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Topic: Secrets of Resident Retention
Topic Author
What is your acceptable turnover? I've read that the national average approaches a horrid 60%/annum. Hard to swallow that number. And it appears that a poll by this forum came up with a turn of 81.9%. That means an average resident stays only a little over one year. To me that number screams of a failed retention program.
What is your actual turnover?
What are 3 key things you do to keep your turnover lower?
(and yes I have searched this forum and have found a lot of salient advice, but I prefer to have the answer from each company associated with their actual turnover)
As always thank you for your time.
What is your actual turnover?
What are 3 key things you do to keep your turnover lower?
(and yes I have searched this forum and have found a lot of salient advice, but I prefer to have the answer from each company associated with their actual turnover)
As always thank you for your time.
Posted 14 years 4 days ago
This number really depends on a number of factors including the build form and target demographic... i.e. a residential high-rise located near a university community may experience higher turnover due to the transient nature of students but backfill easily with properly managed lease end dates (i.e. controlled supply). A executive class rental in a downtown community would be entirely different but the fundamentals remain the same... HIgher turn is not a problem if it fits with the nature of the target demographic of the building and is both anticipated and managed appropritely... (my portfolio is less than 0.8% vacancy in a 4% market... www.westcorp.net)
C.M. Gourley
Marketing Manager
Westcorp Properties Inc.
This email address is being protected from spambots. You need JavaScript enabled to view it.
C.M. Gourley
Marketing Manager
Westcorp Properties Inc.
This email address is being protected from spambots. You need JavaScript enabled to view it.
Posted 14 years 3 days ago
I find it kind of funny when folks try to guess at what the national turnover rate it. No reason to guess - although I appreciate the interest in this critical performance metric. No worries...NAA has done all of the heavy lifting for all of us...the annual NAA Income and Expense Survey. The national turnover rate has consistently remained at about 60% for the last six year, with fluctuations of 2-3 points.
I agree that it is amazing that this figure does not get more attention. Would the owner of a fee management company accept 60% of his or her clients departing each year? Would any service provider accept that kind of client turnover? I know we wouldn't. Turnover can kill a business - because then your efforts are on revenue recovery instead of revenue growth. The same holds true for properties! And this has never been more critical than at a time of increased cap rates, decreased asset values and maturing debt!!!
I tip my hat to all of the property management companies out there that understand that the majority of turnover is controllable (the SatisFacts Index shows over 60% is!), and who are committed to their customers, the residents - and translate this into delivering the best customer service and experience they can.
I include our clients in this category - and the proof is in the numbers...our clients average a 10 point lower turnover rate than reported each year by NAA. At $4,500 a move-out (vacancy loss, concessions, marketing and advertising costs, staff incentives, staff time and hard turnover costs), this 10 point lower turnover rate for a 5,000 unit portfolio translates into millions of dollars in additional NOI and tens of millions of dollars in asset value!
I agree that it is amazing that this figure does not get more attention. Would the owner of a fee management company accept 60% of his or her clients departing each year? Would any service provider accept that kind of client turnover? I know we wouldn't. Turnover can kill a business - because then your efforts are on revenue recovery instead of revenue growth. The same holds true for properties! And this has never been more critical than at a time of increased cap rates, decreased asset values and maturing debt!!!
I tip my hat to all of the property management companies out there that understand that the majority of turnover is controllable (the SatisFacts Index shows over 60% is!), and who are committed to their customers, the residents - and translate this into delivering the best customer service and experience they can.
I include our clients in this category - and the proof is in the numbers...our clients average a 10 point lower turnover rate than reported each year by NAA. At $4,500 a move-out (vacancy loss, concessions, marketing and advertising costs, staff incentives, staff time and hard turnover costs), this 10 point lower turnover rate for a 5,000 unit portfolio translates into millions of dollars in additional NOI and tens of millions of dollars in asset value!
Posted 14 years 2 days ago
Great post Doug. I too, am often very concerned about the relationship between tenant and manager and how to leverage that into loyalty. As such, I have been working on better understanding the key drivers of the relationship and searching for a reproducible solution that will work to make that necessary connection. I think that I have come up with something pretty unique and am working on rolling it out with one 24,000 unit reit as well as a second, similar-sized owner / operator (although I am a former partner with them, so that may have influenced the sale a bit). I am confident that I can dramatically raise their lease conversion ratio as well as increase tenant retention- without incurring additional expense. To me, this is a no brainer. The challenge that I am hearing very often is that 'our portfolio occupancy is 94%-96%, why do I need to worry about retention right now?' Of course we both know that this is very short sighted...but we also know that operators of any scale are very slow turning ships, and it is almost impossible to establish urgency with them, unless they just hit an iceberg. What are your experiences?
RRB
RRB
Posted 14 years 23 hours ago
Retention is not rocket science... treat the residents with respect and respond to their complaints in a timely manner.
What I would like to ask is how different turnover rates are at convnetional/market properties; as opposed to LIHTC properties, or student housing. As I see it student housing and LIHTC will naturally have a higher turnover rate as a result of students graduating or transferring schools; and LIHTC residents may no longer qualify when their income increases outside the income restrictions at recertification.
I forgot to add in communities that serve Military bases; based on the DoD's needs, service members are transferred regularly; adding to the turnover rate.
What I would like to ask is how different turnover rates are at convnetional/market properties; as opposed to LIHTC properties, or student housing. As I see it student housing and LIHTC will naturally have a higher turnover rate as a result of students graduating or transferring schools; and LIHTC residents may no longer qualify when their income increases outside the income restrictions at recertification.
I forgot to add in communities that serve Military bases; based on the DoD's needs, service members are transferred regularly; adding to the turnover rate.
Posted 14 years 21 hours ago
You know Johnny, I kind of agree with you and kind of disagree when you say that "Retention is not rocket science... treat the residents with respect and respond to their complaints in a timely manner."
I agree that the job of a leasing agent is incredibly simple (not saying that it is always easy), but it is certainly simple.
Where I disagree is that property management is generally a losing battle for the PMs. Think of it this way- How hard is it to go over and above the call of duty with residents that they feel a sense of brand loyalty to the company? It's almost impossible because respect and timely response are simply expected.
On the other hand, How simple is it to underperform in a residents eyes. Residents generally dont appreciate (in a meaningful way)the good things we do but never forget the bad...
Retention also has only a few typical drivers:
job location- outside of PMs control.
price- outside of PMs control.
resident experience- as discussed above, it is much more difficult to overperform than underperform.
What PM needs to really affect resident retention is a unique tool that makes an immediate and special connection with a walk-in during their tour, and then again when they make the same decision 11 months later. That connection comes down to creating a sense of shared values. Otherwise, our leasing agents are just throwing spaghetti at the wall, hoping that something sticks.
RRB
I agree that the job of a leasing agent is incredibly simple (not saying that it is always easy), but it is certainly simple.
Where I disagree is that property management is generally a losing battle for the PMs. Think of it this way- How hard is it to go over and above the call of duty with residents that they feel a sense of brand loyalty to the company? It's almost impossible because respect and timely response are simply expected.
On the other hand, How simple is it to underperform in a residents eyes. Residents generally dont appreciate (in a meaningful way)the good things we do but never forget the bad...
Retention also has only a few typical drivers:
job location- outside of PMs control.
price- outside of PMs control.
resident experience- as discussed above, it is much more difficult to overperform than underperform.
What PM needs to really affect resident retention is a unique tool that makes an immediate and special connection with a walk-in during their tour, and then again when they make the same decision 11 months later. That connection comes down to creating a sense of shared values. Otherwise, our leasing agents are just throwing spaghetti at the wall, hoping that something sticks.
RRB
Posted 14 years 16 hours ago
One of the things I learned early on is that, for most individuals/families, housing and housing related costs are the single biggest line item on their monthly budget. This is where the resident spends the greatest amount of time considering options. Once I realized that, everything else fell into place with regard to closing and retention rates.
That said, I looked further into the reasons a resident may need to move; and classified them into what the management team could control and what they couldn't.
Things that the management has the ability to control include:
-Timely response to concerns.
-Accuracy of that response (i.e. was the repair done right the first time?).
-relationships with staff and residents (even if you are a porter, you have a stake at resident retention).
-efforts made to keep common areas usable.
Things that are NOT within management's control include:
-Household composition (say they gain a family member and need a larger floorplan than you can support). In this case, I would look into sister properties and find out about reciprocating referrals. If no referrals within the company/area are available, look at your comps if they are willing to reciprocate.
-Income change (say a household member loses their income and they can no longer afford the rent).
- Employment change (say they have a change in employment location that makes relocation necessary). I would delve further into the situation and find out if I had another property where the resident needs to relocate to. If you have no properties in the area they need, I would look here (or other network groups you may be connected to) for referrals.
With regards to customer service, I am MUCH MORE critical of the service I give than what I receive. I know what it is like to receive poor service; and do not want to be accused of giving it. This has served me well, because; the decision to stay beyond the original commitment is often made early on; if the initial opinion is good, and you keep the standards of service levels high; the only reasons you will have for turnover are those you cannot control. When I was in retail, I was very successful (moreso than most of my peers) in generating brand loyalty. I have had customers follow me from location to location, even from company to company; many of these relationships were worth several thousands of dollars in weekly sales each. I even had a customer that would call the store first JUST to make sure I would be there when they were planning to come by, because they were not willing to talk with anyone else (even if they knew I trained or trusted them).
That said, I looked further into the reasons a resident may need to move; and classified them into what the management team could control and what they couldn't.
Things that the management has the ability to control include:
-Timely response to concerns.
-Accuracy of that response (i.e. was the repair done right the first time?).
-relationships with staff and residents (even if you are a porter, you have a stake at resident retention).
-efforts made to keep common areas usable.
Things that are NOT within management's control include:
-Household composition (say they gain a family member and need a larger floorplan than you can support). In this case, I would look into sister properties and find out about reciprocating referrals. If no referrals within the company/area are available, look at your comps if they are willing to reciprocate.
-Income change (say a household member loses their income and they can no longer afford the rent).
- Employment change (say they have a change in employment location that makes relocation necessary). I would delve further into the situation and find out if I had another property where the resident needs to relocate to. If you have no properties in the area they need, I would look here (or other network groups you may be connected to) for referrals.
With regards to customer service, I am MUCH MORE critical of the service I give than what I receive. I know what it is like to receive poor service; and do not want to be accused of giving it. This has served me well, because; the decision to stay beyond the original commitment is often made early on; if the initial opinion is good, and you keep the standards of service levels high; the only reasons you will have for turnover are those you cannot control. When I was in retail, I was very successful (moreso than most of my peers) in generating brand loyalty. I have had customers follow me from location to location, even from company to company; many of these relationships were worth several thousands of dollars in weekly sales each. I even had a customer that would call the store first JUST to make sure I would be there when they were planning to come by, because they were not willing to talk with anyone else (even if they knew I trained or trusted them).
Posted 14 years 15 hours ago
From my White Paper, The Top Ten Truisms of Apartment Marketing:
The renewal sale is yours to lose for the term of the lease.
Affirmative renewal decisions are made within 30 days of Move-In. The attitude and responsiveness of the onsite staff will occasionally turn a non-renewer around. But a poor attitude or an unresolved service issue will definitely put a happy customer on the market.
All too often renewal customers are taken for granted. Community managers fall in to a mindset that the renewal rate is XX%, so we have to get this number of new leases. They view the percentage as a set rate, which they have no control over. The truth is, they have a huge amount of influence over the renewal rate…not all of it, but a larger number than they think.
Consider this rule of thumb:
1/3 of your current residents will stay with you regardless
1/3 of your current residents will move out regardless
1/3 are genuinely undecided.
They will stay unless you treat them poorly, or unless they receive a stunningly better offer from your competitor.
They will move if you ignore them or, worse, treat them to a bad experience.
The last group are the ones you need to focus on. Although you typically don’t know exactly who they are. The wise community manager will reach out to all upcoming renewals and “kill them with kindness.” Oh, and always make the effort to save those customers who give a Notice to Vacate. It just takes a call, and you’ll be pleasantly surprised that a few will agree to stay. Worst case: You quickly get a good understanding of why people move, and what you can do to reduce this going forward.
The renewal sale is yours to lose for the term of the lease.
Affirmative renewal decisions are made within 30 days of Move-In. The attitude and responsiveness of the onsite staff will occasionally turn a non-renewer around. But a poor attitude or an unresolved service issue will definitely put a happy customer on the market.
All too often renewal customers are taken for granted. Community managers fall in to a mindset that the renewal rate is XX%, so we have to get this number of new leases. They view the percentage as a set rate, which they have no control over. The truth is, they have a huge amount of influence over the renewal rate…not all of it, but a larger number than they think.
Consider this rule of thumb:
1/3 of your current residents will stay with you regardless
1/3 of your current residents will move out regardless
1/3 are genuinely undecided.
They will stay unless you treat them poorly, or unless they receive a stunningly better offer from your competitor.
They will move if you ignore them or, worse, treat them to a bad experience.
The last group are the ones you need to focus on. Although you typically don’t know exactly who they are. The wise community manager will reach out to all upcoming renewals and “kill them with kindness.” Oh, and always make the effort to save those customers who give a Notice to Vacate. It just takes a call, and you’ll be pleasantly surprised that a few will agree to stay. Worst case: You quickly get a good understanding of why people move, and what you can do to reduce this going forward.
Posted 13 years 11 months ago