure the barriers they had are resolved for the future prospective tenants. A hustle-free journey is always preferred, no matter what business you’re in.
As per Copenhagen Business School’s research, if you don’t consider an outsider’s perspective, your business is 67% likely to experience trouble in the future. So why not utilize these visitors’ feedbacks as a 3rd person’s advice for a better rental occupancy rate?
With all our expert advice, also keep this in mind that if a tenant is willing to leave even after incentives, let them. You can’t force them to stay, don’t give them reasons to give a bad review, especially when you’re struggling with a high rental vacancy rate.
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