Quality renters stay longer, give you fewer headaches, and end up being more profitable for you. See how I keep tenants for 5+ years.
One of the biggest headaches that come along with rental properties is tenant turnover. If only there were a way you could avoid the problem of sourcing new tenants for as long as possible. Luckily for you, there is! The key is doing the work to make your property appeal to quality, long-term renters. But how can you attract quality renters for your investment property? It’s easier than you think.
To get multi-year tenants, you’ll need to put in some effort before listing your property for rent. Set clear policies, keep up with the maintenance of common spaces and landscaping, offer discounts for multi-year contracts, and give them a sense of ownership for their living spaces.
It sounds easy enough, but the truth is it takes some forethought and foundation-building to make it happen. So I’m going to cover why all this work is worth the effort, what you’ll need to do, and my secret sauce for keeping tenants 5+ years. Let’s dive in.
The Importance of Long-term Tenants for Your Business
I’ve seen landlords churn tenants at a breathtaking pace before and have wondered how long they’ve kept their businesses afloat. You might think any tenant is good enough as long as their check clears, but there are some key things a long-term renter can do for your business:
- They ensure a steady income stream – When you have renters who stay for years, you can begin to use their monthly payments in your financial forecasts and better predict when you’ll be able to pay off debt like mortgages or other costs. In addition, the more long-term tenants you have, the more stable your financial situation will appear to lenders when you’re ready to expand your business.
- They reduce your costs – Empty buildings cost money. As the owner, you’ll need to cover the costs associated with maintaining the property, paying the mortgage, dealing with the plumber to fix frozen pipes, etc. When you have tenants who stay with you for the long haul, your costs are significantly reduced.
- They improve your business’ reputation – Consider your tenants as a way to use word-of-mouth marketing. People love to talk about nightmare landlords, and that talk has a ripple effect that can prevent new renters from applying. If you have renters who have stayed with you for years, that speaks volumes about how your business is run and can make the difference when you need to get a little goodwill from the community.
- They save you time – Time is money and the time spent dealing with sourcing new tenants, onboarding them, running credit and background checks is time that’s taken away from growing your business. When your rentals are run on auto-pilot, thanks to good tenants, you’re able to focus on expanding your empire and generating more profit.
Consider how much your time is worth. Is it more valuable to spend time doing a little bit of work to attract ideal tenants now or get stuck in a cycle of constantly dealing with sourcing new renters?
What Your Investment Property Needs to Attract Quality Renters
Before you put that “For Rent” sign out, you’ll need to do a little prep work first. Most of the things you’ll need to do are easy enough but do require some intention. Here are a few places to focus your effort.
Your rent should always be competitive to attract a large pool of applicants. Pricing your property too high will scare away solid renters who may be reliable but timid about taking on too much rent. Pricing your rental too low, however, will automatically make applicants think there’s a catch or ask, “What’s wrong with it?”
There’s a method I use that just skims under the market rate I’ll discuss below, but to give you an idea of what “competitive” means, here are the ten most desirable cities in the US for renters in 2021:
|City||Average Price for 2 Bedroom||Average Square Footage for 2 Bedroom|
|Virginia Beach, VA||$1,295/month||1,025|
Renters will be more interested in properties that include, or are close to, some conveniences. If you’re able to offer laundry on-site, you could attract more applicants and be able to have your pick of tenants. Depending on the type of tenant you’re seeking, whether or not the property comes with major appliances like a fridge and stove could be a deal-breaker for some. To prevent this from being an issue, you’ll need to know who you’re targeting and how to appeal to them. Younger or single renters may want the appliances included as it’s one less thing for them to deal with, while older tenants may have their own appliances they’d prefer to use.
Well-Maintained Landscaping and Aesthetics
If you want tenants that care then, you’ll need to show you care, too. A well-maintained lawn and landscape will go a long way toward attracting the renters you’re seeking. In addition, if you’re renting a home in a multi-family or apartment building, then make sure the common areas are aesthetically-pleasing. Have the hallway walls freshly painted every few years and install small decor accents like nice lights or reception tables for mail. The more effort you make to show you’re not an absentee slumlord, the higher likelihood you’ll find model tenants who stay for years.
Few people enjoy having others invade their private spaces, so you’re going to need to let go a little bit and avoid middle-managing your tenants. You’ve rented to them because they appeared trustworthy, so honor that. No one wants a nosy landlord, especially if they’re not doing anything sketchy. Dropping in unannounced or keeping too close of an eye on the property can make tenants feel uncomfortable, and may seek a new place to rent as quickly as they can.
Your tenants don’t need to know the way your business runs; I don’t mean that sort of transparency. Instead, you need to set clear expectations in writing at the beginning of your rental agreement. When is the last day rent is due, and what does “due” mean? Does it mean “check in your hand” or “postmarked envelope?”
What are the noise level requirements, and when are the “quiet” hours? How should complaints be handled? What should they do if there’s a leak? Don’t make any assumptions at the beginning of this tenant-landlord relationship. Your tenants will appreciate having everything laid out ahead of time so that they know what’s expected from them and you.
Easy Payment Methods
More landlords are embracing digital payments for their monthly rents, and I think it’s great. Millennials and Gen Z-ers rarely deal with checks these days and are instead opting for things like paying online or through apps like Venmo. If you want to attract long-term tenants, then lean into how the new generations handle their finances instead of sticking only to traditional methods that exclude entire potential renters.
Longer Lease Terms
Your first rental agreement can (and should) be for one year while you and your tenant get into the swing of things. But once you’ve established trust and they’ve shown a track record of on-time payments and have kept the home in good condition, consider offering multi-year lease agreements. You can add incentives like a free month or a reduced rate to entice them to stay for longer than the standard year.
How I Keep My Renters for 5+ Years
Let me start with: my method is not for everyone. That said, in all the years I’ve been a landlord, I’ve perfected this method to the point that I rarely have to scramble to fill a rental property.
Okay, here’s how it works:
First, I buy properties designed for long-term tenants. What this means varies based on your area, but where my properties are, this means standalone, single-family homes that have multiple bedrooms, a backyard, and on-site laundry. These properties are spaces that a family can grow into instead of things like one-bedroom condos with a higher turnover rate.
Next, I take the time to ensure my properties are the nicest available. The landscaping is maintained, the interior spaces are clean and painted with neutral tones.
Neither of these is really groundbreaking, I know. But here’s my secret sauce: I price these clean, single-family homes at a rate that’s $50 – $100 cheaper than every other property listed for rent. It might seem counterintuitive to take a cut of my profits off the table right away, and for many new investors, that might not be an option, but that $100 off pays dividends.
By lowering the rent to be less than the going rate, I attract so many applicants that I get to be picky about who I’ll rent to. Since I get to be picky, I can find the right tenants who will fit the profile I’m looking for, who will stay for years, and (most importantly) will leave me alone.
I’m what I like to consider a “hands-off” landlord who deals with tenants who feel empowered to take some ownership of the property. My rental application includes questions like:
- “Do you own a toolbox?”
- “Do you own a lawnmower?”
- “Do you know how to fix a faucet with a drip?”
If an applicant answers “No” to any of these, I’ll say, “Thanks for your interest, but this isn’t a good fit.” I’m willing to trade a lower rent for a tenant who can take responsibility for the upkeep of the property and let me focus on running my business instead.
Now, if there’s some major disaster, I wouldn’t expect my tenants to take care of those. My tenants are given a list of trusted contractors who can take care of most situations and bill me later. In turn, these contractors will do a once-over of the property and alert me to any major things I need to know. But in general, my philosophy is, “I own the property, but you live in and run it. If that works for you, we’ll get along just fine.”
Two Things You Can Do to Keep Your Tenants
There are two things you can do to keep your tenants that are so simple it will blow your mind when I say how rarely they’re done.
Be proactive and flexible.
If you’ve got a good tenant that you don’t want to lose, let them know it. Many landlords won’t do this because they think it’s a move that puts your tenants in a position of power, but I don’t see it that way. If they’re a good tenant, then it’s worth finding what it takes to keep them with you. It might be something you’d already do, like discounting multi-year leases. They might give you some insight into blind spots you’ve had that have made other tenants leave.
Being flexible in your policies doesn’t mean bending over backward or getting taken advantage of but instead means finding a compromise that reduces your effort and costs. Consider making exceptions to your policies for good tenants for things like pets, putting things on walls, painting, or other smallish things that you’re willing to bend on.
Getting long-term, quality tenants requires some work on your end to get the foundation in place, but once you’re able to get into a flow with expectations, you’ll find that it’s not as difficult as it seems.
What tips have you found helpful for keeping your best tenants around? Leave a comment and let me know.