Why Losing a Resident Hits Harder Than You Think

It’s been a tough few years for the multifamily industry. Supply chain disruptions, rising inflation, and higher interest rates have pushed operating costs sky-high. Property taxes are skyrocketing in some areas, and the cost of labor, materials, and capital improvements seems to have no ceiling. For property management companies, maintaining a healthy Net Operating Income (NOI) has become a true juggling act.

But it's not just our budgets feeling the pinch. Your residents are too. Even a modest rent increase can significantly impact their already strained household finances, as inflation has outpaced income for far too long. They're looking to us to find efficiencies, hoping to avoid sharp rent hikes.

While many increases to NOI are out of your control, there is one area that can profoundly impact NOI for the good or bad that we do have some measure of control over: renewals.

When you think about it, keeping an existing customer is almost always easier and cheaper than finding a new one. Consider the marketing spend alone. Depending on your property type, competition, and marketing channels, acquiring a new lease can cost anywhere from a few hundred dollars to several thousands. Organic SEO might be light on the wallet, but expensive ILS platforms and PPC campaigns can quickly add up.

And marketing is just the beginning. Factor in the administrative costs of processing applications, screening prospects, inspecting and preparing the unit for move-in, and, perhaps most significantly,  the loss of rental income while the unit sits vacant. It's estimated that the total cost of turning over just one apartment is approximately $4,000.

Then there's the unknown. There's no guarantee that a new resident will be a great one (i.e. someone who pays on time and treats your property with care). That’s why if you have quality residents in your community, you should do everything in your power to keep them.

The reality is, you start losing residents the moment they sign their initial lease. Without a solid strategy to retain them, your bottom line will inevitably suffer. This isn't just about filling units; it's about building a stable, profitable business. In fact, renewals often account for around 50% of a property's rent roll, making them a critical driver of overall performance.

We need to understand why good residents move and implement strategies that address those reasons head-on. In our next blog post, we discuss some of those strategies, including the importance of timely, personalized communication, efficient processes for residents to renew, and how to use data to identify and target residents with the highest likelihood to renew. Every effort to foster a positive resident experience is an investment in your property's financial health. It's time to shift focus from just filling vacancies to cultivating lasting relationships. 

To learn more about best practices for increasing renewals, check out our latest ebook, The Resident Retention Formula.