For single-family owners, the most expensive part of owning an investment property is turnover, and the best way to avoid those costs is by having an ‘A’ property in an ‘A’ location that attracts ‘A’ residents who want to live there long-term. Tinley Park, Ill-based MACK Investments, a division of MACK Companies, one of the largest owners and managers of single-family rentals in the Chicago area, explains how to attract and retain the best renters and sustain profitability.
“An ‘A’-quality resident possesses two key traits; taking exceptionally good care of the property, and staying long-term,” said Eric Workman, vice president at MACK Investments. “Owners who frequently need to locate new residents find that the cost to do so goes well beyond a new paint job and placing a rental ad – just because rent stops coming in when property sits vacant, doesn’t mean the mortgage, taxes, insurance and utility bills stop.”
Workman identified the three critical factors for attracting and retaining ‘A’ residents:
1. ‘A’ properties
Unlike homebuyers who often plan on investing in upgrades after a home purchase, ‘A’ residents want a higher standard of living at move-in. Finishes are the first thing that ‘A’ residents will notice upon touring the home. “‘A’ renters know if the home’s been cheaply done or outdated,” said Workman. “‘A’-quality residents will not choose a home with 30-year-old cabinets, tattered appliances or worn carpeting. They demand top-grade finishes like granite countertops, maple cabinetry, ceramic tile and wood flooring.”
But the demand for quality doesn’t stop with aesthetics, said Workman, who noted that
‘A’ residents want up-to-date windows, HVAC, electrical and plumbing. “‘A’-quality residents won’t tolerate the living room lights dimming when the dryer is on, a toilet that backs-up because the sewers were not scoped properly or bad-tasting water from galvanized piping.”
2. ‘A’ location
As MACK Investments has learned through its 17-year experience in single-family property management, ‘A’ residents will not compromise on quality of location, even if the property itself is a perfect fit. “An effective way to judge the level of care residents have for a neighborhood is by looking at the condition of the homes, yards and local parks. But prime location is defined by a lot more than just landscaping,” said Workman. “A strong infrastructure, public transportation, commercial and retail development, and access to employment corridors, are all critical to attracting ‘A’-quality residents. Raising their quality of life in each of these ways will better ensure that ‘A’ renters stay in your property long-term.”
One way to help ‘A’ residents find your property, is by establishing local relationships. Workman suggested, “Research the top leasing agents in the community, and then build a relationship and allow them to tour your property. Other local groups, like municipal agencies, churches or community organizations, are also great sources that will lead ‘A’ residents to your property.”
3. ‘A’ residents
Once a prospective renter has been qualified financially, landlords need to research if the resident is likely to care for, or abuse, the property once moved in. “A renter could pay their rent on-time for years, but cost the property owner thousands of dollars in repairs because they didn’t care for the home during that time,” said Workman. “Obvious red flags include any judgments against the applicant, past evictions or housing issues as documented in public records.
But not all careless renters end up in court, so landlords should also interview the current landlord and visit the prospective renter in their current home.” Conducting a site inspection in a prospective renter’s current home enables a landlord to look for signs of poor care, like garbage left outside of the receptacles or obvious signs of damage. He added, “How the resident treats their current home directly correlates to how much time and money will need to be invested to make the home rent-ready when they leave.”
Beyond the level of care a resident is likely to provide during their tenure, an ‘A’ renter also has ties to the local community, further strengthening the appeal to stay in your property long-term. Workman noted, “Moving is disruptive to every part of a renter’s life, from changing cable providers to changing schools – but it’s a necessary step when the property doesn’t suit the renter’s overall lifestyle. Renters who already have strong ties to the local community, like having a job nearby, kids enrolled in a local school and extended family that lives close by, are all signs that a renter will likely stay in the home long-term,” said Workman. “More importantly, renters need a home that will suit their lifestyle today as well as two, five or even 10 years from now. For young families in particular, the home needs to have sufficient space for growth.”
Maintaining the AAA model long-term
Once ‘A’ residents have moved in, the key to retaining them long-term is through superior property management. “‘A’ residents will not renew their lease – and therefore eat into your profits – if you don’t make their time in your property a consistent quality experience,” said Workman. But good property management doesn’t just mean making the occasional repair. Keeping in touch with renters, whether it’s collecting rent in person or occasionally checking in, goes a long way toward making a connection with the renters, and gives landlords an opportunity to monitor the condition of the home.
“If all the pieces are in place, in terms of quality, location and lifestyle, good ongoing property management can keep ‘A’-quality residents long-term and ensure the maintenance of your asset while minimizing the cost of turn-over.”
About MACK Investments
A division of MACK Companies, MACK Investments is part of a two-decades-old organization that provides turn-key residential real estate investments to individual and institutional clients world-wide. In August of 2012, MACK Investments structured the largest single-family performing asset deal in U.S. history, identifying the firm as one of the most experienced providers in the single-family investment industry. The MACK Investments’ property inventory of more than 1,200 homes valued at $170 million in the Chicago area serves investors world-wide with an average 15+ percent levered return.
About MACK Companies
MACK Companies is an organization of real estate divisions that offer investment, construction, residential, commercial, landscape and brokerage services. Founded in 1998 by Chicago-native father and son duo James and Jim McClelland, MACK Companies was built out of a shared passion for real estate. Today, MACK Companies is one of the largest providers of turn-key real estate with a portfolio of more 1,200 single-family homes in the Chicago area. With a team of experts employed throughout 15 corporate departments, MACK Companies is able to function at the highest levels of production in all specialized sectors of real estate. For more information, visit mackcompanies.com.
- Real Estate
- property management
Julie Liedtke, (312) 267-4521