“Oh, you know, COVID…”: Spotlighting Tenant Retention Amid Rising Costs

 

“I noticed you didn’t post a blog last month?  I really missed it!!”

(Actually, no one said this…😊)

 

I think one of the frustrations that I’ve had in the last year is how seemingly how every business underperforming service-wise or raising prices can be explained away easily by COVID or her offspring (shortages, inflation, sharp price increases, not enough employees, etc.).  Examples:

 

My coffee cost $4.00 last week and now it is $5.50.  Why?

“Oh you know, COVID…  Prices of coffee in South America have spiked due to complications in the harvesting process and container price shipping increases.”

 

Why wasn’t the gym open this Monday when I showed up there?

(A sign with a partial explanation was posted to the locked front door on Monday and then Tuesday the front desk person offered more details)

“Oh, you know, COVID…  Staffing is still really tough as no one wants to work anymore.  Once people left the workforce, they just didn’t want to come back.  You know, I think it’s mostly due to video games- guys just prefer to play them all day instead of going to work.” (Oh, really???)

 

Voicemails I run into frequently: “Due to recent events, call volume has increased creating longer than normal hold times."

(I’d like to get an explanation on why this voice mail message is still there and has not changed in almost three years).  But I can speculate…  COVID?

 

I can be frustrated as a consumer, but understand it.  I’m used to getting what I want at a reasonable price and in a reasonable time period and feel slighted when I don’t.  Pretty much every business has raised prices and many have had hiring issues.  It’s a fact that costs and wait times have skyrocketed whether I agree with the causation rationale or not.

 

Many landlords have experienced “Oh, you know, COVID…” conversations for the costs now associated with fixing up rental homes between tenants.  All of the issues above coupled with a hot real estate market has led to sticker shock when these repair quotes come out.  The cost of painting an entire house and replacing the flooring (as well as the myriad of handyman issues) has risen, especially when landlords compare prices 5-10 years ago (think double).

 

Rising rents after fix-up will eventually offset these increased costs, but it is still painful to look a $10K+ repair bill and know that the person writing that check is going to be you.  So, how can this be avoided?

 

It can’t be avoided forever.  However, there is the strategy of kicking the can down the road as long as possible.  This can be accomplished through an intentional effort in tenant retention.  The basic rationale is that if tenants don’t move out, most repair costs (cosmetic, that is) can be avoided until after their tenancy is eventually over.

 

So how do landlords accomplish tenant retention?  There are books written about this, so I’m not going to go into all the creative ways people have thought up of: giving free flat screen TVs to the tenants when they sign a multi-year lease, delivering chocolate chip cookies on their birthdays, having a monthly rent credit incentive where some of the money is forfeited if tenants move-out prior to a set number of years, etc.  The advice below is for a landlord who is more a “nuts and bolts” person and doesn’t bake very well.

 

The great news is that the cards are stacked in the landlord’s favor right now so most of what I propose is being done by others already.  The landlord’s job is just to keep the rental rate reasonable on lease extension offers.  That’s it.  I’m not even saying to not raise the rent at all; just don’t be greedy.  That’s the only thing the landlord has to do right now as a decent tenant retention strategy. 

 

Very few people like to move.  Landlords should continue to perform normal landlord activities in a timely manner so tenants do not have some explicit reason why it is imperative for them to leave the house.  And be pleasant.  Then wait.  The heavy lifting is already being done by the big institutional landlords who own houses nearby and are raising the rents up 25%-50%.  When tenants see the advertised rental rates of homes on the market and then see their reasonable lease extension rate, most will stay put. 

 

If the tenant still leaves, then biting the bullet on fixing up the property may be an unfortunate reality.  But the silver lining is that the house can now be advertised at the higher market rate (thank you again, big institutional landlords!) which will reduce the time on the ROI.

 

Best of luck keeping your good tenants around and avoiding the “Oh, you know, COVID…” expenses on your rental home for as long as possible.

 

Happy Landlording!