(And Other Soft Market Tips)
By Doug Chasick, CPM®, CAPS, CAS, Adv. RAM, CLP, SLE
Here’s a PROVEN strategy to deal with Resident turnover in a soft market. I’ve used it many times and it has always worked better than sending out renewal letters when my market disappeared! This idea is based on my belief that there are two kinds of Residents who move: those who have to, and those who want to.
1. Residents who move due to necessity (job, marriage, divorce, financial condition change, roommate add/subtract, buy house, etc.), are going to move – no matter what you say or do – because they have no choice. Stop trying to “save the notice” and do whatever it takes to make their move as stress-free as possible. It’s your last chance to let them leave with a good impression of you and can result in referrals to you later on!
2. Most Residents who don’t have to move due to necessity aren’t really aware that their lease is expiring until we tell them it is – with our array of 120/90/60/45/30 days prior-to-lease expiration letters. The Residents who want to move because they can’t stand living somewhere know exactly when their lease expires. They’re marking the number of days left on their lease on the living room wall, the way prisoners do in jail!
So, in a soft market, where concessions and specials abound, most people who are reasonably happy with where they are currently living do not peruse the real estate section. They’re not reading the various specials, because they aren’t thinking about moving. If we don’t send them a renewal letter or notify them that they are now month-to-month Residents (the other part of this strategy is that we do not send them a MTM letter and we do not charge them a MTM fee), in almost every jurisdiction, under the Landlord Tenant law, the lease will automatically convert to a MTM lease. The only real reason to send them a MTM letter is to be entitled to collect MTM charges and to notify them that we are/will seek relief under any holdover tenant provision. So, the majority of Residents will stay put, paying their rent each month and living their lives.
When the market “comes back”, we now have the ability to raise rents to whatever the market will bear with a 30-day written notice to all of those MTM Residents. If we had followed “conventional” property management procedure, we would have signed new, one-year leases with all these Residents at depressed rental rates (possibly with renewal specials), and we would have to wait for their lease expiration before we could take advantage of the stronger market. Plus, we could have forced turnover by “telling” the Residents to shop around for the best deal.
While I don’t have any “hard” statistics for this since I leave all of that stuff at whatever company I was working for at the time, I can tell you that it works. In the approximately 16 years I have been using this strategy, I have always had less turnover during the “no renewal letter” period than in the rest of the year; my occupancy was higher than my comps without specials; and when the market came back, we realized significant (15 – 25%) rental increases even if I had to force turnover, eat the turn costs and some vacancy – or, if the Residents just stayed put and signed the new one-year lease at the current market rate. Try it. What have you got to lose? It really works!
Some other thoughts about succeeding in a soft market:
1. It’s the service, stupid! The three most important aspects of real estate will always be location, location, location – and the three most important reasons to renew are service, service, and service. Let’s focus on maintenance service for now: Are you A) Taking care of your Residents the way they want to be taken care of, or are you B) Twisting and squishing and otherwise reshaping their requests so that it fits your policies and procedures? If you chose “A”, you’re on the right track; if you chose “B”, read on . . .
Do you have a Service Tech who works on Saturday? How about several evenings a week? Automobile dealers discovered this a long time ago. Some of the dealers near me have Service Departments that are open Saturday and Sunday, as well as being open until 9:00 PM or 10:00 PM each weekday evening. Why? Because that’s the only time many of their customers can come in to get their cars serviced! “Oh, but Doug, the apartments are right here – the Resident doesn’t need to go anywhere, and nobody has to be home and we don’t do appointments and I can’t afford overtime and blah, blah, blah…”
Call me wacky, but most Residents want to be around when someone is in their apartment, even if we think that’s silly or inconvenient. We may have the right to enter without their presence; but when our Residents aren’t happy, they have the right to move. Follow the Platinum Rule: do unto others as they want to be done unto. Schedule a Service Tech to work Tuesday through Saturday. Schedule a Service Tech to work from noon until 8:00 PM two or three days a week. Accommodate the wants and needs of your Residents and they will stay put!
2. Beauty (and service) is in the Eye of the Beholder (or, You Can’t Manage What You Don’t Measure). How do you know when you are doing a good job? Actually, have you defined what a “good job” is, as far as Resident Retention is concerned?
• Do you measure the percentage of expiring leases that renew?
• Do you factor in how early they renew – 90 or 60 days out vs. the day before the lease expires?
• Do you factor in the amount of the rent increase vs. the value-added (stays with the property) renewal bonus or renewal concession?
• Do you keep track of whether they called you before you sent out the first renewal letter (they love it so much they want to make sure they don’t miss their renewal), or how quickly (or even if) they reply to your renewal invitation(s)?
• Do you review their service request and general complaint history and the completion/resolution satisfaction rate?
• How often do you talk to your Residents when you aren’t trying to renew their lease or collect their rent – do you call them after a service request is completed?
• Do you make NAR (No Apparent Reason) calls? If you schedule 5 to 10 each day, just to say “Hi” and find out if they need anything, you can end up talking to each Resident 4 – 8 times a year!
• Are you using “Rate Our Maintenance” cards? Yes, using, them – not just attaching them to service requests, but following up on each one, enrolling your entire staff to encourage Residents to return the cards, and recognizing service delivered at the level you have established.
• Are you USING “Rate Our Service” cards for the office staff? Wanna be really bold? Call these “Are You Getting Your Money’s Worth?” cards, and read the responses. If you want people to renew their leases, their responses on these cards will become your road map!
People who have a choice of staying or moving will stay put when they are getting their money’s worth, when they feel special, when living at our property saves them time, money and aggravation, and when they enjoy interacting with you and your staff. We know why they move and why they stay; so why not establish specific performance thresholds? Meticulously measure your actions and refine your policies, procedures and techniques to produce the results you know you need to keep your Residents happy.
Now, let’s get to work!
Douglas D. Chasick, CPM®, CAPS, CAS, Adv. RAM, CLP, is , Chief Learning Officer, and Senior VP, Multifamily Professional Services, CallSource.