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Property Management Minutes

Thoughts and Observations on Marketing, Leasing, Maintenance and Property Management Operations

Celebrate Lease Renewals

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Benefits of Lease Renewal

An effective resident retention program offers many benefits. The most obvious benefit is lease renewals. Increased renewals result in a reduced number of move outs. Reducing move outs reduces turnover expenses.

This affects labor expenses for our team, contract and supply expenses. We don’t have vacancy loss or the marketing cost to find a new resident for the apartment home. We have saved expenses in a number of expense areas, and possibly limited some capital replacements.

We have probably secured a rent increase. In addition, to the many areas of expense reduction (saving) we have also added revenue of a rent increase times twelve to the property rental income.

There is a wide range of value from a lease renewal. How well do we prepare to present the new lease offer to our residents?

Generally, a form letter mail merged to pull name, address and new rental rate are mailed a month or so, before the current lease expires. The letter is generic confirming to our residents; they are an apartment number and a rental rate. Even more disappointing are preprinted letters, poorly copied, with spaces for the “required information fields.”

Retaining a resident will continue rental income, thousands of dollars. The time to prepare a renewal offer? Even if it takes 15 minutes to prepare a renewal letter, consider the return on the investment. Twenty five percent of a leasing persons hourly rate. Certainly a wise investment.

How to Personalize A Lease Renewal Offer

An effective personalized lease renewal offer should include:
Personalized details. Date the current lease will expire. Names of the lease holders. Identify current fees included in the existing rental rate; such as pets, garage, or storage, with specific details. I.E..Garage 1430.

If the current rental rate has been discounted with a recurring concession. It is important to identify this value.

“Your current rental rate of $925 reflects a discounted rate, from your original concession of $75 per month. This concession saved you $900 last year. As a valued resident we are pleased to offer you a rate of $950. This rate remains $75 less than the market rent for your apartment home. This rate will continue to save you $900 per year.”

(The use of rental concessions has many pro’s and cons. Depending on your location, it may or may not be a necessary tool. But if you use concessions, remind the resident often of the value they receive from the concession.)

Including Loyalty Rewards.

Recognizing a residents loyalty and years of residency is a great personalization tool. One option is to offer a discounted lease renewal rate based on the years of occupancy.

Another option is a renewal menu that offers apartment upgrades which increase in value based on the years of residency.  Recognizing positive resident behavior is acknowledging perfect payment history. Including a discount in the new rent calculation for never having a late rent payment. Tells the resident, we recognize their compliance with policies and offer a reward for a behavior that has saved us from sending late notices or making phone calls to collect rent. Instead of rewarding a resident who has paid late with a waived late fee. Recognize the person who has paid on time.
Each and every of one these suggestions offers a personalized approach to the lease renewal. Again with minimal cost, or even time investment.

What other ideas do you have to personalize a lease renewal offer?  Share your ideas in the comments below.

 
 
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  • I love this idea. It's so easy to create a template and send the same letter to everyone. It saves time in the office. But does it increase retention? Unlikely. A letter like this would stand out from previous renewal offers they would have received elsewhere. It drives the point home - you matter here at XYZ property. Even with an increase, I think they would be more likely to renew.
    I have been working to try and put together a "renewal menu" of apartment upgrades that residents can choose from when they renew for an additional year. The main issue that I run into at my property is that our maintenance team is already pushed pretty tight on schedules, and so anything that takes up more of their time is hard to manage. Any ideas on what could be relatively quick upgrades, or could be contracted out fairly inexpensively?

  • David Glenn

    I've seen studies that suggest turnover expenses average almost $1000 per unit -- and some property management companies say that figure can be $1500 - $5000 when lost rent, advertising, maintenance cost, paint & cleaning services, and rental concession are added. Often the advice is that not having a turnover can save on capital expenses. But, can a capital expenditure (HVAC system replacement as an example) while the tenant is still under lease actually increase the chance of a renewal if the expenditure results in a savings that makes staying longer financially beneficial to the tenant? For instance, updated HVAC equipment can result in utility savings of $20 - $40 (or more) per month which would be a good situation for the tenant and if it led to a single lease renewal term the savings would cover most or all of the cost of the equipment. Is my logic wrong in this? Appreciate any comments!

  • We created a tool several years ago with SatisFacts to estimate turnover cost. It has default values probably from 2011 or so, so not current, but probably not too far different. http://www.multifamilyinsiders.com/apartment-turnover-cost-calculator