Property Management: Keeping Residents Happy and Apartment Profits Up!

Lower profit killing turnover costs!Property management professionals know that two profit killers remain:

1. Unmanaged property tax liability. This is an item that needs an annual review by a professional. As an example, exception value in Oregon can only be appealed the first year it appears. No, they don’t identify it…so failure to appeal can cause a permanent increase in taxes.  There are a few exceptional professional property management companies that consider property tax minimization as part of their mandate to run the property.  Many do not!

2. Resident retention…and turnover costs when we fail to do so. Many multifamily property management folks don’t focus on this so much, after all the next renter is just around the corner. While the vacancy component of total turnover cost is lower than it used to be, the costs of turnover can be huge, particularly if retention rates drop. Below is another great article from Keat Foong of Multi-Housing News Online. Interesting reading that challenges commonly held beliefs about renter behavior.

“There is no magic wand for improving resident retention. Despite contrary opinions, our research consistently shows it is not about creating a sense of community, a community Facebook page, or having social activities; these have value as icing on the cake, but are not retention drivers. It has to do with boring things such as submitting an order immediately when the resident calls about a broken toilet, and following up with residents after the work is done. It’s a culture of responsiveness that has the greatest impact on renewals,” says Doug Miller, founder and president of the resident satisfaction specialist firm SatisFacts Research.
Concerned about maximizing your apartment portfolio’s profitability?  Contact Rick M. Bean of Rose City Commercial Real Estate for an evaluation.  We’ll discuss low hanging fruit as well as more involved projects.  Phone: 503.577.1034, or e-mail me at:

According to Miller, being able to successfully keep your residents has to do with paying attention to basic “blocking and tackling” tactics on the operational side of apartment property management. “What we have found is that when prospects are first enticed to a community, they are interested in how the community looks and all the bells and whistles. Once in there, their focus shifts, to the service level and the value they are getting. The question for them becomes how easy it is to be a resident in the community, to get calls returned and things fixed,” says Miller.

For a recent national survey conducted in June and July, “Getting Inside the Head of Today’s Online Renter—Behaviors, Preferences and Implications,” SatisFacts surveyed about 85,000 residents in communities of all classes managed by 20 companies. Topping the list of what is most important to residents when shopping for their next apartment is the perception of quality customer service, the ability to pay rent or submit service requests online, and the ability to provide resident feedback. At the bottom of the list is having a community Facebook page, or the ability to rent Zipcars.

Biggest reasons for turnover

The Towbes Group boasts a relatively high resident retention rate, and its turnover rate does not exceed 45 percent, even with the recent implementation of a rent increase program. That number is 10 to almost 20 points below the average industry resident move-out rate of 58 percent to 63 percent. Jim Carrillo, vice president, residential properties, for The Towbes Group, says “communication with the residents is always transparent and two-way. Nothing of importance is kept from the residents, positive or negative.” The company also surveys other communities in the markets it serves to observe the level of service provided at its competitors’ properties. Then the company establishes a standard above that.

As a way to preempt potential move-outs, in October of 2008 The Towbes Group informed all its market-rate residents that rents would be frozen through 2009. Rents were again frozen in 2010. And the company did not participate in lease renewals, but rather, allowed all leases to convert to month-to-month after the initial 12-month lease. This led to a low annual turnover rate averaging 39 percent—in the midst of the economic recession following the financial crash. Since then, the company has implemented a renewal program that is seeing some of the first increases in nearly three years, says Carrillo.

Lowering the rent or refraining from raising it, although necessary in downturns, may be a costly way to keeping residents in communities, however. Instead, Jen Piccotti, SatisFacts senior vice president of education and consulting services, recommends that property management professionals pay attention to providing great service at all stages of the lifecycle of the apartment renter. SatisFacts’ research shows that residents tend to feel neglected towards the end stage of the lease cycle. “You have to show the love 365 days a year,” not just at the beginning of the lease term, says Piccotti.

“Every property has its chronic complainers. You get to know your high maintenance residents, and the human tendency is to start hiding and looking busy when you see them coming, but you have to make sure every resident feels welcome. They are, after all, paying your salary,” says Piccotti. “Keep that smile, welcome everyone, and bend over backwards every time someone walks in the door. We need to assume that as soon as they leave the office, they go to their mailbox and find a lease renewal/rent increase letter awaiting them.”

Creating an appealing environment

The visual appeal of an apartment community can also play a role in retaining residents, according to designer Rebecca Jones, ASID, principal of RD Jones & Associates Inc. “Overall, the client base is hesitant to invest in design the way it should, but clients that do are reaping the rewards,” she adds. For example, The Bozzuto Group hired Jones to design the interior spaces of The Fitzgerald in Baltimore, which garnered a 2011 MHN Excellence Award and is, according to Bozzuto, the fastest-leasing apartment community (25 units per month) in the history of Baltimore.

The Fitzgerald was designed with a boutique hotel aesthetic, reminiscent of a hot spot you’d find in New York City, such as The Gramercy, says Jones. “If you design something really cool, that sets you apart from the competition,” she adds. The fashionable design makes the residents “feel good about the space, about themselves and about their living environment.”

Self esteem is important to the sociable Generation Y, and they like to bring their friends to their trendy buildings—they see the common areas and the entertainment spaces as extensions of themselves, she says. “They want to be able to say, ‘this is my personal space that I can enjoy and use with my friends,’” Jones notes.

Don’t underestimate the role that functionality in the design plays in holding onto residents, says Jones. Flow, access and convenience are important. You do not want the garages to be in a location that is too much of a trek. And make sure there are enough elevators interspersed through the property. “We see a lot of buildings in which you have to hike a football field to get to your space,” she notes. People may express dissatisfaction with such daily inconveniences by moving.

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