Top performing property teams recognize the relationship between lease renewals and resident satisfaction. In fact, many property management companies are embracing new processes and technology to optimize resident satisfaction and renewals, therefore maximizing operating income.
On Average Multifamily Properties Lose Over $400,000 NOI Annually on Turnovers
Preventing all turnover is unrealistic, some things are beyond your control. Residents move, have children, get married and have a variety of life events that lead to relocation, purchasing a home or some other living change. Based on the national average, published by the NMHC, 53% residents move out annually, that’s 106 units on a 200 unit building. According to data published by Zillow Rentals, 2/3rd of this turnover is related to resident satisfaction and is within the control of the property staff. If you have recently attended any industry events and given the current economic climate, its apparent there is a lot of focus on retention and the various strategies being used to maximize renewals.
Another statistic worth mentioning is that the average cost to turn over a unit, fully loaded from lost rent to new resident concessions is approximately $4,000 on a $1,000/month rent. These numbers will vary depending on property type, market conditions, etc. Based on our 200 unit example, that is $424,000 a year in NOI due to resident turnover.
Example Resident Turnover Cost Calculation
Additional Factors When Considering Resident Service Levels
Resident Satisfaction and Renewals
A recent J Turner Research study* showed a strong correlation between resident renewal and resident satisfaction. “The core driving force for renewal is resident satisfaction. The residents who are willing to renew their lease rated their overall satisfaction with the property at 8.14 on a 10-point scale; this is 35% higher than the ones who said no. The naysayers rated their satisfaction at 6.04.”
Positive Resident Interactions Lead to Better Reviews
We all know the power of resident reviews, so it goes without saying that avoiding negative reviews and cultivating positive ones have a direct monetary impact to your property. Optimizing your resident service and maintenance responses will yield to a higher satisfaction rate among residents.
It’s no doubt that the industry has recently been focused on resident retention and renewal strategies. There were some valuable sessions at this year’s NAA conference dealing with these very issues. Aptly is a communication platform designed specifically to address resident service and communication for property teams.
How do these calculations measure up to your properties? Let us know in the comments.
*(Resident Attitudes Toward Renewals and Online Reputation, June 2018)