The tenant retention rate is probably the single biggest factor when it comes to apartment profitability. Typically, a nonrenewal can result in costs between $2,500 and $5,000 to make an apartment ready for a new tenant. Meanwhile, the costs of obtaining new customers are anywhere from 5 to 25 times more expensive than maintaining old relationships. With all of this in mind, most apartment managers want to figure out ways to keep tenants in for the long haul.
One major missed opportunity in improving tenant retention is updates. Most managers choose not to do anything with the apartment while the tenant is inside it, thinking instead they’ll save it for the move-out. However, for the tenant, this acts as a deterrent to renew as they never get updates, and their apartment falls out of date around them. Landlords may find it’s better to make occasional upgrades to show tenants appreciation rather than pay the high expense of finding new renters every few years.
Why the Tenant Retention Rate Matters
The average rate of residency is two years. Apartment managers need to factor in upgrade costs based on that time period. The security deposit won’t cover the expense of upgrades, so these projects will come out of the landlord’s pocket. But, of course, smart upgrades are a worthwhile investment. At whatever point an existing tenant does not sign on for another term, the manager is going to need to post the vacancy, manage applications and background checks, show it to prospective tenants, and vet the candidates.
Meanwhile, that apartment will sit empty until all these steps are accomplished. The time and resource costs add up quickly, which is why tenant retention matters so much. By giving tenants incentives to continue in their apartments, landlords eliminate a large portion of these expenses.
Most managers choose not to do anything with the apartment while the tenant is inside it, thinking instead they’ll save it for the move-out. However, for the tenant, this acts as a deterrent to renew as they never get updates, and their apartment falls out of date around them.
Using Regular In-Unit Upgrades to Improve Tenant Retention
While community amenities involve more accessible renovations and can go a long way toward making an apartment complex more appealing, managers also need to look at the appeal of the units themselves. Value engineering-based renovation can improve the desirability of a space in a single afternoon so tenants stay longer and pay more at renewal.
Some renovations to consider include:
Nothing provides a faster unit facelift than a new coat of paint. Providing tenants with updated paint, and even giving them color options, can significantly improve goodwill and increase the chance of retention later on. Most experts would recommend repainting every five to seven years, but for something as highly trafficked as an apartment, it’s wise to err on the side of sooner rather than later.
With carpeting, landlords should offer cleaning at least once per year. It should also be replaced every five years or so to keep the space looking fresh and modern, as well as reduce the risk of “lived-in” odors that can linger. To enhance the space even more, landlords can consider adding hardwood flooring that’s easier to clean and provides another layer of sophistication.
Bathroom fixture upgrades
The bathroom is so much more than a personal hygiene space. With the right upgrades, it can become a sanctuary that improves tenant happiness. Garden style baths, updated vanities, and shiny new fixtures all enhance a space and are easy to add in a single afternoon.
One major way to increase tenant loyalty is to find a way to save them money when it comes to utilities. Energy-efficient appliances can help to cut their electrical costs and appease today’s environmentally savvy renters who consider energy conservation a priority.
Smart home upgrades
Including full-unit Wi-Fi can help to support the demand for gadgets like Internet-connected lighting, surround sound, and security cameras. This is especially important for appealing to Millennial renters as 86% report they’d be willing to pay more for an apartment that offers smart home connectivity.
The Expanding Benefits of Timely Upgrades
By focusing on individual unit upgrades, apartment managers can improve their tenant retention rates and reduce expenses. This can pay dividends as current tenants become more likely to recommend their apartment complex to their coworkers, friends, and family. By making individual apartments more appealing, landlords increase the appeal of their complex as a whole.