CREATING A TENANT RETENTION PLAN
READY. SET. GO.
While it is true that success in real estate is a result of ‘location, location, location’ ‘rent, rent, rent’ is equally as important. The ability to maintain rentable building space for financially sound tenants is the key to maintaining cash flow and helping owners achieve ownership goals.
Retaining tenants is of paramount importance. Building owners expect their in-house management team to provide and maintain the programs and services that will keep tenants happy and encourage them to remain in the building. The costs to replace a tenant can be significant and includes several variables, including:
- down time realized in vacancy loss
- brokerage commissions
- tenant build-out allowances for the incoming tenants
- relocation costs
- concessions (such as free rent) to be paid
Building management services can play a significant role in influencing a tenant’s decision to remain in their existing space or relocate. If location and value among competing buildings are essentially equal, the next determining factor for a tenant to remain or move will likely be the quality of management services.
A tenant retention plan is an effort by building management to prevent existing tenants from moving out of the building. The methods and strategies employed to accomplish this define the tenant retention plan. At a minimum, the plan should identify the tenants, the services and amenities to be provided, and indicate a method to measure success. The design and creation of the plan must be a joint effort among all of the various disciplines involved in the process. Input should be solicited from the owner, asset manager, leasing broker, marketing, and building management team. The plan should be a formal written document with defined objectives and measurable goals that are specific for each tenant.
The stated goal of the tenant retention plan should be 100 percent retention. In some instances, however, tenants will not renew their lease, regardless of the quality of the property management. The tenant may need additional space that the existing building simply cannot accommodate. It is possible that the tenant is going out of business or is relocating to another city.
The physical condition of the property, its location, relative position in the marketplace, a SWOT (Strength, Weakness, Opportunities and Threats) analysis, and rent structure should be included as part of the tenant retention plan. To remain competitive, this information should be updated at least annually. (If the property is located in a rapidly changing market, the data should be updated more frequently.)
An important part of the tenant retention plan is a profile of each tenant. You can list basic information, such as a brief statement of the tenant’s business, contact information, the lease termination date, a history of tenancy, and the likelihood of renewal. The information to be included in the tenant profile can be summarized from a lease abstract form.
The tenant profile should also include a history of maintenance and service activities, especially those actions that might have been extended as a courtesy beyond the scope of the lease. Some tenants may forget or come to accept such courtesies as commonplace. A polite reminder of the extra level of service being provided may help solidify the tenant’s renewal decision.
Regularly scheduled meetings with tenants should also be tracked in the tenant profiles. These meetings provide an opportunity for tenants to discuss their satisfaction with or concerns about building services. The feedback from these meetings provides the information necessary to make changes that will help to retain the tenant.
The quality and efficiency of contractors, service providers, and vendors are a critical part of how a building is maintained and serviced. The tenant retention plan should include a review of your existing contractors and a history of any unique or difficult situations you or your tenants may have experienced with them.
Tenant Satisfaction Survey
A tenant satisfaction survey is an important part of the tenant retention plan. It helps to determine which aspects of property management are satisfactory to tenants and which areas need improvement. Document improvements that are made as a direct response to data obtained from the survey. Tenant satisfaction surveys should be conducted on a regular basis, preferably annually, but no longer than every two years. Be sure to establish a timeframe to inform tenants of the results of the survey and any planned follow-up activities.
While a formal survey conducted each year will provide important information on the quality of the property and services, do not underestimate the value of more frequent, informal discussions with tenants. A comment made during an informal conversation may reveal a growing concern on the part of a tenant. Addressing small issues before they become larger problems will go a long way toward maintaining tenant satisfaction.
A tenant retention training program for each member of the management team should also be a part of the tenant retention plan. The individual components of the training program will vary based on each team member’s responsibilities, but the common and overarching theme will be to ensure that tenants always feel welcome and appreciated. Customer service, communication, and overall hospitality are three of the most important areas in which staff should be trained.
The mission statement and service philosophy of building management should guide the actions of all employees. Many companies print their mission statement and service philosophy on the back of their business card or on plastic wallet-size cards that employees can carry with them as a reminder of their dedication to the tenant.
Tenant communication can be achieved in many different ways—through e-mails, office visits, newsletters, and the like. Regardless of the method of communication, a regular schedule for communicating with tenants is another important component of the tenant retention plan.
Services and Amenities
Beyond the basic services required under the lease, additional amenities and services can help to differentiate building management from competitors. The tenant retention plan should individually list the services and amenities to be provided and should include a plan for developing, maintaining, and adding services and amenities as necessary.
While no management team wants to lose a tenant, it is an inevitable part of doing business. Exit interviews provide the opportunity to understand why a tenant is leaving the building. Even if the tenant is leaving because of factors beyond your control, you will likely obtain information that can help you make changes and improvements that should help retain the remaining tenant base. At a minimum you should document the following two items:
- Official stated reason for moving: Include details such as information about new location, size, rent, lease terms, purchased property, and so forth.
- Comments and suggestions: How could the management team have served the tenant better? What did we do right? Be as detailed as possible.
Always end the tenant relationship on a professional note. Obtain forwarding information and contact information for the tenant in their new location. Remember, the tenant’s decision to move is not always within your control. Concluding the tenant relationship on a positive note may still result in leasing opportunities. The tenant may be used as a reference for potential tenants. Additionally, they may know of other companies looking for space and will refer your property as a positive one to consider.
Tenants who feel valued and are comfortable that their needs are being anticipated and fulfilled are more likely to renew their leases. The property management team that can deliver superior service and stay close to the customer through excellent service and communication will differentiate itself from the competition and keep their tenants, and their owners, happy.
This article is based on BOMI’s new and updated coursebook, Fundamentals of Real Property Administration. For more information, call 1-800-235-BOMI (2664) or visit BOMI’s website at www.bomi.org.
10 OPERATIONAL PRACTICES TO RETAIN A GOOD TENANT
A good tenant is your best asset, and as a landlord, retaining good tenants should be one of your biggest priorities. The good news is that keeping great renters isn’t too hard if you know what to do. Here are ten things you must do to keep your good tenants happy enough to stay put!
1. Respond quickly to complaints about noise or reports of criminal activity, such as drug dealing.
If you have specific rules about noise, enforce them. If you are aware of any crimes taking place on your rental property, take action immediately. Evict drug dealers; consult your attorney if you need help, or consider hiring a property management company that includes evictions in its services. If drug dealing is happening on a nearby property that is not owned by you, work with neighbors, the property owner, and the police.
2. Schedule maintenance and repairs at times convenient to your tenants, and let them know in advance.
Minimize the impact of repairs and maintenance by scheduling them at the times your renters are least likely to be around, typically between 9 and 5, Monday through Friday. Let your tenants know in advance when repair work is being done, and why. Consider the safety and security of your tenants while the work is taking place (for example, if a tenant’s parking spot will be unavailable during repairs, provide another). After the work is finished, send a thank you note.
3. Provide designated parking spots and enforce parking rules.
Having a parking spot with a short walking distance to home is very important for many tenants. Assign parking spots and enforce parking rules. Send warning letters to tenants who break the rules and have their cars towed if they ignore your warning. Also, make sure you have well-marked and sufficient guest parking.
4. Follow through on repair requests and other commitments.
It’s simple: do what you say you’ll do. Recognize that all tenants want their repairs handled promptly, efficiently, and predictably. And remember that many tenants are “renters by choice“. They prefer to rent rather than own partly because they want someone else to be responsible for repairs. Have a repair and maintenance process that helps you consistently meet or exceed tenant expectations.
5. Give your tenants advance notice of upcoming inconveniences that you’re aware of.
Warn tenants about unexpected inconveniences that will be taking place near their home. If you’re aware of upcoming road closures or a planned power outage, consider sending out a newsletter, email, or a quick text message informing your tenants, so they have an opportunity to prepare or change their plans. You can also keep tenants updated using a Facebook or Twitter account.
6. Understand that your tenants want to feel safe at home.
Make sure that any outdoor areas used by tenants at night (such as a parking areas, paths, and entries) are well-lit. Keep foliage trimmed, and fences low. Stay on top of repairs. Arrange for a safety and security survey a couple of times a year, and let your tenants know when you’ve made improvements. Also consider giving your tenants some safety guidelines when they move in.
7. Make sure all of your tenants follow the House Rules.
Good tenants are good neighbors. In return, they want the same consideration. They will follow the rules you have developed for your rental property, as long as they are reasonable. All of your tenants should read and sign a copy of your rules when they execute the lease. Explain to your tenants that the rules will be enforced. Consider eviction for serious violations.
8. Consider allowing pets; and if you do allow pets, make sure owners clean up after them!
Tenant retention has been shown to improve if you allow pets, and certainly there are some great tenants out there who are also animal lovers. If you do allow tenants to keep pets, require them to clean up after them in the lease and require them to keep them on a leash when outside the rental unit. Provide “doggy bags” and garbage cans close by. If any tenants are not complying with your pet policy, issue a written warning. If that doesn’t work, ask them to remove the pet from the rental.
9. Be polite, courteous, and professional.
Recognize that being a landlord requires you to have great customer service skills. Never complain about your job or personal life. When the phone rings and the call is from a tenant who is paying you thousands of dollars a year, politely ask how you can be of assistance, no matter how bad your day is going.
10. Create opportunities to appreciate your good tenants.
I have read that you have to thank someone seven times before they really feel appreciated. I’m not suggesting that you maintain a spreadsheet tracking your appreciative words, but you should say “thank you” or send thank-you cards when appropriate. Gestures such as these go a long way in making your good tenants feel welcome and appreciated.
Good tenants know they are good tenants, and they expect to be treated that way. It’s worth the extra effort to keep them–they pay their rent on time, they maintain your property well, and they’re generally pleasant to deal with. If you are reliable, professional, and courteous, they will be too.
Story by: AKPA