Buying, selling — and renting out property is one of the oldest forms of business. And it has continued to this day on an ever-growing scale — with some twists along the way.
Now, in today’s digital age, you can find homes listed online, you can even “tour them” via virtual reality and in some places you can even buy real estate using digital currencies.
But while all of these advancements are welcome, the real estate business still lags behind in some regards. This is especially true when it comes to the rentals business.
Nowadays in the e-commerce world, customers rule the retail experience and online shops obsess about retaining customers, turning them into loyal brand ambassadors and extracting as much “lifetime value” from them as possible.
Those concepts are pretty foreign to owners and operators of rental properties. Tenants come and go, properties remain and for the most part the owners could care less about making their tenants happy.
It shouldn’t be that way, though…
The cost of unhappy tenants
According to statistics in Switzerland, it can cost a property owner more than € 5’500 every time a tenant changes, depending on the country in question. That’s quite a fair hunk of change!
If a tenant stays an average of around 5 years and a multi-family apartment building has 20 tenants, that adds up to a total of € 110 000 down the drain over the same time span — or € 22 000 per year.
Like I said — a fair hunk of change.
Now what would happen, if that property owner figured out a way to retain his “customer” for a significantly longer period of time — say 10 years? In a B2B business or even B2C software business, “customer retention” and “lifetime customer value” would be a top priority.
But then again, we’re talking about real estate — a very old business here…
Now what if property owners and managers took a different outlook and treated their tenants like customers? In other words, what if they made an effort to retain their “customers” for a longer period of time?
For instance, if a tenant stayed twice the normal length of time — 10 years instead of 5 years — this could have a significant impact on the overall revenue of the building in question. Especially if it has a large number of tenants.
Following up on the example above — the 20-tenant apartment building could generate a savings of € 110 000 over the 10-year period.
But how to convince these people to stick around?
One way is to offer tenants a discount on their rent — provided they have been a good steward of the property and have not incurred a large amount of maintenance or repair costs.
But how do you know which tenants are good and which are not? How do you know if it makes sense to incentivise a tenant to stay or not?
Thankfully — there is an answer.
The Elea Property DNA® makes it easy to collect data about maintenance and repairs in one place and track the revenue generated by each tenant.
This means that a property owner could offer a greater rent discount to a tenant that generated no costs whatsoever — and a reduced discount to one that had some costs — and no discount to one that proved to be very costly.
By tracking this data within the Property DNA®, the owner can develop a relationship with their tenants and with data on hand, make relationship-building decisions in real-time.
At the same time, these incentives can lead to improved behaviour from tenants that ultimately reduce costs on the whole. As soon as tenants see that being a responsible tenant pays off, they will be rewarded — and ultimately stick around long-term.
And this is what Lifetime Value is all about.