Why is it that multifamily operators spend relatively little money on acquiring new customers and so much money on losing them?

It makes no sense.  The idea, after all, is to acquire and retain, not acquire and replace.  

Yet we know that the cost of turn for a “bad lease” that includes an unexpected move-out due to skip or eviction averages $4,000.    Typical annual rent on a 12 month lease for a one unit in Baltimore, Md. Or Charlotte, N.C., for example, is approximately  $10,000 , it would seem to make sense to pay more attention to cost and effort on the front-end to move the right resident into a unit in the first place.

Do we need to change the ways we ‘love the ones we’re with’ or to give the ones we’re with better ways to be loved?

The old adage about it being more cost-effective to retain a customer holds true.  In multifamily, however, there are only two times when a community has any leverage to define the linchpin of resident performance:  how they pay their rent.  

1.      At the time of lease offer, based on resident screening, the community decides what offer terms they utilize to both ‘close the sale’ and protect themselves against resident failure to perform.  Higher security deposits are the most commonly utilized tool of choice.  The problem is that by definition higher security deposits assume that the resident will fail at some point and the community will need to recover losses.  They are, as such, a regressive measure that do not fulfill their intent.  (After all, we also know that security deposits don’t cover all losses.)  

2.      The community has to take the habitually late paying resident to court to collect rent in arrears and/or file for eviction.   Same regressive recovery model in play here that hurts the community’s bottom line and its ability to retain residents and stable resident populations.

Many progressive operators are now turning to rent from payroll as solution to give residents a tool to basically disengage themselves form rent payment by turning over that portion of their finances to a third-party provider.  In this model, the rent from payroll provider receives prorated installments toward rent (that can’t be pulled back) every time a resident is paid, deposits those installments in a rent savings account and forwards them to the resident’s community when rent is due.  That’s a tool that gives residents a way to perform throughout the duration of a lease, not just a way to ‘buy their way into’ your community without payment assurances.

For habitual late payers, enrollment in rent form payroll provides a mechanism to recapture rent in arrears while retaining a resident and avoiding expensive unit turn costs.  When coupled as a requirement for renewals for habitual late payers, rent from payroll provides the glue that keeps residents in their units and reliable rent delivery to the community.

Acquisition and retention should go hand-in-hand, but they can only really work when payment assurance is inserted as a pre-emptive tool to enable residents to better manage their payroll and their payment practices.