In multifamily real estate, lease renewal isn't glamourous, but it is essential. It's kale and cardio rather than a blockbuster prescription weight-loss pill — and the stakes couldn't be higher. High interest rates over the past three years have kept potential homebuyers in the rental housing market. Builders continue adding inventory to meet demand, but eventually — most likely by the end of this year — rates will come down, leaving an oversupply of rental housing stock as residents look to become homeowners.

More than 500,000 new rental units will have come to market this year alone and the renewal rate is roughly 50 percent with units sitting empty for an average of six weeks, ultimately costing the industry around $50 billion annually. Once the demand pendulum shifts back to buying, the natural inclination for landlords looking to protect their cashflow will be price reductions. Our research has revealed that price incentives are a driving factor in most decisions to renew or move. But they are not the only factor. The renewal decision has other components, like energy efficiency, proximity to work and other interests, amenities, and local school quality, which are of varying degrees of importance for each resident.

Discounting blindly leads to lost revenue by being too aggressive or to increased vacancies due to inflexibility. Here are nine tips for building a data- and relationship-driven renewal program that allows you to optimize your discounting practices and build high-quality customer relationships.

1. Assess moving costs. Do you know anybody who enjoys the process of packing their home and moving? People dread moving because it's time consuming and tedious. Moving is also super-expensive. Transport, packing supplies, security deposits, and new fees will add up. When you initiate a renewal discussion, you have two key pieces of knowledge already: The resident is not excited to move, and it will cost them. The extent and impact of relative moving costs, including local comps, are data points you need.
2. The renewal effort starts on Day 1. Your residents want to feel like they are getting value for their housing dollar. They worry about whether they will have problems with their unit and if they will have support. Move-in day is your first and most important opportunity to engender confidence and trust. The tone your team sets by ensuring a seamless move-in will pay off in better relationships, easier gathering of data, and more renewals.
3. Leverage service teams. The only variable as important as competitive pricing, if not more-so, is high-touch service. Reasonable residents will forgive a maintenance issue if they sense you're listening, friendly, and making genuine effort to ensure a clean, safe property, foster a pleasant community, and respond to their needs.
4. Gauge satisfaction through surveys. By surveying your residents on a variety of topics at 90, 180, and 270 days after move-in, your team can stay on top of community sentiment and individual resident happiness. Surveys allow you to collect specific data you need and track a resident's satisfaction over time. It also enables you to anticipate renewal challenges so you can initiate discussions with knowledge of possible obstacles. Maintenance requests represent additional opportunities to formally gather data if a particular resident does not respond to surveys.
5. Incentivize survey participation. You can increase participation in surveys by offering rewards, such as movie passes, gift cards, and raffles.
6. Time is of the essence. Your residents should receive renewal offers 15 days before the renewal period begins. So, if your state requires a 60-day notice period, the offer should be in your resident's hands 75 days before their existing lease ends. By giving extra notice, you demonstrate that you value the resident and want to work with them on a renewal that meets all parties' needs. But don't engage in renewal discussions before the 75-day mark. Submarket dynamics can fluctuate in short periods.
7. Keep lease renewal options simple. Perhaps you offer leases of varying lengths. Rather than overwhelming your residents with choices, begin with a full-term option and have a couple of other options in the quiver. With the knowledge you've collected about the resident and your current submarket data, you'll be ready to go with plans A, B, and C.
8. Be strategic in discounting. Discounting yields a 52 percent likelihood for renewal. This does not mean discounts should be uniform. Knowing exactly how much to discount, based on your familiarity and quality of relationship with specific residents, can be the difference between a portfolio that generates increased NOI, one that treads water, or one that goes into receivership. Setting a target range — and floating the largest discount as a last resort — can ensure that you neither over nor under-discount.
9. Don't forget the other deal sweeteners. Discounts and service are essential drivers in tenant retention, for most. But you will always have residents who might ease their price demands or look past a previous complaint if you meet another expectation, such as a cosmetic repair or a new appliance.

Each resident has their own equation. Your data collection program is more important than the infinity pool and pickleball complex you may be considering. Moreover, good data collection and initiative-taking customer engagement go together. When leasing managers and teams gather the information they'll eventually need, they will naturally form high-quality, loyalty-driving relationships with residents.

Whenever a business loses a customer, continued growth requires it to gain two new customers. This means that multifamily operators have two basic options, which often dictate every subsequent decision. They can replace tenants faster than they lose them — or they can retain their existing customers and sleep well.