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HOW DO YOUR RESIDENTS FEEL

HOW DO YOUR RESIDENTS FEEL

DOING A GOOD JOB IS NO LONGER GOOD ENOUGH
We jabber so very often in our circles about Resident Retention, and what that means. We yak about do we send a letter, an email a phone call to reach out to our residents about renewing their lease. Hey, lets send them a gift too. Does any of this non-sense work?

YOU ARE GRADED ON HOW YOUR RESIDENT FEEL
What if you were measured on how your Residents Feel About You and How Your Residents Feel About Your Company, would you act and react differently? Would you even stay with the company you are working for? This is a fundamental change in thinking and requires a paradigm shift. All the things you are doing or not doing suddenly don’t really matter all that much, because you don’t get to choose, Your Resident Chooses. They always have actually.

THINKING LIKE A GENUINE BRAND
Our Brand tells our Resident whether something will make them feel better or make life easier, better or solve a problem, or fulfill a desire. Wikipedia describes a Brand “A brand is a collection of symbols, experiences and associations connected with a product, a service, a person or any other artifact or entity. Brands have become increasingly important components of culture and the economy, now being described as "cultural accessories and personal philosophies.”

ARE YOU DELIGHTING YOUR RESIDENTS
Satisfied Residents are important. However, Delighted Residents become your Primary Influencers and will help you self-rent apartments. Satisfied Residents may or may not renew with you. They are content, but their loyalty to you is suspect. Delighted Residents are committed to future purchases with your company or organization.

We welcome your feedback on things you or your community are doing to Delight the Resident. Are you gauging your success or failure on How Your Residents Feels? Perhaps you should be,
 
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You are singing to the choir.

A critical need in the industry is to elevate "resident retention" (which does not mean pizza parties and move-in gifts - it means a commitment to communication and service delivery, notably regarding work orders) to where it belongs...not being chopped liver vs. leasing/marketing. Retention must, at a minimum, be at par with the focus on leasing.

Leasing is where you cut your losses - you have an empty box generating no income.

Retention, however, is where you make your money and grow asset value.

Every move-out has a bare minimum $3,000 NOI impact...and that figure is up to about $4,500 now due to aggressive leasing incentives that are now very prevalent nationwide. Given that over 60% of turnover is controllable, a focus on what really matters...a commitment to responsiveness, communication and service delivery...helps a property to accomplish goal #1 - maximize NOI and asset value for the owner of the asset.

With cap rates increasing, asset values decreasing and loans maturing or preparing to reset - it has never been more critical to push NOI. Due to LTV issues, owners of a 2,500 unit portfolio purchased in the last 3-5 years are now upside by at least $10,000,000. To get the asset value back up, NOI must increase by $700,000. How, in this economy, are you going to grow NOI in the amounts needed?

You are not going to get there by cutting back expenses, purchasing less expensive supplies - and cutting back on staff is counter-productive. Market forces will not permit the rent increases needed to get you there.

The answer lies in reducing controllable turnover. A focus on what matters most, what has the greatest impact on retention, thus becomes priority one.

If that 2,500 unit portfolio reduces turnover by 6%, that equates to 150 fewer move-outs. At $4,500/move-out, this increases NOI by as much as $675,000...and gets the asset value back up to where it needs to be so that the owner is whole. This is achievable...

You are singing to the choir.

A critical need in the industry is to elevate "resident retention" (which does not mean pizza parties and move-in gifts - it means a commitment to communication and service delivery, notably regarding work orders) to where it belongs...not being chopped liver vs. leasing/marketing. Retention must, at a minimum, be at par with the focus on leasing.

Leasing is where you cut your losses - you have an empty box generating no income.

Retention, however, is where you make your money and grow asset value.

Every move-out has a bare minimum $3,000 NOI impact...and that figure is up to about $4,500 now due to aggressive leasing incentives that are now very prevalent nationwide. Given that over 60% of turnover is controllable, a focus on what really matters...a commitment to responsiveness, communication and service delivery...helps a property to accomplish goal #1 - maximize NOI and asset value for the owner of the asset.

With cap rates increasing, asset values decreasing and loans maturing or preparing to reset - it has never been more critical to push NOI. Due to LTV issues, owners of a 2,500 unit portfolio purchased in the last 3-5 years are now upside by at least $10,000,000. To get the asset value back up, NOI must increase by $700,000. How, in this economy, are you going to grow NOI in the amounts needed?

You are not going to get there by cutting back expenses, purchasing less expensive supplies - and cutting back on staff is counter-productive. Market forces will not permit the rent increases needed to get you there.

The answer lies in reducing controllable turnover. A focus on what matters most, what has the greatest impact on retention, thus becomes priority one.

If that 2,500 unit portfolio reduces turnover by 6%, that equates to 150 fewer move-outs. At $4,500/move-out, this increases NOI by as much as $675,000...and gets the asset value back up to where it needs to be so that the owner is whole. This is achievable - when you have the right focus, which comes from opening up the doors of communication with your residents and finding out...yikes...what they think, need and want.

Our new clients use the satisfaction feedback programs we build to outperform the market. It is not unusual that a commitment to feedback and focus reaps the returns needed...with significant reductions in turnover beginning the first full year (just finished a review with a second year client - their turnover dropped 6 points in the first year!).

As they say, "the proof is in the pudding." Our clients have a 9.5 point lower turnover rate than the industry (as reported in the NAA Income and Expense Survey). The impact of creating loyal, satisfied residents on financial performance is clear.

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  Doug Miller

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