Co-authored by Tim McInerney
As the world begins to settle into this “new normal,” many property managers are wondering how they should approach lease renewals and how they can preserve revenue during this time. Over the past month and a half, residents have been staying indoors and working from home, and as a result the demand for new housing has softened in some markets. To help mitigate this challenge, it’s important to shift your attention to lease renewals and resident satisfaction. Here are 5 ways you can support your residents, while strengthening your retention strategy:
1.) Provide Flexible Lease Terms
As the unemployment rate increases and the economy remains unstable, some of your residents may be uncertain about their financial future. Depending on their personal circumstances, being locked into another 12-month lease may seem like a high risk to them at the moment. One way you can ease the burden on your residents is to offer flexible lease terms, such as 6-month or 4-month leases, or allowing them to temporarily renew month-to-month. That way instead of losing a potential renewal during the immediate crisis, you can let them renew as they normally would in a few months. For other residents, longer, 24-month leases set at a fixed rate may be more appealing. If you give a range of options to choose from, you can increase the chances your residents will renew and provide peace of mind for both parties.
In a recent interview we conducted with Krickett Alexander, CEO of Minnix Property Management, she talked about how she is focusing on renewals and resident retention:
“I definitely believe that now is not the time to lose people. You do not want to lose people. It is in our best interest to keep them…We’re going to navigate through that the best we can and represent our owner’s best interest at the same time that we are representing our tenants’ best interest. But the goal is to keep them there.”
2.) Consider Flat Renewals
While it may seem like a good idea to carry on business as usual with rent increases, it could end up costing you more in the long run. If residents move out because they can’t afford the higher price, then you will be back to square one when it comes to maintaining occupancy, and also incurring vacancy and turn costs. By holding off on rent increases (temporarily) and offering a flat renewal, you can show your residents you care and are doing everything you can to help them during this difficult time.
It’s understandable if you are hesitant to disrupt your lease expiration management schedule or open your business up to potential risks by offering different lease terms than you typically would. However, given the constantly changing situation, being creative with lease terms to keep residents from churning in the next few months can actually ensure stability in the short term and mitigate future risk.
In addition, locking in today’s rent rate for the next 12 months may actually benefit your business in the event rent rates end up going down due to a recession. In a recent interview, Donald from D2 Demand Solutions had some helpful insights on this topic from his own experience in the past, and noted: “Look, rents are going to come down in a recession. So get ahead of it. Offer flat renewals right now.”
3.) Bring Renewals to the Renter
Since residents are no longer able to come into the office to sign their lease renewal in-person, it’s a good time to start thinking about ways you can bring renewals to them. Mobile technology can allow your residents to safely, quickly, and efficiently sign their lease renewals online. Not only is this safer for both parties, but it takes the headache out of the renewal process. With AppFolio’s online leases you can also make changes or edits to existing leases in just a few clicks.
4.) Reach Out to Your Residents
Now more than ever communication and connectivity are key. As a property manager you have to find ways to stay connected and engaged to your residents even with social distancing. At the end of the day, everyone is going through a hard time. By seeing your residents as people first, and then customers, you can provide the support they need.
With fewer in-person tours, many of your leasing associates may also have more down time. Encourage them to use this extra time to reach out to current residents to see how they are doing. Ask your residents how they would prefer to communicate — whether via text, email, phone, or even FaceTime — and be sure to check-in often. For those with renewals coming up, touch base sooner rather than later to get a better sense of what they need and how you can make them feel more comfortable renewing.
For instance, Minnix Property Management increased their renewal rate by proactively reaching out to residents, “We’ve been tracking our renewal numbers for years. Typically for several years in a row, we’re about 55%. Then last year, we brought that up to about 59, 60%. What we found in that shift was that it was really about the follow up. All you’ve got to do is pick up the phone and call them. You don’t have to offer them anything. You just need to get them to sign it. Right? And so what you focus on expands. Then, taking that lesson [further] this first quarter of the year, we’re at 72% renewals.”
5.) Keep on Top of Industry Trends
As states begin to reopen and stay-at-home mandates are slowly lifted, it’s important to keep informed on what is happening in your local jurisdiction and how it could impact your residents. Be sure to check real estate industry sites such as NMHC, National Real Estate Investor, IREM, and Globe St. regularly for the latest news, information, and updates. In addition, visit our COVID-19 Resource Center for tools and articles to support your business, team, and customers.
As COVID-19 disrupts this year’s leasing season, it’s essential to focus on resident retention and renewals. Giving your residents options, like flexible lease terms, holding off on rent increases, and maintaining communications can increase the likelihood they will remain satisfied and happy living in your community. Show them you are here for them by providing the help and support they need now, and they will remember your kindness well into the future.