The most successful businesses today are able to keep their customers paying for their services year after year. This ability to keep customers, or residents in our case, separates the successful, happy owners from the not so successful. Keeping your residents long term is the key to maximizing your cash flow.
The Hidden Cost of Poor Service
Try to remember the last time you received poor service (this is probably not too hard to do) and think about your reaction to it. As an example, think about the last time you had an auto repair performed. Was the repair handled adequately? Was the car ready when promised? Did anyone follow up to see whether you were satisfied or not? Most importantly – was the service good enough that you would not look to a competitor the next time you needed car repair done?
Let’s imagine something was not quite right. Perhaps the repair was performed poorly. Perhaps the service wasn’t so great. Maybe the repair was fine but they dirtied your car. Whatever it was, you probably would never complain. It’s even less likely you’d write a letter. You’d just leave, complain to your friends, and NEVER GO BACK AGAIN.
Now think about your tenants and the service they receive at your apartment building. Are you starting to see why people might be moving out? It may not be the market – it may be your manager’s lack of service. Studies have shown that poor service and neglect are the main reasons people move out of apartments. It’s not price.
The five most avoidable reasons good tenants leave:
- Neglected Maintenance
- Bad Tenants as Neighbors
- Slow or non-responsive management
- Lack of security or perceived lack
- No improvements ever done
You must meet their expectations
You have one product to offer – an apartment that works. Just like a car, if it works most of the time you’re happy. If it breaks down too often you’re not. Now, your residents expect it to not work from time to time. For example, the garbage disposal stops working. How you react to that inconvenience is the key. It will make or break you over time. The potential for dissatisfaction is defined by the difference between what your resident expects your response to be and what your response actually is. You must know what their expectations are.
Apartment managers have the opportunity – and challenge – of pleasing your residents in their many interactions with them. Obviously there will be different service level expectations from a $400 per month one bedroom rental and a $1200 per month one bedroom rental. You must know their expectations. Surveys help here
Start with where you are
One place to start observing how well your manager is doing is to visit the property during its busiest time of day. This may be when residents are returning home from the evening. Perhaps they are picking up their mail. Is your staff member available or easy to find? Does he/she chat with the residents? Is he or she helping to build a sense of community – or are you just renting “four walls and a rug”.
Your residents notice the smudges on the windows, the trash in the hall that doesn’t get picked up. Your manager’s action – or inaction – is weighing heavily on your bank account. When the opportunity to move to another apartment for a little less money comes up – will they move or won’t they? If you’ve built community – they won’t.
Some questions to ask tenants
How satisfied are you with the communications you have with the management staff? Do you believe that your manager and the maintenance staff are doing a good job?
Have you ever asked for help with a repair in your apartment? How quickly did the staff respond? Were you satisfied with the quality of the service you received? With the attitude of the maintenance people?
Do you believe tenant screening is adequate in your apartment building? Are the rules and regulations enforced to your satisfaction? What about the security of the building?
What improvements could be made that would increase your enjoyment of your apartment?
Do you believe you are getting a good value in exchange for your monthly rent check? What do you consider good value?
Here’s some things you can do:
Acknowledge residents’ complaints cheerfully. If you don’t know a problem exists – you can’t fix it. They are helping you retain them by complaining.
Welcome new residents. Get off to a good start
Call resident after move in to make sure everything went OK.
At the beginning of the rental relationship, give your new resident a list of possible upgrades or improvements you would like to do for them over the next three years. Each year, let them choose an upgrade from the list
Send out questionnaires. Give a little bonus for answering them
Set up a system for repairs. Property management is a business. Don’t treat it any other way.
There have been countless stories of owners who were shocked to find that their residents were not moving to the competition because they were getting a better deal but rather because their manager ignored their complaints, made rude comments, or basically delivered shabby service.
Think seriously about whether poor service could be happening at your building. Challenge your assumptions as to why residents are moving. Each time someone moves it costs you at least $1500 in lost rent and/or turnover costs. Our figures indicate the number is closer to $2800.
The most productive source of advertising is word of mouth. You must find out whether your residents are bragging about where they live or complaining about it. You can make where they live a better place for them and significantly improve your bottom line at the same time.
Many owners seem to think that owning is all there is to real estate investing. They assume the tenants should pay their rent each month and any complaints should either go away or take care of themselves. Your tenant’s problems will become your problem if you don’t act. Tenants are your customers.
