Tenant Retention Meaning + 6 Ways to Improve It

As a landlord or investor, one of your biggest challenges is not only finding but also keeping great tenants. High retention rates lead to lower vacancy rates, lower turnover costs, and more consistent cash flow. Keep reading to learn more about tenant retention, what it means for your rental property, and six strategies for maximizing it!

Summary:

• Tenant retention is the process of keeping current tenants in place upon renewal, which can lower your vacancy rate and limit costly turnovers.

• Making repairs quickly, communicating with tenants, offering renewal incentives, accepting pets, and offering multiple payment options are common ways to improve tenant retention.

• Turnkey rentals may offer higher tenant retention rates, as these properties require less maintenance and have property management in place.

What is Tenant Retention? 

Tenant retention is the practice of minimizing turnover by keeping existing renters in a rental property. When tenants renew their lease, you not only keep your rent checks coming in but also mitigate the costs of “turning” a rental property or unit, which often include cleaning, making repairs, marketing, screening tenants, and more.

How Tenant Retention Can Make (or Break) Your Rental 

Let’s say you only own one rental property. Your monthly expenses are $1,500 and your rent is $2,000, so you cash flow $500 per month. You aren’t doing a great job of retaining tenants, so they only stay one year on average. Here’s what that looks like:

Tenants move in January 1^st and move out Dec 31^st. You spend one month turning over the rental (making repairs, cleaning, and preparing for the next tenant). You spend another month finding tenants and screening them. You get your next renter on March 1^st. If this goes on for five years of owning the rental, you will have missed out on 10 months of rent! That's a $20,000 difference, assuming rents have stayed the same! 

If you had a tenant turnover only once every five years, that’s $4,000 in lost rent (two months), a $16,000 difference in cash flow. Now, imagine that, instead of just the one rental, you had 10 rentals in your portfolio. That’s a six-figure difference!

Want headache-free cash flow with property management in place upon purchase?

Why Tenants DON’T Renew 

Tenants may choose not to renew their leases for several reasons. Imposing unreasonable price hikes, communicating poorly (or not at all), or neglecting property and maintenance needs are a few areas where landlords can miss the mark, causing tenants to become disgruntled and leave. But tenants may leave for reasons that are outside your control, too. They could be relocating for work, moving to a different neighborhood, or buying a house!

6 Ways to Keep Tenant Retention High

Want to hold on to more of your tenants? Here are some of the best ways to maximize your tenant retention rate:

1. Make Repairs ASAP (and Limit Maintenance) 

No one likes living in a half-functioning home. If major systems are failing every couple of months, renters will begin searching for other options quickly. If you buy a turnkey rental—like a new build or renovated property—many of these headache repairs have already been addressed, with many systems being replaced entirely! 

2. Be Reachable (within Reason)

Dodging calls from your tenants? Poor communication can quickly erode any hope of lease renewals from your tenants. If you dislike self-managing or don’t have the bandwidth for it, hire a local property manager who can promptly respond to tenants, process maintenance requests, and be available whenever tenants need something.

3. Offer Renewal Incentives 

Tenants want to know that their rent is going toward making their living situation better, which is why some landlords offer incentives to tenants when it’s time to renew their lease. This could be a new toilet, a new ceiling fan, a fresh coat of paint in a room of their choice, or another improvement—something that lets the tenant feel they have some say in the quality of their home!

Want higher tenant retention (and more cash flow)? A turnkey rental is the ultimate low-maintenance rental!

4. Accept Pets

Many landlords won’t accept pets, and for good reason. But with 66% of US households owning pets, you could be missing out on a huge pool of potential renters. Better yet, these renters are less likely to move, as finding a pet-friendly rental is more difficult.

What’s more, you can offset the downsides of allowing pets by implementing pet deposit fees and potentially higher rent for tenants with pets. Just note that emotional support animals (ESAs) are not considered pets, so you cannot charge extra for them.

5. Offer Digital Payment

For most Gen Z renters, writing and dropping off a physical check is an archaic way to pay for something. Offer more modern, convenient payment options instead—like ACH and credit card payments, or payments through peer-to-peer (P2P) platforms like PayPal, Zelle, or Venmo.

6. Buy Turnkey 

Turnkey properties are some of the best real estate investments, as they have all the aspects of a high-retention rental: they’re either newly built or recently renovated, come with property management already in place, and are often located in desirable, growing markets. Plus, they’re typically single-family homes, and these tenants may stay longer than those living in multifamily apartment buildings.

What’s a Good Retention Rate?

The ability to keep tenants varies greatly from market to market, so a “good” retention rate depends on where your property is located. For example, the average single-family rental in Fresno, California boasts a 90% retention rate, but that figure drops to 76% in a market like Jacksonville, Florida. In general, you should aim for a retention rate of at least 70%-75%. This means roughly three out of every four tenants are renewing their leases year after year.

Don’t Get Tenant Retention Wrong

Ready to get serious about improving tenant retention? Try out the above-mentioned strategies, or simply buy a turnkey rental! Because these properties have updated systems and appliances, fewer maintenance needs, and a dedicated property manager, renters are more likely to stay long-term—keeping vacancies to a minimum and providing steadier cash flow. What’s more, Rent to Retirement has turnkey rentals for sale in some of the best places to buy rental property in the US!

Tenant Retention FAQs

What Does Tenant Retention Mean? 

Tenant retention is a landlord’s ability to keep current renters in place and minimize turnover. Retaining tenants tends to result in more consistent rental income and helps you avoid vacancy, cleaning, marketing, and other common turnover costs.

What Does Lease Retention Mean?

Lease retention is another term for tenant retention, which is the process of keeping tenants in place upon renewal. Improving lease retention is a worthwhile practice for landlords, as it can save them thousands on tenant turnovers each year.

How Do I Improve Tenant Retention? 

Making on-time repairs, communicating well, offering renewal incentives, accepting pets, and providing flexible payment options are some of the best ways to keep tenants happy with their current living situation. Buying turnkey can help with tenant retention, too, as these properties are updated and require less maintenance. Plus, you have a professional property manager handling things like tenant communication for you!