Are you actually healing the wound?

Whenever I have a crazy statistical question about resident retention, I call/email Doug Miller of SatisFacts. This last time, he shared with me a quote from Jen Piccotti at the NAA conference that I had to share:

(Our industry's current focus on apartment marketing over resident retention is) "like someone with a serious wound that is bleeding profusely, but all the doctor is doing is blood infusions to try to keep up…versus healing the wound."

WOW! That is such an amazing and spot-on analogy!

I think if top-level apartment executives could be shown some hard data that says something like "Every $1 spent on resident retention has the same positive impact on the bottom line as every $2.38 spent on marketing," they'd be quick to authorize an increase in the resident retention budget. Disclaimer: the numbers above are completely made-up; Brent, I bet you could provide much more realistic values.

I really like that concept, and I'll have to think about how to make a number relationship like that. The basic relationship is pretty simple given the variable turnover cost for that community. The problem I see is identifying the success rate for resident retention in general.

With marketing programs you can often tie the site visit/lease directly to a marketing source, allowing you to identify the composite cost per lease. And if the company is doing that, it's safe(r) to say that they are then choosing the marketing programs that have the highest profitability.

But with resident retention, it's harder to tie specific programs to a certain conversion. I think renewal surveys could help with that challenge by trying to tie the renewal with a certain type of service (i.e., customer service, maintenance, resident events, etc), but I'm not sure how many companies are doing them, or how accurate they are in assessing that service. The only other way to assess is to analyze turnover year over year and see the change. Although I think that establishes success overall, it doesn't allow companies to identify specifically what worked and what didn't.

Great comment!

This is a fascinating discussion. As alluded to, it is easier to quantify what lease-ups/site visits etc. than it is to quantify why residents stay.

I would agree that a survey can be a very important tool. There are several online surveys instruments that can be useful in collecting this information. Surveys responses can be entered into a drawing for a gift card etc or other inducements.

As noted it is important to show the cost/benefit of retention versus new lease-up. Also, any retention program should be evaluated according to ROI.

Thanks for joining in, Michael. I'm not sure if inducements are even necessary, however. The resident is often in the office to sign the new lease, so it probably wouldn't be hard to have a quick survey that is part of the renewal process. Although maybe a gift card drawing might help with creating buyer's satisfaction, so I think it works regardless! (Not sure what the term is that is opposite of buyer's remorse where you affirm a buying decision...)

Great converstation. First, you can quantify the cost of retention/turnover. Due to current concessions, vacancy loss days, turn costs, marketing costs - each move out costs $4,305 currently. And you can quantify the impact...with overall metrics like NOI changes, and specific best practices that most PM systems monitor and report.

Second, abolutely you can quanity why residents leave...we've been collecting and analyzing this stuff for a decade for millions of units. We report this meaty stuff annually in our SatisFacts Index. It's very clear what has the greatest impact on renewal likelihood! What do you think drives renewal decisions the most?

In terms of feedback systems...one doesn't need to try to re-invent the wheel and have to wear a researcher hat (you wouldn't want to - they are very silly looking hats!). Firms like ours have broad lines of feedback systems, from "annual" planning surveys, to 365 day/year feedback programs for move-ins, work order follow up, pre-renewals and even unclosed traffic. Communication at key events/touchpoints in the resident life cycle is critical, and unfortunately office staffs are unable to keep up with the clear need to follow up after every event. There is a huge CRM void - and a great need to shift priorities to what has the best return for the owner (and retention clearly has a greater impact than having a vacant unit and ultimately leasing it).

What do you think?

Doug, I agree that move-out surveys are critical - if a company isn't trying to find out why their customers leave, maybe they need to find another line of work...

However, I would say that the reasons people stay versus the reasons why they leave are potentially two different things. It goes back to Hygiene Theory we have discussed before... In other words, if I leave a community because of maintenance issues, if I had hypothetically renewed instead, that doesn't mean I would necessarily list maintenance as my reason to have stayed.

FYI, i think move-out surveys are not the way to go...not proactive enough and someone who has given notice has no skin in the game and are very unlikely to respond. communication at key moments during the resident experience is the way to go. being a bunch of data heads...as you know we've analyzed what things have the greatest impact on renewals. big picture...perceived value is what drives staying and leaving (since only 30% leave due to buying homes or relocating).

Ah, ok. I thought you were referring to move out surveys. Thanks!

I wish I could help with this topic, but my situation is different. Fifty-three percent of my tenants are referrals from other tenants. I am not afraid of evicting, so tenant retention is not something I focus on. I don't use marketing at all.

What I focus on is - maintaining the property in the best condition possible, responding immediately to tenant concerns, having ALL of the apartments treated by pest control EVERY MONTH, hosting barbecue parties for the tenants on some holidays, and taking immediate action against contract violators. And, most importantly, treating my tenants with respect.

I have 100% occupancy while the other apartment complexes in this neighborhood all have 'for rent' signs. I also have no past-due rents.

Sorry if it sounds like I'm bragging. I'm simply doing what needs to be done - and it works. I don't need surveys or even advertising. Do the job the way it's supposed to be done and it works.

Rather than considering a move-out survey, check into the above issues. You might find room for improvement.

"Due to current concessions, vacancy loss days, turn costs, marketing costs - each move out costs $4,305 currently. And you can quantify the impact...with overall metrics like NOI changes, and specific best practices that most PM systems monitor and report."

Please don't forget wage+fringe in this calculation. It often goes unaccounted for!

Pat - I do not consider that bragging at all - Sharing success stories is how we all learn, so please continue to share! And you have a great case study about how focusing on some of the basic elements of property management done right have a bigger impact than many of the more "flashy" options out there. What I am curious about is whether your turnover has dropped down to the level of the non-savable turnover number (i.e., those who move out of the city). And if it has, then assessing whether your application criteria is 100% effective in maximizing length of stay and minimizing evictions, which you say you have. In other words, unless you are running an absolutely perfect ship, I don't see how cutting out move-out/retention surveys is a good idea, unless the cost can't be recouped by better practices.

you are right! actually that $4,305 figure does include estimated maintenance and leasing cost per move-out. brilliant minds think alike...lol!

Brent Williams wrote:

Pat - I do not consider that bragging at all - Sharing success stories is how we all learn, so please continue to share! And you have a great case study about how focusing on some of the basic elements of property management done right have a bigger impact than many of the more "flashy" options out there. What I am curious about is whether your turnover has dropped down to the level of the non-savable turnover number (i.e., those who move out of the city). And if it has, then assessing whether your application criteria is 100% effective in maximizing length of stay and minimizing evictions, which you say you have. In other words, unless you are running an absolutely perfect ship, I don't see how cutting out move-out/retention surveys is a good idea, unless the cost can't be recouped by better practices.

Thank you for the kind words, Brent. I'm glad you saw that my intention was to share what works for me.
Let me give you a little synopsis:
When I took over managing this property, it was riddled with drug sellers, loud music day and night, trash everywhere, many apartments in terrible shape and approx. 20% of the tenants were at least 2 months behind in their rent.

I talked the owners into trusting me to set it right. They bit the bullet and let me evict as I saw fit. I evicted 18 families the first year. I cleaned up the property, hired a new gardener, pool service and pest control. I put in new plumbing fixtures, flooring and appliances as apartments went empty. I rigidly apply house rules and make sure that all tenant concerns are dealt with right away.

My turnover was at its worst last year - due to job losses. I had a few tenants who needed larger places for their growing families, and a couple of people purchased homes. However, during this high turnover - 15 in the year, my apartments stayed full. I had about 9 people per week applying for apartments and filled almost all the vacancies with referrals. Currently, 53% of my tenants are referrals.

My application criteria covers these points:
income - at least twice the monthly rent
credit - I'm only concerned with bankruptcies and unlawful detainers. I don't care if someone owes credit cards or medical. I just want to make sure they pay their housing.
criminal - zero tolerance for crime. I will not rent to anyone with any criminal history whatsoever.

I have more success with these criteria than my friend who manages property for a company that stresses excellent credit references.

As long as I do my job, the rest seems to come easy.

Hi Pat - You make such an excellent point. It really doesn't make sense to focus 100% on "reducing turnover." That's too big to put your arms around. What you have done is focus on what we can refer to as "daily homework." The things you do on a daily basis to make the resident experience the best it can be contributes directly to how much value they feel they are receiving for the amount of money they are paying. In other words, you are spot on!

The result of making it easy to be a resident, responding to needs and requests, resolving issues quickly, consistently enforcing rules and regulations in a respectful manner, and making it fun to be there - they all add up to less turnover.

Well done!